Shrinkage. The oilfield services world has shrunk. The year 2014 marked the top and we have been shrinking ever since. The industry is now the market cap of Shell. The entire industry. It isn’t all bad. As long as everyone is making money. We aren’t there yet but we will be. It is a very physical industry and we will learn to become more efficient. But as an industry, we won’t be replaced. And the companies left standing will be more profitable, even if smaller, and the sun will shine again! The accompanying list shows some companies that I follow that missed (3rd quarter) earnings. Feel free to provide additions.
At His Word. Rich Dealy, ExxonMobil Vice President for the Permian Basin, said that more consolidation is inevitable in the basin during Hart Energy’s DUG Permian Conference in Midland, Texas.
Stunned. I saw the map (see the other accompanying graphic), flipped the page, then immediately flipped back. The red is the well track of a recent well, with the well path of nearby wells shown in black While many will not appreciate it, as a geoscientist, the idea of this well being steered around looking for the best rock is amazing. Yes, steering a bottom hole assembly drilling horizontal holes is an amazing thing, but, as can be seen by the well tracks in black, they were almost military turns instead of the wandering around of the red line. We have broken the line on how we can drill wells.
We are Good. I have been preaching this for years. It can be a curse. If you aren’t good, no one uses your business and you disappear. But if you are good, you help your customers make more money. So, you develop technologies that improve every part of the crude oil and natural gas exploration and production process, by doing more and more with less and less, benefiting the customer base in very tangible ways. But what happens to the good service, supply, and support businesses that made those dramatic gains in productivity and efficiency possible? “Decimated” doesn’t even begin to describe it. They have worked themselves out of a job.
Casual Day. While I ended last week in Tennessee, this week I headed to New Orleans for a quick line in the water. While at Love Field waiting for my flight, I noticed something. No one was boarding the plane and flying to New Orleans wearing a suit, tie, or even a sport coat. Not one “business traveler.” Odd I thought, but it’s New Orleans after all. So, I went to the next gate where a plane destined for Houston was beginning to queue up to board. One sport coat. That was it. Not even socks and a nice shirt or anyone else. I had to ask the sport coat what he did for a living. An attorney. Of course. But the only one on a Thursday morning flight to Houston? Times appear to have changed in many ways.
—Jim
Subscribe to Jim Wicklund’s full e-newsletter, “Things I Learned This Week at…,” distributed weekly via email, by signing up for free at this webpage: https://www.pphb.com/newsletters. Jim is Managing Director / Client Relations and Business Development for investment banking firm PPHB. Leveraging deep industry knowledge and experience, Houston-based PPHB has advised on more than 180 transactions exceeding $11 Billion in total value. PPHB advises in mergers & acquisitions, both sell-side and buy-side, raises institutional private equity and debt, and offers debt and restructuring advisory services. The firm provides clients with proven investment banking partners, committed to the industry, and committed to success.