Mike Kelly, managing director and senior analyst for Global Hunter Securities, gets perturbed by his self-confessed pet peeve. When asked a question about the number of companies able to generate free cash flow currently, he responded, “Free cash flow is the new trend today; everybody seems to be solving for free cash flow and returning money to shareholders. And it kind of drives me nuts.”

Kelly shared his thoughts along with three other capital providers in a roundtable discussion at Oil and Gas Investor’s A&D Strategies and Opportunities conference in Dallas in September.

It’s all a matter of perspective, he said, and investors today look at oil and gas companies with a skewed viewpoint. Emulating an investor asking a question on an imaginary conference call with Concho Resources Inc.’s CEO Tim Leach, he asked (in a British accent), “Tim, when are we going to get you to increase your dividend?”

Which is entirely the wrong question for investors to be asking of E&Ps today.

The macro looks good, he said. “You’ve got Saudi [Arabia] and Russia holding hands. You’ve got Venezuela imploding, and you’ve got $70 oil. If I’m an investor, I want Tim Leach drilling 100% rate-of-return wells with my money. I don’t want him giving me a 4% dividend.”

But perception is reality in the marketplace today, and investor perception is driven by a one-two punch: Wall Street lost “a zillion dollars” through the downturn, then when investors retreated to their safe haven, the Permian Basin, they got “absolutely smoked on a relative basis” when $17 differentials knocked the knees out from under Permian producers. “They don’t know which way is up, and it’s left them fairly jaded,” Kelly said.

And maybe out of the money too. Seaport Global’s two main proxies for measuring organic growth and returns—debt-adjusted growth and recycle ratios—are at all-time highs.

“It has never been better in the E&P space than it is right now,” Kelly said, “and that counts 2014 when we had $100 oil. If oil prices hold where they are now, the amount of cash flow that is going to be generated in the next two years is going to be insane. When they [investors] see that flow through the income statements, Wall Street will get it. I think it’s a great time to start paying more attention to the space right now.”

Yet despite dropping capex, hitting production targets, nailing efficiencies and getting to free cash flow, stock prices for public E&Ps continue to languish. What does it take to get an improvement in the stock price? asked Jeff Sieler, managing director of the global energy group for Citigroup.

“Maybe M&A is the way to do it. Perhaps now they [CEOs and management] are more willing to take that phone call and talk about what are the synergies that will improve stock price. I think you’ll see that more often going into 2019.”

Evidence of this trend: Concho’s merger with RSP Permian Inc., and Diamondback Energy Inc. acquiring competitor Energen Corp., both deals exceeding $9 billion. Add in BP Plc’s pending acquisition of BHP Billiton Ltd.’s unconventional portfolio for $10.5 billion, and you have the few examples of publics willing to pay a premium for a strategic fit.

If you dial those out, the amount of A&D over the past several quarters has mostly been driven by private equity, said panelist Murphy Markham, EnCap Investment managing partner. “The A&D market is down across the board, but there is a lot of value to be bought. So I do think it’s an opportune time to come in from the private sector to find some opportunities.”

Consider PennEnergy Reosurces’ $600-million acquisition of bankrupt Appalachia player Rex Energy Corp., a private company buying a public company. PennEnergy is backed by EnCap.

“I think there are opportunities in the public market,” said Markham, who said the deal was largely driven by Rex’s PDP reserves. Buying more cash flow vs. solely acreage packages is a growing trend among private-equity buyers, he said. “We’re doing a lot of that.”

Kayne Anderson Capital Advisors managing partner Chuck Yates said after OPEC decided to keep the spigots open on Thanksgiving Day in 2014 he was “face down in pecan pie,” but the fallout from that decision four years ago is what makes him bullish today.

“At some point this [lack of investment] has to come home to roost. Whenever you see a dramatic amount of capital flow out, private equity steps in. That’s what you’ve seen.

“At the end of the day the Saudis can say what they want about what they have behind the spigot ready to turn on, but they don’t have it. I don’t think the Russians have it. It’s going to have to be private-equity driven until the public companies show up.”

So, your choice—distribute, drill or buy. The cash flow is coming.

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