cbs.marketwatch.com
Since oil-producing basins are maturing rapidly, companies have to drill more wells this year than last year just to keep production flat.
On average, yes. But there are many counter-examples, and many companies who have sucessfuly discovered new basins. OIL comes to mind. When I look for E&P's to hold, exploration upside is important - if all they are doing is "drilling more wells.. keeping production flat", then they don't deserve a second look.
Meyer pointed to Burlington Resources' move away from shallow water drilling and its substantial maintenance costs in the Gulf of Mexico as evidence of one "major portfolio shift." Apache, on the other hand, remains committed to growth, he said.
But which strategy has proved better for shareholders in the initial phase of this most recent cycle? BR's or APA's?
If ng was hovering around 2, and oil around 18, the concept of profitable growth vs. pure volume growth might have merit. But where prices stand now, and where I think ng will continue to be, there is no reason to limit production volume.
Wooing investors away from high-flying technology stocks into a sector that's slowing its growth won't be easy, said Meyer, adding that demand for E&P grows at 2 percent a year "at best."
This must be an average number. |
