Imagine a jigsaw puzzle falls to the floor, and what was a complex but connected picture turns into a mix of pieces with no clear image. Uncertainties and offsetting factors abound. And the pieces are seemingly so disparate that they provide little of the clarity needed to move forward.

A similar set of circumstances appears to have arisen in the E&P sector of late. If E&Ps are trading at attractive levels, few investors are jumping in to seize the opportunity. Rather, potential buyers seem paralyzed by a myriad of externalities: price volatility, geopolitical risks, trade wars, etc.

In early June, the energy sector suffered “massive underperformance,” said a Simmons Energy report. The sell-off was sparked by a negative weekly crude oil inventory report released against a backdrop of trade war fears. The XOP (S&P Oil & Gas Exploration & Production ETF) tumbled to a point “essentially flat with its level in February 2016 when WTI [West Texas Intermediate] was about $26/bbl.”

Already have an account? Log In

Thanks for reading Hart Energy.

Subscribe now to get unmatched coverage of the oil and gas industry’s entire landscape.

Get Access
Need more than one account? See Group Subscription options