Barclays on U.S. Oil & Gas: What Drives E&P Share Prices? The Leader Board is Changing

Barclays on U.S. Oil & Gas: What Drives E&P Share Prices?

Analyst, Thomas R. Driscoll, said, "Enterprise value multiples of forward cash flow estimates have been very consistent for the past 18 years. The clear conclusion is that a successful E&P company needs to grow cash flow faster than it grows its balance sheet. Our measure of this growth rate-debt-adjusted cash flow per share (DACFPS)-shows strong correlation with share-price performance."

"Strongest performers over the past 5-years have been Southwestern (NYSE: SWN), Occidental Petroleum (NYSE: OXY), Ultra Petroleum (NYSE: UPL), Anadarko (NYSE: APC), Apache (NYSE: APA) and Range Resources (NYSE: RRC) with all delivering over 10% annual DACFPS growth. The Leader Board is changing however, with oilier companies moving up the rankings. For the 2011-2014 period, we project Pioneer Natural Resources (NYSE: PXD), Nexen (NYSE: NXY) and Noble Energy (NYSE: NBL) will generate annual mid-teens DACFPS growth."

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