COP26 & Energy Investment Banking: Still a Promising Career Path?
In the wake of the recent #COP26 summit, financial industry honchos speculated that slashing investment in fossil fuel production could make energy prices soar and that divestment could make it harder to monitor dirty energy production. On the flip side, investment banking and private equity have witnessed a boost in the demand for energy sector graduates in recent years.
👉 What does all this mean for undergrad students and grads looking to break into the industry?
Energy and healthcare have been touted as industries with massive growth potential which also means greater deal exposure and hence a successful (and rewarding) career path for young aspirants looking to break into the sector. In fact, the European Investment Bank announced funding exemptions for highly innovative low-carbon projects being developed by oil and gas companies, promising to deploy up to EUR 820 million ($949 million) in a bid to spur the development of green hydrogen, synthetic aviation fuel, direct air carbon capture, and long-term energy storage technologies.
So our assessment is that recent developments won’t really lead to any slashing in #ibank or #privatequity headcounts. However, you’ll need a more unique positioning and experience. All major financial institutions have two main teams in the energy group; finance/banking and the technical team.
👉 What’ll you need to crack these roles:
You’ll benefit from a degree in engineering, geology, petroleum engineering, or petrophysics. An additional MBA degree would help you to get into the finance team but you won’t need one for the technical team. Finance undergrads looking for internships must possess strong numeracy and financial modeling expertise along with exceptional communication and interpersonal skills. Unlike others, sector expertise is highly valued for energy, so prior exposure to an M&A deal or even academics will be preferred.
Also, you’ll need a good grip on valuation methodologies (DCF, NAV, EBITDAX, dividend discount model). You can look at the valuation metrics and techniques used in these two major deals: Exxon Mobil / XTO Energy by Barclays Capital and Chevron / Texaco by Credit Suisse for reference.
👉 When to Apply:
Apart from the internships and grad roles offered by the top 5 investment banks (covering over 30% of energy deals) like #JPMorgan, #Citigroup, #BankofAmerica, #CreditSuisse, and #Barclays, some investment banks like #Jefferies also offer off-cycle internships dedicated to the energy team.
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