The industry might have been moving too fast for its own good leading up to the price decline in November of 2014, Netherland Swewell & Associates Chairman and CEO Scott Rees told Angie Austin at EnerCom’s The Oil & Gas Conference 21.
“If you go from the beginning of 2000 to 2014, there was a slip in prices around 2008, but the industry was pretty robust over that time,” he said. “the engineer side of me says ‘we were going too fast with how many rigs we had running and how many wells we were drilling.’ Most E&P companies were paying a lot to have things done yesterday, and when you do that, you’re paying a lot more than it would really cost. So our cost structure was getting out of control,” said Rees, commenting on the current downcycle.
“What’s interesting to me though, is there are some theories that OPEC tapped the break on pricing because they thought shale was getting too far ahead of itself,” he continued. “If that is the case, it was a miscalculation. What has happened now is that everyone has gotten much more efficient. So what was economic two or three years ago at $80 to $90 is economic now at $50 to $60. So they haven’t really changed anything, other than make us a much strong industry.”
For more of Scott Rees’ unique perspective on the oil and gas industry, watch the video below.
