Oil and Gas Investor: The 2021 Top 50 Independents

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[Editor's note: A version of this story appears in the January 2021 issue of Oil and Gas Investor magazine. Subscribe to the magazine here.]

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One thing is clear when compiling a ranking of the Top 50 U.S. independent producers in 2020—the racing field is contracting. A group of 50 public E&Ps is almost all-encompassing, with a range of market capitalizations from a high of $41 billion to a mere $98 million. And while the quantity of oil and gas companies has condensed in the last two years since Investor last performed a market rank check, so too have the valuations. By a lot.

Alas, it almost feels like a scene out of Avengers: Infinity War when half of the universe’s life forms dissipated into a cloud of ash.

The 2021 Oil and Gas Investor Public E&P Top 50 ranks the largest publicly held U.S. based independent producers by market capitalization, a simple and straightforward measurement of how Wall Street values companies in a moment of time. Market caps were researched in mid-November 2020 using data from Yahoo Finance. Changes shown in the accompanying table are against the 2019 Top 50, in which market capitalizations were researched in November 2018.

Since then, the XOP index of U.S. E&Ps has dropped by 57% over two years while the S&P 500 has climbed 36%, a data point that encapsulates the ongoing woes of the proud sector that powers the world. The combined market caps of the 50 largest U.S. companies in 2019 were $460 billion; this year, $195 billion. Some $262 billion evaporated.

Ostensibly, the oil and gas sector is in the midst of a shrink-to-grow phase, one that could take a few years to play out. The anti-fossil fuel movement would hope this is a shrink-to-die moment in history in favor of noncarbon forms of energy. And while alternative fuels will undoubtedly gain market share—as they should if they’re economically viable—oil and gas will continue to play a role in the energy mix for some time to come.

This current cycle, while painful, will strengthen the sector, which had gotten bloated and off course during the roaring shale days. It will burn away debt burdening the system and tighten cost efficiencies as producers strip out unnecessary costs and consolidate portfolios to maximize G&A. What was old is new again as the sector relearns how to make money rather than spend willy nilly on credit. We’re watching a period of winnowing, where the strongest survive.

That said, since our last Top 50 ranking, while a number of those from two years ago dropped out of the list due to bankruptcies and restructurings, amazingly, considering the storms that have swept over the landscape, only three ceased to exist. Anadarko Petroleum was absorbed in a $57 billion made-for-TV-deal by Occidental Petroleum Corp.; Noble Energy Inc. packed its Permian, Eagle Ford and Israel bags and moved in with Chevron Corp.; and Appalachian midcap Montage Resources Corp. hooked up with Southwestern Energy Inc. in a pure-basin merger. The remaining 47 remain in the race, though not all in the Top 50.

The 2021 Public E&P Top 50 tells a dramatic tale of transition. Business strategies are being retooled, and many are taking pit stops to exchange pure production speed for more durable, value-driven engines. All are seeking relevance in the eyes of Wall Street to attract public capital back into their fuel tanks. Some are succeeding and trending up; some struggle and find themselves getting lapped. The individual stories are gripping with outcomes undetermined. Let’s take a look.

The Big 10

While volatility best describes the past two years, seven of the companies appearing in our 2019 list retain their status in the highest echelon. By design, those that lead the pack are the best performers. Yet only six of the Top 50 E&Ps clock in with a market cap higher than $10 billion, a demarcation of scale that will put them on investors’ radars. ConocoPhillips Co. and EOG Resources Inc. stay atop the rankings in the Nos. 1 and 2 positions, respectively, as before.

1. ConocoPhillips—ConocoPhillips, a former diversified major, far outpaces the pack with a $41 billion market cap, boasting a major-like international and domestic portfolio that generates gobs of cash flow. The Houston- headquartered company presciently pivoted to a returns-driven model after the 2014 downcycle when the other cool kids were still driving growth models. In the past four years it has consistently delivered 40% of free cash flow back to investors, which is why many investors have stuck with the company while exiting the oil and gas sector otherwise.

Conoco shook the market most recently, however, when it heralded its pending combo with Permian pure-play and Midland, Texas-favorite Concho Resources Inc., currently No. 6 of the top operator rankings. The pairing will make the 800-lb E&P gorilla even bigger.

“We’ll be a nearly $60 billion enterprise that is uniquely positioned to create sustained value by embracing what we believe are the three essential future mandates for our sector,” ConocoPhillips CEO Ryan Lance said in the company’s third-quarter conference call. “These mandates are: providing affordable energy to the world; committed to ESG excellence; delivering competitive returns. We believe the transaction accelerates our ability to successfully and simultaneously deliver on all three of these mandates. That’s how we will win.”

2. EOG Resources—EOG, a distant second in overall valuation with a $26 billion market cap, is the perennial poster child of producer excellence, setting the example for all other E&Ps as to what they’d like to be when they grow up. Touting its ability to grow organically and thumbing its nose at those calling for M&A, EOG unveiled its South Texas Dorado gas play in November, targeting Austin Chalk and Eagle Ford formations in Webb County, as one of the best gas plays in the U.S.

“No one was looking for a South Texas gas play other than EOG?” one analyst snarkily queried. Yet the Houston company sees low well costs with an advantaged position to export markets via LNG and Mexico. Could the company be signaling a growing strength in natural gas?

But EOG can be contrarian as well. In an environment when other E&Ps are messaging little to less than 5% growth to appease investors skittish of oversupply, EOG plans to nose ahead at an 8% to 10% growth pace—and is modeling $50 oil in their outlook.

“Take a step back, take a deep breath, and think about the future that could be $50/bbl or higher oil,” said Heikkinen Energy Advisors namesake David Heikkinen in a followup report. “That seems to be what EOG did and honestly it made me happy when my mind went to that happy place.”

CEO Bill Thomas was confident and defiant in his third-quarter opine.

“Notably, we are not playing defense in the current challenging environment. In fact, the opposite is true: We are aggressively moving EOG forward, advancing new plays, identifying innovative solutions to lower costs and improve well productivity, sharpening our technological edge and further demonstrating our commitment to sustainability.

“All of this is driven from the bottom up by a decentralized organization and a unique culture. This year more than ever, we are focused on investing in our people and enhancing our culture to sustain our competitive advantage and enable EOG to play an increasingly vital role in meeting the long-term global energy needs.”

But even the two largest and most investor-friendly independent E&Ps were not protected from the equity flight seen by the entire sector. ConocoPhillips’ value dropped 46% over a two-year period, and the fan favorite EOG, 57%. Some would say that makes them a good bet on a rebound in oil.

3. Pioneer Natural Resources Co.—Pioneer, based in Dallas, jumps two spots into the No. 3 position, vacated by Oxy and Anadarko, which downdrafted after their high-profile merger, with a $15.5 billion valuation. Perhaps the most significant event of Pioneer’s past two years was the return of Scott Sheffield as CEO following a brief retirement to navigate the company through turbulent headwinds. Quickly following a fact-gathering roadshow with investors, Sheffield jammed the brakes on Pioneer’s aggressive growth program and hard shifted to delivering returns back to investors.

More recently, Pioneer joined the second-half ’20 consolidation-fest in a pairing with Permian counterpart Parsley Energy Inc., which owns the No. 10 ranking presently, in a $7.6 billion deal including debt. The manifestation creates the largest Permian Basin pure play at 930,000 net acres and adds a Delaware Basin footprint to Pioneer’s Midland kingdom.

“Plainly, this acquisition establishes Pioneer as the leading Permian pure-play E&P and enhances the company’s ability to generate peer-leading free cash flow for the base-plus variable dividend strategy going forward,” noted John Freeman, Raymond James analyst. “We reiterate our Strong Buy rating.”

4. Hess Corp. —For No. 4 player Hess, at $14 billion market cap, the discoveries just keep stacking up on its 30% working interest in Stabroek Block offshore Guyana. The Redtail-1 and Yellowtail-2 wells announced in September total 18 discoveries on the 6.6 million-acre find—equal to 1,150 Gulf of Mexico blocks and purported to hold some 9 Bboe recoverable. The New York-headquartered Hess also keeps rigs running on cash cow assets in the Bakken Shale, the Gulf of Mexico and in Southeast Asia.

In April, as U.S. storage began to fill, Hess commissioned three very large crude carriers at 2 MMbbl each to take on three months of its Bakken production to sell into higher priced markets, a slingshot move to enhance returns. But unlike other operators retooling to live within cash flows, Hess is keeping the capex flowing as it builds out Guyana. The uptake: longer cycle, lower decline massive production vs. shale.

With its breadth, will it be a buyer? “We’re always looking to optimize our portfolio, but we see nothing in the M&A market that will compete for capital against our existing portfolio of high return opportunities,” CEO John Hess told analysts on the 3Q call. It’s all just that good. Hess moves four ranks higher than in 2019.

5. Occidental Petroleum Corp.—Perhaps no producer wishes for a global COVID-19 vaccine and a return of crude demand more than Occidental Petroleum. Occidental falls three spots to No. 5 but remains in the Top 10. Then considered a safe mini-major investment with an impenetrable dividend, the theretofore steady paced Houston oil and chem company sought grandeur and scale with its play for Anadarko, the No. 4 independent at the time, with visions of becoming “a $100-plus billion global energy leader,” according to its victorious announcement.

Unfortunately, it was not to be—at least yet. Instead, the high-premium, debt-heavy deal was akin to a python devouring an alligator, leaving Occidental immobile with a bad case of merger indigestion. Occidental paid $57 billion with a 57% premium and a $30 billion additional debt load. Hindsight is 20-20, of course, but at the time WTI fetched $63/bbl with an upward bias and Occidental anticipated a quick $8.8 billion sale of Anadarko’s African assets to immediately lighten the load. As fate would have it, the Mozambique government scuttled about half of the planned asset sales, and oil began an epic downward slide.

Rather than propelling itself into the No. 1 spot of being the global powerhouse it desired, Occidental’s valuation instead has fallen almost 80%, from $56 billion pre-deal to $12 billion. Since the deal, Occidental’s agenda has focused on debt reduction by asset sales and refinancings.

6. Concho Resources—Concho Resources is the big Midland company with a small-town attitude. Formed in 2004 by Tim Leach and IPO’d in 2007, it grew to No. 6 of biggest public companies through a steady stream of acquisitions and organic fortitude. With 550,000 net acres scattered across the whole of the Midland and Delaware basins, everybody was a neighbor to Concho.

At our last ranking its market cap reached $27 billion, but like the rest of its peers, it dipped nearly 60% to $11.1 billion currently. When the call from Wall Street came for the industry to consolidate, most thought Concho would be an acquirer. Instead, it is selling up to No. 1. The $9.7 billion deal was for all COP stock, so CXO investors are hoping to ride the rising tides on ConocoPhillip’s boat.

7. Cabot Oil & Gas Co.—At No. 7, Cabot is the top ranked gas-weighted producer on the list and forces its way into the Top 10 with an upward move of seven notches. At $6.6 billion market cap, it is also the first to come in below the $10 billion capitalization mark, making it the largest E&P midcap, which says more about the current appeal of the industry to the investment community than the company itself.

The Northeast Pennsylvania producer, though, stands out among peers as a low-cost operator forged out of necessity over several years of producing into a low-priced commodity. In a year in which regional Appalachian differentials resulted in averaged prices below $2/Mcf, Cabot still anticipated generating more than 50% return of capital from free cash flow, it reported. In fact, 2020 marked the fifth consecutive year it has done so.

Cabot is also testing a “new” shale play, the Upper Marcellus, in which it has drilled some 60 wells. EURs indicate 2.7 Bcf per 1,000 lateral foot.

8. Diamondback Energy Inc.—Coming in at No. 8 just shy of $6 billion and moving up five clicks, Diamondback bolstered its heft with two acquisitions two years ago. In back-to-back swings, it took in privately held Ajax Resources for $1.2 billion and Alabama-based Permian player Energen Corp. for a cool $9.2 billion.

However, currently, Diamondback is again fodder for consolidation discussion—either as consolidator or target. CEO Travis Stice bristles at the prodding to buy scale. “Getting bigger does not always translate to getting better,” he preached in his quarterly call. “Better is what should matter to shareholders.”

A well drilled in the Permian Basin by Diamondback today will be quicker, less expensive and operated with the lowest cost structure in the business, he stated, “so we do not need to increase our scale to further reduce our cost structure. … Diamondback is not getting left behind if we don’t do anything today, and we prefer not to make rash decisions at the bottom of the cycle.”

9. Continental Resources Inc.—Bakken and Midcon powerhouse Continental Resources slips two spots from the last measuring but holds firm in the Top 10 with a $5.4 billion cap. This year, executive chairman Harold Hamm spearheaded a new crude benchmark—the American GulfCoast Select—to try and get an uplift for waterborne exports vs. landlocked WTI, and jousted with Saudi Arabia, Russia and oil traders over shenanigans that collapsed oil pricing in April.

So it’s good news that Continental’s cash flow breakeven is now $32 with a projected cash flow reinvestment target of 65% to 75%. The excess Bens will go to debt pay down, the company said. This past year marks the fifth consecutive year of free cash flow generation.

And maybe nobody caught the pivot, as everyone knows Continental churns out oil production, but in the chaos that was May, the company shifted all of its Oklahoma rigs to the Anadarko Basin gas window. “Our assets afford commodity optionality and give us the capability of pivoting quickly and nimbly as demonstrated this quarter to take advantage of higher natural gas prices,” said Hamm on the call. At $3 Henry Hub, those gassy producers deliver over 50% rate of return. We haven’t heard Continental speak Henry Hub in some time.

Underinvestment in the oil and gas space has created a huge opportunity for today’s investors, Hamm emphasized, and he’d like you to know, “Continental Resources should be your number one choice.”

10. Parsley Energy Inc.—The previously mentioned Parsley, at $4.9 billion, rounds out the Top 10 producers, rising eight spots before stepping out via pending merger. The company, launched by the son of the acquirer and seeded by the grandfather’s legacy assets, will return to the family fold, for a slight premium.

Just call it destiny. And synergy.

Looking up

Two companies fall out of the Top 10, but only just barely.

Devon slips from No. 9 to No. 11 following a 71% market cap dive two-years-over-year, now at $4.9 billion. The Oklahoma City producer began trimming its portfolio in early 2019, selling its Canadian oil sands business for some $2.2 billion and its legacy Barnett Shale position for $570 million.

Its biggest news, however, is the announced and still pending merger with WPX Energy Inc., a $5.7 billion valuation. The market results of that combo will be reflected in the years ahead—and likely propel Devon back into the upper 10 considering the added scale combined with the swan songs of Concho and Parsley above.

“This strategic combination of Devon and WPX is transformational,” said Devon CEO Dave Hager in the company’s quarterly call. He added, “To win in the next phase of the energy cycle, a successful company must deploy a financially driven business model that prioritizes cash returns directly to shareholders.”

Marathon drops two from No. 10 to No. 12 but, similar to Devon, suffered a stomach-wrenching 72% plummet in Wall Street favor at $4.3 billion. In the 3Q call, CEO Lee Tillman assured, “Now is not the time for panic, but rather a time for healthy companies to press their advantage and not prematurely react to what is at best a distorted and transitory market.

“Not only have we pulled the necessary levers to protect our balance sheet, liquidity and to generate free cash flow this year in a difficult environment, we have also materially improved the resilience of our business and have dramatically enhanced our ability to generate robust financial outcomes.”

Those that joined other teams

Consolidation seems to be a constantly discussed theme, but it plays out in bumps of activity. That’s certainly the case over the past two years. Eight independents appearing on that list are part of another independent today, freeing up eight spots for new entrants.

Of past Top 50 players that have become one with another, Anadarko Petroleum, valued at $29 billion market cap and No. 4 in our last ranking, is the largest to exit. The Woodlands, Texas-based producer with a diverse asset base across the Permian, D-J Basin, Gulf of Mexico and international was a prized target first sought by Chevron Corp. before being top bid by Occidental. Occidental paid $76 per Anadarko share for $38 billion, with another $19 billion in assumed debt. A great deal for Anadarko stakeholders on the surface, but that equity portion in Oxy shares has taken a hit in the interim.

Chevron, which extracted itself from the Anadarko bidding fray and graciously accepted a $1 billion consolation prize in the form of a break-up fee, a year later got cozy with Noble Energy Inc. It paid $13 billion total equity and debt to enjoy taking Noble’s Permian, D-J and Mediterranean assets for a spin. Noble was No. 12 in our 2019 ranking. Management noted an unclear path to shareholder value creation in the existing commodity price environment vs. its debt load in its decision to leave the track.

Energen, as aforementioned, tipped its cap in farewell as its assets joined Diamondback’s team. Energen ranked No. 19 last time around as the sale was pending at press time. The deal included 179,000 net acres across the Midland and Delaware basins with 97,400 boe/d production.

We all remember Newfield Exploration fondly, the late ’80s start-up of the late Joe Foster. Newfield exited the racetrack in a $7.7 billion takeout by Encana Corp., since rebranded as Ovintiv Inc. Ovintiv, based in Calgary with footprints in various U.S. basins including its prime Midland Basin position, stepped out with the Newfield deal by planting a flag in the Anadarko and Arkoma basins in Oklahoma. It ranks 17th on the scale today, the same position as before, with a $3.1 billion valuation.

Jagged Peak Energy, No. 34 previously, was acquired by Parsley Energy and now is soon to be part of Pioneer’s portfolio.

Wildhorse Resource Development (No. 39 in 2019) became one with Chesapeake Energy Corp., which is currently undergoing restructuring through Chapter 11 bankruptcy and currently out of this year’s rankings.

SRC Energy (No. 41 then) accepted PDC Energy’s proposal to increase in scale in the Niobrara, giving PDC an 11-point boost in the rankings to No. 32.

Carrizo Oil & Gas is now drafting with Callon Petroleum following a $3.2 billion all-stock payout. Callon holds its same rank as before at No. 38 following the deal but suffered an 87% drop in valuation post deal.

Those that spun out

It’s a sign of the times reflecting sustained low commodity prices through 2020 combined with bloated balance sheets carried over from free-flowing credit of days gone by. And while some 89 U.S. E&Ps have succumbed to the bankruptcy courts in the two years since the last data was collected, according to law firm Haynes & Boone LLP’s analysis, only seven of the 2019 Top 50 producers needed a financial engine overhaul since then. With some irony, we consider that good news.

Whiting Petroleum is the former highest ranking E&P to go down. Previously ranked No. 27 with a $3.2 billion cap and one of the largest acreage holders in the Bakken Shale, Denver-based Whiting emerged from restructuring this August with a new board and management, led by former SRC Energy and Kodiak Energy CEO Lyn Peterson. With a much smaller market cap of just $717 million, Whiting still makes the cut at No. 31.

Close behind at No. 28 in 2019, Chesapeake Energy Corp. finally succumbed to the inevitable. Once the largest gas producer in the nation, for years it struggled to operate efficiently under a massive debt load as high as $18 billion  with no help from commodity prices. New management and aggressive asset sales knocked that load down to $12 billion, but the COVID-19-induced demand downturn forced the lagging company into the wall. It has remained sidelined since June but retains a host of premier acreage in multiple shale plays.

Oasis Petroleum, Gulfport Energy, Extraction Oil & Gas, California Resources Corp. (CRC) and Denbury Resources round out the other familiar names that pitted with extended mechanical repairs to their balance sheets.

Of these, Gulfport and Extraction remain stalled, but three of these have since exited the Chapter 11 pit road and are launching back up to racing speeds.

Denbury exited restructuring in September with a truncated name—just Denbury Inc. The CO2  EOR specialist

lightens the load by $2.1 billion and retains its top management in the driver’s seat. With a $938 million market cap, Denbury re-joins the Top 50 in the No. 28 position, well above its previous rank of 46, albeit with a 30% capitalization haircut by comparison.

CRC likewise accelerated out of the pit in late October with $4.4 billion converted to new owner interest, a new board and legacy management. The company—with low-decline assets in renewable-friendly California—had carried some $6 billion in debt in its trunk since its spin-off from Occidental Petroleum in 2014 and is now free from

 that drag for the first time. CRC rejoins the Top 50 at No. 24 with a $1.2 billion cap, only slightly off its 2019 valuation when it ranked No. 45.

Last out of the pit for this year’s standings is Oasis. The Houston-based, Bakken-focused Oasis flushed $1.8 billion of debt out of the system and re-entered in November with a new board and new equity holders but also the same management as before. Oasis roars back into the pack at No. 30 and an upward trending $754 million valuation.

The new kids

After all that jostling for preferred positions, only 11 new names join the lineup of 50 top companies. Or maybe a 20% turnover might be considered high. In the E&P world, however, companies historically come and go—the nature of the entrepreneurial wildcatter to exit for profit and seek new horizons. Perhaps that trend is waning as investors seek more scale and stability from the sector.

25. Comstock Resources Inc.—On the outside looking in last round, Comstock Resources powers its way halfway through the pack 29 spots to settle at No. 25 with a $1.1 billion valuation.

Comstock’s recent story is tied to Dallas Cowboy’s owner Jerry Jones, a new majority owner of Comstock as well. Jones bought into the Ark-La-Tex gas producer in 2018 taking public investors along for the ride with him. In 2019, Comstock got serious with a $2.2 billion takeout of privately held Covey Park Energy, an East Texas player. With capital to spend, Comstock is a favorite spectator pick to further consolidate Haynesville Shale operators.

And CEO Jay Allison doesn’t disagree. “I think you’re going to have some stranded Haynesville producers that need to do something,” he said on the most recent conference call, suggesting market cap growth was a motivator. Commenting on future opportunities for Comstock: “Brighter days are ahead of us,” he said. “Our rearview mirror is pretty small, and the windshield is really big—and gas prices  look really good.”

29. Diversified Gas & Oil Plc—The London-listed Diversified calls Birmingham home, but that’s Alabama and not the U.K., just to be clear, y’all. The company debuts on the Top 50 board this year at No. 29 with a $786 million market cap. This producer of long-lived Appalachian assets IPO’d on the London AIM in 2017 and slipped below the radar at our last ranking. However, bolstered by European investors and a promise of steady dividends based in cash flows from low-decline production, in that time it’s made some $2 billion in acquisitions to raise its standing in the ranks.

“The company is bigger, but we continue to stay true to our strategy,” Hutson told Investor.

“We continue to acquire producing properties and target low-cost, long-lived, low-decline assets on the conventional and unconventional sides. And we don’t apply value to undeveloped resources; all of our value is attributable to the PDP.”

Additionally, Diversified recently secured a $1 billion commitment from Oaktree Capital for further acquisitions.

35. Bonanza Creek Energy Inc.—Although its market cap dropped 13% since 2019, Bonanza Creek jumps 23 notches up the board to No. 35 with a $505 million valuation. Bonanza Creek cleared the books of debt in a 2017 Chapter 11 and has worked to rebuild its equity since. More recently, the Colorado operator has faced uncertainty around the state’s shifting regulatory regime, but is secure in its 62,000 net-acre sweet spot in rural Weld Co.

Late in 2020, however, Bonanza Creek revealed its intent to acquire fellow Niobrara producer HighPoint Resources Corp. out of bankruptcy for $376 million. The deal would more than triple its footprint.

Seven new names fill out the final 10 spots in this year’s Top 50, all falling into the realm of microcaps with valuations below $300 million.

The last time Investor performed a market check, Berry Petroleum was in the process of re-IPO’ing following a 2017 restructuring. The Bakersfield, Calif.-based producer not only trimmed its debt but also its name, losing the  “Petroleum.” It holds conventional assets in California, Colorado and Utah. Berry Corp. joins the club at No. 39 with a $270 million cap.

At a $253 million market cap, movements in the tens of millions of dollars create big percentage jumps for Contango Oil & Gas Co. But Contango’s positive 73% increase over two years is not accidental. It has engaged in several acquisitions and a joint venture in the interim, including the late-2020 announcement that it will combine with Mid-Con Energy Partners. It is gradually and meticulously building scale, entering the Top 50 at No. 42—all the way from 78 previously.

Perennial Gulf of Mexico producer W&T Offshore has been around almost as long as the Gulf, it seems, but its valuations have taken a hit, sliding to $249 million compared to $883 two years prior, a 72% equity deflation. COVID-19 shut-ins and storm shutdowns have hammered 2020 production, and exiting 2020 it had all rigs idled. Its portfolio, however, paints a picture of more heft: 413,000 net Gulf of Mexico acres and 139 MMboe proved reserves. The Houston floater cash flowed every quarter in 2020 and bought back $72 million in senior debt at discount.

Tracy Krohn, CEO, said in public comments that he remains optimistic during this challenged environment. “We look for ways that will continue to add value to W&T as we’ve done this far in 2020 through debt repurchases at discount, integrating acquisitions, reducing LOE costs and closely managing our capital spending.” WTI this year moves up a full 10 clicks to No. 43.

Earthstone Energy shut in more than half its production and all its Midland Basin rigs during the oil price shock of 2020, but managed to deliver free cash flow nonetheless. Although seemingly small at $221 million valuation, it acts big with a lease operating expense of $4.51/boe and a debt load close to 1x. And building scale is the goal, said CEO Robert Anderson in November. “We’re definitely seeing a continued flow of opportunities, most of which are in some stage of distress, but we are optimistic that we’ll be able to add scale in this environment and drive shareholder value.” Earthstone leaps 15 clicks to No. 45.

Haynesville Shale producer Goodrich Petroleum Corp. burns rubber an amazing 30 ranks to land in the Top 50 at No. 46 this year. At $146 million market cap, its valuation drops just 18% from 2019, a sector win by any measure these days. Like its larger peers, Goodrich is targeting free cash flow generation and debt paydown in 2021. Its 24,000 net North Louisiana acres are 75% undeveloped.

This time last writing No. 47 Penn Virginia Corp. was scheduled to be acquired by Denbury Resources for $1.7 billion. The deal didn’t happen, and the Eagle Ford player kept its nose to the drill bit until the pandemic slowed down the world. Since, private-equity firm Juniper Capital has infused $150 million cash and $38 million in asset contributions into PVAC in exchange for a 59% controlling interest. “This transaction further solidifies our position as a leader in the small cap E&P space,” said CEO Darrin Henke in the announcement. Penn Virginia moves up four with a $134 million market cap.

After two bankruptcies, the former Halcón Resources changed its ownership, management team and name while keeping its Permian Basin assets. The new Battalion Oil Corp. with a market cap of $120 million, squeaks into the back of the pack 10 places better than the last vetting. The goal is more, per CEO Richard Little. “We continue to look for opportunities for responsible, strategic M&A to create scope and scale,” he said in the last quarterly call.

Finally, Sandridge. The Oklahoma City operator and Mississippi Lime specialist has had a storied and volatile history and brought in a turnaround artist earlier in early 2020 to “right size” the cost structure. This, following a revolving door of CEOs coming and going over several years. After six months of debt paydown including selling its headquarters, new CEO Carl Geisler touted in the 3Q call, “We now find ourselves in the happy position of being one of the few, if not the only, small-cap publicly traded oil and gas companies transitioning to an increasing net cash positive balance.”

In November, Sandridge traded its outstanding bank debt for $30 million from Icahn Enterprises, owned by 13% stakeholder Carl Icahn. With a nanocap $98 million in market equity, Sandridge climbs 14 to eke into the final spot at No. 50.

The checkered flag

Energy now comprises just 2.5% of the S&P 500, and U.S. independents a fraction of that. Oil and gas stocks are down more than half in two years, turning once large-cap independent producers into mid-caps or lesser.

But if you like a fast and furious sport, the adrenaline of high-pitched engines, the smell of burned rubber, the occasional spectacular crash and watching the players fight for pole positions, then E&P Wall Street spectating is for you. The only thing more exciting is to be in the cockpit.