Friday, February 26, 2010

Chesapeake due for 'Major' upgrade

The face of the energy industry is changing. It is cyclical. It has happened before, and it will happen again. Certain independent exploration and production companies didn't survive the credit crisis.

Those names are gone from the radar; that's one change. Another might be the way we think about some of the large independents.

"Never stop thinking," offered Kenneth A. Hersh, CEO of NGP Energy Capital Management, at IPAA’s Private Capital Conference in Houston on Thursday.

Hersh reminded the crowd that the oil and gas industry is not immune to the conditions and phases that other industries have gone through, and that now is a time to maintain discipline, push forward, and perhaps change the way we perceive the industry.

The best example of the changing times, he said, is the changing of the 'majors,' and perhaps even, the 'super-majors.' ExxonMobil is a non-disputed supermajor. Ten years ago the company had an enterprise value of roughly $50 billion spread throughout the world.

Today, while companies like Chesapeake, Devon, and Apache are all, in fact, independents, they really should be considered majors, he said. Each carries an enterprise value of over $40 billion, and inflation and other generational considerations aside, the companies are certainly in the league as the Exxon of a decade ago -- bigger when you consider the scope of the companies in North America alone.

What do you think? Is it time for the industry to lump these companies in with the Exxons and Chevrons of the world?

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4 Comments:

Anonymous Hondo Lane said...

Super-indies! I believe the litmus test for a major is still a gas station with your name on it down at the corner, and a NASCAR racer with your lubricants' logo painted on it.

March 2, 2010 at 3:34 AM  
Anonymous Anonymous said...

Why do we need to attach a title? What difference does it make?

March 4, 2010 at 7:08 AM  
Anonymous Anonymous said...

Agreed - what separates the majors from the independents is their refining and marketing operations.

What about Oxy? Almost $60b in market cap. Add Valero's refining and marketing operations to Oxy's E&P, and you have a major to rival Conoco (at least in size).

March 18, 2010 at 3:39 PM  
Anonymous Anonymous said...

Perhaps rather than redefining what constitutes a "Major", we should redefine "Independent". I do not see how any publicly traded corporation, beholding to its shareholders, can be considered an Independent. That said, I expect that, should the nation fully embrace natural gas as a transportation fuel, Chesapeake will fast become a leading retail marketer of same, thus joining the ranks of Exxon et al.

September 1, 2010 at 9:32 PM  

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