Insight
Portfolio benchmarking: diversification’s role in long-term strategy
Report summary
With high-grading and recent transformative M&A, the spotlight is on upstream portfolio concentration. With the profile of oil and gas investors changing, shareholders are prioritizing the return of capital, supported by reliable cash flow. A dramatic shift in market focus over the half-decade confirms this reprioritization. Companies with diversified portfolios moved from a discount to a premium. Still, portfolios concentrated through the 2010s and remain over-indexed to certain regions relative to historical levels. Going forward, there’s a tension between focus on advantaged assets and de-risking cash flow. What is the appropriate level of diversification or concentration for a company?
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