Oil, gas industry cools off with rest of economy | AspenTimes.com

Oil, gas industry cools off with rest of economy

Catherine Tsai
The Associated Press
Aspen, CO Colorado

DENVER ” Crashing commodity prices and tight credit markets could mean more gridlock for acquisitions in the oil and gas industry in the first half of next year, experts said Thursday.

At a panel discussion organized by the Independent Petroleum Association of Mountain States, Ward Polzin of the energy investment and banking firm Tudor, Pickering, Holt and Co. said the challenges pummeling the industry won’t go away in a few months.

Stock prices have tumbled, natural gas supplies are up, and oil demand is shrinking, amid a tight lending environment and poor public and private equity markets.

The Paris-based International Energy Agency said Thursday that global oil demand this year will shrink 0.2 percent from 2007, the first drop in demand since 1983.

In July, oil prices hit a high of $147.27 a barrel. Light, sweet crude for January delivery rose $4.46 to settle at $47.98 a barrel Thursday.

“This isn’t really a speed bump. It’s a stop sign,” said Polzin, a managing director at Tudor, Pickering, Holt and Co.

He expected to see average capital cuts of 35 percent next year and less acquisitions in new geographic areas.

“Right now everyone is retrenching to what they know,” he said.

Already natural gas distributor El Paso Corp. has said capital spending will total about $3 billion next year, down from a projected $3.5 billion this year. Producer EnCana Corp. plans to cut its 2009 capital budget by 18 percent to about $6.1 billion.

Things could start turning around in the second half of next year, but Polzin characterized the activity as more like breaking the fever than making a full recovery next year.

John Cleveland, a managing director at SB Energy Partners, said it is not all doom and gloom. Capital is available though it’s becoming more expensive. His investment firm, for one, is about 60 percent committed.

Looking to early 2009, he said, “It could be a good time not to get into the business but to expand.”

Robert Bayless Jr. said his oil and natural gas production firm is remaining cautious. Cutbacks in the industry have presented opportunities for small firms like his to hire strong talent, but Bayless did not comment specifically on his own firm’s head count for next year.

Robert L. Bayless, Producer LLC, with offices in Denver and Farmington, N.M., has doubled to about 25 employees in the past eight years.

Support Local Journalism

Support Local Journalism

Readers around Aspen and Snowmass Village make the Aspen Times’ work possible. Your financial contribution supports our efforts to deliver quality, locally relevant journalism.

Now more than ever, your support is critical to help us keep our community informed about the evolving coronavirus pandemic and the impact it is having locally. Every contribution, however large or small, will make a difference.

Each donation will be used exclusively for the development and creation of increased news coverage.


Start a dialogue, stay on topic and be civil.
If you don't follow the rules, your comment may be deleted.

User Legend: iconModerator iconTrusted User