Oil & Gas Investment Banking 101 - Interviews, Deals, Valuation

3/7/2020 Oil & Gas Investment Banking 101: Interviews, Deals, Valuation
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by Luis Miguel Ochoa Comments (81)
Oil & Gas Investment Banking: More Money

Than Big Oil and Big Banking Combined?
If there’s one coverage group that’s even more desirable than metals and mining, it just
might be oil & gas investment banking.
Not only do you see some of the biggest deals with the world’s largest companies, but
you also learn new accounting techniques, valuation methodologies, and maybe even
something about petroleum engineering.
Everything within the natural resources group – metals/mining, oil & gas, and power and
utilities – is like a cross between industrials and commodities, and you see that most of
all with oil & gas – where some sectors (upstream) are commodity plays and others
(oilfield services) are much closer to “normal” companies.
https://www.mergersandinquisitions.com/oil-gas-investment-banking/ 1/31
We have a sector specialist onboard today who’s going to break it down and explain
everything to you.
Here’s a quick geological survey of the land ahead, before we dig in and start drilling
wells:
Who gets into oil & gas investment banking and how to maximize your chances of
breaking in
Sector drivers and what to look for when analyzing an oil & gas company
Valuation, from NAV to EBITDAX and everything in between
The top boutiques and other banks in oil and gas coverage
Where you go after the sun sets and you decide to look for “more lucrative oil elds”
From Petroleum Engineering to Financial Engineering
Q: A lot of analysts and associates get placed into their respective groups by
happenstance, luck, or just good ol’ networking. How is your story different?
A: I actually studied petroleum engineering in college, which focuses on calculating the

availability of resources.
Nowadays, students tackle broader “energy allocation studies,” including utilities /

power generation and alternative energy. A lot of people here in New York work in
finance, but as you’ve said before, if we were all in Texas, we would all talk about how
we’re in oil and gas. :-)
[N.B.: A friend of mine did time in consumer investment banking, worked at a retail
company, and then moved into oil and gas.]
I started off wanting to be a petroleum engineer, and had a couple of internships

working in laboratories and then in offices.
Working at a “normal” company in this industry is very different from working at a bank
– for instance, if you were doing finance at a place such as ChevronTexaco, your work
would be more focused on a narrow line of activity at that firm, though you’d still need
solid attention to detail.
Q: And so you wanted to move into banking to get a broader view of the sector?
A: Exactly. At an investment bank, your work is much broader, macro-oriented, and you
might even say you have a bird’s eye view of things.
This is one reason why you see [petroleum] engineers trying to get into investment
banking following their internships in industry. Another reason (drum roll) is the gold-
plated exit opportunity.
Even with only a 3-month internship, people look at you differently and expect a little
more from you.
When it came time to apply for investment banks, I contacted alumni, cold emailed
boutiques, and reached out via LinkedIn to anyone I had something in common with.
The bankers saw I already had an energy background, so the conversation was pretty
easy from there.
Unlike other sectors, where you can get in without much industry knowledge, sector
expertise is highly valued in oil & gas. There’s so much jargon and so much to know
that you really need some type of exposure beforehand.
If you didn’t study natural resources in your major, at least take a class. I know some
people get placed randomly, but you definitely want to do the “pre-season training”
ahead of time if you can.
Back in 2003, there was a booklet called “Economics of the Natural World,” by the US
Academic Decathlon. Reading something like this would be a quick starting point –
here’s a chapter on natural resources microeconomics.
Surveying the Landscape: Successful Exploration Expenses & Intangible Drilling Costs
Q: So how is your group divided? What are the different segments?
A: Much like other groups, the oil and gas sector can be viewed in different ways.
The two most common methods are by stage and company size. The latter is easier to
explain, so we’ll start there:
Super Majors: These are the largest oil firms in the world. At the time of this article, the
list includes BP, Chevron, ExxonMobil, Royal Dutch Shell, and Total SA (and sometimes
ConocoPhillips). These companies do everything, from finding oil and gas to
transporting it to refining it.
Before you get really impressed, keep in mind this list excludes state owned
companies.
If you were to include those players as well, the number one contender would be Saudi
Aramco, with over $1 billion per day in revenue and sometimes estimated as being
worth $10 trillion USD (not a typo). Several other state-owned Russian / Chinese /
Middle Eastern companies are on that list as well.
Master Limited Partnerships (MLP): These companies are similar to Real Estate
Investment Trusts (REITs), in that they are tax-efficient entities that derive their income
from one source: in the case of an MLP, that source is pipeline revenue earned by
transporting oil and gas rather than exploring or refining it.
Companies include: Magellan Midstream Partners LP, Energy Transfer Equity LP, and
Plains All American Pipeline LP.
For more information on MLPs, please see this primer by Wachovia.
Companies smaller than super majors and companies which are not MLPs tend to fall
into one or more of the categories below:
Integrated Companies: Not quite the largest, but still sizable firms. These companies
operate across multiple stages, which is a little more complicated than dividing the
world by company size (Companies include: Petrobras, China Petroleum & Chemical,
and Statoil).
Upstream (Exploration & Production, or E&P): These companies explore sites to find oil
and gas, and then develop and produce what they find (Companies include: Chesapeake
Energy, EOG Resources, and Occidental Petroleum – some operate across multiple
segments).
Midstream: Storage and transportation – these companies often do take the form of
the MLPs discussed above, but tend to be smaller and more focused on only these
activities.
Downstream: Refining, logistics, and marketing. By “marketing,” I mean the retail

operation (at the gas station) or even in the store (other petroleum products)
(Companies include: Phillips 66, Marathon Oil, and Hess Corp.).
Other: Outside of these categories, there are companies in sectors such as oilfield
services (think: Halliburton) that fall under the “oil & gas” classification but which really
provide infrastructure or services to energy companies.
If you want to know more about how the sector works, please see this primer by
Investopedia.
Q: Great, so what moves the market for oil and gas?
A: On a macro level, economic conditions, and in particular, geopolitical events

(national, regional, and local) make an impact on the market.
These (broad) factors influence both demand and supply.
On the demand side, you see economic growth, debt grade improvements or declines,
population growth, civil unrest, and political instability as factors.
Suppose you observe massive growth in emerging markets such as China and India;
this economic growth would be the biggest demand driver – when your GDP increases
almost 20x in real terms, inevitably you will use more energy.
You can add seasonality as a driver as well: when things get cold, you tend to use more
energy…
Supply side, you have OPEC (Organization of Petroleum Exporting Countries) decisions,
access to financing, and discoveries of new deposits or even updated findings.
From a government standpoint, the factors include access limitations (where can we go
dig?), the type of drilling a company can undertake, and government sponsorship of
alternative energy.
You can add wars, sanctions (Iran), production/refining capacity, natural disasters, and
technological advancements (fracking and horizontal drilling) to this list as well.
Upstream: On a micro level, the factors include the outcome of individual drilling
projects (how lucrative they are), operational outages, strikes, asset sales, regulatory
changes (tax breaks anyone?), and prices under sharing agreements.
Sometimes you’ll see an oil company split the costs of a dig with another firm or do a
joint venture. You frequently see this with government-owned companies – a private
firm will be brought in to share its expertise (think: Russia and Exxon Mobil with their
arctic shelf drilling plan).
Downstream: Margins are determined by what the company pays for in terms of raw
materials and the price of the output (set by the market).
This latter point is established by a number of factors. According to ExxonMobil, these

factors include: “global and regional supply/demand balances, inventory levels, refinery
operations, import/export balances, currency fluctuations, seasonal demand, weather
and political climate.”
Q: And what are some of the indicators that oil & gas professionals look at?
A: For starters, you’ve got the OPEC basket price that is looked at globally.
Without a doubt, OPEC has a strong influence over the supply of oil. Domestically, you
look at West Texas Intermediate and abroad, you also look at Brent (named after a kind
of goose).
Finding and Discovering the Technical Depths
Q: Since oil & gas is such a specialized sector, would you mind sharing a few pitch
books before we move into the technical details?
I think it’s easier to understand if you can see some of these metrics and
methodologies.
A: Not at all, please take a look at these:
Pinnacle Gas Resources by FBR Capital Markets [fka: Friedman, Billings, Ramsey &
Co.]
Hiland Holdings by Barclays Capital
Exxon Mobil / XTO Energy by Barclays Capital
Chevron / Texaco by Credit Suisse (search for the text “conducted three valuation
analyses”)
Q: Great. So with those examples in mind, what are the more common valuation
methodologies and multiples?
A: This gets complicated because it depends on the specific area that you are working
in (ex: integrated, upstream, midstream, and downstream), but let me summarize it:
Upstream (E&P)
You tend to use Production and Reserves-based multiples here, such as Enterprise
Value / Proved Reserves and Enterprise Value / Daily Production, because when
analyzing energy companies you’re always asking, “How much am I paying for each unit
of energy in the ground and/or production capacity?”
EBITDAX is a variation on the traditional EBITDA metric, and it exists because some oil
& gas companies expense unsuccessful exploration and others capitalize it – so it
normalizes and makes it possible to compare companies that follow different
standards, similar to what EBITDAR does for companies that own vs. rent buildings (or
airplanes).
You’ll see lots of Reserve and Production-related metrics such as the Reserve Life Ratio
(Reserves / Production), % Oil vs. % Gas, and even Key Geographies shown along with
these multiples.
The Net Asset Value (NAV) methodology is also very important and is a twist on the
traditional DCF; unlike a DCF, where you assume infinite growth into the future, with a
NAV model you assume that a company’s reserves get depleted far into the future and
that revenue and profit go to $0, perhaps after a few years of growth initially.
So you project cash flows (production * commodity prices – expenses) until the
reserves run out, discount and add them up, and then factor in the value of other
business segments, undeveloped acreage, and so on.
This can get infinitely complicated – you can separate a company’s reserves by
geography and by Proven vs. Probable vs. Possible (which refer to the probability of
finding and producing energy), and assign different risk-weightings to each of them so
that you discount cash flows by different percentages in each segment.
I’ve even seen models where people analyze each individual well separately, but that is
so time-consuming that it’s not too common.
For a simple example of the output from a NAV analysis, see this page.
Also check out this excellent interview with a reader who moved from oil & gas
investment banking to an energy hedge fund to see how he set up his NAV models in
case studies.
You can also use a DCF analysis even for upstream companies, but the NAV tends to be
prevalent; comparable company analysis and precedent transactions are still used, but
with the different multiples I mentioned.
One difference in the DCF here is that you may separate CapEx into Drilling &
Completion (D&C) CapEx vs. Leasehold and Infrastructure CapEx, with the former being
sort of like “growth CapEx” (the cost of drilling new wells) and the latter more like
“maintenance CapEx” for normal companies.
And then you have actual spending in categories like acquisitions, exploration, and
development, which can be considered another form of CapEx.
You have to be careful with the assumptions you’re making, because you don’t want to
inadvertently imply that a company will grow cash flows at 5% indefinitely without
spending anything on drilling new wells.
Midstream (MLPs)
For MLPs, the most common valuation methodologies are price to distributable cash
flow multiples and the dividend discount model – just like with REITs, MLPs must issue
a certain percentage of their earnings in the form of dividends, so the DDM works quite
well for valuation purposes.
Yields, though not technically a valuation multiple, are also very important since many
investors view MLPs as income-oriented investments (and they really are income
investments if you look at the dividend yield numbers).
Distributable Cash Flow is basically cash available to Limited unit holders (as opposed
to the General Partners, or GPs) after paying for CapEx, other cash expenses, and
distributions to the GPs.
Technically, it’s defined as Net Income + D&A – Maintenance CapEx – Cash Flows to
General Partners.
You can create all sorts of metrics and multiples once you’ve calculated Distributable
Cash Flow, such as Distribution Yield (Distributed Cash / Price) and DCF Yield
(Distributable Cash Flow / Price).
Credit statistics (covered in your corporate banking article) are also important – for
example, investors look at both coverage ratios (EBITDA / Interest Expense) and
leverage ratios (Total Debt / EBITDA) to assess which MLPs might be riskier than
others.
Downstream (Refining & Marketing)
There are not too many differences in this sector because the companies are very
similar to “normal” companies in other industries.
So you still see EV / EBITDA, P / E, and traditional DCF analyses based on Unlevered
Free Cash Flow.
Q: Wow. I’m amazed at how long you’ve been talking about this now.
Anything else to add?
A: Oh, I’m not done yet.
You still see methodologies like the relative contribution analysis (compare how much
the buyer and seller are contributing in terms of net income, cash flows, reserves,
production, etc. and base the ownership percentages and implied purchase price in a
deal on that) and historical equity price comparisons (e.g. average closing price for
both participants over certain time frames).
Sum of the Parts can be common with the super majors and any company that has a
big presence in multiple sectors – you might use the NAV model for the E&P segment,
DCF for refining/marketing, and a DDM for midstream (for example).
Q: Now you’re done, right?
A: Haha, OK, two more and then I’ll be done:
Ratio of Premium Paid to Capitalized Synergies in Precedent Transactions: This

analysis can employ either average daily closing prices or the closing prices themselves
on particular dates.
Return on Gross Invested Capital Comparison: Used for a single time frame (ex: ten
year) and looks at the entire company or particular segment (ex: Exploration &
Production or Refining & Marketing).
The standard definition for this calculation is “(Earnings – Dividends) / Total Capital.”
Here, “Total Capital” is the sum of the debt and equity in a company.
Energy Banks: Super Majors and Integrated Firms?
Q: OK, enough with the technical tips, my head is spinning… great overview, though.
What are the top banks in your space?
A: The top bulge bracket banks in the space are a familiar set, and most of the big firms
all have strong oil & gas teams as well.
The top boutiques are more spread out. Here are a few examples:
KLR Group focuses on the broad “natural resources” sector.
Rivington Capital Advisors, Simmons & Co., Energy Spectrum Advisors, Mitchell Energy
Advisors, and RBC Richardson Barr, RBC Rundle, Tudor Pickering Holt, and Raymond
James Albrecht also cover the sector.
Geographically, as you’d expect, there are a ton of boutique energy banks in Texas, but
you also see them in hubs like New York and London as well.
Q: I noticed not all of your boutiques are really boutiques, what’s the deal?
A: Depending on what year it is, you’ll see banks consolidate or move entire teams to a
“less rocky” platform… so that’s why I’m including banks and groups like “RBC Rundle”
on this list as well.
Off Into the Sunset… Or Back for More
Q: What do you like to read to keep on top of the sector?
A: Oil and Gas Financial Journal features a section on M&A, as does Oil and Gas
Investor. DealBook is good too.
Notice I’m not giving you the whole thing to read, just one section. :-)
For more acquisition and divestiture (A&D) reading, you can check out A&D Watch.
Q: So where do you go after you’ve done your time digging for black gold?
A: There are a lot of commodity [hedge] funds out there that really appreciate the skill
set you gain in covering oil & gas.
As previous interviewees have mentioned, there aren’t a ton of PE firms focused on

energy because of the volatility in the sector, but they do exist and you’d be well-
positioned for them after working here.
I’ve also seen people move to oil & gas companies big and small, and sometimes even
move into different industry groups in banking.
You definitely develop a more and more specialized skill set in oil & gas as you continue
in the field, so it’s easier to move into something different early on if you find it’s not for
you.
The good news is that it’s easier to move from oil & gas into something else than to do
the reverse.
Q: Great. Thanks for your time!
A: My pleasure.
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About the Author

Luis Miguel Ochoa has facilitated a variety of strategic initiatives from corporate acquisitions to new
market development. He earned his B.A. in economics from Stanford University where he was a member
of the varsity fencing team.
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Comments
Read below or Add a comment
Kat
January 4, 2020
Hi, great article!!!
Btw, I know midstream energy MLP typically uses dividend discount model.
Do you have articles or vedios about the midstream (pipeline) dividend discount modeling?
Would really appreciate it!!!
 REPLY
M&I - Brian
January 7, 2020
We do not have detailed coverage of midstream companies at this time.
 REPLY
Fayaz
April 11, 2019
Dear Brian,
Thank you for the interesting article.
I have an upstream oil and gas background, focused on geoscience. I’m looking to build on my
technical work, leverage my technical knowledge in that area, and focus next on
commercial/investment space of oil & gas. I’m based in the Washington DC area.
Examples of commercial work include resource valuation, oil & gas asset transaction advisory,
strategies for oil & gas assets, economic evaluation of oil and gas projects, commercial agreement
design, etc. A couple of questions
1) How would you recommend a technical guy make the transition to commercial work? Speci cally,
a) what roles to target?
b) what companies or rms to target?
2) Can you provide me a few examples of investment banks, investment management rms, private
equities , “energy banks” in the Washington DC area that have oil & gas teams?
 REPLY
M&I - Brian
April 17, 2019
Your options are:
1) Join the A&D team in the energy group of a large bank (see:
https://www.mergersandinquisitions.com/investment-banking-calgary/).
2) Complete a top MBA program and use that to get into the industry.
You have more options with #2, but it will cost more in time and money. #1 could work if you’re OK
with having fewer options but trying to network your way in directly.
Very few oil & gas teams operate in the Washington DC area. In the U.S., most are in Houston, some
are in NY, and in Canada, they’re centered on Calgary. So you’ll probably have to be more exible
with your location to do this.
 REPLY
JohnnyC
January 15, 2019
Hi Brian,
What are the odds of getting into a top PE fund (non-energy) in NYC from a top BB energy group in
Houston?
Thank you for sharing the post!
 REPLY
JohnnyC
January 15, 2019
From target school w/ decent GPA^
 REPLY
M&I - Brian
January 15, 2019
Not great – energy IB/PE recruiting in Houston works differently, and it’s quite di cult to
move from energy/Houston to non-energy/NYC – see:
https://www.mergersandinquisitions.com/energy-investment-banking-houston/
 REPLY
David Ortiz
February 13, 2018
Great article. I am a petroleum engineering senior at OU and currently interested in the Energy
Sector investment banking eld. Although I know the majority of jargon and I am able to keep up with
the article, I would like to know if there are some valuable resources/books that speci cally engage
the energy investment banking industry. Preferably, beginner content, additional material that is more
advanced is welcome.
 REPLY
M&I - Brian
February 14, 2018
Do a search for “Oil & Gas for Beginners”
 REPLY
Syrym
January 26, 2018
Very Interesting article.
M&I, do you plan to cover energy trading anytime soon?
Thanks in advance
 REPLY
M&I - Brian
January 26, 2018
If we can get a volunteer, sure.
 REPLY
Shane Reddell
March 19, 2017
Hi Brian,
I am graduating from a target (for petroleum engineering but not nance) school with an accelerated
petroleum engineering/MBA degree. I’ve switched gears into looking for energy IB jobs in Texas. How
could I leverage an MBA with no full-time work experience and no investment nance internships? I
have a petroleum engineering internship and an internal nance analyst internship, to provide more
information.
Thanks,
Shane
 REPLY
M&I - Brian
March 22, 2017
The answer is “A lot of aggressive networking, but you’re still at a huge disadvantage
without full-time work experience because all other MBA candidates will have it.” Maybe go for
local energy IB boutiques and see if they’re open to it; large banks would be challenging if you don’t
have full-time experience.
 REPLY
TC
January 19, 2017
Hi Brian, I wonder what my chances are in getting into an Energy IB or PE rm. I have 7 years
industry experience in an oil eld serves company (mostly engineering and product management), with
some exposure in advising E&P companies in eld development. I have a BS in chemical engineering
and a minor in Business from a target school. Any advice on how to break into IB/PE rm with my
background?
 REPLY
M&I - Brian
January 24, 2017
You would probably need an MBA at this point. Maybe look at A&D boutique rms
(https://www.mergersandinquisitions.com/investment-banking-calgary/), use your technical
knowledge to get in there, and then transfer to a larger bank. But it’s tough with 7 years of work
experience.
 REPLY
AMtoO&GIB
April 8, 2016
Hi, I’m looking for some advice for how to break into oil and gas investment banking.
I am a junior at a complete non-target with a 3.9 GPA in nance. Despite coming from a non-target
(probably ranked outside the top 150 or so), I have managed to secure a summer analyst gig at a top
BB in their AM division. However, my passion lies with oil and gas (I have had two prior engineering
internships with a F500 Upstream company, but switched majors to nance after) and when I recruit
for FT after the summer is over, I would like to apply to the natural resources divisions at all the BBs
and EBs via online. How can I leverage my experience with the F500 Upstream company, as well as
with the BB in their AM division, to help me land an oil and gas IB position with a reputable rm?
 REPLY
M&I - Nicole
April 9, 2016
I’d focus on networking internally and externally. Seems like you’ve got good credentials
and a passion for oil and gas. What you really need to focus on now is to broaden your network and
nd an available role that ts you. I would focus on connecting with people via LinkedIn. Applying
online may not be the most effective.
 REPLY
AMtoOGIB
April 7, 2016
I ran into this article today and have to ask for your advice.
I am a student with a 3.9 GPA at a complete non-target, doing a summer analyst gig in the AM division
of a BB this upcoming summer. That being said, I’d like to get into oil and gas IB and will be recruiting
after the summer is over, in this upcoming FT cycle. I have also had 2 previous internships with an
Upstream E&P F500 company, for what it’s worth. Both were with the same company. Coming from a
non-target (probably ranked outside the top 150…), what would be your best advice to approaching FT
recruiting in the natural resources division of various BBs and EBs? How can I leverage my past oil and
gas experience, as well as my AM experience from this summer, to help me get into IB?
Many Thanks
 REPLY
GottaBeO&G
March 23, 2015
Hi all,
Along the lines of Oil & Gas investment banking…what are ways to break into O&G investment banking
from industry? Especially if you don’t have a Petroleum Engineering background, but a business
background? And what sorts of roles give you transferable skills besides E&P Acquisitions &
Divestitures? Lastly, how would you answer those questions relative to each vertical in Oil & Gas-
Downstream, Upstream, Midstream? (Particularly, the midstream sector….?)
 REPLY
M&I - Brian
March 23, 2015
Your best bet is to do a business role at an oil & gas or other energy company and then
move in from there. Most O&G teams really want A&D reservoir / other engineers, so your chances
of getting in with a pure business background are lower. If you worked in corporate nance or
corporate development at an O&G company you might have a higher chance of getting in.
I don’t think it really differs by vertical, though you might have a better chance in downstream or
midstream-focused groups since they are less technical.
 REPLY
GottaBeO&G
March 23, 2015
Well, business development at most companies is essentially M&A-type work. At a
larger downstream company, or a big midstream company [think KMI, EPD, PAA, Energy Transfer,
Enbridge], it seems as if they don’t do as much of that sort of work…there are more commercial
analyst roles than business development roles. What would be your counter to those types of
instances? Is there anything relevant within those roles in the midstream area?
 REPLY
GottaBeO&G
March 23, 2015
Hi all,
Along the lines of Oil & Gas investment banking…what are ways to break into O&G investment banking
from industry? Especially if you don’t have a Petroleum Engineering background, but a business
background? And what sorts of roles give you transferable skills besides E&P Acquisitions &
Divestitures? Lastly, how would you answer those questions relative to each vertical in Oil & Gas-
Downstream, Upstream, Midstream? (Particularly, the midstream sector….?)
 REPLY
Matt
August 7, 2014
Thanks for this article. im currently in my 5th year of college completing my ms in acct and
then sitting for the CPA in Jan-May 2015. i have completed an internship at big 4 (chose houston for
oil & gas) and am very interested in getting into IB in houston. Im not from there, but have received an
offer for big 4 audit after i complete my MS. Currently i am learning everything i can about the industry
and have family currently working in E&P there as engineers; that helps me learn. I want to leverage
my big 4 experience (if need to for a year) and my own industry research to get into IB. What is the
best course of action at this point since im already in my 5th year and will most likely have to start at
big 4 in Houston? Can i leverage my big 4 industry speci c background, along with my hobby of
learning the industry and nancial modeling to get into IB? thanks for any feedback.
 REPLY
M&I - Nicole
August 7, 2014
Yes, https://www.mergersandinquisitions.com/breaking-into-investment-banking-
accountant/ should help
 REPLY
Aaron
June 24, 2014
As a petroleum geologist in Texas with ~2 years of experience in E&P my assumption was
that I’d need an MBA to break into the nancial sector. What I’m getting from this article however is
that the best course would be for me to get into IB through networking, cold emailing, etc. Is this
correct? As if I just need to make my wishes known and energy IB will welcome me with open arms?
 REPLY
M&I - Nicole
June 24, 2014
Yes that is partially true though an MBA can be useful if you get into a top tier one and can
afford it. Yes, sometimes it can be as simple as that, though it will depend on your credentials and
presentation skills
 REPLY
Aaron
June 25, 2014
Sure, thanks for answering. It’s not a path you typically hear about on the geology side
so it’s pretty exciting that these opportunities exist. Are the companies listed in the article the
best place to start reaching out to? If I went this path I think I’d rather get out of Texas and into
Boston or NY, so any suggestions would be greatly appreciated.
 REPLY
M&I - Nicole
June 25, 2014
Yes you can try reaching out to these companies rst and see how that goes!
 REPLY
Will
April 6, 2014
Very informative! I’m currently working at a major re ning company as a nancial analyst. I
graduated from a target school a year ago and now do mostly project nance type work (i.e. lots of
DCF modeling). What’s the best way to transition into investment banking without limiting myself to
the O&G industry?
 REPLY
M&I - Nicole
April 6, 2014
Getting into a top MBA would probably open you a lot more doors. Or you can transition
into O&G IB and then move out of that to another industry group.
 REPLY
Will
April 11, 2014
Would moving into a more general IB role be di cult even with extensive networking?
My current job involves a lot of collaboration with the corporate development team so I’m very
frequently on the other side of many IB deals.
 REPLY
M&I - Nicole
April 12, 2014
Yes, it can be challenging, though the networking and interactions you have can
make it easier.
 REPLY
Peter
March 13, 2014
Thanks Brian! I’m assuming do to the similarity in nature of the work, moving from A&D to
O&G M&A shouldn’t be unfeasible?
 REPLY
M&I - Nicole
March 14, 2014
Yes. That’s correct.
 REPLY
Peter
March 6, 2014
Hi, great article (as usual)! Just looking to expand upon indra’s comment. I’m also currently
pursuing a Masters in Petroleum Engineering and I have been looking into the possibility of moving
into an Investment Banks A&D group in London (I’m British) after gaining a few years of experience in
the industry. It would be greatly appreciated if you could answer the following questions: what is the
A&D scene like over here? I’m aware opportunuities will be far more limited than Houston (which is the
gloabl hub). Secondly, I’m not entirely sure how A&D differs from O&G M&A, so any pointers would be
great! Sorry for chucking a wall of text your way!
 REPLY
M&I - Brian
March 9, 2014
There are de nitely opportunities in London, but probably fewer than in places like Canada
/ Australia / Houston that are hubs for natural resources. But plenty of energy groups operate from
there and there are good natural resource teams. A&D is very similar to O&G M&A as far as I know.
 REPLY
Indra
January 27, 2014
this is article has given me a lot of insight with respect to what energy investment (oil and
gas sector) actually means. I am currently pursuing my Masters in Petroleum Engineering and want to
join a bank which specializes in these kind of investments. my question is do I stand a chance when I
apply to these banks and will my international immigration status be an obstacle. the whole idea
behind me doing a masters degree is to provide the employer with a better idea of what the total
reserves are in a particular reservoir and study the latest trends in the petroleum industry. please add
your thoughts.
 REPLY
M&I - Nicole
January 27, 2014
I am glad you nd our article useful! Yes you do though your visa situation can be
challenging. With the above being said, engineering is a specialty occupation and it maybe easier
for you http://www.workpermit.com/us/us_h1b_occupations.htm I’d also consult your career
center re. rms hiring at your school and your visa situation
 REPLY
Brand
December 4, 2013
Hi,
Great article and highly relevant to myself, but I was hoping there’d be a little more in-depth
look at how they were able to make it into O&G IB.
I’m currently in the process of getting a degree in petroleum engineering along with having 10-months
of relevant internship experience (still graduating in 4 years, but had to take a semester off in the
middle, so I spent it interning).
My goal is to end up working for an O&G-focused private equity rm, but I don’t know how to get there.
I gure I need to get an MBA to make the switch, but I don’t know how to go about getting the nance
industry experience necessary to enter PE in a more reasonable time frame than:
Work as an engineer -> b-school -> IB -> PE
In short, my question is, do you know of anyone who was able to skip some of the above steps, and if
so, how?
 REPLY
M&I - Brian
December 4, 2013
Thanks. The way you get into O&G IB is the same as what is described everywhere else on
the site, which is why we didn’t focus on it too much here – network, several rounds of interviews,
and so on.
You generally do not want to do an MBA rst before the others… much better to get transactional
experience now and then do an MBA. It will be much tougher to get into PE afterward unless you
have relevant experience rst beforehand.
 REPLY
SD
November 15, 2013
to further add to my previous comment, do you think getting Oil& Gas industry experience
before trying to get into Oil & Gas M&A is a good idea?
 REPLY
M&I - Nicole
November 15, 2013
Yes. And getting the relevant valuation experience will help.
 REPLY
SD
November 15, 2013
Hi Brian,
I am in a x. I have an offer for the 3 year nance graduate program with Shell and BP, both in UK and
will be involved in nancial planning, reporting and analysis. while also earning a chartered accountant
certi cation (CIMA). Shell might also come with opportunities in commercial upstream. on the other
hand, there is an offer for graduate program in credit risk with bank of america merill lynch in London.
My eventual target is to getting into Oil & Gas M&A and not sure which one I should go with (Shell/BP
or BAML?). would be grateful if you could provide your thoughts on this.
 REPLY
M&I - Nicole
November 15, 2013
The two options are actually pretty different. If you’re looking to get into O&G M&A I think
working at Shell and BP would be more relevant, though you will have to nd a way to move to an
investment bank, through your own network or/and a graduate program at a target school. I think it
can be more challenging to move from credit risk in BAML to O&G IB especially since O&G is pretty
technical and interviewers prefer new hires with some sort of experience in the industry. If you’re
already interested in O&G, I think the Shell and BP opportunity will allow you to learn immensely
which would be very useful for you down the line, assuming you have a passion in O&G and want to
progress your career in a eld related to O&G, be it at a corporate or at a bank doing O&G
deals/analyzing O&G companies
 REPLY
Fen
October 2, 2013
Hi,
I’m a student and I’m doing some work for university on oil and gas.
Could someone help me with some of these questions?
Top 5 banks that do the most deals in the oil and gas sector?
What types of deals are the the most common? ECM, DCM or M&A or lev n…etc?
Thanks appreciate the help
 REPLY
M&I - Nicole
October 3, 2013
If you have access to dealogic that would help. I don’t have the numbers on hand so I’d
leave it to readers to help you.
The link below may help you: http://markets.ft.com/investmentBanking/bankingLeaders.asp
 REPLY
Alice
August 15, 2013
Hi,
I am wondering how is the investment banking aim of the Bank of Montreal, BMO Capital Market, in
the area of energy M&A?
Thanks!
 REPLY
M&I - Brian
September 16, 2013
They are very strong in mining, not sure about energy but I assume they probably have
some strength there as well.
 REPLY
T
October 1, 2013
pretty solid in Houston, but is a major grind. Energy is one of their stronger groups;
other US groups are mediocre at best.
 REPLY
Jane
August 5, 2013
Hi,
I’m going to be a junior in the fall and am currently doing an investment banking internship at a top
foreign rm (though not a traditional BB). I will be studying abroad in the fall – Do you have advice for
how I can best position myself for recruiting? I go to a target school so I will be missing recruiting
sessions in the fall. What can I do so that this doesn’t hurt me come summer recruiting?
Thanks!
 REPLY
M&I - Nicole
August 5, 2013
International experience always looks good when applying for nance jobs so you’ve got a
head start! I’d suggest you to reach out to your career center rep, as well as HR reps of all banks
that recruit at your school, tell them that you’ll be missing the info sessions and ask if they could
potentially connect you with their recruiting reps of their banks. Also keep in touch with them on a
consistent basis so you’re in the loop. I’d also start using your alum network and connect with
alums in the industry, especially banks you’re interested in working for. When recruiting season
comes, tell them you’ll be applying and perhaps try to arrange a call/in person meeting (when you’re
back) with them
 REPLY
Jason
July 21, 2013
Hey, have you heard of anyone willingly go from front o ce to back o ce?
 REPLY
M&I - Brian
July 21, 2013
No, that makes no sense. You might as well just quit the industry and join a normal
company to get better working conditions.
 REPLY
Mr.Banker
July 17, 2013
Hi Brian,
Thanks for the article. Just wondering, how do you get primers off of THOMSON ONE?
Thanks.
 REPLY
M&I - Brian
July 17, 2013
Yeah that is tricky, you need to know someone in banking and ask him/her to look it up for
you. There are some primers oating around online if you take a look, though… see the links above
and http://biws-support.s3.amazonaws.com/MLP-Primer.pdf
 REPLY
Steven
July 17, 2013
Good Article. One question, the boutique houses you mention are predominantly Texas
based, what are the primary houses which operate out of London or are most rms in the sector
simply located in the US?
 REPLY
M&I - Brian
July 17, 2013
Thanks. Most Texas or NY-based rms also have a presence in London. I just looked at our
lists and did not see many rms based in London, but a few that came up (some are more
diversi ed):
http://www.fox-davies.com/
http://www.chescorcapital.com/
http://www.macquarie.com/mgl/com/macquarietristone (Acquired)
http://www.excellioncapital.com/
http://www.tuftonoceanic.com/
 REPLY
Kewal
July 17, 2013
Hi Brian,
See that you have touched Metals & Mining ; Oil & Gas sectors, Have you covered any other sectors
too, please can you share the link.
Can’t wait to read those!
Thanks
Kewal
 REPLY
M&I - Brian
July 17, 2013
Yes – there’s a list of other industry and product groups on this page:
https://www.mergersandinquisitions.com/groups/
 REPLY
John
July 22, 2013
This article is great, thanks for sharing!!
 REPLY
Kewal
July 17, 2013
Hi Brian,
The article was very helpful and looking forward for such more! Thanks
Kewal
 REPLY
M&I - Brian
July 17, 2013
Thanks!
 REPLY
Mr. Helpful
July 16, 2013
I would strongly advise interested candidates to obtain Deutsche Bank’s Oil & Gas Primer, a
400 page research primer published on an yearly basis. Just ask any of your banking mates with
access to ThomsonOne to send you the pdf. The primer gives a high-level summary of everything you
need to know. The document was actually oating around on WSO sometime ago.
And of course, sign up for Brian’s Oil & gas course. :)

 REPLY
M&I - Brian
July 16, 2013
Thanks! Yeah that is a good one but I don’t like to link to other documents unless they’re
publicly available somewhere.
 REPLY
Yerlan
July 17, 2013
Please see http://www.fullermoney.com/content/2010-09-15/oilgas4beginners.pdf for
Deutsche Bank’s Oil & Gas Primer.
 REPLY
M&I - Brian
July 18, 2013
Thanks for adding that, very helpful though quite long
 REPLY
Hart
July 16, 2013
Not to be a nitpicker but neither Transocean or Atwood Oceanic are E&P companies. They are
drilling contractors. They are paid to drill wells by E&P companies, and therefore their balance sheets
look much more like the contracting companies listed under Other.
 REPLY
M&I - Brian
July 16, 2013
Thanks, xed
 REPLY
Hart
July 16, 2013
Not E&P companies*
 REPLY
Hart
July 16, 2013
I thought it was a good article though. Thanks!
 REPLY
M&I - Brian
July 16, 2013

Thanks. Yup, I should have caught that one but xed it before.
 REPLY
Aaron
July 16, 2013
As an undergrad, I don’t seem to have the same experience/knowledge within the industry as
the two commenters above. However, I’m very interested in the natural energy industry and would like
to work in Oil & Gas in Houston next year upon graduation, so I found this piece VERY insightful and
helpful (even if a bit overwhelming). With that in mind, and without re-reading the networking articles
and redoing the networking toolkit module, what’s the best way for a Berkeley undergrad approaching
FT recruiting w/o a “brand name” summer internship to break into a bulge-bracket in Houston? I’ve
already started the LinkedIn search, but this has yielded minimal results thus far…
 REPLY
M&I - Brian
July 16, 2013
Thanks! For getting into Houston: it will be tough to get into the biggest banks without
previous IB experience. So it depends a bit on what work experience you do have right now –
without knowing more about your background, I would say you might almost be better off going for
boutique energy rms there and then making a lateral move after working there for a year or so.
If you have something that could be spun into sounding relevant (i.e. Big 4 experience in energy or
something else energy-related), I would highlight that as much as possible and still contact alumni,
even if they are not based in Houston. If they are doing something energy-related they could still
help with referrals and/or getting you actual interviews there if you explain yourself well enough
(again, hard to say speci cally what story to tell them because I would need to know your previous
work experience rst).
 REPLY
Jason
July 17, 2013
You will likely need previous IB experience for most boutique banks too:
https://www.mergersandinquisitions.com/no-boutique-investment-bank-hire/
 REPLY
Krisp
March 25, 2014
Along the same realm, I graduated last May from Notre Dame with a B.S. in
environmental sciences. I am now working for a natural gas company in Denver and saw it go
through its IPO last october which fascinated me. After consulting my wall street buddies, I
am ready to make the jump. Oil and Gas banking would be a dream but not sure if it is at all
feasible… I have applied to get an MSF at UT and Vandy as well as the MiM programs at Duke
and LSE. Should I even consider these or just start networking like crazy and drop the thought
of school? I want to rebrand myself but not sure if it is worth it. I had a 3.85 and was the
valedictorian of my department if thats worth anything.
 REPLY
M&I - Nicole
March 26, 2014
What about a program at McCombs in Texas if you’re interested in O&G given their
location? LSE maybe a better choice than Duke given their location in Europe, but I am not
100% sure. Yes I’d also network a lot in the meantime. If networking doesn’t help, then a
Masters/MBA at a target can help.
Grant
October 14, 2015
Krisp, I have roughly 3.5 years of reservoir engineering experience and am looking
at the O&G IB transition as well. I recently met with a reservoir engineer, turned oil and gas
investment banker, who told me at out – if you’re going to extend your eductation then get
an MBA from a top school, or don’t do it at all. I even mentioned a MSF and he said
absolutely not. Just FYI…
Keith
July 16, 2013
Hi Brian,
I hope all is well. I also agree with the post above that there are some minor oversights in this article.
I know that you do not post dates of the articles that you write on M&I because “this site is not
dependent on speci c industry trends or whatever’s hot at the moment.”
But I am just wondering out of curiosity, if I want to compare and read articles that you posted in
previous years, how do I see the evolution and change of the articles that you have written over the
years?
Is there a chronological order of when you posted the articles on this website over the years?
I feel the questions that I asked are very relevant because speci c industry trends and current news
events can be very important depending on the type of company and type of group that a candidate is
interviewing for. There is a reason why people in Finance read the Wall Street Journal on a daily basis.
 REPLY
M&I - Brian
July 16, 2013
Feel free to add anything you feel was missing. This industry group article was more
comprehensive than most of the previous ones, so I am somewhat ba ed at this feedback.
This is now getting really off-topic, but if you really want to start from the beginning you can go
here: https://www.mergersandinquisitions.com/page/155/ and move forward. You will see that at
least 50% of the articles back then were poorly written or not very in-depth.
While some of your questions may be related to industry trends, probably 90% of the questions we
receive are not… most questions asked here are some variant of “I have a low GPA, what do I do?”
or “How can I spin my experience to make it sound more relevant?” or “How can I go from X to Y?”
and the answers to those questions do not change over time. If they did, articles from 5-10 years
ago would not receive even more tra c today than they did at the time of publication.
And yes, while there are important industry trends, we are not trying to be The Wall Street Journal –
after all, they already exist so what value would covering the news here add?
 REPLY
John
July 15, 2013
Ok, I can’t tell if this article was written in 2000 or the author doesn’t actually work in oil & gas,
but there are some pretty signi cant oversights. First, British Petroleum existed only until 2001, its
now BP plc.(and the company is very picky on the correct usuage of their name.) Second, I don’t see
how you can exclude Rosneft (the largest oil & gas company in the world) from your description about
the industry. It sounds like the author has never stepped out of Texas.
The valuation info is good though, its true that its very important to understand this in the industry.
I would have expected a little more quality from M&I, articles older than 2012 year were much better.
 REPLY
M&I - Brian
July 16, 2013
Thanks for your feedback. The article, in fact, was written in 2013 and I think you might be
paying too much attention to small details… yes, technically it is BP but everyone knows British
Petroleum as well (I did go back in and change that, though).
Rosneft: As mentioned in the article, Rosneft is 75% owned by the Russian government and as a
result it was not listed because it is mostly state-owned. Even Wikipedia agrees with what was
listed above: http://en.wikipedia.org/wiki/Supermajor
Articles before 2012: Well, you can always go back and read those. There is only so much I (Brian)
can write about personally, and it was necessary to bring on new writers to cover topics that I do
not know much about. And, incidentally, plenty of my own articles from back then were not that
good…
 REPLY
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by Luis Miguel Ochoa Comments (81)

Oil & Gas Investment Banking: More Money

Valuation, from NAV to EBITDAX and everything in between

From Petroleum Engineering to Financial Engineering

A: I actually studied petroleum engineering in college, which focuses on calculating the

Nowadays, students tackle broader “energy allocation studies,” including utilities /

I started off wanting to be a petroleum engineer, and had a couple of internships

Q: So how is your group divided? What are the different segments?

For more information on MLPs, please see this primer by Wachovia.

Downstream: Refining, logistics, and marketing. By “marketing,” I mean the retail

Q: Great, so what moves the market for oil and gas?

A: On a macro level, economic conditions, and in particular, geopolitical events

These (broad) factors influence both demand and supply.

This latter point is established by a number of factors. According to ExxonMobil, these

Finding and Discovering the Technical Depths

A: Not at all, please take a look at these:

Hiland Holdings by Barclays Capital

Exxon Mobil / XTO Energy by Barclays Capital

Downstream (Refining & Marketing)

Anything else to add?

A: Oh, I’m not done yet.

Q: Now you’re done, right?

A: Haha, OK, two more and then I’ll be done:

Ratio of Premium Paid to Capitalized Synergies in Precedent Transactions: This

Energy Banks: Super Majors and Integrated Firms?

What are the top banks in your space?

KLR Group focuses on the broad “natural resources” sector.

Off Into the Sunset… Or Back for More

Q: What do you like to read to keep on top of the sector?

As previous interviewees have mentioned, there aren’t a ton of PE firms focused on

Q: Great. Thanks for your time!

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And of course, sign up for Brian’s Oil & gas course. :)

July 16, 2013

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