Panelists at the recent KPMG global energy conference were cautious on commodity prices but firm on what kinds of business models will draw their funding. "We go to where the oil patch is," Peter Kagan, managing director, Warburg Pincus, told the audience in Houston. "We look for people with passion and conviction-or, we find the opportunity first and then proactively find the team. We found part of the Targa Resources [Inc.] team this way." Warburg provided seed funding for the midstream start-up in 2003. "We're not doing investments that only will work with $70 oil; we're not lowering the bar on the quality of management teams; and we're not accepting lower risk/reward profiles." Banc of America Securities LLC likes domestic opportunities and the Gulf of Mexico, said Dan Condley, managing director of the natural resources group. He doesn't see the investment bank going international for a small or private company, and it is more balance-sheet than reserve-base driven when selecting new investment opportunities. "As an industry, I hope that we're much smarter today," Condley said. "Though we may see $30 to $35 oil and $5 to $6 gas again, we may see newer pricing plateaus." Condley's price decks are conservative, "which means we like $46 for oil and $6.75 for gas. We tend to look at field-level economics, and we'll never be out there lending the strip." Kagan declined to mention Warburg's commodity-price decks. "We may make a prediction about prices or a time period, but we don't do both." He added, "If the current oil and gas pricing macro is so unique, it's ironic that gold, grains, even orange juice commodity prices are high, too. In spite of this, if this is a commodity-pricing bubble, I believe we'll weather it well."

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