Q2 2019 Oil and Gas Industry Update: Fluctuating Prices and Renewed Uncertainties
Commodity price volatility continued throughout the second quarter with oil prices finishing relatively flat after peaking in late April, while natural gas continued to languish, falling below $2.50 towards the end of June. Global developments—including the ongoing US-China trade conflict, attacks on tankers in the Strait of Hormuz, and extension of the OPEC coalition’s production cuts—contributed to oil price volatility. Increases in associated gas production and natural gas inventories have driven natural gas to its lowest levels since 2016. As always, uncertainty remains regarding the future direction of commodity prices heading into the second half of 2019.
Q2 2019 Metrics
12.4 Million Barrels/Day
The United States produces the most crude oil in the world at 12.4 million barrels per day, versus 10.9 in 2018.
$50.60 to $66.60 Crude Trade Range
NYMEX WTI crude traded in a range of $50.60 to $66.60, versus $63.05 to $74.13 in 2018
Natural Gas production reached 89.9 BCF per day, versus 82.07 in 2018
967 Rig Count
Ending US Q2 rig count was 967, versus 1047 in 2018
While global developments grabbed headlines, the domestic energy market also witnessed several key corporate transactions and new initial public offerings (IPOs) in Q2. The bidding war between Chevron and Occidental over Anadarko Petroleum in early April appeared to support the successful launch of Brigham Minerals’ IPO roadshow, giving the company the boost needed to send it trading well above its targeted price range during its trading debut on April 18. In May, Occidental won the battle for Anadarko but its own stock lost out (falling 13% since initially expressing interest). Oxy accepted $10 billion in financing from Warren Buffet and negotiated with Total Energy to sell Anadarko’s Africa assets for nearly $9 billion. The capital markets momentum continued as Rattler Midstream Partners raised $665 million in the largest energy IPO of the year, pricing an increased number of shares in the middle of its target range. Diamondback Energy, Rattler’s former parent company, maintains a majority stake.
As the environment for traditional M&A and capital market transactions remains challenging, several companies still face liquidity and balance sheet issues that have persisted since the downturn began in 2015 and the volume of energy bankruptcy filings peaked in 2016. As anticipated, oilfield services giant Weatherford International filed for Chapter 11 at the end of Q2. Under the proposed restructuring, Weatherford would reduce its funded debt from roughly $8.35 billion to $2.5 billion. Many industry observers believe there is still more work to be done across the energy value chain in this regard.
Despite uncertainties regarding the future direction of commodity prices, continued pace of industry consolidation, capital market receptivity, and the degree of restructuring still required, one thing is certain: Change is inevitable and energy companies that stay focused on continuous improvement will weather the storms and ultimately come out on top.
Riveron brings energy companies an uncommon agility, applying extensive technical accounting, finance, and operations expertise to accelerate the timeline and impact of change. Our experienced team members have sat on all sides of the table from executive roles in accounting and operations to investor roles in private equity and investment banks. We understand the unique challenges facing the energy industry and partner with our clients to achieve exceptional results.