Oil industry bouncing back after pandemic, facing administration changes

Kelci McKendrick, Enid News & Eagle, Okla.
·9 min read

Apr. 3—The impact from the COVID-19 pandemic over the past year has been felt in the oil and gas industry.

Some companies closed and others had to let employees go. People stayed home more and traveled less. With that, the demand for oil and gas dropped, said John Donaldson, president of D&J Oil in Enid.

Around this time last year, when cities began shutting down, a barrel of oil cost $25. The price dropped into the teens during the early months of the pandemic.

"It's been pretty treacherous for a lot of big companies, especially companies that were (private equity-backed), and it's had an effect," Donaldson said. "There's been bankruptcies and changes. That was brutal — to have negative oil there for a while ... It just reduced all our prices so low that it was just really hard."

As of March 29, 2021, it is back up in the upper $50 range, and Donaldson said the $60 to $65 range is sustainable.

Mike Cantrell, chairman of Postwood Energy LLC in Ada, said it's a lot better now than it was last year, but the oil industry isn't out of the woods yet.

COVID-19's impact

Several companies closed in the past year because of the pandemic. Fortunately, D&J, which has 10 employees, stayed afloat thanks to the Paycheck Protection Program.

Other companies stayed in business but had to let employees go. Dewey Bartlett Jr., president of Keener Oil & Gas Co. in Tulsa, said after one employee retired last year, the position never was refilled, and the company of now five had to let an employee of about 17 years go.

"That was tough," he said. "We were losing money and had to borrow money to stay in business, and that's hard. We were trying to keep our debt down ... We've all had salary reductions and benefit reductions, so it's affected all of us, but we're fortunate that we were able to keep people employed."

Brook Simmons, president of Petroleum Alliance of Oklahoma, said more than 20,000 Oklahoma jobs have been lost in the past year. As of December 2020 there have been more than 250 service company bankruptcies and 250 upstream or EMP bankruptcies since 2014. Currently, 17 rigs are running in the state.

One of the biggest challenges was there wasn't a high demand for oil and gas in the early months of the pandemic, so the prices of both were low. Air traffic, Cantrell said, was a big consumer, and when it went to a "grinding halt," the fossil fuel industry felt the impact.

Consumption of petroleum products in the U.S. dropped to its lowest level in decades, falling by 3.4 million barrels per day by April 2020, according to the U.S. Energy Information Administration.

Last April, the price of crude oil was down to around negative $35 in the U.S., according to EIA, and in 2020 oil production fell by 8% and natural gas by 1%.

"When we were down in the $20 and $30 per barrel range, it was pretty desperate for quite a while," Bartlett said. "A lot of people lost jobs. Both oil and gas companies, as well as service companies, had to go out of business."

The price collapse really started in 2014, going below $80 a barrel for oil, Cantrell said, and the pandemic pushed it.

"In my almost 50-year career, this has been the worst year in the oil and gas industry, and it's because prices went so low and stayed so low for so long," Cantrell said.

Biden administration and oil

One of Bartlett's biggest concerns going forward is how President Joe Biden and his administration will affect the oil industry.

"All those people that have been laid off have really not been rehired yet because things are still not real confident about the future, mainly because the new administration has really not been very friendly at all to the oil and gas industry in its entirety," Bartlett said.

In efforts aimed at fighting climate change, the Biden administration halted any new oil and gas leasing on federal lands and waters and revoked the 1,200-mile Keystone XL pipeline permit over climate change concerns.

Cantrell said Oklahoma doesn't have any federal land, but some companies like Devon Energy have assets in other states and could be affected.

A Jan. 27 executive order signed by Biden aims to end federal subsidies for fossil fuels, "to increase renewable energy production on those lands and in those waters" with the goal of doubling U.S. offshore wind capacity by 2030 and direct federal funding to accelerate 'innovation, commercialization, and deployment' of clean energy technologies and infrastructure."

Bartlett said the move to transform the use of natural gas and crude oil products would "essentially" put him and other oil companies out of business.

"They want to transfer to alternative energy sources that don't pollute, and that would be, in my opinion, totally devastating to this country, both to our national economy that relies upon access to reasonably priced energy on a consistent basis, and also the national security aspect," Bartlett said.

Bartlett said if it goes away, the demand will still be there.

"Our being able to produce, domestically, enough oil and natural gas to take care of our needs is a tremendous benefit," he said. "If that goes away ... We're still going to need to drive cars, trucks, buy fertilizer for the farms, use fuel for the tractors and all of the semis that deliver agricultural products to markets — we will always need that — and if it's not being produced domestically, we'll have to buy it from some other country."

Cantrell isn't too worried because he said "nothing happens immediately" and, similar to Mark Twain's quote on his rumored death, that the "demise of the fossil fuel industry is greatly exaggerated."

"The green energy idea — of course we need to pursue that to some extent, but the marketplace will really drive that a lot," Cantrell said. "They can speed the process up some, but they're gonna run into all kinds of problems that they're not contemplating, and we're going to need fossil fuels at least till 2050, so I think that's good for the energy industry."

Good things happened in the past year, too. Donaldson said his company has a couple of prospects that it's working on that has "good potential" — it just needs investors.

Bartlett said the COVID-19 pandemic gave his company an opportunity to look for drilling projects and put ideas together. One of the projects involves vertical holes — traditional, vertical drilling, that involved 3-D seismic.

"Once things do get better, we feel that we have a couple of ideas that we'll be able to show to investors," Bartlett said. "Whereas before, when the business was going good, a lot of companies were very, very busy doing their own deal, and they weren't quite as interested in doing other things or interested in talking about doing it with somebody because they couldn't afford it."

Cantrell is optimistic about the future of the oil and gas industry as it bounces back from the pandemic, though he said it depends on administration and other factors.

"I do think that prices will solidify once Europe is back up and their demand for oil and gas goes back up ... I really think you're going to see ... a dramatic increase in economic activity, which also weighs heavily on the price of oil," Cantrell said. "It's a delicate balance. There's a lot of oil. Demand is going to increase and going to continue to grow, and the only question is will OPEC (and it's allies) ... be willing to maintain their cut as the price goes up?"

Gasoline prices are going back up, which is good for the oil industry because it means the demand for oil is going back up.

Donaldson said the price for a barrel of oil should stay in the area it is now, and that once more people start going out more again, the demand will continue to grow.

"I think as the country comes out of the pandemic and everybody starts flying again, everybody's driving ... I think you're going to see a pretty good flux of people wanting to really get out and move around because they've been shut down for a long time," Donaldson said. "You're gonna see demand grow, and you could see some prices spike a little bit, but, hopefully, we'll be back to drilling by then, and then we can get caught back up."

Simmons said the state is positioned for a slow recovery regarding drilling activity and production — currently, Oklahoma has 17 rigs running. He is, however, optimistic.

"The ship that got us to this place in Oklahoma's history will have to adapt and change as we get to the next destination," Simmons said. "I'm excited when it comes to the hard working men and women of the oil and gas industry in Oklahoma, and we have the grit, we have the determination, we have the know-how to continue to advance the oil and gas industry in this state, from Enid to Poteau."

By next year, Donaldson said he plans to have reworked old wells. Bartlett said he's unsure where Keener Oil will be in 2022 because of the Biden administration plans. Cantrell is optimistic about the future of fossil fuels.

"I think fossil fuels have life for at least a couple of decades, and that could change," Cantrell said. "It could be more than that. It could be less than that. We make so many products from petroleum and from natural gas — thousands of products that we use every day, and that's not going to be easy to replace."

Donaldson said it'll be "interesting" to see how the oil industry progresses in the next 10 years with new technology, but that "the world will always need oil."

"There's gonna be a lot of changes," Donaldson said. "There's going to be some winners, there's going to be some losers. I just hope the oil and gas business wins because ... There's a lot of people in Oklahoma that work off oil and gas, and we need it to stay going."

Kelci McKendrick is police and court reporter for the Enid News & Eagle.

Have a question about this story? Do you see something we missed? Do you have a story idea for Kelci? Send an email to kelcim@enidnews.com.