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Zacks Industry Outlook Highlights: Canadian Natural Resources, Jones Energy, Gulfport Energy, Cheniere Energy and Antero Resources

For Immediate Release

Chicago, IL –July 24, 2017 – Today, Zacks Equity Research discusses the Industry: Oil & Gas, Part 2, including Canadian Natural Resources Ltd. (NYSE: CNQ Free Report), Jones Energy Inc. (NYSE: JONE Free Report), Gulfport Energy Corp. (NASDAQ: GPOR Free Report), Cheniere Energy Inc. (NYSEMKT: LNG Free Report) and Antero Resources Corp. (NYSE: AR Free Report).

Industry: Oil & Gas, Part 2


Both oil and natural gas have rebounded from their multi-year lows reached in 2016 and while the commodities may not be at levels many thought they would be at the end of the year, even at today’s prices certain companies are in a position to earn profits.

As a proof, over the past four quarters, the number of rigs searching for oil and gas in the country have been surging. According to Baker Hughes, the GE-owned company’s closely watched weekly report, the oil rig count was 765 last week and the natural gas rig count was 187 – each of them more than doubling from year-earlier levels.

Throughout the downturn, energy firms worked tirelessly to cut costs down to a bare minimum and look for innovative ways to churn out more oil and gas. And they managed to do just that by improving drilling techniques and extracting favorable terms from the beleaguered service producers.

Oil’s recovery to $45 and natural gas touching the magic $3, predictably, has had a positive effect on stocks in the sector. In particular, savvy investors might view the price bump as the impetus the stocks need after freefalling for three years. Undoubtedly, still a long way to go, but improving crude and natural gas prices may have already primed certain energy producers and linked entities for upward momentum.

True, the energy market faces many uncertainties and it may not be time to buy stocks indiscriminately, but there are players that look like pretty compelling investments.

Good Time to Buy High Quality E&P Names

Oil prices have gained almost 10% since falling to a ten-month low in late June. The recent rebound has been fueled by multiple weeks of strong inventory draws in the U.S. crude and gasoline stockpiles.

While all crude-focused stocks stand to gain from the nascent oil rally, companies in the exploration and production (E&P) sector are the best placed, as they will be able to extract more value for their products.

Moreover, the firms boast conservative balance sheets with enough cash on hand and manageable leverage. This provides them ample flexibility to make acquisitions or grow internally. Moreover, driven by operational efficiencies, these entities have been able to reduce unit costs -- an impressive achievement amid the low realization scenario.

Apart from Zacks Rank #1 (Strong Buy)Canadian Natural Resources Ltd. (NYSE: CNQ Free Report), we advocate the likes of Jones Energy Inc. (NYSE: JONE Free Report) and Gulfport Energy Corp. (NASDAQ: GPOR Free Report). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Jump in Exports to Support Natural Gas

Despite the uncertain natural gas fundamentals and the understandable reluctance on the investors’ part to dip their feet into these stocks, the year-on-year comparison for the commodity is looking good. Prices this year are up around 10% from where they were twelve months back, while natural gas inventory is 289 Bcf (or 8.9%) below the year-ago figure.

New pipelines to Mexico and the startup of the Sabine Pass LNG terminal in Louisiana – North America’s first large-scale liquefied gas export facility – have meant that exports out of the U.S. have taken a quantum leap. In fact, as per the Energy Department, gross liquefied natural gas exports are set to average 1.9 billion cubic feet per day in 2017, almost quadrupling from last year.

While domestic natural gas production is expected to rebound this year, replacing coal-fired power plants and higher demand from industrial projects will likely take care of the increased output.

The resulting effect will ensure natural gas storage keeping pace with the 5-year average in the near future, with deficits piling up later on. Over the summer, these secular headwinds will start to have a positive impact on natural gas sentiment and price.

As a result, the EIA projects natural gas prices to average $3.10 per million British thermal units (MMBtu) in 2017, compared with a 2016 average of $2.51/MMBtu. This bodes well for companies like Cheniere Energy Inc. (NYSEMKT: LNG Free Report) and Antero Resources Corp. (NYSE: AR Free Report) -- those that produce and market the fuel.

Zacks Industry Rank

Within the Zacks Industry classification, health insurers are broadly grouped in the Medical sector (one of the 16 Zacks sectors).

We rank 265 industries into 16 Zacks sectors based on the earnings outlook and fundamental strength of the constituent companies in each industry. We put our X industries into two groups: the top half (industries with the best average Zacks Rank) and the bottom half (the industries with the worst average Zacks Rank).

Over the last 10 years, using a one-week rebalance, the top half beat the bottom half by more than twice as much. The Zacks Industry Rank is #177 (bottom 34%). The ranking is available on the Zacks Industry Rank page.

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Canadian Natural Resources Limited (CNQ): Free Stock Analysis Report
Jones Energy, Inc. (JONE): Free Stock Analysis Report
Gulfport Energy Corporation (GPOR): Free Stock Analysis Report
Cheniere Energy, Inc. (LNG): Free Stock Analysis Report
Antero Resources Corporation (AR): Free Stock Analysis Report
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