Speculation is rampant leading up to Wednesday's meeting of the Organization of Petroleum Exporting Countries, more commonly known as OPEC, with Iran and Iraq said to have agreed to production cuts, Algeria and Venezuela trying to convince non-OPEC member Russia to do the same and Saudi Arabia claiming rebalancing would occur in the market with or without an agreement.
What's a poor energy investor to do, given that the outcome is expected to affect oil prices -- and, as a result, stock prices?
Houston-based, energy-centric investment bank Tudor, Pickering, Holt & Co. -- which is expecting a 1 million barrel-per-day cut -- recommends sticking with core quality names. Its picks include Chevron Corp. (NYSE:CVX) among the major oil companies; Concho Resources Inc. (NYSE:CXO), Pioneer Natural Resources Co. (NYSE:PXD) and Cimarex Energy Co. (NYSE:XEC) among "oily" exploration and production companies; and Antero Resources Corp. (NYSE:AR) among "gassy" explorers and producers.
In the oilfield services sector, which would clearly benefit from more drilling that higher oil prices would bring, TPH analysts like Halliburton Co. (NYSE:HAL) and Forum Energy Technologies Inc. (NYSE:FET).
Piper Jaffray & Co.'s Simmons & Co. International ascribes an 80% likelihood that OPEC will come to some sort of reduction agreement but gives 50/50 odds as to whether it's a "persuasive" (i.e., meaningful) or a "cosmetic" result. Its core favorites also include Chevron, Concho and Pioneer but also Parsley Energy Inc. (NYSE:PE), Suncor Energy Inc. (NYSE:SU), Halliburton Co. (NYSE:HAL), Schlumberger Ltd. (NYSE:SLB), FMC Technologies Inc. (NYSE:FTI) and Tenaris SA (NYSE:TS).
Simmons also offers up "offensive" names that would do well if a "persuasive" agreement is reached. It mentions Oasis Petroleum Inc. (NYSE:OAS), Synergy Resources Corp. (NYSE:SYRG), SM Energy Co. (NYSE:SM) and ConocoPhillips Co. (NYSE:COP), among others.
Analysts at Jefferies & Co. believe a cut in excess of 1 million barrels per day with country-level allocation is the starting point for a "bullish reaction." They think Chevron and Galp Energia (NYSE:GALP) are best positioned strategically among international oil companies, with Repsol SA (OTCQX:REPYY) and Statoil ASA (NYSE:STO) having the most "question marks."
