Screening for value part 2

Using the same methodology as described in the previous post, I’ve now included 9 diversified E&Ps, by which I mean companies that produce in a number of geographic areas, rather than a single area like the Permian or Marcellus.

By this metric the first thing that jumps out is that there is a definite trend here, and that the Bakken companies appear undervalued and the Permian companies appear overvalued.  Note that RRC and AR have valuations that are so high that they are off this chart.

And again using production trends instead of EBITDA trends, the Permian producers appear overvalued.  Some of the diversified companies are growing as fast or faster, with valuations at half that of the Permian pure play companies.  Why are the Permian companies valued so highly?  I certainly don’t have a ready answer for this question.  If these companies were very small, and still in the early land buying and infrastructure building stage it would make sense, but Pioneer (PXD) has a market capitalization of nearly $30b and Conch (CXO) is 14b.  Why should their valuations be so much higher than comparably sized companies with more geographic diversity?