The Zacks Analyst Blog Highlights: ConocoPhillips, iShares Dow Jones US Oil & Gas Exploration & Production ETF, iShares U.S. Energy ETF and Vanguard Energy ETF
CHICAGO, Dec. 10, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the ConocoPhillips (NYSE:COP-Free Report), iShares Dow Jones US Oil & Gas Exploration & Production ETF (AMEX:IEO-Free Report), iShares U.S. Energy ETF (AMEX:IYE-Free Report) and Vanguard Energy ETF (AMEX:VDE-Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Tuesday's Analyst Blog:
Energy ETFs in Focus as Conoco Cuts 2015 Capex
he plunge seems never-ending in the price of oil which is presently hovering around the five-year low of $65 a barrel after crossing the triple-digit mark in the first half of the year. While U.S. shale oil boom, a lack of production cuts by OPEC nations and slowing global demand weighed heavily on oil prices, the latest downbeat forecast by Morgan Stanley for Brent crude has pushed the commodity on another steep downhill ride.
Notably, Morgan Stanley expects Brent crude prices to average $53 per barrel in 2015, with the base case scenario being $70, indicating a steep reduction from the previous estimate of $98. As a result, WTI crude fell to $63.05 per barrel following Morgan Stanley's forecast while Brent fell to $66 per barrel.
Budget Cut at ConocoPhillips
The trend has taken a toll on the global energy market hitting several oil companies badly. Thanks to this disaster, ConocoPhillips (NYSE:COP-Free Report) has announced a cut in its capex budget by 20% year over year next year. This indicates that the energy giants expect the almost six-month long slide in oil prices to extend further and gnaw at the company's margins (read: 3 Energy ETFs Hit the Most by OPEC's 'No Cut' Decision).
Management noted that the guidance cut takes into account reduced expenditure at major projects, even if some of those are on verge of completion, plus the delay of expenses on unconventional plays in North America. However, despite this cut, the company expects to see a 3% increase in production next year from its continuing operations.
Market Impact
Quite expectedly, the news had a negative impact on the company, as COP shares were down about 4.2% on the day with elevated volumes. This could have a huge impact on ETFs that are heavily invested in this energy company.
Below, we have highlighted three oil & gas exploration ETFs with the highest allocation to COP that could shed even more in a few upcoming trading sessions and are in focus following the company's capex guidance cut (read: OPEC ETFs Crushed by Oil Crash: What Next?).
iShares Dow Jones US Oil & Gas Exploration & Production ETF (AMEX:IEO-Free Report)
This ETF – tracking the Dow Jones U.S. Select Oil Exploration & Production Index – invests about $455.0 million in assets in 80 securities, focusing solely on the energy world. In-focus COP takes up the first position here with 14.72% of holdings. Generally, when one stock accounts for as much as 14% of an ETF's weight, its individual performance decides much of the fund's price movement. The fund charges 43 bps in fees.
The fact proved true in this case also as this ETF lost about 5.1% in Monday trading. The fund has also lost about 17% so far this year (as of December 8, 2014). The fund has a Zacks ETF Rank #4 (Sell) with a High risk outlook.
iShares U.S. Energy ETF (AMEX:IYE-Free Report)
This ETF tracks the Dow Jones U.S. Oil & Gas Index, giving investors exposure to the broad energy space. The fund holds 96 stocks in its basket with AUM of over $1 billion. The product charges 43 bps in fees per year from investors.
For the stock under review, COP, investors should note it occupies the fourth position in the basket with 4.84% assets invested in the stock. The fund lost 4.03% on the day ConocoPhillips slashed its guidance. So far this year, the fund has retreated about 13%. The fund has a Zacks ETF Rank # 4 with a High risk outlook (read: 3 Energy ETFs Sliding to 52-Week Lows).
Vanguard Energy ETF (AMEX:VDE-Free Report)
This fund manages nearly $2.97 billion in asset base and provides exposure to a basket of 164 energy stocks by tracking the MSCI US Investable Market Energy 25/50 Index. The product charges 14 bps in annual fees. The in-focus ConocoPhillips is the fourth firm with a 4.5% allocation (see: all the energy ETFs here).
VDE has a Zacks ETF Rank #3 (Hold) with a High risk outlook. VDE lost 4.1% on December 8 and about 12.9% so far this year.
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
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