Sustainability Or Growth? E&Ps Face A Difficult Decision

2 Oct 2017   Shale Oil, USA

U.S. unconventional E&Ps often find themselves in a difficult position in the current environment. The environment has long been “grow or die,” with high emphasis placed on companies growing production. Firms that have little growth prospects generally trade at significantly lower multiples. On the other hand, a different group of investors have much different priorities. Many investors have begun to place a premium on operational sustainability instead of growth. These investors prefer that companies are able to sustain operations and generate free cash flow, rather than spend beyond their means to keep growing. Companies, then, are often forced to decide. Is it worthwhile to spend beyond cash flow to grow? The ideal company is able to do both, but most must choose one or the other. A tough downturn and volatile commodities prices have made E&Ps and investors cautious. Out of 119 E&P companies, 72 are predicted to have […]

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