Read this Reuters article that came out today.
(Reuters) – A string of unforeseen events have reduced oil supply, helping to rebalance the world oil market and push price forecasts higher over the last month, a Reuters poll showed on Thursday.
These events are only unforeseen if you didn’t bother to try. I myself laid out exactly this sequence of events in 2014, along with predicting the survival of the US oil and gas boom.
But the damage that was done exceeded my wildest fears. The maneuvers of OPEC over the past 24 months have been nothing less than amateur. The wreckage from this schlock judgment; pervasive.
That said, I am not sure there will be many more bankruptcies in the oil and gas sector. They are all teetering on the edge, but with prospects of oil turning higher here in a balanced market, revenues and projects should begin to return.
In December of 2015, I bet that we’d see the market bottom within 6 months. I now feel more confident of that than I did then.
The looming debt maturities for the oil & gas sector are daunting, but still wait a few years in the distance. If revenues return in the second half of this year, investors can reasonable expect that the debt will be rolled over.
Financiers have no reason to fight this process…bankruptcy is not usually much kinder to debtors than shareholders. Better to gamble on the future than lose on the present.
The worst is behind us, I believe. But the road forward is going to be long as the industry picks up the pieces.
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You see any FTK’s out there?
Cain
I’m a big energy investor (percentage wise). I felt that the January lows while very painful did seem like a bottom. The range since then continues to suggest this. You also have many pundits telling people all spring to wait for more certainty. This too is positive. We have yet to have a big retail surge that might come when oil gets through $60. When this happens stocks will definitely be higher than today . And rightfully so. Many have driven out costs and will be very profitable in the $60-75 range. Much more so than they were 4 years ago. I believe that this subdued price range will also keep many of the higher cost projects on hold, and from flooding the market.
I also agree that most of the weaker balance sheet players have already been dealt with. We may not see the wreckless growth that got so many into trouble two years ago. OPEC certainly has been taken down a notch or two. Their ability to control the market is certainly in question.
I agree with your thoughts and appreciate your insights.