Oil and Gas Flashcards
What are the four industry sectors for oil and gas?
Upstream: exploration and production
Midstream: pipeline companies
Downstream: refining and chemical work
Services: drilling, fracking, logging
Marcellus
Pennsylvania
Bakken
North Dakota
Eagle ford
Texas, south of San Antonio
Haynesville
East Texas
Three forks
North Dakota
Niobrara
Colorado
Why energy?
Surrounded by energy growing up. Looked into it and found that it is capital intensive, which sets the stage for high deal flow.
Which energy sector has the lowest beta?
Midstream. Long term contracts and steady payment for pipeline usage.
Upstream has an ok beta because price hedging is possible to lock in prices and cut risk, but it’s still cyclical in terms of price.
Which sector has the highest beta?
Services. Highly cyclical with no price hedging
What is fracking?
Fracking is the use of high reassure water, sand, and chemicals to crack open rock. It’s used to break open horizontal shale plays. The shale can be miles wide but only a few feet thick. Companies use fracking to open up the Rock and let the oil and gas flow.
What is LNG?
Liquefied natural gas
The easiest way to transport natural gas is to liquefy it and ship it. As the supply continues to exceed the demand in the US, use of this technology will increase in order to ship gas to areas like Asia
What is an MLP?
Master limited partnership
Company structure that pays out quarterly dividends to limited partners (investors). Many midstream companies are organized this way because the steady cash flow from pipelines helps facilitate the distributions. Because it’s considered a partnership, MLPs avoid taxes. It’s an extremely fast growing sector.
