On Wednesday, Barclays downgraded both Apache (APA.US) and CNX Resources Corp (CNX.US) from "Equal Weight" to "Underweight," setting price targets of $24 and $34, respectively. Despite the downgrades, both stocks climbed, rising 4.69% and 1.75% amid a broader rally in the energy sector. Barclays analyst Betty Jiang highlighted Apache as a prime example of the trend where traditional asset valuations are recovering while US shale asset valuations are declining. Her current estimates suggest that, at prevailing market prices, the standalone free cash flow yield from the Permian Basin will be a mere 3.8% by 2026, representing a significant premium compared to larger, higher-quality pure-play US shale operators. Furthermore, the analyst noted that the substantial gains Apache has realized from natural gas marketing—a key driver of its free cash flow in 2024-2025—are projected to shrink considerably. This is attributed to the expansion of pipeline capacity out of the Permian Basin, which will alleviate the natural gas price differentials in the Waha hub, coupled with a weakening global LNG price environment relative to the US market. CNX Resources Corp's stock is trading roughly in line with the unlevered free cash flow yield of gas E&P companies, even though its resource inventory has a significantly shorter development life. While the market has factored the development potential of the deep Utica shale into its valuation, the inherent risks associated with the play are not yet fully resolved, according to Betty Jiang's analysis. Separately, Barclays reinstated an "Equal Weight" rating on Occidental Petroleum (OXY.US) following the successful completion of the OxyChem divestiture. Betty Jiang analyzed that while this move accelerates debt reduction, bringing it below the target set after the CrownRock acquisition, it also means Occidental has lost a source of free cash flow that provided a buffer against energy commodity price cycles. Looking ahead to 2026, Betty Jiang expressed a positive outlook on several energy companies. She is particularly bullish on Ovintiv (OVV.US), citing its successful transformation into a dual-core liquids-focused operator in the Permian Basin and Montney shale following the sale of its Anadarko Basin assets. She also expressed confidence in EQT Energy (EQT.US), pointing out that the market has not yet fully appreciated the structural growth potential and margin advantages the company has gained through midstream integration in the natural gas sector. Additionally, Betty Jiang remains positive on Viper Energy (VNOM.US), viewing it as a high-quality play on the Permian Basin that is currently trading at an attractive valuation.
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