Best Energy Stocks To Invest In 2017


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According to the Wall Street Journal, the Organization of the Petroleum Exporting Countries (OPEC) confirmed Monday it will host an informal talk in September at an energy conference.


It isn’t immediately known what is on the agenda for the meeting. The organization gathered back in April with the hopes of setting a limit on oil production, but Saudi Arabia refused to agree to a freeze and cited Iran’s similar stance.

Best Energy Stocks To Invest In 2017: Chevron Corporation(CVX)

Advisors’ Opinion:

  • [By Michael K. Farr]

    Chevron is a U.S.-based integrated oil and gas company with global operations. Chevron’s production profile is 67 percent liquids (primarily oil), and oil prices are currently under $37 – a level we haven’t seen since the great recession of 2009. We don’t have a crystal ball, but we’re guessing oil prices will be higher, not lower, three years from now. The stock is trading at 26.2 times calendar year 16 estimated EPS with a 4.7 percent dividend yield. It helps to normalize earnings of companies that operate in cyclical markets, and doing this with Chevron leads to a valuation at 17 normalized earnings or 12 times its average annual EPS for the last 15 years. 

  • [By Ben Levisohn]

    But even if you buy that,Cheniere is still “crazy expensive” compared to peers.Chevron (CVX), Royal Dutch Shell (RDS.A) and Australian firm Woodside trade between 5 and 6.3 times EV/EBITDA. Cheniere: 11.4 times. And while Chevron, Royal Dutch Shell and Woodside will be paying down debt, Cheniere’s will be growing its own, Chanos argued. “This is financial engineering gone crazy,” Chanos says. “[It’s] extremely skewed to the short side.”

  • [By Ben Levisohn]

    The market appeared unfazed by the macro, however. Instead, it was buoyed by shares of Apple, which themselves were boosted by Warren Buffett’s Berkshire Hathway (BRK.B) buying $1 billion of its shares (Apple climbed 3.7% to $93.88 on the news today). Oil, meanwhile, rose 3.3% to $47.72 today, helping to lift energy stocks like ExxonMobil (XOM), Chevron (CVX) and Schlumberger (SLB). Exxon rose 1% to $89.57, Chevron gained 15% to $102.26, andSchlumberger jumped 2.2% to $74.

  • [By Ben Levisohn]

    Should oil prices recover, we believe that deepwater drilling activity growth should lag growth in US shale activity, as project economics is generally better in US shales, and E&Ps involved in US shales are generally quicker to react. Deepwater activity is largely comprises a handful of companies (Petrobras (PBR), Statoil (STO), Total (TOT), Shell (RDS.A), BP (BP), ONGC, ExxonMobil (XOM) and Chevron (CVX)) and it is unlikely that these companies can meaningfully increase their rig demand in a short period of time to absorb the current oversupply. Thus, should oil prices rise in 2018, rig demand may increase, but likely not enough to tighten the market, given that supply equaling 43% of current working rig count is stacked and new supply equaling 25% of working rig count is under-construction and should be entering the market in the coming years. As a result, while we expect some improvement in rig utilization owing to rig retirements, it will unlikely be strong enough to meaningfully improve rates in 2018 above spot levels. Any demand increase in the interim could slow rig retirements materially, and be self-defeating. We thus are Sell rated on Transocean, Atwood and Noble.

Best Energy Stocks To Invest In 2017: Devon Energy Corporation(DVN)


Advisors’ Opinion:

  • [By Robert Rapier]

    Devon Energy (NYSE: DVN) is one of the major oil and gas producers in North America. Historically the company has produced more natural gas than oil — at present producing more than 3 percent of the natural gas consumed in North America — but Devon is now focused on producing more liquids. At present these make up only about a third of the output, but the company anticipates pushing that to 50 percent by 2016 and is devoting substantial capital to that goal.

  • [By Ben Levisohn]

    Deutsche Bank’s Ryan Todd and team explain why they raised their price targets on four oil exploration companies–Pioneer Natural Resources (PXD), Devon Energy (DVN), Marathon Oil (MRO), and EOG Resources (EOG):

  • [By Matthew DiLallo]

    U.S. producers hit their peak more than a year ago with production steadily coming down since then due to under-investment. However, the industry has recently started ramping activity back up in an attempt to push back against the natural production decline. For example, leading U.S. driller Devon Energy (NYSE:DVN) reduced its rig count from 40 in early 2015 to five by the third quarter of 2016. As a result, Devon Energy’s third-quarter production from retained assets declined 6.9% year over year. However, Devon Energy has started adding back rigs now that oil prices have stabilized above $50 per barrel and it expected to end 2016 running 10 rigs, with plans to run 15 to 20 by the end of this year. These rigs should push its production up by a low- to mid-single-digitrate this year.

  • [By Ben Levisohn]

    Lear also sees strong “upside potential” forConcho Resources (CXO), Pioneer Natural Resources (PXD) and Newfield Exploration (NFX) as well performance improves in the Permian/STACK, and also writes positively on Devon Energy (DVN).

Best Energy Stocks To Invest In 2017: MPLX LP(MPLX)

Advisors’ Opinion:

  • [By Ben Levisohn]

    JPMorgan analyst Phil Gresh and team explain what they got wrong about Marathon Petroleum (MPC), as they cut its rating to Neutral from Overweight following yesterday’s disastrous financial results from MPLX (MPLX):

  • [By Garrett Cook]

    Lastly, Citi says Marathon Petroleum (NYSE: MPC) and MPLX LP (NYSE: MPLX) remain Buy rated the heels of benefits derived from strong product demand and the NGL recovery.

Best Energy Stocks To Invest In 2017: MGE Energy Inc.(MGEE)

Advisors’ Opinion:

  • [By Lisa Levin]

    In trading on Wednesday, utilities shares fell by 0.75 percent. Meanwhile, top losers in the sector included California Water Service Group (NYSE: CWT), down 7 percent, and MGE Energy, Inc. (NASDAQ: MGEE), down 6 percent.

Best Energy Stocks To Invest In 2017: Newfield Exploration Company(NFX)


Advisors’ Opinion:

  • [By Ben Levisohn]

    Lear also sees strong “upside potential” forConcho Resources (CXO), Pioneer Natural Resources (PXD) and Newfield Exploration (NFX) as well performance improves in the Permian/STACK, and also writes positively on Devon Energy (DVN).

  • [By Ben Levisohn]

    The large cap E&Ps we cover raised ~ $6.5 billion of equity in 2015 and are likely to consider additional issuance in 2016. Pioneer Natural Resources (PXD) raised $1.3 billion on January 5th and Hess Corp. (HES) raised $1.5 billion of equity/equity-linked earlier this month. We think highly leveraged companies such as Devon Energy,Encana andRange Resources (RRC) and companies with a large deficit (before asset sales), such asAnadarko Petroleum and Devon Energy, are most likely to consider raising equity. Additionally, we believe companies such as WPX Energy (WPX), Southwestern Energy (SWN), Marathon Oil, Continental Resources (CLR),Noble Energy and Newfield Exploration (NFX) could issue equity while several levered companies may be unwilling or unable to access equity markets. We do not think Apache, Canadian Natural Resource, EOG Resources (EOG), Occidental Petroleum orPioneer Natural Resources are likely to issue equity this year.

  • [By Ben Levisohn]

    Large Caps. Our E&P coverage is pricing in $61/bbl WTI and $3.30 gas, and with a lower crude forecast the group is looking less compelling. We argue names that continue to demonstrate resource improvement at the low-end of the cost curve, namely in the Permian and STACK remain attractive, such as Concho Resources (CXO), Devon Energy (DVN), Newfield Exploration (NFX) and Pioneer Natural Resources (PXD). Noble (NBL) remains a compelling value, though has yet to commit to an accelerated US onshore drilling program.

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