Goldman Sachs Energy Conference roundup
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Goldman wrapped up their annual Energy sector conference yesterday noting 1) stabilizing the balance sheet and increasing shareholder returns will be the path for management teams to improve share price performance 2) service cost inflation is being budgeted at ~10% in 2022 3) major projects globally are on track 4) gas focused producers are growing production to meet the needs of the energy transition.

The tone for the Conference was set Wednesday morning as a panel of CEOs from Pioneer (NYSE:PXD), Devon (NYSE:DVN) and Diamondback (NASDAQ:FANG) reiterated their commitment to capital discipline, free cash flow generation and higher shareholder returns; this sentiment was echoed by CEOs from Ovintiv (NYSE:OVV) and PDC Energy (NASDAQ:PDCE) Thursday afternoon, as both see an opportunity to narrow their discount to peers through balance sheet improvement and higher shareholder returns; a standalone presentation from Magnolia (NYSE:MGY) centered around managing cash flow through share repurchases; of note, EOG (NYSE:EOG)
broke from industry, sharing management's view that the path forward should include production growth and bolt-on-acquisitions.
The Wednesday morning panel of PXD, DVN and FANG also pointed towards service cost inflation, with all three seeing high-single digit to mid-teens service cost growth in 2022; this was followed up by a presentation from private Permian operator Colgate, indicating an expectation for 10% service cost inflation, and comments from CTRA about mid-to-high single digit inflationary pressure.
Of the major projects ongoing around the world, of which there are few, Hess noted that phase-2 in Guyana (NYSE:XOM) is on track for Q1 2022 and phases 3 and 4 are on track for 2024 / 2025; Kosmos (NYSE:KOS) provided details on Tortue (NYSE:BP), indicating the project is on track for first production in Q3 of next year, while Murphy (NYSE:MUR) said King's Quay will deliver first production in 1H 2022.
Finally, the gas producers shared their view that the clean-burning fuel will be in high demand during the energy transition, with Southwestern (NYSE:SWN) and Chesapeake (NASDAQ:CHK) focused on investing in high-return projects; taking a different tact, EQT's (NYSE:EQT) comments reflected those of oily shale names, as the Company intends to focus on free cash flow generation rather than growth.