In the last month, the average small cap E&P company is down 26% while the independents are down 16%. This on the back of a significant takeover, prices 20% higher than companies budgeted and a wave of quarterly calls that included the phrase “we are focused on profitability and free cash flow”. What gives?

Certainly oil falling 10% in 2 days didn’t help sentiment but it would seem to me – the move to “risk off” assets in the wake of the trade war is significantly overdone in the energy space. If there is a bright side for investors (medium term) the volatility has accelerated delistings, chapter 11’s and companies that need to die are dying.

But – until we see the move in rig count to below 700 horizontal rigs, oil inventories which grow relentlessly week over week flatten and see incremental consolidation – it’s hard to believe we are out of the woods when it comes to stocks reflecting the underlying business.

I guess the best advice is to make sure the companies you own are the best in class and to stop looking at stock prices until mid July.