ENID, Oklahoma. – A broad-based recovery is underway regarding the state of the oil and gas industry in Oklahoma.
Operators of all sizes are making investments right now, said Brook Simmons, president of the Petroleum Alliance of Oklahoma, adding that the industry’s recovery is supported by higher commodity prices following a “challenging, multi-year rebalancing of the shale business model and depressed prices.”
Simmons said demand for oil and natural gas exceeds supply, driving the higher price and allowing Oklahoma to participate in that recovery.
“It’s a good thing for the state of Oklahoma, both from an employment standpoint and an economic activity standpoint,” Simmons said.
However, this results in higher prices at the pump, Simmons said, adding that the only way to get through it is continued investment in producing crude oil and natural gas.
“Over time, we will discover that the market will come into balance,” he said. “When it is, I do not know, but it is generally the path it has taken. That is the nature of the cycle.”
In 2020, the price of a barrel of oil dropped in the teens of the first months of the COVID-19 pandemic, and even dropped to the negatives, and by the end of March last year, the price was in the upper $ 50 range.
Now, according to the United States Energy Information Administration, crude oil prices for West Texas Intermediate stood at $ 91.44 as of ThursdayFebruary 17, 2022.
Simmons said demand for oil and natural gas exceeds supply, driving the higher price and allowing Oklahoma to participate in the broad-based recovery.
Several thousand jobs in the oil and gas industry in Oklahoma have been added over the past eight months, Simmons said, after more than 20,000 jobs were lost in 2020.
John Donaldson, president of D&J Oil at Enid, said the oil and gas industry is “much better” than the previous two years, and in the past year the price of natural gas has risen.
“I think oil and gas are picking up again and COVID-19 is falling off. Hopefully things will get normal again here over the next six months,” he said.
Concerns at the state level
Simmons said at the national level that the headwinds for growth and job creation in the oil and gas industry include a “squeeze on investment capital and public policies designed to harm U.S. producers but strengthen OPEC + competitors.”
“One can look at broad trends when it comes to some of these public policy risks, but the current administration is no fan of Oklahoma and no fan of the crude oil and natural gas industry,” he said.
“Bad” federal policies at the federal level, Simmons said, could increase the cost of doing business in the oil and gas industry at the state level.
Oklahoma is challenged and is always competing against peer states that may have more productive and more profitable resources, and Oklahoma needs to compete against investment.
Simmons said Oklahoma is competing for the third- or fourth-dollar oil and natural gas investment as family-owned companies, private equity-backed companies and listed companies rank their best opportunities for return on capital.
According to Baker Hughes, Oklahoma had per. Feb. 11 53 rotating rigs running, and came just behind Louisiana with 54. New Mexico has 92, and Texas stood at 100.
“These are the states that we compete against for drilling capital,” Simmons said, “and it does not matter if you are a large, listed company or a small family-owned store. You may have assets in the other states and you must Decide where you want to put your dollars to get the best return. “
‘Preserve what we have’
Simmons said the oil and natural gas industry is the main driver of the state’s economy and is responsible for more than half of the state’s annual real GDP growth each year, “far faster than any other sector of the state’s economy.”
He reminded state and local officials that boom and bust will continue to define Oklahoma’s common prosperity and not take the state’s “highly specialized economy” for granted.
“Doing so would weaken the state’s quest to become a Top 10 state,” he said.
Simmons said it is difficult to predict where the oil and gas industry will go in the next few years.
“I hesitate to guess, but I just want to say that companies will continue to face current challenges and new challenges, and there will be twists and turns along the way,” Simmons said. “I hope Oklahoma will continue to be able to compete in that environment.”
Donaldson said he hopes the next two years will be good, and in the meantime, D&J Oil, which has 10 employees, is focusing mostly on refurbishments and reworking of old wells currently operating about 65 in northwestern Oklahoma.
Donaldson said the company would like to have 100 wells operational by the end of the year.
“We’re just trying to maintain what we have and we’re always looking for smaller acquisitions where we can buy wells, complete them ourselves and put them on,” he said.