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The Zacks Analyst Blog Highlights: ConocoPhillips, Pioneer Natural Resources and Chevron

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For Immediate Release

Chicago, IL – January 15, 2021 – Zacks.com 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: ConocoPhillips (COP - Free Report) , Pioneer Natural Resources Company (PXD - Free Report) and Chevron Corporation (CVX - Free Report) .

Here are highlights from Thursday’s Analyst Blog:

3 Oil Stocks Gaining Traction from $50/Barrel Oil Prices

In 2020, when crude price was trading in the bear territory, oil producers slashed costs, partly induced by a wave of merger accords to survive the pandemic. With lower cost structures, oil majors are now in a better position since oil price has recovered considerably in the past several months. Hence, it can be said that 2021 is going to be a favorable year for oil explorers and producers.

Crude Price Above $50

The price of West Texas Intermediate (WTI) crude has risen roughly 9% since the onset of this year and is now gradually approaching the $55 a barrel mark. Thus, the price of crude oil has witnessed a significant recovery over the past several months from the pandemic lows in April 2020 when the commodity price had slipped into a negative territory.

This positive momentum is likely to continue with the recent coronavirus vaccine rollout and the massive pandemic aid bill that was recently signed into law by the outgoing President Donald Trump. These positives have already been bolstering investor confidence in a strong fuel demand rebound this year.

Notably, the recent surge in the commodity price was also supported by a surprise move by Saudi Arabia that will see the kingdom unilaterally cut 1 million barrels of crude production every day starting this February through March.

Good Times Ahead

Crude price above $50 is much more profitable for U.S. oil companies since many analysts believe that the average breakeven costs for the firms dropped significantly below the price at which the commodity is currently trading. Notably, when the coronavirus pandemic hit the energy market hard last year, causing oil price to plunge, the upstream companies trimmed their costs to stay afloat. Thus, with low-cost structures, the breakeven costs also declined.

Overall, with the possibilities to restore fuel demand and perk up the business scenario further, the U.S. oil producers will likely be in a better position to generate higher cash flows for rewarding their shareholders with more dividend payments.   

3 Stocks to Gain

In light of the tailwinds, it will be better to focus on energy players that entered into merger agreements last year to weather the low oil prices, triggered by the coronavirus pandemic.

With acquisition deals, the energy majors will realize significant cost savings, which are paving the way for more cash generation. We narrowed down to three currently Zacks Rank #3 (Hold) that are well positioned to gain in the near term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In October 2020, ConocoPhillips confirmed its decision to buy Concho Resources in an all-stock transaction, valued at $9.7 billion. The deal, likely to be consummated by the first quarter of 2021, will not only boost ConocoPhillips’ competitive position in the Permian Basin, but also help save costs and capital worth $500 million, annually, by 2022.

Management also announced that through regular dividends and other cash distributions, more than 30% of operating cash flows will be returned to the company’s shareholders.

Pioneer Natural Resources Company recently completed the acquisition of Parsley Energy, creating an upstream giant in the prolific Permian Basin. With this buyout, Pioneer bolsters its Permian presence. Importantly, the combined entity is now expected to save costs worth $325 million, annually, courtesy of the consolidated synergies.

On Oct 5, Chevron completed the acquisition of Noble Energy in an all-stock deal worth $5 billion. The buyout of Noble Energy’s assets is anticipated to expand Chevron’s base in the DJ Basin of Colorado and the Permian Basin across West Texas and New Mexico. The acquisition will also generate potential annual cost savings of $300 million within a year of the deal's closing.

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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 https://www.zacks.com/performance for information about the performance numbers displayed in this press release.


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