Optimism abounds, as companies reiterate efficiency, capital discipline and portfolio optimization.
2019 has started on a positive note. Earnings reports continue to impress analysts and although average prices were lower in Q1 2019 than in Q4 2018, OPEC and production cuts were enough to offset continued North American production growth and drive an upward trend in oil prices. Revenue growth stalled as crude and LNG prices combined with thinner refining margins, but the companies we track posted better operating incomes. The investor community seems encouraged by the sector’s ability to sustain and build on efficiency improvements, grow production and strengthen fundamentals. The focus now is on incremental sources of value.
M&A opportunities have come to the fore, with particular awareness of consolidation in the US onshore segment. Cash has been and always will be a focal point with an increased focus on distribution and stock buybacks, leading us to question investor confidence in the sector’s capacity to grow profitably. Project developments and FIDs are of interest as investors seek to understand “what’s next?” as we approach energy transition. Company optimism abounds, as they reiterate efficiency, capital discipline and portfolio optimization.