INTEGRATED OIL/REFINING：ENERGY SUMMIT TAKEAWAYS

We hosted our annual Boston Energy Conference this week, with 18 corporatesacross Integrateds, E&Ps, Refiners and Service companies in attendance. Whilesentiment could be described as “cautiously optimistic” across both corporatemanagements and investors, with crude having rallied 7.5% over the past 16days, excitement remains quite muted. We remain cautious crude dynamics into1H18, remain focused on high asset quality execution stories, and see increasingtailwinds in refining into 2018. See within for company takeaways.
Continuing the conversation on growth, returns, and what to do with excesscapital
Although we remain somewhat skeptical of a wholesale change in mentalityacross the E&P sector （from both corporates and investors）， to their credit,companies largely stuck to message, showing limited interest in accelerating intoa potentially higher oil price, and a willingness to pursue （or at least consider）various responses to higher prices, including buybacks （COP, APC）， debt reduction（CLR）， reducing anticipated outspend （HES）， or just sticking to the multi-yearplan （PXD, NBL）。 Recent shareholder pressure is clearly having some effect, andwhile limited clarity given, we would expect increasing conversations on potentialchanges to management compensation metrics, as suggested by companies,including PXD.
Inflation?Not for now
Despite concerns earlier this year of significant cost inflation, particularly in thePermian Basin, most E&Ps said that after the early increase, they have seenlimited, if any, inflation over the past 1-2 quarters, with the view that efficiencygains should be able to offset the presence of modest inflation into 2018. Sand, inparticular, is expected to see downward pressure in 2018 following the openingof new sand mines and the shift towards more local supply.
The （modest） revival of the diversified?
While US unconventional, and in particular the Permian, remains dominantamongst investors, the increasing focus on returns, sustainable business modelsand potentially cash return to shareholders （as well as the continued costdeflation of conventional projects） has seen a modest rekindling of interest inthe diversified model （CVX, HES, NBL, APC, COP）。 Timing of the cash/investmentcycle remains key, however, with the post-spend “harvest” at CVX and COP