Taal selectie


Shale is the name of the game

The WTI oil price dropped nearly 5% in February, to USD 61.6 per barrel. Shale oil producers shares (XOP Index) fell 10.4%. Our selection went down 7.7%, much of which has already been recouped during the first week of March.

CrudestocksSource : Bloomberg

General negative market sentiment, rather than fundamentals, was responsible for the February correction in the oil price and shale oil shares.

The problem of excessive oil inventories has now largely dissipated and production discipline in the OPEC and Russia remains exemplary, which should underpin the oil price going forward.

Fourth quarter results reported by shale oil producers generally beat market expectations and their forward-looking guidance is excellent, as regards both production growth and capital expenditure discipline. Small- and mid-cap shale oil companies are very attractively valued, trading at EBIDTA multiples of around 6x (or even lower in some cases). Institutional investors’ lack of conviction in the sustainability of the current USD 60-65 oil price is the only reason we can find for such low valuations. It might take some time to persuade these investors that USD 60 per barrel is a rock-solid bottom – at which point we could witness a sudden and considerable revaluation of the sector.

(update : 03.2018)