Devon Energy, Hess upgraded on improved E&P outlook

Dec. 10, 2019 3:16 PM ETDevon Energy Corporation (DVN), HES, VET, CTRA, CXO, EOG, FANG, PE, PXD, WPXDVN, HES, VET, CTRA, CXO, EOG, FANG, PE, PXD, WPX, XOP, GUSH, DRIP, NDP, IEO, PXEBy: Carl Surran, SA News Editor7 Comments
  • Devon Energy (DVN +0.8%) and Hess (HES -0.2%) are upgraded at J.P. Morgan as part of the firm's 2020 outlook on the oil and gas exploration and production sector.
  • JPM analyst Arun Jayaram says the group's transition to free cash flow that began in 2019 should support better free cash flow metrics and cash return given efficiency gains and oilfield services deflation.
  • Jayaram also thinks U.S. shale growth is poised to disappoint, which could lift the back end of the curve.
  • In addition to upgrading DVN to Overweight from Neutral and Hess to Neutral from Underweight, Jayaram also downgrades Vermilion Energy (VET -1.2%) to Neutral from Overweight, saying he sees a smaller margin of error for the company.
  • The firm's top picks in the area include Cabot Oil & Gas (NYSE:COG), Concho Resources (NYSE:CXO), DVN, EOG Resources (NYSE:EOG), Diamondback Energy (NASDAQ:FANG), Parsley Energy (NYSE:PE), Pioneer Natural (NYSE:PXD) and WPX Energy (NYSE:WPX).
  • DVN's Sell Side Rating, Seeking Alpha Authors' Rating and Quant Rating are all Bullish.
  • HES' Sell Side Rating, Seeking Alpha Authors' Rating and Quant Rating are all Neutral.
  • ETFs: XOP, GUSH, DRIP, NDP, IEO, PXE

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