Opportunities for Independent E&Ps in Marcellus, Eagle Ford and Permian Basins: A Wall Street Transcript Interview with Leo Mariani, U.S. Oil and Gas Exploration and Production Analyst with RBC Capital Markets

Wall Street Transcript

67 WALL STREET, New York - March 3, 2014 - The Wall Street Transcript has just published its Oil & Gas: Refining, Independent and Major Integrated Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Oil Price Expectations - Unconventional Resources - Capital Expenditures and Consolidation Activity - Oil and Gas - Emerging Shale Plays - Shale Drilling Capital Expenditures - Independent E&P Opportunities

Companies include: United Parcel Service, Inc. (UPS), FedEx Corporation (FDX), EOG Resources, Inc. (EOG), Pioneer Natural Resources Co. (PXD), Newfield Exploration Co. (NFX), Goodrich Petroleum Corp. (GDP) and many others.

In the following excerpt from the Oil & Gas: Refining, Independent and Major Integrated Report, an expert analyst discusses the outlook for the sector for investors:

TWST: As we look out over the next year or two, how would you characterize the outlook? It's been pretty interesting so far.

Mr. Mariani: I think the outlook for independent E&Ps is actually pretty good over the next couple of years here. Generally speaking, I think that commodity prices are going to hold in there. We are definitely not bearish on commodities, but not super bullish either. We continue to see WTI oil prices kind of in that mid-to-low $90s on average over the next couple of years, and Brent prices north of $100. So I think that's definitely a good spot here for these E&Ps in terms of profits. Natural gas, obviously a lot of the E&Ps have got exposure there in the U.S.

Our expectations are that gas prices may have peaked a bit in the short term. We do expect them to come down a little bit over the next couple of years. We still think we are kind of in that $4 to $4.50 range though, which for the right producers in the right plays, most notably the Marcellus Shale, there is still quite a bit of profits and strong economics there.

TWST: Natural gas prices have been lower than people anticipated. Is it going to stick at a better level as we look forward?

Mr. Mariani: Yes, we do think that's the case. Obviously, if you look at 2012 and 2013, these years had been pretty challenging for natural gas, and particularly 2012 was pretty ugly. So our expectations are, given where storage is these days for natural gas, that prices will be better over the next couple of years, which is kind of in that $4.00 to $4.50 range. So we don't really have any big concerns.

I would say though, I do think that supply continues to grow a bit faster than demand in the short term. But due to an extremely cold winter that we have experienced here in 2013/2014, storage is in a great spot, and we think that as a result prices will stay better than they have been for the last two years.

TWST: As we look out, where are the opportunities for the independents? Is it still the shale gas and shale oil?

Mr. Mariani: Yes, generally speaking that's correct. I think if you look at the key plays that folks are drilling out there on the oil side, it's really the Bakken, the Permian and the Eagle Ford. I would highlight the Permian as a huge opportunity for independent E&Ps, which I think will have legs for the next 10-plus years...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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