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Fly News Breaks for January 13, 2020
Jan 13, 2020 | 07:32 EDT
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.
News For OXY;CXO;APA;XEC From the Last 2 Days
May 27, 2020 | 14:50 EDT
Occidental Petroleum is being sued by shareholders who claim that they suffered billions of dollars in losses because the company, which is deeply in debt, hid its ability to weather falling oil prices, after paying $35.7B to acquire Anadarko Petroleum, Reuters' Jonathan Stempel reports. The proposed securities class action was filed in a New York state court on behalf of former Anadarko investors who swapped their shares for Occidental shares, and investors who acquired $24.5B of Occidental bonds that helped fund the tie-up, Stempel notes. Shareholders claim that Occidental should have disclosed in its stock and bond registration statements how quadrupling its debt load to $40B would leave it "precariously exposed" to plunging oil prices, and undermine its ability to increase shale oil production and its common stock dividend, the author notes. Reference Link
May 27, 2020 | 11:05 EDT
Bullish option flow detected in Occidental Petroleum with 62,536 calls trading, 5x expected, and implied vol increasing over 1 point to 80.57%. Jul-20 21 calls and Jul-20 20 calls are the most active options, with total volume in those strikes near 49,100 contracts. The Put/Call Ratio is 0.11. Earnings are expected on July 30th.