Over the past nine months, the decline in the price of oil, as well as the decline in the stock prices of many energy and energy-related service companies, has caused a great deal of uncertainty for investors. The big fear among many investors today is that the U.S. energy industry will experience a repeat of the 1986 oil crash, which lasted a decade in North America. We believe it is the fear of this “repeat” that has brought many energy company valuations down to levels we have not seen since that time.
On the surface, there are many similarities between the late 1980’s and today, with the most obvious being the significant decline in the price of oil. If nothing else, we believe it is this decline in price that has increased the level of fear and anxiety about owning energy-related companies. However, we also believe there are material differences that make a repeat of the prolonged 1980’s energy bust a low probability event. In this report, we hope to address many of these concerns by highlighting the differences between the current energy environment and other energy market declines over the past 35 years, specifically that which occurred in the 1980’s. Continue Reading »