- Wolfe Research's Paul Sankey says he is bracing for some ugly Q3 earnings reports among oil and gas producers and a soft environment well into 2016, arguing that with oil prices stuck ~$45/bbl for West Texas crude, "there is real bankruptcy risk for probably one-quarter of the U.S. oil industry.”
- The analyst advises clients to stick with quality companies that can weather a prolonged stretch of soft prices, which means larger independent producers such as EOG Resources (NYSE:EOG), Anadarko Petroleum (NYSE:APC) and Chevron (NYSE:CVX) among the majors.
- Sankey says “all will be fine in due course,” although the next 6-12 months could be “tough sledding” for their businesses.
- Sankey likes a number of refiners, who will benefit from cheap crude oil, including Valero Energy (NYSE:VLO), Marathon Oil (NYSE:MRO), Western Refining (NYSE:WNR) and HollyFrontier (NYSE:HFC).