Despite this evolution, the basic structure of the energy industry has remained intact. The terms "upstream," "midstream" and "downstream" are generally used to describe the operations of oil, natural gas and coal companies pursuant to a "stream" analogy from source of product (upstream) to end use (downstream). Traditionally, many industry participants exhibited varying degrees of vertical integration. However, in recent years, the focus on vertical integration has lessened as each industry segment has become increasingly competitive and distinct as a business.

Exploration and production activities for all energy commodities are capital-intensive and require considerable engineering and operating expertise. Historically, many upstream oil and natural gas companies have focused on growth in revenues and reserves, with little regard for returns on capital, as public market investors often focused more on growth measures when evaluating financial performance. The upstream segment of the industry is now facing new challenges to produce increasing returns on capital invested. We believe this is driving significant industry consolidation and rationalization as producers intensify their efforts in core areas and rationalize non-core assets.