oil and gas finance industry outlook
Currently, 2nd year associate at what you would consider a PE MF for energy but considering business school and lateraling out of energy completely. I used to think getting a few years under my belt here and then going the portco route made a lot of sense but it seems to me the asset class is pretty far down the maturity curve and there’s not much room for the same lucrative payouts in energy as there was 10-15 years ago. Work has become pretty stale, only so many upstream companies you want to look at and they are all pretty much the same. Anybody have any takes on the state of the industry? There’s a lot of money out there right now with the NGPs and Stone Ridge’s of the world but I find it incredibly hard to believe that anyone will truly waterfall at some of these valuations.
I mean, you could say they got lucky but didn't ECP properly clean up with the Calpine sale? I heard an energy banker say it's got to be the most successful energy deal in the 21st century.
I wouldn't call that "energy" as OP is referring more to oil & gas. Power is a different animal entirely. It was a tremendous deal. That sector is getting very saturated now however
There will always be opportunities in traditional oil & gas -- it's a cyclical industry. All about buying right. The problem is that there is so much built up capital, both human and financial, that it's extremely difficult to deploy said capital in an advantaged manner
OP here yeah talking mainly upstream and midstream PE
Range bound oil $60 - $70 feels like a nightmare for upstream oil & gas PE. Not low enough for distress, not high enough for lucrative success. I'm not bearish or bullish oil over the next 5 years, I think it will generally stay right where it is outside of some short-term fluctuations. Just not enough demand growth + too much non-OPEC supply + OPEC spare capacity (ignore the talking heads "OPEC is out of capacity!") + NGL demand makes up a large portion of the equation now which isn't all that helpful to oil producers. Gas is bullish IMO, but the short-term supply response, at least domestically, is something to behold. You get a gas strip near $4 and supply growth comes out of the woodwork. I would like to be wrong on just about all of this. I don't mean to be pessimistic, there will always be opportunities in oil & gas -- we're going to keep using more and more of the stuff despite what the big brains in California and New York will tell ya.
Any thoughts on the maturity/ scarcity premium that’s implied on some of these valuations
Not really. All just sounds like a convenient narrative to me. I mean why should there be a scarcity premium on Permian acreage when XOM is blasting out new 200,000 bpd Guyana projects out like nothing? They're testing shale in S America, the Middle East and Asia too.
You could pivot to industrials. Similar to Oil & Gas minus commodity exposure
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