Mercer Capital’s energy team sponsored and attended the D-CEO 2021 Energy Awards in Dallas last week, October 26, 2021.  It was a great event and a good opportunity to connect with clients, peers, and industry leaders in the energy space.   Awards ranged from honoring top executives, including Scott Sheffield of Pioneer Energy, to private equity firm innovators like Pearl Energy Investments.

Oil, Natural Gas, and Renewables

The focus of the night was the interdisciplinary threads between oil, natural gas, and renewables.  “Sustainability and profitability are not mutually exclusive,” said Vikram Agrawal of EarthxCapital who participated on a panel alongside Joe Foran, CEO of Matador Resources.  According to the panelists, renewables and natural gas are to be watched as the energy mix needs evolve in the U.S. and around the world. As an example, natural gas fuels about 40% of our power in the U.S. according to Agrawal.

If the move goes towards more electrification, as illustrated by the news this week that Hertz has ordered 100,000 Tesla electric vehicles, there will be a need for 20% – 40% more power in the next 20 years.  As we’ve discussed before, the current trajectory of renewables appears unable to meet these demand growth needs.  Therefore, cleaner-burning natural gas will be a key contributor.  One panelist mentioned the  exception was hydrogen as a potential contributor.  Interestingly, this was echoed in comments on the latest Dallas Fed Energy Survey:  “The more I become educated on EVs [electric vehicles] and the charging and battery disposal problems, the more I think they will have little effect on the market in the future.  My investigation turns more toward the hydrogen cell as the long-term solution.”

No matter what the source, recent price growth suggests that more investments will be needed.  The panel also stated that oil and gas investment will drop 26% from pre-pandemic levels to $356 billion in 2021.  Various sources, including Exxon, suggest that this figure needs to increase to around $600 billion by 2040.

Optimism for investment opportunities was not limited to upstream, but also infrastructure, with nearly $18 trillion in investment opportunities for energy transmission alone.

Interesting Tidbits & Statistics

Within the theme of investment opportunities, renewables, and natural gas, several interesting factoids from the evening emerged (in no particular order):

1.   Electric Vehicles and Charging Stations

• • How many electric vehicles are there for every charging station in the U.S.?
    • The current ratio is 17
    • Many think this ratio needs to be closer to 10 (there are about 42,000 charging stations in the U.S. right now – many at hotels and other overnight destinations)
    • The Biden Administration suggests we need 500,000. Agrawal thinks the real number is 1,000,000 to 1,500,000

2.   Electric Cars Are Not a New Thing

• • Did you know that 120 years ago, nearly one-third of our cars were electric?  Granted there were only 4,000 cars at the time.  Did you also know that Thomas Edison invented the first electric-powered car?

3.   Investment in the Space Is Picking Up

• • So far this year 35 SPACs acquired businesses worth $100 billion

4.   What Do “Net Zero” or “Carbon Offsets” Really Mean?

• • According to a Wall Street Journal article, only 5% of “carbon offsets” actually remove carbon.

Conclusion

Thanks to our clients, friends, and partners that we saw at the event.  It was fabulous and nostalgic to be getting out again!  And thanks to D-CEO for putting on a great event.  Until next time!