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.
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.