http://localhost:4503/content/ogfj/en/blogs/engrossed-in-energy.html2016-05-26T06:30:43.142ZEngrossed In Energy BlogEngrossed In Energy Blog : Oil & Gas Financial Journal : Being part of the energy industry in Houston, dubbed the "energy capital of the world," Mikaila Adams finds herself thinking "all energy, all the time." Welcome to her outlet. Adobe Experience ManagerOGFJ.com Most Read 2010noemail@noemail.orgMikaila AdamsAh, January – the start of a new year and new beginnings. While I’m not one to make resolutions, I do like to reflect on the past year. <br /><br />For those of you who are regular print subscribers, you may be familiar with my <a href="http://www.ogfj.com/index/article-display/2090547213/articles/oil-gas-financial-journal/volume-7/issue-12/beyond-the-well/charities-and-champions-the-year-in-review.html">Charities and Champions: year in review </a>column that appears each December. I reflect back on various industry execs and companies that donated their time, money, and talents to help others in the community. <br /><br />It may be three weeks into January, but I thought I would take this opportunity to reflect back on 2010 in another way. <br /><br />2010 was a tremendous year of growth for <a href="http://www.ogfj.com">OGFJ.com</a>. The introduction of both our <a href="http://www.ogfj.com/index/Mergers-Acquisitions.html">Deal Monitor </a>and <a href="http://www.ogfj.com/index/unconventional.html">Unconventional Resources </a>pages were a great boost in our continued effort to bring up-to-date oil and gas industry information to our online readers. What generated the most interest? <br /><br />This year, a tragic event held top billing for most read articles on OGFJ.com.<br /><br />While many updates and articles were written about the Deepwater Horizon incident, three made it into the top tier in 2010: <br /><br /><a href="http://www.ogfj.com/index/article-display/2323778238/articles/oil-gas-financial-journal/e-__p/offshore/Gulf_of_Mexico_oil_spill.html">Who will be held responsible for Deepwater Horizon?</a><br /><br /><a href="http://www.ogfj.com/index/article-display/6252765637/articles/oil-gas-financial-journal/e-__p/offshore/update_-deepwater.html">New Orleans lawyer details scrutiny sure to follow Deepwater Horizon accident</a><br /><br /><a href="http://www.ogfj.com/index/article-display.articles.oil-gas-financial-journal.e-__p.offshore.bp-begins_second_relief.QP129867.dcmp=rss.page=1.html">BP begins second relief well, places containment system in leaking riser</a><br /><br />With “Financial Journal” as part of our title, it wasn’t a surprise that articles with a financial twist were also part of the most read articles of the year. <br /><br /><a href="http://www.ogfj.com/index/article-display/9173512859/articles/oil-gas-financial-journal/volume-7/issue-5/cover-story/tudor-pickering_holt.html">Tudor Pickering Holt develops into key energy finance player</a><br /><br /><a href="http://www.ogfj.com/index/article-display.articles.oil-gas-financial-journal.volume-7.issue-9.features-.renewed-interest_in.QP129867.dcmp=rss.page=1.html">Renewed interest in royalty trusts</a><br /><br />One shale article made it into the top ten: <br /><br /><a href="http://www.ogfj.com/index/article-display/4466065513/articles/oil-gas-financial-journal/volume-7/issue-4/analyze-this/Oil-shale-deal-flow-heating-up-in-Bakken-Niobrara.html">Oil shale deal flow heating up in Bakken, Niobrara</a><br /><br />Also not surprisingly, articles and news briefs about shale activity, especially those pertaining to <a href="http://www.ogfj.com/index/unconventional/eagle-ford-shale.html">Eagle Ford shale </a>activity, fleshed out much of the remaining “most read” articles for the year. <br /><br />Again, it isn’t my nature to make resolutions, but I do start every year with a renewed sense of optimism and hope. To 2011, I say: Show me economic recovery, open capital markets, and a greater utilization of shale assets. They’d make a nice Top Five list for next year.<div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/3084996027800757167-1676733391398461456?l=ogfj-eie.blogspot.com' alt='' /></div>tag:blogger.com,1999:blog-3084996027800757167.post-16767333913984614562011-01-14T18:40:00.000Z2011-08-02T15:11:44.085ZDrilling moratorium may be more costly than oil spillnoemail@noemail.orgDon StowersEconomic researchers in Louisiana and Texas have been busy calculating the damage to the states’ economies caused by the Obama administration’s moratorium on deepwater drilling. It turns out that the economic impact to businesses and workers in both states may be more severe than the cost of the cleanup in the aftermath of the April 20 explosion and fire aboard the Deepwater Horizon drilling rig and the subsequent gusher of crude oil into the Gulf of Mexico. A small portion of that oil washed ashore on Louisiana beaches and marshes, and the spill shut down the fishing industry near the affected areas.<br /><br />As costly as that has been (estimates range upward to several billion dollars), the long-term loss of jobs of offshore oil industry workers and the loss of business for related companies may be even worse, says a report by the Houston-based Institute for Energy Research.<br /><br />More than 8,000 jobs and about $500 million in wages will be lost if the moratorium continues longer than six months, according to the report titled “The Economic Cost of a Moratorium on Offshore Oil and Gas Exploration to the Gulf Region.” This will result in a total economic loss of about $2.1 billion to the area.<br /><br />Joseph Mason, a professor at Louisiana State University in Baton Rouge, says that economic losses in Texas will be about $622 million, about half that of Louisiana. However, he says the data suggests that, “The moratorium could be more costly than the oil spill itself.”<br /><br />There is no doubt that the oil spill will lead to tougher regulations on Gulf of Mexico drilling, and this may drive some drilling contractors and operators to other countries where the rules governing drilling aren’t as onerous to the petroleum industry. So the long-term loss of jobs and tax revenue from operators, industry vendors, and employees may be very detrimental to the economies in Louisiana and Texas.<br /><br />One industry veteran told me recently, “We have come back from Katrina, from Gustav, from Ike, and from other natural disasters. However, I don’t know if the industry will ever recover if the government chases off [operators]. The oil and gas industry is the basis for our livelihood, and I don’t know what can take its place.”<br /><br />The major Gulf of Mexico players like BP, Shell, Chevron, and others are large diversified corporations with worldwide operations. They will survive whatever the government throws at them. However, many of the independent operators that are focused almost exclusively on the Gulf may not. Neither will some of the family-owned and smaller suppliers to the offshore industry.<br /><br />This is not obtuse economic theory. To those of us who live along the Gulf Coast, it is tangible and easy to understand. If the White House truly wants to turn the economy around and stop the loss of jobs, it must consider lifting the drilling moratorium immediately.<div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/4422135586590402834-1185473677560890252?l=energy-capital.blogspot.com' alt='' /></div>tag:blogger.com,1999:blog-4422135586590402834.post-11854736775608902522010-09-08T21:38:00.000Z2011-08-02T15:09:18.476ZHoward Dean, Ed Gillespie agree: Energy policy needednoemail@noemail.orgMikaila AdamsAccording to the <em>Ernst & Young Business Risk Report 2010</em>, the country's uncertain energy policy is the No. 1 risk to the oil and gas industry. Actually, the move wasn't a monumental one as this risk ranked No. 2 in the same survey last year, topped only by "access to reserves: political constraints and competition for proven reserves." <br /><br />I see a theme here. <br /><br />Ernst & Young points to the "vague outcome" of the Copenhagen climate conference in December 2009 as one factor. Yet another: the energy policy decisions further complicated by the tragic Gulf of Mexico oil spill. <br /><br />Political factors that might limit or prevent access to reserves and an uncertain energy policy that hinders the ability of oil and gas companies to plan, invest, and respond to the laws of supply and demand have a tight grip around the industry that provides the country with its energy needs. <br /><br />At Ernst & Young's Energy Executive Insight Session recently, I had the opportunity to hear a debate between Howard Dean, Former Chairman of the Democratic National Committee, and Ed Gillespie, Former Chairman of the Republican National Committee. <br /><br />As politicians do, each stated their case for victory in the coming elections. However, both agreed on one thing: the need for a cohesive and comprehensive energy policy.<br /><br />Governor Dean believes the country hasn't had an effective energy policy in 20 years, partly because the topic isn't well understood in Washington, partly because the industry itself isn't unified. <br /><br />Different constituencies – wildcatters, super majors, enhanced recovery companies – are working against each other instead of together. Dean noted the coal industry as one example. "The biggest opposition of the oil and gas industry outside of the government is the coal industry," said Dean, referring specifically to shale development in the <b><a href="http://www.ogfj.com/index/unconventional.html">unconventional resources</a></b> space. <br /><br />Will natural gas be a bridge fuel because of its clean-burning properties and plentiful supply? Gillespie, who does work with the Natural Gas Alliance, thinks so. "Natural gas is looming in a big way in the energy debate," he said. "It's inevitable we'll see more reliance on natural gas – maybe in our autos," he continued. <br /><br />While Dean disagrees about natural gas in the automobile industry – he feels electricity has leapfrogged the fuel in that regard – broadly speaking, he sees the US as having the ability to use all forms of energy. The question is in what order and how do we do it? The technology is there, but the marketplace is distorted. This is where an energy policy is needed. <br /><br />"No matter what happens with the election, the parties will have to decide they WANT to pass something," commented Dean. <br /><br />Can the energy industry to come together and write an energy plan?<div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/3084996027800757167-4199021095958268011?l=ogfj-eie.blogspot.com' alt='' /></div>tag:blogger.com,1999:blog-3084996027800757167.post-41990210959582680112010-09-01T22:07:00.000Z2011-08-02T15:11:44.397ZChesapeake due for 'Major' upgradenoemail@noemail.orgMikaila AdamsThe face of the energy industry is changing. It is cyclical. It has happened before, and it will happen again. Certain independent exploration and production companies didn't survive the credit crisis. <br /><br />Those names are gone from the radar; that's one change. Another might be the way we think about some of the large independents. <br /><br />"Never stop thinking," offered Kenneth A. Hersh, CEO of NGP Energy Capital Management, at IPAA’s Private Capital Conference in Houston on Thursday. <br /><br />Hersh reminded the crowd that the oil and gas industry is not immune to the conditions and phases that other industries have gone through, and that now is a time to maintain discipline, push forward, and perhaps change the way we perceive the industry. <br /><br />The best example of the changing times, he said, is the changing of the 'majors,' and perhaps even, the 'super-majors.' ExxonMobil is a non-disputed supermajor. Ten years ago the company had an enterprise value of roughly $50 billion spread throughout the world. <br /><br />Today, while companies like Chesapeake, Devon, and Apache are all, in fact, independents, they really should be considered majors, he said. Each carries an enterprise value of over $40 billion, and inflation and other generational considerations aside, the companies are certainly in the league as the Exxon of a decade ago -- bigger when you consider the scope of the companies in North America alone. <br /><br />What do you think? Is it time for the industry to lump these companies in with the Exxons and Chevrons of the world?<div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/3084996027800757167-9192875967687849199?l=ogfj-eie.blogspot.com' alt='' /></div>tag:blogger.com,1999:blog-3084996027800757167.post-91928759676878491992010-02-26T20:50:00.000Z2011-08-02T15:11:44.958ZExploration spending on the rise?noemail@noemail.orgMikaila AdamsThe drop from a $100 oil environment and a $10 gas environment to a $50 or $60 oil environment and a $3 or $4 gas environment forced most E&P companies into a hibernation of sorts. Cash flows were cut in half, if not more, and companies hunkered down in hopes of making it through the winter. <br /><br />Spring came and went and things looked no better, in fact, in many cases, things got worse. Now, the summer has passed and 3Q09 numbers are starting to peek out from under the leaves. While earnings are still wobbly, it appears conditions may be right for an increase in exploration spending.<br /><br />As recently reported in the November issue of Oil & Gas Financial Journal, capital spending among the Top 20 publicly-traded US companies in 2Q09 jumped more than 47.5%, nearly doubling the $28.1 billion spent in 1Q09. <br /><br />On the international front, SMH Capital recently raised its 2009/2010 earnings per share estimates for oil service giant Schlumberger to $2.74/$2.85 from $2.71/$2.70, as the firm expects “a shallower downturn internationally given 3Q09 results and a higher forecasted international activity given rising oil prices.”<br /><br />Oil prices are holding steady and many operators, both domestic and international, have “under-spent” first half ‘09 budgets after operating in survival mode for most of the year. With the much talked about boom in M&A activity upon us, perhaps too, is an uptick in exploration spending.<div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/3084996027800757167-2318341774120936514?l=ogfj-eie.blogspot.com' alt='' /></div>tag:blogger.com,1999:blog-3084996027800757167.post-23183417741209365142009-11-04T22:43:00.000Z2011-08-02T15:11:46.425ZLimits on commodities trading will challenge E&P companies looking to manage risknoemail@noemail.orgMikaila AdamsBoth the Treasury Department and the CTFC believe greater oversight of financial trading activities is needed to prevent future market turmoil. Position limits on finite commodities pose challenges for companies managing energy commodity risk exposure. <br /><br />If enacted, one challenge would be the resulting effect on the availability of hedging counterparties. Simply put, increased margin requirements of exchange-based trading would decrease the number of counterparties.<br /><br />Forcing transactions to clear on a more transparent exchange would mean companies would be forced to rely less on credit to support deals. Could that actually be a good thing for the industry in that it would reduce counterparty risk?<br /><br />More factors facing companies are an increase in regulatory disclosure requirements, and expanded internal and external compliance oversight and reporting requirements.<br /><br />If enacted, companies could end up spending millions increasing and enhancing reporting and risk infrastructure and activities. <br /><br />There are still some major questions about how, if enacted, the new rules will evolve. Who would set the limits? The CTFC? Individual exchanges? Who, if anyone, should be exempt? At what level should the limits be set? How would the appropriate level be determined?<br /> <br />Do the benefits of a more transparent system in hopes of thwarting another market disaster outweigh the potential challenges faced by companies to adapt to the new rules? <br /><br />I suspect that if the new rules were to be enacted in the current economic state, companies would take their transactions overseas and hedge risks elsewhere. Depending on the volume of companies looking for alternatives, would that then make the efforts of the Treasury Department and The CTFC moot? And what impact would that then have on the US market?<div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/3084996027800757167-2438112499969385479?l=ogfj-eie.blogspot.com' alt='' /></div>tag:blogger.com,1999:blog-3084996027800757167.post-24381124999693854792009-10-08T17:32:00.000Z2011-08-02T15:11:47.485ZWill an over-extended government agenda save the industry from prohibitive legislation?noemail@noemail.orgMikaila Adams<p>While producers of oil and natural gas continue to be a target of the Obama administration's agenda, the IPAA is ready to fight the battle, said Joel Noyes, IPAA's Director of Government Relations & Industry Affairs. Noyes was one of numerous panelists at Wednesday's Summer NAPE E&P Forum in Houston.<br /><br />Some of the outstanding issues facing the industry are cap and trade, hydraulic fracturing, energy taxes, and hedging and commodities markets. Fighting to ensure the voices of the industry are heard in Washington is the main objective of the IPAA. How will the association effectively lobby against so many potentially negative bills simultaneously?<br /><br />It may not have to, at least not this year.<br /><br />Noyes recollected a public official exclaiming that the last six months in Washington have been the busiest he's seen since perhaps the Carter administration.<br /><br />The following list from the official White House website is a sampling of the issues President Obama and his administration would like to address:<br /></p><ul><li>Civil Rights</li><li>Fiscal Responsibility</li><li>Defense</li><li>Foreign Policy</li><li>Taxes</li><li>Disabilities</li><li>Health Care</li><li>Technology</li><li>Economy</li><li>Homeland Security</li><li>Urban Policy</li><li>Education</li><li>Immigration</li><li>Veterans</li><li>Seniors and Social Security<br /></li></ul><p>…and the list goes on.<br /><br />The Obama administration will continue to set its sights on the oil and gas industry over the course of its reign in Washington. Currently, one particular issue has come to the forefront, and it isn't related to oil and gas. Healthcare is priority number one.<br /><br />Perhaps the industry can breathe a little easier, at least for awhile. As our lives remind us everyday, there are only so many balls you can juggle at any given time.<br /></p><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/3084996027800757167-500435121116742413?l=ogfj-eie.blogspot.com' alt='' /></div>tag:blogger.com,1999:blog-3084996027800757167.post-5004351211167424132009-09-02T15:52:00.000Z2011-08-02T15:11:48.593ZWill bearish gas market come back this year?noemail@noemail.orgDon StowersThe North American gas market is suffering from oversupply and waning demand that have combined to keep natural gas prices low. Yet, despite this, there are several indications that prices may rally, although there is no consensus on this.<br /><br />Crude oil prices have been hovering around $70 for some time, and at least one senior analyst, Darin Newsom with DTN, a market information service out of Omaha, Neb., says that oil may hit $90 before year-end.<br /><br />Newsome added that even though oil has the potential to rise another $20, supply and demand fundamentals remain weak.<br /><br />The EIA recently reported record-high gas storage. That, combined with robust production mainly from unconventional resource plays, will continue to depress the price of natural gas, the agency said.<br /><br />In its August short-term energy outlook, the EIA projected a full-year average price of $3.92/MMBtu – a full 30 cents less than its previous forecast.<br /><br />However, as the economy bounces back and the supply-and-demand dynamic starts to balance, the EIA expects the Henry Hub price to rise to an average of $5.48/Mcf next year.<br /><br />The EIA said it expects storage inventories to set a record by the end of the injection season, reaching 3.8 tcf by the end of October, topping the record set in 2007 by 235 bcf.<br /><br />Canada’s National Energy Board attributes current low gas prices to an expanded US natural gas pipeline network, higher LNG imports, and sluggish gas demand. The NEB says the low prices have put pressure on drilling activity since late last year, with Canadian drilling down about 60% and US activity down roughly 50%.<br /><br />The NEB said it expects gas prices to hold at or below the $4/MMBtu level for the next few weeks at least.<br /><br />What are your thoughts on natural gas prices and when you think the market will improve?<div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/4422135586590402834-813288701869908273?l=energy-capital.blogspot.com' alt='' /></div>tag:blogger.com,1999:blog-4422135586590402834.post-8132887018699082732009-08-14T16:38:00.000Z2011-08-02T15:09:26.494ZNew oil sands emissions studies not enough to dissuade oppositionnoemail@noemail.orgMikaila AdamsTwo independent studies have found direct emissions from producing, transporting and refining oil sands crude are in the same range as those of the other crudes refined in the US.<br /><br />The Life-Cycle Analysis of North American and Imported Crude Oils is based on two independent studies that comprise the first robust comparison of domestic, imported and oil sands crude processes in US refineries. The research, conducted over the past year by US-based consulting companies Jacobs Consultancy and TIAX LLC, was funded by the Alberta Energy Research Institute (AERI).<br /><br />The studies found that direct greenhouse gas (GHG) emissions from the oil sands are generally about 10% higher than direct emissions from other crudes in the US, but if cogeneration is taken into consideration, oil sands crudes would be similar to conventional crudes in terms of GHG emissions.<br /><br />This is a positive step in providing a more scientifically-based comparison between oil-sands-derived fuels and conventional crude oil-derived fuels, especially in an era where legislation is targeting greenhouse gas emissions; however, oil sands mining is questioned not only on the basis of greenhouse gases, but its effects on the landscape.<br /><br />Land use and water consumption need to be analyzed and compared as well. Perhaps then more effort can be put into tapping the oil sands' full potential.<div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/3084996027800757167-3475610751544806662?l=ogfj-eie.blogspot.com' alt='' /></div>tag:blogger.com,1999:blog-3084996027800757167.post-34756107515448066622009-07-24T19:49:00.000Z2011-08-02T15:11:49.123ZHydraulic fracturing legislation not needednoemail@noemail.orgDon StowersA new report from the Colorado School of Mines’ Potential Gas Committee concludes that the United States is sitting atop natural gas reserves much larger than previously thought – more than 2,000 tcf, according to the committee, or nearly 100 years worth of production.<br /><br />This expanded forecast is due mainly to the discoveries of large reserves of gas in America’s shale regions, including the Marcellus in Northern Appalachia, the Barnett in North Texas, the Woodford in Oklahoma, the Fayetteville in Arkansas, the Haynesville in Louisiana and Texas, and several others. The upward revision represents the largest jump in resource estimates in the 44-year history of the report.<br /><br />Unfortunately, we may not be able to recover much of this newly discovered clean-burning natural gas. In a move that studies suggest could result in thousands of lost jobs, billions in taxpayer revenue, and massive amounts of energy left in the ground, Congress has introduced legislation that, if passed, will impose new restrictions on a safe and commonly used recovery technique known as hydraulic fracturing, which is a critical well stimulation technology.<br /><br />Hydraulic fracturing has been used for more than 60 years to access and increase oil and gas production of resources that otherwise would have remained trapped under miles of rock. It’s also been regulated by state agencies for at least that long.<br /><br />Now, members of Congress who apparently believe that hydraulic fracturing is unsafe and unregulated want to require the U.S. Environmental Protection Agency to regulate hydraulic fracturing as a form of underground injection under the Safe Drinking Water Act.<br /><br />Doing so would place an unnecessary financial burden on a critical American industry without any tangible environmental benefit. Hydraulic fracturing has been aggressively regulated by the states and the process has an impressive record of safety and performance. Imposing an additional burden on companies that employ the technique could conceivably result in the loss of thousands of jobs, billions of dollars in taxpayer revenue, and leave massive amounts of energy in the ground.<br /><br />Your thoughts….<div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/4422135586590402834-5087207062762984756?l=energy-capital.blogspot.com' alt='' /></div>tag:blogger.com,1999:blog-4422135586590402834.post-50872070627629847562009-06-26T20:09:00.000Z2011-08-02T15:09:30.691ZWith the price of oil creeping upwards, are we in danger of a new recession?noemail@noemail.orgMikaila AdamsWith the price of oil creeping back up, folks in the energy patch are beginning to breathe cautious sighs of relief. While higher costs per barrel generally have positive effects on the industry, how high is too high?<br /><br />New research by Wall Street energy business analysts, Douglas-Westwood LLC, suggests that when oil consumption costs exceed 4% of US GDP, recession almost always occurs. And in general, a sustained rise in the oil price of 50% or more has always been followed by a recession.<br /><br />"In every case when oil consumption breeched 4% of GDP, the US suffered a recession and indeed, the current US recession began within two months of oil hitting the 4% threshold, most recently, when oil reached $80 a barrel," said Steven Kopits, managing director at Douglas-Westwood.<br /><br />Another factor is the maximum rate of adjustment for the economy, which appears to be about 0.8% of GDP per year. That is, the economy cannot shed oil consumption instantaneously; society needs time to adjust. When the economy is adjusting at full speed, it will tend to struggle. Adjustment will tend to be characterized by recession, inflation or generally low GDP growth.<br /><br />"Our research suggests that a return to $80 oil could kill the present recovery and trigger a new recession – today's oil prices means we are again teetering on the edge," he added.<br /><br />While last year's $140/barrel oil proved fruitful for the industry, the benefits were short-lived and companies were left struggling in the depths of the recession. An increase in the price of oil is needed to get companies and the economy back on track, but at what price do we risk a new recession?<div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/3084996027800757167-7434784117747387092?l=ogfj-eie.blogspot.com' alt='' /></div>tag:blogger.com,1999:blog-3084996027800757167.post-74347841177473870922009-06-24T15:05:00.000Z2011-08-02T15:11:50.044ZA bearish market for natural gasnoemail@noemail.orgDon StowersThe head of Mercator Energy, a Rockies drilling company, recently predicted “massive drilling curtailments” this summer due to a continuing “glut” of natural gas supplies, which will soon include large volumes of LNG scheduled to arrive in the United States at about the same time that gas storage capacity begins to fill up.<br /><br />Mercator’s John Harpole, speaking at an oil and gas conference in Denver, said that a number of factors are contributing to the oversupply problems. First, at the current injection rate, he noted that storage facilities will be nearing capacity limits by late summer, which means the already saturated market will be flood with gas. In addition, Harpole said that LNG imports have increased more than 200% year over year as of early April. This, he said, could result in “massive shut-ins” as natural gas prices plummet lower and lower. Producers around the country will see this as a signal and will begin shutting in production, he added.<br /><br />On the positive side, it was noted that there has been a 225% rise in gas-fired electric power generation since 1996, while coal-fired generation has remained fairly static during this time. Nuclear and hydroelectric power generation haven’t changed much either. Renewable energy, especially wind power, has risen significantly during the past decade but still remains a relatively small part of the total energy mix. In electric power generation, natural gas still affords the greatest opportunity for growth and increased market share.<br /><br />Therefore, say many analysts, the long-term outlook for natural gas looks good, but in the short term, oversupply will lead to lower prices and further production cutbacks.<br /><br />What’s your take on this? How low will natural gas prices drop this summer?<div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/4422135586590402834-3537384629252028088?l=energy-capital.blogspot.com' alt='' /></div>tag:blogger.com,1999:blog-4422135586590402834.post-35373846292520280882009-04-25T20:10:00.000Z2011-08-02T15:09:33.873ZSEC continues path to end abusive short sellingnoemail@noemail.orgMikaila AdamsTo the delight of many whose company shares are “trading at a discount,” the Securities and Exchange Commission appears to be putting some genuine thought into reinstating the now defunct ‘uptick’ rule.<br /><br />At her confirmation hearing in January, Schapiro told lawmakers the agency would look at the entire area of short- selling and whether to reinstitute the ‘uptick rule’ that forces short sellers to sell at a price higher than the previous trade. With that, federal securities began contemplating ways to place restrictions on traders who bet that stock prices will fall.<br /><br />Then, just recently, at the April 8 meeting of the SEC, the agency’s five commissioners voted unanimously to open the alternatives to public debate. While no definitive plan has been set, it appears as though the motion is at least pushing forward.<br /><br />Sen. Ted Kaufman, D-Del., said he was pleased the SEC has begun to move on the issue but will not be satisfied until a rule is put in place “that is meaningful, difficult to evade, and vigorously enforced.”<br /><br />The uptick rule was adopted in 1938 after the SEC conducted an inquiry into the effects of concentrated short selling during the market break of 1937.<br /><br />The SEC eliminated the uptick rule in July 2007 as part of a planned action set into motion in 2004 to study the effectiveness of the rule. The SEC officials and researchers concluded that the rule only modestly reduced liquidity and didn’t appear necessary to prevent manipulation.<br />Wild swings in the market are now being attributed to the fact that the uptick rule was eliminated.<br /><br />“When the [uptick] rule changed you could see a marked change (60-90 days) in the volume of volatility in various sectors. Several hundred point swing days, as opposed to once or twice a year, were happening many times in a two- to three-month period. It exacerbates any market instability or nervousness and you’re able to push it even further,” warned TXCO Resources’ VP of capital markets and corporate secretary Bob Thomae back in <a title="September" href="http://www.ogfj.com/display_article/339040/82/ARCHI/none/none/1/Is-it-time-to-regulate-short-selling?/">September</a>.<br /><br />Another criticism is regarding the research results themselves. Critics say the SEC eliminated the rule during a bull market, when liquidity was not a problem. fast forward to 2009. Market manipulation speculation runs rampant and liquidity is a huge problem.<br /><br />In March, House Financial Services Committee Chairman Barney Frank (D., Mass.) told reporters, “[SEC Chairman Schapiro] Mary is moving towards the uptick rule, which some people think is very important, some people think it’s not important, nobody thinks it does any harm. I think that will go back (into effect).”<br /><br />If no one thinks it “does any harm,” why not reinstate it? What else do we have to lose?<div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/3084996027800757167-4138347204537171580?l=ogfj-eie.blogspot.com' alt='' /></div>tag:blogger.com,1999:blog-3084996027800757167.post-41383472045371715802009-04-09T20:42:00.000Z2011-08-02T15:11:50.371ZSocial networking sites as a business tool?noemail@noemail.orgMikaila AdamsUnless you’ve been completely unplugged, you’ve seen Microsoft’s new ‘People Ready’ ads touting the benefits of constantly-emerging technology in today’s global workplace. Communication is as essential to our businesses as it is to our personal lives. Many of us do what we can to keep up with technology and the latest communication tools (this is a blog, n’est-ce pas?).<br /><br />What we know is that social media tools are ever-evolving and ever-emerging from cyberspace - MySpace, Facebook, Twitter, LinkedIn…the list goes on and on and on. While I’m ‘plugged-in’ to many, I only use one for professional purposes.<br />And I’m not alone.<br /><br />According to a recent survey conduced by <a title="PennEnergy" href="http://www.pennenergy.com/index.html" target="_blank">PennEnergy</a> in partnership with the Oil &amp; Gas Journal Research Center, Microsoft Corp., and Accenture, only one out of four respondents reported leveraging new social media tools to capture and share important information internally.<br /><br />The “<a title="Oil and Gas Collaboration Survey 2009" href="http://www.microsoft.com/presspass/press/2009/feb09/02-18OGSocialMediaPR.mspx" target="_blank">Oil and Gas Collaboration Survey 2009</a>,” conducted in January, polled 272 oil and gas industry professionals from around the world and was the first to try to measure the effect of social networking sites on an industry known for being slow to embrace change.<br /><br />While the majority of respondents aren’t using these types of tools professionally, 40% of them believe company adoption of the tools, including social networking sites, would boost productivity on the job.<br /><br />Personally, I’m not convinced these tools will aid day-to-day operations any more than an email or a phone call.<br /><br />Have an idea otherwise? I’d love to hear it.<div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/3084996027800757167-213689382056803007?l=ogfj-eie.blogspot.com' alt='' /></div>tag:blogger.com,1999:blog-3084996027800757167.post-2136893820568030072009-03-16T20:41:00.000Z2011-08-02T15:11:50.714ZBudget proposal is harmfulnoemail@noemail.orgDon StowersThe Independent Petroleum Association of America rarely gets this upset about a new government policy. However, on Feb. 26, the Obama administration delivered a body blow to the industry when it proposed a colossal $30 billion tax increase (as part of the 2010 budget) on US energy producers. IPAA management and staffers were livid that the President would attempt to derail domestic oil and natural gas production at a time when the economy is in shambles and the country is importing more and more of its energy needs.<br />So much for energy independence.<br /><br />There is faint hope that Congress will modify the proposed budget and remove some of the more loathsome provisions. However, any such changes would have to come in the Senate because the House leadership likely helped craft the budget proposal or at least contributed in some way to the anti-oil tax provisions.<br /><br />The IPAA exists to help protect the interests of independent oil and gas producers – not so-called Big Oil, but the many small- and mid-sized companies that drill roughly 90% of the nation’s oil and natural gas wells. These companies produce 68% of American oil and 82% of our natural gas supplies, and in case the government hasn’t noticed, they are suffering along with the rest of America in the current economic turmoil.<br /><br />A tax increase such as the administration has proposed would have a devastating effect on US producers, and it would run counter to the needs of the country. It could shut down thousands of domestic oil and gas wells and increase the need for imports. The government would ultimately lose much more in tax and royalty revenues than it would gain by such a proposal, and the loss of jobs would be catastrophic in petroleum-producing states. With the current unemployment rate at its highest level in years, this could not come at a worse time.<br /><br /><span style="color:#339999;"><strong>Without going into too much detail, here are some of the items in the budget proposal:</strong><br /></span><strong><p><span style="color:#339999;">* Repeals expensing of intangible drilling costs (fuel, repairs, etc.);<br />* Repeals percentage depletion (without this provision, many small, barely economic wells will be shut down);<br />* Repeals marginal well tax credit (an important safety net);<br />* Repeals enhanced oil recovery credit;<br />* Eliminates expensing of geological and geophysical amortization costs;<br />* Imposes an excise tax on Gulf of Mexico production; and<br />* Repeals manufacturing tax deduction for oil and gas industry, a provision that is allowed other US manufacturers.</span></strong></p><span style="color:#339999;"></span><br />It is worth noting that this budget proposal slams the petroleum industry at the same time that Interior Secretary Ken Salazar has decided to cancel the planned oil shale lease sale. An earlier government study revealed that nearly 800 billion barrels of crude oil lay untapped in oil shale deposits in several Western states, and now it appears that they will remain unexploited.<br />In a conference call announcing the cancellation, Salazar commented: “Those who believe oil shale is a panacea for America’s energy needs have been living in a fantasy land.”<br /><br />To that I would say: those who believe that alternative energy alone can fuel our vehicles, heat and cool our homes and businesses, and provide the necessary energy for American industry to thrive have followed Alice down the rabbit hole. This kind of thinking will cripple our energy infrastructure.<br /><br />Earlier this year, Salazar said his office would “rework” the five-year offshore oil and gas leasing plan that proposed opening up parts of the Outer Continental Shelf, which have been closed to hydrocarbon development for decades. I can hardly wait to see the revised proposal.<br />Writing in the Wall Street Journal recently, BP CEO Tony Hayward noted that America needs to stop looking to others for its energy needs and develop its own hydrocarbon endowment. He said, “Even with the rapid growth of alternatives, fossil fuels will continue providing most of the energy Americans consume for decades to come.”<br /><br />Oil imports, said Hayward, have more than doubled in the past 35 years – from 30% in 1973 to around 65% today. This figure needs to get smaller – not bigger.<br /><br />With declining energy demand due to the recession, Hayward noted that now is the ideal time for Congress and the Obama administration to work with energy producers to craft an energy policy that creates jobs, expands and diversifies the nation’s energy supply, generates government revenue, and protects the environment.<br /><br />We agree. Unfortunately, the current budget proposal is a step in the wrong direction.<div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/4422135586590402834-2395224978405745636?l=energy-capital.blogspot.com' alt='' /></div>tag:blogger.com,1999:blog-4422135586590402834.post-23952249784057456362009-03-11T19:55:00.000Z2011-08-02T15:09:38.194ZHow full is the energy glass?noemail@noemail.orgDon StowersAmid all the gloom and doom reporting about the economy and financial markets in the news media, a friend sent me an energy market assessment by Michael Smolinski, an industry analyst with Phoenix-based Energy Directions Inc. and a well-respected contrarian. In his analysis, Smolinski points to a number of factors that may indicate that:<br /><br />a) the economy is stronger than we think; and<br />b) the situation is starting to improve already.<br /><br />Although headlines are pointing out that unemployment has reached its highest mark in 26 years, they fail to mention that the US population was about 232 million then – 72 million fewer than today’s population. So, obviously, there are a lot more people gainfully employed today than there were in 1983. People are still working, consuming, using up, and wearing things out, says Smolinski.<br /><br />Another sign that things may be on the upswing is electricity generation. For the last week of January, our nation’s power producers generated 81.253 billion kilowatt hours of electricity. That is nearly 25% greater than the same week last year and second only to the record of 83.459 needed two years ago.<br /><br />Natural gas inventory is also on the decline, which if it continues, should foreshadow an increase in prices, which would be great news for hard-hit producers. Smolinski points out that Canada, our largest source of imported natural gas, is using more gas and supplying less of it to US markets.<br /><br />Finally, our friend Allen Brooks over at Parks Paton Hoepfl &amp; Brown recently said that he believes this energy downturn may be more like the 2001-2002 market correction rather than the 1980s energy bust. It’s a disservice to explain his theory and his rationale in a few short sentences (read his “Musings from the Oil Patch” dated Feb. 3 for a more thorough explanation), but Brooks notes the current downturn has seen 516 rigs idled so far, which represents a 25% retrenchment.<br /><br />If this downturn were to match the 2001 decline, there would be another 357 rigs yet to be idled. This would be a net loss of 873 rigs from the rig count that peaked at 2031 active rigs last fall. This decline matches pretty closely the 2001 decline and that forecast by Nabors Industries late last fall as well as Brooks own forecast in November.<br /><br />What do you think? Is the energy glass half full or half empty?<div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/4422135586590402834-3239562490857645543?l=energy-capital.blogspot.com' alt='' /></div>tag:blogger.com,1999:blog-4422135586590402834.post-32395624908576455432009-02-11T20:54:00.000Z2011-08-02T15:09:41.813ZLayoffs may pose larger threat to industrynoemail@noemail.orgMikaila AdamsCompanies across the board are scrambling to save cash and reduce debt in light of the worst economic crisis in decades. No one is immune. Not even the energy companies.<br /><br />Drastic times call for drastic measures - and that means layoffs. According to many companies, layoffs come only after all efforts to cut costs are explored internally. Apparently, that time has come.<br /><br />Oilfield services giant Schlumberger was one of the first major companies in the sector to announce job cuts. A 17% drop in 4Q08 earnings has helped spur a 5% cut of its global work force – roughly 5,000 jobs. Up to 100 employees will be laid off in Houston.<br /><br />Another oilfield services giant, Baker Hughes, is poised to top the number of workers laid off in Houston. The company is expected to reduce its workforce by 4%. Of the 1,500 planned cuts, 200 are expected to be cut right here in the company’s home town.<br /><br />Halliburton’s 4Q08 earnings were down 32%. The company has said it will lay off an unspecified number of employees.ConocoPhillips said it plans to cut 4% of its 33,600 workforce. That’s a loss of nearly 1,300 employees, not including additional cuts planned to its contracted workforce.<br /><br />What we’ve been hearing repeatedly regarding headcount reductions is that companies are ‘doing what’s necessary for the short-term’ in order to ‘emerge stronger’ on the flip side of the downturn.<br /><br />But what about the long-term implications? Factor in the ‘talent shortage’ that companies in our industry have been facing for years. Depending on the length of the economic crisis, layoffs across the board, from management to contractors, could potentially add to an existing problem.<br /><br />I first wrote about the talent shortage in the <a href="http://www.ogfj.com/display_article/237821/82/ARCHI/none/none/1/Industry-facing-critical-shortage-of-engineers,-other-professionals/" target="_blank">October 2005 issue</a> of Oil &amp; Gas Financial Journal. One reason for the shortage centered around the drastic layoffs during the bust cycles of the 1980’s and ’90s. This left the general public - including those students who may have otherwise entered the field - with a negative perception of an industry that downsizes its workforce every time oil and gas prices collapse.<br /><br />The topic came up again in <a href="http://www.ogfj.com/currentissue/index.cfm?p=82&amp;v=3&amp;i=9" target="_blank">September 2006</a>. The article focused on the transfer of knowledge from senior-level professionals to entry-level and mid-career professionals. The learning curve is steep. It can take up to a decade for a new graduate to ‘learn the ropes.’<br /><br />While I can’t say I’m experiencing déjà-vu – I wasn’t old enough to understand the bust of the 80’s and wasn’t old enough to care about the bust of the 90’s – I’m cognizant of what’s occurring now and wondering if we’re trading one problem for another, and effectively exacerbating an existing one.<div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/3084996027800757167-9112011854764244765?l=ogfj-eie.blogspot.com' alt='' /></div>tag:blogger.com,1999:blog-3084996027800757167.post-91120118547642447652009-01-30T21:40:00.000Z2011-08-02T15:11:51.354ZDrill baby, drill: new developmentsnoemail@noemail.orgMikaila AdamsIn one of his last efforts as President, President Bush has started the “drill baby drill” process that so many in the oil patch have hoped for.<br /><br />Closing a public comment period on the proposed lease of 2.9 million acres of ocean offshore Virginia to oil and natural gas companies, the US Interior Department has set the ball in motion. <br />As gas prices climbed to $4 a gallon this summer, the idea of increased US drilling looked more and more popular. In recent months, President Bush lifted the presidential ban on offshore drilling set by his father, and later, a gridlocked Congress let a separate drilling-related suspension expire.<br /><br />Now it seems as though the Bush camp is “testing the waters” in Virginia. The Minerals Management Service believes that while the area may be a drop in the bucket as far as oil, the natural gas reserves could prove extremely fruitful. However, the main draw might be the path of least resistance. Government opposition in Virginia may be less than elsewhere, say, California. <br /><br />But wait. While the window of opportunity for the energy industry seems the biggest in decades, there are still obstacles.<br /><br />The US Navy, NASA, and those that follow the migration patterns of the North Atlantic right whale have all expressed their respective concerns.<br /><br />To many in the industry, the fact that President-elect Barack Obama has the power to stop the process in its tracks when he takes office in January is the most disconcerting.<br /><br />There are, however, a few important things to remember.<br /><br />Obama has selected Ken Salazar as the new interior secretary nominee. Salazar is part of a group of lawmakers known to favor Outer Continental Shelf drilling in exchange for more investment in low-carbon technology. <br /><br />Secondly, when most feared the “sure thing” Windfall Profits Tax that was to accompany Obama’s presidency, he reassessed the situation - ultimately rejecting the idea.<br /><br />And, perhaps most notably and most relatably, President-elect Obama agrees that “responsible” offshore exploration should be part of the total energy picture.<br /><br />He’s proven he is listening to industry voices and ideas. Perhaps he will surprise you again.<div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/3084996027800757167-8792324087087606740?l=ogfj-eie.blogspot.com' alt='' /></div>tag:blogger.com,1999:blog-3084996027800757167.post-87923240870876067402008-12-22T21:38:00.000Z2011-08-02T15:11:51.775ZInvesting in energy is patrioticnoemail@noemail.orgDon Stowers<p>For years, the US government has paid lip service to “energy independence” and “energy security.” This has amounted to a token acknowledgement that the United States has become too dependent on foreign sources of energy for its own good. We need more than tokenism from the new administration that takes control in Washington on Jan. 20. The government needs to allocate resources to actually doing something about the problem.<br /><br />First, one of the things the Obama administration can do that won’t cost the taxpayers a dime is to allow drilling in areas that have been off-limits for years, including federal lands in the West and in offshore areas that heretofore have been off limits to oil companies. This would be a good start.<br /><br />Next, the government needs to encourage investment in emerging technologies for all forms of energy – petroleum, coal, nuclear, hydroelectric, wind and solar, tidal and wave energy, and biofuels – with government-guaranteed loans, if necessary. This may include public-private cooperation in building nuclear power plants and in developing zero-emissions coal-fired plants. We need to encourage American ingenuity so that we don’t fall behind other nations.<br /><br />Government policies have helped destroy much of the manufacturing base in the United States, so it behooves us to make up for this by shoring up our reputation as the high-tech capital of the world. With many traditional investors weakened by the strongest economic recession since the 1930s, it’s time for the government to step up to the plate and help out by investing in our energy future.<br /><br />It’s also appropriate at this time to express thanks to the President-elect for backing down from his earlier view that a new Windfall Profits Tax is needed due to “excessive” oil and gas profits. Obviously the excessive stage is over and much of the industry is now in a survival mode.</p><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/4422135586590402834-6592742852642677439?l=energy-capital.blogspot.com' alt='' /></div>tag:blogger.com,1999:blog-4422135586590402834.post-65927428526426774392008-12-09T20:52:00.000Z2011-08-02T15:09:43.904ZReady, Set, Action!noemail@noemail.orgMikaila AdamsWith the financial crisis in full-swing, people around the sector are gearing up for an active merger and acquisition space in the coming year.<br /><br />When capital was free-flowing, companies borrowed. A lot. Now, overleveraged companies are scrambling to improve balance sheets. One sure-fire way to do this quickly is to sell assets. Some, however, are waiting, not wanting to let go of promising properties acquired only a short time ago for significantly higher prices. How long can they hold out?<br /><br />And what about the smaller companies that partnered with oil majors when prices skyrocketed over the $100 mark? With prices skimming half that, companies that thought they hit the jackpot on signing day may now be wondering how they will keep up. The supermajors have money. On top of that, the supermajors can still get money.<br /><br />When the bigger companies forge on with capital intensive projects, many of their partners will quickly run out of funds. How long do they trudge through with hopes of rebounding prices? Can they afford to bail on projects and joint ventures that served as the catalyst for their growth in the space? Can they afford not to?<br /><br />For some companies, including those not partnered, the result will be buyouts by supermajors. Most companies these days are “trading at a discount.” Interesting phrase for what is essentially a negative position - for them anyway. For the big oil companies it is quite the opposite. The stage is set for huge M&amp;A deals, the likes of which haven’t been seen since the late 90’s when oil dropped to around $10 a barrel. It was then that Exxon merged with Mobil and Chevron began its dealings with Texaco.<br /><br />I’ve only been in the energy space four years. In that time I’ve come to recognize quite a long list of companies. My guess is that list may become a lot shorter in 2009.<div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/3084996027800757167-5340152159811887681?l=ogfj-eie.blogspot.com' alt='' /></div>tag:blogger.com,1999:blog-3084996027800757167.post-53401521598118876812008-11-25T21:36:00.000Z2011-08-02T15:11:52.805ZDepending on your pole position, rules are made to be brokennoemail@noemail.orgMikaila AdamsThe old adage “rules are made to be broken” seems to be the running theme as of late. You simply can not pick up a newspaper or turn on the television without hearing about another ’side-stepping’ of a rule or otherwise generally accepted practice.<br /><br />Naked short selling; financial institutions accused of breaking ethical, if not judicial laws; governments overstepping previously-accepted boundaries - bailing out said institutions; NASDAQ “relaxing” a de-listing rule, even if temporarily…To those who think these are insignificant or isolated incidents, I say look at the bigger picture. These things together are disconcerting.<br /><br />Put together, these incidents have helped to create a lot of the strife and stress we (most of us anyway) are feeling. Were the rules broken to make things easier? If so, that ease was temporary for most. Was it more sinister - a power play to override the less-than-desirable outcome that the rules would have allowed? Or are folks simply trying to cover for past mistakes? At what point did it become acceptable to cover repercussions of rules broken with additional rule breaking? What rung on the totem pole do you have to pass in order for the rules to no longer apply? And where does it stop?<br /><br />My final thought is - when can I start bending rules and have it deemed an acceptable practice? The recession-bound economy certainly affects me as well. Even if my moral and ethical fortitude wasn’t a factor, rule-breaking wouldn’t be an acceptable practice for me. I’m too far down the totem pole.<div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/3084996027800757167-5482491607193200642?l=ogfj-eie.blogspot.com' alt='' /></div>tag:blogger.com,1999:blog-3084996027800757167.post-54824916071932006422008-10-28T20:35:00.000Z2011-08-02T15:11:53.288ZWho is your choice for Energy Secretary?noemail@noemail.orgDon StowersAs this is written, we are exactly one week away from electing a new President of the United States of America. Regardless of who wins, it is critically important for the oil and gas industry and for America to adopt a comprehensive energy policy that includes an emphasis on developing domestic oil and gas reserves.<br /><br />At this time, neither Barack Obama nor John McCain favors drilling in the Arctic National Wildlife Preserve (ANWR), although both say they favor greater exploitation of our natural resources. We hope that whichever candidate is elected will see the need to establish a plan to reduce our dependence on foreign oil imports in part by encouraging energy companies to drill and produce more petroleum from our abundant onshore and offshore oil and gas fields.<br />The new President will set energy policy for the next four years, but it is the Secretary of Energy who implements the plan. It is essential to have a strong person with a deep knowledge of the industry in this job.<br /><br />Here are a few names being discussed:<br />• Congressman Joe Barton (R-Tex), ranking member of the House Energy and Commerce Committee;<br />• Senator Jeff Bingaman (D-NM), chairman of the Senate Energy and Natural Resources Committee;<br />• Sen. Kay Bailey Hutchison (R-Tex), who has said she will not run for re-election to the US Senate;<br />• Congressman Gene Green (D-Houston), vice chairman of the House Energy and Commerce Committee;<br />• Former US Sen. John Breaux (D-La), a conservative Democrat and strong advocate for the oil and gas industry;<br />• Various high-profile members of the energy industry, including Chesapeake Energy Chairman and CEO Aubrey McClendon and investment banker Matt Simmons of Simmons &amp; Co. International.<br /><br />My question to you today: Who would you like to see become the next Secretary of Energy and why?<div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/4422135586590402834-4319540836836232696?l=energy-capital.blogspot.com' alt='' /></div>tag:blogger.com,1999:blog-4422135586590402834.post-43195408368362326962008-10-28T19:48:00.000Z2011-08-02T15:09:46.509ZCrisis casts shadow over oil patchnoemail@noemail.orgMikaila AdamsSan Francisco wasn't so sunny today. While the weather outside was beautiful, the mood inside the IPAA OGIS conference was less than joyful. I've been wondering when the energy industry would, at the very least, reference the financial crisis. The energy industry has been incredibly strong in past years, but it doesn't operate in a vacuum.<br /><br />While the financial markets have been gloomy for awhile, attitudes around the oil patch have remained optimistic despite the crumbling economy around them. That is, until now.<br /><br />Nearly every presenter started off with a joke about the markets. "Sorry I'm late; I couldn't tear myself away from the Lehman Brothers interrogation," said Southwestern Energy's Harold Korell. Another joked that the water pitchers should be filled with vodka instead.<br /><br />The focus of presentations became less about assets and properties and more about financials and balance sheets. As it will now be much harder to raise capital , companies talked about recent deals and financings signed "just in time." Words like "liquidity" and "unused" in reference to credit facilities became the buzzwords of the day.<br /><br />While executives finally recognized the impact the financial markets have on energy, the overall sentiment remained positive. "While people are probably glued to the markets," said Swift's Bruce Vincent, "I want people to know that the fundamentals of energy are strong."<br /><br />Does anyone else remember hearing that in reference to the American economy recently?<div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/3084996027800757167-3242852574644345774?l=ogfj-eie.blogspot.com' alt='' /></div>tag:blogger.com,1999:blog-3084996027800757167.post-32428525746443457742008-10-06T23:30:00.000Z2011-08-02T15:11:54.552ZWhy Boone Pickens' energy plan won't worknoemail@noemail.orgPennwell Blogs AdministratorT. Boone Pickens, who has made billions in the oil and gas industry, is now touting the virtue and value of wind energy. He proposes that the U.S. spend roughly $1 trillion to install gigantic wind turbines from Texas to the Canadian border that he believes would eventually meet as much as 20% of our domestic electricity demand. By doing this, Pickens says we can shift away from using natural gas for power generation and use it instead to power our vehicles. <br /><br />Although this sounds good in theory, the devil is in the details. One of those itty-bitty details is infrastructure. Pickens' plan leaves lots of unanswered questions:<br /><br />• Who will build the transmission lines from the prairies to the cities where the power is needed?<br />• Who will pay for it?<br />• Who will build the natural gas fueling stations, complete with new pumps and storage tanks?<br />• Who will pay for it?<br /><br />Investment banker Matt Simmons recently described his own wind energy project to Oil & Gas Financial Journal. He is investing in a large wind farm off the coast of Maine because the wind is fairly constant over the sea. Not so for land-bound locations such as the Texas panhandle where the winds tend to subside during summer months when electricity demand is greatest. This is where Pickens' own Mesa Power is pouring $12 billion into what he calls “the world’s largest wind farm.”<br /><br />Pickens’ proposal is bold (some would say grandiose), but it is riddled with problems. Everyone knows that Americans need to wean ourselves away from our reliance on foreign oil, but I’m not convinced Boone has the solution.<br /><br />What do you think?<div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/4422135586590402834-3731026646983337627?l=energy-capital.blogspot.com' alt='' /></div>tag:blogger.com,1999:blog-4422135586590402834.post-37310266469833376272008-09-29T21:27:00.000Z2011-08-02T15:09:48.053ZMcCain, Palin and ANWR drillingnoemail@noemail.orgMikaila AdamsJust this past week, we've learned that Alaska Governor Sarah Palin will run alongside Senator John McCain in hopes of winning the respective Vice President and President roles.Until recently, McCain has kept a fairly "hands off" stance in terms of opening up the Arctic National Wildlife Refuge (ANWR) to oil drilling.<br /><br />His opposition is in direct contrast to Palin's view. She whole-heartedly supports opening the area for drilling. Just recently, the House Republican leaders held a press conference to promote the party's American Energy Act. While McCain is supportive of the act in general, he still takes issue with parts. Is it the part that calls for more drilling in coastal ocean areas and the Arctic?<br /><br />Do you believe this will be a major point of contention within the GOP? Will Palin change his mind?<div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/3084996027800757167-1210919871680660647?l=ogfj-eie.blogspot.com' alt='' /></div>tag:blogger.com,1999:blog-3084996027800757167.post-12109198716806606472008-09-08T15:31:00.000Z2011-08-02T15:11:55.675ZInvestments increase, but production is still flatnoemail@noemail.orgDon StowersIf you think US oil companies are making obscene profits, think again. The latest Ernst &amp; Young study shows that exploration and development costs are up sharply, while revenues have increased a little, and upstream profits have nudged upward by only a few percentage points. Nobody who can read a balance sheet would call this a “windfall.”<br /><br />Yes, some petroleum companies have fared better than others, as is the case in other industries. But, taken as a group, US-based oil and gas companies are earning only modest profits. The ledger item that jumps out at you is the dramatic jump in costs.<br /><br />Exploration costs increased 165% over the past five years from $4.8 billion in 2003. There was a 15% increase the past year, from $11.1 billion in 2006 to $12.8 billion in 2007.<br /><br />Development costs have risen 180% from $18.4 billion in 2003. In the past year alone, the cost of development moved up a staggering 28% to $52.2 billion.<br /><br />This year, preliminary reports indicate that the expense side of the balance sheet continues to edge upwards, as E&amp;P companies move into deeper and deeper offshore waters in search of oil and natural gas, and onshore companies face increased technological challenges and steeper drilling costs operating in unconventional geologic formations.<br /><br />As Matt Simmons says in this month’s cover story, oil is becoming a scarce resource. It’s not that we’re running out of oil. We’re running out of cheap, easy-to-find, easy-to-produce oil. Already we import about 70% of our oil, and forecasts are that this will rise to 80% in the next few years, making us ever more dependent on foreign sources and worsening our trade deficit.<br /><br />President George W. Bush was correct in saying we’ve become addicted to oil. But even if we implement draconian conservation measures in the United States, the demand for energy in developing nations is likely to more than make up the difference. As long as demand is rising and production is stagnant, prices will rise. That’s a basic economic principle.<br /><br />Although speculative trading no doubt factors into the current high price of crude, it is not the main driver. At most it accounts for $20 to $30 of the current price, according to some analysts. If you examine the problem closely, you’ll see that energy consumption is increasing dramatically in developing countries and that more mature economies like the United States have not reduced their consumption significantly. We all still have hypodermic needles in our veins.<br /><br />Here are some recent predictions about where oil prices will go:<br /><br />Chakib Khelil, president of OPEC, predicted on July 6 that oil prices could go as high as $170 a barrel this summer.<br />Paolo Scaroni, head of Italy’s Eni SpA, said in late June that he could see prices hitting $200 a barrel this year.<br />On June 9, Gazprom’s Alexei Miller commented: “We think it [the price of oil] will reach $250 a barrel.” A company spokesman specified that Gazprom believed that level would be hit in 2009.<br />And, finally, the legendary T. Boone Pickens, a billionaire oil investor, said on July 22 that he believes oil will hit $300 a barrel in 10 years.<br /><br />Of course not everyone agrees with these assessments. Most analysts, in fact, believe oil prices will range between $100 and $200 in 2009. Forecasts beyond that date are probably not very reliable.<br /><br />As of this writing, crude has fallen to $123 a barrel – about a $20 drop in the past weeks – after hitting an all-time high of $145.85 in early July. This shows the futures market is in quite a bit of flux. Crude oil prices averaged $72 a barrel in 2007, so even the current seven-week low of $123 is a significant increase ($51/bbl) over last year’s average.<br /><br />Peter Fusaro, co-founder of the Energy Hedge Fund Center and a contributor in this issue, notes, “We are not running out of fossil energy, but cheap energy days are gone forever. Live with it and see it as an investment opportunity.”<br /> Have an opinion on this?<div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/4422135586590402834-5955660254504693239?l=energy-capital.blogspot.com' alt='' /></div>tag:blogger.com,1999:blog-4422135586590402834.post-59556602545046932392008-08-07T21:44:00.000Z2011-08-02T15:09:50.331ZPennWell, OGFJ plan second investor forum targeting buy-side analysts, institutional investors, hedge fundsnoemail@noemail.orgDon StowersEach year Oil & Gas Financial Journal editors and staff travel to a wide variety of energy investment presentations to gather information and intelligence on companies operating in our sector. This year, we’ve been to IPAA events in New York, San Francisco, and London, as well as that organization’s small-cap conference in Florida. We regularly attend the Howard Weil Energy Conference in New Orleans, John S. Herold’s Pacesetters Conference in Connecticut, and Ener-Com’s investor conferences in Denver and San Francisco. <br /><br />What has been conspicuous by its absence is an investment symposium of this type in Houston, widely regarded as the center of the oil and gas industry in the United States, if not the world. Last year, PennWell and Oil & Gas Financial Journal decided to do something about it. We organized and hosted the fi rst annual Houston Energy Financial Forum, or HEFF. <br /><br />One presenter, Jeff Johnson, chairman and CEO of Fort Worth-based Cano Petroleum, called HEFF “long overdue,” adding, “We regularly participate in investor presentations in New York and elsewhere. It’s about time we had one in Houston, Texas, the energy capital of the world.” <br /><br />The purpose of the event is to provide independent oil and gas companies with the opportunity to make their corporate presentation before an audience of analysts, investors, bankers, and other members of the fi nancial community. Typically these presentations are made by the CEO or CFO and include up-to-date fi nancials and a fairly detailed look at company operations. <br /><br />Our first investor conference exceeded our expectations in the caliber of presenting companies, 55 in all, as well as the quality and number of attendees. More than 560 attended the inaugural HEFF in November, and an additional 1,000-plus viewed the live webcast or saw the presentations online after the event, making this one of PennWell’s most successful web presentations to date. <br /><br />This year, PennWell and OGFJ plan to build on last year’s success for the second HEFF event, scheduled for Nov. 18-20 at the Houstonian Hotel, Club & Spa. We anticipate between 70 and 100 presenting companies, including separate tracks for E&P, midstream, and oil service companies. Just a few of the companies that have confirmed their participation include Anadarko Petroleum, Ultra Petroleum, Kinder- Morgan, Range Resources, and W&T Offshore. Major sponsors include CIT Energy, Bucking Horse Energy, Cameron, Halliburton, Seismic Micro-Technology, Flotek, and Gardere Wynne Sewell. <br /><br />New this year is a golf outing on Monday, Nov. 17, at the Redstone Golf Club, home of the Shell Houston Open and Houston’s only PGA tour course. <br /><br />Nicole Durham, OGFJ publisher, says that PennWell is “looking outside the traditional box” for conference attendees. “We’re not content with merely inviting the same people who attend PennWell, OGFJ plan second investor forum Don Stowers Editor-OGFJ other investor presentations. We’re actively pursuing representatives from institutional investors, energy hedge funds, and buy-side analysts from throughout the United States and even overseas.” <br /><br />She added, “Presenting companies want to make sure they are reaching new people – not just the analysts and investment bankers who regularly follow their company. Although this will be a Houston event, our attendees will come from all over to hear the latest news from these companies and to have the opportunity to talk with their top executives one-on-one.” <br /><br />Although there are a number of bank-sponsored investor conferences, both presenters and attendees are attracted to events sponsored by a neutral third-party, such as PennWell. No favoritism is shown to clients, and there is greater exposure to the entire community of analysts and investors. <br /><br />This year’s Houston Energy Financial Forum will be held shortly after thirdquarter financial results are released for most public companies, so HEFF will be the first opportunity for attendees to hear this latest information. <br /><br />With the overall economy slowing and oil and gas prices on the rise, there has seldom been a better time to consider investing in the petroleum industry. This November’s HEFF provides an opportunity for participants to see and hear fi rst hand some of the outstanding companies operating in the sector. We hope to see you there.<div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/4422135586590402834-4842231376222701489?l=energy-capital.blogspot.com' alt='' /></div>tag:blogger.com,1999:blog-4422135586590402834.post-48422313762227014892008-07-09T14:47:00.000Z2011-08-02T15:09:51.594ZNear $130 now, will oil prices rise or fall?noemail@noemail.orgDon StowersCrude oil traders and energy company executives seem to disagree about which way oil prices are going. Commodity traders in New York, London, and elsewhere apparently believe the sky is the limit, judging from the current run-up that has given us $133 oil in recent days. Conversely, a recently-released KPMG survey of oil and gas industry executives indicates that most believe the price-per-barrel of crude oil will drop below $100 by the end of the year.<br /><br />So, who are we to believe?<br /><br />KPMG surveyed 372 financial executives from oil and gas companies in April 2008 and made the results available on May 9. Here’s what they had to say:<br /><p><br />55% think that crude will drop below $100/bbl by year’s end;<br />21% think the price will close between $101 and $110;<br />5% think between $111 and $120; and<br />9% believe it will close at above $120.</p><br />Bill Kimble, executive director of KPMG’s Global Energy Institute, noted, “The combination of traders moving resources into commodities and the weak dollar has had a signifi cant role in the surge in pricing in recent weeks. However, in addition, there are underlying issues in the energy industry, such as escalating energy demand in emerging markets and declining oil reserves, which will continue to contribute to upward pricing pressure for years to come.”<br /><br />Last month, Goldman Sachs, one of the world’s most infl uential investment banks, hiked its oil price forecast for the second half of 2008 to $141/bbl, up from its previous forecast of $107. With steadily escalating prices and significantly higher prices at the retail level for gasoline and diesel, it would seem some consumers might begin to change their habits and reduce the number of miles they drive to conserve fuel or begin to buy more fuel-effi cient vehicles. Actually, there is anecdotal evidence that both are occurring.<br /><br />However, even if Americans suddenly decide to become as fuel-effi cient and eco-minded as, say, most Europeans, there is steadily increasing demand for energy in emerging economies such as China and India that will tend to prop up oil prices.<br /><br />Legendary oilman T. Boone Pickens recently told CNBC, “85 million barrels of oil a day is all the world can produce, and the demand is 87 million. It’s just that simple. It doesn’t have anything to do with the value of the dollar.”<br /><br />If Pickens is correct in his facts, we simply aren’t producing enough oil to meet global demands. However, the dollar has fallen 12% against a broad range of other world currencies over the past year, including 15% against the euro. So it’s likely the relative value of the dollar has something to do with the price of oil.<br /><br />Most KPMG survey respondents overwhelmingly felt that opening up domestic drilling on public land, in the Arctic National Wildlife Reserve, and in offshore waters that are currently offlimits to drilling is our best option for increasing oil and gas production and enhancing US energy security.<br />What do you think about oil prices and opening up more land to domestic drilling?<div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/4422135586590402834-7745431400890594838?l=energy-capital.blogspot.com' alt='' /></div>tag:blogger.com,1999:blog-4422135586590402834.post-77454314008905948382008-06-28T20:22:00.000Z2011-08-02T15:09:53.466Z 500

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