Strong prospects for oil & gas ‘Super Independents’

For U.S.-based oil and gas firms, 2018 is shaping up to be a very active year as the industry responds to evolving conditions. Doug Reynolds, Head, Global Investment Banking – Energy, outlines the rising prospects of the ‘Super Independent’ firms, drawing upon insights from Scotia Howard Weil’s recent Large Cap Monthly report.

Industry shifts from exploration to development

During 2017, we saw the market shift from an exploration focus to a world in which lower oil prices and subsequent recovery drove clients to concentrate more on delivery, operations, volume increases and engineering of new wells. This has also become the emphasis of equity and debt investors.

Super Independents poised for growth

In this environment, the companies that are attracting high valuations and high multiples include the Super Independents, those companies with typically more than $5 billion in market cap in scale with the ability across several attractive oil or gas producing basins to drive significant volume growth.

These companies are the ones with the operational capability, with ‘the right rock’, the balance sheets, and the overall scale to really drive volumes, as well as shareholder returns. They are having a big impact on U.S. volumes, are leading considerable unconventional development, and are at the forefront of applying technology.

As such, we see the Super Independents in a good position to grow into bigger, more attractive entities. They are picking up speed as they become more attractive to investors, gain cash flow, grow volumes, and deliver more to shareholders.