Oil Prices, Energy Trends & What Comes Next
Here's the deal on oil. We kind of saw this back in 2009. I've talked to a couple of the businesses leaders in Dickinson about it and they've said that while they've had to tighten their belt for the remainder of the year they believe prices will come back about mid-summer. The only problem with that is the drilling plans for these companies have already been done so we won't see much more growth this year. Which isn't a bad thing because it'll give infrastructure time to catch up in the Bakken. I think you'll see rigs drilling again at a decent clip by spring or summer 2016.
I don't think we'll see a ton of foreclosures. Maybe a few, but those have been happening already anyway. And I'm also not convinced that rents will bottom out. People are going to sit back and wait to see what oil prices are on December 31st. I think they'll start bouncing back in July or August. It's kind of scary right now, but I don't think you'll see panic until January if the prices are still low.
I talked to our production manager today about this (deals directly with this stuff, with 28 year experience throughout the nation),and if oil prices go back up like they were, those rigs will be back out there within weeks. Oil companies don't mess around, if price forecasts show them sustainable for even a while, drilling will start soon after. Most oil companies should already have enough secured land rights (and will continue to work on more), finish other day to day contracts, and then start to drill. All it takes is something to cause the oil prices to spike upwards, and there would be a prompt meeting with all the big guys, and they would be running full gear, hiring all they can back.
Well yeah, it is, but it still takes time and money to get those rigs out of the dirt once they're in there. I used to work for a company called Pason that does Electronic Drilling Recorders. I was shocked at how one company would be able to put something together in days and another one would take months. But with you working for Oxy you probably know that.
The thing that a lot of people don't know is you've got the Operator (Continental, Oxy, Marathon, Conoco-Philips) who pays to rent the rig from a Contractor (Cyclone, Nabors, Precision) who actually owns the rig. Most of the Operators are generally comparable, but holy crap are the contractors different. You could be on a Nabors or Precision rig and feel completely safe, but then step onto a Cyclone rig and feel like it could blow at any moment. Not surprisingly, the companies who's rigs looked like crap, usually took longer to drill the wells.
Actually, now that I think of it, the Operators aren't necessarily generally comparable. Most of them work with certain Contractors and that plays a huge role in how clean and safe the rig was. But damn were there company man, rig manager teams that could punch holes in the ground. I had one rig that was moving like every 15-20 days, which was awesome in the Bakken with how deep the holes are.
I loved working in the oil industry. You learned something new every day and the people you met on the rigs were definitely "colorful."
@ryanator, do you ever get to go out on the rig sites?
The thing that a lot of people don't know is you've got the Operator (Continental, Oxy, Marathon, Conoco-Philips) who pays to rent the rig from a Contractor (Cyclone, Nabors, Precision) who actually owns the rig. Most of the Operators are generally comparable, but holy crap are the contractors different. You could be on a Nabors or Precision rig and feel completely safe, but then step onto a Cyclone rig and feel like it could blow at any moment. Not surprisingly, the companies who's rigs looked like crap, usually took longer to drill the wells.
Actually, now that I think of it, the Operators aren't necessarily generally comparable. Most of them work with certain Contractors and that plays a huge role in how clean and safe the rig was. But damn were there company man, rig manager teams that could punch holes in the ground. I had one rig that was moving like every 15-20 days, which was awesome in the Bakken with how deep the holes are.
I loved working in the oil industry. You learned something new every day and the people you met on the rigs were definitely "colorful."
@ryanator, do you ever get to go out on the rig sites?
What are you up to now with the slow down? Oxy doesn't have any rigs drilling right now, do they? I know I've talked to several of my old Pason coworkers and they are just constantly driving around making sure people know they're still there if they ever start drilling again.
This is the thing that a lot of people don't seem to grasp out the oil industry. The demand isn't going anywhere. In fact, demand for oil will continue to grow and does every day. It's not just cars we use for oil, we use petroleum based products all around us every day. A large amount of whatever production surplus we have had in the past will be used up quickly. Price is going to go up. It always does.
True but for once we are producing more than we are using. Also lets not forget about the surplus that everyone is hording out there waiting for it to return. Also as we become more environmentally friendly the demand will go down. Plus old gas guzzelers are getting phased out and replaced but more economical vehicles. Look at what new pickup get's these days. 20 years ago this would had been unheard of.