RE: EnQuest doppelgänger17 Oct 2018 14:52
I'd approach DGOC with a healthy dose of caution. It may have large 2P reserves, yes, but please note that the big acquisition made back in June in Appalachia that MO refers to below as well as the recent buy adjacent to the June buy (geographically) are all primarily nat gas producing wells. The unfortunate reality of nat gas in the US is the very poor pricing that comes with it.
During the fracking process, lots of Nat gas is produced as a by product and quite a bit of is flared particularly in the Permian, as there's no gas pipeline takeaway capacity to the coast from the Permian. This is a well known fact. As a result gas prices are really low in the Texas region, and whilst they may be better in the Appalachia, it's still substantially lower than say in Europe. On Wall Street, crude producing (higher % than gas) upstream companies are valued much better than gas majority producing ones. And with ever increasing nat gas production from the fracking belts of the US, pricing there won't get any better in the near future and neither will valuations. If you consider that stock valuations of crude majority upstream companies haven't recovered anywhere near where they were when WTI was last at $70, the valuations of gas majority companies are even worse.
To me, ENQ is in a better place from a commodity pricing viewpoint (Brent crude linked) and also the commodity weighting mix (greater than 90% oil and the rest, gas). Not too many US players can stack up against these facts. Let's start getting the debt down and our valuations will improve. H2 2018 will be a good start and 2019 will be breakout year..All, IMO.
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