For those of us who grew up somewhere between poor and middle class, we learned early on in life how unexpected events could immediately trigger sacrifices. A parent’s sudden job loss, recession, rumors of war and other “grown up” concerns were completely out of our control and could mean only one Christmas present that year and more bologna sandwiches every week. Luxuries like dining out, summer camp, school outings and the like became—for the foreseeable future at least—a romantic memory. “We have to cut back” became the ubiquitous term for “This is gonna hurt for a while.”
In no uncertain terms, those times again have befallen us with a confluence of the expected and unexpected, shaking not only the nation’s oil and gas industry but the entire industrial world in which we arguably lead. The situation is nothing less than profound, but one that is surmountable as steps are taken to control that which we can.
Last year’s dry-up of private-equity capital sent a shock to the system of E&Ps already over-leveraged and quickly becoming the bane of shareholders impatient for returns on their investments. Tanking oil and gas prices since 2014 be damned. Show us the money or we’ll show you the door. The midstream sector, however, became somewhat insulated from the capital crisis because of the oversupply, creating an influx of infrastructure builds and expansions to move all that crude and gas to markets. Exports soon became the name of the game and the stats were there to prove global demand, driving more production and more infrastructure at a dizzying pace. Yet prices continued to tumble, bankruptcies began to mount in the double digits, and a “We have to cut back” solo sung by drillers unleashed a powerful echo across America’s shale revolution.
Which brings us to where we are now. The unexpected now perched atop the expected in the form of a global virus that will once again transform the nation’s oil and gas industry and maybe for the better. Demand for American energy post The Virus disruption will again return—perhaps even greater as nations resume business as usual to provide for their populations and economies. Sacrifices will indeed be made as we settle back in with tightened belts and rethought plans, but this time more mindful of spending, borrowing, cost-cutting, lean processes, and improved efficiencies. This may very well be our new moment.
What do you think?
Steve Reese is the publisher of Reese Midstream Report