Free cash flow in the North American energy sector is about to soar, and that trend should continue for the next 5-10 years - even with declining oil and gas prices - says US brokerage firm Raymond James (RJ).
For investors, it could (should?) mean higher multiples as energy producers turn into more sustainable cash flow machines.
The heart of RJ's argument is that the massive overspending by producers on new land plays is almost over, and production costs have stabilized. At the same time, oil and gas production per well is increasing - sometimes dramatically.
Stable costs and higher production. The result? A new era of positive, free cash flow that should last several years.
Some supporting evidence comes from a second research report - also issued on July 14 - by the #2 Canadian brokerage firm, BMO Nesbitt Burns. In a 26 page summary introduction report to their