Opportune's Jim Hansen Lays Out the Landscape of Oil & Gas Finance Today
Long-time energy investment banker and oil and gas sector finance expert Jim Hansen recently spoke to Oil & Gas 360 for an exclusive interview about the shifting capital foundation that traditionally fuels the oil and gas sector.
Hansen is the head of investment banking for Opportune Partners LLC, an independent investment banking and fnancial advisory affliate of Opportune LLP. Hansen has more than 40 years of commercial and investment banking experience including as head of the Oil Service Lending Group at Manufacturers Trust Co. and as co-head of its Energy Corporate Finance department. Hansen has worked at Howard Weil, Banc of America Securities, First Albany, Morgan Keegan and Ladenburg Thalmann & Co., working on M&A, public and private equity, convertible preferred, high yield, investment grade debt, private placements, debt restructurings, strategic initiatives and fairness and solvency opinions for both domestic and international E&P companies, oilfield services, pipelines, MLPs and trust issuers.
OAG360: Where do you think things stand right now, and what do you see for the next two, three, four years as far as private capital, investment banking and sources of capital for the oil and gas industry, the E&Ps in particular?
JIM HANSEN: These are interesting times. The E&Ps have to ask themselves, what do you do to posture yourself if you’re an E&P company? I see people stepping back from the latest decline in oil prices to get a longer-term perspective on what it really takes to not only survive but to flourish in this kind of environment.
I think that by and large, the public markets will continue to focus on the larger companies that have scale and free cash flow, which is now the mantra driving most of the research analysts who are high-grading their stock picks. I think it’s a challenge for smaller caps and middle-sized caps to create an environment of free cash flow.
The difficulty, obviously, is that there’s not a lot of mature conventional-type assets with a lot of these newer companies that have focused on the shale plays. So the maintenance capital expenditure levels may be higher for newer shale companies than they would be for an older company that has legacy assets with a slower decline.
I think there’s a lot of focus, both at the public and private companies, on the fundamental blocking and tackling issues of best internal practices and making sure that operationally and financially, you’ve gotten the company into the best possible shape. Do that first. Then consider your strategic options from there.
Those are diffcult parameters to have to live with. Beyond that, you’ve got the whole issue of your marketing, your procurement and everything that goes into streamlining your operating and financial decisions – determining and using best practices.
As much as that’s a goal and objective, I’m not sure that a great deal of the public and private companies can achieve those kinds of metrics as they go forth. However, they’ve got to strive for it, and that’s the key for trying to position the companies for either an exit if you’re a private company, or to improve the valuation if you’re a public company.
OAG360: In your view what’s the state of energy IPOs for 2019, 2020?
JIM HANSEN: I think they’ll be very quiet, if at all. I think that the shale play IPOs will be continued to be delayed. By this I mean the public equity players continue to sort through the various developments as each quarter flows through and people come back with updated analysis of their drilling results. I think there’s plenty of opportunity already existing for people to buy into existing public companies with liquidity as opposed to trying to buy an IPO candidate that has not been tested in the marketplace but may be in an area or geographical or geographic basin that is already well-represented in the public domain.