It’s no secret that oil and gas companies are struggling to attract investors. Oil prices continue to fluctuate and the energy landscape is evolving. The sector’s annual stock performance over the last five years has consistently lagged behind the S&P 500. A 2019 PwC survey of oil and gas business leaders and industry analysts revealed that both groups recognize attracting investors will be a challenge going forward. Many are taking steps to do something about it -- others aren’t as far along. To recover investor confidence and capital, oil and gas companies should continue looking for new ways to change their game.
Who Are Your Investors...And Who Are Your Peers?
The first question to answer is: Who are the investors? No, this isn't a trick question. The unfortunate reality is that those who have historically invested in oil and gas, such as growth investors, are no longer interested in the industry. Meanwhile, investors who primarily rely on an Environmental, Social and Governance (ESG) lens have never had an interest in oil and gas given their focus on carbon reduction and other related issues. That means it's time to focus on the remaining type of investor: The value investor. This fundamental shift highlights an obvious disconnect, but provides clarity for a path forward. It may also help to redefine your peers. Since the value investor is a generalist in terms of industries, the implication is that your peer group is now the broader market. In other words, the S&P 500.
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