There’s a popular business adage of companies which form in a recession are more likely to succeed than during a market expansion. This is easily translatable to the current state of $40 oil. E&Ps who can currently weather the costs of rig start-up and sustain operations are more than likely to continue when prices rise.
This sentiment was echoed at the North American Producers Expo (NAPE) held in Houston last week. Various E&P CEOs acknowledged the opportunities that lay ahead by moving forward with exploration and production programs now and thus able to incur high return on investments down the line. More so, a handful of smaller E&Ps operating in Tier 2-3 basins (i.e. non high-profile) will have a distinct first-mover advantage when the market picks up and their acreage becomes even more profitable to operate.
It’s no secret financial analysts are relying on marginal producers to go out of business in order to remove the excess supply from the market – the market ‘correction’. Fair point. However, the correction does not have to apply to all E&Ps. We still need small, nimble and innovative drillers/producers. Don’t be the correction.
If you are a small E&P and looking to start-up operations, please contact EnergyFundz and we will endeavor to help your firm connect with investors. We would also like to hear your thoughts and/or experiences on starting-up in a $40 environment? Feel free to comment below.