Permian Basin prepares for possible long-term dip in oil prices
U.S. oil prices posted their worst declines since 1991 on Monday.
"We've had supply shocks, we've had demand shocks -- but we kind of got the one-two punch with both of them happening at the same time," said David Bledsoe, President of Henry Resources.
Bledsoe was new to the industry in '86 -- when there was a significant shock to the industry -- but he explained that this drop was much more sudden.
He said just a couple of months ago the price per barrel of West Texas Intermediate crude oil was over $60.
"The supply issue, in my opinion, is the bigger issue," Bledsoe said.
Yes, there is still concern about the coronavirus outbreak.
Although, Bledsoe said he's more worried about the fears surrounding what about what OPEC and Russia will do next.
So what does this all mean for the Permian Basin?
For now, Bledsoe sayid the U.S. has been producing roughly 8 million barrels a day -- but things will have to change.
"As everybody says -- the only cure for lower oil prices is lower oil prices. We all need the Permian Basin to rollover and decline. When it does, we'll start seeing some improvement, but that may take awhile."
He expects oil and gas companies will have to do more layoffs. Plus, drilling budgets and production will drop.
Bledsoe can take a deep breath though, because his family-owned energy company has been working with economists and preparing for a market shake-up just like this.
"We started planning in the fall. We'll execute on the plan now," He explained. "We will be fine. It's hard to saw that's true for all of the companies, cause a lot of companies have a lot of debt. We're fortunate that we don't ,and that we will drill what we can drill out of cash flow."
Henry Resources only has one rig running right now, and it will continue to stay in service. Although, Bledsoe said the company does plan on postponing a lot of fracks.