The past few days I read that energy groups are not desirable like 20 times, but nobody seems to give any argumentation why they perceive it like that… please let me know your thoughts about it.
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it's a declining industry. People expect traditional oil and gas to be phased out.
that said, commodity price environment is great now and conducive to M&A (and doesn't seem like that will change in the near-term) and most energy groups are now also doing "energy transition" work
Declining industry for sure, but biggest issue is that these groups are hard to get out of. NYC generalist / non-energy PE is a tough road, most people have to lateral to NYC IB groups first. Your PE options are pretty much, from most to least common:
1. Houston energy PE (most common),
2. energy/infra PE outside of Texas,
3. NYC infrastructure PE,
4. Generalist MM/LMM in Texas or the south, but even then you're fighting an uphill battle as "the energy guy"
5. NYC PE (kind of rare without a stop at another group first)
Not to mention Houston energy PE is declining, with a couple MFs closing shop or excluding O&G from their new raises, so even your default exit has a narrowing path.
Lateraling to NYC after SA or within your analyst stint is viewed as a Judas move from your group, so I wouldn't enter energy IB planning to do that. If you are from Texas and definitely want to stay, it might be the right group for you, but this forum is heavily skewed towards people who want to be in NYC PE which this group offers limited options to reach.
great post
Traditional energy has been the worst performing sector of the past 5, 10, 15 and 20 years in the US. The industry is in the crosshairs of any political body you can imagine. Their ability to pivot to renewables is highly questionable. The skill set is incredibly niche and limiting. Renewables and power are covered by separate groups.
Need more?
Oh ok thanks, didn’t know that renewables are separated. Are renewables considered desirable?
They are fine - are you talking about a group in Houston or ny?
I work for a traditional Houston Energy shop, and I'd say 80% of the transaction value I've got to my name is in the renewables / energy transition space (EV/charging companies, RNG, renewable diesel, carbon capturing / carbon sequestration). Most of these relationships were established during the SPAC boom of the last 2 years, and now we're finally seeing these new publics entering a round of consolidation to scale a lot of these individual firms (and entire industries, in some cases). You've also got some capital markets work in there with RINs/LCFS credits, in terms of hedging / risk management (TBH I'm fairly green here / still learning in this area)
Pretty exciting and interesting, particularly since it wasn't something I was expecting to get exposure to when I was recruiting with different banks during business school....but now it's looking more and more like I'll be covering clean / renewable energy clients as I continuing down the current path Im trending towards as a career coverage banker.
Also - I'd take what you read about energy investment banking on WSO with a massive grain of salt. Most of it appears to be conjecture from analysts in NYC with less than a year's worth of experience on the desk.
With the specific industries you highlighted, it sounds like we either work on the same shop or compete for most deals. Great insight.
Which shops would you say likely offer the best exposure to ESG, transition, renewables mandates in Houston?
From the little knowledge I have of banks in htx, heard EVR, Citi, JEF were ones that had made a serious push and/or merged with pu&i groups? Any insight into these at all? Also when you say renewables, are u classifying renewable diesel under that or are u referring to traditional renewables like offshore wind, solar, battery storage etc.
Renewables and power groups aren’t separated anymore.
Lol yes they are. Some have merged the senior reporting structure (citi / cs) but they’re not always cross staffing Houston guys on power
ie. GS NYC energy is not going to staff a deal with NYC MDs and Houston analysts - they have their own teams
Besides what folks have mentioned above, the types of models and analyses you do in Energy banking is also not as applicable to other more mainstream industries (NAV models, etc.)
Interned in a Nat Res group.
Energy M&A is fine, but which bank and which group you choose is extremely important. In my group, when asked about the impact of 1) ESG increasingly being considered by asset managers and PE funds and 2) The decline of oil & gas naturally via vicious price cycles, overleverage, peak oil, etc., the MDs basically were like “we think oil & gas will be around for a long time as India and China industrialize.” Not the mentality you want.
I surmise that the banks that have strong energy M&A presences over the next 5 years will be those with strong Tech and Power & Utilities groups who can provide expertise on non-O&G energy, as well as O&G and NatRes groups that are welcoming this transition and hiring bankers with coverage in these new verticals.
Bump. Would be very curious to see from someone with expertise how this has played out.
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