Coterra Energy (NYSE:CTRA) and Comstock Resources (NYSE:CRK) both tilt ~1% lower in Wednesday's trading after Citi downgrades both gas-focused producers to Sell, citing risk that production growth in the Haynesville Shale will be forced to slow as egress falls short and gas inventories tread above normal.
Citi also cut EQT Corp. (EQT) and Southwestern Energy (SWN) to Neutral, with all four downgrades driven by a weaker macro picture and associated pricing risks, while maintaining Range Resources (RRC) at Neutral.
"The slow cadence of infrastructure growth and timing of newbuild LNG facilities continue to be harbingers of potential friction across the domestic natural gas markets in the coming year," Citi analyst Scott Gruber wrote.
The firm's preferred energy names are APA Corp. (APA) as international gas-linked contracts reduce risk, EOG Resources (EOG) whose premium should re-emerge on superior capital efficiency, and Denbury (DEN) due to its takeout potential.
Coterra Energy (CTRA) is returning 50% of its free cash flow via dividends, Michael Wiggins de Oliveira writes in an analysis newly published on Seeking Alpha.