The American Oil and Gas Reporter - January 2012 - (Page 103)

Outlook 2012 Financiers Expand Oil, Gas Divisions By Colter Cookson Investors, bankers and producers share at least one trait: They need to carefully balance risk and reward. Now more than ever, producers can use ever-improving technology and ever-expanding geological databases to boost returns from once marginal wells and turn previously uneconomic wells into promising opportunities. Today, producers have another advantage: High oil prices and anticipated longterm demand growth have spurred investors and bankers alike to commit capital to oil and gas. “The oil and gas sector is robust,” says Sylvia Barnes, managing director and head of KeyBanc Capital Markets’ oil and gas group, which recently doubled in size and opened an office in Houston. “The sector is almost a defensive play for investors because it offers tangible assets, commodity prices with a degree of stability, and the ability to hedge for right-way risk.” Because of those factors, Barnes says KeyBanc is seeing investors–particularly those in the high-yield sector–rotate out of areas such as high technology and heavy industry in favor of oil and gas. “This is beneficial to producers, as they can access high-yield capital and credit at lower prices,” she observes. Investors and investment banks such as KeyBanc Capital Markets are far from the only ones that are expanding their stakes in oil and gas. Other participants include commercial lenders such as Mutual of Omaha Bank, Community National Bank of Midland, Tx., and F&M Bank of Tulsa and Dallas, as well as private equity firm EnCap Flatrock Midstream. All of the banks say they view oil and gas as a way to diversify and expand their income bases. “Oil and gas is one of our five core focus areas, but it accounts for less than a fifth of KeyBanc’s revenues and profits,” Barnes says. “I see my job as growing the oil and gas teams’ relative contributions so they are closer to the other areas, such as real estate, industrial, and utilities.” Achieving Growth According to Barnes, KeyBanc Capital Markets provides everything from lending and underwriting to advice on mergers and acquisitions for independent oil and gas companies. “Since KeyBanc is the 14th largest bank in America, we clearly have the resources to do that,” she says. “We have limited exposure to international volatility, so those resources put us in a fantastic position to grow.” To achieve its goals, KeyBanc Capital Markets opened a Houston office and hired a team of seasoned oil and gas investment bankers, including Michael Klayman, Daniel Welch, Jonna Huneryager and Cole Ciaburri. This team will be supported by one in Dallas that consists of three investment bankers, three portfolio managers, and an on-staff engineer. “We also have well-established, experienced, and qualified sales and trading teams both in public equity and high yield, as well as extensive commodity derivative and oil and gas advisory experience,” Barnes comments. Those teams’ location in Houston and Dallas is a great benefit, Barnes continues. “We are a part of the oil patch community, so we have a greater understanding of the dynamics than we would if we were flying in from New York,” she relates. “We get to compare notes with thought leaders at industry functions and gain a better sense of their priorities and concerns, which helps us effectively address their needs.” The close-knit nature of the oil and gas community makes a good reputation vital, Barnes observes. “It takes decades to build a reputation here, but only a few minutes to destroy it,” she says. Barnes says her team has built its credibility by being honest about its capabilities and putting its clients’ interests first. “We are not just looking for a fee,” she stresses. “We will tell clients if they should develop properties more before selling them, suggest using joint ventures if that is more appropriate for their goals, and take the time to come up with creative structures that give them an advantage.” Barnes adds that clients will get senior banker focus from the start of a project to the end. “The senior teams’ hands-on approach and our teams’ specialization in oil and gas ensures that clients get help from people who understand the industry well enough to meet their needs and tell investors why they should be excited about an opportunity,” she says. Reserve-Based Lender In July, Mutual of Omaha Bank launched its oil and gas lending group by hiring George McKean, who has 25 years’ experience with banks and producers, as manager of energy lending. “Mutual of Omaha Bank has expanded into the oil and gas sector to round out its business focus, which traditionally had been concentrated on real estate and commercial and industrial lending,” he says. Senior Energy Lender Ed Fenk, a certified petroleum geologist with 30 years’ experience in energy lending and exploration and production, says the upstream sector has been a hotbed of debt financing activity. “High oil prices and the need to replace reserves have driven producers to increase spending on their organic activities and acquisitions, which has translated to a need for more energy credits,” he explains. Mutual of Omaha Bank hopes to provide those credits not only to upstream companies, but also to midstream comJANUARY 2012 103 SYLVIA BARNES Managing Director and Head of Oil & Gas KeyBanc Capital Markets

Table of Contents for the Digital Edition of The American Oil and Gas Reporter - January 2012

The American Oil and Gas Reporter - January 2012
Oil & Gas Counts
State Legislative
Industry Digest
Tech Connections
Washington Watch
Federal Legislation
Gulf of Mexico
Resource Plays Providing Wealth of Opportunities
Tight Plays Poised to Transform U.S. Crude Supply
El Paso Project Optimizes Eagle Ford Completion Design
Real-Time Forward Modeling Improves Bakken Horizontals
Cover Story
Financial Firms Expand Oil and Gas Divisions
Multicomponent 3-D Poised for Growth in Shale Plays
Cloud Computing Driving Business Step Changes
Advanced Attributes Improve 3-D Interpretation
3-D Data Improve Knowledge of Shale Heterogeneity
HBUR RSS Solves Granite Wash Drilling Challenges
Technologies Improve Production Consistency in Resource Plays
SaaS Helps Operator Streamline Data Management
Automation Enhances Operations in Challenging Applications
Dispersant Chemistry Combats Plugging in Low-Gravity Oil Wells
New Technologies Optimize Production
Drilling Regs
The Presidential Papers
Energy Education
Shale Gas
New Lits & Products
Computer Currents
Industry Focus
Classified Advertising
Advertisers Index

The American Oil and Gas Reporter - January 2012