Equities, in general, are supposed to discount future market conditions, and that’s why price targets are usually set on metrics projected for 2020, for example, rather than what is forecast for the next quarter or two. But energy equities have a shallow set of buyers, and trading strategies have found it often possible to make money selling stocks short ahead of quarterly conference calls.

It’s hard to find a CEO today who is unaware of investor pressure on E&Ps to spend within cash flow and, as soon as possible thereafter, generate free cash flow. Also, it’s sometimes hard to know exactly what drives a company’s stock price, even if you’re a CEO who knows which levers logically should deliver stock price performance. Take, for instance, first-quarter results by SM Energy Co.

“We are so close to growing within cash flow that we can almost taste it,” said Jay Ottoson, SM Energy’s CEO, noting his shared disappointment with investors over recent stock underperformance. Even with key quarterly metrics pre-announced—and incremental news being decidedly positive on drilling developments—SM’s stock fell a further 9% at one point on the day of its earnings release.

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