Welcome to part one of this three-part series from Ed Cowsar, our CEO!
In the recent Journal of Petroleum Technology article entitled Industry Faces Long Road to Recovery, Adam Wilson quotes Jarand Rystad, CEO of Rystad who says the recovery will be from “six to 22 months”, and discusses variables affecting the timeframe. Magnus Nysveen head of analysis for Oslo based energy consulting firm Rystad says, “Shale Oil, especially will struggle, but the effects may be delayed.” While this analysis may use accurate data, an industry insider could speculate that analysts are looking primarily at what happened. Oil and Gas companies know how to lower CapEx and Lease Operating Costs and are stressing that innovative engineering and technology initiatives will change those oil and gas companies in just a few months. Some producers with low debt to equity ratios, a path to free cash flow, and innovative lean operational practices that leverage technology are already there. Those Rystad estimates will be beaten by the innovators.
Some independents and many global producers and NOC’s are going through the stages of grief quickly and accepting the new reality. Some shale producers hit the wall in 2019 and were ahead of the curve, already focused on lowering production costs, knowing that exploration was going to slow as capital dried up or until their Break-Even Point (BEP) is lowered. Drilling methods vary quite a bit even on land and especially vs offshore, so the lessons learned there in one play do not always translate to another continent or offshore.
It does not matter if production is in the Permian, Bakken, SCOOP, Marcellus, Utica, DJ Basin, Eagle Ford, Canadian Oil Sands, Norway, the Middle East, offshore platforms in the Baltic Sea, North Sea, Gulf of Mexico, or on a Floating Platform offshore of Brazil, the production issues and Artificial Lift failures have a certain repeatability, combined with a local well design and formation dimension. So while drilling slows on land and offshore, it’s clear there is the common ground to lower production expenses and leverage common Lift Types and methods, allowing producers in conventionals, unconventionals, and offshore to leverage common Artifical Lift Types and Production Intelligence technologies with Machine Learning improvements around the globe in production.
Other articles pile on, including Bloomberg, pointing out in a March 10th update to “Shale’s New Reality: Almost All Wells Drilled Now Lose Money”, that of the data they have access to, only Exxon, Oxy, and Crownquest can make money in the low 30’s and high 20’s per barrel of oil. Of course, the capital markets are changing, and drilling designs are changing and even being shut down in some companies. However, based on our experience, these writers only have access to the broad aggregated public data, and while that looks grim, it is yesterday’s news. Agile producers in shale plays and offshore are tapping into innovation, existing production, alternative approaches and technology to lower operating costs and forge ahead.