IPAA’s Private Capital Conference to Welcome Arthur L. Smith, CFA as its’ Keynote Speaker

Tuesday, January 24
The Westin Houston, Memorial City
                                                                                                           

Arthur L. Smith (Art) will be the keynote speaker of IPAA’s Private Capital Conference on January 24 at the Westin Houston, Memorial City. Art founded Triple Double Advisors, LLC in August 2007 after he completed the sale of John S. Herold, Inc. to IHS, the global information specialist. He serves as portfolio manager and oversees the firm’s energy research. From 1984 to 2007, Art was Chairman and CEO of John S. Herold, Inc. where he helped guide the growth of Herold into a widely-recognized independent authority in oil and gas research and consulting. From 1976 to 1984, he was an energy equity analyst with Argus Research Corp., The First Boston Corporation and Oppenheimer & Co., Inc. Art currently serves on the Board of Directors of PAA Natural Gas Storage, L.P. and Pioneer Southwest Energy Partners, L.P. Previously, he has served on the boards of Plains All American L.L.P., Pioneer Natural Resources, Cabot Oil & Gas Corporation, Evergreen Resources, Inc., Parker & Parsley Petroleum, the New York Society of Security Analysts, and was a past appointee to the National Petroleum Council. Mr. Smith received a BA from Duke University and a MBA from New York University’s Stern School of Business. Smith is the author of the work – Something from Nothing – which chronicles the career of Joe B. Foster and the success of Newfield Exploration Company.

You don’t want to miss hearing this legend of the industry speak. Onsite registration is still available.

Yesterday, the Obama administration announced its rejection of TransCanada’s proposed Keystone XL pipeline that would have traveled from the Canadian oil sands to the U.S. refineries in the Gulf of Mexico.

In the State Department press release, the administration blames Congress for forcing him to make a decision, claiming the administration simply does “not have sufficient time to obtain the information necessary to assess whether the project, in its current state, is in the national interest.”

Therefore, the administration deemed the construction of Keystone XL “not to serve the national interest.” Really? The construction of this pipeline was set to create 20,000 jobs for Americans. It would have secured a source of much-needed oil that may not be domestic, but at least sourced from Canada, our neighbor and great ally. The completion of this pipeline also would have helped America’s independent producers, who face a backlog in the transport of their oil from Cushing, Oklahoma.

Additionally, the press release even indicates that the president has had four years to review the Keystone permit: “since 2008…been conducting a transparent, thorough, and rigorous review.” That’s when President Obama was elected! Four years is still not enough time?

This flat-out rejection of American jobs, energy security, and economic development is sure confirmation of the administration’s animosity toward the oil and natural gas industry and demonstrates the chokehold that the President’s environmental base has over the administration. The labor unions, a huge base of the Democratic Party, are up in arms over this rejection of jobs. Canadian Prime Minister Harper expressed his “profound disappointment” of President Obama’s decision.

Once again, the administration puts pressure from its environmental base over the needs of the American people. In a struggling economy, the fact that the President puts concerns of radical, anti-development activists over blue collar Americans who would have benefited from the well-paying Keystone XL pipeline jobs is truly shameful.

These words are splashed across the headlines, sounding doom, gloom, and fear– but it’s important to truly analyze the geopolitics at work here. Iran is threatening to block the Strait of Hormuz. But what does this actually mean for the United States, which doesn’t receive oil directly from Iran?

IPAA’s chief economist, Fred Lawrence, broke it down in a Declaration of Independents analysis. Essentially, the Strait of Hormuz is one of the most important trade passageways in the world. The US Dept. of Energy defines the Strait as “the world’s most important oil chokepoint, with an average of 14 supertankers passing through it every day, most of them heading towards Japan, South Korea, India and China.”

Asia and Europe would feel this supply shock most of all because these are “two regions with growing import dependence on the Middle East.” Luckily for the United States, “Our total import dependence is declining. U.S. net imports have dropped from over 60 percent of our total consumption in 2005 to around 45 percent in 2011 through November…52 percent of our oil imports emanate from the Western Hemisphere.” This is due in large part to the increased shale oil reserves, made accessible by the combined technologies of hydraulic fracturing and horizontal drilling.

Although the U.S. is clearly more insulated from Middle East supply shocks, we are far from isolated. The growing interdependence of global markets makes any economic hit to European or Asian markets a close second hit to the U.S. markets. As the analysis outlines,

“Given the current debilitated state of world markets, every bit of negative economic news from Europe or China exacts a toll on our recovering economic markets because they are two of our top trading partners. Any oil shock of this magnitude would pass quickly through the global business cycle as energy costs directly impact trade flows, industrial activity and consumer spending which comprises over two-thirds of the U.S. economy.”

Thus, the negative effects of a Strait of Hormuz shut-down would certainly hit the United States – although not as hard as it would hit Asia and Europe. In our globalized world, any drama featuring the remarkably strategic and crucial commodity of oil will have ripple affects felt the world over.

Click here to read the analysis and to view original charts and graphs.

Yesterday, the Durham Herald Sun reported that a group of respected scholars came together yesterday on an unbiased, academic panel to discuss the economic, environmental and social impacts of hydraulic fracturing.  RIGHT.

The group that actually came to Duke University on Monday was a gang of biased, anti-development professors whose studies on natural gas and hydraulic fracturing have been discredited over and over again.

Robert Jackson, professor and director of the Center on Global Change at Duke’s Nicholas School of the Environment (the title of which truly says it all) was the author of a study called “Methane contamination of drinking water accompanying gas-well drilling and hydraulic fracturing.” Energy in Depth combed through the study – highlighting the problems with the data, revealing the author’s bias and bringing to light the authors’ own admission that hydraulic fracturing has no impact on water wells.

Not least among the panelists was Robert Howarth, professor of ecology and environmental biology at Cornell University, and author of the notorious paper which claims that natural gas has more emissions than coal. This study has been “debunked by the U.S. Department of Energy, the Council on Foreign Relations, Carnegie Mellon University, and even his own colleagues on campus.”  Check out Energy in Depth’s smack-down of the paper to see how completely biased and manipulated this study was.

Susan Chistopherson, another Cornell professor, said on the panel that the economic benefits are overrated and that “longterm outcomes for the places where drilling takes place are not ‘particularly favorable.’”

Couple that biased, dour outlook with today’s Bloomberg news article about the economic ripple effect of oil and natural gas drilling which started off saying:

“Thirty-four years after Black Monday, the day Youngstown Sheet & Tube announced shutdowns marking the end of the Ohio city’s steel era, a $650 million mill is coming to life thanks to the natural-gas drilling boom.”

It continued on to cite these statistics from Marcellus shale development:

“Employment by businesses directly involved in Marcellus shale grew 114 percent in the first quarter of 2011 from the same period in 2008, according to the Pennsylvania Center for Workforce Information and Analysis. Wages in Marcellus industries average $76,036, compared with the state average of $46,222.”

It’s truly a shame Duke and Cornell are not serving their purpose as academic institutions to seek the truth but getting together to espouse to each other their politically-motivated, debunked accusations in the form of an “academic panel.”

There are real concerns from the public about the environmental impact of natural gas development which need to be addressed by academics, industry, and the government. However, these blatantly biased panels instill illegitimate fear in the public and detract from these real concerns.  The industry is ready and willing to participate a real, honest conversation surrounding hydraulic fracturing and natural gas development.

IPAA’s Private Capital Conference (PCC) has the session for you. On January 24, 2012 at The Westin Houston, Memorial City IPAA will host its’ PCC conference. The second session titled “New Capital Sources” will feature five speakers who will discuss how they approach the investment process, what they think about current commodity prices and how they can be approached to support new clients. This session is sure to give you some new ideas on where and how to invest to receive the greatest ROI.

Registration is now open. Visit the meetings webpage for a complete list of speakers.

Registered to attend OGIS Florida but need a place to stay? Rooms at the Four Seasons Palm Beach (conference location) are running out fast…but thankfully, IPAA has secured a DISCOUNTED room just for you! Be sure to call the hotel by Wednesday, January 11 to receive a discounted room rate of only $299. 

Book Your Beachfront Room Today! Call: 561-582-2800

p.s. Still need to register for OGIS Florida? Check out my post on registration and begin preparing for this stellar opportunity!

Registration for IPAA’s quarter one OGIS event, OGIS Florida, is now open. The event is February 2-3, 2012 and extends FREE registration to buy-side and sell-side analysts, portfolio managers and managing directors. IPAA Members also receive a discounted registration to attend. Not a Member of IPAA? Conveniently register as a Non-Member for the conference and receive a one year membership to the association.

 So here is the basic “to do list” before getting on a plane to Palm Beach, Florida:

1. REGISTER FOR OGIS. Download the faxable registration form or register online. Brittany Green, IPAA’s Meeting Registrar, is ready and available for all registration questions at 202-857-4733.

2. BOOK YOUR HOTEL. IPAA has a block of discounted hotel rooms at the Four Seasons Resort Palm Beach, the location of all OGIS Florida meetings and events. To receive IPAA’s discounted rate of $299 for a single or double, please call the hotel directly at (561) 582-2800 and ask for room reservations. Be sure to mention IPAA OGIS in order to get the discount. After Tuesday, January 10, 2012, the IPAA room discount will end, so get moving!!

3. CHECK OUT OUR PRESENTING COMPANIES. This year’s list of presenting companies is an all-star lineup that is continuing to grow as the conference gets closer. Attendee registration grants you not only access to presentations by C-level management, but great networking events, small breakout sessions for q&a and one-on-one meetings for analysts.

Abraxas Petroleum Corporation
Callon Petroleum Company
Carrizo Oil & Gas, Inc.
Cross Border Resources
Evolution Petroleum Corp.
Far East Energy Corporation
FX Energy Inc.
Gastar Exploration, Ltd.
GeoResources, Inc.
InterOil Corporation
Panhandle Oil and Gas Inc.
Penn Virginia Corporation
PetroQuest Energy, Inc.
QR Energy
Samson Oil & Gas Limited
U.S. Energy Corp.
W&T Offshore, Inc. 

4. PACK YOUR SUNSCREEN. Palm Beach in February is a sunny 75 degrees!

Stay tuned next week for information on requesting One-on-One meetings at OGIS Florida!

For the most up-to-date information on OGIS Florida, visit www.ipaa.org/meetings.

The major media outlets are all reporting on the economic good news of 2011, the real stimulus sweeping the nation:  Despite the recession, the oil and natural gas industry is providing jobs, tax revenue, and economic growth in communities across the United States.

“Sure enough, money is flowing by the barrelful into Mountrail County, transforming a tiny community once proudly situated in the middle of nowhere into an unexpected oasis of prosperity at the heart of the nation’s biggest oil play…With the unemployment rate at only 1.3 percent, local sons and daughters are no longer leaving to find work. (New York Times)

“As the rest of the nation watched incomes drop or stagnate, in Mountrail County median income rose more than 50 percent in the last decade, the fifth-highest gain in the nation. Residents earned on average an additional $20,000, adjusted for inflation, according to an analysis of census data by Andrew A. Beveridge, a demographer at Queens College in New York.” (New York Times)

“A Pittsburgh-area school district gets $628,000 for lease with oil and gas drilling company…Phillips Exploration’s lease with the South Butler School District also carries an 18 percent royalty from any gas that is produced and sold from the acreage.” (Associated Press)

“Chemung and other counties in the state’s Southern Tier where shale gas is assumed to be plentiful can expect a surge in retail sales and tax revenue from those workers once drilling begins…Last year, Chemung led all New York counties in the growth of sales tax and hotel tax revenue, as well as in the expansion of its tax base, avoiding the property tax increases and economic doldrums faced by local governments elsewhere in the state.” (New York Times)

“In northeastern Ohio, oil companies from across the U.S. are setting up shop, developing wells and putting people to work, trying to get the oil out of the sedimentary rock.” (Fox News)

“People who have opportunities in many other places in the country or elsewhere in the world have elected to come to Ohio and seek opportunity here, that tells me that people who are making very rational decisions spending shareholder money are coming to the conclusion that this is worth chasing.” (Fox News)

“The boom in low-cost natural gas obtained from shale is driving investment in plants that use gas for fuel or as a raw material, setting off a race by states to attract such factories and the jobs they create. Shale-gas production is spurring construction of plants that make chemicals, plastics, fertilizer, steel and other products. A report issued earlier this month by PricewaterhouseCoopers LLC estimated that such investments could create a million U.S. manufacturing jobs over the next 15 years.” (Wall Street Journal)

This morning, Lee Fuller, IPAA’s vice president of government relations appeared on a panel on hydraulic fracturing on the Diane Rehm Show (NPR & WAMU’s 88.5). The purpose of the panel was to address the “New Concerns Over Hydraulic Fracturing.” The panelists included two of the natural gas industry’s most vocal opponents – Ian Urbina,  New York Times’ reporter of the infamous “Drilling Down” series, and Dusty Horwitt of the Environmental Working Group, an active anti-development organization. Peter Robertson of America’s Natural Gas Alliance (ANGA) represented the natural gas industry as well.

Throughout the interview, as accusations on environmental dangers of natural gas development were addressed, Lee urged the panel and the public to put accusations in a broader context.

On Hydraulic Fracturing

“It’s important to put this in some context. The context is we’ve probably done a 1.2 million or so hydraulic fracturing jobs in the United States since it was initiated and the success record for that effort has been extraordinary—to the point where we’re now looking for one or two instances to try to suggest that there is some sort of systemic problems with fracturing.”

“In fact, all of the analyses that have been done suggest that fracturing is safely managed now and continues to be safely managed.”

On Pavillion

“It hasn’t been peer reviewed. It’s very important that we not jump at conclusions with respect to Pavillion until there is a better chance for questioning to be made.”

“Even EPA Administrator Jackson has been very cautious taking a position on the quality of this report. Secretary Salazar of DOI has been very critical. The state of Wyoming is concerned about the quality of the data.”

“In fact, one of the monitoring wells that EPA drilled may well have been drilled into a natural gas formation. The reason why they’re seeing various chemicals and compounds there may have been from their own well operations.”

On Landowners

“We have about a million oil and gas wells that are in operation today in the United States and around 8.5 million leaseholders. The process for actually going through the leasing activity is one that has been working in general quite well.”

“As the industry has moved into areas like the Marcellus in Pennsylvania and New York…the familiarity with the industry is not as extensive. There probably needs to be a better mechanism to share information with the potential leaseholders as that contract is being negotiated.”

To listen to the full segment, please click here.

ICYMI: Newly elected Chairman of IPAA, Gigi Lazenby, was featured in The Hill on Monday. She discussed the bright future of the oil and natural gas industry and the prominent role it can play in leading the United States to economic recovery. Here’s the full op-ed:

American oil, gas production righting our economy’s ship


By Virginia “Gigi” Lazenby, founder and CEO of Bretagne, LLC

Only a few years ago, our nation was looking toward a future of dependence. Dependence on foreign energy supplies, imported technologies, and the hope that one day an economic miracle would land at our feet and revitalize our nation. Today, however, it seems as though our waiting could be over – and for good. America’s on- and offshore oil and gas reserves have presented a new opportunity for the United States’ energy supply, and alongside it, tens of thousands of jobs and millions of dollars in revenues and economic activity.

America’s independent producers alone are responsible for developing 95% of our nation’s oil and gas wells, producing 54% of domestic oil and 85% of domestic natural gas. Despite the poorly painted picture of “Big Oil,” the real truth is that the average independent producer employees less than 12 employees. Yet, collectively, it’s the small independent producers that have made – and continue to make – great strides to provide and responsibly develop the job-creating, American resources we all rely on every day to keep our economy moving and competitive.

The innovative combination of horizontal drilling and hydraulic fracturing, led by America’s independent producers, has unlocked vast quantities of oil and natural gas from shale deposits. At the same time, offshore development – both in shallow- and deep-water – enables communities and countless individuals to find opportunities to get back to work across the nation and to be proud again. Hotels are bustling, restaurants once on the brink of shutting their doors are packed, family farms are remaining intact, and governments are collecting much-needed revenues for schools, roads, and other important programs.

And the whole world is taking notice. As foreign oil imports into the U.S. are down from 60% in 2005 to 47% today, even OPEC leaders like Saudi Arabia have admitted increased access to North American reserves are beginning to change the global energy supply chain. Russia and other major natural gas-producing nations are seeing the power they were once able to leverage erode by the day as more natural gas is responsibly produced here at home and in other countries worldwide.

Yet with impressive growth has come obstacles. As the New Year quickly approaches, our industry stands at a crossroads. As readily and safely as American innovation has unlocked the potential of our on- and offshore energy reserves, heavy-handed regulation and unnecessary roadblocks have been misguidedly erected by some leaders in Washington. Threatening U.S. supply and restricting access to our nation’s abundant and reliable energy resources, duplicative and unnecessary bureaucratic red-tape continues to impede this development – and consequently stands in the way of job creation, economic growth, and energy security without adding any additional environmental safeguards.

This month, President Obama released a new 5-year plan for offshore leases. And while the plan represents a good first step, it certainly does not represent a bold statement that America is finally – once and for all – serious about our nation’s energy security. At the same time, the Obama administration continues to slow-walk permits in the Gulf of Mexico while also creating barriers for onshore development on taxpayer-owned lands onshore.

With every new and excessive limitation, another livelihood of one of the four million American workers who depend on the oil and natural gas industry for a well-paying job is put at risk and a new job disappears. Our producers are ready and able to develop our natural resources in a safe and responsible manner while providing for the needs of the American people. It is clear that we have the ability to help take our nation down the path of prosperity and energy security.

The coming year will certainly be full of electoral excitement, as it especially is every presidential cycle. Jobs continue to be front-and-center on the minds of the American electorate, and rightfully so. Our industry can continue to be a solution to our jobs crisis – if Washington will be a partner and not an adversary. We see a bright horizon of revived rust belt towns and a strong, broad-based energy outlook that sees our abundant oil and natural gas resources as a competitive advantage in the global economy – not a liability. We stand ready to do our part in ushering in a renewed, stronger and more secure America. This is the clarion call of our time.