Latest news with #shaleoil
Entrepreneur
7 days ago
- Business
- Entrepreneur
3 remarkable winners amid an unseen surge
Oil prices have been falling as OPEC increases production. Like Trump with trade, the cartel is looking to re-shape the chess board. Here's what investors need to know This story originally appeared on WallStreetZen The dominant story of 2025 has been President Trump using tariffs to restructure global trade. So, many investors are missing another major development as OPEC has been increasing oil production. Notably, this increase in production has come about despite already weakening oil prices. This is not an accident as OPEC is looking to increase its market share. Over the last decade, steadily rising US shale oil production has eroded OPEC's control of the market and resulted in the US becoming a net exporter of energy. WTI Crude oil started the year at around $74 per barrel and currently trades below $60 per barrel. However, shale oil production is only viable at prices above $70 per barrel. 2020 and 2014 The last two major instances of OPEC members increasing oil production were in early-2020 and 2014. And, both instances marked the beginning of multi month declines in oil prices. In 2014, WTI crude dropped from $105 per barrel in June 2014 to below $55 by the end of the year. The major impetus for this increase was the growth in US shale production which was starting to affect OPEC's market share and pricing power. In early 2020, Saudi Arabia decided to increase oil production in an effort to discipline other OPEC members who were not abiding by the cartels' production quotas. As the chart below shows, this resulted in oil prices sliding lower and eventually collapsing as the pandemic temporarily crippling oil demand. Both experiences contain important lessons for investors. 2025 In its first production surge, OPEC didn't materially cut back on supply increases until there was a material decrease in rig counts and shale production. 2020 gives us few clues, since the production surge ended quickly, once the nature and challenge of the pandemic became clear in early March. However, the biggest takeaway is that investors should not ""fight OPEC." A common adage on Wall Street is "don't fight the Fed." Essentially, this means don't be bearish when the Fed is aggressively easing or don't be overly bullish if the Fed is tightening policy. Similarly, investors should have a more risk-averse approach when investing in oil, whenever OPEC is increasing production. What Opportunities Does the OPEC Surge Create? Instead, investors should focus on the consequences of a multi month decline in oil prices, as these are where investment opportunities can be found. For instance, many airline stocks enjoyed spectacular rallies in 2014 and 2015 as lower oil prices boosted margins and profits. In 2020, many shippers enjoyed huge gains as the world was awash in excess oil which had to be stored and transported. Investors should identify stocks with strong fundamentals that have strong quantitative ratings. Then, they can narrow down this list of stocks to find the ones that will benefit from this specific catalyst. The Zen Ratings can help you screen for these stocks. For instance, investors can screen for stocks with an overall A or B rating along with strong component grades for defensive categories like Safety, Value, or Financials. Currently, there are a handful of stocks that fit this criteria. In today's article, I want to discuss 3 companies: United Airlines (UAL), CVR Partners (UAN), and Hallador Energy (HNRG). 1. United Airlines (UAL) United Airlines (UAL) is a major beneficiary of lower oil prices as it reduces costs, boosts margins, and leads to an increase in consumer spending. As oil prices dropped by more than 50% between June 2014 and February 2015, UAL's stock was up by nearly 70%. UAL also brings outstanding financials given a solid balance sheet, low debt-to-equity ratio, and a rock-bottom forward P/E of 6.6 which is significantly cheaper than the S&P 500's forward P/E of 22. The company is also well-regraded by Wall Street analysts as it has 8 Strong Buy ratings and 3 Buy ratings with no Sell or Hold ratings. It also has a consensus price target of $103 which implies 30% upside. Another indication of strong performance is that the company has topped analysts' earnings expectations for 11 straight quarters. Similarly, the Zen Ratings are also bullish on the stock as it has a Strong Buy (A) rating. A-rated stocks have an average annual performance of 32.5% which beats the S&P 500's average annual gain of 10.8%. 2. CVR Partners (UAN) CVR Partners (UAN) produces nitrogen fertilizer, providing farmers with ammonia and other products. A byproduct of reduced shale oil production will be higher natural gas prices, and fertilizer prices tend to rise with natural gas prices. Like UAL, UAN offers a strong balance sheet, low leverage ratios, and an attractive valuation with a P/E of 11. UAN also pays an 8% dividend yield and has consistently hiked dividend payouts over the last decade. While certain segments of the economy are going to lose from tariffs, agriculture is an exception. Either the administration is going to strike deals that will boost exports, or it will provide aid to farmers given their political importance as was the case during the previous trade war in 2018-2019. Given these strong fundamentals, it's not surprising that UAN is rated a Strong Buy (A). The stock has appeal to both value and growth investors. The company's recent earnings reports reveal strong cash flow. Over the last 12 months, the company generated nearly $100 million in cash which is impressive given its total market cap of $825 million. This combination ensures a margin of safety while providing exposure to positive catalysts. 3. Hallador Energy (HNRG) While UAN will benefit from higher fertilizer prices, HNRG will benefit from higher coal prices. Coal prices and natural gas prices tend to move in the same direction. Further, the Trump administration's embrace of coal also removes another major headwind for the industry which led to underperformance for most of the last decade. Essentially, coal stocks were mired in a brutal bear market from 2010 to 2020. Low natural gas prices made it less competitive. At the same time, the government was embracing environmental policies to reduce coal consumption. Now, both of these headwinds have eased, and investors are finding opportunities in the sector. Wall Street analysts are also bullish on the stock as it has 2 Strong Buy ratings and 1 Buy rating with 0 Sells or Holds. In terms of the Zen Ratings, it's rated a Buy (B). B-rated stocks have produced an average annual return of 19.5% which beats the S&P 500's average annual gain of 10.8%. The stock is also a standout in terms of component grades. Out of our universe of 4,500 stocks, it's in the top 3% for Growth. This is consistent with the company's improving outlook given increasing coal production and rising prices. Additionally, it ranks in the top 4% for Safety due to its low levels of debt, leverage, and collection of high-quality assets. What's the Endgame For OPEC's Production Uptick? While the endgame and path for Trump's trade war is unclear, the fallout and conclusion of OPEC's production surge is much more predictable. While North American energy producers are likely to struggle, commodities like natural gas, coal, and fertilizer will benefit. Another winner will be airlines as consumer spending remains strong while fuel costs decline. What to Do Next?
Bloomberg
21-05-2025
- Business
- Bloomberg
ConocoPhillips CEO Says US Shale Oil Can Grow, But Not Near $50
US shale oil output hasn't peaked and can expand, but not if prices are near $50 a barrel, according to the chief executive officer of oil giant ConocoPhillips. Shale executives are keeping a close eye on crude prices as they trade near levels that make drilling unprofitable. Before prices started plunging last month, most banks and research firms had forecast US shale production would grow this year and next before plateauing later in the decade.
Reuters
21-05-2025
- Business
- Reuters
Estimated 6 billion barrel shale oil reserve in southeast Turkey, minister says
SIRNAK, Turkey, May 21 (Reuters) - U.S. oil producer Continental Resources estimates there is a shale oil reserve of 6.1 billion barrels in Turkey's southeastern Diyarbakir Basin, the Turkish energy minister said. Continental Resources and Turkish national oil company TPAO signed a joint venture agreement in March to develop shale fields in the basin. "Turkey's current annual (crude) oil import amounts to 365 million barrels. So a 6.1 billion barrel reserve is a great figure," Energy Minister Alparslan Bayraktar told reporters during a visit to southeast Turkey this week. The minister previously heralded the March agreement as "a new era in local crude oil exploration" with Turkey viewing shale oil and gas discoveries as a key development. It is aiming to produce shale gas from the northwestern Thrace region, Bayraktar said. "Shale oil and shale gas could be a game changer," he said. Continental Resources did not immediately respond to a request for comment. Turkey is not a major oil and gas producer and currently imports more than 90% of its energy needs. The government is looking to cut its import bill and boost supply security by developing domestic resources and expanding international partnerships in oil and gas exploration. President Tayyip Erdogan recently announced that Turkey had discovered a new reserve of 75 billion cubic metres (bcm) of natural gas during drilling works in the Black Sea.
Zawya
20-05-2025
- Business
- Zawya
US shale to plateau if oil stays in current range, ConocoPhillips CEO says
U.S. shale oil output will flatten out if prices remain where they are now and will start to decline with prices in the $50s per barrel, the CEO of ConocoPhillips said on Tuesday in the latest prediction that oil's slump could curb U.S. supply. The comments from Conoco CEO Ryan Lance come as forecasters including OPEC and the International Energy Agency have trimmed their expectations for shale output after prices sank to the lowest since 2021 this year at near $55 for U.S. crude. "The breakeven probably hasn't moved a lot," Lance said at the Qatar Economic Forum in Doha. "I think long-term, if you're going to see oil prices in a comfortable range - maybe in the 70s, or 65-75, we'll still see continued modest growth out of the U.S.". "But we see plateauing production, probably the end of this decade, coming out of the U.S., unless there's going to be another technological breakthrough in our business. And don't bet against our industry." If oil fell below $60 a barrel, there would be a decline in investment and global power requirements would not be met, Qatar's energy minister Saad al-Kaabi said, speaking alongside Lance at the same event. Global crude benchmark Brent was trading below $66 and U.S. crude near $63 on Tuesday. Prices slid after U.S. President Donald Trump announced trade tariffs on April 2 and fell more after OPEC+ decided to add supply faster than planned. With oil prices in the $70s per barrel range, U.S. oil output could grow to more than 14 million bpd from between 13.3 million bpd and 13.4 million bpd now, Lance said. LNG SUPPLY The LNG market will grow to north of 700 million tons from around 400 million tons now over the next decade or so, Lance said, adding the market was growing at an annual compound growth rate of 1-2%. "It's going to take a lot of growth. It's going to take growth in Qatar, its going to take growth in the United States, the two biggest suppliers in the world, to satisfy the enormous amount of energy growth that's coming," the ConocoPhillips chief executive said. Kaabi, who is also CEO of QatarEnergy, added that Qatar, one of the largest LNG global exporters, was "not worried at all" about a supply glut of liquefied natural gas (LNG). "I think the U.S. volumes are going to go to certain markets that are mostly Europe, South America. And our volume will predominantly be serving Asia," Kaabi said. "I think we need all that volume." Kaabi said Chinese and Indian buyers are discussing additional LNG supply from Qatar. He will meet buyers of Qatari LNG in China, where he is flying for a conference. "But we have multiple countries that are discussing with us additional volumes. And these negotiations take time," he said. Qatar began trading operations a few years ago when it saw "money left on the table" when traders were buying spot Qatari LNG. Qatar is currently trading around 10 million tons of LNG, around half of which is non-Qatari. By 2030, it aims to trade 30-40 million tons of non-Qatari LNG. (Reporting by Andrew Mills and Federico Maccioni; Writing by Nayera Abdallah and Yousef Saba; Editing by Louise Heavens, Kirsten Donovan, Alex Lawler and David Evans)
Yahoo
20-05-2025
- Business
- Yahoo
US shale to plateau if oil prices stay in current range, ConocoPhillips CEO says
By Andrew Mills DOHA (Reuters) -U.S. shale oil production will flatten out if prices remain where they are now and will start to decline with oil prices in the $50s per barrel, ConocoPhillips CEO Ryan Lance said on Tuesday. "The breakeven probably hasn't moved a lot. I think long-term, if you're going to say oil prices in a comfortable range - maybe in the 70s, or 65-75, we'll still see continued modest growth out of the U.S," Lance added, speaking at the Qatar Economic Forum in Doha. "But we see plateauing production, probably the end of this decade, coming out of the U.S., unless there's going to be another technological breakthrough in our business. And don't bet against our industry." If oil fell below $60 a barrel, there would be a decline in investment and global power requirements would not be met, Qatar's Minister of Energy Saad al-Kaabi said, speaking alongside Lance at the same event. He added that Qatar, one of the largest LNG global exporters, was "not worried at all" about a supply glut of liquefied natural gas (LNG).
