Crude Oil ( ) Brent Crude ( ) Natural Gas ( ) S&P 500 ( ) PHLX Oil ( )

Intervale Capital Managing Partner Charles Cherington appeared on Fox Business’ Opening Bell with Maria Bartiromo to discuss the current oil markets. Cherington believes, like other oil executives and analysts, things are likely to get worse before they get better.

“The fundamental problem right now is that supply exceeds demand by a considerable amount,” says Cherington. “And production in the United States is going to increase through the duration of this year – with rollover in production not expected till Q4’15 or Q1’16.”

This supply problem is intensified, Cherington says, as crude oil inventories in the United States are hitting levels not seen in 80 years.

But there’s more than one side to the supply and demand equation.

“It’s always remarkable when you are in a situation where oil drops 50% and there’s not a real demand response,” explains Cherington. “So demand is quite anemic, and demand is inelastic with no immediate response.” With supply outpacing demand, Cherington expects things to get worse before they get better.

“Crude oil demand will grow approximately one million barrels per day this year,” he believes, “But we currently have two million barrels per day of excess supply in the system, and another 700,000 [barrels per day] on the way from the U.S.”

Cherrington believes it may be 2016 before we see any type of market rebalance.

About Intervale Capital

Intervale Capital is a private equity firm investing exclusively in oilfield manufacturing and service companies. Intervale has raised $1.2 billion of committed capital and is currently investing from its third fund. Further details about Intervale Capital are available on the firm’s website at www.intervalecapital.com.

Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. The company or companies covered in this note did not review the note prior to publication.


Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.