“IEO” – the iShares U.S. Oil & Gas Exploration and Production ETF ended in the green on Wednesday after OPEC+ said it will cut oil production by 2 million barrels per day to boost the tumbling oil prices.
Sean O’Hara reacts to the OPEC+ news
Petroleum exporting countries have agreed to lowering production from November even though the United States had lobbied against it.
The announcement, according to Sean O’Hara – President at PacerETFs, sets oil up for a $10 move to the upside that warrants keeping “overweight” energy.
Energy companies have been minting cash as the oil prices have gone up. More importantly, they’ve cut back on CAPEX and so, they’re poised to buyback stock and reinstate or grow their dividends and free cash flow.
Energy stocks, he added, offer means to remain defensive in the current environment.
O’Hara reveals his favourite energy stocks
Oil prices have pulled back to under $90 a barrel from close to $130 a barrel in March of 2022.
Two stocks in particular that he’s convinced will benefit from the potential recovery in oil prices, O’Hara said on TD Ameritrade Network, were Marathon Oil Corporation (NYSE: MRO) and ConocoPhillips (NYSE: COP).
We own both because they have high free cash flow yield. The price of oil has had a big impact on their free cash flow. They’ve pulled back and are cheap n a relative basis.
Other names he likes in this space, especially after the OPEC+ news, include Chevron, Cheniere Energy, Occidental Petroleum and Phillips66.
At the time of writing, the aforementioned energy ETF is trading more than 10% down from its year-to-date high.
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