We've recently discussed a striking shift among small and midsized oil and gas producers: They're altering their production mix in favor of oil. Those who don't follow the industry probably think of these companies as "oil" companies -- if they think of them at all. The truth is that countless independents, from Chesapeake Energy
With technology advances making natural gas reserves easier and cheaper to find in North America, this imbalance served the smaller companies well enough. They were able to post massive growth, low finding costs, and robust cash flows. Then natural gas prices went south -- and unlike oil, they have yet to recover.
Given the current pricing chasm, every independent E&P is now scrambling to get "oily." Newfield Exploration
Newfield's actually got a better head start than peers such as Carrizo Oil & Gas
Because Newfield has already established its unconventional oil credibility in plays like Monument Butte, I feel pretty confident that the company will execute on its transformation in an efficient way. It also helps that the firm already has a nice foothold in places like the Eagle Ford shale and the deepwater Gulf of Mexico, with two prospects currently being drilled in the latter -- a gassy one operated by Murphy Oil
Unless new oil plays really proliferate, I suspect that many of Newfield's competitors are not going to find the transition to such projects nearly so seamless.
Fool contributor Toby Shute doesn't have a position in any company mentioned. Check out his CAPS profile or follow his articles using Twitter or RSS. The Fool owns shares of Chesapeake Energy. The Motley Fool has a disclosure policy.