2019 was an exciting and consequential year for the oil and gas industry. Major stories included records in domestic production, increased exports, financial developments, and a reduction of oil rigs by privately held energy companies.
A major financial story of 2019 for the oil and gas industry is that there appears to be a financial divergence occurring among the industry players. Companies with strong internal cash flows are easily able to fund the exploration and development of new drilling operations. There are also firms that lack sufficient cash flows but can secure funding from banks and investors. These firms are still in the game for new exploration and development.
On the other side of the financial divergence in the oil and gas industry are companies that lack both the internal cash flow generation and the ability to borrow large amounts of capital to sustain exploration and production of energy. The firms that lack the cash flow and the ability to borrow money are finding it difficult to sustain and expand their operations. As a result, many of these cash-strapped firms are reducing or even stopping their operations entirely.
In fact, 29% of privately held oil rigs that were in operation in the past year in the USA, have suspended their operations entirely. Privately held energy and production companies are continuing to cut back on oil rig operations. On the other hand, publicly traded companies are adding the number of rigs in operation. Experts predict that the idling of rigs by the privately held E&P firms is a sign that the oil and gas industry may be heading towards a stabilization, but that has yet to occur as rigs continued to be idled by the privately held firms and added by the publicly held ones.
Other significant stories in the oil and gas industry in 2019 include the fact that oil and gas prices continue to remain rather low. The price of oil ranged between $51-$60 per barrel of oil in 2019. A remarkable story is that despite 300 rigs being idled in the USA during the past 12 months, the production of oil and gas still increased. Higher efficiencies and greater yields per rig are why the total production of oil and gas rose, while the number of rigs declined substantially.
Additional noteworthy events in the oil and gas industry for 2019 included increasing amounts of exports of both liquefied natural gas and oil. In fact, 2019 marked the first time since the 1940s that the United States was a net exporter of crude oil. This shows that domestic production is rising, and there is a market for increased oil and gas production abroad.