The U.S. Energy Information Administration (EIA) projects the average spot price of West Texas Intermediate crude oil to be $64.16 per barrel in 2023, a decrease from $76.60 per barrel in 2022. This anticipated decline, driven by rising global oil inventories, could negatively impact exploration and production activities for integrated energy companies in the U.S. The Zacks Oil & Gas US Integrated industry, which includes firms engaged in oil and natural gas exploration, production, and midstream operations, ranks #173, placing it in the bottom 30% of over 250 Zacks industries.
In a challenging market, ConocoPhillips (COP), Occidental Petroleum (OXY), and National Fuel Gas Company (NFG) are among the companies expected to perform relatively well. Notably, OXY reported stronger cash flows in the first half of 2023 despite weaker crude prices. The integrated oil sector has underperformed over the past year, with a 5% decline compared to a 19.9% gain in the S&P 500.
As of now, the industry trades at an enterprise value to EBITDA (EV/EBITDA) ratio of 4.64X, significantly lower than the S&P 500’s 18.47X and the sector’s 5.15X, indicating its struggles amidst changing energy demands and price pressures.
