There’s little question that U.S.unconventional resource development has moved into manufacturing mode from what once was an era of nimble E&Ps aggregating acreage and testing target zones.Now a premium value is accorded economies of scale,an advantage enjoyed by integrated and many large-cap producers,while small/mid-cap(SMID)E&P stock valuations have been deeply derated.With E&Ps facing a narrowing range of options,uncertainty is in the air.Access to capital markets,both equity and debt,is no longer available to many E&Ps.A new set of investors is increasingly pressing for”organic growth”and free cash flow(FCF).Priorities include cutting costs,extending liquidity,bolstering balance sheets,reducing FCF breakeven and returning money to investors.No small challenge.Or maybe even mission impossible,if striving to reach all the above goals at once.
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