U.S. crude oil futures slipped below $ 72 / b on Friday, but managed to close with a fourth consecutive weekly gain thanks in large part to the slow recovery in production following two hurricanes in the Gulf of Mexico in the United States.
The oil markets started the new week on a losing note, however, with WTI is trading at $ 70.40 / bbl after pulling out of a seven week high of $ 72.86 / bbl which it hit on Wednesday. Natural gas prices also retreated from a seven-year high of $ 5.460 / MMBtu, also set on Wednesday, to trade at $ 4.99 / MMBtu as demand concerns resurfaced after China reports new Covid-19 outbreak in Fujian province as Japan extends tougher Covid-19 lockdown measures.
Marshall Steeves of IHS Markit said oil prices could face near-term weakness as Gulf production recovers; however, he says long-term oil prices will be driven primarily by growth in demand.
That said, the uptrend in the stock market shows no signs of slowing down. According to Michael Hartnett, chief investment strategist at BofA, the market is experiencing a “Monster reallocation of liquidity to equities as the threat of fiscal redistribution recedes and the Fed is expected to stay in favor of Wall Street (liquidity is easiest since July 07). “
Last week saw the largest inflow to US large-cap funds at $ 28.3 billion, more than 4 times the inflow of $ 6.9 billion for US growth funds, $ 4.2 billion $ 1.6 billion for small cap funds and $ 1.6 billion for value stocks. Among large caps, Select Sector SPDR ETF technology (NYSEARCA: XLK) attracted the largest inflows at $ 3.2 billion as the ETF Energy Select Sector SPDR (NYSEARCA: XLE) recorded the fourth highest inflow at $ 1 billion.
Here are five oil and gas stocks that have provided the best returns so far this year (excluding dividends).
# 1. Antero Resources Corporation
Market capitalization: $ 5.24 billion
Year-to-date equity returns: 206.6% Colorado based Antero Resources (NYSE: AR) is the 3rd largest natural gas producer in the United States, pumping 3.2 billion cubic feet / d of natural gas from the Appalachian Basin, where it owns 612,000 net acres of oil and gas properties on 18,893 billion cubic feet (535 billion cubic meters) of estimated proven reserves.
Related: Goldman: Oil Could Hit $ 85 In Q4
The company is gripped by concerns about its burgeoning long-term debt, which reached $ 5.4 billion at the end of September. Fortunately, the company was able to repay much of the debt, which currently stands at $ 2.4 billion.
Despite this year’s impressive run, AR stocks carry a strong buy rating on Wall Street with an average price target of $ 18.32.
# 2. Range Resources Corporation
Market capitalization: $ 4.53 billion
Year-to-date equity returns: 182.8%
Operating in the gas-rich formation of Marcellus at Texas, Range resources (NYSE: RRC) is America’s 8th largest shale gas producer. As of December 31, 2020, the Company owned and operated 1,310 net producing wells and approximately 781,000 net leased acres located in the Appalachian region of the northeastern United States. The company’s acreage is larger than most of its peers, allowing it to enjoy a lower rate of decline and more efficient operations.
Recently, Morgan Stanley chose Range Resources along with its shale gas counterpart Antero Resources as their preferred gas stocks, as their disproportionate exposure to liquids still makes sense with the growing prospects of a squeeze in propane supply. Propane is trading at 75% of WTI, well above the low percentage more typical of the 1950s for this time of year, with the Wall Street bank remaining bullish on LPG prices.
# 3. Continental Resources, Inc.
Market capitalization: $ 15.17 billion
Year-to-date equity returns: 157.5%
Based in Oklahoma Continental resources (NYSE: CLR), the company controlled by billionaire Harold Hamm, produces crude oil and natural gas primarily in the northern, southern, and eastern regions of the United States. The Company sells its production of crude oil and natural gas to energy marketing companies, crude oil refining companies, and natural gas gathering and processing companies. As of December 31, 2020, its proved reserves stood at 1,104 million barrels of crude oil equivalent (MMBoe) with proven developed reserves of 627 MBoe.
Last year, during the energy crisis, Continental Resources ceased all shale operations in North Dakota and shut down most of the wells at its Bakken oilfield totaling around 200,000 bpd. Fortunately, the company was able to bounce back and forecast $ 2.4 billion in free cash flow in 2021 at current strip prices. The company also increased its quarterly dividend to $ 0.15 per share and resumed its share buyback program. Management said they expect the leverage to be less than 1.0x by the end of the year.
# 4. Magnolia Oil and Gas Company
Market capitalization: $ 3.94 billion
Year-to-date equity returns: 136.7%
Magnolia Oil and Gas Company (NYSE: MGY) is a Houston, Texas-based company engaged in the acquisition, development, exploration and production of oil, natural gas and natural gas liquids reserves in the States -United. The Company’s properties are located primarily in Karnes County and the Giddings Field in South Texas, primarily comprising the Eagle Ford Shale and the Austin Chalk Formation. As of December 31, 2020, its assets consisted of a total lease of 460,398 net acres.
In August, analysts at Truist moved MGY from Hold to Buy with a price target of $ 21 (26% up from current price), saying the company is expected to continue to record continued outperformance and up by. compared to the Giddings area of the company, thus driving dividend growth and share buybacks.
In addition, Magnolia has always maintained a philosophy of low debt and positive free cash flow, which has served the company well during the crisis.
# 5. PDC Energy, Inc.
Market capitalization: $ 4.35 billion
Year-to-date equity returns: 114.6%
One of JP Morgan’s fall “plans” for oil and gas exploration and production companies are those with the highest potential return for “significant” levels of free cash flow to shareholders. , rather than just using them to reduce debt, like most oil and gas companies have done this year. Indeed, JPM says that since the end of 2020, the companies in the company’s hedging group have reduced their net debt by $ 9.65 billion thanks to their balance sheets as of June 30.
PDC Energy (NASDAQ: PDCE) is one such company that has announced ROI strategies beyond normal dividends.
PDC Energy is an independent exploration and production company that produces crude oil, natural gas and natural gas liquids in the United States. The company’s operations are primarily located in the Wattenberg field in Colorado and in the Delaware Basin in Texas. As of December 31, 2020, it held interests in approximately 3,727 producing gross wells.
JPM also favors PDCE as the first choice because:
“We believe the current pricing environment remains a ‘sweet spot’, with demand gradually recovering from COVID-19 and the market share war between OPEC and shale remaining fairly subdued in large part thanks to market discipline. public companies on the shale.. “
By Alex Kimani for Oil Octobers
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