With ESG pressures clamping down on the industry, and the initiative to scale back by 2050, what is the future on the kinds of deals that you’d see in oil and gas investment banking? Is it fair to say that bigger players will focus on their assets into smaller operations?
What does the future hold for oil and gas?
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Bump. Also interested
People have asked stuff like this for more than a decade.
Oil and Gas is going nowhere and that’s reality. Banking may involve less m&a as the wave of consolidation enters later stages, but the idea that the industry will meaningfully shift has proven to be fantasy
The LNG decision will literally not impact anyone's bonus.
Consolidation is in the middle-late innings so yeah few big pieces are off the board (Pioneer, Endeavor, Hess) but there is still a long way to go. Additionally, there is the constant churn of acreage optimization which means A&D shops should have some runway. I also think that PE will start to push play boundaries and that could create some medium sized private cos that will look interesting to an inventory starved seller. That's only when considering lower 48 shale. International is going to get way more focus in the future as we hit peak shale barrels sometime this decade. All in all I think there are some good years left in upstream M&A / A&D but definitely have my eye to the door for when the music stops. Midstream / OFS have more duration imo.
Any opinion on ECM in the energy space? Raymond James did some tiny IPOs in 2023. Small companies but don't think we've had an energy IPO in some time
Biden's LNG ban only affects contracts post 2027/2028. It will not have an effect on any bankers bonuses. Additionally, it seems more than likely Trump will be elected and will fast-track a change on the ban.
It is and it isn't. It seems like there's a wave of M&A starting up in the US but it's no doubt that demand is seriously low and supply is outrageously high. The market imbalance is underpinned by serious global pushes to fight climate change and transition away from fossil fuel. Saudi Arabia recently cancelled expected production expansion plans which at the very least indicates they don't expect demand to pick up and at the most it means their wild ride is over and we'll soon see just how effective Saudi Vision 2030 is...
By far the worst career mistake I made in my life was the 2 years I spent in oil and gas banking. It’s a low/ no growth industry where most of the consolidation will happen by the end of this decade. Then what? Bank some BS carbon capture or “clean molecules” companies? Seriously take your talents elsewhere
So where would you say the opportunity (i.e. good roles) is if you're interested in energy?
Maybe something to do with power trading as the phase in of renewables will make for more complex and unpredictable power grids
Interested. Looking to transition down to Texas in the near future to get out of NYC.
The industry has changed significantly in the last 3-5 years. The massive capital returns programs are slowly convincing investors to wade back in and the cries for ESG are nearly gone. (In an interesting corollary, the bubble has burst in renewables as all of the solar and wind projects have drastically underperformed the expectations set out a few years ago. Compounded by higher interest rates. It's like seeing the shale collapse of 2016-2018 all over again. RIP paying for "development" upside. Mark NEP's dividend cut as D-Day.)
There's plenty of M&A activity left in the sector for years to come, but we're unlikely to see a return of capital markets activity that really gave juice to the 2010s heydays. IG balance sheets and self-funded capital programs don't leave lots of opportunities for juicy HY deals or equity activity. Unlikely to see a ton of new entrants go public either.
The perennial issue in energy is that the banking space has too many competitors despite high costs of entry. Balance sheet, A&D teams, capital markets etc just to chase the remaining M&A fees. And even with that, the boutiques are winning plenty of deals. Will be interesting to see if more and more banks drop out of the sector.
On the flip side, every NYC banker hates to be associated with energy despite how active it is (niche industry from modeling perspective / unsexy to be associated with) so if you specialize it provides a TON of job safety
These are my favorite threads and I’m glad it comes up every 6 months
(1) ”oil and gas banking isn’t going anywhere! Deal flow is strong and consolidation needs to happen”
(2) ok…so why did DB / UBS / BMO all shut down their houston offices? Because Houston doesn’t need more than 10 banks covering oil and gas…and there’s not enough fees to go around after consolidation.
if you say the former out loud you are quietly admitting the latter is also true.
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