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DALLAS—Tellurian Inc.’s (NASDAQ: TELL) approach to the global natural gas business is straightforward:
“We believe natural gas is a commodity-based business and our integrated model provides low cost,” John Howie, the LNG company’s senior vice president for upstream told attendees of Hart Energy’s A&D Strategies and Opportunities Conference & Workshop on Sept. 6. “In a commodity-based business the low-cost guy is going to win.”
More than 700 billion cubic feet of natural gas is afloat in the form of LNG on the world’s waterways today, he said during an afternoon session. Each day, 40 Bcf is loaded on ships to head to market.
The fast-growing industry needs to keep growing. Howie said that another 127 million tonnes of liquefaction capacity per year will be needed by 2025.
“We want to acquire and move [shale] gas to the front gate of [Driftwood LNG near Lake Charles, La.] for $2.25,” he said. While the proximity of the Haynesville Shale makes that play an ideal source, Howie said that Tellurian is open to other sources, such as Eagle Ford.
The afternoon roundtable focused on insurance and how it can reduce business risk. Matthew Wiener, senior vice president of Aon Transaction Solutions, moderated the panel. Speakers included Stephanie Hyde, executive director of PE Risk; Michael McGowan, head of M&A insurance for North America at XL Caitlin; and Sarah Mitchell, counsel at Vinson & Elkins LLP.
Prior to noon, Gordon Lindsey of Talos Energy Inc. told attendees that operations in the Gulf of Mexico are looking better all the time.
“We see tremendous opportunity in the Gulf of Mexico,” said Lindsey, the company’s vice president for corporate development, during the “buyers and sellers” panel. “It’s not hugely competitive but getting more competitive with each lease sale.”
Fresh off the completion of its merger with Stone Energy Corp. in May, Talos was rewarded with its prolific Zama discovery, which encountered 1,100 ft of gross pay. Mexico may have been disappointed when Talos won the lease but Lindsey suspects it is happy now. Talos will move a rig to Zama in November.
Jay Paul McWilliams, CEO of LOGOS Resources II LLC, said private equity-backed E&Ps have opportunities if they pursue mature assets. He noted that openings develop in mature basins as public money shifts to “hot” basins. The challenge with assets with a lower risk profile is to develop an exit strategy, he said.
Daniel Houghton, manager of finance and planning at Bruin E&P Partners LLC, extolled the benefits of operating in the Bakken Shale following its $1.4 billion purchase of assets from Halcon Resources in 2017.
“When you buy in the Bakken there is a lot of production and it already has cash flow,” he said.
Earlier in the morning, Patrick Oenbring, chairman and CEO of Hawkwood Energy LLC, told attendees that his company’s Eagle Ford operations have “reached a point where we don’t need any more equity infusion,” and members of the public equity panel acknowledged that investors are jaded after the last five years of returns from the oil industry but still express optimism about the future.
Oenbring opened the conference with a keynote focused on the newly popular eastern Eagle Ford, which Hawkwood considers to be a basin with top tier economics and no oil pipeline takeaway issues to date.
Oenbring credited advances in completion technology as the driver of the company’s success in the area.
“We’ve developed the completion recipe that works in the higher clay of East Texas,” he said.
Hawkwood’s financial position allows it to fund a two-to-three rig program and possibly pursue refracking opportunities, Oenbring said. He added that he expects midstream activity by the end of the year.
On the public equity panel, Mike Kelly, managing director and senior analyst with Seaport Global Securities LLC Seaport Global, said debt-adjusted growth has never been higher.
“If oil prices hold, the amount of cash flow will be incredible,” he said.
But so far that cash has flowed from private equity and institutional investors are unenthused about oil and gas performance over the last five years.
“It’s going to have to be private equity until public equity shows up,” said Chuck Yates, managing partner of Kayne Anderson Capital Advisors LP.
More oil is being produced, said Jeff Sieler, managing director of Citigroup’s global energy group, but investors are watching to see how companies are responding to that bounty.
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