Energy: Higher Oil, Flat Activity - Recapping 1Q

Research evidence excerpt

Energy: Higher Oil, Flat Activity - Recapping 1Q

Idea

May 12, 2026 12:49 AM GMT

Morgan Stanley & Co. LLCMEnergy | North America Devin McDermott

Equity Analyst and Commodities Strategist

Higher Oil, Flat Activity - Devin.McDermott@morganstanley.comJoe Laetsch, CFA +1 212 761-1125

Equity Analyst

Joe.Laetsch@morganstanley.com +1 212 761-8804

Recapping 1Q Helen Lin

Research Associate

Helen.Lin@morganstanley.com +1 212 761-0766

Oil E&Ps reported strong 1Q results with average cash flow +7% Svetlana Do

vs cons. Most left activity unchanged, while even slight spending ResearchSvetlana.DO@morganstanley.comAssociate +1 212 761-2409

increases were met with weak market reception. The group has Justin W Latran, CFA

fallen ~8% month-to-date. We see value in Majors & E&Ps with ResearchJustin.Latran@morganstanley.comAssociate +1 212 761-2869

positive rate of change. Jacqueline M Kenny

Jacqueline.Kenny@morganstanley.com +1 212 761-2253

Key Takeaways

Exploration & Production

The bulk of our oil-focused coverage has now reported 1Q results. On average, North America

Industry View In-Line

they beat consensus production by 1%, capex by 2%, with 7% stronger cash flow

Integrated Oil

Most left activity unchanged, with some slightly raising volume guides due to North America

Industry View Attractive

efficiencies. The few opting to raise spending (FANG, COP, PR) saw weak

reception

Despite strong results, the group fell ~8% month-to-date alongside peace deal

progress. US Majors are now near pre-conflict levels while E&Ps are up ~10%

Oil producers are pricing in long-run WTI of ~$67, ~19% below the 12-month strip.

Gas E&Ps reflect ~$3.45 Henry Hub, near the forward curve

Beyond the quarter, we retain our preference for Majors (most upside for XOM)