JPMorgan upgrades two, downgrades one in exploration and production

JPMorgan analyst s Arun Jayaram and Zach Parham reshuffled exploration and production ratings after the group "outperformed the broader market by a wide margin in 2022, the second consecutive year of significant outperformance relative to the S&P 500." JPMorgan sees a "much trickier set up" going into 2023, driven largely by capital efficiency concerns from higher oil field services costs and initial signs of deterioration in well productivity in several key U.S. shale basins. In addition, the firm models lower cash distribution yields in 2023 given backwardation in the strip. It believes U.S. E&Ps are likely to "take a back seat" to other energy sub-sectors in 2023, including European majors, oil field services, and Canadian oil sands. In conjunction with its 2023 E&P outlook, JPMorgan upgraded Murphy Oil (MUR) to Overweight from Neutral with a $56 price target, upgraded Callon Petroleum (CPE) to Neutral from Underweight with a $57 price target, and downgraded Laredo Petroleum (LPI) to Underweight from Neutral with a $69 price target.