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A Note From East Daley’s Managing Director of Midstream Strategy, Ethan Bellamy

I admit It. When I saw -$38 for a Cushing barrel, I considered throwing in the towel on energy. When I first arrived in Colorado in 1998, you could find former landmen driving taxis. Geologist John Hickenlooper first became a brewer on his way to the Governor’s mansion. I survived the oil price whipsaw of 2008, falsely confident that I had seen a career worst, but newly cognizant of how wrong purported experts can be, how badly organizations can be managed, and how quickly oil prices can pummel investments into oblivion. The cyclicality of energy markets creates periods of pain and pleasure, immortalized by the classic oil patch bumper sticker, “Please God, give me one more oil boom. I promise not to piss it all away next time.” Ironically, the year started out bullish with potential Iranian strife threatening supply and providing a price tailwind. Yet by May, I felt like the demand shock of 2020 might be the last straw for me.

The Coronavirus pandemic has killed 154,471 Americans, 47,746 Mexicans, and 8,947 Canadians as of August 3, 2020. Resulting lockdowns have destroyed businesses, leading to massive monetary and fiscal intervention that has dwarfed the response to the Great Financial Crisis. Protests and riots over the murder of George Floyd have exposed deep political and cultural divisions in the US. And the oil crash, the byproduct of halting most economic activity to control the spread of COVID-19, delivered a knockout blow to many energy companies. Elected officials and bureaucrats responded with mixed success, contributing to fading trust in government, which is seen as a sign of cultural sickness and national decline. 

Out of this chaos it is clear to me that, more than ever, we need reliable facts and data. We need steady hands, deep expertise that is willing to challenge and be challenged, and we need relentless curiosity to seek understanding and develop actionable intelligence. Ultimately, we need to combine these things with experience to operate from a place of wisdom to preserve and grow capital. This broad thesis about the world, when applied to our industry, led me to East Daley, a team of energy professionals who have peerless analysis of the midstream.

I know merit when I see it. Justin Carlson, Chief Strategy Officer, and Rob Wilson, Executive Director of Capital Markets, opened my eyes and kept me in energy when I began the interview process with EDC. Most of us who have spent time in energy finance think we have seen it all. If you’ve buried your face in Excel for years, dreaming in “if-then” statements, then you doubt someone can recalibrate for you the idea of what’s possible. Rob and Justin presented me the highly granular EDC analysis in a Zoom call. The depth of data, analysis, and answers I saw sold itself. When you’ve picked up a lot of fool’s gold, you can feel the weight of the real thing in your hand. Using FERC, well-level, and other bottom-up data, EDC has built a better mouse trap for understanding and predicting midstream asset performance, and the firm continues to push the boundaries in this dynamic market. It is a comprehensive set of solutions that keeps EDC customers from being blindsided by knowable events and enables them to move quickly on opportunities. 

After seeing the model efficacy for myself, I don’t think it is possible for any other service provider to offer midstream companies, partnerships, public investors, and private investors better business and market intelligence. And here is the thing: I really like to win. EDC is the Oakland A’s in Money Ball. And I love to get on base.  

There is a lot to be done, a lot to navigate, and major challenges to face. North American energy finance has suffered financial losses while creating a resource bounty that has stimulated economic activity, a largely underappreciated fiscal stimulus. As the US energy industry moves forward, it will need to step up its game by focusing on free cash flow instead of net asset value growth, which inevitably requires consolidation. On July 20, after surviving through the worst part of the crisis, many Noble Energy employees woke to the news that they were redundant and would finance the $300 million in synergies captured by Chevron in the merger. This is one example of many. The much-needed industry consolidation comes at a deep personal cost for many. This will continue. 

However, the US energy infrastructure network is the substrata upon which all other activity occurs. It’s largely taken for granted because it is so effective, so much so that casual observers, goaded by climate alarmists, believe we can do without it. Math and physics have a way of squashing fantasy, but we can go a long time into the red before that occurs. In an age of propaganda and demonization of fossil fuels, the industry needs us all to work as ambassadors on behalf of logic, reason, and the cost-benefit analysis of energy decisions. Industry needs to steer “ESG” – environmental, social and governance – initiatives from within, touting the merits of natural gas, in particular, to provide clean fuel for a growing world. US midstream providers will play a key role in delivering this resource globally. 

If you haven’t already done so, I hope you take the time to open the East Daley toolbox with me, Rob, Justin, and the others who make up this winning team. You will realize that no one else in the world can provide the expertise, depth, and yet roll it up concisely to the points that matter, like EDC. As Aubrey McClendon once said, there’s a lot of bad analysis that “can only come at the dangerous intersection of Excel and PowerPoint.” From wellhead to burner tip, East Daley connects the molecules to the money. I look forward to sharing the firm’s expertise with my long-time clients, colleagues, and all of you in energy infrastructure as we chart the course of the next decade together. I look forward to having a discussion on how EDC might fit into your world to address some of the current challenges you may be facing.

Warmly,

Ethan Bellamy

Managing Director, Midstream Strategy