It’s been an interesting week in Oklahoma's energy sector.
On Tuesday, state treasurer Ken Miller released his office’s monthly revenue figures, which showed collections from oil and natural gas production dropped by more than 54 percent compared to April 2014. A day later, several energy companies released their first quarter earnings for this year.
Adam Brooks, the managing editor at The Journal Record says the earnings reports are pretty much what industry analysts expected after commodity prices tumbled late last year and early this year. The big names in Oklahoma energy were no exception.
"Chesapeake was down 45 percent. SandRidge was down 51 percent. Continental Resources was down 42 percent. If you're looking for 'good news,' Devon was only down 11 percent," Brooks said. " One of the things that hit Devon was a $5 billion [one-time asset impairment] charge, and Chesapeake losses for the quarter in real dollars were $3.74 billion."
But crude oil prices are climbing, and reached $60 a barrel for the first time in 2015 Tuesday. Fadel Gheit, senior oil and gas analyst for Oppenheimer & Co Inc., told The Journal Record's Sarah Terry-Cobo these lean times force drillers to make their operations more efficient.
The best news about the first quarter is that it’s over, Gheit said. Second-quarter results will likely be much better due to rising commodity prices, he said. Crude prices have risen $18 per barrel, or 35 percent, in the last two weeks. In order to survive in a volatile commodity market, drillers must be the lowest-cost supplier, Gheit said. The most-disciplined companies will have to squeeze out every penny from their cost structure and won’t wait for oil and natural gas prices to bear out. “All of these companies will have to improve operating efficiencies, because it will take six months to a year to get past the downside impact of oil and gas prices,” Gheit said.
But because of that lag, lower revenue collections will continue. And that could affect state revenues and the budget for Fiscal Year 2016 as lawmakers work toward an agreement with three weeks to go until they're constitutionally required to adjourn.
"We're not sure that anyone at the Capitol is going to get too far ahead of themselves right now when things are so uncertain," Brooks said. "There's been some talk that we don't even know if they'll have to tap into the Rainy Day Fund if there's more severe storm damage."
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