Wall Street traders are collectively scratching their heads as crude oil, and thus oil stocks, roared out of an early morning dip on Monday to push the Dow Jones Industrial Average over the 18,000 level for the first time since last May.
This after the eagerly awaited Russia-OPEC production freeze meeting in Doha on Sunday broke up in acrimony after months of teasing a deal to help bring the oversupplied global oil market back into balance. Initially, crude oil and equities futures traded lower in the overnight session.
The old “We need Iran in the deal” lynchpin seems to have been the problem. Remember, Tehran wants any deal to put it at pre-sections output levels near 4 million barrels per day vs. around 3.3 million now. The Saudis are against this. And Tehran and Riyadh don’t like each other anyway — you know, for religious reasons going back centuries.
So why the big rebound?
I can’t explain it definitively, but is likely a combination of ongoing squeezing of shorts (most shorted leading the way), technical impetus to get the Dow back to 18,000, and a nagging concern that a loss of diplomatic goodwill inside OPEC could result in deepening military tensions between Iran/Russia and Saudi Arabia/Gulf states.
Whatever the reason, and assuming the upside extension continues, here are seven oil stocks you need to keep your eye on.
Oil Stocks That Could Go Full Bull: Chesapeake Energy Corporation (CHK)
Chesapeake Energy Corporation (NYSE:CHK) is threatening to break above its 200-day moving average for the first time since the summer of 2014 as it extends off of a consolidation range going back to December. Shares got a lift earlier this month after an upgrade from analysts at Tudor Pickering on a strengthening balance sheet after amending a credit facility.
Cheapeake Energy managed to get out of a couple trials related to whether it “cheated thosuands of property owners out of millions of dollars in natural gas royalties,” according to the Fort Worth Star-Telegram. CHK managed to settle a pair of cases that were scheduled for trial in April and this month.
Chesapeake is slated to report earnings in early May. The current expectation is for a 10-cent-per-share loss on a 7.5% revenue decline to $2.55 billion.
Oil Stocks That Could Go Full Bull: Exxon Mobil Corporation (XOM)
Exxon Mobil Corporation (NYSE:XOM) for months has been embroiled in an investigation as to whether the company previously knew about and covered up the risks of fossil fuels on climate change, with up to 18 states’ U.S. attorneys general involved. Most recently, a Reuters report showed that those attorneys general met with climate scientists and environmental lawyers last month to bolster their cases.
Nonetheless, XOM is challenging its November high near $86 as it extends up out of a three-month consolidation range.
One thing helping on the fundamental front was an announcement back in March that it was reducing its capital spending by 25% to $23 billion to preserve cash in this difficult environment.
XOM reports first-quarter earnings before the bell April 19, with analysts expecting a massive drop in revenues and earnings. Sales are expected to dive 29% to $47.84 billion, and profits are expected to crater 74% to just 31 cents per share.
Oil Stocks That Could Go Full Bull: ConocoPhillips (COP)
ConocoPhillips (NYSE:COP) made plenty of headlines in February with its first dividend cut in at least a quarter of a decade, and marked COP stock as one of the largest dividend victims of the oil price crash.
However, COP has been strongly on the rise with the rest of Wall Street since the February lows, turning things around (coincidentally enough) starting right around its ex-dividend date on its reduced payout of 25 cents, down from 74 cents previously.
Now, COP is challenging its mid-March high after rallying by a third of its February low. A move above $46 would be the first thrust over its 200-day moving average since October 2014.
ConocoPhillips reports earnings the morning of April 28, with analysts expecting a 4.4% decline in revenues to $7.65 billion, resulting in a massive 93-cent loss per share.
Oil Stocks That Could Go Full Bull: Chevron Corporation (CVX)
Chevron Corporation (NYSE:CVX) has been one of the stronger stocks in the sector over the past few months, pushing above its late 2015 trading range to hit heights not seen since last summer.
That’s despite the fact that Chevron has been among the names bandied about in terms of a payout that could be hacked. CVX sports a hefty $1.07 quarterly dividend — which is 25 cents shy of the $1.32 that analysts believe Chevron will earn all year.
To help its cash situation, Chevron has clipped its 2017-18 capex budget from a range of $24 billion to $20 billion to a range of $22 billion to $17 billion. More recently, CVX announced that it is divesting all of its Myanmar assets, estimated to be wroth around $1.3 billion.
CVX will report earnings before the bell April 29, where it’s expected to post a loss of 10 cents per share on a 38% drop in revenues to $21.47 billion.
Oil Stocks That Could Go Full Bull: Schlumberger Limited (SLB)
Schlumberger Limited (NYSE:SLB) is trying to trim up poor performance wherever it can, including recently announcing that it would be reducing its operations in Venezuela — a move made by several other oil services companies — because of late payments thanks to the oil-exporting country’s weakness in the face of low prices.
SLB also recently announced a partnership with Packers Plus, which will feature the latter selling Schlumberger technology in Canada.
Schlumberger has been a bright spot for the energy sector in 2016, up more than 10% for the year. SLB is consolidating its recent breakout above its 200-day moving average — a level it hasn’t been above since last June. This caps a near 30% rally off of its January low.
Schlumberger’s Q1 earnings report is slated for the evening of April 21, with earnings expected to plunge more than 60% to 40 cents per share on a revenue drop of 37% to $6.51 billion — a low, low bar to beat.
Oil Stocks That Could Go Full Bull: Anadarko Petroleum Corporation (APC)
Analysts at Stifel downgraded Anadarko Petroleum Corporation (NYSE:APC) on April 6 on the expectation the Doha negotiations would be a dud, which they were.
Unfortunately for those analysts, APC and the rest of the energy sector managed to rebound regardless, with Anadarko climbing nearly 2% on Monday in response. Perhaps JPMorgan’s experts got it right, upgrading APC shares to “overweight” at the end of last week.
APC is attempting a breakout above $50, a level of resistance from December and March.
The company will report results on May 2 after the close. Analysts are looking for a loss of $1.15 per share on revenues of $1.83 billion.
Oil Stocks That Could Go Full Bull: Denbury Resources Inc. (DNR)
Denbury Resources Inc. (NYSE:DNR) has had a rockier 2016 than the rest of the oil stocks on this list, falling by nearly half at one point, but now it’s the best-performing of this bunch at 60%-plus gains year-to-date.
DNR shares are making another attempt at an upward cross of its 200-day moving average — a breakout it tried back in March. The stock originally lost its 200-day average in 2014.
The company will report results on May 5 before the bell. Analysts are looking for a loss of 7 cents per share on a 9% revenue decline to $276.8 million.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.
