Current And Apparent Supply Of Natural Gas For The Foreseeable Future Keeps Prices Weak Relative To The Global Crude Market;

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Current And Apparent Supply Of Natural Gas For The Foreseeable Future Keeps Prices Weak Relative To The Global Crude Market;

Post by ToddS on Mon Jul 11, 2011 1:45 pm

Current And Apparent Supply Of Natural Gas For The Foreseeable Future Keeps Prices Weak Relative To The Global Crude Market; Executive VP And CFO Of Crosstex Energy (XTXI) Gives An Exclusive Interview

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On Monday July 11, 2011, 12:33 pm EDT

67 WALL STREET, New York - July 11, 2011 - The Wall Street Transcript has just published its Oil & Gas: Refining & Marketing Report offering a timely review of the sector to serious investors and industry executives. This Special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Shale Drilling Capital Expenditures - North American Hydraulic Fracturing Legislation - Frontier Oil Exploration - Oil and Gas Price Divergence - Emerging Market Competition

Companies include: Berry Petroleum (BRY); Forest Oil (FST); International Fuel Technology (IFUE); ARCO (BP); Anadarko (APC); and many more.

In the following brief excerpt from the Oil And Gas: Refining And Marketing Report, expert analysts discuss the outlook for the sector and for investors.

William W. Davis, CFA, is Executive Vice President and Chief Financial Officer of Crosstex Energy, Inc. (XTXI), and Crosstex Energy, L.P. (XTEX). He has more than 30 years of financial and accounting experience, and he is a well-known business leader in the energy industry. As a key member of the Crosstex executive management team, Mr. Davis has played a vital role in developing Crosstex's everyday business strategy. He has also been instrumental in Crosstex's evolution into a significant service provider in the energy industry's midstream business sector. Mr. Davis began his career in public accounting at Arthur Young & Co. Mr. Davis graduated magna cum laude from Texas A&M University with a BBA in accounting.

TWST: Please give us a little history and a very basic overview of Crosstex Energy.

Mr. Davis: Crosstex's roots go back to 1992 when the company really was just Barry Davis, our CEO, and a business plan. I don't even know if he had a desk back then, but he was basically trying to create something significant in the midstream space. He eventually merged Ventana Natural Gas, the marketing operation that he created, into a company called Comstock Resources, which today is a fairly major independent E And P company.

In 1996, he led the management buyout of Comstock to form Crosstex Energy. At the time of the buyout, Crosstex had nine employees. Then in 2000, a major energy investment fund called Yorktown invested in the company to buy out the prior investors in Crosstex, and that gave Crosstex its first significant access to capital. The enterprise value of the company at the time of this buyout was approximately $35 million. With the capital that Yorktown provided, Crosstex began a series of acquisitions.

TWST: So does "midstream" mean literally the middle part of the process, that part between the producer and the company that sells it to the consumer?

Mr. Davis: Exactly. We link producers who explore for and produce gas with consuming markets. The producers need to move their product, and the midstream industry provides them that highway to get the product into the marketplace, be it natural gas, natural gas liquids or crude oil. We don't currently handle crude oil, but we are very close to entering into some crude oil business that we're very excited about.

TWST: Why and how did you expand this way?

Mr. Davis: We have a strategic set of assets in south Louisiana that access what's known as the Louisiana Light Sweet crude market, or LLS. LLS trades similarly to Brent crude oil, which has been trading well ahead of the WTI, West Texas Intermediate, market. So because the WTI price is so severely discounted to the LLS price - by as much as $15 to $20 - producers in the midcontinent and Rocky Mountain areas of the United States want access to this LLS market. We provide them that access and connection into the refining markets in Louisiana. So we're very close to having some opportunities where we close that gap and bring that crude from those discounted markets into the LLS market. We do that for a fee and allow the producers to realize a major part of that differential.

TWST: Do you have the same types of relationships with natural gas producers as you do with crude producers?

Mr. Davis: When thinking about Crosstex and our competitive advantages, one is our strong and deep customer relationships. And many natural gas and crude producers will be the same people, whether it's the majors, the large E&P companies or the smaller E&P companies. These companies are very flexible in their ability to target either natural gas, liquids or crude, depending on the economics.

TWST: Is crude more lucrative than natural gas?

Mr. Davis: Crude has been significantly more expensive than natural gas in the United States on an energy-equivalent basis in the last couple of years. U.S. natural gas trades in a domestic market with a different set of dynamics than crude, which trades in a worldwide market and is affected by worldwide crude supply and demand issues. We have an abundance of natural gas domestically due to the success producers have had developing these shale plays with the new technology that's available. The current gas supply and the apparent supply for the foreseeable future is very large relative to the perceived demand going forward. As a result, this has kept natural gas prices weak relative to the crude market, where there are some concerns around supply being able to keep up with demand - given the demand growth expected in countries like China and India.

The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This Special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online .

The Wall Street Transcript does not endorse the views of any interviewees nor does it make stock recommendations.


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