This is the hottest/coldest/wettest/driest summer/winter/fall of my life! We like to attach this “xyz ever” label to a narrative of events that often isn’t “the worst ever”. But what then, pray tell, do we make of the current down cycle in oil and gas? Is it actually the worst ever?

It certainly feels like it. Any day the market is open is another day for energy stocks to fall. More directly, energy has underperformed the S&P in any duration of time you select. It’s so bad that Energy companies now compose less than 5% of the S&P index which is the lowest back to at least 1990 (I stopped checking before that due to depression). And yet- energy consumption globally is at an all time high – north of 100 mmbo/d.

To me, most telling is the performance of the big 4 ($XOM, $BP, $RDS, $CVX) – all have yields above 3.8% and no one else is close. And… they are outperforming the equity of their smaller rivals. DRAMATICALLY.

What is clear is that oil and gas investors don’t want mid sized independents anymore (God forbid you should be public and smaller!). You MUST pay a big dividend and MUST strive to be >$100b in market cap. That these 4 are “healthy” when everyone else is down so much tells you this is not a cycle – this is a change in the game.