Brian Walzel, senior editor, Hart Energy: Hi, I am Brian Walzel, senior editor at Hart Energy. We're here at the DUG Executive Oil Conference in Midland, Texas. I'm here with Marshall Adkins, head of energy at Raymond James. And Marshall just give a great presentation on his perspectives on U.S. oil and gas prices. I want to follow up here with the few questions. You look a lot at what the market may be missing in oil and gas pricing. Can you talk a bit about what you're seeing there?

Marshall Adkins, Raymond James: Yeah. There's quite a few things I think the market is factoring in that isn't necessarily accurate. The biggest one is there's this perception of a massive overhang of excess capacity in OPEC, and I think it's much, much smaller than the number most people quote, and that's for many reasons. The top line is reported by the IEA [International Energy Agency] is always inflated by guys like Venezuela, Nigeria and Iraq that have never gotten to their potential and probably won't for a long time. But the bigger issue is, I think on a sustainable mid-term basis, actual excess capacity, which is you need it to be sustainable in the next year or two, is much, much lower. So most people quote five, 6 million barrels a day. I would tell you, I think that number's closer to one and a half, two at the max, which is a big deal because if you lose somebody like Iran than you're going to eat up a lot of that excess capacity pretty quickly.

BW: Yeah. And what are some of the drivers that you feel may push natural gas prices higher?

MA: Well, it is clearly the demand side over the next five years, you have these unprecedented surge in demand from both LNG and powergen. Powergen's kind of been the surprise one for most people, ourselves included, as to how strong and how sudden that's come on. With AI, everyone's trying to get a first mover advantage, and these chips are absolute power hogs. And so as you build that out, we're looking, average over the next five years, or I think you'll see probably two Bs [2 Bcf/d] a day of power demand growth and probably two Bs a day or more of LNG growth. So when you're talking four Bs a day on a hundred B market, that's a big deal because over the past decade, that number would've been much, much smaller.

BW: Yeah, it's good news for natgas producers, certainly. You mentioned crude oil growth has been relatively flat. What are some factors, could that lead to more growth in oil supply?

MA: Well, I don't think we're going to see at current prices any meaningful growth in U.S. production. I would also say the other major non-OPEC players, which you'd call Norway and Canada and Brazil—Brazil massively disappointed this year, and so I don't see any meaningful growth in those three. Maybe some growth in Brazil, but I think that's overestimated as well, because people aren't factoring in the decline rates there. Really, then you're left with Guyana and Guyana's going to grow. That's going to happen. A lot of people are quoting a million half a day of non-OPEC growth next year, so their models are out of whack. I think best case scenario, we're talking closer to half a million a day from non-OPEC.

BW: Okay. Well, Marshall, I appreciate your insight and thank you all for watching.

To read or watch more, visit HartEnergy.com.

Comments