Bruce Jefferson
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Bruce Jefferson in Commodities,

Oil Slide Fallout Continues; Devon Energy, ConocoPhillips Downgraded

The summer driving season is in full swing, but oil prices have not budged. A bearish undertone is evident in the crude oil space; after starting the year around mid-$50 levels, the "black gold" has come off significantly and is currently around the mid-$40 levels.

Twin Downgrades

Against this backdrop, Bernstein downgraded shares of Devon Energy Corp  and ConocoPhillips  to Market Perform, attributing the action to the substantial reduction to its oil price deck.

Diversification To Hurt ConocoPhillips

Analyst Bob Brackett is of the view that those companies without strong catalysts are unlikely to outperform in a flat commodity price environment. Specifically, on ConocoPhillips, the analyst said the downgrade stems from two factors, namely the diversified nature of its portfolio and its more muted growth prospects.

The analyst now models strong growth in U.S. onshore, particularly the Permian, while he expects flattish supply elsewhere. Therefore, the analyst recommends those names highly levered to the U.S. onshore, rather than more diversified names such as ConocoPhillips.