Abstract
It is no secret to anyone in this room that the oil and gas industry is a capital intensive one - the participants in which usually rely heavily on the financial markets to fund expansion plans. Unfortunately, as regards the capital markets, oil and gas companies have faced a kind of "double indemnity" in recent years - the volatility of the oil and gas business itself combined with the dramatic volatility of the financial markets over this same period. Needless to say, October 19, 1987, redefined the term volatility for all of us vis-a-vis the equity market, but the debt markets have exhibited their own version of volatility as evidenced by experience over 1988. For example, the ten-year Treasury bill has fluctuated from a low of 8.10% in February, 1988 to a year high in the 9-1/2% range - a roughly 150 basis point fluctuation that would have been unheard of only a few years ago in the course of a single year. As always, though, the flip side of challenge has been opportunity, and any number of small, medium-sized, and large oil and gas concerns have successfully tapped the markets during this period - not only insuring their survival in a volatile era but also positioning themselves well for the recovery. The secret to success for the energy companies which have financed successfully has usually been timing, product innovation, or often a combination of both.
