Trump's Paris Deal Exit To Support Oil Production: 5 Picks
Zacks Investment Research | Jun 05, 2017 03:26AM ET
President Donald Trump’s exit from the Paris climate accord is now dominating headlines. When almost every country has signed the deal to protect the world from greenhouse gas emissions, Trump’s pull-out has become a topic of interest for investors.
The move will create jobs in the fossil fuel industry. This is also in line with the President’s pre-election commitments. This also lends an edge to U.S. upstream companies over OPEC as they can now continue with their exploration and production activities.
Paris Climate Deal
The accord aims to bring all nations on the same platform in the fight against global warming. The efforts are directed toward putting a check on rising global temperatures by keeping it below 2°C above the pre-industrial mark by the end of this century.
If this temperature mark is crossed, the world might face problems related to the availability of food and water. There could be a drastic change in the pattern of weather and a rise in sea levels.
Though there is no detailed description on how the countries will reach their respective goals, there is a framework with specified oversight and accountability. Out of the 195 countries that have signed the agreement, 147 parties have ratified it.
Why Has Trump Pulled Out?
Trump thinks that the climate deal is not going to do much for the environment and called it a "self-inflicted major economic wound." The president added that the treaty will paralyze the U.S. economy, especially the fossil fuel industry. The accord will adversely affect the American workers and will give undue advantages to the biggest polluters of the world.
In other words, the President claimed that getting into the deal will distribute wealth among other countries, thus putting the interest of other parties ahead of the U.S.
The decision reflects Trump’s commitment toward his promise of creating jobs in America and giving preference to the country’s energy industries.
Trump’s Decision Favors Oil Players
Oil players in the U.S. have more initiative to continue production as Trump’s pull out is in favor of fossil fuel. U.S crude plays will likely see more drillers in the days ahead. In fact, the recent weekly rig count data provided by oil field services firm Baker Hughes Inc. (NYSE:BHI) showed the 20th consecutive increase in U.S. weekly rig count.
We can say that OPEC’s agreement of maintaining the production cut for another nine months along with Trump‘s recent decision will drive traction for U.S. upstream players in the oil industry.
With increased exploration and production activities there will be higher requirements for drillers and oilfield services firms for digging and efficiently setting up the crude wells. Higher production will call for improved demand for new midstream infrastructures that includes transportation and storage facilities.
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Headquartered in San Antonio, TX, Abraxas Petroleum Corp. (NASDAQ:AXAS) is involved in the exploitation and production of oil and gas resources in the Permian Basin, the Rocky Mountain, and South Texas areas.
The company currently carries a Zacks Rank #2 and VGM Style Score of ‘B.’ Also, for 2017, we are expecting the company to witness year-over-year earnings growth of 343%.
C&J Energy Services Inc. (NYSE:CJ) – headquartered in Houston, TX – is the provider of oilfield services to the exploration and production companies in the U.S.
Presently, the company carries a Zacks Rank #2 and VGM Style Score of ‘B.’ For the second quarter, the Zacks Consensus Estimate for the company’s bottom line has been revised upward.
Headquartered in Houston, TX, W&T Offshore Inc. (NYSE:WTI) is involved in the exploitation of oil and gas plays in the Gulf of Mexico.
The company has VGM Style Score of ‘A’ and a Zacks Rank #2. On top of that, W&T Offshore managed to beat the Zacks Consensus Estimate in all of the prior four quarters at an average of 69.21%.
Seadrill Partners LLC (NYSE:SDLP) – based in the U.K. – is the owner and operator of offshore drilling rigs. Most of the drilling units have been awarded long-term contracts by major energy companies.
The partnership has a Zacks Rank #2 and VGM Style Score of ‘A.’ The earnings surprise history looks lucrative as reflected by Seadrill Partners’ beat in each of the prior four quarters at an average of 51.34%.
Houston, TX-based Enbridge Energy Partners LP (NYSE:EEP) , a master limited partnership (MLP), is engaged in the gathering, processing and transmission of natural gas and crude oil.
The partnership has a Zacks Rank #1 and VGM Style Score of ‘A.’ We are expecting Enbridge Energy to post year-over-year earnings growth of 22.6%.
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