Oil Industry Faces Nightmare on Wall Street

摘要

For executives of public oil companies, Wall Street has become a dark and dangerous place. Shares in most energy companies were underperforming the broader market even before the oil price slump began in 2014, and the gap has continued to grow. Oil companies now find themselves stuck between an uncertain outlook for the future and the unimpressive financial performance of the recent past. As a result, investor unease over energy has perhaps never been greater. Over the past five years, the benchmark US S&P 500 index is up almost 47%. But energy companies within that group, traded under the ticker XOP, are down more than 60% (PIW Apr.2’18). Energy has the slowest and most volatile revenue growth, the weakest free cash flow generation and the lowest return on capital, says Nathan Strik, energy sector leader at Fidelity Investments. “Nothing in that is particularly attractive, and that’s the underpinnings of why the sector has lost favor,” he notes (PIW Jun.4’18).