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Martin Tillier

Martin Tillier

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Looking For Bargains? This Profitable E&P Company Is A Good Place To Start

For most oil and gas exploration and production (E&P) companies the last year or so has been about survival. The spectacular collapse in oil prices has been followed by a less publicized drop in natural gas to the point where the lows of 2012 are well in sight. Those that were slow to react to the changing environment or who were under hedged when the drop began have found themselves struggling to keep afloat. There are, however, one or two that reacted quickly enough to still be making money, even after prices fell. I am not talking here about the large integrated firms, whose diversity protects them at times like this, but about North American, pure play E&P companies.

With oil looking like it may have finally bottomed out and natural gas about to get the stabilizing effects of winter demand and, at some point, the benefit from exports, many see it as a good time to go shopping for bargains in the E&P space. If the last year has taught us anything, however, it is that false dawns are extremely possible. It would be prudent, therefore, to look first at companies who have remained profitable. Their stock has generally still been hit hard and so has some upside, but reward is only one half of the equation. Risk, which constitutes the other half is still present, of course, but it is manageable downside risk rather than existential risk that can result in a total loss of your investment.

With that in mind I set out to find a profitable E&P operation…

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