Think Twice before Recruiting for HOUSTON IB!!

Background

I am a semi-target student (Vandy, WashU, UVA) who somehow leveraged my connections to land a spot at a top bank in Houston last cycle. It's a great group, advised on roughly 40% of upstream A&D transactions while also ranking as one of the top midstream groups by sell-side volume

I did my internship and enjoyed my experience. However, I don't think I'll stay in the industry beyond my two-year analyst stint, TBF. Here's my reasoning:

(1) Exits are not good outside of Texas/Energy: Our group has placed analysts into some top-tier energy funds like NGP, Quantum, and EnCap, and even into the energy teams at MFs like Sixth Street and Blackstone. However, exits outside of Texas and energy are extremely difficult. Searchers tend to look down on energy groups, even though we have solid modeling skills and arguably grind more. From what I've observed, second-year analysts who decide to lateral to NY/SF tend to end up at LMM funds or another bank as associates

(2) The industry is cyclical, and so are our working hours: A&D activity is picking up in Q2/Q3 because of higher oil prices, and everyone expects a huge wave of PE-backed companies offloading their assets. I've seen first-year analysts pull two all-nighters doing analysis. Even the technical engineers work extremely hard during these waves. And by working hard, I don’t mean your typical 80-hour week. I’m talking 110+ hours when things get busy

(3) Good deal experience, but not necessarily transferable: Before I joined the group, I bragged about how O&G has its own specialized modeling toolkit and a complex supply chain. At this point, I've realized that many of those skills—type curves, Upstream map work, etc.—aren't particularly transferable outside of O&G. No one really appreciates them if you're recruiting for generalist PE. If you don't like real assets and are only using energy as a way to break into investment banking, your life will probably be miserable cuz all deals are almost the same and super commoditized 

(4) Banks are competing for a smaller pie: The number of public companies has fallen from around 60 to 20, while Permian rig counts have declined from 300+ to roughly 240. PE dry powder has fallen from $100+ billion to around $20 billion, and there are fewer private targets left to acquire. I used to be a hater of the energy transition and thought natural gas would take significant market share and go to $5/MMBtu, but that never happened. Some EBs, like EVR and MOE, are now competing for ~$100 million mineral deals. You don't really see that happening in healthcare, tech, or industrial

(5) It's very hard for non-Texans to fit in: I love my intern class and the analysts I've worked with, but they speak an entirely different language. Many of them went to private schools like Kinkaid and already have deeply established networks. Their conversations are often about their high school's football team or some great Houston/Dallas restaurant I've never heard of

(6) Weather and traffic: Horrible. Anyone who disagrees has been drinking the Houston Kool-Aid

The only positives are that my firm’s culture has improved significantly and deal flow remains strong