DALLAS—Many energy executives struggle with the growing emphasis on ESG—environmental, safety and governance—issues. And well they should, speakers at the EnerCom Dallas investor conference Feb. 11-12 cautioned. 

Meanwhile, another trend grows: Investors want value—returns on their capital—not growth, they added.

“ESG is not a flash in the pan,” James Wicklund, managing director with Stephens Inc., cautioned in his presentation. “The goal is to be the best there is” in an industry focused on producing out-of-favor, carbon-based fuels. A producer can’t compete environmentally with an office-bound information technology firm, for example, but that producer can work to keep its environmental impact less than that of similar-sized peers.

He added that “the midstream is the only segment that still works,” for environmentally sensitive investors. “It’s also the only one that is sustainable. The Holy Grail is all things digital and intelligence.”

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Kenneth Wonstolen, senior vice president and general counsel for Denver-based HighPoint Resources Corp., discussed Colorado’s “challenging environment” for oil and gas producers. He reviewed the firm’s ESG efforts centered on an active corporate responsibility program.

He noted that getting credit for corporate ESG efforts depends to a large part on learning to speak the right jargon.

“One of the first things to know about ESG is if you don’t say it, you don’t get credit, even if you’re doing it,” Wonstolen said. For example, he said companies should not have an environmental “practice” but a “policy.”

Why the persnickety emphasis on language?

He said the monitoring agencies that rank firms’ ESG efforts must rely on web crawlers that search through a blizzard of corporate responsibility reports, proxies and other documents to establish ratings. “They simply don’t have the manpower” that would allow staff to manually read thousands of documents.

The crawlers have key words to find. If the words are there, fine. If not, investors and the public won’t know.

HighPoint Resources operates in the Denver-Julesburg Basin, with more than 155,000 net acres under lease, centered on Weld County, Colo.

Charlie Riedl, executive director of the trade group Center for Liquefied Natural Gas, said in a luncheon keynote that the industry does have a good story—natural gas—to tell on environmental issues.

“Gas derisks renewables,” Riedl said. But he cautioned that Russia, and perhaps other energy producers, have a vested interest in boosting U.S. environmentalism at the expense of the domestic oil and gas industry.

“There is a strong effort to undermine our efforts,” he said, adding Russia wants to emphasize the perceived risks of hydraulic fracturing but “is not forthcoming about its own environmental risks.”

He also cautioned the conference’s energy-friendly audience not to assume regional support of the industry. Riedl described a recent survey of energy industry issues that found similar, and generally negative, views about oil and gas among Houston-area respondents. Their comments differed little from people questioned in Seattle.

Natural gas does have a more positive view with the public than oil, he added, due to its use in sustaining renewable energy when the wind stops and the sun doesn’t shine.

Decoupling oil and gas could be an important move as many in the general public now mentally link gas with renewables, and oil with coal. “Thinking of the two together can be a dealbreaker for gas,” he added.

Wicklund noted the environmental part of ESG continues to loom as a prime, worldwide issue. He noted BP Plc announced plans Feb. 11 to be a net-zero carbon company by 2050.

“Companies like BP and Exxon Mobil don’t change their emphasis on a CEO’s whim,” he noted. Such supermajor announcements come only after considerable research and consideration. 

Several speakers spoke to another significant trend: Investors’ view of energy stocks as a value play rather than a growth play. Some cautioned the current downturn in prices could linger as efficient production from the unconventional plays exceeds demand.

Wicklund also said BP has decided to emphasize “value or volume” because “investors want to be paid a return on their capital.’

The Williston Basin could be one play that gains from that value emphasis. Nicholas Noppinger, CFO with Flatirons Field Services LLC, a Bakken and Rockies midstream operator, reviewed the firm’s North Dakota operations for conference attendees.

“The Williston is a true mining operation,” Noppinger said, due to its predictable geology, which keeps costs low. However, the region faces the prospect of more crude-by-rail shipping as slowing production growth won’t merit new pipeline capacity.

Elaborating on value, Wicklund closed his presentation by saying, “The question is profitability, whatever the [commodity] prices are.”

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