E&P analysts, and investors, are borderline obsessed with production growth, catalysts and asset popularity. They rarely talk about an energy producer's proven value as a reason to invest. Production growth is nice - as long as it's economic growth. As are catalysts - it's nice to have reasons for the stock to go up, right? But how do you really value an energy company?
An energy company's value is essentially the value of its proven reserve cash flow stream (discounted, of course) plus the value of any unproven/undrilled/unexplored reserve potential. Most E&P companies trade at a healthy premium to their proved value because they usually have large undeveloped acreage positions and lots of unproven "upside." Companies that are
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