Michael, Re: Depletion & Acquisition
An E&P can not remain an E&P without exploration. You must continually replace reserves.
In the long run, yes, your statement is correct. In the short term, however, as long as the E&P's acquire the necessary reserves to meet their production, growth, cash flow, and earnings objectives, then the market could care less whether they acquire those reserves by drilling in the field or by "drilling on Wall Street".
IMO, this is a perfect price environment for acquisitions, as long as the E&P's keep trading at a discount relative to their net asset value. Some of the recent articles posted by Tomas, myself, are indicative of this continuing trend.
Stay tuned. IMO, there will be more to come.
Razor |
