2025 Outlook_NA Integrated Oils

Summary of Integrated Oils Sector Conference Call Industry Overview - The crude oil market is facing challenges as supply growth is expected to outpace demand growth, leading to a below mid-cycle crack spread year for downstream operations [4][4] - The price forecast for Brent crude oil is set at $70 per barrel for 2025, aligning with current market strip pricing, while the 2026 base case shows a downside risk skewed towards lower prices [4][4] Key Financial Metrics - The estimated earnings per share (EPS) for Q4 are approximately 3% below market expectations, with 2025 estimates around 27% lower due to a combination of reduced crude price forecasts and lower crack spread assumptions [4][4] Company Ratings and Financial Projections - **Chevron (CVX)**: - Rating: Not Rated (NR) - 2023 Total Return of Capital Yield: 9.8% - 2025 Estimated Dividend Yield: 11.7% [11][11] - **ExxonMobil (XOM)**: - Rating: Overweight (OW) - 2023 Total Return of Capital Yield: 7.6% - 2025 Estimated Dividend Yield: 8.1% [11][11] - **Canadian Companies**: - **Crescent Point Energy (CVE)**: - Rating: Overweight (OW) - 2023 Total Return of Capital Yield: 5.2% - 2025 Estimated Dividend Yield: 6.5% [11][11] - **Suncor Energy (SU)**: - Rating: Neutral (N) - 2023 Total Return of Capital Yield: 7.3% - 2025 Estimated Dividend Yield: 5.8% [11][11] Market Positioning - Defensive positioning is recommended in the current market, favoring US companies over Canadian counterparts due to more attractive downside valuations and better free cash flow (FCF) resilience [4][4] Price and Yield Forecasts - The forecast for Brent crude oil prices includes: - Downside:$ 70/bbl - Base case: $80/bbl - Upside:$ 90/bbl [5][5] - Free Cash Flow (FCF) Yield projections for 2025 and 2026 indicate a range from 0% to 16% across various companies, with US companies generally showing stronger resilience [6][6] Additional Insights - The integrated oils sector is expected to experience a challenging environment with modest growth in both supply and demand, impacting overall profitability and investment returns [4][4] - The analysis suggests a cautious approach to investment in the sector, with a focus on companies that demonstrate strong cash flow and capital return capabilities [4][4]