Energy Prospectus

Another ESG article in OilPrice.com sparked this post.

https://oilprice.com/Energy/Crude-Oil/F ... mands.html

There is no doubt in my mind that oil should be in the $110 to $120 range given our current 27 days of crude inventory based upon inflation adjusted historic prices. I accept the current $75 WTI and its impact on stock prices as a symptom of the ESG pressure. What I don't understand is how this pressure is affecting any of the companies in the EPG Small Cap, Sweet 16 or High Yield portfolios. Sure a year ago a lot of these companies were in debt past their eyeballs, but today most have massive FCF, are paying down debt like crazy, or refinancing way out into the future.

For sure the ESG pressure is making the production expansion outlook iffy, and no one wants to repeat the drill baby drill of 2011-14, so it seems to me, companies like Devon have it right: Expand at 5-7% each year, pay out huge dividends and let higher WTI prices slap some sanity into energy policy.

With so much cash flowing in and limited expansion goals, why would any of these companies beg ESG sensitive banks for loans?

In fact, it makes me wonder what oil and gas related businesses are even considering begging for money?

Kevin

None of the companies in our Small-Cap Growth Portfolio need additional bank loans unless they are making a large acquisition. InPlay's recent acquisitions is a good example of what a "good acquisition" looks like; immediately accretive to operating cash flow + lots of low risk drilling locations. Earthstone's "grow via acquisition" strategy is also working.

There are still plenty of regional banks willing to make loans to high quality (cash flow positive) upstream companies.