Energy Investment Strategy
The energy sector is undergoing a dramatic restructuring worldwide. Oil prices have dropped precipitously due to supply and demand imbalances. The overall excess supply is not great on a percentage basis and should come back into balance over time. Large oil producing nations require substantially higher prices to balance their budgets and we anticipate an eventual move by these nations to unify to constrain supply and bring prices back to productive levels.
The cost of drilling in the USA has declined significantly over the last two years, which has maintained production at higher levels than many analysts had anticipated. However, given the current oil price trading range, we anticipate production in the USA to decline at a more rapid pace in the coming months.
Energy is a cyclical industry and we expect it will rebound to profitable levels with 24 months. Over the next 12 months, we anticipate a number of distressed opportunities will arise due to high levels of debt by some operators. We see opportunities in acquiring assets spun-off by distressed operators in an effort to provide liquidity to their balance sheets. We also anticipate opportunities in acquiring distressed debt.
Our experienced team has the ability to seek out and evaluate these opportunities, and to operate the assets at cost structures below the competition.