Wednesday afternoon’s business conference executive panel featured a diverse group of industry experts, but they came up with consistent themes. The panel included Maynard Holt, co-president of Houston-based investment bank Tudor, Pickering, Holt & Co.; Bill Whitsitt, Devon Energy’s executive vice president of public affairs; Robert Ryan, Chevron vice president of global exploration; and Peter Dea, president and CEO of Cirque Resources. Moderating duties were handled by Dr. Pete Stark, vice president of industry relations for conference sponsor IHS.
Holt and Ryan both suggested that conditions for exploration and production internationally, as well as tightening regulation on other energy sources—such as nuclear and coal—have made domestic oil and gas production very attractive. US $6 billion in joint ventures has been done in 2012, and the JV trend is likely to continue for years, driven primarily by demand in Korea, China and Japan.
A “fundamental belief in long-term oil price,” and long-term gas demand are also necessary for investment, Holt said. The public markets have been receptive to this story, as 17 oil and gas IPOs have sold for $20 billion combined since 2010. There are “buckets and buckets” of money looking for oil and gas opportunities, not the least of which are international entities that demand natural gas and are enduring much higher prices, he noted. Holt said they are envious of domestic prices and are enticed by North American gas market.
Increasingly active private equity, hedge fund and institutional investors desire even more exposure to the industry, and 10% return made in a relatively stable regulatory and operationally conducive U.S. environment will continue to be received positively, especially when measured against many less favorable international options, according to Holt.
Left to right: NAPE Business Conference attendees heard from an executive panel that included Peter Dea, Cirque Resources; Maynard Holt, Tudor, Pickering, Holt & Co.; Bill Whitsitt, Devon Energy; and Bobby Ryan, Chevron. The Wednesday afternoon session was moderated by Dr. Pete Stark, IHS (far right). |
The operators’ perspectives centered on increasing demands on industry to proactively engage stakeholders. Cirque’s Dea said stakeholder engagement has lagged the ability to produce.
“The shareholder relations ‘revolution’ must catch up to the technology revolution,” he said, suggesting that what the industry has and will accomplish with horizontal drilling and multi-stage frac development in unconventional resources should go down as one of the top 10 technology revolutions in the last 100 years, as it has exposed a century of affordable domestic resource and the economic impacts derived from its development.
Chevron’s Ryan said those impacts, by 2015, would include $29 billion in government revenue and $900 per household in energy savings, along with a good portion of 1.6 million jobs expected to be created by 2035. By then, per household savings are expected to be $2000, and government revenue to be $59 billion total.
Ryan also said that aside from these ‘carrots,’ the industry would also feel the pressure to produce to meet U.S. energy demand as other conventional energy sources face stiffer regulation and resistance, and renewables have yet to be able to scale to meet future demand.
To accomplish oil and gas development that yields societal benefits and fulfils an increasing share of U.S. energy requirements, Ryan said the industry must be a good partner. The next frontier, he said, is not a play, but a method of operating focused on reduced footprints, the protection of water, and transparency. This will require the industry to work differently.
“You have to partner in a way that makes you welcome for years to come,” he said. That alone might not be enough.
Devon’s Whitsitt presented both regional and national advertisements the company had or would be running for stakeholder outreach and education. The industry can easily overwhelm some of the small communities in which it now finds itself, and needs to communicate to those areas and the broader nation.
“This level of activity has never been seen before,” even in traditional oil and gas areas, he said. Whitsitt said Devon was meeting concern and opposition “on the road,” where worries originate, saying a single animation the company presents to stakeholders “does more than any of the tools we’ve ever had” to educate and build trust.
Whitsitt said the industry needs to talk about the real concerns of constituents on water and water use. It’s not sufficient to be a conscientious operator.
“We have to tell the story,” said Whitsitt, “We have to demonstrate that we care.”
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