Where Do We Go From Here? - COVID-19, Price Wars and Black Swans: School of Energy Goes Virtual!

Throw out your old production forecasts. Delete your pricing model spreadsheets. Push out the dates on your infrastructure project timelines. Or kill the projects all together. We’ve got a black swan on our hands here, folks. Perhaps a flock of black swans. And while we may see something like normal again in a few months, there is little doubt that it will be an entirely new normal. How do we even think through the wrenching transformations that are working through energy markets? At RBN, we don’t have any more answers than anyone else, but we do have a structured approach to market analysis supported by a set of spreadsheet models that are the core of our School of Energy, scheduled for April 14-15. We think that’s exactly the kind of approach necessary to make sense out of this volatile and chaotic market. And although we have cancelled the in-person conference, we’ve made the decision to GO VIRTUAL! Today, we explain our decision to move forward with the virtual School of Energy and discuss the new material we are incorporating into the curriculum to address today’s market realities.

With the overwhelming market disruptions of the past few weeks — the COVID-19 pandemic, the Saudi Arabia/Russia standoff, plummeting crude oil prices, the stock market crash and a slew of energy-company capex cuts — the oil, natural gas and NGL sectors are undergoing an unpredictable series of calamities, and at a remarkably rapid pace. Global demand for energy is cratering as industrial and commercial activity slows, the transportation fuel sector freezes up, tele-working takes off, and we all deal with shutdowns of schools, sports venues, movies, restaurants — the list goes on. At the same time, the Saudis, Russians and others are ratcheting up crude oil supply, sending WTI prices to levels that make continued drilling-and-completion activity in most key U.S. shale plays uneconomic — at least for now.

It certainly meets the definition of a black swan: a previously unthinkable confluence of events that forces all of us to step back, take a deep breath and make a top-to-bottom, side-to-side reassessment. We need to look at U.S. and international energy markets from a whole new perspective. Ask questions like, what will $30/bbl or $25/bbl or lower oil mean for drilling activity in the Permian, the Bakken, the D-J and other key shale basins? How much will oil, gas and NGL production slow this year and next, and where? What will that mean for the midstream companies whose pipelines had already been battling for barrels and cubic feet before the old normal hit the fan?

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