It is surprising how much small numbers, or small differences in numbers, matter to investment returns, according to one buysider.
"Small numbers separate greatness from mediocrity. Compound interest is the eighth wonder of the world. And, you make more money selling pick axes to miners than being a miner yourself," Jim Murchie of Energy Income Partners LLC said at a recent energy conference. The firm invests only in midstream or infrastructure master limited partnerships and income trusts that own midstream assets.
"Small numbers do matter. The difference between being a player in the AAA baseball league and moving up to the majors is just making one more hit per week, if he plays 162 games a year. [Similarly]...a finding and development cost difference of only $0.30 per thousand cubic feet makes a huge difference in your internal rate of return."
Murchie believes oil-industry profits are beginning to shift to those who "sell the pick axes" -that is, to the providers of oilfield services and infrastructure, and away from oil and gas producers, which is why he focuses on investments in infrastructure and midstream companies.
Recommended Reading
CGG to Change Name to Viridien
2024-05-17 - The company’s new ticker symbol will be “VIRI” and listed on Euronext Paris, effective May 21.
Sector’s Appetite for Capital Remains Amid Consolidation Frenzy, Panelists Say
2024-05-17 - There’s still an appetite for capital in the oil and gas sector—companies just need to think creatively to find it, a number of panelists said during SUPER DUG in Fort Worth, Texas.
SilverBow Resets Shareholder Meeting After $2.1B Crescent Deal
2024-05-16 - SilverBow Resources said it will adjourn its May 21 shareholders’ meeting until May 29 following Crescent Energy’s agreement to buy the Eagle Ford operator.
Blue Racer Midstream Prices Senior Notes Offering
2024-05-15 - Net proceeds from the sale of senior notes will be used to pay off debt and other general corporate purposes.
Petrobras CEO Prates to Step Down
2024-05-15 - Brazil’s President Luiz Inácio Lula da Silva has requested that Petrobras CEO Jean Paul Prates resign following a dispute over dividend payments.