Energy sector not likely to soon improve job outlook

The downward pressure on jobs in the Fort Smith metro area tied to natural gas exploration and production is not likely to ease in 2009, according to a member of a new Stephens Inc. energy investment banking team.

Numerous companies, including Halliburton and Schlumberger, have sizeable operations in the Fort Smith area. The decline in natural gas prices and increases in gas storage have created an environment in which exploration and production companies are hesitant to boost production.

Natural gas acquisition prices are consistently in the 4$ to $4.50 range, according to a May 13 report by the American Gas Association. The AGA also reports that natural gas storage as of early May was 34.4% more than the same period in 2008.

“Domestic production declines will happen as time passes given reductions in drilling activity and budgets – that is a fact. … (M)any analysts believe that the market price for natural gas still has room at the bottom to fall given high storage inventories, lackluster demand and a relatively strong supply position compared to potential summer demand,” AGA noted in its report.

Keith Behrens, managing director of Stephens’ new energy investment team, told The City Wire not to expect gas prices to push renewed activity anytime soon.

“Most analysts are projecting soft gas prices through the end of the year although gas prices have increased recently,” Behrens noted in an e-mail interview. “As gas supply is worked off when economic activity picks up, gas prices should rebound and activity will pick up.”

ENERGY INVESTMENT BANKERS
Officials with Little Rock-based Stephens announced May 11 the new energy team with offices in Dallas and Houston. Managing Directors Keith Behrens, Ronald Montalbano and Bradley Nelson, are joined in the effort by Will Page, Joseph Allio and Steven L. Hanks. The group, originally formed in 2001 as Energy Capital Solutions, has closed more than 100 energy sector deals for public and private companies.

The new team is active in providing capital to ethanol operations and other renewable energy companies. Wind energy is not now a part of the business, but Behrens said the company “will evaluate opportunities that arise within that sector.”

Nuclear power, an energy sector that has seen more than 20 applications for new plant within the past few years, also is not an active part of the new Stephens energy group.

We have not been active in nuclear energy since no new plants have been built over the past few decades and, therefore, little capital has been required for groups like ours to assist companies with,” Behrens noted. “There has been some (mergers and acquisition) activity and we would get involved in those transactions.”