Goldman Sachs just came out with an $80 price target on WTI Crude Oil. This note from National Bank helps to explain things:
“So, while the oil field service narrative has generally been muted under the context of upstream discipline, the Majors are signaling the initial innings of a demand-led recovery; we suggest that global production is potentially impaired and higher activity levels will be inevitable and could magnify the cycle through the supply side. As an example, major market prognosticators (EIA, OPEC, etc.) suggest U.S. production being restored towards 12.3 mmbbl/d by year-end 2022 (+12%); however, in our estimation, under the prevailing rig count and historical rig efficiencies, the U.S. market would actually see volumes contract. To attain the suggested forecasts, spending and activity will have to be restored, and we would suggest that U.S. oil rig counts need to average 600-650 (~2x current) to satisfy that call on supply.”
In other words, insufficient investments have been made in both restoring existing production capacity and developing new production capacity to meet the jump in upcoming forecasted demand.
It’s not that difficult to understand. If you are an oil company, when oil dipped below zero last year and you spent the rest of the year hearing about the likelihood of the same stifling lockdowns returning – all the way until the vaccine was approved in December – would you have had an easy time pouring money into pushing new production capacity into action with a six-month lag?
But now, here we are, on the verge of “reopening”, with all the pent-up travel demand that implies, and interest rates are at 0% and we have pushed several trillion dollars out the door in monetary expansion and fiscal stimulus, and no one has been willing to bet big on new oil and gas production capacity.
The energy market is simple: it’s just a supply-versus-demand equation. Right now, investors can probably rely on the ideas that implies.
With that in mind, we take a closer look at a few stocks aligned with that theme that may deserve some extra attention, including: SM Energy Co (NYSE: SM), Range Resources Corp. (NYSE: RRC), Allied Energy Ord Shs (OTC US: AGYP), and Cimarex Energy Co (NYSE: XEC).
SM Energy Co (NYSE: SM) bills itself as an independent energy company engaged in the acquisition, exploration, development, and production of oil, gas, and NGLs in the state of Texas.
SM Energy routinely posts important information about the Company on its website.
SM Energy Co (NYSE: SM) most recently announced that it expects to release its first quarter 2021 financial and operating results after market on April 29, 2021.
Last time around, the company announced Fourth quarter 2020 production volumes at 122.4 MBoe/d, 51% oil, including production that exceeded guidance, predominantly due to better-than-expected base production from existing Midland Basin wells.
The stock has been acting well over recent days, up something like 12% in that time. Shares of the stock have powered higher over the past month, rallying roughly 12% in that time on strong overall action.
SM Energy Co (NYSE: SM) generated sales of $320.3M, according to information released in the company’s most recent quarterly financial report. That adds up to a sequential quarter-over-quarter growth rate of 14% on the top line. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($10K against $583.7M, respectively).
Range Resources Corp. (NYSE: RRC) trumpets itself as a leading U.S. independent natural gas and NGL producer with operations focused on stacked-pay projects in the Appalachian Basin.
The Company is headquartered in Fort Worth, Texas.
Range Resources Corp. (NYSE: RRC) most recently announced its first quarter 2021 financial results, including realizations before index hedges of $3.20 per mcfe, or approximately $0.51 above NYMEX natural gas, pre-hedge NGL realization of $26.35 per barrel, highest since late 2018, and NGL differential of $1.52 per barrel above Mont Belvieu, best in Company history.
Commenting on the quarter, Jeff Ventura, the Company’s CEO said, “Range continues to make progress on key near-term objectives: improving margins with a focus on cost structure, generating free cash flow, enhancing liquidity, and operating safely while maintaining peer-leading capital efficiency. There were sizable improvements in pricing quarter-over-quarter leading to Range’s $193 million in cash flow from operations before changes in working capital. The corresponding capital spending of $105 million generated solid free cash flow for the quarter.
The context for this announcement is a bit of a bid, with shares acting well over the past five days, up about 11% in that timeframe.
Range Resources Corp. (NYSE: RRC) pulled in sales of $513.4M in its last reported quarterly financials, representing top line growth of -12.6%. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($458K against $706.8M, respectively).
Allied Energy Ord Shs (OTC US: AGYP) specializes in the business of reworking and re-completing existing oil and gas wells located in the thousands of mature oil and gas producing fields across the United States, with the objective of mobilizing its expertise and technology to drive higher production volumes, longer well life, and more efficient recovery of proven and available oil and gas reserves in acquired wells.
AGYP recently put out a comprehensive corporate update that explains its overall strategy, and that’s worth checking out. The strategy appears to be centered on diversification and selectivity in target wells.
Allied Energy Ord Shs (OTC US: AGYP) recently announced that it has submitted and posted its bond for the P-4 and P-5 applications to the Texas Railroad Commission, Allied is waiting on the Texas Railroad Commission to accept their bond and active the P5 operating permit.
According to the company’s release, Allied has secured Oil Cat Energy Services for the filing of the necessary Underground Injection Permit for saltwater injection for the Green lease. Allied will use Oil Cat Energy Services as the go-to solution for surveying the plat for the precise injection well location, for securing the drilling permit for the injection well, for engineering services and consulting, and workover engineering for new production well set ups for increased fluid production rates.
Allied Energy Corporation CEO, George Montieth added: “We are extremely excited about our recent acquisition of the Palo Pinto wells and have a high confidence that these wells will become part of Allied Energy Corporation’s oil production numbers. These formerly producing wells are perfect candidates for modern reworking and recompleting technology that will give these old wells new life. In many cases, the most productive days are still ahead for some of these wells!”
Allied Energy Ord Shs (OTC US: AGYP) shares have been in a sturdy upward trend over the past four months, rising as much as 500% in that time as the company ramps up its operations. Given the potential for an oil shortage this year, AGYP is well positioned for further gains as the company expands its reach and scale.
Cimarex Energy Co (NYSE: XEC) frames itself as an independent oil and gas exploration and production company with nearly 620 million barrels of proven reserves and owned interests in roughly 2,800 productive oil and gas wells.
The company’s principal operations in the Permian Basin and Mid-Continent areas of the U.S.
Cimarex Energy Co (NYSE: XEC) most recently announced that Megan Hays will join Cimarex as Vice President of Investor Relations. Megan joins Cimarex from Concho Resources Inc., where she most recently served as Vice President of Investor Relations and Public Affairs. According to the release, she has 15 years of experience in strategic communications, sustainability, corporate development and capital markets within the energy industry. Megan will report to Senior Vice President and Chief Financial Officer, Mark Burford.
Mr. Burford, said, “We are excited to have Megan join our team. She is an accomplished leader with a strong network of relationships across the financial community. Megan’s experience in the industry – from strategy to sustainability – will make her a great addition to our company.”
The context for this announcement is a bit of a bid, with shares acting well over the past five days, up about 10% in that timeframe.
Cimarex Energy Co (NYSE: XEC) pulled in sales of $434.7M in its last reported quarterly financials, representing top line growth of -33.9%. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($273.1M against $660.2M, respectively).
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