Thread by @EnergyCredit1

I give energy management teams a lot flack over governance and pay. These issues can be questioned across all industries. Tech had the options backdating scandal. Understand I’ve mostly lived in a high water mark/perform or get nothing world.

1/

I swear I worked for a HF mgr who when I started said ‘’I have a couple analysts that I don’t think that are kind of average and they are more reporters ... they’ll never makes more than 400-500k but little downside. You can have that deal or salary (~100k) and high vol.”

2/

I was like fucking sign me up for door number two dude do you think I’m an idiot.

But I regress. I think the Energy industry needs to change. I think someone needs to shine a spotlight on bad practices. I don’t think anyone reads proxies and they should.

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It will take time but there needs to be a huge tech push for efficiency gains (at the cost of jobs likely) with a new generation of leaders embracing these changes.

It is going to take a LONG time to get investors in aggregate interested in the sector again w/o high oil.

5/

There are so many variables outside mgmt control it is completely fair to question how much value can be created in this sector vs how much is luck.

I would highlight how tight my controls were, how efficient I was, what tech moves were being made etc to differentiate 5/

But the hard reality is there may need to be a cathartic cleansing before the industry can perform again for investors. I don’t think anyone knows the right way to value. Even on FCF basis many look overvalued still at strip vs the broader market. 6/

Shale has been a huge massive success. For consumers. For landowners. For govt coffers. For management teams. Investors have been demolished. Biggest bull market in human history and Energy investors largely left behind despite the US Energy independence narrative. 7/

That “Energy Independence” has been subsidized by equity and credit losses in the many tens/hundreds of billions in energy investor losses. It’s not sustainable. It has to end. Someone has to state the obvious. 8/

Many of the biggest and best distressed shops cane in during the last bankruptcy cycle. I’d love to know how many really played out well. Everyone always underestimates the amount of cash you have to keep injecting into these businesses. 9/

But let’s all be honest. These are generally low ROIC, low ROE businesses. They need to be managed well. They need to be tight ships. Bad businesses combined with loose ships and leverage and you get what w got.

So things need to change. The good old boy network I think has evolved quite a bit in recent years but is more to do. Bring in a TON of women. Youth movement. Change incentive structures. Increase disclosure. All of the above strategy to show change.

As mentioned all that may not matter if shale is more of a treadmill than expected. If curves change as reservoirs mature. It is still a show me story. I think the next few years are huge for the industry to determine if they can actually be legit businesses. End/