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Times should be good for Legacy Reserves Inc. and Approach Resources Inc., two small producers working in the oil-rich Permian region. Crude prices rise slightly and big drillers want to grow there. Yet, they lost 99% and 87% of their market value in the past year and Legacy filed a Chapter 11 claim last month.
But it's not just the minnows fighting. The largest producers, including Parsley Energy Inc., QEP Resources Inc., Centennial Resource Development Inc., SM Energy Co., and Cimarex Energy Co., all lost between 42% and 59% of their market value in the last year. Meanwhile, the West Texas Intermediate crude oil price, the US benchmark, fell only 14%.
For larger companies, such as Exxon Mobil Corp. and Chevron Corp., combating rates of decline means drilling so many wells that they create a long, low decline production tail that brings in money for years without reinvestment. But it takes time and a lot of money, a luxury that is not within the reach of many independent actors.
Last year, share offerings were the lowest since at least 2006 and have fallen more than 60% from 2017. Public capital is hard to come by, producers like Pioneer Natural Resources Co., Devon Energy Corp. and Apache Corp. have sold less large acreage as they seek to exploit their most productive acreage.
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