Credit professionals from PESA member companies gathered at the 2016 PESA Credit Interchange Division Annual Meeting on September 21-23 for networking opportunities, training on how to best utilize the CID platform, and presentations from industry experts.
With more than 40 member companies, PESA-CID creates a unique opportunity for credit professionals to exchange trade credit information and histories on more than 10,000 customers. This data provides a cost-effective way for members to anticipate and reduce financial risks. Additionally, the program provides a strong network of credit professionals, which was elaborated on by Doug Dunlap, Director of Credit, TETRA Technologies, Inc., and PESA-CID Operating Committee Chairman:
“We, CID members, are a living history. We learn through networking and use shared experiences to prevail through a challenging market,” stated Dunlap. “The CID Annual Meeting elevated my knowledge on the issues and trends facing our industry and provided valuable networking opportunities with peers and industry leaders.”
Speakers, including those from Haynes & Boone, Kirkland & Ellis, BDO USA, Wood Mackenzie, M-III Partners and Parkman Whaling, shared their expertise through presentations and engaging discussions. Topics of discussion included basin analysis as a tool in making credit decisions, current legal issues in credit and bankruptcy, and understanding debt structures and equity financing.
In addition to outlining how the economics of a well differ not only from basin-to-basin but within the basin, speakers from Wood Mackenzie shared an overall positive outlook for the industry. For natural gas, the Northeast will see the fastest growth with the Marcellus and Utica plays representing more than half of the breakeven gas resources. The oil-focused Permian Basin will experience more growth than other areas, accounting for almost 60 percent of the sub-$60 breakeven wells. With continued investments in this region, it is estimated that 50 percent of production will come from the Permian Basin by 2025.
Despite recent improvements, bankruptcy and insolvency continues. However, according to Charles Beckham, Jr., Partner at Haynes & Boone, traditional Chapter 11 bankruptcies are rare. With the rise of “prepackaged” and other forms of bankruptcy, it is important protect your company by understanding the effects of a customer filing bankruptcy and adjusting payment terms accordingly. Before the petition date, debts can be restructured and paid under a plan. Upon petition, debts are frozen then subject to administrative expenses and ordinary course obligations.
With wide experience in restructuring proceedings, Steve Hessler & Andrew Calder of Kirkland & Ellis provided insight on strategies service and supply companies can use when one of their customers enters into bankruptcy. “Dialogue with a distressed company” is critical, and you should start it early.
Jared Yerian, Managing Director at M-III Partners, discussed the importance of asking the right questions when determining credit terms. Some factors he considers vital are rock quality, the effectiveness of drilling techniques, capital allocation across a portfolio and the ability to execute a development plan.
“Client asset specificity is critical to the commodity risk profile,” stated Yerian. “Asset quality and productivity varies widely within each basin and different data should be used to analyze the productivity of each play and each operator.”
Bret West and James Peery from Wells Fargo provided insight into past and upcoming borrowing base redeterminations. They also emphasized that rock quality will be an important factor moving forward. The information from the PESA-CID Annual Meeting provides true value, helping members to rebuild and refocus during the downturn.
In an effort to better serve its members, PESA added two seats to the CID Operating Committee and appointed Carrie Mendiola, North America Credit Manager at Schlumberger and PESA Advisory Board Member, as the first CID Liaison to the Board of Directors.
Additionally, PESA held the first ever elections for the CID Operating Committee and updated its policies to facilitate increased member engagement. Congratulations to the 2016-2017 PESA Operating Committee: Don Burell, Schlumberger; Doug Dunlap, TETRA Technologies; Committee Chairman Randy Friedsam, Select Energy Services; Don Giallanza, Halliburton; Ross Guthrie, Key Energy Services; Lauri McDonald, Nabors and Kristy Woolsey, DistributionNOW. For more information on how to join PESA-CID, contact Ryan Bowley at firstname.lastname@example.org.
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