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Goldman Sachs likes eight E&Ps in low oil price environment

Jul. 13, 2017 2:35 PM ETEOG Resources, Inc. (EOG) StockCHRD, OVV, EOG, PXD, CTRA, CLR, WPX, FANG, RSPP, CRCQWBy: Carl Surran, SA News Editor23 Comments
  • The Goldman Sachs gang remains generally negative on U.S. E&P companies, seeing $55/bbl WTI needed for the group to drive U.S. growth and help repair balance sheets with $45 oil as a threshold where balance sheets weaken.
  • E&P stocks are at $0.80 per dollar invested, after adjusting for changes in long-term corporate returns, while the group bottomed at ~$0.70 in the last two cycles, the firm says.
  • Even so, Goldman thinks $45-$55 oil and a shift in shale will benefit a few E&P companies, including "productivity winners" EOG Resources (EOG +0.9%), Pioneer Natural Resources (PXD +0.2%) and Cabot Oil & Gas (COG +0.9%), as well as Diamondback Energy (FANG +0.7%) and RSP Permian (RSPP -0.7%) for productivity plus consolidation.
  • Among higher beta E&Ps, Continental Resources (CLR +1.8%), Encana (ECA +0.1%) and WPX Energy (WPX +0.1%) are oversold, "with a favorable combination of growth/deleveraging/valuation."
  • The firm is avoiding Whiting Petroleum (WLL -1%), Oasis Petroleum (OAS +0.1%) and California Resources (CRC +2%) because of questions around their growth, returns and balance sheets.

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