Citi Downgrades California Resources (CRC) to Neutral

Citi analyst Scott Gruber downgraded California Resources (NYSE: CRC) from Buy to Neutral with a price target of $36.00 (from $62.00).

The analyst comments "A central tenet of the Energy playbook is to buy low-cost producers when oil is trading below marginal cost. Friday marked that point with WTI sliding to $62, below our ~$65 marginal cost estimate. Hence, we upgrade FANG to Buy as the sell-off (down 26%YTD and 40%TTM) presents an opportunity to buy a high-quality E&P discounting ~$58 WTI into perpetuity. Regarding timing, the playbook suggests buying when marginal producers react to lower prices. Our call may be early, but the trade war and OPEC’s actions present unique aspects to this correction. We see higher cost, small cap stocks as likely taking longer to recover given macro uncertainty. Thus, we downgrade CRC and VTLE to Neutral. We applaud CRC’s longer-term strategy (CCUS and power growth), but the core remains higher-cost CA production. We expect the market to look beyond VTLE’s hedge book to focus on their relative break-even."

For an analyst ratings summary and ratings history on California Resources click here. For more ratings news on California Resources click here.

Shares of California Resources closed at $34.83 yesterday.

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