Weak Oil Prices Loom: 3 Integrated Energy Stocks That Could Hold Up

Industry Overview - The Zacks Oil and Gas Integrated International industry includes companies involved in upstream, midstream, and downstream operations across various regions including the U.S., Asia, South America, Africa, Australia, and Europe [3] - Integrated energy firms are increasingly focusing on renewable energy to lower emissions and carbon intensity [3] Current Challenges - Rising oil inventories are expected to negatively impact crude prices, which will affect exploration and production operations of integrated energy players [1] - The EIA projects the average spot price for West Texas Intermediate crude to be $52.21 per barrel in 2026, down from $65.40 per barrel in 2025, indicating a potential decline in cash flows for upstream businesses [4] - A slowdown in oil production growth in the U.S. is driven by shareholder demands for capital returns rather than production expansion, leading to reduced revenues [5] - Growing demand for renewable energy is expected to decrease reliance on oil and natural gas, adversely impacting integrated energy firms focused on fossil fuels [6] Industry Performance - The Zacks Oil and Gas Integrated International industry has a Zacks Industry Rank of 233, placing it in the bottom 5% of over 250 Zacks industries, indicating bearish prospects [7][8] - Over the past year, the industry has outperformed the broader Zacks Oil - Energy sector with a rally of 13.9%, but underperformed the S&P 500, which surged by 21.5% [9][10] Valuation Metrics - The industry is currently trading at a trailing 12-month EV/EBITDA ratio of 5.22X, lower than the S&P 500's 19.04X and the sector's 5.55X [13] - Historically, the industry has traded between 2.79X and 6.61X over the past five years, with a median of 4.18X [14] Key Companies - Chevron Corporation (CVX) is well-positioned in the Permian Basin and benefits from a stable business model and softer oil prices, holding a Zacks Rank of 3 [21] - BP plc (BP) anticipates strong demand for oil and natural gas, benefiting from its upstream activities and refining operations, also holding a Zacks Rank of 3 [17] - Petrobras (PBR) has lower breakeven costs and lifting costs, positioning it favorably in a soft crude pricing environment, with a Zacks Rank of 3 [19]