I have received a few messages thanking me for providing TA curves and stating they were just fundamentalists. Actually so am I - the only thing TA does is allow you to try to read the other participants and try to predict their behavior. Only real way to have predicted the behavior of a lot of high flying stocks, Apple and Tesla recently, but a lot of energy stocks up until 2014 was with TA.
The fundamentals are actually really good right now, but the charts are saying no one is believing them. If you look at someone like APA as a representative fundamental case study, they have taken huge write downs, and their book value is near zip. Now O&G prices are going back up, and many of their assets, assuming a "normal" projection of price and asset performance, have reflated in value. Yet you don't see that in the EV - you see the debt but not the market capitalization. The problem for the fundamentalist is how to value future production, for instance, APA has a reasonably good chance of returning to their pre-Covid production rates next year, the problem is the Market is not buying $75 oil and $4 gas in the long term, and APA's ability to continue to drill in the non-carbon energy world.
Right now, the change in the Market believing in longer term pricing and markets is not there - sure there are a lot of people that are believers in energy, but there are a lot that don't - look at what happened to Exxon and Chevron in their shareholder meetings. A lot of equity investors have very strong feelings that need some physics and economics lessons, and frankly those are starting, as headlines start to point out problems with EV's and the costs of renewables.
But still fundamentals are the driver, for APA, Suriname is a game changer, and their partner TOTAL reports next Thursday and APA reports on August 5th. Through at some conferences I've heard this described as needing another word bigger than "big", and that is to be expected - turbidites have a tendency to be high energy environments, and give beautiful logs if they are there and oil saturated, now the question is connectivity which the infill drilling will solve and some flow testing. The Guyana/Suriname basin has two valuation drivers - the shallower sands that Exxon is knocking the balls out of the park in Guyana, and the deeper targets that APA drilled into, below the discoveries they have been disclosing.
TOTAL, reportedly did not learn from Apache's experiences on casing setting depths and is having problems drilling into the deeper, higher pressured zones, but now everyone is talking and they have been working together, and I have no idea what they are seeing down there. Apache disclosed the presence of carbonates, and high pressure rich gas, but that is about it. TOTAL, based on results so far, has leased the offset two blocks in the last month, so some of the lack of information may be tied into that - everything is not leased up. The upper sands may be enough if they have connectivity, since the experience in Guyana is the drilling is much cheaper in these upper sands, and the economics are really good - Guyana will probably have 10 FPSO's in the next five years producing or under construction.
The point is, fundamentals are the driver, but the analytics tell us whether that is driving investors. Oil and gas prices are up, and those charts look pretty clear. For companies, charts need data to plot, and if Q2 has a big impact fundamentally on companies financial performance, the charts may start to change. For sure by Q3, will enough positive fundamental news be in place to drive investing. Any reason for people to not think Q4 looks good fundamentally as well? The TA should really start to show that.