These Energy Firms Look Cheap Today
Good acreage and very lean operations make RSP Permian and Diamondback our top exploration and production picks.
Dave Meats: The potential exhaustion of Tier 1 shale acreage is a common fear in the market that we think is overblown. Shale fields are not homogenous--the productivity is higher in so-called sweet spots, and there's a lot of uncertainty about how much of the good stuff is left. If it runs out soon, the marginal cost of production could rise significantly, taking oil prices with it.
In the Eagle Ford Shale specifically the best acreage could be drilled up in about five years, but this does not apply to the Permian Basin or the Bakken. The Permian is at least 10 times thicker than the Eagle Ford, and there's enough runway in the Tier 1 sweet spot to keep operators busy for another 15 to 20 years. Bakken operators still have plenty of low-cost prospects as well. And don't forget, while the shale industry has already made huge productivity advances through technology, including longer laterals and high-intensity completions, there's still scope for further improvements that could offset any acreage-related declines. There's no shortage of Tier 1 acreage, and no mechanism for crude prices to move higher, even though that's what the market expects.
Dave Meats does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.