Recap: Credit Suisse Energy Summit
Last week, the energy industry's movers and shakers headed to Vail, Colorado for this year's Credit Suisse Energy Summit; no doubt the chairlifts sat empty with all those PowerPoint presentations to watch.
Company presentations are a great way to get a firm grasp on the overview of a particular company. Where are its operations, what is it focusing on in the long term and the short term? How does it compare to the rest of the industry? Here is a quick recap of four companies that were among the presenters.
Encana (NYSE: ECA)
The market's biggest worry about Encana is that prolonged basement-level prices of natural gas will leave the company in ruins. The company addressed this concern in its presentation. The "Meeting the Challenge" slide outlines a four-part strategy for "adapting to a prolonged low gas price environment."
The first two points contain fairly ubiquitous plans industrywide: Target oil and natural gas liquids, and limit natural gas investment to low-cost plays.
The next two points, leveraging third-party capital and maintaining financial discipline, are just as crucial to Encana's ability to stave off doom. The company's capital budget this year is a tight one. Encana won't spend a penny more than its expected cash flow, minus dividends.
I'm not saying that Encana isn't guaranteed to fail by any means, but executing its game plan this year is crucial to future success. The company has a ton of debt maturing in 2014, which could prove to be disastrous if the ship isn't righted by then.
Devon Energy (NYSE: DVN)
Devon Energy owns liquids production. The company's sales revenue mix as of the third quarter was 57% liquids, 43% gas. Most U.S. companies would kill for that breakdown right now.
Devon puts a lot of emphasis on per share returns, optimizing shareholder value through exploration and production projects, debt reduction, and share buybacks. Many Fools before me have questioned the value of share repurchase programs, but reducing debt is typically a winning idea. The company has a net debt to capital ratio of 10%.
Outside of that, I was a little bit disappointed in Devon's presentation, which focused mostly on recapping 2011, leaving investors in the dark a bit about 2012.
Marathon Oil (NYSE: MRO)
This is the beginning of Marathon's first full year without its refining business. 2011 was a rough transition year, and the company needs to find a way to make up the ensuing gap in revenue. Therefore, I was most interested in seeing how it plans to spend its money in 2012. The company did not disappoint, treating me to three different pie charts.
Marathon plans to spend $4.5 billion to $5.5 billion in 2012, with the bulk of that aimed at growth initiatives in the Bakken and Eagle Ford shale plays. The company has also set aside 25% of its budget to maintain operations in the U.S., Canada, and abroad. The international assets will receive 39% of those dollars. Marathon's international operations are focused in Scandinavia, Africa, and the Middle East.
Newfield Exploration (NYSE: NFX)
Newfield's used its presentation to announce its goals for the year and to highlight the transformation of the company's production mix from 70% natural gas in 2010 to an expected 52%/48% gas to liquids split in 2012. Again, the liquids focus isn't news, but Newfield proves it has a track record of successfully adjusting its production, growing liquids from 30% in 2010 to 40% in 2011. Plenty of companies will talk about doing it, but Newfield can actually back it up.
I like Newfield's approach for 2012. Similar to Encana, it plans to keep a tight leash on costs. It also plans to improve its operational focus, putting the "right people on the right projects." Human capital plays an increasingly important role in this industry, it's growing quickly and it is becoming more difficult to fill crucial positions with experienced candidates. The emphasis management is putting on its people is a good sign.
Most companies will have an "Events and Presentations" section on their investor relations site. These presentations can contain a great deal of insight to operations and financials and are worth reviewing whenever possible. Not to mention they are almost always easier on the eyes than a 10-K.
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