By Kiel Porter
It’s not a lot of fun being a Wall Street energy banker these days.
Long lunches, maybe, but that’s because there’s not much going on in the way of deals. They started to disappear once crude oil prices crashed and, along with it, jobs and big bonuses.
That may help explain why there’s been an uptick of investment bankers leaving Wall Street this year for more stable corporate gigs. While there’s always been a revolving door between banks and their clients, at least three high-profile energy deal-makers have made the switch this year alone, from firms including Morgan Stanley and JPMorgan Chase & Co.
Typically, that means taking a fat, 50% pay cut — from about $1.5 million for a bank managing director, according to a person familiar with the matter, who asked to not be identified because the information is private. But if all goes well it brings the potential to make a lot more in the future, not to mention better hours and less travel.
“It’s on top of every senior energy banker’s wish list,” said Mike Karp, chief executive officer of recruiting firm Options Group. He says more bankers than usual are looking for industry jobs.
One recent switch came this summer when John Bishop left Morgan Stanley, where he was head of global oilfield services, to join industrial refrigeration firm Chart Industries as chief operating officer. He had spent a total of more than 15 years in investment banking.
Further, earlier this year, Credit Suisse Group AG’s Chris Conoscenti left the firm and now runs Desert Peak Minerals, which owns mineral rights to oil and gas properties. Robert Kimmel left JPMorgan and has become chief financial officer and executive vice president at Oryx Midstream Services, an energy pipeline company.
“This was a exceedingly rare opportunity for me to join a world-class team in an industry I love with a financial sponsor I know and trust,” Kimmel said. “You just don’t pass that up.”
Representatives for Bishop and Conoscenti declined to comment.
For oil and gas companies, bankers are appealing hires. Their experience in energy capital markets and takeovers can be valuable as the industry grapples with slowing growth and depressed commodity prices.
For bankers, going in-house can mean getting out of a Wall Street job that of late has become a dead-end environment with sluggish pay.
“It’s just gotten to be much less lucrative for the average banker,” said Steven Jones, chief financial officer of WaterBridge Resources LLC, who spent about 10 years in investment banking before leaving Tudor, Pickering, Holt & Co. in 2014. “People don’t see the upside the way they used to. We always used to have senior bankers over us who were making eight figures a year and had built real wealth. It’s really difficult to do that now.”
Of course, that’s for those who still have a job. The value of announced U.S. energy mergers and acquisitions has fallen nearly 30% to about $180 billion through mid-October, according to data compiled by Bloomberg. The slump is even more pronounced when excluding Occidental Petroleum Corp.’s $38 billion takeover of Anadarko Petroleum Corp.
The retrenchment has led to finance job cuts in Houston, with firms including Wells Fargo & Co., and Jefferies Financial Group Inc., trimming their headcounts this year. Deutsche Bank AG closed its Houston office in 2018.
At the same time, private equity firms are tightening their belts, limiting a popular landing spot for senior bankers, said Julian Bell, managing director of executive search firm Sheffield Haworth Ltd.
“I can imagine there are some people who’ve spent their whole career in banking wondering how they are going to finish their careers,” said Scott Archer, who left Tudor, Pickering Holt & Co in 2015 to become chief financial officer of Howard Energy Partners, an oil and gas pipeline operator that he had advised for several years.
Those fortunate to get a job will likely face some short-term sacrifices, like that 50% pay cut, when moving into a chief operating officer or CFO role, Bell said.
But a C-suite job often includes a long-term stock incentive package that can eventually offset most of the pay cut. And the really big bucks will come if the company gets sold or undertakes an initial public offering, said Bell, who has placed a number of investment bankers in energy jobs this year.
While that prospect may appeal to bankers struggling to drum up business, Waterbridge’s Jones has some advice: Be discerning.
“I’ve seen a lot of colleagues and peers jump into situations that haven’t worked,” he said. “They’ve gone to companies that were challenged and they thought they could fix them and found it’s a lot more challenging than deal math and financial models.”