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SHAWN REYNOLDS: VanEck recently held its inaugural boots-on-the-ground investor conference in Houston, Texas. We invited a number of leading senior executives from the oil industry, as well as the chairman of the leading, largest gold miner in the world and one of the premier shipping companies to come down and discuss with us just how all these different companies and their executives have been dealing with this historic bear market that they've all been facing. One of the basic investment tenets we have is to find companies that have long-term structural growth prospects and can, in most cases, overcome macroeconomic and commodity price softness. Thus an overarching theme for our conversations during the day was surviving and thriving in the current environment. Here are some of the highlights from the fascinating conversations we held at the conference.


[E&P Panel]


REYNOLDS: It's clear that all three of your companies have embarked on this transition -- driven separately from the oil price – from different stages of that development. Can you talk about the challenges that you've faced as you've gone through this transformation? Bryan, what has been the most difficult part through all this as you have tried to create this company and get it to grow despite getting slammed with oil prices?


BRYAN SHEFFIELD: I think we were one of the only companies that continued drilling through this downturn. We maintained the momentum of four horizontal rigs, and we actually increased cap-ex from about fifteen to sixteen. I think we were the number one E&P. The hardest part is making that decision. We knew our balance sheet was good, but everyone's cutting back. We’re still making thirty percent; why do we need to cut back like everyone else? We're hedged up for the next two years. Do we follow the crowd, or do we continue to grow and come out with a plan in '16 that makes the right decision for the investors and for the company, versus following the crowd.


DAVE KHANI: As you know, the E&P business is all about rate of change. We didn't have the mentality inside the company to really be a great E&P company. I started benchmarking everything for everybody, and I started to show them what we look like and what others look like. We’re very fortunate because we're in the Marcellus, and we have the largest acreage position in the Marcellus. We have over a million acres of Marcellus in Utica. We’re blessed with great assets and we're around what I would call the low-cost natural gas producers of Range, EQT, Antero, and Cabot. Those are our basic comps. We set on a mission to effectually make the change to where we can actually start to overtake these guys.


It started with benchmarking. We had to go replace people. We had, I would say, a lot of complexity and a lot of silos within our company. For a company that had essentially an acreage position that was all within about a two-hour drive, we had satellite offices all around, and it was almost like we gave everybody capital to go run their own little business. We didn't leverage it up. We brought everybody in, into one spot. We changed the management team off. We literally met every day at eleven o'clock for about an hour to talk about the process change and how we were going to shrink cycle times. When I got there, we basically needed four dollar natural gas to break even. I say that as part of a fully-loaded E&P side of the business. Today, we're at two.


[Newfield Exploration]


GARY PACKER: We were doing all of this simultaneously, until these resource plays really kicked off, and we were able to evolve the organization, which I understand is maybe part of the theme that's represented here today. But change the culture, but never the values, and change the skill sets that were necessary to succeed in these resource plays. As you well know, they're highly demanding of capital. We’re blessed to be in a few resource plays that are really good. In order to capitalize these new investments, we sought to sell those assets. We've sold well over probably two billion dollars now of assets as we shed those marine plays in focus of the more predictable, developmentally-oriented resource plays today.


We all know that we're in a low commodity price environment; liquidity across the industry has been challenged, and we have depressed margins. The issue is: we've been here before. This is the fourth cycle this management team has seen. I've seen three different CEOs in the role that I currently serve, and this is a situation that we know how to handle. A key to some of the successes that we've enjoyed has really been our ability to drive cost out of the system: thirty percent from 2014 to 2015.


We entered 2016 once again setting the bar higher for ourselves. How do you evolve the psyche of an organization to evolve from a prospect-generated conventional player to an organization that now is driving these kind of results in a resource game? We've had to change how we think and how we attack these plays. I've already said it -- I can't say it enough. Getting a low cost to entry is the key to making these plays work and preserving that balance sheet. We have a true long-term strategy that's necessary for us to preserve the NAV (net asset value) that we're creating, and in order to do that, we have to hold the play together.


[Superior Energy]


DAVE DUNLAP: We were conservative in the way that we managed our balance sheet in the latter years of the last cycle, and conservative in the way that we built cash, and that's put us in that survivor category. You have to have equipment capacity, you have to have people, and you have to have those resources to be able to take advantage of that.


I think one of the most important resources to have is cash. We’ve been winding down. When things start to pick up, we're going to need to fund working capital. We're going to need to fund some maintenance capital for things that haven't been done in the last couple of years. We're going to need to go hire some people. We hire people and they're not productive for you right away, so you need cash. You need cash to be able to respond to that reality. Many of our competitors won't be able to. Investors get attracted to companies that they believe are being run well and that they believe have extreme exposure to earnings growth.


Every once in a while, I'll hear something about return or I'll hear something such as investors want earnings growth. What you want to be able to do to outperform in the early part of the next cycle is show extreme earnings growth relative to your peers. You’ve got to be a first responder. One of the advantages that the large-caps have in being able to build international presence is the breadth in product line. Superior has that same kind of breadth in product line. It’s clear to me that our best long-term value proposition is expanding geographic footprint.


The challenge internationally is doing business in another country. You come from the U.S. and you go to a foreign country but they've got different laws, different labor rules, and different tax schemes and tax regimes. You’re then working in a different currency, and you've got to be able to import, and you may have to export. Learning all those things about doing business in a country is the hard part. Getting work is not the hard part. Picking your countries, because international is not a market but rather 80 individual, independent markets that all march to a little bit different beat, has been a big part of our story and a big part of our success to this point.


JAN VAN ECK: As we have seen in this video, our portfolio companies are run by dynamic leaders who have to deal with rapid changes in industry conditions, including changes in oil prices and shifts in technology. Our portfolio managers, using their deep industry experience, are constantly evaluating these companies and assembling them into intelligent portfolios. This event demonstrates how we like to exchange ideas with clients and look forward to doing so in the future.



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