Speakers Urge Companies to Invest Today for Comeback of Oil & Gas Markets

---

Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Low crude-oil and natural gas prices make this the ideal time to invest for the next upturn, several speakers told the 27th Annual Rocky Mountain Energy Summit in Denver last week. Whether it is seeking permits to build infrastructure, engaging stakeholders, or broadening employee skill sets, the time to plan for the future is today, when everyone else is focused on low prices, speakers told the conference, which was organized by the Colorado Oil & Gas Association (COGA).

"We are actively investing in the midstream today, even though natural gas and natural gas liquids (NGL) prices are low," Wouter van Kempen, chairman and chief executive at DCP Midstream Partners LP (NYSE:DPM) (Denver, Colorado), told roughly 1,100 attendees in Denver. "Downturns create opportunities. Careers are made in down cycles. Cycles are part of our industry, and we'll emerge from this one smarter and better."

Speaking August 25, van Kempen continued: "It's about controlling what we can control. We can't control crude oil prices. We can't control gas prices. We can't control NGL prices. But we do think we can control how we operate as a company."

Stephanie White, vice president and director of public involvement at consultants HDR Incorporated (Omaha, Nebraska), agreed: "The current cycle could last a few years. Use this time to invest in your company and its people. Explore and position yourself for the up cycle."

A third speaker, David Lawler, chief executive of U.S. Lower 48 Onshore at BP plc (NYSE:BP) (London, England), urged Oil & Gas companies attendees to invest in stakeholder education and outreach: "Social media doesn't stop--why should we? As an industry, we need to do a better job getting the word out, educating and engaging people."

Another COGA speaker, Colorado Governor John Hickenlooper, a petroleum geologist by training, told attendees, "It's always the down cycle that drives innovation." He called on attendees to find a way to get Colorado's natural gas to planned liquefied natural gas (LNG) export terminals on the West Coast.

"Now is the time to raise your hand to be on the task force looking into the next breakthrough to increase well productivity or lower costs," said another COGA speaker, Claire Farley of Kohlberg Kravis Roberts & Company LP (NYSE:KKR) (New York, New York). "Things are never as bad as the bearish commentators would have you believe. We will come out of this. You may lose your job, but if you want to stay in this industry, you will find another. Remember, you are part of a high-tech commodity industry that needs you."

Former Houston Mayor Bill White, another COGA speaker, acknowledged that many leaders are "in shell-shock" over prices, "but you also have to prepare for what comes after the downturn." He said the best-run independent producers "have schooled" the Super Majors on hydraulic fracturing. But he also said 70% of fracs are uneconomic, which he said means the entire industry still has a lot to learn about hydraulic fracturing. "We are nowhere near the so-called 'manufacturing' cycle in hydraulic fracturing."

"We will increase well productivity tremendously in the next five years," White said August 26. He noted well productivity in the Permian Basin continues to increase, despite low oil prices. A new well drilled in the Permian Basin is producing an average of 300 barrels of oil per day (BBL/d), he said, but a well drilled there last year produced an average of only 170 BBL/d.

White, currently chairman of Lazard's Houston office, continued: "There is no close second to the United Sates for the Oil & Gas Industry. International investors are still coming to the U.S. to learn about hydraulic fracturing." He urged the audience to remember the advantages that come from working in the U.S. Oil & Gas Industry.

Speakers at the conference recognized it might seem counter-intuitive to recommend investing for the future at a time when they have reduced staff, closed offices or sold assets to keep operating in today's low-price environment. A speaker from Shell Technology Ventures, a unit of Royal Dutch Shell plc (NYSE:RDS.A) (The Hague, Netherlands), said: "I understand we're all gloomy today. The sentiment today is like what I saw in 2001 in the Internet sector. But today's oil & gas business has a huge upside. This is the time to launch your business or enter a new market, not when oil is $140 per barrel."

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.