Diversified Independents Trading at Premium to Pure Play Tight Oil Players
For the first time, a group of diversified independents (DI) tracked by Wood Mackenzie is trading at a premium to a group of pure-play US tight oil players (PP) monitored by the company, according to a new report from the research and energy consultancy.
“For a number of years the market has attributed a higher value to tight oil companies than we have in our base case asset valuations, whereas the diversified independents have traded at discounts to our base case valuation … For the first time we have seen this reverse,” Kris Nicol, corporate analyst at Wood Mackenzie told Rigzone.
Nicol said the market valuations of the DIs had risen “significantly faster” in the past 12 months compared to the PP companies, “primarily driven by the positivity around upsized buyback programs and negativity towards Permian growing pains and Mid-continent below ground risks”.
In the report, Wood Mackenzie highlighted that the oil price collapse has underlined the benefits of having portfolio exposure to cash-generative international legacy assets, flexible unconventional opportunities and high-margin international growth.
The report warned, however, that the DIs will need to continue to adapt to protect market outperformance and outline compelling long-term visions to investors.
Wood Mackenzie’s tracked DI group comprised Anadarko, Apache, ConocoPhillips, Hess, Marathon, Murphy, Noble, Occidental and Repsol. The tracked PP companies comprised EOG, Pioneer, Continental, Devon and Newfield.
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