Barclays starts U.S. Integrated Oil & E&P sector with Positive view

Barclays initiated 19 stocks in the U.S. Integrated Oil & E&P sector with an overall positive view but a preference for companies that have a high rate of growth for cash flow per debt-adjusted share, significant cash return to shareholders, under-levered balance sheets, and a differentiated asset portfolio that adds optionality in a higher commodity price environment. The sector offers a better value proposition than ever before, the analyst states, noting the group’s strong balance sheets, low cash flow breakeven prices, and significant free cash flow generation, the analyst tells investors in a research note. The firm points to the significant underweighting of the sector by the market that shows that despite the free cash flow generation, investors have not yet been willing to pay a multiple that is above where the group has traded in the last five years. Barclays further contends that it sees the risk to oil prices skewed to the upside in the near term and more reasons to be constructive in the long run. The analyst is rating Exxon Mobil (XOM), Chevron (CVX), ConocoPhillips (COP), Coterra Energy (CTRA), Marathon Oil (MRO), Ovintiv (OVV), and Viper Energy (VNOM) at Overweight, and APA Corp (APA), California Resources (CRC), Devon Energy (DVN), EOG Resources (EOG), Diamondback Energy (FANG), Murphy Oil (MUR), Occidental Petroleum (OXY), Antero Resources (AR), and Chesapeake (CHK) at Equal Weight. Barclays rates Sitio Royalties (STR) and Range Resources (RRC) at Underweight however, citing the lackout of a competitive dividend paytout and expensive valuation as the detriments of those names respectively.