Fig Partners Director Of Energy Views The Marcellus Shale As A Must Buy For Serious Investors: Highest Investment Returns Available
December 30, 2009 - The Wall Street Transcript has just published Oil & Gas Production and Distribution Report offering a timely review of the Energy 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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JOSH SILVERSTEIN is currently the Director of energy research at FIG Partners, LLC. Prior to his position at FIG, Mr. Silverstein was a Senior Financial Analyst covering the energy, power and infrastructure sectors for Highbridge Capital Management, LLC, and a Financial Analyst for SILCAP, LLC, a utility-focused Bass Brothers hedge fund. Over the last six years, his primary focus has been investing in domestic natural gas and oil exploration companies.
TWST: As we look out beyond this year, will we see a more stabilized rig count at this level? Or is it likely to see it pick up again?
Mr. Silverstein: I think we are still going to continue to see the rig count pick up. After reviewing the third quarter conference calls, I think companies are becoming more active in certain plays, and some companies are just switching rigs from one play to another, such as going from the Barnett to the Eagle Ford or to the Haynesville Shales. Additionally, as we mentioned before, service costs have decreased to a point where it could make sense to add rigs.
TWST: What is going on in the LNG market? A year go that was supposed to mess up the whole picture here, but it seems to have faded from the scene.
Mr. Silverstein: I think initial expectations were for more cargoes to arrive in the U.S. this year, but there has been a draw towards Spain and the U.K. as the South Hook facility started operations this year. And prices would justify going there versus here. But then again, if there is an excess of LNG liquefaction capacity that comes online, and it doesn't go towards places with storage, then you can certainly see some cargoes coming here.
TWST: If we look beyond the next couple of years, will we see pricing get back to where it was a couple of years ago? Or was that a one-time blip in the longer term picture?
Mr. Silverstein: I don't think we are going to see a 13 gas price environment in the near term or even within the next couple of years. I think that was a bit of an anomaly. As far as oil prices go, I don't think we are going to go back to the 30 world that we saw earlier in this year, and I am not sure if the 150 market will hit again. But as we go through the next few years and oil demand picks up, I think you could see oil reaching 100, depending on how global economic growth adjusts.
TWST: Anything on the horizon in terms of new technologies or new fields coming along that may change the picture for this space?
Mr. Silverstein: Well, I certainly think you are having the continued emergence of unconventional gas, particularly shale plays. The Barnett led the charge five years ago and is producing around 5 Bcf per day. So the basin itself is almost producing close to 10% of the lower 48 onshore production supply. And I think you are going to continue to see that trend as technology gets better and better, and producers get more and more efficient. We are seeing a rapid increase in the Haynesville and Marcellus Shales because these plays are economic down to lower prices. As far as the emerging plays, certainly the Eagle Ford has caught everybody's radar screen. There are a couple of producers down there that have announced significant wells in various parts of the play that look to be economic. There has been a pickup in the Cana Shale in Western Oklahoma, and there is also the emerging horizontal Granite and Colony Wash play that stretches over the Texas-Oklahoma Panhandle region. While this play isn't new, industry has recently started to apply horizontal technology, so there is still a lot to be learned.
TWST: Given the positive performance the group has had so far this year, are investors still interested?
Mr. Silverstein: I think so. I think right now investors are still very interested in what's going on, as companies start to lay out their plans for next year. Certainly, there are still some pretty good opportunities within the emerging plays at the Haynesville Shale and the Marcellus Shale, and now the Eagle Ford and Granite Wash area. So I still think investors are still very interested in what's going on within the group.
TWST: What should investors be paying special attention to?
Mr. Silverstein: If you are a natural gas-focused investor, I believe you should have exposure to the Marcellus Shale. It looks like this basin will produce the highest investment returns on a single well basis. I would also be focused towards the core part of the Haynesville Shale in Northern Louisiana that now extends southeast into Texas. In addition, the emerging Eagle Ford and Horn River Shales look prospective as well.
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