Top 5 Energy Stocks To Own Right Now

Top 5 Energy Stocks To Own Right Now: ConocoPhillips(COP)

Advisors' Opinion:

• [By Wayne Duggan]

  Bernstein maintains Outperform ratings on the following oil stocks:

  Apache Corporation (NYSE: APA) Anadarko Petroleum Corporation (NYSE: APC) Cobalt International Energy, Inc. (NYSE: CIE) Cabot Oil & Gas Corporation (NYSE: COG) ConocoPhillips (NYSE: COP) Devon Energy Corp (NYSE: DVN) EOG Resources Inc (NYSE: EOG) Range Resources Corp. (NYSE: RRC) Southwestern Energy Company (NYSE: SWN)

  GMP analyst Bob Bakanauskas went long E&Ps back on February 3. He predicts that the oil market will transition from oversupply to undersupply in 2017. From that point forward, the world will once again require shale production growth.

• [By Ben Levisohn]

  Citigroup’s Alastair Syme and Fernando Valle point to ConocoPhillips’ (COP) plan to sell “stranded” assets as the one big surprise from the oil giant’s investor update yesterday. They explain:

  Agence France-Presse/Getty Images

  The core elements of Conocos strategy update had by and large been flagged to the market through the course of this year rebalancing the business to a lower oil price, boosting profitability and a promise to increase returns to shareholders. Much of this resembles the strategy of Big Oil peers. But one key, new, and different element is the promise to sell $5-8 B of North American gas assets assets that we would argue the market regards as stranded and attributes no value to and return $3 B of that capital to shareholders…

  Conocos claim of 18 B boe of resources that are economic in a sub-$50/bbl world mirrors our own analysis (see Global Big Oil: Weathering the Storm). We value this core asset base at $95 B which, after stripping our $30 B of debt (including decom liabilities), alone offers c. 30% upside to current equity value. This of course gives no value to another 25 B boe of company resour! ces that sit above a $50/bbl cost of supply.Conoco is looking to demonstrate that there is some value in this stranded portfolio, targeting NAM gas where there are buyers who believe in price recovery. The suggestion is that the majority of the $5-8 B in deals is close to being concluded. Although not specified, San Juan, Barnet, Uinta, Deep Basin and Clearwater are all substantial gas asset positions thatConoco could look to sell…

  It looks a decent attempt to unlock much of the hidden value we see in theConoco equity. Buy.

  Shares of ConocoPhillips have dropped 2.7% to $43.59 at 11:16 a.m. today, while the Energy Select Sector SPDR ETF (XLE) is off 2.3% at $69.12.

• [By Ben Levisohn]

  Unlike ConocoPhillips (COP), Hess’s (HES) dividend wasn’t big enough to move the needle if cut. So it’s selling stock instead:

  Bloomberg News

  Hess has priced the concurrent offering of ~28.8mm shares of common stock and ~11.5mm depositary shares, assuming the over-allotment options are exercised. The depositary shares represent a 1/20th interest in each share of Hess 8% Mandatory Convertible Preferred Stock, which unless converted earlier at the option of the holder will convert on or around February 1st, 2019 into Hess common shares. Based on the equity offering price of $39/share, we estimate total net proceeds of ~$1.65bn net common offering proceeds of $1.09bn and net depositary share offering proceeds of ~$558mm. The offerings represent ~10% of Hess prior outstanding share count and ~15% on fully diluted basis including the conversion of the convertible preferred shares.

  Hess said it will use the proceeds from the offerings for general corporate purposes and to strengthen its balance sheet. Prior to the offering, Hess already had one of the strongest balance sheets within our E&P coverage group with a net debt/capitalization ratio of ~14% at YE15 and more than ~$2.7bn of cash on its balance sheet. However, based on current NYMEX strip ! prices an! d after dividends, Hess was confronting a ~$2.0bn cash flow outspend this year and another ~$2.3bn in 2017. Mgmt. emphasized that it has no intention to cut the companys dividend.

  Mgmt. emphasized that the offerings were not intended to pre-fund any M&A activity or to accelerate drilling activity.

  Shares of Hess have tumbled 11% to $38.89 at 1:26 p.m. today, while the Energy Select Sector SPDR ETF (XLE) has fallen 2.2% to $56.

• [By Ben Levisohn]

  We have seen several dividend cuts in the recent past, including Anadarko Petroleum cutting its dividend by 81%…and we expect more companies to follow suit. Chesapeake Energy (CHK), ConocoPhillips (COP), Encana,Marathon Oil and Noble Energy (NBL) are among energy companies that have also cut dividends in the past 12 months, but dividend requirements even after several cuts will consume ~26% of 2016 estimated cash flow at current dividend rates (15% excluding Occidental Petroleum (OXY)) for the large cap E&Ps we cover. We believe most of the companies with a dividend yield of more than 1.5% should consider cutting the dividend and find the following companies more likely than not to reduce dividends:Apache (2.5% yield),Devon Energy (4%),Encana (1.5%) andMarathon Oil (2.5%). We believe Canadian Natural Resource (CNQ) (3.0%) is likely to maintain its dividend while Occidental (4.5%) has the financial strength to maintain or even increase the divide nd…

source from Top Stocks For 2015:http://www.topstocksblog.com/top-5-energy-stocks-to-own-right-now-4.html