When “Dallas” was a top-rated television show back in the ’80s, oilmen were portrayed as wildcatters, the last of a breed of take-no-prisoners businessmen who took risk after risk.
Wildcatters, even fictional ones like J.R. Ewing, and real ones like T. Boone Pickens, drilled where their gut told them. Sometimes they won, sometimes they didn’t. The wildcatters were true boom or bust men. Lost a fortune yesterday, but won it back today. Pass the bourbon.
Those days, even those men in fiction, are long gone. Now the bottom line in the oil industry is just that, the bottom line. Money men with CPA degrees hanging on their office walls and chief financial officer titles on their business cards make decisions based on charts, maps, analysis and Wall Street.
This could be the reason why so many oil and natural gas companies are seeking more stakeholders to spread out the risk for their billion-dollar projects.
What happened to the oil and gas boom of just nine months ago? And why, as The Wall Street Journal reported this month, are banking giants such as Goldman Sachs Group Inc., USB AG and other large financial institutions facing tens of millions of dollars in losses on loans they made to energy companies last year?
Supply and demand. From the Dutch tulip trade — which created the modern-day stock market — to oil and natural gas, the scarcity of a commodity will drive up the price.
For the past several weeks, newspaper headlines and national cable news shows have squawked about the decline of natural gas prices. All the stories have one thing in common: there is no scarcity, just the opposite.
This drives down prices, leaving energy companies holding millions in loans and billions of BTUs in natural gas just sitting in reserve.
Starting in early March, trade publications began reporting that at least five major energy companies were scaling back on projects and cutting budgets in the shale fields. Consol, one of the largest energy companies, told Marcellus.com that cutting its budget 8 percent allows for “the flexibility to increase activity” levels during the second half of 2015 if energy prices justify increasing production.
Three weeks ago, EQT announced it had taken on another stakeholder for its multi-billion dollar Mountain Valley Pipeline, which it plans to run through southern West Virginia.
EQT announced WGL Midstream, based in Washington, D.C., has offered financial terms for 7 percent ownership in the pipeline.
The $3 billion to $3.5 billion, 300-mile project is intended to transport natural gas from Wetzel County to a trading point in Virginia.
With WGL Midstream, a division of WGL Holdings Inc., EQT has now sold 45 percent of the project to outsiders.
This came after EQT cut its exploration plans for 2015. In February, EQT announced it would reduce the number of wells it planned to drill in western Pennsylvania and central West Virginia by one-third, citing declining commodity prices.
The Pittsburgh-based energy and natural gas company revised its forecast to reflect proposed budget cuts from $2.5 million to $2.05 million.
The new forecast now calls for drilling 122 wells in the Marcellus shale basin, mainly in Pennsylvania and West Virginia this year. In 2014, the company drilled 196 wells, according to a February press release.
There is no new drilling activity planned in the Huron shale basin in eastern Kentucky for this year. In the past, EQT has suspended development in that area because of declining gas prices.
Other companies that announced cuts are Range Resource Corp., Rex Energy and Rice Energy.
Estimates are the companies are slashing about $2 billion, or about 30 percent, of their costs until the natural gas slump ends.
Baker Hughes, which issues a rig count every week, showed the number of rigs reduced by 56 over the past few weeks. And down 734 since March 20, 2014. This report doesn’t break down where and what type of oil the rig is drilling.
These numbers are also having an effect on jobs. Last winter, help-wanted ads in the oil and gas sector were common. However, a recent Forbes article estimates that an 75,000 workers — about 12 percent — in the oil and gas industry have lost their jobs. It is estimated there are about 600,000 oil and gas jobs in the United States, that figure including the petroleum industry.
According to the article, the declining rig count cuts about 40 positions per rig, that includes all jobs associated with the rig. However, the largest cuts are being made by oilfield service companies. Leaders in the industry are shedding jobs by the tens of thousands — 56,000 to be precise. Topping the list is Schumberger with 9,000 job cuts, followed by Weatherford’s cuts of 8,000, Baker Hughes at 7,000 and Halliburton eliminating 6,600 jobs.
The sector within the oil and gas industry suffering the second-largest loses is exploration and production, with 10,000 slashed jobs, and then pipe manufacturing with 9,000 positions gone.
“The tremendous growth in these oil and gas jobs has been vital to help the United States crawl out of the Great Recession. And keep in mind the add-on effect — every oil layoff means that much less money to be spent on meals, clothes, trucks, homes and on and on,” writes Christopher Helman.
This article was written by DANIEL TYSON from The Register-Herald, Beckley, W.Va. and was legally licensed through the NewsCred publisher network.