Notes from EnerCom’s The Oil & Gas Conference ® 2015 – Denver
www.theoilandgasconference.com/ 8-17-15 DENVER
We have been attending this well-known oil and gas conference for a few years. This year seems special. Many of the companies presenting there have stock prices below $5. Some will probably not survive to the next show a year from now. Others must be astounding values as prices are down 90% from the peak in some cases .
Ryan and I grabbed an Uber from the Denver airport to the Westin downtown. Cost $39.61 with tip- Eric our driver when asked told us he was making $8,000 per month driving 50 hours a week for Uber. He is in online grad school for IT but enjoys working Uber for the social contact. 50 hours is a lot of social contact but that’s some serious coin for driving around in your car all day.
There is a common theme at the conference as you could imagine with oil down 60% from its peak a year ago. That mood is best epitomized by the bumper sticker given out by the show sponsor, “keep calm and drill on”
The mood is universally dark and gloomy. The luncheon sponsor, Repsol, even eliminated the desert course from the menu. Talk about tightening the belt.
Sanchez, SN,$18.71 all in cash per barrel operating expense is a low-cost operator with a strong financial position. Their junk bonds are not due until 2019 and 2021. They sounded like they hoped to make it that far. Perhaps we misunderstood but if they can make money at $19/barrel oil, there must be others.
A big part of this newly found efficiency is driven by jawboning down the cost of your contracts with your vendors. Every producer so far has been extolling their ability to drive costs down.
Michael Carey, Chief Economist Credit Agricole, talked about the general economy, nothing that specific to an oil and gas crowd but did emphasize the consensus opinion that the drop in price’s positives outweigh the negatives. He also mentioned the median savings for an individual with oil at these prices to be $750 per year.
Synergy, SYRG has well costs $2.7 to $3.2 million but believes they can get to $2.5 million, they do not have much debt mostly in the Wattenberg play but they sell oil at a $8 discount to the price of WTI crude because of transportation costs. All plays are challenging at $32-35 oil price net to them. The Company basically said there was nothing they could do to make money at these prices. Gloomy but probably honest.
On that note, there seems to be two kinds of CEOs at this event. One who cannot understand how undervalued their company is, like Crestwood Midstream Partners, LP, CMLP (18%) yield and the CEO from Synergy who thought his stock was down in the toilet for basically good reasons. No one was crowing about high stock prices. We are looking into Crestwood’s too good to be true yield. I have to admit the founder and CEO Bob Phillips was persuasive. So were snake oil salesmen in the Wild West. I’m not trying to disparage his character but experience shows that when things are too good to be true, they usually are.
Clayton Williams, CWEI, CEO remarked, “This is a challenging environment. It has the feel of the 80’s.” Not sure what the 80’s were like but it didn’t sound pleasant. He said “ all options are on the table” including a sale of the Company.
Nighthawk Energy, PLC, CEO said ”it’s hard to be optimistic with $42 barrel oil”
After that my mind started to wander. It had been a long day waking up at 4:15AM, an hour before my alarm was set. We hailed another Uber from the hotel who got lost taking us back to our Airbnb rental. We apparently paid more than a comparable taxi ride although still not a great expense. A little more disappointing was hunting down our host for the night who did not show up on time as he said he would. Finally after calling Airbnb operator for assistance, he showed up shortly and led us into his gorgeous 2BR penthouse overlooking downtown Denver, the baseball park and Union Station. It’s way cool to watch RTD Bus & Light Rail (branded as TheRide) and the occasional AMTRAK lumber in. Better bring ear plugs though as the buildings shake and the air compresses around you as massive locomotives power through just inches from the building.