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Anthony Marino, President and COO of Vermilion Energy and an ARCO alumnus will be named the company's CEO in March when current CEO Lorenzo Donadeo steps down.
Marino was interviewed on Bloomberg News Wednesday January 6, 2016 where he talked about commodity markets, acquisitions, and Vermilion’s continued commitment to its shareholders.
Where is the world oil price likely to bottom out? We assume the strip will prevail and we will manage the company on that basisAnthony Marino, President and COO of Vermilion Energy
Called the “darling of the industry” by the interviewer, Vermilion is feeling comfortable with what they believe is a well planned and well executed business mix. Said Marino, “We still have a great deal of growth, but all told the company is down. We have not changed our production profile very much. Per share growth has continued.” This year will see continued cutting of exploration and development, with Canada having the biggest cuts. This year will see Canada getting a quarter of the overall E&D investment compared to 50% a couple of years ago. The company has reduced its global budget, and over the long term, depending upon the commodity market, Vermilion might have value adding acquisitions if “we can find those in the market”, said Marino.
“We plan to maintain the current dividend. We designed our budget so that we could fund our E&D investments and our cash dividends for 2016. We would further reduce capex before reducing the dividend. We have a strong balance sheet particularly relative to the rest of the industry in today’s environment,” said Marino. Vermilion has paid out more than 2.3 billion in dividends over the thirteen years they have paid dividends.
Asked where is the world oil price likely to bottom out, Marino replied: “We don’t know so we are managing for the commodity strip. Vermilion is taking the conservative approach; we assume the strip will prevail and we will manage the company on that basis."
Efficiencies and performance were key attributes for third quarter results that exceeded internal forecasts. SM Energy Company announced its financial results for the third quarter of 2015. Said President and Chief Executive Officer Jay Ottoson: “I am pleased to report another excellent quarter with production and EBITDAX that exceeded our internal forecasts. Third quarter production was up sequentially from the second quarter (adjusted for assets sold in the second quarter) and up 22% compared with the third quarter last year.
SM Energy reports positive test results that translated into higher than forecast production.Jay Ottoson, SM Energy
“Operational execution continued to drive our outperformance. We are working hard to reduce costs and apply technology effectively on a number of fronts. We are reducing drilling times, optimizing completions and generating better well results in our core development programs…At the same time, we have been conducting several pilot tests in high productivity areas of the Eagle Ford and Bakken/Three Forks. Test results to date have been positive and have translated into higher than forecast production,” shared Ottoson in the company presentation to investors.
Looking into 2016, SM Energy plans to focus on programs that generate the best returns. The company expects to allocate an increased portion of capital to the Permian and Williston Basins. “Fundamental to the 2016 operating plan will be aligning capital spending with estimated EBITDAX to optimize cash flow and inventory expansion, resulting in differential value creation in 2016," said Ottoson.
Source: SM Energy website.
While all of us are personally aware of how low crude prices are impacting companies and individuals, the WSJ article summarizes a variety of pain points with comments from executives at Conoco Phillips and BP, how funding grew increasingly difficult during 2015, and a look at break-even figures. The ConocoPhillips 2016 Capital Budget and Operating Plan Conference Call was about the company’s plans in this difficult operating environment.
Shares the WSJ report, the ingenuity and easy money that allowed American oil companies to keep pumping through a year-long price crash appear to be petering out as U.S. crude slides toward $40 a barrel.
Forty-dollar to fifty-dollar oil prices don’t work in this businessRyan Lance Chief Executive of ConocoPhillips
U.S. companies stunned global rivals by continuing to produce oil —particularly from shale deposits—ever more cheaply as American crude prices plunged from over $100 a barrel in 2014. But the recent drop toward $40 a barrel and below puts even the most efficient operators in a bind.
“Forty-dollar to fifty-dollar oil prices don’t work in this business,” Ryan Lance, chief executive of ConocoPhillips, was quoted saying in the WSJ article.
Ryan Lance started his career with ARCO Alaska in 1984. In 1989, he moved to Bakersfield with ARCO and then to Midland Texas where he worked on ARCO’s coalbed methane operations in the San Juan Basin. From 1996-1998 he worked for Vastar Resources in Houston as a planning manager. In 1998 he was named VP of the Western North Slope for ARCO Alaska and in 2001 he returned to Houston as the General Manager of the Lower 48 and Canadian Operations for Phillips Petroleum. In 2002, upon the merger with Conoco, he became Vice President of the Lower 48 for ConocoPhillips. He has been Chairman and CEO of ConocoPhillips since May 2012.
Lance shared his expectations for delivering value through the inevitable cycles to come on a call December 10, 2015. During the 2016 Operating Plan Conference Call, Lance and his executives shared the 2016 operating plan, and explained how ConocoPhillips has been transformed, especially during this downturn. “Despite the tough market,” said Lance, "our dividend remains the highest priority use of our cash. We view the dividend level as a long-term decision.” He continued that despite a significant reduction in capital spending, the company expects to grow production 1% - 3%.
Looking at the industry overall, the WSJ quoted worldwide job losses at over 250,000 people in the industry over the past year, according to figures from Graves & Co., a Houston consulting firm.
For the past year, energy companies touted the profitability of their best prospects, explaining their success to investors using the concept of a “break-even” cost, generally defined as the oil price needed to reach a 10%-to-20% profit margin. When oil was trading around $65 a barrel, many top energy executives said they could turn a profit even if the price fell to $60. As costs in the oil fields dropped, those break-even figures fell along with them, making certain wells profitable even at lower prices.
“Everyone is going to feel pain at $40.”
The WSJ article finishes with a quote from Dennis Cassidy, the Dallas-based managing director of oil and gas at AlixPartners, an advisory focused on turnarounds: “Energy companies will be forced to cull billions more dollars from their budgets next year as low crude prices halt drilling around the world. Shale producers with high debt or marginal oil fields will suffer the most", he said, but added, “Everyone is going to feel pain at $40.”
Sources: Wall Street Journal: Low Crude Prices Catch Up with the U.S. Oil Patch; transcript from ConocoPhillips 2016 Capital Budget and Operating Plan Conference Call; Wikipedia
Todd Habliston enjoyed a 16 year tenure at ARCO, from 1983 - 1999. After his ARCO years he worked for Forest Oil, where he retired in April 2015 after seven years of service including post-merger duties with Sabine Oil and Gas. Todd also supported the divestiture of nearly $4 billion of company assets, including the December 2014 merger.
Todd founded and is Managing Director of Vision Energy Partners LLC, focused on redevelopment of legacy, conventional oil & gas assets, and consulting for multiple clients in Denver and Ft. Worth who are focused on strategic M&A activity in California, Rockies and the Mid-Continent.
On a personal note, Todd Habliston's oldest daughter has blessed his wife and him with 2 grandchildren and his youngest daughter expects a child at Thanksgiving.
ARCO alums gathered on a sunny Anchorage evening in July. A summer event enabled former ARCO employees who summer in Anchorage to attend. This included Kirk Barker, who is pictured wearing ARCO memorabilia.
Wayne Morrison made his annual appearance and came along with an ARCO pennant. Wayne was in Prudhoe on the day the ARCO pennant came down for the last time.
With ARCO alum Ryan Lance in Anchorage earlier that day for a ConocoPhillips town hall, there was a lot of talk about oil prices and how this would impact both those of us still working and cities like Anchorage. What do you predict oil prices will do? Take the oil prices poll and share your view.
SPE ATCE is in Houston this September. If you are attending, log onto events and RSVP to join others living in Houston or those from out of town attending the conference. We are meeting from 5:00 pm at MKT Bar.
In Anchorage, not all the talk was on the falling oil prices. Marilyn Watts came to visit with friends. Her husband has passed away, but Marilyn said ARCO was a part of the family’s life and they cherished the friends they made and experiences they had.
Bharat Jhaveri will be retiring from BP at year’s end. Other BP employees included Janet and Troy Weiss, Marcia Bandy and from BP Houston, Larry Bacak. In addition to BP, our sponsors were PRA, Advancial, GCI, SM Energy and Newfield Exploration. Russ Doig was there from GCI and Tom and Chantal Walsh of PRA.
Thanks to Angie and Brandon from Advancial for the gift certificates and giveaways.
Ken and Dotty Elmore visited with friends and Ken wore an ARCO shirt. Paula Harris, COP, was in town from Oklahoma. Having grown up in Anchorage, Paula returned for a high school reunion. Others from COP included Pam Barkeley, Dan Eck, Kathy Godsey, Vicky Hahn, Linda Petrie, Kathleen Plunkett and Tina Suellentrop. Dan made an appearance with his daughter and then exhibited he remains athletically inclined when he left to bike with his children.
Also at the happy hour: Micky Becker, Shell; Diane and Dean Carson, Susan Jakonis, Dante Keumerle, AECOM; Katheen Oakes Morrow, Jack Porter, Virginia Reffner, Dan Rodgers, Becky Schumacher, Gerry Suellentrop, D&M; Deb and Roger Wahrer, and Mark Worcester.
Log on to ARCO alumni and click on Who’s Doing What to read what your former ARCO colleagues are doing.