American Oil and Gas Reporter - April 2015 - 156

ConventionCoverage: Louisiana Oil & Gas Association
when small businesses pay all the taxes,
he mused. "Big business is not paying
anything," Adley assessed.
The speakers also faulted a number
of other exemptions. Robideaux indicated
the state's homestead tax exemption had
a large fiscal note and could be vulnerable.
Nevertheless, he added, "Certain members
of leadership are very protective of it."
Adley counseled LOGA not to expect
the state's horizontal drilling exemption
to escape unscathed, but he said he was
proposing legislation that would harmonize it with Louisiana's sales tax ex-

emption for natural gas used as feedstock.
"I would create a swap," he described.
"When gas is below $5 or $6, you get
the exemption, and the chemical company does not. When it is above that,
we take it off you and give it back to
them."
During his presentation to the board,
Briggs noted that Governor Bobby Jindal
sought to bridge some of the budget gap
by taking general revenue funds from both
the Department of Natural Resources and
the Office of Conservation. Those agencies
then would have to raise $12 million by

increasing fees. "We have not had a fee
increase since 2002," Briggs noted.
Existing application fees would double
to raise $2.6 million in new revenue,
while new application fees would aim to
bring in another $2.6 million. Meanwhile
he said, new production fees would total
$5.0 million.
Briggs also pointed to the public relations challenges associated with such
direct funding. "We are attacked already
because the industry pays its regulators'
salaries," he reasoned. "This is going to
make that much more the case."
Ì

Oil Markets Could Rebalance In 2016

LAKE CHARLES, LA.-Assuming
people behave rationally, West Texas Intermediate oil prices should rebalance to
$75 a barrel by early 2016, Jan Stuart,
Credit Suisse managing director and
global energy economist for equity research, told the Louisiana Oil & Gas Association.
Of course, he conceded, rational behavior is no small assumption. And although Stuart cited a number of geopolitical wild cards that could raise oil and
gas prices, he said other examples of irrationality made him bearish. One he
cited was many investors' keen interest
in putting their money into energy stocks.
It has gotten to the point, he mused, that
investors are lined up to invest in even
subpar companies with prospects in second-tier plays. "Everyone thinks energy
stocks are cheap," he mused. "That is
great if a lot more people get to keep
their jobs, but it is going to delay the
slimming that began in 2014."
Stuart offered his remarks on the
second day of LOGA's 2015 annual convention, held March 11-13 in Lake
Charles. Others addressing LOGA were:
* U.S. House Majority Whip Steve
Scalise, R-La.;
* Karen Alderman Harbert, president
and chief executive officer of the U.S.
Chamber of Commerce's Institute for
21st Century Energy;
* Charles T. Goodson, chairman,
CEO and president of PetroQuest Energy
Inc.;
* William H. Fenstermaker, chairman
and CEO of Fenstermaker & Associates
Inc. and chairman of Iberia Bank Corp.;
* Daniel P. Hurley, chief operating
officer of Shoreline Energy LLC;
* Steven Chustz, secretary of the

Louisiana Department of Natural Resources;
* Peggy Hatch, secretary of the
Louisiana Department of Environmental
Quality;
* Tim Barfield, secretary of the
Louisiana Department of Revenue;
* Conservation Commissioner James
Welsh; and
* Louisiana State Treasurer John
Kennedy.

Production Fall-Off
At the beginning of 2015, Credit Suisse
predicted WTI would rebalance to $75
by year's end, Stuart said, but a number
of factors convinced the firm to postpone
that forecast. Nevertheless, he held, demand growth could get it in that range
consistently during early 2016. "More
importantly, we also think U.S. production
growth will slow," he advised. "Last
year, liquids grew 1.5 million barrels a
day, year-over-year. That was an acceleration of 500,000 bbl/d."

156 THE AMERICAN OIL & GAS REPORTER

That acceleration has slowed, he said,
but even with producers' feet off the gas,
U.S. output still is coming fast. "It is
going to take time to damage oil production
outside America, and it is going to take
time for one or two producers to fall over,"
he assessed. "It also is going to take time
for low prices to accelerate the demand
growth that drains the inventory surplus."
Oil prices could skyrocket immediately
under a number of scenarios, Stuart acknowledged. Although such unforecastable
events tend to be known as "black swans,"
he suggested Middle East instability had
attained "black turtle" status. "It is in the
room, is unpredictable, is going to bite
you, and it isn't going away," he characterized.
However, he continued, if his firm's
forecast proves too bullish, prices may
well hover around $50. "They may tick
up $10 one quarter, but then too many
people will complete too many wells and
they will go down $10 the next quarter,
and we (could) oscillate around a painfully

West Texas Intermediate crude
prices may average $75 a barrel
by early 2016, estimates Jan Stuart,
Credit Suisse managing director
and global energy economist for
equity research. Stuart, who spoke
at the Louisiana Oil & Gas Association's 2015 annual conference,
March 11-13 in Lake Charles, La.,
said that forecast was subject to
a number of factors, including investors' eagerness to put their
money into oil and gas.



American Oil and Gas Reporter - April 2015

Table of Contents for the Digital Edition of American Oil and Gas Reporter - April 2015

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