Oil and Gas

Despite recent oil rout, don't expect cuts: Analyst

Another round of oil cuts coming?
Another round of oil cuts coming?

Despite the recent rout in oil, don't expect U.S. shale companies to start cutting capital spending or jobs, analyst Mike Kelly said Tuesday.

For one, the budgets were set at the end of last year when oil was around $50 a barrel, he noted.

Plus, the oil exploration and production companies are doing better than expected this year.

"They're drilling bigger wells; they're drilling them faster and actually a lot cheaper than expected, too," the managing director and senior analyst at Global Hunter Securities said in an interview with CNBC's "Power Lunch."

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In fact, a survey Global Hunter Securities conducted after first-quarter earnings shows that about 50 percent of the 70 companies the firm follows are potentially set to increase their budgets. That was done at a time when oil was between $55 and $60 a barrel.

"We don't expect major cuts here in most programs going forward. Actually we can expect in second-quarter earnings maybe even hear some guys increasing the budgets," said Kelly.

Read MoreOil rout especially bad for drillers

On Tuesday, U.S. crude closed down 20 cents, at $52.33 a barrel, after falling almost $2 at the session low. , on the other hand, rose 43 cents to $57 a barrel.

U.S. crude has lost almost 10 percent since Thursday's close for the sharpest two-day fall since 2011. It is teetering toward a bear market technically, having lost almost 20 percent from a high above $62 just a month ago.

When it comes to investing, Kelly pointed out that not all oil plays are created equal.

"You are going to see the guys with really high-quality acreage positions, those that are in the core of the Eagle Ford, or the Permian or even the core of the Bakken be able to really press on here."

One name he likes is Gulfport Energy, which is down about 13 percent in the past month.

He called its downturn a "pretty big opportunity," noting it is "one of the best drill stories out there."

Read MoreRefiners due for a pullback: Trader

The name is commonly mistaken for a play on oil but it is really a gas-weighted name in the best gas basin in the country, he said.

He also likes Parsley, which he said has the best rock in the best oil basin on the Permian.

Supply-demand balance issue

Supply demand balance issue: Pro
Supply demand balance issue: Pro

Meanwhile, a nuclear deal with Iran may also weigh on the oil market, said Ed Morse, head of commodities research for Citigroup.

A deal would bring more of the country's crude into an already oversupplied market. However, Morse said the impact really depends on how much oil Iran releases and how quickly.

"The question is will the Iranians surprise the market by agreeing to and implementing the sanctions relief that they need to do and instead of there being a six-month wait between an agreement and more oil, it's shorted to maybe even two months," Morse told "Power Lunch."

Read MoreHow low can oil go?

However, he believes Iran's claim of being able to add 1 million barrels a day into the market is overstated. He thinks it is probably more in the range of 300,000 to 500,000 barrels a day in incremental crude that could be added to the market.

"Whether that is really bearish or just another input in the database is really a function of where other producers are going," said Morse, noting that both Saudi Arabia and Iraq have indicated they are going to increase production.

"It's a supply-demand balance issue. A million would really dump the market, 2[00,000] to 300,000 barrels a day, we don't really know."

—Reuters contributed to this story.

Disclosure: PE and GPOR are investment banking clients of Global Hunter Securities.