By Younas Chaudhary
This is an uncertain period of time and it is new to all of us. We have challenges before us that we’ve never faced before and we need to confront them with hope and optimism instead of fear.
Our markets are totally shaken from their roots, government policies are just being reshaped, and nobody wants to lose what they have. This is basic human nature.
In the oil and gas business, companies have started making major adjustments and reductions to their budgets. Based on my experience, the best adjustment you can make is to control and reduce all your expenses and cost.
According to Rystad Energy, an energy industry consultant, Saudi Arabia produced oil at a cost of $9 per barrel last year. We cannot match it here in the United States and that is the reality. Our cost here is much higher.
For example, a company with 100 wells could make profits by running five of their high producing wells at $15 per barrel but the remaining 95 wells need to be shut down. There is a human cost to it as you may have 20 people working for the remaining unprofitable wells which unfortunately you have to let go under the current unpredictable circumstances.
In today’s low oil price and low demand environment if the wells are not making a profit, the company won’t be able to pay its costs. This is similar to what we are seeing in the airline industry. There are so many airlines mulling over upcoming layoffs. If you don’t have a certain number of passengers, how will you operate your airline?
We, in the oil and gas business are on a similar or rather way worse condition.
During earlier recessions, companies could talk to vendors and ask them to wait until things got better. Today, I don’t even know if oil prices will stay in the twenties, whether it will go higher or go further down. I don’t see a recovery in the oilfield industry anytime soon.
However, this is not the time for any of us to be doubtful or fearful. We all need to face uncertainty with courage by standing together by reducing all our costs. Let’s hunker down, streamline and reduce all our existing costs.
Energy consumption patterns will change and most likely will go down once the world wakes up from its current fears of COVID-19. We may not have adequate demand for oil in the foreseeable future but that doesn’t mean that it will stay down on forever.
This is a time for all of us to do some introspection. Let’s find ways to meet this uncertainty with hope, wisdom and optimism.
Find out more about me in my best-selling book “From dirt roads to black gold.” Note that 100 percent of the proceeds from the sale of this book will help people in need through my foundation, the YBC Foundation.
The views, thoughts and opinions expressed in this article are my own and do not represent the opinions of any entity whatsoever with which I have been, am now or will be affiliated.
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