COVID-19 has been a global disaster, the likes of which haven’t been seen since World War II in terms of disruption, and a lot of the old ways of operating are not going to return.
A recent analysis reveals 107,000 lost oil and gas jobs won’t be recouped. What will streamlined companies look like in the future? Kirk Edwards, president of Latigo Petroleum, says, “Companies will be using and investing in more and more technology, as it becomes available, especially when it comes to translating production in the field to digital formats.” Many companies are already taking on new software platforms to help them work from home, manage assets, documents, revenue, HR, taxes, operations and a slew of other functions that make the oil and gas industry tick.
There is still room in the office for many workers who are in the field, but more frequently we are seeing automation free these workers to do other things. While that has had a positive impact on the level of productivity, it is not, however, an easy task to retrain workers and teach them new skills (something that usually takes 10 to 12 months). Retraining and retaining loyal workers, rather than laying them off, is better for general morale, the company and, most importantly, the economy.
An extreme period of reduced demand for oil and oil-based products has led to a slump in oil prices which has oil companies asking themselves, “Where do we go from here?” Compounding the future slump in prices, the utilization of electric cars becoming more commonplace will also cause many in the oil industry to pause and consider the new reality that will dawn in the near term. While many companies are taking a look at diversifying into various energy options, some other companies that have natural gas assets are doubling down on consumption over the long term. Edwards goes on to explain, “Many companies took the path to diversify last year and have pivoted away from basins that are notoriously bad for marketing, especially on the natural gas side. These companies that maintain steady, low-decline natural gas assets should be well positioned for 2021 and beyond.”
With bankruptcies running rampant, companies with stronger financial positions will take advantage of the situation and acquire the smaller struggling companies in order to expand their presence, footprint and own operations. Edwards adds, “The Big Four companies will use this period in our industry to consolidate the larger, yet weaker, independents in critical strategic areas they are now calling ‘core.’ The 2,900 independent producers will still continue the tradition of operating in a low-cost environment and hopefully see a reward when prices turn higher ahead . . . which they always do!”
This year there have already been numerous consolidations across the industry, with large companies getting larger or diversifying into other verticals of the industry by acquiring downstream operations or mid-stream transportation solutions. There are abundant opportunities in the current market.
With extra time, many companies are working hard to clean up the environment from decades of pollution. Many are looking at ways to mitigate their contributions to the carbon footprint of the industry. Edwards mentions, “Except for the operators in the Permian Basin that continue to flare large amounts of natural gas, operators have, and always will be, strong in stewarding their operations for a clean environment. The truth is this: everyone wants a clean environment. For anyone to preach differently is just wrong when it comes to the modern oil and gas industry practices of today.”
The industry is making wise use of its time to diversify, reduce, consolidate and clean up the environment. While there are going to be a lot of permanent changes that occur or remain after the pandemic ends, the industry is doing its best to shore up against a lot of the negative changes, by taking action now.
This month, we are completing a full year of the pandemic. With vaccines soon to be released, we are going to turn the corner. Taking off on a new and better trajectory, 2021 should be a year of recovery.