Survey: Energy companies sheltering in place as they wait for prices to recover
Energy companies sheltering in place as they wait for prices to recover
“We are starting our fourth month without any revenue.”
That statement in the latest quarterly energy market update issued by the Federal Reserve Bank of Kansas City likely sums up the situation for at least some oil and gas energy producers.
The survey polled energy firms based in Oklahoma, Colorado, Kansas, Nebraska, Wyoming and the northern half of New Mexico and the western third of Missouri.
It tracks numerous specific business activities, including drilling, capital spending and employment.
It also asks company executives what their expectations are for future prices on oil and natural gas.
Survey results are measured using diffusion indexes that calculate results by subtracting the number of companies expecting declines in each of the measured activities from those that expect improvements.
Second-quarter survey estimates were down sharply compared to the first quarter, and also were down dramatically year-over-year, the survey showed.
“A majority of firms in our survey applied for and received Small Business Administration ‘paycheck protection plan’ loans, but low energy prices have hurt profitability,” said Chad Wilkerson, an economist at the bank who also is its Oklahoma City branch executive. “Most … do not plan to increase production levels until oil prices recover more.”
Meanwhile, a growing number of producers reported they expect to see prices for oil, natural gas and natural gas liquids gradually climb as continued production declines work toward rebalancing regional and global markets.
The average price per barrel for oil that would be needed before they restarted drilling programs averaged $51 a barrel, the survey showed.
“Continued improvement in oil prices will drive our business in the next six months,” an executive at one surveyed company stated.
Jack Money, Business writer