Short Term Oversupply, Permian in the Pole Position
Oil & Gas 360® interviewed Stephens Inc. Senior Vice President E&P Research, Will Green, and Vice President E&P Research, Ben Wyatt, this week, in pursuit of their view of the current commodities cycle and related effect on the E&P space, looking at 2015 and beyond.
Oil and Gas 360® caught up with Will Green and Ben Wyatt by telephone at Stephens’ Fort Worth offices on Monday:
OAG360: How is the current oil price drop different from other cycles?
WILL GREEN: Today’s cycle is driven by supply/demand. This time the industry has to own up to the supply issue. The industry has to actively look at itself in the mirror in terms of admitting that it was involved in oversupplying the situation. The companies we cover are doing what they believe is the right thing for investors—growing production, growing revenues. But it’s prudent now to cut back to where hedges support you a little bit. It’s a hard decision, but they realize what needs to be shuttered and cut back. The prudent decision is definitely to cut back.
OAG360: What’s going to cause a bounce, what’s going to happen that shows the bottom?
WILL GREEN: I think one thing is this—actually getting some support from the demand side. It’s a good step in the right direction to see a reduction in production [and let some of the oversupply work itself out], but if we see continued economic strength in China, if China or other emerging markets blossom and demand remains strong, we should start to find support.
OAG360: What is Stephens’ deck calling for oil to be in 2015?
WILL GREEN: We just updated our deck today. We’re calling for WTI to average $53.75 in 2015, $67.50 in 2016 and $80 in 2017 and beyond. It’s a tad bit higher than strip. We are long term bulls on oil & gas: we believe this is a short term oversupply that fixes itself relatively quickly.
OAG360: If oil stays at today’s levels for a good while, what is going to happen to the midstream sector?
BEN WYATT: You’ll clearly see some slowdown. The midstream companies need the E&Ps to commit to capacity. They’re not going to build a spec pipeline, for example, without strong long term commitments from the E&Ps, and in this price environment it becomes more challenging. So it clearly dominoes.
OAG360: Which basins have the best upside for E&Ps?
WILL GREEN: From a wellhead economics standpoint, I’ll put the Permian in the pole position, the Eagle Ford second and the Bakken falls behind those. From an equity standpoint, the Bakken has sold off harder, so I would look at the Bakken as offering better values today. It was driven by consensus thought. The consensus thought was to shed the Bakken because of its higher differentials, so those operators have been sold way down, so there’s a lot of value there in the equities. But if you look purely at the wellhead economics in the core of the Permian, it can stand up to virtually anything in North America.
OAG360: Where does OPEC fit into the equation – how low can they let this go?
WILL GREEN: I think this downturn is really going to test their resolve. There are some troubled OPEC nations who are definitely struggling through this. It’s the Saudis’ M.O. not to cut production, and if their projects are economic they should keep producing, just like any other country or company would. If we’re still sitting here [at these prices] the next time OPEC meets, and Venezuela or some other OPEC nations can’t make their quota and if Saudi can’t take over a burden of another 1-2 million barrels a day, then you’ll see some price movement. If the planet needs 90 million barrels of oil per day, it’s the last barrel needed that sets the price. Ultimately if we have 90 MMBOPD that can be produced at $45 per barrel, then that’s the price. For now, investors are waiting until there’s more clarity around the demand side.
OAG360: What will M&A look like in 2015?
WILL GREEN: The balance sheets are center stage for this group [E&P]. On one hand you might have a more motivated seller because of their debt burden, but they’re not willing to sell unless they’re forced. From a buyer’s perspective, buyers are trying to maintain their balance sheets. If prices and activity get back on track later in the year, you could see offers, but right now there are dis-incentivized buyers and sellers.
BEN WYATT: I would add that a lot of these guys are well hedged, so you do have some time—maybe six months—but as we get closer to 2016 you might see some sellers who are more open to the idea.
Oil & Gas 360® had an opportunity to speak with John Gerdes about the oil and gas industry from his perch in Houston as KLR Group’s Managing Director and Head of Research. KLR is a merchant and investment bank, research house, institutional sales and trading firm that is focused on the natural resources and energy space. In this oil and gas interview, Gerdes brings to the table 30 years of oil and gas experience from his posts at Canaccord Genuity, SunTrust Robinson Humphrey, Raymond James, Salomon Brothers, Jefferies & Company, Shell and ARCO. Gerdes holds an MBA from the University of Chicago and a BS in Petroleum Engineering from the University of Tulsa.
Original Article at The Wall Street Journal
As the economy picks up, companies are starting to hire more. But managers often only get funds for a few key hires, so they have to select new employees wisely. That makes conducting a smart interview critical.
1. In what ways will this role help you stretch your professional capabilities?
2. What have been your greatest areas of improvement in your career?
3. What’s the toughest feedback you’ve ever received and how did you learn from it?
4. What are people likely to misunderstand about you?
5. If you were giving your new staff a “user’s manual” to you, to accelerate their “getting to know you” process, what would you include in it?
Read Full Article at The Wall Street Journal
Full original article at The New York Times
Research the company and the industry, says Adrien Fraise, founder of Modern Guild, which provides online career coaching to college students and high school seniors. “Know the major industry trends and news,” he says, and be able to talk about how they could affect the company.
Find out who runs the company and how they got there. “Look at their profiles on LinkedIn and see if you find a common bond,” says David Lewis, the chief executive of OperationsInc., a human resources outsourcing and consulting firm in Norwalk, Conn. “If you are able to say, ‘I went to the same college as you’ or ‘I also majored in psychology,’ that demonstrates you really did your homework.”
Q. What questions can you expect, and how can you prepare to answer them?
A. You may be asked to walk the interviewer through your résumé, so prepare concise, articulate anecdotes to illustrate what you did or learned in each experience you’ve listed, Mr. Fraise says. Highlight what you achieved and the skills you used — and how you want to keep using them. “Rehearse in front of the mirror and then in front of others,” he says. “Be so comfortable with it, it doesn’t sound scripted.”
Interviewers often ask questions like “Can you give me an example of when you had to work as part of a team or learned something new quickly?” Mr. Lewis says your examples might come from experiences in a club, fraternity or sorority. “Did you organize a membership push? Plan events? Do recruiting?” he says.
If you’re asked a question like “Why did you choose your college major?” be complete in your answer. “Don’t just say ‘because I really like psychology,’ “ Mr. Lewis advises. Instead, note from a business perspective why you liked the subject. “Maybe you found the classes to be informative about human behavior, which is a key to success in anyone’s business,” he says.
Take along samples of your work — whether from an internship, a class or an extracurricular activity — in a folder or on a laptop computer or tablet.
And always prepare questions to ask at the end of the interview, says Alexa Hamill, American campus recruiting leader for PricewaterhouseCoopers in Philadelphia. Questions on the interviewer’s own career progress are a way to conclude, she says: “What opportunities have been presented to them? How were they trained and developed? This shows you are looking at the job as something potentially long term.”
Read full original article at The New York Times
OGFJ recently spent some time with three Preng & Associates partners to discuss executive search and the looming talent shortage in the energy industry. The Houston-based firm specializes in energy placements.