Book Review: Can’t Deny It

Can’t Deny It: An Unlikely Wall Street Career and the Calls that Reshaped an Industry. 2024. Doug Terreson. Seminole LLC.

In Can’t Deny It, Doug Terreson, former head of Energy Research at Evercore ISI and Morgan Stanley, provides a fascinating memoir in which readers are taken on a journey through the worlds of the Gulf of Mexico oil patch, global oil markets, and Wall Street. He describes the inside stories behind his notable market calls in such chapters as “The Era of the Super-Major,” “The Golden Age of Refining,” and “The Pledge.” Terreson was ranked as the #1 or #2 Integrated Oil Analyst in the Institutional Investor poll for 20 years and was a member of the All-America Research Team (II) 24 times.

In the chapter “Cutting My Teeth in the Oil Patch,” the author shares that prior to his Wall Street career, he worked as an engineer for Schlumberger (now SLB). He explains how his firsthand experience with evolving technologies and processes in the oil industry gave him a significant advantage in his finance career.

Acquiring geological and technological expertise, as well as extensive field experience, was a rarity among his Wall Street peers, who typically came from economics or finance with Ivy League degrees and worked in investment banks, asset management, or private equity. For younger practitioners, Terreson’s early career path offers a reminder that working in a selected industry can provide valuable experience prior to embarking on a finance or Wall Street career.

As a real estate finance practitioner, I found Terreson’s summary of crude oil and the chaos of 2008 during his time at Morgan Stanley to be the most interesting part of Can’t Deny It. His oil price forecast of $95/bbl for 2008, made on 14 March 2008, was in stark contrast to the prevailing Wall Street consensus, which was raising forecasts daily to align with rising market prices. In March 2008, the West Texas Intermediate crude oil price got as high as $110/bbl.

Goldman Sachs indicated a likelihood of $150–$200/bbl over the next six to 24 months, while other competitors asserted that oil could rise to $200 or even $300/bbl, which highlighted the bullish sentiment at the time. Terreson left Morgan Stanley on 8 July 2008, just three days prior to the all-time peak oil price of $147/bbl on 11 July 2008. The price eventually plunged to $37/bbl by December 2008 and for the year as a whole averaged $98/bbl, within 3% of his $95/bbl projection for 2008. This experience taught him to trust his instincts and the value of rigorous analysis, as well as to be willing to stand apart from the crowd, even when it is uncomfortable.

The chapter on privatizations highlights the important role that Terreson played in the initial public offerings of Sinopec in China, Statoil in Norway (now Equinor), and Conoco in the United States and explores the heartbreaking story of PDVSA, Venezuela’s national energy company. The author summarizes how Morgan Stanley’s proposal to privatize PDVSA was rejected by the new government after Hugo Chávez won the presidential election in December 1998.

The result was an economic disaster in Venezuela as oil production plummeted due to mismanagement, corruption, economic sanctions, and such flawed policies as currency and price controls. In thinking about the potential trajectory of PDVSA and Venezuela, the author correctly stresses how the country had the opportunity to mirror Norway’s success with its massive sovereign wealth fund, benefiting current citizens as well as future generations.

My favorite chapter is the final one, in which the author highlights current trends in the industry, including those that led him to leave Evercore ISI in July 2021. A key factor for his departure involved the broader changes occurring within Wall Street research and investment banking as firms began to increasingly compete more with financial capital rather than intellectual capital.

A key shift in sell-side research resulted from the European Union’s 2014 Markets in Financial Instruments Directive (MiFID), which introduced new regulations aimed at enhancing competitiveness. Under these new rules, financial institutions must unbundle the cost of research from other services and directly charge clients for it. This new system does not favor older business models that allowed analysts like Terreson the time, focus, resources, and freedom to make substantial, multi-year strategic forecasts. Another important trend is rapidly evolving artificial intelligence (AI), which has the potential to disrupt the financial industry and the work of Wall Street research analysts.

The author skillfully incorporates personal stories — including how his 48-foot boat named “Can’t Deny It” and crew won the Emerald Coast Blue Marlin Classic — to explain the business lessons he has learned. This memoir, written by one of the most decorated research analysts in recent decades, covers many relevant topics and will appeal to all finance practitioners and energy industry specialists.