(Evercore ISI, 24.Jan.2024) — It became clear a number of weeks ago that this was not the quarter for all the gory detail on current quarter prints or outlooks particularly for most E&Ps. There is little reason to believe earnings season will stop being the key volatility event of the quarter, but the ability to predict outcomes (and more importantly stock reactions to fundamentals) remains highly suspect particularly as broad based de-risking has been ongoing.
As we approach earnings reports, within we outline where our estimates most diverge from fresh consensus (and places where our conversations suggest positioning is offsides). Broad strokes our view is upstream operators have some reality to inject into the outlook with 2024 guidance (commodity strip is below street estimates a rather significant $6-8/bbl for oil) with likely modest step downs for capex / production with the outcome being lower shareholder distributions (largely already discounted).
Less clear will be where management teams shade more / less bullish than the environment and where improving efficiencies allow for some divergence from this trend. A notable dearth of ‘new’ ideas we continue to think major M&A (unlikely done) is driving some ‘wait and see’ from investors and outlooks for 2024 will be somewhat half baked awaiting better clarity (for acquirees) post close.
Our sense in positioning is investors are long the integrated oils + Canadian vs. a number of the E&Ps (COP, EOG, OXY) and then there are debates around mean reversion and what could improve for 2023 laggards such as DVN, MRO, and APA.
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