By Sam Boughedda
Citi analysts upgraded shares of Pioneer Natural Resources (NYSE:PXD) and Marathon Oil (NYSE:MRO) to Buy and downgraded Ovintiv Inc. (NYSE:OVV) to Neutral in a note to clients on Thursday.
The analysts told investors in a note that they recommend investors focus on catalysts and quality within exploration and production.
"Capital efficiency should improve for domestic E&Ps on lower service rates, while PXD should also experience rising well productivity in 2H '23. MRO offers catalysts given the re-frac opportunity in the Eagle Ford and improving international gas exposure, where Citi sees upside to the forward curve," wrote the analysts.
"Conversely, OVV remains modestly levered, has greater domestic gas exposure and a higher cost structure," they added.
Citi's base case is for weak gas prices to linger as producers fail to make sufficient cuts to activity. The firm's top exploration and production picks alongside MRO, and PXD include Diamondback Energy (NASDAQ:FANG) and EOG Resources (NYSE:EOG).