Disconnect -- August 24, 2022

Check the share prices of the E&Ps in these four charts vs their earnings.
See if you can see the problem.

• gas-weighted E&Ps' 2Q22 results; 
• oil-weighted E&Ps' 2Q22 results;

If following the news for the past six months, it's even more interesting.

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The Third Time Is The Charm

Other see it different: two oil price crashes later, shale investors are finally being paid. Link here.

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Investors Are Too Pessimistic

From The WSJ.

Saudi Arabia and Goldman Sachs agree: Investors have the oil market all wrong.

Money managers bracing for a global slowdown have pulled back from bets on oil and other commodities, helping push prices lower. But their focus on potentially waning demand isn’t shared with some of the most powerful figures in the industry, or with investment banks, who point to a host of other reasons why prices should be higher.

This week, Saudi Prince Abdulaziz bin Salman said the oil futures market has become increasingly disconnected from supply and demand for energy. Saudi Arabia is considering cuts to OPEC+ production to try to balance this, a move that other members of the oil cartel said they may also support.

The median forecast among 22 Wall Street analysts surveyed by FactSet is for Brent crude oil, the global benchmark, to finish September at $115 a barrel. That contrasts with Wednesday’s $100 a barrel. The most actively traded Brent crude futures have fallen nearly 4% in August, regaining some ground after trading as low as around $92 a barrel earlier this month.The market is irrational and the combination of decent demand, falling inventories and tight supply should be pushing prices up, Goldman Sachs analysts said in an Aug. 12 report.

“Almost any measure of investor participation in this space is dwindling, this is what gives us the confidence to say this is investor-led,” said Jeff Currie, the bank’s head of commodities research, referring to the recent price declines.

Much more at the link.

Investors are not too pessimistic. They are rational. They need an incentive to invest in E&Ps.

Exhibit A:

• despite soaring profits, and,
• 12% off its recent 52-week high,
• CVX is up .... drum roll ..  six cents today on a stock that trades for $160 (6/16000) = 0.00% to the nearest hundredth -- and now, the share price has actually turned negative for the day.
• dividend history here: