Valuations for oil and gas producers are not holding up as well as the broader energy sector since the recent Fed decision to not increase interest rates, according to RigData’s RADAR Report.
Independent producers’ stocks doubled the losses of the overall S&P Energy Sector Index as of the Fed announcement this month. The RigData News & Analysis (RDNA) team found that on average domestic producers traded for $25/BOE, or $3.50 less than their realized prices for existing production. US operators with international exposure were valued at ~$7/BOE more than strictly domestic producers and possessed $3/BOE higher realized prices. At the margins, exclusively domestic operators are trading at discounts, while producers with international exposure trade at parity with realized prices. In valuing producing assets, the total should approximate $50,000 per flowing daily barrel of crude.
RDNA’s sample companies collectively held $17,000 in debt per flowing BOE/d. Lenders are not likely to extend credit availability much past $30,000/BOE/d. Operators close to this limit will need to raise capital by other means (i.e., selling assets or raising equity) as this downturn progresses.
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