From left to right: moderator James Wicklund, managing director at Parks Paton, Hoepft & Brown; Michael Bodino, Texas Capital Bank managing director; Russell Weinberg, Energy Capital Solutions’ founder and managing director; and Stuart Weinman, Total Sand Solutions CEO. (Source: Hart Energy)
The oil and gas sector is spending upwards of 70% of cash flows, but with the consolidation frenzy sweeping the industry, there’s still an appetite for capital, a number of panelists said during the SUPER DUG Conference & Expo in Fort Worth, Texas.
Companies just need to think creatively to find cash, they concurred.
“It's hard to find good teams, good projects, but there is some capital, especially the acquisition financing,” Michael Bodino, Texas Capital Bank managing director, said May 16 during a panel discussion on financial trends.
Russell Weinberg, Energy Capital Solutions’ founder and managing director, said private equity has “largely left the building,” forcing companies to be “creative to find that capital.” As a result, family offices are attracting and getting a lot of attention, he said.
Weinberg warned that bringing family offices to energy industry investments can be like "herding cats," but said it can be an excellent source for businesses.
Considering the cash flow conundrum, debt is being priced cheaper, Bodino said.
“There's always been a premium paid to get debt, particularly for the users of that capital in this industry. [But] because the balance sheets are so strong, they have a cost of capital advantage versus other industries right now, which is kind of unique,” Bodino said.
Total Sand Solutions CEO Stuart Weinman said there’s a different balance in the risk reward from the institutional side.
In terms of debt, Weinman said the amount of debt that a company needs to consider depended on where the company was in the cycle.
“If you're at the top of the cycle, you probably want to use equity over debt because you can never deflate your way out of the debt problem,” Weinman said. “If you're at the bottom of the cycle, I think you probably want to use a little bit more debt than equity because it's much easier, [and] you can just inflate your way out of that problem.”
But, equity is also available and a number of companies are looking at public markets to access capital, Bodino said.
“We're seeing it across a myriad of energy industries, not just upstream,” Bodino added.
M&A deals continue—and not just for the larger companies, according to Russell Weinberg, Energy Capital Solutions’ founder and managing director.
Panel moderator James Wicklund, managing director at Parks Paton, Hoepft & Brown had an easy suggestion for clients pondering whether they should go public or not.
RELATED: Q&A: PPHB’s James Wicklund on North, South American LNG, Irrational Net Zero Ambitions
"I have spent years telling clients, 'If you want to get rich, don't go public. Sell the company,'" Wicklund said.
Recommended Reading
Shale Outlook: Power Demand Drives Lower 48 Midstream Expansions
2025-01-10 - Rising electrical demand may finally push natural gas demand to catch up with production.
The Wall: Uinta, Green River Gas Fills West Coast Supply Gaps
2025-03-05 - Gas demand is rising in the western U.S., and Uinta and Green River producers have ample supply and takeaway capacity.
Intensity Infrastructure Partners Pitches Open Season for Bakken NatGas Egress
2025-02-04 - Analysts note the Bakken Shale’s need for more takeaway capacity as Intensity Infrastructure Partners launches an open season for a potential 126-mile natural gas transport line out of the basin.
Gas & Midstream Weekly: Cushing Crude Storage Levels Near All-Time Lows
2025-01-16 - Low levels of crude in storage could cause problems across the U.S. supply chain; a "gas super-cycle" may be coming; and Liberty Energy's Chris Wright testifies to the Senate.
FERC Closes Out ’24 with Rulings to Boost LNG Supply
2025-01-06 - A trio of Federal Energy Regulatory Commission authorizations in the latter half of December allowed new LNG trains to begin operations or boosted gas supplies to the facilities.
Comments
Add new comment
This conversation is moderated according to Hart Energy community rules. Please read the rules before joining the discussion. If you’re experiencing any technical problems, please contact our customer care team.