How the Mud-Covered Oil & Gas Industry Will Brush Their Shoulders Off And Leap Into The New Year
Note: Article courtesy of Pipeline & Gas Journal and written by Courtney McShane, Director of Business Development at Willbros. McShane will participate in a panel to discuss developments in the Marcellus and Utica region at the 2017 Pipeline Opportunities Conference.
Major industry players have consolidated the market, mega mergers occupied the airwaves, massive infrastructure projects on the horizon, drilling rig count up, a game-changing Marcellus ethane cracker plant being built in Pennyslvania…so what was the hold up this year? $52 oil prices and $3.50 gas prices, that’s what.
There is no other industry I know of where the price of the product drops by 50% in less than 6 months.
Commodities are gracious or evil, there is no in-between. Nearly 400,000 people have been laid off according to a report by Graves & Co, 175 companies were forecasted to go bankrupt in 2016 according to Deloitte’s very cool infographic report (and this only includes Exploration & Production Companies), numerous midstream operations have closed and many more are simply holding their hats hoping to wait out the wave.
That being said, those of us lucky enough to stay in the industry during this challenging downturn have hope. Sometimes, hope can save companies.
In fact, some would argue that this economic downturn has benefited many in the sense that we have all found ways to become more efficient, bring down overhead costs, skinny the books and identify the most talented employees to retain our keystones.
What I’ve found interesting most recently, is the magnitude of the impact of the planned Atlantic Coast Pipeline (ACP) by Dominion, Atlantic Sunrise by Williams and Mountain Valley Pipeline (MVP) by EQT. Last year, forward-thinking midstream companies bid pipeline and facility projects 3 years in advance to lock in contractors at then-current pricing, which is highly strategic. Backlog is a big draw for contractors (no surprise there) and everyone today has extra sharp pencils, hoping to win work and breathe life back into our operations. But the hurdle is…3 years from now, expecting that the ACP/MVP put high demand on contractors, the price of labor, equipment and materials will undoubtedly surge. The challenge for contractors is winning the bid today but being able to afford construction costs at the promised price in 2018.
Offshoot and interconnect projects down the east coast are tapping their feet waiting for those two 300-400 mile 42’’ diameter pipeline monstrosities to initiate construction. The original plan was to start construction this year. Now both have been pushed back to March/April of 2018 and this has a ripple effect all the way down to North Carolina for gas companies who intend to connect to this line and supply their communities with the cleanest, most sustainable energy source available in our repertoire of energy solutions today.
The year 2017 offers exciting new opportunities, a dedication to building important infrastructure not only in the energy industry but also dire water transit needs, and civil roads, bridges and highway systems. Assuming your head hasn’t been in the sand (like a fearful ostrich) for the last couple months, no doubt the excitement level is building rapidly to get outside, get dirty, and get working.