PITTSBURGH – Several attorneys who represent companies in the oil and gas sector believe the industry is headed for a recovery in the Appalachian Basin, but they said Thursday it will be modest in comparison to the original boom that was launched in the Marcellus Shale region a decade ago.
Their comments came in one of several panel discussions at the Oil & Gas Awards Industry Summit for the Northeastern U.S. at the Westin Convention Center in Pittsburgh.
Before an audience of several hundred industry managers and employees, moderator Charlie Schliebs, managing director for Stone Pier Capital, asked a panel of three attorneys to assess the current state of merger and acquisition activity among exploration and production companies, noting there are currently five “meaningful” producers in the basin, as compared to “at least 70” when the gas boom began in the last decade.
Matt Jarrell, director for Pittsburgh-based Sherrard, German & Kelly, noting the industry downturn of the past couple of years, said there was scant activity in private equity financing of mergers in late 2015 and throughout 2016.
“There were a lot of people looking for a deal, but not wanting to jump in,” he said. “I think we’re coming up on a second cycle of private equity. ... There is a tremendous amount of capital on the sidelines.”
Ron Frank, a partner with Blank Rome, said with the price of natural gas stabilizing, “I think we will see M&A continuing to pick up.”
Alan Laurita, the oil and gas practice leader for Hodgson Russ, said in his estimation, M&A activity already was heating up, noting there was $6.25 billion worth of acquisitions in the Marcellus last year, and another $250 million in the Utica, all from three buyers.
But one of the biggest hurdles will be the ability of producers to make money on natural gas in what Jarrell sees as a lengthy period – years – of lower-priced natural gas.
Stating he doesn’t believe natural gas will return “in my lifetime” to its $12- to $13-per-mcf price range that was the going rate when the Marcellus boom began, Jarrell said, “At some point, somebody needs to make money producing molecules.
“We’ll hover at $3 for a long, long time ... and we’ll have to figure out” how to make money at that price, he said.
A good portion of Thursday’s event was spent with attorneys and industry executives discussing the need for constructing communication strategies with communities, public officials and stakeholders to combat groups who are opposed to natural gas development and new pipeline infrastructure projects seen as essential if producers are to get more of their gas to markets.
Keynote speaker George Stark, director of external affairs for Cabot Oil & Gas, implored the audience to constantly take a message to the public about the benefits of natural gas.
“No one’s telling the positive story of what we do and how it affects lives,” he said. “You are the tool to communicate our story.
“Don’t wait for a problem to start talking about science data,” Stark said, urging companies to line up speaking engagements with local Rotary clubs and organizations like Trout Unlimited.
The same message was delivered even more explicitly by Michael Krancer, former secretary of the state Department of Environmental Protection in the Corbett administration, who is now senior counsel for energy at Blank Rome.
Krancer, whose topic was to ascertain how President Trump’s policies were shaping up and how they would affect activity in the Marcellus and Utica plays, said people shouldn’t let their expectations of Trump’s early days in office cloud reality.
While acknowledging the president issued numerous executive orders regarding pipeline construction and loosening regulations, Krancer characterized the actions as “taking a baseball bat to a beehive (while) blindfolded.”
“Where public opinion is, the elected officials and the regulators will follow,” he said. “Trump is not going to solve all of your problems. As a result, complacency is going to be a recipe for disaster. There’s no middle anymore.”
Groups that oppose natural gas drilling and pipelines, he said, aren’t interested in compromising with the industry.
“The goal is the complete destruction of the industry,” Krancer said. “There’s no comprise with their ideology.
“You have to win at the end of the day, and messaging is key to the campaign.”