瑞信-美股-石油与天然气行业-2019年Q3美国石油与天然气行业季度预览-2019.10.21-30页.pdf
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Oil & Gas E&P Quarterly Preview
Guide to Navigating 3Q Results
Oil & Gas Exploration & Production | Sector Review
Positive/negative 3Q19 results and updates. Our 3Q CFPS estimates for our E&P
coverage are ~4% below consensus on average, likely in part due to the Street being slow
to mark-to-market for the weak commodity prices during the quarter. Relative to 3Q
consensus forecasts, we are most positive on EOG, MRO, PXD, and WPX while most
cautious on AR, MUR, RRC, and XOG.
■ Major theme will be 2020 outlooks/commentary. While the majority of E&Ps will wait
until early next year to provide “explicit” 2020 guidance, most have already given broad
parameters or guideposts and are generally signaling budgets will be based on
~$50-$55/Bbl WTI (in line with the current futures strip) with an emphasis on FCF
neutrality (at a minimum). But given recent volatility and macro uncertainty, we think E&Ps
will ultimately budget closer to ~$50/Bbl (or potentially lower). We see a number of E&Ps
walking down 2020 expectations this earnings season: APA, CHK, RRC, XOG, and
expect OXY will officially guide to 2020 capex/volumes below its current base case in
order to preserve FCF. Overall, we preliminarily forecast capex for our E&P coverage down
~5% YoY (near consensus) but see downside risk if WTI stays in the low $50s/Bbl.
■ Implications for 4Q and YE19 exit rates. We also expect close attention will be placed
on 3Q results’ implications for 4Q, particularly as it relates to spending, activity levels, and
production heading into 2020. We forecast ~80% of FY19 capex programs were spent
through 3Q19, adding pressure for E&Ps to deliver on full year budgets without sacrificing
planned activity levels. We also expect spending/completion activity for 2019 to trough in
4Q which, given the lag effect between a change in activity levels and impact on production,
implies downside bias to both E&P 1H20 volume forecasts (consensus forecasting robust
QoQ growth of ~3% for 1Q20) and US oil production estimates for next year. Notably,
most of our conversations with E&Ps seem to indicate no (immediate) pick-up in activity
levels relative to 4Q19.
■ Broader industry themes we expect will dominate this earnings season: 1)
softening oilfield service costs, which should provide a tailwind to well costs in 2H19-
2020; 2) how E&Ps with federal acreage exposure are interpreting potential risks of
increased regulation as Democrat primary candidates (particularly Senator Elizabeth
Warren) continue to dial up the rhetoric on regulating fossil fuel development on federal
lands and a “fracking ban”; and 3) increased focus on M&A as three more E&P
corporate deals have been announced since mid-year (CPE for CRZO, PDCE-SRCI, PE-
JAG), although we continue to see corporate consolidation as more of a long-term story.
■ Low FCF yields keep E&P sector out of favor. But we expect relative outperformance
from E&Ps that offer a combination of competitive growth, above-average FCF yields,
willingness to return cash to shareholders, and attractive relative valuation. Top picks are
COP, FANG, PE, PXD, MRO, and VNOM. We have Underperform ratings on CHK,
GPOR, SWN, and WLL.
Please see separate preview for detailed SMID-cap company write-ups.
21 October 2019
Equity Research
Americas | United States
DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS,
LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do
business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of
interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their
investment decision.
Research Analysts
William Featherston
212 325 6283
william.featherston@credit-suisse.com
Betty Jiang, CFA
212 325 6259
betty.jiang@credit-suisse.com
William Janela, CFA
212 325 2646
william.janela@credit-suisse.com
Michael Ziffer, CFA
212 538 0568
michael.ziffer@credit-suisse.com
Christopher Zhang, CFA
212 325 4431
chris.zhang@credit-suisse.com
Chris Baker, CFA
212 325 6375
chris.baker@credit-suisse.com
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