A panel of prominent energy capital providers recently gathered to weigh in on the latest trends in investment strategies, acquisition trends and--of course--the outlook for natural gas. The speakers presented in a boardroom-style setting at Oil and Gas Investor ’s 5th annual Energy Capital Conference on June 7 in Houston.
During the roundtable discussion, the panel touched on the allure of the joint venture as a growth option and whether the trend would be ongoing, especially between large international companies and domestic independents.
"JVs are like marriages,” said Mark Bononi, senior analyst, Vedanta Energy Fund. “The new partner usually brings something to the relationship other than just money. Sometimes a company really just wants money, but we as investors want the partnership to be symbiotic.”
When partners aren’t properly aligned in their interests, it can cause problems, he said.
“Some ‘over-seasoned’ financial partners may be motivated by something other than rate of return, so they say drill just to drill. On the other hand, the company may have better economics than it normally would in these types of transactions. We want to avoid that conflict of interest. When we invest we always know there’s more to the story than the Wall Street quick math to get to the cost per acre or per barrel.”
Large, international companies buying unconventional U.S. assets has been another trend, and the window of opportunity is still open, according to the panel.
Mark Ammerman, industry head, U.S., Latin America and U.K./Europe, Scotiabank Global Banking & Markets, said during the last few months his firm has seen a lot of interest coming in from foreign buyers for unconventional gas in the U.S.
“In working through the math [NOCs] can buy the assets at a breakeven price of $4, but if they liquefy it then they can ship it to Asia and deliver it for a price that’s competitive. The difficult part of that equation is the liquefaction. But many of these companies still believe that this is an opportune time to buy.”
“Historically, the national oil companies have owned property and the integrated national public companies such as Exxon have the technology,” added John McNabb II, vice chairman, investment banking, Duff & Phelps Corp. “So what you are seeing is the NOCs trying to acquire assets and that technology. They are lacking the technology know-how on the financial and the operating side--they just don’t have it