If there's one thing the downturn in the oil industry has done, it's eliminated a lot of names from our reading list. A number of failed oil-price predictions or absolutely atrocious planning for the possibility of a downturn will do that.
However, while we've stopped listening to a number of industry experts and CEOs, there are a handful of energy CEOs who still have our ears. It's not that they predicted the oil price to the second decimal point, but that they have avoided such predictions. Instead, they have focused on what matters more, which is leading a business that can thrive in any condition. Three CEOs have really come to the forefront during the downturn, having earned our trust and our listening ear whenever they talk about the industry.
Tyler Crowe: There are still several energy industry execs whom I listen to when they talk about their companies and the direction they want to go in today's price environment. But for the most part, I like to listen to them because they stick to their knitting and focus more on their own company rather than try to make any broad-stroke assessments of the industry. When I'm looking for insight into the entire oil and gas industry, though, the one CEO whose conference call transcripts I take time to read is Core Laboratories (CLB 2.57%) CEO David Demshur.
There are two primary reasons I find Demshur's insights so valuable. The first is that Core has an extremely broad customer base that varies from the world's largest oil and gas company -- Saudi Aramco -- to the smaller mom-and-pop producers here in the U.S. The company sees what is going on with several OPEC nations, offshore production and activity, shale gas and tight oil in the U.S. and abroad, and everything in between. Working with this wide swath of companies that make investment decisions ranging from green-lighting development work to designing plans to maintain production at mature fields gives Core Labs an incredible wealth of knowledge that few can replicate.
The other reason that I value Core Labs' and Demshur's insights so highly is that the company is extremely well versed in the dynamic properties of oil and gas reservoirs. Core's entire business model is based around their expertise in understanding the interaction among rock, water, and oil in a reservoir and how to most economically get hydrocarbons out of the ground. Since the company is doing these tests on an almost daily basis, Core knows where investment is needed to maintain production at wells, reservoirs, entire companies, and to a lesser degree the entire world.
With that amount of data at his disposal, more than 35 years of experience at Core, and more than 20 at the helm of the company, it's worth paying attention when Demshur has a chance to talk.
Jason Hall: Like Tyler, the CEOs I tend to pay the most attention to are the ones who focus their talk on their particular companies and segments of the business, versus the ones who pontificate on things like oil prices. One CEO I especially listen to is Terry Spencer, CEO of ONEOK and its master limited partnership, ONEOK Partners.
While Spencer has only been at the helm since the beginning of 2014, he's been at ONEOK for almost 15 years and in a number of roles that give him solid operational knowledge of the business and its strengths. And while he's a newcomer to the CEO seat, he's no spring chicken, having been in the oil and gas industry for more than 30 years.
But what it really gets back to with Spencer -- and why he's a CEO I'll listen to -- is the results of the business he runs corresponding to what he says, combined with the fact that he doesn't talk about anything and everything but focuses instead on his business and the midstream segment it operates in.
In his must-read book The Signal and the Noise, statistical wizard Nate Silver wrote about a negative correlation between how often pundits and experts make predictions and how often their predictions are right. In other words, the more often someone is willing to predict the future, the more likely they'll get it wrong. I've learned it's better to listen to CEOs who predict less and talk about what they are doing in their businesses more.
Matt DiLallo: One energy CEO whom I've really grown to respect during the downturn is Paal Kibsgaard of Schlumberger (SLB 3.26%). As the leader of the world's largest oil-field service provider, he has his finger directly on the pulse of the oil industry. Because of that, he can see things that others can't. That's why his market commentary each quarter is a must-read for me.
Kibsgaard doesn't bother predicting where oil prices will head. Instead, he focuses on the oil market and has been spot-on in his analysis of the fundamentals of supply and demand. For example, he was one of the first to hint that lower spending by oil companies would eventually lead to tightening supplies simply because the decline rate would take over. The next quarter he reiterated that tightening in the oil market would start to become visible in the second half of this year. Then just last quarter he called the bottom, not in oil prices but in activity levels due to what he was seeing in the rig count as well as from customers. Through it all, he pointed to the challenges ahead as the oil market self-corrects, but noted that once that correction comes, activity levels will begin to improve. We've seen glimpses of that on the horizon as the rig count has stopped its dramatic drop.
However, what has impressed me most about Kibsgaard isn't just his solid market analysis, but the steady hand with which he has guided Schlumberger during the downturn. I can't help but be impressed with his company's operational performance as Schlumberger managed to beat analysts' estimates both quarters so far this year as the company has done an exceptional job managing its margins. It's an impressive feat and only gives more proof of Kibsgaard's ability to lead and paint an accurate picture of the oil market.
Suffice it to say, when Paal Kibsgaard speaks, I'm all ears, with pen at the ready.