2015 All-America Research Team: Integrated Oil, No. 1: Douglas Terreson

Douglas Terreson

Evercore ISI

First-Place Appearances: 5

Total Appearances: 23

Analyst Debut: 1995

Douglas Terresonof Evercore ISI rises one rung to claim his fifth top finish since 1997 — and first No. 1 since 2007, when he headed up Morgan Stanley’s global energy group. He left that firm the following year and in June 2009 signed on with ISI Group, which Evercore Partners acquired last October. From his base in Fairhope, Alabama, the 54-year-old analyst takes “an approach that’s well thought out, comprehensive and consistent over time,” one fund manager affirms. A second admirer adds that he possesses “excellent contacts, with Middle Eastern relationships that are unmatched and give him a window on OPEC that is a true competitive edge.” Looking ahead, Terreson projects that industry prospects will be good for money managers whose interest in U.S. integrated oil companies is over an intermediate to longer-term horizon, considering the poor 2015 results for the sector and the “unusually unfavorable sentiment” surrounding the names in this space. However, in the interim, “performance will probably remain challenged until it becomes clearer to investors how oil markets will rebalance in 2015 to 2016,” he acknowledges. For this year to date through mid-September, the group declined by 21.9 percent, lagging the S&P 500 by 17 percentage points. Against this backdrop, the researcher does not recommend that clients buy the supermajors. Their capital expenditures per unit of shareholder distribution are “near decadal highs,” he notes, “and when this factor is at high levels, the outcome is unusually unfavorable for shareholders.” Instead, he continues to prefer Houston’s ConocoPhillips, which is the world’s largest pure-play exploration and production company; and New York–based Hess Corp., a midsize driller. The stocks were trading at $48.36 and $52.43, respectively, in mid-September; Terreson tags them both with a price objective of $85.