Services and integrated firms trading at discounts to fair value.
But the sector's current tailwinds are likely unsustainable, so investors should prioritize high-quality businesses with stable balance sheets.
Even after the rally, the sector is undervalued, with the average stock trading at a 9% discount.
How the vaccine affects this sector, and two of our top picks.
We expect a nearly complete recovery in crude demand as the pandemic subsides in 2021.
Weaning America off fossil fuels will take decades, even if Democrats sweep Congress in November.
When will crude oil recover?
We expect demand to catch up in 2021 and 2022.
Chevron announces acquisition of Noble Energy, but this won't change its fair value estimate or moat rating.
But first-quarter wallop still stings.
It's been rocky, but the worst is probably behind us.
Widespread social distancing due to the coronavirus has dragged down gasoline consumption and storage utilization is rapidly climbing.
Plenty of reason to worry, but we still expect a nearly complete recovery.
We are taking into account the depressed oil price environment and expectations for companies to continue to slash guidance for 2020 development capital expenditure.
We anticipate lowering our fair value estimates for our U.S. E&P coverage as a result of a strained price environment and lower U.S. production.
The near-term outlook for energy companies is bleak and likely to affect our valuations.
Oilfield services stocks appear to be the most undervalued.
Two main concerns for investors are overblown.
Oilfield services look particularly attractive.
We see some midstream opportunities, but much depends on the speed of recovery.
Diamondback Energy and Continental Resources look especially appealing.
Nearly all the E&P and oil-services stocks we cover trade below what we think they're worth.
We suggest investors avoid betting on near-term oil prices and instead take a longer-term view.
But while the expanded development plan is accretive to our net asset value, we still see little upside remaining.
Our negative stance is underpinned by our view on long-term oil prices rather than operational weakness at the firm.
But we think the latest acquisition is moat-enhancing and fairly priced.
We think these elite producers have sustainable competitive advantages.
We see the price of oil, along with the valuations of many E&P stocks, as frothy today, but DiamondBack is one pocket of value.
President Trump's decision to abandon the Iran nuclear accord could exacerbate the global supply shortage.
The energy sector has been one of the hardest hit in recent days, and Morningstar's David Meats takes a closer look at where investors should look for opportunities.
It's one of the lowest-cost oil producers in our coverage universe.
Good acreage and very lean operations make RSP Permian and Diamondback our top exploration and production picks.
But a few low-cost, low-leverage E&P companies remain undervalued, despite looming commodity headwinds.
We see room for oil prices to fall, but think some shale producers still look attractive over the long term.
We no longer think rig count increases are realistic, and we put the new fair value estimate at $26.
RSP Permian is our top pick in the upstream E&P segment, and we expect it to see substantial growth next year.
Its liquids-rich drilling inventory will enable it to outperform peers if NGL prices continue to strengthen.
As OPEC keeps prices propped up, producers will have more incentive to add rigs, which could mean oversupply in 2018.
Strong realized natural gas prices and leverage to liquids put Antero Resources at an advantage to its peers.
The firm's track record in the Midland Basin has been impressive and consistent.
We believe the acquisition of Vantage Energy will be accretive for shareholders of this natural-gas producer, but its shares remain overpriced.
The no-moat gas and oil producer plans a much higher-than-expected level of drilling activity in 2017 and beyond.
The firm has ample liquidity, but its high leverage will prevent it from growing as quickly as the market expects.
Markets have rebounded recently, but much uncertainty remains, meaning near-term prices could remain ugly or deteriorate further.
Concerns over low natural gas prices are obscuring the long-term potential of Rice Energy's high-quality asset base, says Morningstar’s David Meats.
The durable competitive advantages of undervalued Continental Resources and Cabot Oil & Gas should drive strong returns on capital over the long term.
High-quality E&P bargains can be found today, but investors must be prepared to face new lows in the short term and seek out firms that can weather extremely challenging conditions.
The current glut in crude supply continues to weigh on prices and will take several quarters more to work through.
Continental Resources has the wherewithal to tolerate a temporary period of lower prices better than many peers.
Undervalued Continental Resources should be able to withstand the turmoil in today's energy market better than its peers, says Morningstar's David Meats.