Oil prices will remain choppy for the next few quarters as demand is affected by the threats of a worldwide recession and COVID lockdowns in China ripple through the world economy. Because of the lack of global E&P expenditures for the last several years and the self-discipline of the US producers who focus on shareholder returns and debt repayment rather than production growth, oil supplies will soon be regulated. The US Natural Gas curve remains backward-dated due to oversupply from strong drilling inventories in the Marcellus and Haynesville regions. Still, demand should pick up as North American LNG terminals come online in 2024.
The modest increases in the US rig count, which remains below pre-pandemic levels, is a function of increased capital discipline on the part of US producers and more efficient drilling techniques allowing overall production increases with fewer rigs. Oil Field Service companies that survived the downturn are starting to realize some pricing power as older equipment wears out and labor continues to be a constraining factor for safe operations.
At Carl Marks Advisors, we understand the challenges facing companies across the E&P, midstream, and oilfield services sectors and what these issues mean for their stakeholders. Our experts, led by a team in Houston, know how to pinpoint critical value drivers, evaluate the options, and help make decisions that borrowers, lenders, investors, and other stakeholders face regarding capital expenditure plans and liquidity requirements.