By: Mike Malloy, RK Energy Account Executive
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%, 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.