Barclays: The North American E&P Sector At 50% Premium Of Historic PE

Barclays came out with a note this week entitled “Profiting from the Valuation Gap between Share Prices and the Oil Curve”. The bank notes that the shares of North American E&P companies in the oil sector appear to be discounting $95/bbl WTI, well above the forward curve.

There is no historical precedent for E&P valuations to be trading at such a large premium to the forward curve for an extended period. And, based on these historical trends, Barclays believes that the valuation gap between oil strip prices and E&P share prices will converge over the next 12-18 months.

E&P sector: Overvalued

Barclays makes the case that many companies in the North American E&P sector are overvalued with oil trading at present...