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Barclays Warns Of Big Tumble For U.S. Oil Producers

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Barclays Warns Of Big Tumble For U.S. Oil Producers

North American oil and gas producers could see further stock price declines because investors harbor unrealistically high expectations for energy prices, an analyst said Wednesday.

Barclays' Robert R. Driscoll downgraded a raft of companies and warned that equity values among North American oil producers could fall a further 30 percent.

"The abundance of relatively cheap oil from the U.S. production could delay a price recovery," according to Driscoll, who expects $50 a barrel for West Texas Crude will prevail in 2015, down from a current price of $57.

Production costs for oil have declined 25 percent in the past two years, while companies are currently cutting capital spending.

The lower spending will result in even lower costs to producers, and Driscoll expects North American oil production growth will therefore remain strong in 2015.

Driscoll downgraded four companies to Underweight from Equal-Weight: Chesapeake Energy Corporation (NYSE: CHK), Halcon Resources Corp (NYSE: HK), Resolute Energy Corp (NYSE: REN) and SandRidge Energy Inc. (NYSE: SD).

A half-dozen companies got cut to Equal-Weight, including Continental Resources, Inc. (NYSE: CLR), Devon Energy Corp (NYSE: DVN), Marathon Oil Corporation (NYSE: MRO), RSP Permian Inc (NYSE: RSPP) and Whiting Petroleum Corp (NYSE: WLL).

Driscoll also downgraded Kosmos Energy Ltd (NYSE: KOS) to Equal-Weight and reinstated an Equal-Weight rating and $15 target on Rice Energy Inc (NYSE: RICE).

Latest Ratings for CHK

DateFirmActionFromTo
May 2020UBSMaintainsSell
May 2020CFRADowngradesSellStrong Sell
Apr 2020B of A SecuritiesMaintainsUnderperform

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