On May 1, 154 participants from 95 companies joined PESA President Leslie Beyer for a candid market outlook webinar with John Daniel, Founder and President, Daniel Energy Partners LLC. John has more than 20 years of experience within the U.S. oil service industry as a leading market analyst with companies such as Simmons Energy, a Division of Piper Sandler, Key Energy Services and PNC Bank.
After some brief words about his transition to running his own company, Daniel discussed how he has been managing through the current environment and whether the pandemic has impacted his new endeavor. “My biggest challenge has been the inability to go out and see people and have face-to-face meetings, but I will get out and start that again soon.” This will be a critical part of the Daniel Energy Partners business model, the value of in-basin research.
Daniel shared his view of the market and gave a current outlook, citing the remainder of 2020 as being “painful” for the oil and gas industry followed by challenges in 2021, with no certain recovery in the near term due to cash constraints. When asked about his note on the futures of frac fleets bottoming out between 50-75, he noted that his practice of spending time in the field has served him well, as the opportunities to speak face-to-face with E&Ps has helped him with his forecasts. Looking at next year this time, Daniel’s opinion is that rig counts will be at 350-400 and frac spread between 150-175.
As producers and service companies alike struggle over the next several months, Daniel noted it’s important for producers to be cognizant of service provider costs through the recovery. Prices may be low now, but when things turn service providers will be looking to reinvest in their people and equipment. With the double blow of the COVID-19 pandemic and crushingly low oil prices, Daniel stressed the importance of consolidation in the oil industry. Companies should focus on what they do really well and go out and capitalize on those services, he said.
With regard to oil service CAPEX budgets, larger companies Daniel has spoken with are trending down 45-50% overall this year versus 2019, and smaller, midcap companies are at 50-60%+ cut. Companies are unable to reinvest in their organizations in the current environment, which may be an issue once recovery hits.
Daniel then addressed E&P earnings calls that are currently taking place and possible predictions for future quarter’s calls. He hopes to hear production is being shut down to let oil prices and supply and demand work for the next three quarters. As he travels out to the field over the next couple of weeks, Daniel said he will be having conversations with companies, researching what may be happening in the near future with regard to supply of crude.
Daniel also talked through his organization’s business model, which is subscription-based. Reports on earnings calls, press releases and field tours, as well as anonymous discussions with industry and private equity firms, are at the core of Daniel’s business, micro-focused on the lower 48 states.
He sets himself apart from other research analysts by getting out into the field at the local level, making numerous stops along his travels to investigate. Daniel also has an extensive network and uses his contacts to help determine where he should head next, how he can assist and what projects to focus on. His executive advisory committee, composed of seasoned industry experts, was developed with the intent to help support Daniel on research and projects.
The COVID-19 pandemic has affected in-person industry events throughout the sector, and Daniel’s famed events are no exception. However, he does plan to host several events in the fall including his popular yearly barbecue in Midland, targeting September.
When asked about what advice he can provide to those out in the oilfield and equipment sector who are struggling and having a hard time seeing the light at the end of the tunnel, Daniel’s message was simple. “Be willing to reinvent yourself and try to have fun. This is a great business with a great people. This is painful, but it will turn around.”
Daniel Energy Partners is an independent energy market intelligence firm focused on delivering energy market intelligence and research, business consulting services and investor relations advisory services.LISTEN TO THE RECORDING