Texas energy lawyers are sorting through the chaos of the Iran War, helping some clients find new domestic energy sources and telling others that new mergers and acquisitions are “dead, dead, dead.”
The uncertain prospects of a ceasefire, volatile oil prices and urgent requests of clients are adding to the lawyers’ sense of being on a rollercoaster—one that is zipping in the dark.
“The conflict in the Middle East has had so many reversals,” said Jeff Nichols, the Houston-based chair of Haynes Boone’s energy group. “It’s like playing chess on a board where the pieces keep disappearing.”
Energy lawyers from Baker Botts, Vinson & Elkins, Foley & Lardner and Troutman Pepper Locke dealmakers and energy lawyers are weighing short-term opportunities against longer-term uncertainty as well as assessing the need to beef up staffing in a lateral market that has already caught fire due to the buildout of artificial intelligence data centers.
The lawyers are cautioning clients that the truce between the US and Iran remains fragile and are advising them to take measured approaches to swinging global oil prices. “Things have been changing so far, so rapidly,” said Cody Carper, the Houston-based co-chair of Baker Botts’ oil and gas transactional practice. “No one has that crystal ball.”
Nichols said the chaos has caused clients to hit pause on deals that are in progress and stress test their relationships with other entities. “Price volatility doesn’t just change the math, it tests the commercial marriage,” he said. “We are there to negotiate the counseling session before it turns into a divorce.”
Bryan Loocke, an M&A and oil and gas partner at Vinson & Elkins in Houston, said upstream activity has “shut down” due to the volatile oil prices. He’s seen some drilling deals get done and clients getting ready to go to market, but most new and existing M&A activity not under contract “has been dead, dead, dead, because it’s impossible to price,” he said.
Deals on Hold
The war delivered a jolt to energy practices in Texas that were already contending with high demand due to the buildout of AI data centers.
Carper said some of his oil and gas clients have “gotten kind of giddy” about potentially marketing their assets given higher oil prices. Regulatory colleagues have taken calls from clients interested in reentering wells that had been temporarily plugged “to take advantage of near-term price spike,” he said.
“It’s been a hard market to get something done just because no one wants to cut a bad deal,” Carper said. Fiscally conservative operators have used the price spike to pay down debts and look over their balance sheets, he said.
Nicholas Peters, the Dallas-based vice chair of Foley’s energy and infrastructure practice, said his clients are “trying to get as much production back online as possible so they can start selling into this market” as oil prices remain high.
“The short-term capital expenditure decisions like that are moving as quickly as they can,” Peters said. But in respect to drilling, his clients are “taking a far more conservative, let’s wait-and-see approach, because the last 24 hours is really indicative of how quickly things change.”
Bill Swanstrom, an energy and corporate partner at Troutman Pepper Locke in Houston, said he’s seen a rising interest in LNG export terminals, natural gas storage and pipeline projects near the Gulf Coast.
The war with Iran “is a reminder that people would rather source hydrocarbons from safer areas and that is going to have a long-term positive impact on pricing,” he said.
Hot Market Hotter
The lateral hiring market for energy lawyers in Texas was already robust in large part due to the AI data center boom—and firms are now looking to add more staff.
Foley’s energy and infrastructure team, boasting more than 200 lawyers now, is hiring in Texas, Peters said. On Thursday the firm announced it hired Deanna Reitman and Glenn Reitman from Faegre Drinker Biddle & Reath as partners in the firm’s transactions and finance practices in Houston. Foley said both partners have “strong ties” to energy and infrastructure.
Swanstrom said the global energy crisis has “added an additional tailwind to what was already happening,” as Troutman is among the firms looking for talent in Houston and Dallas. “This was happening before the war, but the last couple of months puts an exclamation point on the long-term outlook for us,” he said.
As a result of the war, the lawyers said they have increased their calls to clients and colleagues around the world.
Nichols, of Haynes Boone, noted that shipping and maritime lawyers, many in London, have been advising on force majeure and insurance issues behind the Strait of Hormuz as well as cargo impacts around the world, “as ships are re-routed to accommodate a changing world energy system.”
In recent weeks, Carper of Baker Botts said he has been on the phone with colleagues in Singapore, London and Dubai. He recalled a number of weeks where his colleagues in the Middle East couldn’t work in their offices amid the war.
“This has definitely felt like a global event,” he said. “Everyone is taking a wait-and-see approach.”
V&E’s Loocke said he told clients and associates that “it’s time for a vacation.”
“Take some time off, enjoy the quiet, because when prices stabilize, there’s going to be a lot of pent-up demand and it’s going to get busy as hell,” he said.
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