- The Goldman Sachs (NYSE:GS) 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.
- Now read: Why These 2 Oil Producers Can Withstand The Extended Downturn
Original article