In 2019 so far, Hess Corporation (HES) and Noble Energy (NBL) have risen 61.8% and 15.1%, respectively. Among upstream stocks that are also constituents of the S&P 500 Index (SPY), HES and NBL are the outperformers. Devon Energy (DVN) has risen 1.9%, making it the third-largest gainer among upstream stocks.
On a YTD (year-to-date) basis, WTI crude oil futures have risen 27.7%, while Henry Hub natural gas futures have fallen 13.9% as of November 25. Let’s discuss the top and bottom three upstream stocks based on their price performances.
Top upstream outperformers
Hess Corporation’s upstream assets could increase its profitability by 2025. In the next six years, HES is targeting a “Brent portfolio breakeven” of less than $40 per barrel. At this break-even level, it could create considerable wealth for investors. Yesterday, Brent crude oil prices settled at $63.65 per barrel. To learn more, read Hess Corp: Performance, Holdings, and Analysts’ Views.
Early this month, Noble Energy (NBL) reported its third-quarter earnings results. It reported adjusted EPS of -$0.10. Its EPS outperformed analysts’ mean estimate by 10%. Based on the company’s earnings presentation, it’s reduced its capex by $200 million from its earlier guidance YTD.
Moreover, the company expects free cash flow of more than $500 million next year. In the first three quarters of 2019, its total cumulative free cash flow was -$469 million. Its Leviathan natural gas project will come online by December 2019 and will be an important cash engine for 2020.
In February, Devon Energy (DVN) decided to separate its Barnett Shale and Canadian assets. To learn more, read Devon Energy’s Announcement Could Boost Investor Confidence.
Usually, Western Canadian Select prices are below WTI crude oil prices. Last year, the gap widened and may have negatively affected Devon. Read Why Devon Energy Fell in November to understand this relationship. Moreover, DVN’s adjusted EPS outperformed analysts’ mean estimate by at least 25% in the first three quarters of 2019.
Interestingly, Occidental Petroleum (OXY) has lost around 32% YTD and underperformed its upstream peers. Its peers include constituents of the S&P 500 Index. The deal between OXY and Anadarko may have been a major driver of the decline.
Activist investor Carl Icahn criticized and fought with OXY’s management about the deal, which he called “hugely overpriced.” Read Occidental Petroleum Earnings and Icahn versus Buffett to learn more.
On November 18, JPMorgan Chase reduced its target price on CXO by $2 to $130. Earlier this month, Citigroup reduced its target price by $2 to $72. In the third quarter, CXO reported adjusted EPS of $0.61, 11.5% lower than analysts’ mean estimate.
For Cabot, lower natural gas prices could be its most important driver. In the third quarter, COG’s production mix in natural gas was 100%. We’ve already discussed the fall in natural gas prices. Moreover, this winter season could also disappoint the natural gas bulls.
In addition, with rising oil production from the shale regions, natural gas supplies are also rising. Read Will the Rig Count Support Natural Gas Prices Today? to understand this relationship.