“While it’s one of the oldest fields in the U.S., there are multiple producing formations there, and companies are learning how to optimize horizontal drilling in them," WTRG Economics' James Williams says. "The growth is evidence that they’re figuring it out."
Indeed, as Permian crude production per rig is expected to climb to 98K bbl/day this month, up from 83K a year ago, according to the U.S. Energy Department.
While Pioneer Natural Resources (PXD), for example, is drilling in a 300-ft. thick shale shale formation in Texas' Eagle Ford play, the Permian offers shale depths of 3,500 ft., “so this is why this area has really substantial running room going forward,” COO Timothy Dove says.
The energy analysts at Cowen say that after three years of disappointment, 2014 is expected to bring stabilization and moderate growth with the potential for meaningful ramp-up in the sector during 2015-18.
One of Cowen's three big oil favorites is Occidental Petroleum (OXY) after announcing plans to spin off its California assets into a separate company; the firm likes OXY's potential to see the full benefit of rising oil prices in future results without being weighed by refining or midstream operations.
The firm foresees margin expansion at Exxon Mobil (XOM) with incremental growth coming from liquids-linked output, and thinks capex will start to drop after this year.
Cowen analysts also like Chevron (CVX) but would be patient buyers while awaiting commentary on further improvement due to better project mix.
Kyle Bass timed his Herbalife (HLF -0.9%) trade fairly well, exiting his entire stake by year's end after getting in sometime during Q3.
His just-filed 13F shows continued bets on real estate-related names, with new holdings in specialty servicer Nationstar Mortgage (NSM -1.5%), distressed-home buyer (and member of the OCN chain) Altisource Residential (RESI +1.2%), and Rayonier (RYN -0.2%). Bass is already a large owner in recently-gone-public mortgage insurer NMI Holdings (NMIH -1%).
He also shows new stakes in a number of energy companies: Kinder Morgan (KMI +0.2%), Comstock (CRK +1.2%), and Occidental Petroleum (OXY +4%).
Occidental Petroleum (OXY) +2% premarket on news it will spin off its California assets into a separately traded company, creating the state's largest natural gas producer.
OXY says the new company will be the largest oil and gas mineral acreage holder in the state with ~2.3M net acres, and will have major operations in the states high-potential oil and gas basins, including Los Angeles, San Joaquin, Ventura and Sacramento.
NuStar Energy (NS +4.8%) signs a long-term agreement allowing Occidental Petroleum (OXY) to ship natural gas liquids on NuStar’s currently idled 200-mile pipeline between Mont Belvieu and Corpus Christi, Texas.
NS has begun work to reactivate the line, reverse its flow and convert it from refined products service to NGL service; the pipeline has capacity to move ~110K bbl/day.
The project is scheduled to be completed and in full operation in Q2 2015, although the pipeline may flow at reduced rates this year; once the line is in service, it is expected to generate ~$23M/year of incremental EBITDA for NS.
Occidental Petroleum (OXY -1.1%) is lower even after reporting that Q4 earnings soared as the company benefited from the sale of some of its stake in Plains All American Pipeline.
Q4 production volume fell to 750K boe from 779K in the year-ago quarter; OXY says that while production increased in California and south Texas, overall domestic production fell because of severe weather and plant turnarounds in the Permian operations and reduced domestic gas drilling.
Sees 2014 capital program of ~$10.2B, up from $8.8B in 2013; says it is making "steady progress" on discussions with key partners in the MENA region for the sale of a minority interest in operations there (earnings call slides).
OXY's realized price for worldwide crude oil rose 3.2% to $99.27/bbl, while domestic crude prices added 7.6% to $94.52.
XOM has been rising on expectations for a recovery from a difficult year for production and a record level of refining maintenance that weighed on 2013 earnings, but the firm believes this is now largely priced into the stock.
However, Citi raises its price targets for XOM, Chevron (CVX -0.7%), ConocoPhillips (COP +0.1%) and Occidental Petroleum (OXY -0.2%) largely based on a reduction of its cost of capital assumptions and the approaching start-up of many large scale upstream projects.
State-run Abu Dhabi National Oil will not renew its 75-year oil-production agreement with BP, Exxon Mobil XOM, Royal Dutch Shell (RDS.A, RDS.B), Total (TOT) and others to run the fields, which produce more than half the United Arab Emirates' crude output of 2.8M bbl/day.
Abu Dhabi also had green-lighted Occidental Petroleum (OXY), China National Petroleum (PTR), Statoil (STO), Rosneft (RNFTF) Japan's Inpex and Korea National Oil to bid.
Raymond James sees a better year for oil in 2014, and a better year for ConocoPhillips (COP +1%) - whose rating the firm raises by a notch to Market Perform from Underperform - but warns not to get too excited.
Analyst Pavel Molchanov's main concern about COP is significant outspending, but he says this becomes less pressing in the context of the improved oil forecast, and he finds valuation metrics more reasonable.
Molchanov still sees better E&P ideas - among multinational large-caps, he prefers Apache (APA), Anadarko (APC), BG Group (BRGYY, BRGXF), Marathon Oil (MRO) and Occidental (OXY) - but he no longer finds sufficient downside in COP to warrant a continued negative stance.
With the price of gas likely to remain in a narrow range next year, the firm says investors should buy high-quality, large resource-based stocks such as COG and RRC.
The net asset value race is over, and the coming year is about execution, ML says, seeing PXD and WLL as winners here.
Following 2013's wave of activism, the firm sees gains in HES and OXY.
Favorable outlooks for E&P budgets could lift oilfield services stocks focused on North America, such as HAL and SLB.
The ML team sees crude production rising to the highest level since 1989, and pinpoints TSO and VLO as the refiners to benefit the most in 2014 because they're crude-advantaged and have stock-specific catalysts.
Finally, the firm suggests investors with significant gains in CVX may want to take those and buy XOM for 2014.