Hi-Crush Partners L.P. is having a little party today, up 29% as of now and taking back some of the vicious losses from the last month. Oil prices are laying under $50 per share; a bleak reminder of the horror lying in wait for everyone in the U.S. oil and gas industry.
The once mighty WTI-Brent spread has been decimated, now barely $2 difference, having all but priced in the US opening domestic oil production for exportation. Or perhaps a global depression of shocking depth and scale. I can’t really tell for sure.
We are fast approaching the winter months, when production budgets for oil and gas companies reset. The next two months will be full of nightmarish stories playing out in real life. Bankruptcies will pick up, solvent firms will implement a drilling holiday anyway, and real hard decisions will be made about what are “core activities”. Non-essential (and especially money draining) operations will never reopen for business.
This should feed the narrative of a tightening market and help to shore up prices a little more. But then in January, with fresh budgets for the year, we’ll see what’s left turn the lights back on and set forward.
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