SHREVEPORT, La.—Capital discipline is the secret sauce that has vaulted the oil and gas sector ahead of all others in the stock market this year, but from a relative value perspective, energy companies are still trading fairly modestly, a markets expert said May 26.
Energy companies as a whole are trading at 8x EBITDA and account for about 5% of the S&P 500 index, said Jay Salitza, managing director for oil and gas at KeyBanc Capital Markets Inc., at Hart Energy’s DUG Haynesville conference and exhibition. By contrast, the technology sector trades at 17x EBITDA and constitutes about 25% of the index.
“So, you’re either going to see a lot more running room for gas stocks, or further compression from the tech space over time,” Salitza said. “Oil and gas, in our opinion, continues to show the ability to return capital to shareholders.”