Look for more funds to rotate into Upstream Oil & Gas

[dan_s]

From RBN Energy Newsletter dated 4-1-2019:

U.S. exploration and production companies (E&Ps) have found it very difficult to shake the aura of doom and gloom that shrouded the industry after the 2014-15 oil price crash brought many to the brink of insolvency. Investor sentiment, as reflected in the S&P Oil and Gas E&P stock index, tells the tale. After reaching a high of more than 12,000 in mid-2014, the index plunged to as low as 3,600 in early 2016. With crude prices and profits rising after that, the index climbed back to about 6,600 in the fall of 2018, but plummeted nearly 40% to 4,000 — one-third of the 2014 high — in the second half of December (2018) on fears of a return to red ink as oil prices dipped to $45/bbl. But recently released 2018 financial results from our universe of 44 major U.S. E&Ps provided strong evidence that belied the negative sentiment about the sector.
Despite the fourth-quarter oil price decline, the industry roared back to profitability in 2018. More tellingly, the industry has streamlined its cost structure so dramatically that overall 2018 profits were just 20% below those generated in the $100+/bbl environment in 2014. Remarkably, the Diversified E&P Peer Group — whose portfolios are roughly balanced between oil and gas — generated $14.10 per barrel of oil equivalent (boe) in profits in 2018, 7% higher than the $13.20/boe the group netted in 2014, when revenues were much higher. And with first-quarter 2019 oil prices rising 30% — the largest quarterly increase since 2009 — the industry appears to be on track for solid profitability again in 2019.
----------------------------
If WTI goes to $65/bbl and natural gas averages $2.50/Mcf, our Sweet 16 may be more profitable in 2019 than they were where WTI averaged $100/bbl.

As I have posted here many times, the gloom & doom is even worse for the "gassers". AR, GPOR, RRC and SWN are all profitable at today's natural gas and NGL prices. GPOR has the lowest PE ratio in the Sweet 16.

[dan_s]

If you'd like to see the RBN newsletter, send me an email (dmsteffens@gmail.com) and I will forward it to you.