Upstream Stocks' Q1 Earnings To Watch: XEC, CXO, MUR, NBL

 | May 03, 2016 08:06AM ET

Crude stocks have been getting crushed for over one-and-a-half years. Among the different types of energy players whose market capitalization has witnessed a sheer drop, exploration and production (E&P) companies are the most striking. While these upstream firms are more sensitive to price changes in oil and gas, they also stand to profit greatly from a price increase in the commodities. When investing in such stocks, you’ll want to choose companies that are not financially distressed. This is because there is no certainty as to when the energy rally will start, or if the current prices are even sustainable.

Investors are perturbed owing to the fact that for almost throughout first-quarter 2016 crude prices traded significantly below the $40-per-barrel level. Most importantly, WTI crude fell to the 12-year low mark of below $27 per barrel in mid February. The low levels were owing to plentiful supplies and lackluster demand. This was aptly echoed by the weekly release of Houston-based oilfield services company Baker Hughes Inc. (NYSE:BHI) that reported the sixth consecutive record fall in U.S. rig count.

What’s more, given the absence of major production cuts from OPEC, the effect of booming shale supplies in North America and a stagnant European economy, we do not expect much upside in the commodity’s prices in the near term.

The prevailing trend in the oil and energy sector is well outlined in the Zacks What's in Store for Noble Energy in Q1 Earnings? )