Following are excerpts of some of the key energy “themes” for the US in 2020, taken from a recent CreditSuisse energy research report [1]: E&P companies are evolving from growth-oriented to more capital disciplined and free cash flow generating entities; [2] Utilities will continue to transform into a lower-carbon and higher tech industry as renewable…

The oil price crash of 2015 and 2016 naturally led to numerous financial difficulties for many oil companies.  Following a partial rebounding of prices, oil companies rushed to produce by borrowing significantly.  This has led to a “debt wall” with scheduled maturities rising sharply over the next few years.[1] Many companies will have difficulty paying…

Investors and operators are now required to consider a portfolio of aging wells that have been drilled, but uncompleted (“DUCs”).  Delaying a completion of a previously drilled well, by as many as four years, has “little effect” on the initial production level, according to a new study by US Energy Information Administration (EIA). The study…

Remember that Little Bombing Incident in Saudi Arabia? Last month, two of Saudi Aramco’s oil production plants were attacked with a combination of twenty-five drones and missiles.  The sites hit, the Abqaiq and Khurais oil facilities, impacted Saudi production by 5.7 million barrels per day of crude [1]. This disruption in supply caused Brent Crude…

Was Natural Gas the Fuel for Jerry Jones’ $90 Million Bet on Zeke?   This last month, Jerry Jones, owner of Comstock Resources and the Dallas Cowboys, entered into a six-year, $90 million contract with running back Ezekiel Elliott, financed in part by natural gas.1  Jerry Jones was quoted as saying that, “the way you…

A Review of the Risk Premium Method for Regulated Electric Utility ROEs Energy ROE In utility financial economics, the cost of capital, or rate of return, is the cost of an electric utility’s invested funds, both debt and equity. The cost of equity capital is the rate of return that common shareholders require on their…

Natural Gas Producers Woes Continue Two natural gas-focused E&P companies are now down approximately 95% over the last five years. Driven by the over-supply from Permian Basin development (focused on oil, where natural gas is merely a byproduct). 5-Year Stock Performance: CHK (Dark Blue) and RRC (Light Blue) More recently, over the last 3 months,…

Family Therapy: Parent-Child Issues in Shale Basins A recent Society of Petroleum Engineers’ article1 focuses on the disparities in production between parent and child wells in US shale basins, and its impact on the ability of operators to maintain high levels of output over the next few years. However, Doug Suttles, Encana President and Chief…

In this month, we take a look at market multiples as compared to the size of each company for a group of E&P companies (but excluding the majors like Exxon Mobil, Chevron, and others).  As shown in the table below, this group of companies had enterprise values in the range of $3.4 billion to $55.3…

The “Expected Range Cone” for a stock’s expected prices in the future represents a theoretical price range that is calculated from options’ implied volatilities.  A selection of large Texas oil & gas companies is shown below.   If the implied volatility is relatively high, then the market is expecting a larger potential price range for…

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