By: RK Energy
In the summer of 2014, crude commodity prices were more than $100 a barrel. Since then, prices have dropped to $45 and stayed low for the last few years. While dozens of energy companies had to file for bankruptcy during the down turn, quite a few have made it through despite the low prices. What is the secret to their sustainability? The Denver Business Journal credits their survival to technology advancements, paying debt, cutting expenses and earning favorable margins at a lower cost per barrel.
Technology advancements significantly cut costs.
Technology advancements have cut drilling costs in half. Strategic companies are using the money saved on drilling to pay off debts and sell unneeded assets.
Private-equity investors are still keen on oil and gas.
Over $130 billion has been raised by investors, and due to the market’s high demand, they’re not going anywhere. They see the potential for big returns in the future.
New lending agreements negate the possibility of bankruptcy.
New lending agreements have fixed problems that popped up during the downturn. Companies can no longer receive cash advances before they reduce the value of their reserves or file for bankruptcy. Also, lists of assets used for collateral have expanded to include other property, company-owned bank accounts and underground reserves.
Through the adoption of advanced technologies and cutting expenses, many oil and gas companies in the Denver-Julesburg (D-J) Basin are expecting to pour over $2 billion into drilling in 2018, boosting output by 83{daeb8d662f58e4975bc93960761d671bdf0aa2ad049ea8a375d2717d280ef80b}, according to a recent Denver Post article. Even at $50 a barrel, the future is looking bright for the oil and gas industry.
RK Energy specializes in upstream and midstream production equipment, along with custom manufactured and skidded equipment for the oil and gas industry. We use advanced engineering, preconstruction and CAD modeling to fabricate skidded equipment for easy installation and maintenance in the field.
By: RK Energy
The recent decline in the oil and gas industry has many companies experiencing hardship. Those that have survived are working to reduce costs by selling equipment or letting it sit idly; others are bypassing well testing, equipment servicing, repairs and site maintenance.
While scrimping on equipment maintenance is tempting, companies should seriously consider retaining and maintaining their costly operating equipment and field sites. Used equipment can now be found at bargain-basement prices today. Selling equipment in a downturn will likely result in a large capital loss for the business. The benefits will lie only with the buyer. Oil and gas companies should consider that once the industry turns around, the cost of equipment will also rise.
By holding onto equipment and investing in preventative maintenance instead, operators can gain enormous savings on future repairs. Investing now in maintenance will reduce down time and extend the life of the equipment. It will also help identify potential site risks and reduce overall production costs.
If companies continue to market effectively, it could also be an opportunity to win some business from competitors who are downsizing. Rather than dismantling and selling equipment or slashing the maintenance budget, maintaining existing equipment can put companies in a position to gain market share when the industry picks up because they’ll be able to ramp up production more quickly.
Despite the significant slowdown, there is still plenty of oil to drill. When the industry is on the upswing, competitors who downsized will be forced to spend extra time and capital expense before getting back to work as they will have to replace their equipment and perform site maintenance. Those who sustained their equipment and sites will be able to get to work right away.
If you are looking for someone to maintain your oil field equipment and perform on-site maintenance, RK Energy would be happy to discuss our services with you. Contact RK Energy at rkenergy@rkindustries.com for more information.