SunTrust downgrades entire oil exploration and production sector on 'upcoming energy Armageddon'

Published Mon, Mar 9 20203:47 PM EDT

(This story is for CNBC PRO subscribers only.) SunTrust no longer has a buy rating on any company in the oil exploration and production space. On Monday, the firm downgraded the entire sector, saying the energy "Armageddon" is upcoming. "We believe oil prices are set to collapse to potentially the $20's & stay in the range for a moderate period," SunTrust analyst Neal Dingmann said Monday in a note to clients. "Given the current market, we have taken the unprecedented steps of bringing our full coverage group to Hold or Sell even after the recent selloff that puts many of our names already at multi-year lows," he said. Here are some of the firm's new ratings: The firm cut Continental Resources to a hold rating, and reduced its target on the stock to $15 from $30. "We believe should crude prices materially weaken as we suggest; Continental could need to look to notably further reduce activity in both its core operating plays." SunTrust cut shares of Apache to hold from buy, and lowered its target on the stock to $22 from $38. "While Apache has made meaningful strides in refocusing activity on its higher margin regions both domestically and abroad, as well as in kick-starting its Suriname exploration program, the company remains exposed to commodity price volatile with no meaningful hedges currently in place." The firm cut shares of Occidental Petroleum to a sell rating, while slashing its target on the stock to $15 from $35. "We believe weaker upcoming crude prices coupled with an inflated balance sheet as a result of the Anadarko acquisition ... We believe OXY could soon need to take a number of strategic steps to address the issues at hand including a meaningful reduction in drilling activity, further head count reduction, and possibly even a cut to its large common dividend." SunTrust downgraded Pioneer Natural Resources to a sell rating, while also lowering its target on the stock to $90 from $150. "Our chief concern with the company is that only ~54% of STRH [SunTrust] estimated 2020 production is hedged and of that all the hedges are three way collars with current prices already much lower than the bottom of the hedge." - CNBC's Michael Bloom contributed reporting.

Oil operations in the Permian Basin near Midland, Texas

Nick Oxford | Reuters

(This story is for CNBC PRO subscribers only.)

SunTrust no longer has a buy rating on any company in the oil exploration and production space.

On Monday, the firm downgraded the entire sector, saying the energy "Armageddon" is upcoming.

"We believe oil prices are set to collapse to potentially the $20's & stay in the range for a moderate period," SunTrust analyst Neal Dingmann said Monday in a note to clients. "Given the current market, we have taken the unprecedented steps of bringing our full coverage group to Hold or Sell even after the recent selloff that puts many of our names already at multi-year lows," he said.