Oil and gas finance-from capital markets to merger activity-was among the topics at the KPMG global energy conference in Houston recently. Among the interesting remarks: • The Federal Reserve has been slow to raise interest rates, but Tim Murray, senior vice president of energy lending for Wells Fargo, expects rates to rise dramatically in the next year. Specifically, Wells Fargo anticipates a 200-basis-point increase in the next 12 months. • Banks have undergone dramatic consolidation, Murray added. Among the possible effects: underwriting fees could go up, however, loan structures will not be affected; ancillary business will become even more important to banks; regional banks will compete for lead roles; and, displaced energy-finance talent will migrate to new institutions and create more competition. • Phil Pace, a managing director of Credit Suisse First Boston, said that while natural gas prices seem high, in reality, they're cheap. With $40 oil, the right price for spot gas is $6.50 to $7.50 per thousand cubic feet, depending on inventories. • Pace, who analyzes E&P companies, said commodity price risk is low on his profile. Instead, he worries more about inflation fears affecting portfolios, and about rising service costs. • Stephen Thorington, senior vice president and chief financial officer for Plains Exploration & Production, said that from a user's perspective, there is abundant capacity in the bank markets right now, and flexible terms and structures are being offered. • On the issue of E&P reserve revisions and third-party engineering reports, Pace said it is "odd" for companies today to not have third-party reports. But the value of these reports varies according to different types of capital providers. Murray said Wells Fargo requires such reports from any independents seeking capital. But Billy Quinn, managing director of private-equity provider Natural Gas Partners, said these reports, from his point of view, are not worth the paper they're printed on. His firm seeks to back management teams, not assets. -Jodi Wetuski