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⁠Wall St Engine
KREMLIN: MERZ STATEMENT ON LONG-RANGE WEAPONS PROVOKES WAR
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⁠Wall St Engine
KEYBANC ON OIL & GAS: 'GAS IS THE SAFETY TRADE, OIL OUTLOOK IS A QUESTION MARK'

"We marketed in several cities in the Midwest last week, meeting with many long-only clients. The trip was timely, coming one week after earnings, and amid a stabilizing, albeit sharply lower, crude price at the $60 level. We noticed a very different focus on this trip, vs. 2H24 and 1Q25 marketing. We spent significant time discussing the oil macro backdrop, vs. prior meetings that were almost exclusively focused on natural gas, and we sensed confusion from investors who were looking for guidance on oil. Natural gas remains the safety trade, with nearly unanimously bullish views on price, due to secular demand increases. We also noted surprise from investors on the activity reductions announced to date, which are far more modest than media headlines would suggest. Lastly, we noticed continued interest in undervalued equities amid the YTD sell-off for most names. We highlighted EOG and EXE among the large caps and GPOR, MTDR, and INR among sell-offs.

Takeaway 1: Buy side looking for direction on oil macro. We sensed confusion and a lack of clarity on oil from buy-side clients we visited. We reiterated our view that the weakness was policy driven, that we have yet to see meaningful barrels added back by OPEC+, and that the path of least resistance for oil is up from here, in our view. We maintain a $66/b WTI forecast in 2025 and a $65/b forecast in 2026.

Takeaway 2: Natural gas E&Ps remain safety trade. We are still new to realizing how uniformly bullish investors are about the natural gas macro backdrop. We agree with the secular demand growth story, but urged caution at relentless and underappreciated (in our view) production growth we have seen YTD. We do not expect U.S. oil production to decline meaningfully, which implies no rollover in associated gas.

Takeaway 3: Investors surprised at how modest activity reductions are to date. In Figure 8 on page 7, we show aggregate oil production and capex forecasts for our coverage group. Since mid-April, we see only a modest reduction to 2025E oil (-0.7%) and a modest reduction to 2025E capex (-2.4%). We urge clients to review this table, which shows how modest the changes are. In addition, we see 2026 capex and oil production above 2025, showing no contraction is expected yet.

Takeaway 4: Investors still open for stock-specific ideas; EOG, EXE, GPOR, MTDR, and INR pitched during meetings. One comforting takeaway was investors continuing to look for undervalued ideas, despite the weak YTD performance (XOP -7%, vs. SP500 +1%). EOG was a frequent name of discussion that was widely owned. We noticed EXE was under-owned and provided our views that it was a relative value vs. natural gas peers. Looking to smaller names, we highlighted MTDR and INR as interesting liquids producers and GPOR as another relative value idea."
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