Following the recent volatility in both oil prices and related equities, Morgan Stanley analyst Devin McDermott sees a more balanced risk-reward for Exploration & Production companies and downgraded his industry view to In-Line. While oil markets are fundamentally well supplied and structural oversupply persists across natural gas and NGLs, E&P stocks are up about 19% since early December despite roughly unchanged oil prices, McDermott noted. Ongoing focuses on returns, cost and capital efficiency are key drivers of stock performance and he prefers producers that have the scale and/or asset base to support sustainable free cash flow generation at flat commodities prices, the analyst noted. McDermott upgraded Occidental Petroleum (OXY) to Overweight from Equal Weight with a $59 price target, calling the stock a top pick for 2020, noting that the stock now offers a peer-leading 7% dividend yield well covered by growing free cash flow. McDermott also upgraded Concho Resources (CXO) to Equal Weight from Underweight with an $88 price target, citing its Q3 operational turnaround and initiation of a $1.5B share repurchase program. He upgraded Apache (APA) to Equal Weight from Underweight with a $31 price target, stating that the catalyst path from further exploration could continue to support valuation following its oil discovery at its Suriname exploration well. McDermott downgraded Cimarex Energy (XEC) to Equal Weight from Overweight with a $54 price target, noting that the stock has rallied 15% over the past month and citing his view that its gas and NGL weighting offers it less free cash flow growth than Permian peers.