Why These Upstream Big Fishes Outperformed Peers Last Week

Upstream stocks

Between December 7 and 14, EQT Corp (EQT) gained the most on our list of upstream energy stocks. However, the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) fell 7.8%—the largest fall among the major energy ETFs we discussed in the previous part of this series. EQT shareholders Toby Rice and Derek Rice, who hold 2.75% of the company, expressed disagreement with the current management team last week.

Why These Upstream Big Fishes Outperformed Peers Last Week

Other outperformers

ConocoPhillips (COP), Anadarko Petroleum Corporation (APC), Occidental Petroleum Corporation (OXY), and Continental Resources (CLR) were the second-, third-, fourth-, and fifth-largest outperformers, respectively, on our list of upstream energy stocks last week.

What’s behind the outperformance?

According to ConocoPhillips’s (COP) management, the company requires sustaining capital of $3.5 billion per year in case of flat production between 2018 and 2020. The funding is easily achievable from the company’s cash flow from operations—even if oil is at $40 per barrel. ConocoPhillips is the S&P 500 Index’s (SPY) largest upstream energy-sector holding. Occidental Petroleum (OXY) is confident that it will continue to pay dividends and maintain its production status quo, even with WTI crude oil at $40.

However, APC management expects to generate significant cash in 2019 with WTI crude oil at $60 per barrel, Brent crude oil at $70 per barrel, and natural gas at $3 per MMBtu. OXY and APC are the S&P 500 Index’s (SPY) third- and fourth-largest upstream energy sector holdings, respectively.

Last week, US crude oil January futures closed at $51.2 per barrel and natural gas January futures closed at $3.827 per MMBtu.

Next in this series, we’ll discuss the biggest declines in the upstream energy space.