University of texas roundtable on financing and managing energy investments in a low-price environment

• Autores: Marshall Adkins, Greg Beard, Bernard Buddy Clark, Gene Shepherd, George Vaughan, Sheridan Titman
• Localización: Journal of Applied Corporate Finance, ISSN-e 1745-6622, Vol. 28, Nº. 1, 2016, págs. 30-45
• Idioma: inglés
• Texto completo no disponible (Saber más ...)
• Resumen

  • During the past 18 months, the U.S. oil industry has seen oil prices plunge from well over $100 a barrel to under $30. In a session that was part of a recent Private Equity Conference at the University of Texas in Austin, the CEO of a small independent producer and a representative of a large global oil and gas company discussed the challenges of financing and operating energy companies in today's low-price environment with the director of energy research at a brokerage firm, the senior partner responsible for the natural resource investments of a well-known private equity firm, and the head of the oil and gas restructuring practice of a national law firm.

    The panelists appeared to reach a consensus on at least the following three arguments:

    Although the causes of the oil price crash of 2014–2015 are often identified as the weakness of global (and particularly Chinese) demand, and the unwillingness of OPEC nations to cut production in the face of the slowdown, the more fundamental cause has been the dramatic increase in the productivity of the U.S. oil and gas industry and the doubling of U.S. oil output since 2008 attributable to the new shale gas technology. But if large price drops are the expected consequence of such technological change and productivity gains, most of the panelists also believe that the current supply-demand imbalance will disappear in the next few years and prices will return to a level at which efficient “marginal” U.S. producers earn acceptable returns—a level the collective best guess put at around $60–65 a barrel.

    The greatest financial opportunity involves the purchase of the debt—some of which now trades for as little as 20% of face value—of highly leveraged and distressed U.S. “E&P” companies, possibly (though not necessarily) with the aim of gaining control of the company. But if such price discounts represent investment opportunities for private equity and other distressed investors, they also present opportunities for the companies themselves find a way to increase their own values by either renegotiating or finding a way to buy back their discounted debt.

    The industry has collectively failed to do a good job of hedging its oil price risk, which has proved especially destructive for those companies operating with significant financial leverage. For those companies that have hedged, the typical hedges have extended only 12–18 months forward, thereby failing to provide protection against exposures created by oil reserve lives (on which debt financings are often premised) that typically run as long as 10–20 years.