What is in store for the energy commodities in 2022? We talk to Enverus to find out.

Dane Gregory - Enverus -ENB

What is going to drive the 2022 energy markets? Well, Dane tells us. There are vast amounts of data that Enverus evaluates before making market predictions. If you need to make a decision in the energy market, make that decision based on data. If you need data, go to Enverus.

Thank you Dane for stopping by the ENB Podcast. I had an absolute blast and look forward to our next update.

Please connect with Dane at his LinkedIn address Here: 

 

 

The following is an automatic transcript, and we disavow any errors unless it makes us sound smarter or more intelligent. 

Stu Turley, CEO, Sandstone [00:00:04] Hey, everybody, today is wonderful. Welcome to the Energy Newsbeat podcast. And I’ll tell you Enverus is always a great company. And if you want data and you got to make a decision, go to Enverus, and I’m here, and I’m here with Dan Gregory’s. I’m sure I butchered that name up. But I’ll tell you what, we are ready for a talk. You’re up in Calgary, aren’t you?

Dane Gregoris, Managing Director at Enverus [00:00:32] That’s right. Yeah, we are based in Calgary, Alberta, Canada,

Stu Turley, CEO, Sandstone [00:00:35] and you’re a managing director up there, correct? That’s right. Yeah. Of the research group, we were just talking about how you got to invest a little while ago, and you’ve been you were at the company formerly known as in Canada and kind of like the artist formerly known as Prince. Tell us a little bit about your background and how you got to converse.

Dane Gregoris, Managing Director at Enverus [00:01:02] Yeah. Yeah, I guess I got sucked into the energy industry from eastern Canada. I went to school out there, did an engineering degree, and, you know, as they say, moved west pretty quickly after I graduated, got a job at, as you mentioned. In Canada at the time, I was working in central Alberta on, you know, some really kind of old coal bed methane fields, but sort of cut my teeth on production engineering, which was awesome. And shortly after that, you know, I wanted to understand the industry from a higher level. Think about, you know, why companies make decisions, what drives financial markets. And so I moved over to a job with a company called ITG at the time, and it was the Calgary office of IPG, which was an energy kind of only equity research desk and based in Calgary here. And so I’ve been in the same job since that time. The companies changed their names many times, but I started as a research associate and worked with a lot of the same folks that I started with today. But the company certainly changed its names. We were carved out of ITG in. And that was, I guess, 2016 to be our standalone business, our U.S. energy group. And then ah, as energy was acquired in 2020, I believe by Inverse. So it’s been good it’s been a great ride and always, you know, fascinating to follow the industry through to the last almost decade.

Stu Turley, CEO, Sandstone [00:02:41] Well, I’ll tell you what, Dane, those that survive that many transitions of people being bought by a company says a lot for you.

Dane Gregoris, Managing Director at Enverus [00:02:50] Well, I think we’re lucky we’re in the people business being in that sort of research business and, you know, data and analytics company now. Yeah, certainly a little bit asset-light versus the, you know, empower sectors that we follow.

Stu Turley, CEO, Sandstone [00:03:05] Oh, all right. Let’s go over just a little bit. You just put out a report as managing director. Tell us a little bit about the report that you just put out. It was Energy Market Insights, 20 22 themes. Tell us a little bit about your thought process and your team working on this.

Dane Gregoris, Managing Director at Enverus [00:03:24] Yeah. So this is a sort of a culmination of, you know, a ton of work that we’ve done over the past year to give you a sense of the scale of the research. Our intelligence team at embarrassed today. It’s about 100 people. And so it’s a massive organization from a research perspective if you look at the relative size of other different kinds of industry research groups out there. So we’re able to take, you know, all the data that was available to our clients and you compare that with what we’re seeing in financial markets, in commodity markets and then come up with opinions on how we think, you know, the next year is going to play out. And so the 2022 themes that we’re anticipating are going to drive energy markets is what the research part is, is on.

Stu Turley, CEO, Sandstone [00:04:22] And when we sit here, we take a look at valuations that reset one of your quotes and here with valuations have reset across the new energy subsectors, particularly in the E.V. charging and energy storage. Can you allude to a little more on the E.V. side in the storage?

Dane Gregoris, Managing Director at Enverus [00:04:44] Yeah, sure. So then what we’ve seen, you know, with a lot of the discussion about high inflation through sort of the back half of 2021 and subsequent conversations with the Federal Reserve and other global central banks talking about, you know, the necessity. Raise rates. It’s really pushed a lot of the valuations for what we’d probably prefer to as a kind of like new energy companies that were recently public, you know, have a super high growth profile driven by, you know, the necessity to reduce carbon emissions and ultimately, you know, get to net zero at some point in the future. So. Right. If you think about the preference for the equity markets to like companies that have, you know, super high growth profiles versus companies that are maybe relatively flat burning a lot of cash, which would be more of a kind of the old energy economy? Is it really preferred in sort of the back half of twenty-one and then specifically in 22 there really, there’s been a strong preference for the cash flowing, you know, oil and gas companies rather than these really kind of new energy, but high growth companies so. So the valuations of reset on the growth side for sure. And that’s trickled down into these like energy transition equities. And we think that presents, you know, good opportunities. You know, at some point, if there’s a lot of companies out there, a lot of capital has been raised or will probably continue to be raised. So it’s going to be super fascinating to watch. I don’t think it’s clear to anybody who are going to be the huge winners or huge losers, but certainly, the size of the prize is big. And so, you know, entering or looking at the sector now may maybe be really fruitful, just given the downdraft in valuations that we see across those energy transition type equities.

Stu Turley, CEO, Sandstone [00:06:46] You know, when you sit back and take a look at energy is needed in everything. I mean, you’re talking energy to heat your house, which is kind of cold up in Calgary. It’s kind of cold here in Texas as well as Oklahoma. But how come some of the prices are going through the roof when we sit there and think about the prices of natural gas in New England is just going nutty, and the price is only five dollars, but they’re up and around one hundred and eighty dollars equivalent up in New England. I mean, in that kind of weird.

Dane Gregoris, Managing Director at Enverus [00:07:27]. Yeah, I think. You know, this year’s been. That’s a good way to put it. I think maybe a weird year for commodity prices, a lot, a lot of things driving that. You know, in the winter, particularly when it’s a little bit colder than expected like if we step back to December, there was a lot of forecast saying always going to be a super mild winter. So I think expectations kind of coming into January were pretty low from any sort of, you know, expecting any sort of big cold snaps. And so when you do get a cold snap, which the last couple of weeks has been pretty cool, the Northeast, which is the biggest sort of demand center for natural gas, right? You get weird pricing for sure. And it’s, you know if you look back in history and you can sort of seeing it on a cold winter-like, you know, especially in New England or, you know, other parts of the Northeast, you just get these really, really high prices and essentially is because there’s a ton of demand as you were right to heat their homes as in, it’s either need to get it through. LNG, I think in some cases or different pipeline routes that just aren’t really there. And so they need to pull on storage and other supply sources to get it.

Stu Turley, CEO, Sandstone [00:08:47] Oh yeah, the outside supply sources for LNG up in New England is kind of funny. They’re coming in from Russia and Norway. And so we’re paying for those, and I would rather buy everything from Canada. And because Canada has got some fantastic regulations up there as far as ESG, so

Dane Gregoris, Managing Director at Enverus [00:09:10] well, I don’t think they need that. They need it from Canada. I mean, they have the Marcellus right there.

Stu Turley, CEO, Sandstone [00:09:15] Oh yeah. So there’s not even a lot of it.

Dane Gregoris, Managing Director at Enverus [00:09:18] Yeah, they wouldn’t even need to go across the border too, but it’s difficult to build pipelines anywhere, really. I mean, we just heard I think it was last week, about the Mountain Valley pipeline being sort of stopped again by by courts. So it’s a very sort of structural theme, and it’s something that we’ve been talking about Appalachian gas, you know, beyond MVP, just given how much of a headache this pipeline has been and, you know, subsequent pipelines before then or I guess, precedent pipelines before then, it’s like it’s unlikely to really see another pipeline natural gas pipeline to be built out of the Northeast. And a lot of people are saying ever, which is kind of hard to think about, but it’s it’s it’s just that difficult to add infrastructure.

Stu Turley, CEO, Sandstone [00:10:05] Don’t you think it’d be it’s a bit of hypocrisy for folks saying we want ESG, but yet they’re buying from importing from Russia, oil me and Russian natural gas and LNG. I mean, it just seems kind of odd to me.

Dane Gregoris, Managing Director at Enverus [00:10:20] But yeah, it’s a global market. So I mean, you can if you’re willing to pay certain prices for things you, you get them. And so I do think there’s yeah, like an intuitive kind of strangeness about it, but at the same time that if you need it, if you need gas or you need oil or you need any sort of commodity, you can just go out there and bid sort of a high price and get it in in short order.

Stu Turley, CEO, Sandstone [00:10:49] with OPEC Plus meeting this week, what are your thoughts on Libyan OPEC+?

Dane Gregoris, Managing Director at Enverus [00:10:57] Yeah, we think, you know, they look they’ve done a really since the bottom of COVID, right? So if you think about it and sort of 2020, maybe like June, I think, was the big announcement where they were going to cut 10 million barrels a day out of the market as sort of the economy was grinding to a halt. And oil demand, you know, cratered at least call it five 10 million barrels a day or instantaneously. They’ve really ever since that point; they really have done a fantastic job sort of managing the oil market right now, taking supply off, adding a bit of supply only as prices really started and try and demand really started to recover. And so we think they are acting in their own interests in terms of driving higher prices. And certainly, they could have been more, I guess, or less accommodative from a price standpoint and just added a bunch of supplies or to whatever they wanted. But they’ve been pretty thoughtful. Right? And so, yeah, it’s led to, you know, that their policy decisions and among other different factors on the supply side have obviously led to very strong pricing for oil globally today. And we’re sitting here, I think it ticked over $90 for the first time since 2014. Just that. Wow, which is pretty wild.

Stu Turley, CEO, Sandstone [00:12:24] That is just crazy. And this sounds kind of odd, but my team has put together numbers for various reasons for $120 oil this year, and I’m showing 98. And there are some serious problems that that does bring in, and Nat Gas is looking at four dollars and 92 cents right now. So that and Brant was actually less than it’s eighty-nine, thirty-nine unless I’m reading that wrong and I am old, and that’s quite possible.

Dane Gregoris, Managing Director at Enverus [00:13:10] So yeah, I’m not sure that it is true. Usually, brands are so.

Stu Turley, CEO, Sandstone [00:13:16] And so when we sit back and take a look in various has got great data, you’ve got a great reach on your foresight and everything else. What do you see natural gas coming around for? Are the U.S. and for Europe, I mean, because that’s nuts. I mean, over there, what are your thoughts on worldwide pricing and or pricing for natural gas?

Dane Gregoris, Managing Director at Enverus [00:13:44] Yeah, for sure, I think the when you know, the team looks at, you know, we have an entire team that looks at the commodity market on a on a daily basis, and they’re sort of refreshing all the data we’re ingesting and changing models to better reflect what we think sort of the best guess the future will be right. And really for both commodities, both oil and gas, we do think that you’re going to see some softening like there are prices are really high and unsustainably high in Europe in and they shouldn’t be oil. Globally, oil and then U.S. natural gas prices, I can’t really comment on European pricing. OK. Don’t have a strong view one way or the other today, but certainly, we expect, you know, European pricing is going to be much higher than U.S. pricing, which will incentivize LNG. And that’s sort of been a really critical kind of fixture to the U.S., you know, natural gas prices and U.S. natural gas market. And so we still see that there is a ton of opportunity for more LNG to get built out. However, in the next couple of years, you have also a lot of supply getting added to the market. So the Haynesville is about 50 rigs running in the Haynesville today. There are certain operators, one private one in particular that I think is running last. I checked 13 or 14 rigs and then so if you take that plus southwestern plus Chesapeake, that’s like 60 to 70 percent of the rigs running the play today. So the Haynesville is an interesting story because if you take out maybe a few of those private operators and keep production flat all of a sudden in North America gas pricing looks rather interesting and it could stay relatively high. But if you have the Haynesville adding, you know, two Bcf a day a year for the next couple of years, right? You know, the gas market doesn’t necessarily look as short as it does today from an inventory perspective. So you start to sort of add to the supply, and that helps kind of bring prices down to a more reasonable kind of level in the three to 350 range. So that’s what we’re anticipating is that Hamas was going to grow. You also have associated gas with the Permian. That’s going to grow a lot to like. I think we heard ConocoPhillips talk about today that they’re a bit worried about Permian supply growth again. And it’s sort of this funny situation we’re in where I think last year everyone said, you know, supply growth in the U.S. is over. You’re never going to grow again. But certainly, that’s not the case. You know, we’re expecting almost a million barrels a day of growth out of the Permian and to be the everyday growth out of the gas side of the Permian, the Permian, the big gas player.

Stu Turley, CEO, Sandstone [00:16:23] Yeah, the EIA just put out Permian oil output forecast to hit a record high in February.

Dane Gregoris, Managing Director at Enverus [00:16:29] So yeah, it’s probably it’s there for sure already.

Stu Turley, CEO, Sandstone [00:16:33] And so when you take a look at the Haynesville, the Haynesville down in the Louisiana area down near the Gulf Coast is a wonderful place for like Cheniere. And after they got there, turning six on so that they can start putting out that LNG to Europe, there’s some profit. I mean, that was also kind of goofy. Just recently they had all of the LNG ships being, you know, one was in a Y, can you believe that day? And it got turned around and went to Europe? It’s what three hundred thousand dollars used to go through the Panama Canal. Holy smokes. That’s a lot of extra money they’re willing to pay just to get a load of LNG.

Dane Gregoris, Managing Director at Enverus [00:17:14] Interesting. Yeah. I mean, 300 grand is probably a drop in the bucket with these vessels. But yeah, that’s yeah,

Stu Turley, CEO, Sandstone [00:17:20] my credit card goes that high.

Dane Gregoris, Managing Director at Enverus [00:17:21] Yeah, yeah, yeah.

Stu Turley, CEO, Sandstone [00:17:24] But you know, we sit here and we think about the Haynesville. The Haynesville is the gift that keeps on giving. And you know, in in the marsh, the when you take a look at the Marcellus up there, it just is a shame. The Marcellus is such a gas-rich field, and they can’t have the takeaway going to the U.S. markets. It just is mind-boggling.

Dane Gregoris, Managing Director at Enverus [00:17:48] Yeah, no doubt. I mean, if you look at the Northeast, Marcellus, and Utica, the takeaway is probably, if not the most important part of the sort of economic. The decision for an operator standpoint, right? I mean, it’s pretty Effendi is pretty cheap. I like your drill cost per molecule, and it is not very expensive, but it costs you, you know, in some cases a dollar, if not more, to get it to market, right? Dylan MacPhee So it’s a better it’s a different play for sure from that perspective. And so every, you know, these big companies in Appalachia that have grown dramatically, you know, been the drivers of the, you know, practically zero to 35 Bcf a day play that it is today are sitting on, you know, great assets and they’re generating a lot of cash flow. But if there was a, you know, high gas prices or a reason to to to continue to grow, it’s the calculus is a little different there than it is in the Haynesville. Because if you add a bunch of production, the differentials that you’ll receive on the rest of the gas that you produce is is going to be the pricing you’ll receive is going to be rather low just because differentials will widen significantly. And we think that’ll probably happen a little bit in 2022. Just and even we think it’ll probably happen in the Haynesville on a short-term basis. Okay. So you need to see the Gulf run pipeline come online at the very end of this year, and we think the Haynesville will sort of outpace capacity at some point this year. So there’s always sort of these bottlenecks that tend to happen when the industry moves back to growth mode. And certainly, we do think that there are certain parts of the industry that are growing again, would say the private operators. The supermajors are definitely adding growth in North America to offset declines elsewhere. And the public is a bit still pretty conservative from a growth standpoint. They’re not really growing in the same manner that these private and supermajors are in the U.S..

Stu Turley, CEO, Sandstone [00:20:00] When we take a look at them there’s a. I was reading a couple of weeks ago about a billion-dollar natural gas plant going up into the Pennsylvania area. Do you remember which one that is or what that it is? I don’t,

Dane Gregoris, Managing Director at Enverus [00:20:17] I don’t recall. Yeah, unfortunately, I don’t. But I was having a conversation with a colleague the other day asking about, you know what, if they just built a bunch of, you know, gas mustard gas plants in the Northeast and shipped power instead of shipping gas? But yeah, and I’m sure many people have run that math, and there’s probably a good reason why there’s not a ton of new ads.

Stu Turley, CEO, Sandstone [00:20:41] That’s funny. I’ll tell you, you know, we need to definitely get off of coal and we do need natural gas. So I think natural gas is definitely the lowest way to help the emissions out there. We got a few more minutes here, and when you take a look at in various is. Give us your last thoughts on what you think in various is going to come because you, you were part of four purchases from, I mean, you had a trail to get to and bears where if you think where do you think in various is going and tell us what’s on the next hurdle for next corner for investors?

Dane Gregoris, Managing Director at Enverus [00:21:26] Yeah, for sure. I mean, it’s a big company today. I think the last time we had a new private equity sponsor in 2021 that injected capital at around a $4 billion valuation. Wow. So it’s a big business today and there is a, you know, there’s a fantastic team that’s been assembled. You know, from external hires, you know, tons of internal people that have either come from different parts of of the sort of embarrassing family kind of looking backward. And so, you know, the whole organization, I think, is rallying around the necessity and the importance of energy for all our livelihoods. And I think last year in particular, given the run-up in commodity prices, given the run-up in just pricing like inflation, I think it’s a lot more apparent. You know, you had a European energy crisis. Luckily, you know, a warmer winter didn’t have as many negative consequences as it could have from. But overall, there’s a I think there’s a more kind of societal push to bring energy sort of the forefront of conversations. And so everybody here it is sort of an energy nerd, if you will, right? Like, they’re super fascinated by the industry and they want to do their part to make our clients lives, which most of the time are either, you know, look to do financing in the energy industry or look to operate and develop projects, whether it’s on the upstream, midstream, downstream sides of the supply chain. So we can do a lot as a technology provider to help to make their lives easier to help make their decisions. Armed with more data. And so they can make more accurate decisions about, you know, what different, whether it’s just, you know, supply and demand forecast, whether it’s optimizing a given unit, you know, of drilling spacing unit in the Permian Basin, you know, there’s many different ways we can help, but certainly, that’s sort of our our our north star. And we’re continuing to sort of invest in our products. So ultimately, you know, all these all are our clients can do their jobs better and deliver, you know, a reasonable cost energy mix to the global population.

Stu Turley, CEO, Sandstone [00:23:58] I’ll tell you what, that is a very good way to say everything there. And it’s if you got to make a decision in the energy space, you better make it based off of data in a data go to and various because I’m impressed with all the data resources in the products.

Dane Gregoris, Managing Director at Enverus [00:24:17] Holy smokes. Oh yeah, me too. For sure. It’s great.

Stu Turley, CEO, Sandstone [00:24:20] Yeah, you know. Anyway, well, thank you very much for stopping by the podcast and look forward to getting this out and we’ll have your contact information in there as well, too. So thanks very much.

Dane Gregoris, Managing Director at Enverus [00:24:31] Thanks to appreciate the time today. All right.

Stu Turley, CEO, Sandstone [00:24:33] Bye-bye.

 

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About Stu Turley 2062 Articles
Stuart Turley is President and CEO of Sandstone Group, a top energy data, and finance consultancy working with companies all throughout the energy value chain. Sandstone helps both small and large-cap energy companies to develop customized applications and manage data workflows/integration throughout the entire business. With experience in implementing enterprise networks, supercomputers, and cellular tower solutions, Sandstone has become a trusted source and advisor in this space. Stuart has led the “Total Corporate Digital Integration” platform at Sandstone and works with Sandstone clients to help integrate all aspects of modern digital business. He is also the Executive Publisher of www.energynewsbeat.com, the best source for 24/7 energy news coverage and is the Co-Host of the energy news video and Podcast Energy News Beat. Stuart is on Board Member of ASN Productions, DI Communities Stuart is guided by over 30 years of business management experience, having successfully built and help sell multiple small and medium businesses while consulting for numerous Fortune 500 companies. He holds a B.A in Business Administration from Oklahoma State and an MBA from Oklahoma City University.