In the giant family that is the ASX, it is the onshore oil and gas producers that are currently being treated like delinquent teens that are not behaving as expected.
Sure, commodity prices are tumbling, but given the strong growth of companies like Drillsearch Energy Limited (ASX: DLS) and Senex Energy Ltd (ASX: SXY) the current low valuations seem to be out of proportion to the drop in oil price. This leaves some companies looking cheap.
Senex Energy is a prime example. Focused on the Cooper/Eromanga Basin the company has done a good job of growing 2P reserves, while more than doubling production over the last three years. It has also been chalking up valuable funding deals with the likes of Origin Energy Ltd (ASX: ORG), while avoiding the burden of debt.
Yet the company has lost a quarter of its market value over the last three months while oil has fallen just 15%.
| Company | Market Cap | Current share price | 3-month price change | FY14 P/E |
| Santos Ltd (ASX: STO) | $12.91 Billion | 13.21 | -7% | 28.7 |
| Beach Energy Ltd (ASX: BPT) | $1.85 Billion | 1.43 | -12% | 18.3 |
| Drillsearch Energy Limited (ASX: DLS) | $531 Million | 1.20 | -20% | 7.4 |
| Senex Energy Ltd (ASX: SXY) | $613 Million | 0.53 | -25% | 16.2 |
Source: Yahoo Finance, company releases
It is a similar situation for Drillsearch Energy which is down 20% in the last three months and sells for a mere 7.4 times earnings, despite the company's long-term gas prospects.
Drillsearch grew earnings per share by 50% for the full year FY14 and although production guidance for FY15 is relatively flat at 3 – 3.4 million barrels of oil equivalent (mmobe), the revenues will help drive exploration and increases in 'wet-gas' reserves.
More established producers like Santos Ltd (ASX: STO) and Beach Energy have better weathered the share price falls, possibly because their production mix is diversified across oil and gas.
The implication for long-term investors is that the falls in share price make now a great time to consider adding energy production exposure to your portfolio. Analyst consensus for oil prices compiled by Reuters suggests prices could be above current levels in 2015 in which case the family delinquents could again become the family favourites.
