IPAA members exude positive attitude despite low commodity prices
NEW ORLEANS -- As they gathered for the opening reception of their annual meeting in New Orleans Sunday night, members of the Independent Petroleum Association of America (IPAA) were doing their best to take an optimistic attitude toward the year-long slump in oil and gas prices. “We’re taking the cheap route and drilling some relatively shallow, inexpensive oil wells in traditional areas,” said one small North Texas producer. “If you’ve got the cash, now’s a good time to drill a few wells and take advantage of the lower costs for equipment and services,” he added.
Similarly, a number of small- and medium-sized independents are carefully picking and choosing the reduced number of wells that they are drilling for the remainder of this year and early next year, with a slight uptick in the proportion of gas wells drilled. “Sure, the price of gas is not very attractive right now, but we’re trying to be proactive and anticipate future demand, as well as when prices will recover,” explained another producer based in Oklahoma. “But we’re not going to go wild about drilling either.”
Juxtaposed against the relatively upbeat attitudes of producers is the nervousness of IPAA service/supply members. “Just when I think we’ve hit bottom and are going to level out, it seems like we have to cut prices for our products yet again,” complained one service/supply executive. “And I’m afraid that we’re going to see at least one more substantial wave of layoffs, which leaves me wondering how some firms are going to be able to continue business-as-usual, if they’re cutting into the bone of their personnel.”
Concerns
Meanwhile, virtually all the IPAA members seem to agree that advances in technology will be a prime factor in helping to make their operations more profitable. “We’re carefully watching some of the recent new technology fixes that the majors and larger independents are applying to their operations, including what they’re doing in the shales,” said a medium-sized Texas operator. “Eventually, whatever works best for them is going to filter down to us.” Several producers mentioned that items on their “hot list” right now include production enhancements, refracing, and improved water treatment.
The agenda at the IPAA annual meeting reflects the wide range of concerns facing independent producers. In sessions on Monday afternoon, speakers were due to brief members on the geopolitical situation in the Middle East, and how it affects oil prices and demand, and thus their own livelihood, as well as the overall E&P global macro, with emphasis on shale vs. other segments, and the relevant cost structure and break-even points. On Tuesday, independents will hear the latest analysis of the 2016 race for the White House, as well as key U.S. Senatorial and House election contests, and the implications for changes in legislative attitudes affecting oil and gas.
Also on the Tuesday agenda will be a session with multiple speakers analyzing the current oil and gas price environment, and how producers can adapt to the market and take advantage of hidden opportunities. In addition, IPAA members will be briefed on the latest logistics and policies related to getting crude oil to market, as well as the controversy surrounding potential oil exports and a review of EPA and Interior Dept. regulatory initiatives.
