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The Zacks Analyst Blog Highlights: Whiting Petroleum, Chesapeake Energy, Marathon Oil, Pioneer Natural Resources and Continental Resources

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For Immediate Release

Chicago, IL – August 20, 2020 – announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Whiting Petroleum Corporation , Chesapeake Energy Corporation , Marathon Oil Corporation (MRO - Free Report) , Pioneer Natural Resources Company (PXD - Free Report) and Continental Resources, Inc. (CLR - Free Report) .

Here are highlights from Wednesday’s Analyst Blog:

Are There Signs of Green Shoots in U.S. Shale Oil Production?

The shale revolution greatly improved U.S. energy independence. But it also ushered in a flood of domestic supply that is unlikely to subside anytime soon. The breakneck production growth continued to put pressure on prices to an extent where the majority of oil plays worked on razor thin margins. There was always a concern that the frenzied activity out of the shale region was economically unsustainable in the long term given the massive capital burn, depressed returns and huge debts.

Shale’s Economic Viability Breaks Down

Then came the coronavirus pandemic, the subsequent hit to global oil demand and with it, collapse of prices. With WTI crude futures falling below $30, $20, $10 and even going negative for a while, U.S. shale oil producers started feeling the heat. Even the Permian, where production had been on a tear until recently, was forced to go into negative growth amid unsustainable oil prices. The WTI benchmark may have more than doubled from their April lows, but oil at $40 is still unprofitable for most companies, especially the ones with huge debt burdens.

Oil between $45 and $50 a barrel is considered the break-even point for most shale operators, which means that they need crude prices of at least $45 to balance their operating cash flows with capital expenditure. Some shale companies such as Whiting Petroleum, and Chesapeake Energy were already struggling to turn profitable even before the coronavirus struck and have since filed for bankruptcy. At the prevailing crude prices of around $42.50 per barrel, a lot more firms are unlikely to hit cash flow breakeven.

Players Dial Back Production

As a response to the bearish environment, the shale fraternity — especially the ones whose production mix is heavily tilted toward crude — has scaled back drilling activity and cut their capital budgets significantly.

Per the latest edition of the EIA’s Drilling Productivity Report, crude output in these prolific shale plays is expected to decrease in September, from 7,577 thousand barrels per day (Mbbl/d) in August to 7,558 Mbbl/d — levels last seen during 2018. A closer look at America’s seven most significant shale basins would reflect that September would be the fifth month in a row that oil production will shrink.

But Permian Output Shows Signs of Revival

The Eagle Ford is set to lose 14 Mbbl/d between July and August, the most across all major shale basins, as the likes of Marathon Oil have slashed capital spending. Most other formations are also set to decline in September.

However, production in two of America’s biggest oil fields — Permian Basin in the western part of Texas and the south-eastern part of New Mexico, and Bakken in North Dakota — is making a comeback after months of bust.   

In particular, output from United States’ number one basin — Permian — is expected to rise by 7 Mbbl/d month over month to 4,154 Mbbl/d in September, indicating the first increase in five months. With oil prices having rebounded from the coronavirus-induced lows in late April to more than $40 per barrel now, the likes of Parsley Energy and Pioneer Natural Resources have brought some previously shut-in production back online.

In the Bakken region too, output is expected to edge higher by 7 Mbbl/d to 1,191 Mbbl/d in September with the Zacks Rank #3 (Hold) Continental Resources restoring curtailed volumes.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


In a nutshell, the decelerating field work over the past few months is leading to significant pullback in crude oil output in the U.S. shale basins. At the same time, stronger oil prices are prompting more companies to reactivate their coronavirus-hampered production.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit information about the performance numbers displayed in this press release.

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