Key Points

• OPEC+ set to add 500,000 bpd daily for three months beginning in November.
• Oversupply is likely to lower oil prices by $3-7 per barrel.
• These upstream-focused stocks risk sharp cash flow and margin reductions.
• It sounds nuts, but SoFi is giving new active invest users up to $1k in stock, see for yourself (Sponsor)

OPEC+, the coalition of major oil producers plus Saudi Arabia and Russia, plans to increase crude output by 500,000 barrels per day (bpd) starting in November. This daily hike will continue for three months, injecting about 45 million additional barrels into the global market amid already weak demand caused by economic slowdowns in the U.S. and Asia. 

The move, aimed at balancing supply, risks creating an oversupply that could drive down prices. Recent expectations point to a November increase similar to September’s 500,000 bpd boost, despite denials from OPEC. Analysts forecast Brent crude dropping $3 to $7 per barrel, hitting around $60 to $65 from the $70 per barrel level when the plan was revealed. Pricing has already dropped to around $64 per barrel. 

This would cut revenues and cash flows for producers dependent on higher prices. The three stocks below are among those oil stocks most at risk.

Occidental Petroleum (OXY)

Occidental Petroleum(NYSE:OXY), the Warren Buffett-backed producer, focuses heavily on upstream exploration and production, making it vulnerable to oil price declines from the OPEC+ hike. About 80% of its earnings come from U.S. shale, primarily from the Permian Basin, where it holds significant assets. 

With breakeven costs estimated at $50 to $55 per barrel for full-cycle operations including debt service, a $5 price drop could slash free cash flow by 15% to 20%. OXY’s net debt stands at around $20.7 billion, resulting in a debt-to-EBITDA ratio of about 2.5x — higher than peers. This leverage stems from the 2019 acquisition to Anadarko Petroleum, and lower prices would raise interest burdens while limiting capital for dividends or buybacks.

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In the second quarter, with West Texas Intermediate (WTI) crude at $63.74 per barrel, OXY reported solid production but flagged risks from volatility. The output increase could exacerbate this, as Permian-focused firms like OXY lack downstream refining to offset upstream losses. This suggests earnings could fall 25% if prices hit $60 a barrel.

ConocoPhillips (COP)

ConocoPhillips(NYSE:COP), a large independent producer, faces risks from the OPEC+ plan due to its upstream emphasis and recent expansions. Roughly 70% of revenues are tied to oil production across shale basins like the Permian, Eagle Ford, and Bakken. Its breakeven is lower at about $30 to $35 per barrel, offering some buffer, but a sustained price drop still erodes margins. 

COP’s net debt is around $24 billion, with a low debt-to-EBITDA below 1.0x, but the 2024 Marathon Oil acquisition added exposure and integration costs. If prices fall to $60 a barrel, free cash flow could dip 10% to 15%, pressuring its dividend growth strategy. 

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Q2 results showed adjusted earnings of $1.42  per share with WTI at $64, but executives noted demand worries. The hike could intensify these risks, as COP lacks major refining operations to hedge. Lower prices might force it to cut capital expenditures or jobs, as seen in recent Permian staff reductions amid oil in the $60 to $70 per barrel range.

Devon Energy (DVN)

Devon Energy(NYSE:DVN) operates as a pure-play shale producer, heightening its exposure to price drops from OPEC+’s output boost. It draws most earnings from multi-basin assets, including the Delaware Basin, with oil output at 388,000 barrels daily — some 4.3% of total U.S. shale production. 

Breakeven for Devon hovers at $43 to $45 per barrel, so a $5 decline could reduce free cash flow by 12% to 18%. Its net debt is $8.9 billion, with a net debt-to-EBITDA of 0.9x and debt-to-equity at 0.55, providing moderate leverage but it has no downstream cushion. 

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Because Devon’s variable dividend is tied to cash flows, it could shrink sharply in low-price scenarios, as seen in past volatility. The shale producer beat guidance in the second quarter with breakevens below $45 for WTI, but the company warned of commodity risks. 

The three-month production hike threat risks flooding markets with cheap oil, hitting DVN’s production outlook and $1 billion free cash flow goal by 2026. Devon’s shale focus makes it prone to capex adjustments if prices linger in the $60s, making DVN stock one to avoid for the immediate future.

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