The latest swoon in shares of exploration-and-production companies is distressing for dedicated energy analysts.
“The big picture thing is there’s a lot more pain to go around,” said Bill Costello, an energy analyst at investment manager Westwood Holdings Group, referring to the sharp declines in E&P shares. “The longer oil prices stay down, the harder the slog these companies will go through.”
Shares of energy companies have tumbled since the second half of 2014. The S&P 500′s energy sector is off 7.5% this year after dropping 23.6% last year.
Even as shares of energy companies are low, being cheap is no longer enough of a reason to scoop up these so-called bargains, Mr. Costello says. A year ago, the price of oil appeared to be headed back to around $55 a barrel. Now, there is fear that the price per barrel could remain closer to $30 for a long time.
Last year, the share price of energy companies tended to stabilize after sharp drops on expectations that oil prices had hit a bottom. This buy-the-dip mentality, which showed up in March and to an extent in late September, doesn’t appear to be playing out this time around, analysts say....MORE