Zacks Industry Outlook Highlights: Chevron, Matador Resources, Memorial Production Partners, PetroChina and Dril-Quip
CHICAGO, Sept. 13, 2013 /PRNewswire/ -- Today, Zacks Equity Research discusses the U.S. Oil & Gas, including Chevron Corp. (NYSE: CVX-Free Report), Matador Resources Co. (NYSE: MTDR-Free Report), Memorial Production Partners L.P. (Nasdaq: MEMP-Free Report), PetroChina Company Ltd. (NYSE: PTR-Free Report) and Dril-Quip Inc. (NYSE: DRQ-Free Report).
Industry: Oil & Gas
Considering the turbulent market dynamics of the energy industry, we always advocate the relatively low-risk conglomerate business structures of the large-cap integrateds, with their fortress-like balance sheets, ample free cash flows even in a low oil price environment and growing dividends.
Our preferred name in this group remains Chevron Corp. (NYSE: CVX-Free Report). Its current oil and gas development project pipeline is among the best in the industry, boasting large, multiyear projects. Additionally, Chevron possesses one of the healthiest balance sheets among peers, which helps it to capitalize on investment opportunities with the option to make strategic acquisitions.
While all crude-focused stocks stand to benefit from rising commodity prices, companies in the exploration and production (E&P) sector are the best placed, as they will be able to extract more value for their products. In particular, we suggest exposure to small-cap, undervalued E&P players like Matador Resources Co. (NYSE: MTDR-Free Report) and Memorial Production Partners L.P. (Nasdaq: MEMP-Free Report), which enjoy the benefits of crude oil price leverage.
The current oil price environment should also benefit producers, particularly those international players having attractive growth opportunities in their home markets. One such standout name is PetroChina Company Ltd. (NYSE: PTR-Free Report), which remains well-placed to benefit from the country's growing appetite for energy and the turnaround in commodity prices. We are also encouraged by the natural gas price reform that is expected to boost PetroChina's margins.
One may also capitalize on this opportunity with the related business sector of energy equipment service providers. Our top pick in this space is Dril-Quip Inc. (NYSE: DRQ-Free Report). This offshore drilling equipment maker boasts of highly engineered drilling and production equipment for deepwater severe-service applications and harsh environmental conditions.
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