WALL Street is losing its top oil analysts as securities firms suffer record losses and hedge funds offer the promise of higher pay.
Morgan Stanley's Douglas Terreson and Citigroup Inc's Doug Leggate, ranked first and second by Institutional Investor on coverage of the biggest oil companies, left their positions, the banks said. Geoff Kieburtz, the No. 3 analyst for oil field contractors, is leaving Citigroup. Robert Morris, the top-ranked analyst for independent oil companies such as Anadarko Petroleum Corp, left Bank of America earlier this year.
United States-based Exxon Mobil Corp, Anadarko and other oil stocks rose to all-time highs this year as crude futures surged 46 percent to a record US$139.89 a barrel and natural gas jumped 73 percent. The exits also came as banks and securities firms cut more than 83,000 jobs after the collapse of the subprime mortgage market led to US$390 billion in write-downs and losses.
Energy's hot
"Energy's been a hot area, and you're getting some big turnover," James Halloran, who helps oversee US$38 billion in assets at National City Private Client Group in Cleveland, told Bloomberg News. "A lot of this has to do with Wall Street either not paying the same rate, or not being the same place, to be as fun anymore."
Morgan Stanley dropped coverage of the three largest US oil companies - Exxon Mobil, Chevron Corp and ConocoPhillips - on June 4, after Terreson left, bank spokeswoman Jennifer Sala said last week. New York-based Citigroup, the largest US bank by assets, got notice from Leggate on May 30.
In a May 14 memo, Jonathan Rosenzweig, director of Americas research for Citi Investment Research, told employees Kieburtz was leaving to "pursue another opportunity." Citigroup spokesman Duncan Smith confirmed the contents of the memo.
Faisel Khan, who covers refiners and gas-related companies, will take over Leggate's coverage, while Citigroup's oilfield-services coverage "will be discontinued temporarily" after Kieburtz leaves later this month, according the memo.
Leggate, 41, said in an interview that he left on May 31 to join hedge fund Quadrum Capital Management in New York. Terreson, 46, and Kieburtz couldn't be reached for comment. Going from a securities firm to a hedge fund could mean doubling annual compensation to as much as US$4 million because analysts often share in a percentage of earnings from their recommendations, said Alan Johnson, managing director for Johnson Associates.
"Particularly if you're in a white-hot sector like energy, you can make a lot more money," Johnson said. "If you've been around, you know these things are cyclical, and if you wait another year or two, the opportunity may pass you by."
The losses reflect the higher value of energy analysis to hedge funds and mutual funds, said Ted Harper, who helps manage US$9 billion at Frost Investment Advisors in Houston.
The Sarbanes-Oxley Act, passed by Congress in 2002, raised penalties for corporate wrongdoing and stiffened audit rules following the collapses of Enron Corp and WorldCom Inc.