Failing to convince investors

While oil and natural gas prices have recovered and are near their combined highest level in history, exploration and development (E&P) spending has not recovered at the same rate. E&P company stock prices have lagged the price recovery even more. Share prices of major oil companies and independent E&P companies have not kept pace with share prices of companies in other industries, such as technology and telecommunications, or even the S&P 500. And the share prices of oil companies have not even kept pace with the increase in oil prices, the indicator they have tracked historically. As a consequence, many E&P companies find themselves struggling to convince investors they can create value during a time of strong product prices and cash flow, according to Arthur Andersen’s 21st annual Global E&P Trends, interpreted for Petroleum Economist by Victor Burk, managing director, energy industry, Arthur Andersen.