Oil stocks are in focus following second quarter earnings. But U.S. oil prices have tumbled below the key $70 benchmark as Washington called on OPEC+ to boost production.
Following a contentious meeting, OPEC+ finally agreed on July 18 to gradually end the remainder of production curbs that began last year. But the White House called on OPEC+ on Aug. 11 to boost production further to prevent oil prices from stalling the economic recovery.
But the delta variant of the Covid-19 virus is also casting a long shadow over the economy as companies delay their return to work plans this fall.
When weighing oil stocks to buy and watch, investors should consider which ones are diversified and which are focused more on U.S. shale in particular regions like the Permian Basin. Crude oil prices have a big impact on oil stocks, especially pure-play shale producers.
For reference purposes here are the top stocks involved in U.S. shale as of Aug. 12.
Exxon Mobil, Chevron
Exxon Mobil (XOM) is the world’s largest publicly traded oil company by market cap ($242 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 the Covid-19 pandemic weighed on oil demand, sending oil prices lower and the company was booted off the Dow Jones Industrial Average in August 2020.
In July, Exxon reported second-quarter earnings and revenue that topped Wall Street estimates. Oil-equivalent production fell 2% to 3.6 million barrels per day. Production in the Permian Basin jumped 34% to 400,000 oil-equivalent bpd.
Exxon said it anticipates demand improvement in its downstream segment with a continued economic recovery. It expects to grow production by 40,000 barrels of oil equivalent per day in Q3.
XOM stock broke out of a flat base in June, according to MarketSmith analysis. But the breakout has since failed. The stock is consolidating in an attempt to break out again.
Meanwhile, global oil rival Chevron (CVX) is closing in on Exxon’s dominance with a $198 billion market cap and is the only oil major on the DJIA.
Chevron and Exxon reportedly engaged in preliminary merger discussions in 2020, sources told the Wall Street Journal. The talks aren’t currently ongoing but sources told the Journal the discussions could be revisited in the future.
Chevron reported Q2 results that beat Wall Street estimates in July. Chevron said it will resume buybacks in the third quarter, with annual repurchases of $2 billion to $3 billion.
CVX stock also failed to break out of its flat base but shares have rebounded off its 200-day line and are headed towards their 50-day line.
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ConocoPhillips is one of the biggest Permian Basin producers and the largest U.S. independent oil company following the $9.7 billion acquisition of Concho Resources in January. Conoco’s market cap is now $76 billion.
Combined production is expected to hit 1.5 million barrels per day, according to an earlier Reuters report.
On Aug. 3, Conoco reported Q2 earnings that beat Wall Street estimates.
COP stock has fallen out of buy range after breaking out of a cup with handle base with a 59.44 entry on June 4. On July 19, the stock triggered the 8% sell rule.
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EOG Resources (EOG) is known as the “Apple of Oil” for its use of technology and big data to aid in drilling operations. The company has a $40 billion market cap.
The company has premium acreage in the Eagle Ford shale formation in south Texas and the Permian’s Delaware Basin.
EOG beat analyst expectations when it reported Q2 results Aug.4. The company maintained its 2021 capital spending guidance at $3.7 billion-$4.1 billion.
On May 7, shares broke out from a flat base with a 77.24 buy point, and beyond the 5% chase zone, which tops out at 81.10. But the stock triggered a sell signal when it fell below its 10-week line in mid-July. Shares are falling towards their 200-day line.
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Pioneer Natural Resources
Pioneer Natural Resources is a pure-play Permian Basin company after selling its Eagle Ford assets in 2019. It has a market cap of $37.5 billion.
In May, Pioneer closed its deal to buy DoublePoint Energy for $6.4 billion for nearly 100,000 acres in the core area of the Permian Basin. That followed a deal to buy Parsley Energy in an all-stock transaction valued at about $4.5 billion that closed early this year.
With both deals, Pioneer now has roughly 1 million net acres in the Permian and became the largest oil producer in the prolific basin, according to company officials. That will put it ahead of Occidental Petroleum (OXY) in the Permian.
Pioneer reported Q2 earnings and revenue below analyst expectations in August. But the company declared an inaugural variable dividend of $1.51 per share to be paid during Q3. That’s on top of its regular dividend.
PXD stock failed to break out of a cup-with-handle base in May. Shares have rebounded off their 200-day line but face resistance at their 50-day line.
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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 $25 billion. Occidental expanded holdings in the prolific play after buying Anadarko for $27 billion in 2019.
To focus on the Permian, Occidental Petroleum sold off an oil field in Qatar to state-owned Qatar Petroleum in 2019. 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.
In August, Occidental Petroleum beat Q2 expectations.
OXY stock broke out of a cup with handle base with a 30.15 entry in June. The stock is trading between its 200-da and 50-day line.
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Unlike many of its shale 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 $14 billion.
Continental Resources reported Q2 earnings and revenue that beat Wall Street expectations in August. It also increased its quarterly dividend to 15 cents from 11 cents.
CLR stock failed to break out of a cup base in June month. The stock then formed a gap-up base with 34.40 as an alternate buy point. But the stock erased a gain of more than 20% from the buy point. It is now consolidating again with a 40.51 entry.
Harold Hamm, Continental’s founder and CEO, stepped down last year and assumed the role of executive chairman. Former ConocoPhillips executive William Berry replaced Hamm.
Follow Gillian Rich on Twitter for energy news and more.
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