News Release

Enverus: Welcome to the Dark Side of the Boom

byEnverus

Austin, TX (April 7, 2020) – Enverus, the leading oil & gas SaaS and data analytics company, has released its latest FundamentalEdge report, The Dark Side of the Boom.

 In one of its largest releases of the year, this report focuses on the new global supply and demand outlook since the failure of OPEC+ to reach an agreement on temporary production cuts. That failure resulted in a full-blown market share war between Saudi Arabia and Russia, coinciding with a massive crude oil supply increase from the United States. Efforts to limit the worldwide spread of the coronavirus have dramatically worsened that situation and sent the global economy into reverse gear, hammering demand for oil, natural gas, and natural gas liquids.

“Many U.S. wells were only marginally economic before the Saudi-Russian price spat, and things are only getting worse as demand for crude oil drops due to the spread of the coronavirus,” said Bernadette Johnson, vice president of strategic analytics at Enverus. “We’ve never seen demand destruction occur this much and this fast. A continued, significant reduction in drilling activity is still well on its way as the industry realizes this won’t be a quick recovery. Rigs will get laid down, the backlog of uncompleted wells will grow, and people will get let go.”

“There have certainly been historical booms and busts to draw from, but the oil and gas industry is finding itself in unknown territory right now and it’s turning into a bit of game theory in terms of next moves. Operators who pull the trigger too soon on certain responses are going to be at a disadvantage relative to some of their competitors. It’s definitely an expensive game of chicken,” continued Johnson.

“But the cure for low prices is low prices,” Johnson added. “The industry won’t see the beginning of a longer-term price recovery until the end of next year at the earliest, and it will likely be drawn out longer than that. An investment cycle or two definitely will be missed, and this year, and next year, will be tough. However, prices should look a lot better by 2022-2023. Shale is far from dead.”

Johnson offered some hope along with the release of the report.

“There could be bright spots to these recent events, too. Despite a lack of capital in energy and a willingness of parties to come together on asset transactions in recent years, this ultra-low price environment could generate bids and offers that move things further into the correct alignment, luring in reluctant investors who have been waiting on the sidelines,” she said. “We may not like it, but the market has been responding in a rational manner. We’ll see lower prices before we see recovery, but the market is working, and we can see a path to recovery.”

The Dark Side of the Boom covers:

  • Crude oil price drivers and global supply demand outlook
  • Potential basin shut-ins in the lower 48 states
  • Rig count changes
  • Natural gas breakeven sensitivities
  • Anticipated production changes related to power and electricity demand
  • LNG exports
  • Rig count
  • Capex reductions
  • Hedging volumes

Key Takeaways from the report:

  • Crude oil markets are under unprecedented pressure as efforts to control the spread of novel coronavirus send the global economy into reverse gear. What started out as a rout caused by a standoff between Saudi Arabia and Russia turned into a deep selloff as refiners began to see consumer demand for their products disintegrate. To keep inventories of gasoline and jet fuel from getting out of hand, refiners have opted to cut throughputs. This has placed intense downward pressure on prompt barrels and has pushed prices in the field into single digits in some locations. Still, there are more petroleum liquids sloshing around in the world than there is storage capacity to contain it. Although we can expect all tight oil operations to grind to a halt in the coming weeks, there simply isn’t enough time for the tight oil patch to go into base decline. Shut-ins are coming, and they are likely to be big.
  • The oversupplied oil market will keep crude prices low, depressing natural gas production. Enverus expects dry gas production to decline by over 6 Bcf/d by December 2020 compared to 2019. This will cause the gas market to go from being long during the summer months to being very short by the winter 2020-21. A sharp increase in natural gas prices is needed to incentivize natural gas production growth from gas directed plays, namely Marcellus, Utica and Haynesville. Enverus forecasts prices will exceed $4/MMBtu and could reach $4.50/MMBtu as early as the coming winter. Longer term, natural gas prices are expected to average $2.80/MMBtu; this level allows gas production growth to meet expected demand gains.
  • Natural Gas Liquids production is expected to decline in the next year as crude oil prices are expected to remain low. This will prompt a number of basins to have excess pipeline takeaway capacity to flow to fractionation hubs. Fractionation capacity has been running tight for over a year, and a number of projects are slated to hit the market in 2020 and 2021. However, as production is expected to decline as these projects come online, these fractionation projects will have trouble finding the volumes to run at capacity. Crude oil prices are expected to rebound in 2022 through 2025, helping natural gas liquids production to rebound off of the decline.
  • Earnings season was just starting to wrap up as oil prices turned dark red. Operators likely had just finished up their late nights running their models to perfect 2020 capital plans, which consisted of not-so-meaningful reductions on the oil side while gas players were bringing spend averages down. After the crash, Parsley and Diamondback were the first to trash initial plans, followed by over half of our coverage dropping a combined $21+ billion worth of capex, with over 160 rigs and 60 crews hitting the yard. Eyes have been on hedges, capital savings, and production decline rates to gain an understanding of which E&Ps will be weathering this storm as near-term maturities and maxed out credit facilities have some operators backed against a wall.

The Dark Side of the Boom | FundamentalEdge Report

Members of the media can download a preview of the full report, The Dark Side of the Boom, or contact Jon Haubert to schedule an interview with one of Enverus’ expert analysts.

Visit enverus.com/managing-the-energy-market to stay informed of the latest market conditions.

About Enverus
Enverus is the leading data, software, and insights company focused on the energy industry. Through its SaaS platform, Enverus provides innovative technologies and predictive/prescriptive analytics, empowering customers to navigate the future. Enverus’ solutions deliver value across upstream, midstream and downstream sectors, enabling the industry to be more collaborative, efficient and competitive. With more than 1,300 employees across the globe, the company’s solutions are sold to more than 6,000 customers across 50 countries. Enverus is a portfolio company of Genstar Capital and brings together the technology of Drillinginfo, RS Energy Group, PLS, 1Derrick, MineralSoft, Midland Map Co., MarketView, DataGenic Group, PRT, Oildex, Cortex, Red Dog Systems and RigData as one company. Creating the future of energy together. Learn more at www.enverus.com.

Enverus

Enverus

Energy’s most trusted SaaS platform — creating intelligent connections that uncover insights and opportunities to deliver extraordinary outcomes.

Related News

Enverus News Release - EPA’s emission revision: More rules, double the methane, triple the tax
News Release
ByEnverus

Enverus Intelligence Research (EIR), a subsidiary of Enverus, the most trusted energy-dedicated SaaS platform, has released a report that analyzes the U.S. Environmental Protection Agency’s (EPA) latest proposed changes to Subpart W of the Greenhouse Gas Reporting Program (GHGRP), quantifying...

Enverus News Release - Maintaining our bullish call past the deadline
News Release
ByEnverus

Enverus Intelligence Research (EIR), a subsidiary of Enverus, the most trusted energy-dedicated SaaS platform, has released its latest FundamentalEdge report focused on global drivers for oil and gas prices to 2030, the five-year oil and gas supply and demand outlook,...

Enverus Press Release - Tapping Alberta’s overlooked lithium brines
News Release
ByEnverus

Enverus Intelligence Research (EIR), a subsidiary of Enverus, the most trusted energy-dedicated SaaS platform, has released a new report that outlines the untapped opportunities in Alberta's lithium brines, focusing on the potential for direct lithium extraction and prospects in wastewater...

Enverus News Release - Who’s making the connection in southern Louisiana?
News Release
ByEnverus

Enverus Intelligence Research (EIR), a subsidiary of Enverus, the most trusted energy-dedicated SaaS platform, has released a report analyzing midstream operators' exposure to low breakeven emissions and significant CO2 storage capacity in southern Louisiana. The report also covers operators with...

Enverus News Release - Quantifying unproven inventory in the Permian
News Release
ByEnverus

Enverus Intelligence Research (EIR), a subsidiary of Enverus, the most trusted energy-dedicated SaaS platform, has released a new report that quantifies the geologically viable but not yet economically proven inventory in the Permian Basin and investigates the associated impact this...

Enverus News Release - Energy impacts of Gulf of Mexico hurricanes quantified
News Release
ByEnverus

As Tropical Storm Hilary downgrades from a hurricane but continues to flood parts of Mexico, California and the Southwest U.S., Enverus Intelligence Research (EIR), a subsidiary of Enverus, the most trusted energy-dedicated SaaS platform, has released a report assessing the...

Enverus Press Release - FundamentalEdge
News Release
ByEnverus

Enverus Intelligence Research (EIR), a subsidiary of Enverus, the most trusted energy-dedicated SaaS platform, has released its latest quarterly FundamentalEdge report focused on global drivers for oil and gas prices to 2030, the five-year oil and gas supply and demand...

Enverus Intelligence Research Press Release - EIR: Density drives steepening declines in U.S. shale
News Release
ByEnverus

Enverus Intelligence Research (EIR), a subsidiary of Enverus, the most trusted energy-dedicated SaaS platform, has released a new report that examines how oil decline profiles have steepened across U.S. shale oil plays over the last decade. 

power-grid-congestion
News Release
ByEnverus

Enverus, the most trusted energy-dedicated SaaS company, announced today it has acquired CRCL Solutions, a provider of cloud-based algorithms and modeling for wind and solar generation forecasts. CRCL Solutions provides a wide range of advanced forecasting data to help power...

Find Out How Enverus Can Help Your Business

Subscribe to the Energy Blog

A weekly update on the latest “no-fluff” insight and analysis of the energy industry.

Let’s get started!

We’ll follow up right away to show you a quick product tour.

Let’s get started!

We’ll follow up right away to show you a quick product tour.

Get Started

Register Today

Get Energy Transition Research updates straight to your inbox by filling out the form below.

Sign Up

Power Your Insights

Connect with an Expert

Access Product Tour

Speak to an Expert