The last two years in the oil and gas industry have been one hell of a roller coaster ride. In the Fall of 2014, everything fell apart as OPEC decided to put the screws to other producers around the world in order to gain market share. A high number of job cuts were made in the fourth quarter of 2014 and the first half of 2015. Almost every capital project that could get cancelled, did.
But then it felt like the bottom was there and gone. In June of 2015, oil was back to $60 and rigs were going back to work. It felt like a long break up that allowed producers and service providers to take a breather and see where they had been over staffed and inefficient after five years of busy growth and investment. It seemed like most companies experienced a set back but would be in better shape because of it. Banks were giving extended lines of credit, refinancing existing loans and even letting clients make interest only payments. Producers with hedged production and lower service costs were feeling as good as they were when they were spending like mad to grow production.
However, by the end of summer 2015 the price of oil was having troubles staying near $50. Prices and activity kept slowly deteriorating until February, 11 2016 at which point the bottom for prices was finally hit at $26. Prices started to climb but activity stayed at close to nothing. There were very few companies with rigs working. This second price dive was a lot harder for everyone to cope with. Manufacturers didn’t have existing orders from a previous year’s budget. The banks said, in effect, you will have to sink or swim on your own, as we don’t know when this will end so let’s rip off the band-aids now and not throw good money after bad. Many producers and service providers didn’t make it. Some were consumed by their peers (if they were lucky) and others went into receivership where their assets were sold off.
By June of 2016 the price of oil thankfully made it back to $50 (double what it was in February). Production from the US and from other parts of the world was starting to show significant decreases. At that time, many believed the price wasn’t going back to the twenty dollar range but still many proceeded with caution. M&A activity began picking up, and a few more rigs were deployed. The rest of the summer remained relatively flat and quiet as it usually does in the Canadian oil patch.
Today prices are feeling steady at $50 with OPEC’s recent announcements to curb production and American shale production continuing its steady decline. Producers have spent two years lowering the overall cost of production to the point where profit margins are slim. Today, the vibe is better, there aren’t large capital budgets but they are improving and it is refreshing. There are companies with ads out trying to hire workers. Fracking companies are having troubles supplying already and the industry isn’t even doing a quarter of the work it once was. Many people have made career changes and are not coming back. For those of us that are left, we hope this is a sign of where we are headed.
A big salute to everyone for hanging in there. At OSY Rentals, our doors are still open and we are optimistic and hopeful for our battered oil industry. We want to give people a little fresh air after all of the pressure that has been on all of us for the last two years. OSY Rentals, with the help of the BOE Report, is offering a free hockey draft with great weekly prizes and a grand prize of two tickets to any NHL playoff game (flights and hotels included).
It takes less than a minute and requires zero hockey knowledge.
Contact Dallas Cairns, OSY Rentals General Manager, at dallas@osyrentals.com for more information.