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What Companies Have Taken Advantage of Lower Energy Prices?

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Cyclical behavior of energy prices

After staying high around $100 per barrel from 2011 to 2014, crude oil prices have been following a cyclical downtrend for the last two years. From their peak in 2014, WTI crude oil (USO) (UWTI) (DWTI) and natural gas (UNG) (UGAZ) (DGAZ) prices have fallen ~57% and 43%, respectively, in the last two years.

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Divestitures to raise cash

Many upstream companies expect the lower and volatile energy prices to stay. This “lower for longer” trend in crude oil prices has taken a toll on energy producers, especially those with leveraged balance sheets such as Southwestern Energy (SWN), Chesapeake Energy (CHK), and Denbury Resources (DNR). Dwindling cash flow has raised liquidity concerns for these companies and they are left with no choice but to sell some of their assets in order to raise cash.

Who was buying?

Upstream companies with less leverage and more liquidity ventured out to add quality acreage to their portfolios at attractive prices. Companies that took advantage of the decade-low crude oil and natural gas prices include Range Resources (RRC), EOG Resources (EOG), and Occidental Petroleum (OXY).

In this series

So far, we’ve looked at upstream companies that are active in the A&D (acquisitions and divestitures) market. In the course of this series, we’ll also look at details of acquisitions by RRC, EOG, and OXY. Later on, we’ll compare the price performance of these companies to see if they are outperforming upstream companies that sold assets. At the end, we’ll look at the Wall Street analysts’ ratings for these companies. Let’s start by looking at RRC’s, EOG’s, and OXY’s acquisitions.

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