When weighing oil stocks to buy and watch, consider which ones are diversified and which are focused more on shale or particular regions like the Permian Basin. Crude oil prices have a big impact, especially pure-play shale producers.
Investors should do additional research before making any purchases, especially as oil prices remain under pressure. But for reference purposes here are the top stocks involved in U.S. shale as of December 2020.
Exxon Mobil, Chevron
Exxon Mobil (XOM) is the world’s largest publicly traded oil company by market cap ($176 billion), despite a sharp decline, with operations around the world from deepwater drilling off the Australian coast to conventional drilling in the Middle East.
Exxon also doubled its holdings in the Permian Basin, which accounts for one-third of U.S. production, with a $5.6 billion deal in 2017. But drilling has been curtailed as oil prices fall amid the coronavirus pandemic. Exxon said in October that it plans to end the year with just 10 rigs in the Permian down from 50-60 rigs before the start of the coronavirus pandemic.
In October, Exxon reported mixed third-quarter results. It was booted off the Dow Jones Industrial Average in August.
In December, Exxon slashed its five-year spending plan to $19 billion or less in 2021, and $20 billion-$25 billion a year between 2022 and 2025. That’s down from a prior forecast for annual investment of $30 billion during that period. It also confirmed a write-down of $17 billion-$20 billion in Q4 and said investments in certain natural-gas assets will stop.
Exxon hopes investment and job cuts will help maintain its quarterly dividend at 87 cents a share. But Wall Street analysts remain skeptical.
Meanwhile, global oil rival Chevron (CVX) is closing in on Exxon’s dominance with a $159 billion market cap and is the only oil major on the DJIA. In July, Chevron agreed to buy Noble Energy for $5 billion, increasing its presence in the Permian Basin, as well as in the eastern Mediterranean and West Africa.
Chevron reported also reported mixed Q3 results in October.
Oil has been hit hard by the coronavirus pandemic as travel ground to a halt. As demand dried up, U.S. oil futures with May expiry went negative in April as storage rapidly filled.
ConocoPhillips (COP) will be one of the biggest Permian Basin producers and the largest U.S. independent oil company following its acquisition of Concho Resources (CXO) in an all-stock deal valued at $9.7 billion. Conoco’s market cap is $42 billion currently but could swell when Concho, which is valued at $10.9 billion, is officially added.
As of September, Concho had 800,000 gross acres in the Permian. ConocoPhillips has 10.3 million net acres in the continental U.S., with a focus on the Eagle Ford, Bakken and Permian Basin. The merger will allow the combined company to produce 1.5 million barrels per day, according to a Reuters report. The deal is set to close in Q1.
Concho reported a loss in Q3 on lower realized prices and lower production volumes amid the Covid-19 pandemic.
The company says it’s the largest oil producer in the Eagle Ford shale formation in south Texas. It also holds premier positions in the Permian’s Delaware Basin.
EOG reported mixed Q3 results in November. It sees 2021 crude oil production at 440,000 barrels per day, roughly the same level as Q4 as the global crude market is still likely to remain unbalanced into next year.
EOG Resources CEO Bill Thomas, one of shale’s pioneers, acknowledged the muted 2021 production outlook and on the earnings conference call. But said he didn’t want to put OPEC in a situation where “they feel threatened — like we’re taking market share, while they’re propping up oil prices.”
Pioneer Natural Resources
Pioneer Natural Resources (PXD) is a pure-play Permian Basin company after selling its Eagle Ford assets last year. It has a market cap of $18 billion.
In October, Pioneer reached a deal to buy Parsley Energy in an all-stock transaction valued at about $4.5 billion. The combined company would have roughly 928,000 net acres in the Permian, according to the analysts.
The merger is a family affair as Pioneer CEO Scott Sheffield is the father of Parsley’s co-founder and chairman, Bryan Sheffield. Parsley’s current CEO, Matt Gallagher, has previously worked at Pioneer.
Pioneer reported mixed Q3 results in November and shut-in 5,500 barrels per day of production due to lower oil prices.
Like Exxon Mobil and Chevron, Occidental Petroleum is a global company but is also the largest acreage holder in the Permian. It has a market cap of $16 billion. Occidental wants to grow its holdings in the prolific play after buying Anadarko for $38 billion.
To focus on the Permian, Occidental Petroleum sold off an oil field in Qatar to state-owned Qatar Petroleum in last year. But it still has operations in Oman, Colombia and Libya. But some investors aren’t happy with the deal and activist investor Carl Icahn and other shareholders were upset they were denied a vote on the deal.
Occidental reported Q3 results that fell short of Wall Street estimates in November. CEO Vicki Hollub said that the company “will go into 2021 conservatively” and wouldn’t spend more than $2.9 billion on new projects next year.
Unlike many of its peers, Continental Resources (CLR) didn’t rush to gain acreage in the Permian and instead kept its focus on North Dakota’s Bakken play. The company is the largest producer in the Bakken. It has also been aggressive recently in Oklahoma’s STACK and SCOOP shale plays. It has a market cap of $6 billion.
Continental reported Q3 results that beat analyst expectations in November. It sees capital spending of $1.2 billion- $1.3 billion next year.
Harold Hamm, Continental’s founder and CEO, stepped down at the end of January and assumed the role of executive chairman. Former ConocoPhillips executive William Berry replaced Hamm.
Follow Gillian Rich on Twitter @IBD_GRich for energy news and more.
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