A good practice on any stock, whether this one or another is to compare progress, SP, Sentiment and identify and try to understand the differences. In O&G there are many good stocks each with their challenges and successes so even if we don't hold there is information available to improve our positions. Benchmarking for me isn't about bagging other stocks but identifying opportunities and weaknesses in my own understanding.
I keep an eye on a mix of O&G and have my own little index of 25, some I watch closely others less so unless some difference occurs. When comparing the SP activity over the past years I believe we have essentially tracked the average therefore likely the dominant driver has been overall market sentiment. Some stocks have done better, some much worse but on average this is my view below (based on averages)
Each June we also get an annual number from the cash flow statements from which we can follow the cash to see how a company has performed. From the above companies in my group and narrowing to similar size companies we can form an opinion how we are travelling operationally.
From the above we can see that compared to the group, fundamentally we are doing okay. A major competitive advantage is our low admin costs which means we need less production than the peer companies to generate similar or better returns. It also imo provides a buffer if things are delayed because the ongoing fixed costs are easier to cover from existing cash flow.
Given the above results I have always expected these results would be reflected in Market cap however that hasn't been the case as seen below:
Therefore even though I believe O&G sentiment has been low for all stocks some have a higher premium associated which imo is largely due to reserves, prospects and sentiment to both and management. This factor doesn't mean the other stocks are over valued or bad but only that imo fundamentals alone do not drive the SP.
Final one is looking at our prospects and the price we receive for our production. As I understand we receive Brent pricing for the oil and Nymex for the gas. Louisiana is mature in regards infrastructure and our operations are close to facilities and end use. As with low admin costs the pricing also gives a competitive advantage meaning we can produce less and receive same bottom line as many similar sized companies.
As above there are many good undervalued O&G stocks at the moment. Whatever mix we have in our portfolio's doesn't really matter, only our understanding of why we choose to hold and what we expect in to happen in the future. The Junior O&G stocks are not blue chips and each have a good story but carry associated risks which are often overlooked when the rainbows appear. For us we have witnessed many times how difficult it can be to overcome obstacles therefore we should all be in a better position today from this experience. If not we have wasted years for no apparent gain. Knowledge and cash is king in my books. I will be interested in the next few weeks what happens with Louise but for the above reasons what happens has little bearing on my mid or long term perspective. Imo confusion likely results in some volatility which in turn provides opportunity and challenges. Best wishes to everyone whatever you choose to do.
All the above is just my opinion and handiwork based on my understanding of my research. it is not advice and I welcome any suggestions to improve my knowledge or understanding. O&G is quite complex and the more we learn the more we realise we don't know. Using averages often results in average analysis and the choice of companies and bias can also skew a result so please double check for yourselves. The analysis is not complex and easy to replicate from the June quarterly cash statements, anyone can do it if they have the inclination and a bit of time, all the info is readily available on the internet. That is my take away anyway.
Cheers & GLTA
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