While shale oil producers have enjoyed an advantage over gas producers over the past 15 years, the situation is likely to reverse in 2025, according to JPMorgan.

Analyst Arun Jayaram said in a note that natural gas producers are likely to benefit from three "powerful secular demand trends" in 2025:

  • The build-out of significant LNG export capacity
  • Rising power demand from electrification
  • The switch from coal to natural gas
Natural gas prices could remain above $3.50 per MMBtu (Metric Million British Thermal Unit) in the long term, as this price reset to a higher level will be needed to incentivize incremental supply growth from higher-cost gas basins, Jayaram stated.

The Rating Changes

ConocoPhillips (COP  ) - upgraded from Neutral to Overweight.

While the stock has underperformed peers year-to-date, the company is likely to be "one of the few E&Ps in our coverage that raise cash return in 2025," including $6.0 billion in share buybacks, the analyst said.

Devon Energy Corp (DVN  ) - downgraded from Overweight to Neutral.

The company faces tougher comps in 2025, given its strong well productivity so far. "Another factor that supports our downgrade is the sizeable PE overhang post the Grayson Mill deal (~6% of shares outstanding)," Jayaram wrote.

SM Energy Co (SM  ) - downgraded from Overweight to Neutral.

The downgrade reflects a "preference for natural gas exposure" and the company's near-term cash return lagging peers," he stated.

CNX Resources Corp (CNX  ) - downgraded from Neutral to Underweight.

The stock has outperformed year-to-date and the company has "less near-term gas exposure compared to gassy peers given its robust hedge book," the analyst said.

Price Action

At the time of publication Thursday:

  • Shares of ConocoPhillips had risen by 0.58% to $104.10.
  • Devon Energy's stock had declined by 0.93% to $36.14.
  • SM Energy's stock had risen by 0.98% to $42.34.
  • Shares of CNX Resources were down 0.21% at $38.15.