The biggest news in the energy markets last year became a reality on January 1 as OPEC finally cut its production for the first time in years. While it is no secret that some countries will cheat, and Iran has no intention of slowing its newly resumed oil sales, there is reason to believe that most will adhere to the cuts, as the spot price of oil needs to be higher for many Middle East nations as that is their main source of revenue.
Fundamental conditions for the integrated oil sector are arguably the most favorable since 2012. Company self-help measures have driven break-even prices down to $50 per barrel, while OPEC intervention in the oil markets has likely put a floor on Brent prices in the low- $50’s. In other words, the sector is now able to cover its dividend burden with free cash flow; in fact, we expect a sector free cash flow yield of 5.1% in 2017, which exceeds the dividend yield of 4.6%. These three top U.S. stocks make the cut at Jefferies, and all are rated Buy at the firm: Chevron Corp. (CVX), Marathon Oil Corp. (MRO) and Royal Dutch Shell PLC (RDS-A).
Source: Yahoo Finance
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