NEW YORK ─ Tactical concerns dominated the FT Energy Strategies Summit on May 14, especially the price of oil, perceptions of the current oversupply and the need for producers to control costs. But on the panel on risk and opportunity for investors, the focus quickly turned to longer-term concerns that the near-term softness could be sowing the seeds of the next supply crunch.

“In a highly cyclical, capital-intensive commodity industry there is no surprise that operators are not covering their cost of capital at the bottom of the cycle,” said W. Mark Meyer, managing director of securities at Tudor, Pickering, Holt & Co. “There is nothing new in that, and we can all agree that the returns necessary are driven by a higher price deck.” The more important point, he emphasized, “is that over the past 15 years the industry has demonstrated its ability to drive costs down.”

Noting that there has been a harsh light shone on the higher-cost wells in some plays such as the Bakken, John Lancaster, partner and managing director at Riverstone Holdings, responded that his firm owns about 20 energy properties and that oil selling points vary, as do operating costs, from basin to basin. “Many basins remain highly commercial even at today’s oil prices. All we know for sure is that the current market environment is very different than it was just a few months ago, and that it will be very different again a few months from now.”

Lancaster also questioned the idea that unconventional development is still in its early days. “This is a new phenomenon and we still may be in the early phases of it, but the industry has already learned a great deal. We are already seeing higher production from less-costly wells thanks to a consolidation of intelligence around best practices.”

Underscoring that idea, Poppy Allonby, managing director in London at BlackRock Investment Management, added, “Unconventional operators in the U.S. have been very good at bringing down costs, but that has not been the case outside the U.S.”

Broadening her focus, Allonby asserted that the near-term focus on costs was obscuring a longer-term shortage of capital investment that could lead to a supply constraint before too long. “When you look outside the U.S., there has not been sufficient capital invested in this industry. This point deserves further discussion. Not just what is going on in the U.S. as a result of lower oil prices, but also what is going on worldwide.”

She added, “Energy equities on a value basis are very attractive. They are still out of favor now as a result of historic valuations, but the price-to-book ratio is very attractive as compared to the broader market.”

Lancaster observed that there is not a lack of capital available to producers. “Why did $15 billion come into the space when prices were down 50%? If you believe that the scarcity of really good rock is real, then the people who have that rock need to retain their core positions. They need to reduce debt and hold onto what took them years to develop. These investments are quite rational in the long term.”