XEC has historically been a price taker that favors flexibility in order to sustain corporate-level returns above its cost of capital, and as such, has minimal hedging on the books to offset wide price differentials over the next year. The stock has been under pressure for this reason and because management has opted to defer returning capital to shareholders in favor of investing in higher-return growth opportunities (which they stress test for 10%+ corporate level ROICs at $40 per barrel oil). This came at a time when E&P's were (rightfully) being chastised for destroying shareholder value with overinvestment (or poorly timed investments?) and asked to prioritize dividends and share repurchases over volume growth. Although we understand this rationale quite well, we do not believe in putting every E&P in the same bucket, especially one like XEC, which we believe is a top-tier capital allocator compared to its peers.
From FPA Capital's second quarter 2018 shareholder letter.
