10 US Oil Companies Still Likely to Thrive in 2030

EOG Resources

EOG Resources Inc. (NYSE: EOG) recently decided to maintain its dividend payout, but its yield is under 3% and not so stretched that the company has to balk here. In May of 2020, EOG took out another $1 billion or so in capital spending plans that effectively halved its original 2020 spending expectations. The company also is looking to save another 8% in well-cost savings. To prove how hard times were, note that its first-quarter 2020 net income of $10 million was just or $0.02 per share, versus $635 million or $1.10 per share a year earlier.

EOG’s adjusted income for the same period was $318 million, or $0.55 per share, compared with $689 million and $1.19 per share a year earlier. EOG has been focused on improving its cost structure, focusing on disciplined and higher-return investments and targeting free cash flows, all while looking to strengthen its own balance sheet. EOG’s rating at Moody’s at the end of 2019 was A3. At $52.75 a share, it has a market cap just above $30 billion, and its 52-week trading range is $27.00 to $95.29.

Exxon Mobil

Exxon Mobil Corp. (NYSE: XOM) still has problems and is still trying to right-size (or right-position) its portfolio of large oil. The biggest bet is Guyana at this time, and that oil will be cheap to produce (estimated well under $40 per barrel) and it will continue in the Permian while it sells other assets. Exxon probably needs to have a reality check about the pressure of maintaining its high dividend (over 7% yield now), as so many companies have cut dividends or scrapped them, and it is still selling some assets.

The company may never be what it was in the last decade, even after a record $41 billion natural gas acquisition of XTO Energy, but the company has the means to survive if it operates prudently and keeps looking for cost cuts and using new technologies, and if it keeps a tight grip on its treasury assets. S&P changed its rating to AA from AA+ in March of 2020, followed by a Moody’s downgrade in April of 2020 to Aa1 from Aaa. At $46.25 a share, Exxon has a $196 billion market cap, and shares have traded in a $30.11 to $77.93 range over the past 52 weeks.

Pioneer

Pioneer Natural Resources Co. (NYSE: PXD) recently launched a $1.15 billion convertible senior note offering with an implied strike price of $109.77 per common share, and it came with a mere 0.25% coupon and a 30% price premium at that time. Pioneer now has slashed its 2020 capital budget by a total of 55% from its original 2020 budget expectations, along with corporate cost cuts, lower production costs and salary reductions. It remains to be seen whether Pioneer’s $100 million in cash flow from the first quarter of 2020 can remain at these lower prices.

Pioneer has a Baa2 senior unsecured rating at Moody’s that is based on its large acreage and reserve base in the Permian Basin and with a low-cost and oil-focused production. The company’s solid cash margins and efficient capital investment underpin competitive capital returns. Pioneer’s growth spending has moderated as the company has increased its emphasis on returning capital to shareholders. Fitch Ratings issued a BBB unsecured rating on Pioneer in May, and late in 2019, Moody’s had a Baa2 unsecured rating.

At $94.25 per share, it has a $15.5 billion market cap, and its 52-week trading range is $48.62 to $159.01. Pioneer’s dividend yield of 2.3% also has not raised red flags, even if that payout had been raised recently.

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Valero

Valero Energy Corp. (NYSE: VLO) has nearly doubled from its dog days in March, but its stock is still down handily from its highs. There are times when low energy prices are good for refiners, but after earning $5.00 per share in 2019, the refining player is expected to lose over $1.00 per share in 2020. The analyst community sees earnings returning to $4.00 per share in 2021, but that assumes less wild swings. Valero’s dividend is $3.92 per share on an annualized basis, and there may be a debate about what a normalized dividend would be.

With a $28 billion market cap, it had revenues over $100 billion in 2019 and 2018, and the majority of its assets are in its refineries and physical infrastructure locations. As of the end of 2019, Valero’s 15 petroleum refineries had a combined capacity of about 3.15 million barrels per day, without tallying up ethanol facilities, and it sells gasoline and products into 7,000 outlets under multiple names. The reality is that the electrification of cars comes with a risk, but Valero deals internationally and it has many assets that can be used to provide a buffer that protects its viability in challenging outlook.