Full Presentations, Breakouts, Optimism Characterize 21st EnerCom Denver Conference

At day two of the 2016 EnerCom conference, presenters and speakers talked to a packed house. Some presentations and breakouts were standing room only.

Some of the themes coming forward on Tuesday included:

The need for more pipelines: Infrastructure and pipelines are a lagging indicator of the efficiency of a region, and takeaway capacity is major benefit or hindrance of getting oil and gas to market. Pipelines are constructed with the knowledge that capacity can be filled and contracts can be executed. Companies drilling in the Permian and the Montney are very well aware of the challenges that a lack of pipelines and infrastructure can pose. The burgeoning infrastructure in the Marcellus sparked questions of the benefits of cost improvements for transportation and reduced differentials in the region.  The opposite was true for companies operating in the Montney with a serious lack of infrastructure and a limited scope of help in sight. The Montney is inhibited by takeaway capacity, and operators there may need to become more creative getting oil and gas to market.

EnerCom Denver Conference: Day Two Observations

Hon. Elizabeth Ames Coleman, former Chair of the Texas Railroad Commission, speaks to a full room at EnerCom’s 21st The Oil & Gas Conference

Government regulations: As Colorado stares down the barrel of Initiatives 75 & 78, other aspects of energy regulation were taking center stage as lunch speaker Elizabeth Ames Coleman of the Texas Railroad Commission mentioned the need for more energy friendly legislation in Washington. Current legislation for the oil and gas industry was described as “out of touch, and out of reach.” Current regulations pose serious hurdles to the oil and gas industry, and legislation that is more in touch with the market would benefit all involved.

Mergers/Acquisitions and JVs: As companies high grade assets and reconfigure acreage positions, some are moving away from “non-core” assets and others are in search of opportunities to buy. A large portion of companies at the conference received investor questions regarding the possibility of realigning assets to streamline operations and others are full of liquidity and looking to pounce. The M&A market seems to be alive and well as oil and gas companies use them to reduce costs, build stronger core positions and provide opportunities for future growth.

Art Hogan

Wunderlich Securities’ Chief Market Strategist Art Hogan spoke to a full room at the 2016 EnerCom conference in Denver today. Hogan, who is a frequent guest on CNBC, Bloomberg and other networks, said his most common question boils down to this:  “What’s Next?”

Hogan said the feeling he’s getting from talking to people is, “I don’t trust this market.” He put up a slide entitled “The Top 10 Reasons Markets Must go Down,” and then proceeded to debunk just about all of them.

EnerCom Denver Conference: Day Two Observations

Wunderlich Securities Chief Market Strategist Art Hogan speaks with Angie Austin during an Oil & Gas 360 television interview at the 21st EnerCom conference.

“A bubble is any asset class that you don’t own,” he told the crowd at EnerCom. Hogan also said that “we pay way too much attention to Fed policy.”

“The most concerned I get is when people buy stocks for yield and they buy bonds for capital appreciation.”

Oil

On the oil and gas topic, Hogan said that today’s tensions escalating the geopolitics of the Middle East have added “zero dollars to a barrel of oil.” Hogan said the fire in Canada, which took production off line, added $10 to the price of a barrel of oil, a much more real effect that tension in the Middle East.

Art Hogan price factors

He said the rumors this week of possible cooperation from OPEC in tightening supply, which sent the price of oil up above $46.50, is another headfake. Hogan listed factors with a heavy impact on oil prices. “The weak U.S. dollar helps the most.” Other factors: “Iran ramping up production faster than any of us guessed.”EnerCom Denver Conference: Day Two Observations

Hogan used a U.S. crude oil production slide to illustrate a simple fact. “We dropped from 1,900 rigs working to 470. Production is going to fall.” Hogan said he believes we are getting closer to being balanced. He said the headlines that say storage is full are flat wrong. “Have you ever been to Cushing? It will never be completely full.”

Hogan said with respect to price influence from supply disruption, “Ex-North America, I can’t think of a place on the globe that isn’t susceptible to a supply disruption.” Hogan said he is looking for oil to settle back to the $40-$45 range.

Wunderlich Supply is Balancing

The Economy

For the broad U.S. economy, Hogan said for the first time in six to nine months we’ve had an increase in household formation. “Those kids are actually leaving your house, getting married and starting families.”

With a slide called “Where is the Good News?” Hogan pointed out how economic date is improving, banks are lending, central banks are accommodative and Europe is stabilizing. “Even if the Fed tightens this year, we’re still ultra-accommodative.”

Hogan said one concern of his is if Europe has another referendum. “That would destabilize the financial markets. That would be the black swan.”

 


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