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Oil prices have recently fallen to their lowest level in over four years, with the price of West Texas Intermediate crude currently trading below $57 per barrel. Concerns about slowing energy demand due to the escalating trade war between the United States and China are weighing on the price of the commodity. Amid the ongoing uncertainty and low commodity pricing scenario, can upstream majors like EOG Resources Inc EOG and ConocoPhillips COP weather the storm?
Low Breakeven Cost & Strong Balance Sheet to the Rescue
Although oil prices have plunged recently, the breakeven price in most existing shale plays in the United States, including Permian, is significantly lower than the current oil price. It seems that upstream operations are still profitable for most of the leading players like EOG Resources and ConocoPhillips.
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If these companies have strong balance sheets, they can confidently leverage their financial strength to avail debt capital during uncertain times at favorable rates, maintaining their operational stability even during turbulent times.
2 Must-Watch Upstream Stocks: EOG, COP
EOG Resources
In the United States, EOG is among the largest oil and natural gas exploration and production companies. As of Dec. 31, 2024, the firm reported total net proved developed reserves of 2,566 million barrels of oil equivalent (MMBoe), higher than the 2,349 MMBoe reported in 2023. Despite the decline in oil prices, EOG’s operations in low-cost resources like the Delaware Basin, a sub-basin of the broader Permian and Eagle Ford shale play, are still profitable.
Also, EOG, currently carrying a Zacks Rank #3 (Hold), has a strong balance sheet that the upstream player can rely on to ride the current uncertain business environment. Notably, the upstream energy giant’s low debt-to-capitalization of 13.9% is considerably below the industry’s 51.4%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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ConocoPhillips
Based on production and reserves, ConocoPhillips, with a Zacks Rank of 3, is among the leading upstream energy players in the United States. In 2024, COP produced a record 1,987 thousand barrels of oil equivalent per day (MBoE/D) globally, thanks to its strong presence in the prolific low-cost resources in the U.S. Lower 48 and Alaska, along with Asia, Australia, Africa, Europe and Canada.
COP, with a debt-to-capitalization of 27.3%, is also demonstrating its strong financials and is well-positioned to navigate the tariff-induced market uncertainty.