Increased M And Activity In The Oil And Gas Sector Predicted For 2012 And Beyond; An Exclusive Interview With Senior Energy Expert With Stifel, Nicolaus And Co. Inc., Mr. Amir Arif
January 13, 2012 - The Wall Street Transcript has just published Oil & Gas: Refining, Independent and Major Integrated Report offering a timely review of the sector. This Special Report contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. Please find an excerpt below.
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Amir Arif joined the research team at Stifel, Nicolaus & Co., Inc., in April 2009. He brings to the firm more than 15 years of experience in petroleum engineering, investment banking and investment research in the energy sector, with a focus on upstream oil and gas companies in the U.S. and Canada. Mr. Arif received his BSc in petroleum engineering with distinction from the University of Alberta and his MBA in finance from the University of Calgary. He also holds the CFA and CMT designations.
TWST: You expect activity and interest in the Utica Shale to pick up next year. What are the characteristics of Utica that make it promising, and which are the companies that stand to benefit from opportunities there?
Mr. Arif: What makes it promising is the depth of the play is going to make it very economic, and the fact that there will be a wet gas and an oil window, which again just makes the play's economics very hard to find dry gas plays that are economic today. Also the location of it being in the Northeast means the gas that comes out of it gets premium, and again, it could also benefit from the infrastructure plans that are already being put in place for the Marcellus on the wet gas side.
So with these, it's going be a very promising play. >What's also going to change I think is additional data that will come out in the play around the March time frame from the Ohio Department of Natural Resources. Ohio, unlike other states, only puts out production data once a year. So in March we will get the updated production data for any wells that were on line in 2011. Again, that should take us from about five data points in the play to probably closer to 50.
TWST: Which companies do you believe will be the big beneficiaries here?
Mr. Arif: EVEP (EVEP) has the most exposure on a per share basis. But that is an MLP, so not too many institutional accounts can touch that name. After that, Chesapeake (CHK) has the best exposure, and after that, Gulfport (GPORChesapeake and Gulfport, from what we can tell, both do have good acreage in the play in terms of being in the wet gas and the oil windows.
TWST: Do you believe the environment the sector is in right now is going to lead to a lot of M And A over the next year or two, and what kinds of transactions or even specific deals should investors keep an eye out for?
Mr. Arif: Absolutely. M And A is going to be an ongoing trend for the next year or two years, and basically as the integrateds continue their desire to increase the exposure to the shale plays, as well as the fact that independents don't necessarily have the balance sheet to develop the assets or the resources that they are firming up in these shale plays. So that move will continue with the integrateds continuing to buy the independents. Initially, we saw that that trend happening through JVs, joint ventures, and then as the integrateds became more comfortable operating and understanding the assets, we started to see more corporate M And A. Initially again, it was more with Shell (RDS-A), Chevron (CVX) and Exxon (XOM). But now, we've also seen that move into the international integrated space. We saw that with Statoil (STO) buying Brigham and we saw that with BHP (BHP) buying Petrohawk, and I am sure that will continue as well.
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