E&P Companies Flailing Financially: "Discoveries Have Been Too Sparse"; "Market Is Dysfunctional"

[hatrack]

The $250m price tag attached to the sale of a 50% stake in a key project should have given a big boost to the share price of Africa-focused oil explorer Bowleven last week. It failed to. Analysts said the farm-down of the oil and gasfield off the coast of Cameroon was worth about 68p a share to Bowleven. Yet a day later, its shares were trading at just 40.5p. Its market value is now lower than the cash it earned on the Cameroon deal.

“Something is not working here,” says a person close to the company. “The market is dysfunctional.” International exploration and production companies – or E&Ps – were once stock market darlings. But E&Ps have lost their lustre. That is partly because they seem to have lost the knack of discovering oil.

“It would be great if someone actually found something with the drill bit to remind people of the reasons for holding E&P stocks,” “Discoveries have been too sparse.” With a few exceptions, “the whole sector is trading below core net asset value”.

Disappointing exploration results are just part of the problem. The E & Ps’ fortunes rise and fall with the oil price, and crude has been more or less stable over the past two years. Also, valuations used to be supported by merger and acquisition activity in the sector. But since Cove, deals have been few and far between. “Potential acquirers are much more choosy than they were in the past,”. Big Oil, under pressure from shareholders to show more capital discipline, has pulled back from large corporate deals. Also, E & Ps hoping to sell themselves or their assets are facing a much more crowded market, as the majors pursue multibillion-dollar asset disposal programmes.

EDIT

http://climatechangepsychology.blogspot.com/

Third article down below link list - FT subscription-only.

[Demeter]

1. There is no future in drilling

and fracking is just a flash in the pan. Time to adjust to reality.

And as for a dysfunctional stock market...you only noticed now? It's been that way since HFT started in 1999.

[Benton D Struckcheon]

2. New oil discoveries are harder and harder.

Fracking only works at a high price, and even then is barely profitable. Crude is cratering today, meantime. The global economy is just too slow; China's slowing down, and the EU is its usual austerity crippled self. Only the US is maintaining at all, but at a lower level than pre-crisis. The world is awash in commodities; too much supply, too few buyers.
But we're running out of resources, ya know. Just can't figure out which ones...