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Shale Industry Cuts Rigs As Shareholder Pressure Mounts

Bakken

Friday October 13, 2016

In the latest edition of the Numbers Report, we’ll take a look at some of the most interesting figures put out this week in the energy sector. Each week we’ll dig into some data and provide a bit of explanation on what drives the numbers.

Let’s take a look.

1. Energy stocks underperforming

(Click to enlarge)

- Investors are losing patience with the shale industry, which has posted enormous production growth rates for years, but has come up short on profits.
- The growth-at-all-costs business model is suddenly being challenged by a wide range of investors, who are demanding that shale drillers slowdown and focus on returns rather than higher levels of drilling.
- The backdrop to this shift in shareholder sentiment is some of the worst returns on investment. The energy sector has dramatically underperformed the broader S&P 500.
- “E&P (shale growth) model is capital destructive,” said Morgan Stanley analyst Evan Calio.
- Analysts view Anadarko Petroleum’s (NYSE: APC) September decision to buy back up to $2.5 billion in shares – and the subsequent spike in its share price – as a sign of changing times.

2. Drilling activity declines, especially for indebted companies

(Click to enlarge)

- The U.S. shale industry has suffered some hiccups lately, even as oil prices recently jumped back above $50 per barrel.
- The rig…

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