Energy Industry Most Lucrative?

What would be some career paths that would get someone great exposure/connections to the energy industry?

Become an energy banker would be great, but you would ultimately only be a middle man for deals being made...

What position in an energy firm would you want to work in, if the ultimate goal was to be involved with making decisions regarding purchasing other companies and strategic planning?

Here are some fields that I have heard of...

  1. Alternative Supplier in deregulated markets
  2. Demand side management
  3. Energy efficient projects (your potential career here might be a project engineer or coordinator that works with generating and supporting project proposals).
  4. Solar power
  5. Distributed generation
  6. Demand repose
 
rufiolove:
rufiolove:
Would be sick to be head of Corp Development at an E&P company...

I work in Oil & Gas M&A and we deal with the Corp Dev guys all the time... I can definitively say that you are off base here... Also, a lot of them were former bankers and if you start at a small cap E&P and it grows to a mid cap you can cash in on some serious equity...

Did you just respond to yourself?

 
rufiolove:
Would be sick to be head of Corp Development at an E&P company...

What do yo mean by that?

Too lame of a job or the opposite?

I have been thinking about specializing in the energy or high tech industry.

What's your say? I am not studying engineering though

No one would remember the Good Samaritan if he'd only had good intentions; he had money as well.
 

If you want to make decisions regarding m&a or strategy you need to get into an operational role and work your way up to a CXO position. Corpdev doesn't actually make decisions about anything - it's just an analytical support function.

 

Currently consulting on an energy client, they have a 10 year planning group that will provide strategic recommendations. I'm not familiar with who is in the group but I do know there are finance types. The key thing to note that the people in this group will likely never rise to make the decisions though, those people all come out of the business areas. They'll be people with technical backgrounds (50%) or management but have likely spent over 10+ years with the firm.

 

My friend is a miner downunder and his take homepay last year was >$250k AUD (3rd year on the job). He left after 1st year of his engineering. Not sure about his health though.

 

If had the math skills for it, I would have done- petroleum engineering -> big oil company -> MBA -> high level corporate job eventually

"There are only two opinions in this world: Mine and the wrong one." -Jeremy Clarkson
 

jon1987, the problem with that is that senior positions (not C level tho) are usually awarded to seniority. Yes you would move up at a faster pace but it would still take you a while to get there. I know this because I come from a family of energy service professionals, including one family member who is one level below C - level exec at a mid cap firm. He rakes just shy of 7 figs (salary, dunno about bonus but it must be a shitload of stock options) and he just finished his first year in the position.

 
Unforseen:
jon1987, the problem with that is that senior positions (not C level tho) are usually awarded to seniority. Yes you would move up at a faster pace but it would still take you a while to get there. I know this because I come from a family of energy service professionals, including one family member who is one level below C - level exec at a mid cap firm. He rakes just shy of 7 figs (salary, dunno about bonus but it must be a shitload of stock options) and he just finished his first year in the position.
Yeah, the executive teams of these companies are old WASPs who went to Big 12 schools.
 

Interesting...I don't have much knowledge of the industry insides so I just figured that sounded like reasonable path. I'd still really like to break into that field eventually, even if I have to take a long road to get there.

"There are only two opinions in this world: Mine and the wrong one." -Jeremy Clarkson
 

Its an excellent path don't get me wrong, probably the most lucrative on an average basis and a LOT less competitive.

Petroleum Engineer -> field operator/other field role (90kish, and you save a shit ton cause you spend 70% of your year in the field) -> Manager/BD role (100-200k, 60 work weeks) -> MBA -> coming back to the same company for senior role (250k+ depending where you are).

So yeah this path is one of the most lucrative ones there is out there. What I meant is if your company has a very senior management role (500k total salary + bonus), they will probably give it to a guy with 20+ years in the company/industry over you if you have 5-10 years and an MBA.

 

Unforseen, you don't need any degree for a field operator role. Also, they make over $100k starting out. I have several friends/family members who do this and make a shit ton of money with no degree. You will be working your ass off tho.

Thurnis, some services companies are not that expensive to start. I'll give you an example, I used to sell equipment to one that started with one piece of equipment and within 3 years bought 100 more from me.

 
txjustin:
Unforseen, you don't need any degree for a field operator role. Also, they make over $100k starting out. I have several friends/family members who do this and make a shit ton of money with no degree. You will be working your ass off tho.

Thurnis, some services companies are not that expensive to start. I'll give you an example, I used to sell equipment to one that started with one piece of equipment and within 3 years bought 100 more from me.

Completely agree. Look at FracTech. Two brothers started it with basically the same setup, a few trucks hauling frac fluids, then grew it and sold 70% of it for $3.5 billion.

 
NickTheRichard:
txjustin:
Unforseen, you don't need any degree for a field operator role. Also, they make over $100k starting out. I have several friends/family members who do this and make a shit ton of money with no degree. You will be working your ass off tho.

Thurnis, some services companies are not that expensive to start. I'll give you an example, I used to sell equipment to one that started with one piece of equipment and within 3 years bought 100 more from me.

Completely agree. Look at FracTech. Two brothers started it with basically the same setup, a few trucks hauling frac fluids, then grew it and sold 70% of it for $3.5 billion.

hummm, this just gave me an idea.

I know a few owners of oil services companies worth mid 8 figures

 
I work in Oil & Gas M&A and we deal with the Corp Dev guys all the time... I can definitively say that you are off base here... Also, a lot of them were former bankers and if you start at a small cap E&P and it grows to a mid cap you can cash in on some serious equity...

Alright. I said that corpdev at a company is not the place to be if you want to make decisions about strategy or acquisitions - that's what the OP was asking. You get to make recommendations about these areas, but the actual decision making rests with the CEO, the board and the C-officers that control the company's operations. How's that offbase? You claim that you can make some serious cash and I agree that that's the case, but only if you get into some company poised to grow. However, that's unrelated to my point.

 
N.R.G.:
I work in Oil & Gas M&A and we deal with the Corp Dev guys all the time... I can definitively say that you are off base here... Also, a lot of them were former bankers and if you start at a small cap E&P and it grows to a mid cap you can cash in on some serious equity...

Alright. I said that corpdev at a company is not the place to be if you want to make decisions about strategy or acquisitions - that's what the OP was asking. You get to make recommendations about these areas, but the actual decision making rests with the CEO, the board and the C-officers that control the company's operations. How's that offbase? You claim that you can make some serious cash and I agree that that's the case, but only if you get into some company poised to grow. However, that's unrelated to my point.

I disagree

 
rufiolove:
N.R.G.:
I work in Oil & Gas M&A and we deal with the Corp Dev guys all the time... I can definitively say that you are off base here... Also, a lot of them were former bankers and if you start at a small cap E&P and it grows to a mid cap you can cash in on some serious equity...

Alright. I said that corpdev at a company is not the place to be if you want to make decisions about strategy or acquisitions - that's what the OP was asking. You get to make recommendations about these areas, but the actual decision making rests with the CEO, the board and the C-officers that control the company's operations. How's that offbase? You claim that you can make some serious cash and I agree that that's the case, but only if you get into some company poised to grow. However, that's unrelated to my point.

I disagree

I have yet to see a company run by its corpdev team and not the c-levels responsible for its operations, but I guess that's either some kind of innovation or most likely wishful thinking.

 

that's true txjustin, but you need to know someone to start. Its better to get a petroleum engineering degree and then get recuited IMO. My friend doing this degree at Texas Austin just did his first internship in Mexico. Fucker is gonna graduate and make 130k start or so (dad is a manager, kid is quite smart and speaks 5 languages which is huge for the business, degree from a target school...etc).

Starting salaries are already over 100k? jesus...

 

If could do it all again from HS, UT-Austin would be my first choice by far. Their website puts the starting salaries for petroleum engineers around 80k last time I checked.

"There are only two opinions in this world: Mine and the wrong one." -Jeremy Clarkson
 

I had a very strong incentive to do it obv, and money wise it was probably the best thing to do. I probably would be making 6 figures now and my career curve would look very promising. I however would be sitting in a trailer in the middle of nowhere right now working 12 hours/day, 7 days a week for 28 days straight hoping for that 14 day break you get as a field operator. I chose lower level office job making much less over that.

Dunno if it was the right thing to do or not, impossible to tell.

 

Side note, can anyone recommend any books/resources to read to become more knowledgeable about the energy industry? I have somewhat of an interest in working in an energy group in Houston and I'd like to be more aware of the terms and happenings to decide if it's something I'm seriously interested in.

MM IB -> Corporate Development -> Strategic Finance
 
SECfinance:
Side note, can anyone recommend any books/resources to read to become more knowledgeable about the energy industry? I have somewhat of an interest in working in an energy group in Houston and I'd like to be more aware of the terms and happenings to decide if it's something I'm seriously interested in.

Ditto

 
JeffSkilling:
SECfinance:
Side note, can anyone recommend any books/resources to read to become more knowledgeable about the energy industry? I have somewhat of an interest in working in an energy group in Houston and I'd like to be more aware of the terms and happenings to decide if it's something I'm seriously interested in.

Ditto

+1

 

I'm a petroleum engineer in my first year at a supermajor coming from an enigineering school target. I can say definitively that starting total comp in my industry for a petroleum engineer is over 100k - but not 130k. In regards to my career path, I plan to move into the trading program within the company after I get out of the new professional job group. See, doing it this way (my company only hires from within for the program), I keep my base salary as it is at that point - probably a bit over 100k by then - and get the trader bonuses too. To be fair, the percentage of P&L is probably lower than at a energy fund/trading boutique. However, I've heard it said that you won't find any of the best traders at an oil company, but most of them started there. I personally think that trading/starting your own company is the best way to go in energy. Realistically speaking, most people don't even get their first supervisory role at the larger companies without 10 years experience.

 

Field Engineering can be tough. Ran into one guy who started at one of the major servicing companies but quit after a year cause he was stuck in some random small town in Oklahoma, pretty much by himself. Another guy mentioned how they work in 12 hour shifts, but as the new guy, whenever something new happens, the new guy is awaken up to 'learn'. I have also ran into expats working in major highway construction in Africa who were going crazy cause they were stuck in some remote locations by themselves. I'd suggest not to underestimate being somewhere secluded (there are few people, just not your age, type, mentality) for a long period. And the work is not that exciting anyway.

 

Consider PE Alternative Energy Infrastructure/Cleantech fund. I started to work for PE Wind/Solar energy infrastructure fund as an analyst and can't complain - hours are good, pay is even better, reasonable amount of travel. You however do not purchase companies, but taking over assets/building assets (according to fund strategy) and do a lot of asset-based financial engineering in excel as an Analyst :) Hierarchy is the following: Analyst => Associate => Investment manager => Partner.

 

As a former research associate in Energy/Utility sector, I must say Alternative Supplier in deregulated markets is in chaos after the recession. Margins are down, smaller companies dying up with competitors from overseas...

Calmness develops character; Frugality cultivates morality.- Kongming (Chinese strategist, 181–234 AD)
 

terrible advice on this thread. Still surprising that there is so much ignorance about the energy field on this board.

Here's my advice: Focus on the aspect of the industry you're most interested in. You'll quickly learn where the money is, and hopefully, make it work if you're relatively smart and ambitious.

As for me, I wasted some time as an entry level employee at a BB. You can do that, or sell vacuums. Neither are much help; neither are impressive.

I know more than a few people in the industry who make 7-8 figure salaries; they are passionate and relatively intelligent. I know more who barely make enough to purchase a house (i.e. 500k salary in NY). They are often late to the table, predictable, and mediocre. Don't be like those people. Demand repose--not sure if that's a very clever pun

I rich, smarts, and totally in debt.
 

Good point!

BTW: When I see "PJM", I know you are in the game! :-)

[quote=MrDouche]terrible advice on this thread. Still surprising that there is so much ignorance about the energy field on this board.

Here's my advice: Focus on the aspect of the industry you're most interested in. You'll quickly learn where the money is, and hopefully, make it work if you're relatively smart and ambitious.

As for me, I wasted some time as an entry level employee at a BB. You can do that, or sell vacuums. Neither are much help; neither are impressive.

I know more than a few people in the industry who make 7-8 figure salaries; they are passionate and relatively intelligent. I know more who barely make enough to purchase a house (i.e. 500k salary in NY). They are often late to the table, predictable, and mediocre. Don't be like those people. Demand repose--not sure if that's a very clever pun

Calmness develops character; Frugality cultivates morality.- Kongming (Chinese strategist, 181–234 AD)
 
monty09:
I been in the industry since 07 and dont rush to latest hot thing. Pick something you like and do your best. If you are good at your job the money will take care of itself. My wife works in education and her base is more then mine. Creams rises to the top. Find something you like and work your tail off. Rest tends to take care of itself

Thank you sir!!

No one would remember the Good Samaritan if he'd only had good intentions; he had money as well.
 
monty09:
I been in the industry since 07 and dont rush to latest hot thing. Pick something you like and do your best. If you are good at your job the money will take care of itself. My wife works in education and her base is more then mine. Creams rises to the top. Find something you like and work your tail off. Rest tends to take care of itself
Yes but I like energy as an industry for reasons other than compensation. The issue seems to be breaking in without being an engineering major.
 

great response. Although it is easy saying this after you've been in the industry, but trying to tell a kid that is a junior/senior in college thats been brainwashed into thinking a certain job/industry will guarantee a paycheck is nearly impossible. I 100% agree, but people refuse to see pass their own ignorance and instead focus on improving skillets they are weak in instead of leveraging their strengths.

 
Revolution:
great response. Although it is easy saying this after you've been in the industry, but trying to tell a kid that is a junior/senior in college thats been brainwashed into thinking a certain job/industry will guarantee a paycheck is nearly impossible. I 100% agree, but people refuse to see pass their own ignorance and instead focus on improving skillets they are weak in instead of leveraging their strengths.

agree 100%

 
Walkerr:
"I know a few owners of oil services companies worth mid 8 figures"

What do you mean by oil services companies? Are you referring more to the consulting aspect or production etc?

production. Guys who 10 - 15 years ago took big loans and mortgages and bought a cementation truck or a logging unit and worked their asses off and now own 50m in equipment

 
porsche959:
1. Alternative Supplier in deregulated markets 2. Demand side management 3. Energy efficient projects (your potential career here might be a project engineer or coordinator that works with generating and supporting project proposals). 4. Solar power 5. Distributed generation 6. Demand repose

The original question was oriented towards electricity/power: for this, I suggest familiarizing yourself with regional markets and the gen/supply mix within these -- the FERC overview linked below is a good place to start. If you have the time, money, and interest, the Stoll book (second link), despite it's age, is one of the best references I've ever come across for electric industry fundamentals.

Also note that many of the renewables and demand-side options you mention:
1 are not the most economical compared to more traditional options (e.g. gas), and thus are only sustained by regulations/policy, and then only at minimum-requirement levels 2 many utilities have limited (financial) incentives to support these and do so for compliance (see prior point) and/or PR While there are reasons to be optimistic, in many markets, scaling these resources to the point they are not just a "rounding error" will be challenging. Barring a tip in economics and/or realignment of financial incentives, they will remain proportionately small contributors to total capacity (MW) and energy (MWh) supply. Should you decide to pursue one of these paths, best of luck.

http://www.ferc.gov/market-oversight/mkt-electric/overview.asp http://www.amazon.com/Least-Cost-Electric-Utility-Planning-Harry/dp/047…

 

I had a lecture by a guy from GDF Suez, he told me that energy related traders will remain and grow in the future. It's one of teh job areas, in his, opinion, that will increase. We didn't talk about traders at IBs.

What do you guys think?

 
Walkerr:
I had a lecture by a guy from GDF Suez, he told me that energy related traders will remain and grow in the future. It's one of teh job areas, in his, opinion, that will increase. We didn't talk about traders at IBs.

What do you guys think?

many of the bb's largest growing areas is phy trading which is what Suez does as well. I would not call them a trading firm as they are more of an asset manager. They picked up some assets few years back but got burned so pulled out the trading biz.

 

PM me if you would like. I interned in Energy about three years ago. It's a very complex industry, and unless you are sure that Energy is the group you want to get into, don't go into it. Also, most Energy groups are based out of Houston so keep that in mind.

 

For one thing, energy is the largest industry in the world. I believe 7 out of the top 10 companies in Fortune's Global 500 are oil & gas companies. Another thing is that a lot of M&A happens in this sector since companies have to replenish reserves etc. Leads to good experience.

 

I don't really have any helpful advice, but realize that there are investment banks who specialize in energy. For Example: http://www.simmonsco-intl.com/

Also, realize you can do whatever you want in energy if you so desire. You could trade energy at an oil company, you could do corporate finance at an energy company, etc.

Just offering some other ideas, good luck in your research.

 

Depends on which sector within oil & gas you want to be in. From personal experience, it would definitely be advantageous to have a petroleum engineering background if you want to go into upstream banking; downstream and oilfield services are more like your traditional corporate finance experiences (generally speaking). Midstream is in a league of its own given the complicated org. structures...

 

I'm new to this forum; I've been in creation and development of several "machines"... Like many others, I'm not the one that made money with these adventures. I'm still in R & D over some "energy generators" and think that this forum may bring me somewhere... Let me get use to your site and I'l get back to you. Regards !

 

I posted in the post from the link above a few months ago, although my situation has changed slightly since I posted. I've since moved to my companies offshore team as a Finance Manager and work mostly on acquisitions and joint ventures.

I also went to UT Austin and went on many O&G finance interviews (especially if you have an energy background). There are many different types of programs and you'll have plenty of time to learn about each. One thing to really think about if you want to get into this space is that O&G companies, especially majors, want their assets for extremely long periods of time. So when making investment decisions it takes a very long time to get through the red tape. I found this in direct difference to PE where the focus is more on building the portfolio in your investment window. They can afford to wait.

Most people from UT go into consulting or finance so you have plenty of opportunity once interview season comes up. UT doesn't allow companies to interview interns until January so you'll be networking a lot and really figuring out whats right for you.

PM if you want more info.

 

I work in this sector and am very happy with it. Not a post MBA role, just out of ugrad. Salary is 60k, out by 5 everyday, and I think in in general it's a fun industry to be in. Granted, I don't think I'd look at corp fin positions post MBA unless it was for one of the super majors (I'll be looking for more stimulating work.)

 

Is there any possibility of starting in Procurement and moving into more of a true finance role? I think Procurement is probably my easiest road into Oil & Gas, and while it isn't where I want to be long-term, it is what my Air Force experience has been in so far.

 

Energy and oil are vital to everything that happens in our societies with the search for sustainable and renewable fuels being of utmost importance to the global community. As the world changes, the energy industry must adapt and find new ways to support the growth of an increasingly industrialized world.

This being the case, there is scope for plenty of young graduate recruits who are looking to break into an exciting, forward-thinking industry.

The sector largely offers up career opportunities in the areas of engineering and science, but recruits people with a wide range of skills.

If you have a degree in a different subject, you can still find jobs in commercial roles such as marketing, sales or management.

I like to doing work.
 

Hey there, ya, I want to do energy trading for life (financial and physical). However, recruiting process has been quite difficult... I would def need some help. Maybe cuz I am from a non target (top 25 tho, target for banking, but not trading). Participated in CME commodity trading challenge this year (top 10 ranking). Recently I am starting to trade CLE, NGE, HOE on NYMEX/Globex. I have been following the Schork report and Gartman letter on a daily base. Undergrad in Mathmatics (3.95) and Business Adminstration (3.47). I am currently in my first and last year of grad school, studying in Applied Mathematics (probaility, stats, stocastic calculus etc...) I have some experience in programming, bloomberg, trading platforms etc. I am also a BJ card counter (not big time, lol)

I appreciate any advice regarding breaking into energy trading... Thx a ton...

 

deleted.

"Greed, in all of its forms; greed for life, for money, for love, for knowledge has marked the upward surge of mankind. And greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the USA."
 

I'll be starting shortly in Houston on the energy S&T side of things with a BB and after having interned down there over the summer, I really think Houston is the place to be for energy. The energy industry is clearly centered down there and it seems like the majority of the growth is occuring with energy groups down there vs other cities like NYC. Additionally, other (non-bank) potential employers for energy trading like the big oil companies are also located in Texas. In terms of job fluidity and networking opportunities, Houston seems like the better choice if energy is your goal.

As far as overseas, I don't know much but it seems as though energy trading, electricity in particular, is a growing sector in Europe. Had the chance to intern at a commodities shop in the Netherlands (turned it down to stay stateside) but it seemed like a good place to work. Also have heard of quite a few other shops overseas doing some hiring. Guess it really comes down to A) where you can get a job, and B) if you have a choice, where would you prefer to work.

 

Wow -- you must have had some kind of offer in the US to turn down a commodities internship in freaking Amsterdam. One of the best places in the world to spend a summer.

If the offer was for Rotterdam then please ignore my comment.

 

I would second that Houston is the best place to be in terms of NA...

The number of shops is just unreal in houston bb, oil/power/nat gas companies, wholesalers, hf, marketers etc etc.... my firm trades with over 300 cp's and 90% are in Texas....

However, their are still great jobs outside of Houston but I would put Houston in one group and everyone else in another... from Shell in SD to SIG in NJ... you have a lot of options...

One of the things I tell people all the time is that you only need one offer... so dont sweat trying to get multi offers....

one thing that is huge in houston.. I wanted to leave my firm and had interviews at over 8 firms and all my interviews were in same building or across the street....

 

yeah, i was simply going to ask what people's perspective on Europe is. I know Houston is the big player here because it is the hub for all things oil stateside. Europe is closer to an even bigger game though, and I know there are energy traders/strategists in Hamburg outside of the one I saw in "Syriana" so I was wondering If anyone in the game would say if they had the opportunity to do it all over and start there... would they?

As for multiple offers, I have nothing and am currently treading water. Several of my older friends though are now a decent ways up in some big firms all over so I am simply not going to ask one of them to go to bat for me without knowing that its my first choice...

 

To start a career Houston is better by far. Networking is also great as WxOnWallStreet has pointed out. Hope you will like it WxOnWallStreet.

Trading out of London you get less to see out of the ARA, not much like what you would see out of Houston. Not bad still nevertheless. It is well positioned, you get to see some Saudi flows.

Later on you will really want to weight the pros and cons of physical vs paper.

 

Houston is definitely a huge hub for energy, but if you're looking into trading, sales, or structuring, New York is still bigger.

Keep in mind that all 3 of the biggest commodities desks (Goldman, Stanley, Barclays) are still in New York. So is #4, JP Morgan. The rest of the banks may have defected to Houston but when the biggest names stay in New York there must be a reason.

All that said, if you're looking at straight up banking then Houston is probably a better place to be than NYC. At all of the banks with big commodities desks they have bankers on the ground in Houston, but front-office S&T positions are still all in New York....

 

Definitly stretching it to say that the front office S&T positions are ALL in New York. Lot's of primary and secondary (yet still major) trading floors in Houston. Merrill, Citi and to a good extent JPM with the Bear aquisition last summer are all big players (and growing) and all are based in Houston. That all said, it's important to think outside the realm of just banks when it comes to energy trading. So many commodities shops, hedge funds and oil/energy companies are located in Texas. Banks are an attractive place to enter into energy trading but certainly not the only place.

 

skins1 with all due respect that's a very narrow view of the business. It is true most of the PAPER business is done out of NY no question, but to start ground up you want to know the flows and what is going on. And that you get in Houston.

 

I said all front-office for the biggest 3 commodities shops is in NYC, not Houston. Which is absolutely true. And yes, I do in fact mean "all"...

Merrill, Citi, DB, etc. are in Houston, but they are nowhere nearly as large as the big 3 shops. I was purely commenting on the biggest 3.

Yes, Barclays, Goldman, etc. do in fact have offices in Houston, but they are IBD, scheduling, physical trading, etc.

Last, to pillz: you are definitely right. I'm not saying this is anywhere close to the entire energy business. I was just saying that for people focusing on sales/trading/structuring of financial derivatives based on commodities, that's where most of the action is. To be perfectly honest with you, I was just looking at it from the point of view of someone who chooses a finance career coming out of a top MBA program, and what their world most likely looks like. So this is less for someone who knows they want to pursue a career in the energy industry, and more for someone who wants to pursue a career in finance, and then decides to choose commodities as their focus in finance (vs. credit, rates, FX, IBD, PE, etc.). That's all....

 
aachimp:
i'm sure you've all read that energy trading bonuses are being cut massively. does anyone think energy is gonna rebound in the next two years?

Bear in mind, bonuses in commodities the past year or so were on the high side compared to other areas. From what I've been hearing, things are still looking good in this sector despite all that is going on. Bonuses will of course drop across the board dramatically but given that most energy groups are still making money even in this environment, I can't imagine they will take as bad of a hit as some other areas. Only time will tell though.

As for the future, I don't see anything replacing oil/gas in the next 5 years and even at that point market penetration of any new fuel will take years if not decades to make a truly meaningful impact (and that's just in the US). As soon as the economy starts to turn both here and abroad I'd think we're gonna see a lot of focus on commodities again; it's simply inevitable.

 
Best Response

Agree with previous posters--for IBD in N. America Houston is probably better than New York. For S&T, I'd say the other way around, but Houston is great, too, if you are willing to live there...

As far as whether commodities will continue to do well--definitely. I've posted this before, but close to 1/2 the revenue at commodities desks on the sell-side is from sales and structuring. And that's what will hold up those desks in down times--specifically, the fact that the bulk of the people who trade in commodities are not hedge funds or other investors, but corporates (i.e. anyone with an actual exposure to commodities, from Southwest to P&G to McDonald's).

And those firms need to trade to manage their exposures, regardless of how well the economy is doing. And needless to say, the greater the volatility the greater the need to hedge. So that side of the business is something you can count on year in, year out. Similar story with rates or FX, because corporates will always need to hedge those types of exposures, regardless of how well the overall economy is doing.

 

And regardless of location, if you're working in any commodities-related role at Goldman, Stanley, or Barclays, then you're in a great position, and from a career point of view the only difference btw NYC or Houston will be your own personal living preferences....

 

I'd be interested to hear some opinions about Devil Advocate's question too. Some are saying we may see $25-$30 oil soon; others say that while they agree in the short run, these low prices are not sustainable in the long run. What do you guys think? And how will this impact the energy sector from a S&T and IBD perspective?

 

From my [limited] experience, it seems like the majority of the people involved in energy trading specifically sought out a career in energy rather than finance (in Houston anyway). This was the case for me; my particular major (an earth science - total non-business) has great ties to energy markets and that's what spawned my interest. What's nice about it is its accessibility to people who have a legit interest and knowledge in the field and may otherwise have been be weeded out during typical recruitment by banks. Of course it's also nice to have a wide variety of employers to choose from (banks, hedge funds, integrated oil companies, utilities, prop/commodities shops, etc...) It's also nice that while the energy groups are of course just another division of the bank and investmenting banking field as a whole, it seems to be a pretty cut off and close nit group; relatively speaking anyway. This can probably be attributed to the fact that most people spend only a few years or less at a certain shop and then move on along with the heavy counterparty interaction that you don't have in other groups; power or nat. gas scheduling for example.

As far as the future prospects; Skins makes a great point about the sales aspect. Companies will always need to actively manage their exposure to commodities no matter what the state of the economy. As for oil, I have little doubt it rebounds over the next year or so. I don't think we've seen the last of $100+ oil. Bear in mind of course that oil isn't the only thing traded by energy groups. Natural gas markets are huge and the future looks bright for electricity markets assuming states continue to go dereg and stay that way (debateable). Weather markets are a particular interest to me and while some inherent flaws have kept them from taking off to even greater extents, there are companies working on new methods that will hopefully make these markets more viable in the future. OTC structuring of weather trades are becoming increasingly popular though. Then there's also coal and emmisions which should be interesting to watch over the next few years too.

All in all, I feel pretty comfortable going into a career in commodities. The landscape will change considerably with the passing years but people will always find new things to trade and new ways to make money.

 

honestly for me..... I grew up 2 miles from Enron... thought it was the coolest place in the world... everyone said that working at Enron was like writing your own ticket.. I came out of high school in 2000... Enron gave over 50 million to my college and hired a ton of people from my business school... seeing Ken Lay on campus was pretty neat for a 18 year old... sure it sounds sick now but in 1997 was not a better place to work

 

Agreed with WxOnWallStreet for most part. Most people came into energy because they wanted to. If you're not sure, go grab a couple of internships - I was on FX options before I tried out energy and liked it for its many facets and how much influence it has on the world markets and vice versa.

What kind of growth and stability are you worried about? Your own or the industry? Anyway with the obscene amount of money governments earn from taxing oil, they will make sure it sticks around. Just look at Russia.

Anyway also to point out - if your energy universe is limited to WTI FOB Cushing - you're better off doing something else.

 

it really comes down to what interests you about the market. energy is traded completely different from say eurodollars. the highly quant shit that's used for trading rates just doesn't work for energy, and it would be news to me if someone was running an energy book as sophisticated as a currency or ir book.

if you have the choice, find out what type of trading you like, and pursue a product or products that will let you trade in that way.

 

Having been on FX options and energy, I see more tricks in the bag for FX/rates derivs than energy derivs, which are usually structured to be quite simple, so i do believe that's what he is referring to.

That doesn't mean it's less quant though, i think it's the fuzzy definition of quant all round.

 

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