Pioneer's Take | Russell T. Rudy Energy LLC
Earlier this month Pioneer Natural Resources CEO and Chairman, Scott Sheffield, addressed the S&P Global Platts Benposium. “Rigzone” reports that over the five industry downturns throughout his career, the major lesson he has learned is that debt is toxic in the oil and gas industry.
Sheffield opined that the industry needs to shed $100 billion of debt to get balance sheets back in order. He cited the bankruptcies of 77 North American Exploration and Production companies, totaling $52 billion, as evidence. While the major oil companies seem to be in relatively good shape, he thinks they are more burdened with debt than he has ever seen in the past.
Pioneer views the Permian Basin as “set for explosive growth” and feels that operators there are among the most financially stable in the industry. In spite of the most active rigs and relatively strong players, Sheffield does not see even this modest prosperity as sustainable at a crude price of $50 per barrel. At this level some operators might grow in the short term, but production will continue to decline and long term prospects are bleak.
Sheffield concludes “I think the world is going to need Permian Basin oil production, and it’s not going to grow until you get to $60 long term.” At this price he sees at least $10 per barrel going toward debt retirement or some operators will have to start selling assets. For those companies which already have strong balance sheets, the $10 would be a huge benefit.
To read the article in its entirety, please go to http://www.rigzone.com/news/article.asp?hpf=1&a_id=145084&utm .
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