For the last several years, the global diversified mining sector has emphasized financial discipline and return of shareholder capital. There is now clear evidence of widespread adoption in the U.S. oil and gas industry and, this year, a number of energy companies have made significant capital returns to shareholders in the form of dividends and/or share repurchases.
We are encouraged by the fact that:
- Exploration and production companies (E&Ps) have demonstrated discipline despite, at times, higher commodity prices;
- Share price performance of these E&Ps appears to be less susceptible to macroeconomic headwinds, which, in recent years, drove a more substantial negative impact; and
- Improvements have been made in the multi-year visibility for enhanced free cash flow yield in the space, even in a moderately depressed commodity environment.
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