I did the spreadsheet below to prepare for the IPAA's Oil & Gas Industry Symposium next week in New York City. It's going to be four days (Sunday-Wednesday) of full-on, independent oil producer (and service company) information overload. It's like Woodstock for smaller-cap energy names.
As the spreadsheet shows, this group has been hot, hot, hot this year, with an average gain of 9.6% YTD, far outpacing the S&P 500's 2.2% year-to-date gain. Forty-one of the 68 presenting publicly traded companies have posted share-price gains thus far in 2015.
On a year-over-year basis, of course, it's a different story. Only nine of the companies that are presenting and have been public for at least a year have posted share price gains between April 16, 2014, and the same date this year. While the tide has turned, the damage is still evident in the 38.3% average drop in share price on a year-over-year basis in this cohort.
Of course, the "I" in IPAA stands for independents, and thus these are smaller companies. Clearly the market thought that smaller companies would be less likely to withstand the plunge in oil and natural gas prices, and a handful have fallen by the wayside in the past few months.
Larger players like Cimarex (XEC) and Carrizo (CRZO) have been among the best performers over the past year (two of the nine that have risen in the past 52 weeks of trading), but the little guys are having their day now. Especially this week, which has seen an avalanche of green on my trading screen.
Is this oil price rebound -- up more than 12% in the past six trading sessions -- for real? Is it a head fake? I think it's real, and a product of a shift in speculative sentiment toward the bullish. Let's not forget that speculators caused the $100/barrel to $45/barrel collapse in the first place. It's not like all this oil magically appeared at the surface of the Earth. It's actually really hard -- and really costly -- to extract.
I'll have a much better feel for the industry zeitgeist early next week. The producers are price-takers, but they are not totally in the dark. Clearly, currency traders and Middle Eastern despotic regimes have caused much of this plunge, but the "drill, baby, drill" tactics of U.S. E&Ps have been responsible, as well.
Could capex budgets be cut further? And, taking a more constructive stance, at what point do producers start hedging? December 2015 WTI futures are trading above $61/barrel today. Will independent E&Ps start to lock that in?
So many questions will be answered next week, and, until then, I'll keep watching the WTI price and keep studying up. Many of these companies have just filed 10-K's for the 2014 calendar year, and I've read at least 10 in the past two days. I'm almost ready!
Presenting companies that I will place particular emphasis on are:
Arabella Exploration (AXPLF)
Evolution Petroleum (EPM)
Gastar Exploration (GST)
Goodrich Petroleum (GDP)
GreenHunter Resources (GRH)
HII Technologies (HIIT)
Magnum Hunter Resources (MHR)
Miller Energy Resources (MILL)
Victory Energy (VYEY)
I'll publish a short blurb on each one in my next column.
