Oil, gas industry will bounce back from low prices
CANFIELD
The oil and gas industry eventually will bounce back from low energy prices, an Ohio Oil and Gas Association spokesman says.
Mike Chadsey, the association’s director of public relations, provided an update on the overall industry Thursday to the Youngstown/Warren Regional Chamber at Tippecanoe Country Club.
Since the shale boom in 2011, the U.S. is producing the most oil in 30 years. But OPEC is not making any significant reduction in its production, which is not protecting the standard of $100 a barrel of oil. Therefore, the supply is high while global demand is weak, which caused oil prices to drop below $50 for the first time in five years, Chadsey said.
And, gas has dropped below $2 per thousand cubic feet.
“Now we’ve got too much,” he said.
As of July 18, there are 1,980 horizontal-well permits issued in Ohio’s Utica Shale, of which 1,535 are drilled with 925 wells producing, and the rig count was at 20, according to the Ohio Department of Natural Resources.
The drop in prices has caused several spending cuts throughout Ohio.
At Vallourec Star, 2669 Martin Luther King Jr. Blvd., Youngstown, plant leaders announced early this month a workforce reduction of about 60 to 80 jobs effective in August. In February, company leaders decided on a three-week shutdown at that time. The company also offered a voluntary six-month layoff for workers interested.
Prices will rebound eventually, Chadsey said. “What goes down must come up.”
Things will become clearer by the end of the year, he added.
There is some uncertainty with the price of oil as a potential deal with Iran could release its oil into the market again, said George Mokrzan, director of economics for Huntington Bank.
“This is the year of the consumer,” he added. “There are other industries benefiting from low oil prices.”
Industries such as transportation have benefited from the price drops. Mokrzan said he doesn’t see the price of oil going much lower.
Chadsey said oil prices at $70 to $75 a barrel could benefit both producers and consumers, though it’s not clear.
“There has to be a balance,” he said.
Aside from oil prices, the Valley’s own shale boom has slowed as producers head farther south. OOGA ranked Columbiana as the seventh-most active county in the Utica Shale with Carroll and Belmont counties as the most active.
BP pulled out of Trumbull County early last year.
“It just didn’t fit their portfolio,” Chadsey said, but added that another producer could step up to take advantage of the oil-rich part in the northern Utica including Trumbull County.
Atlas Noble LLC, Chesapeake Exploration LLC, Enervest Operating LLC, Halcon Operating Co. Inc., Hilcorp Energy Co. and CNX Gas Co. are among the companies operating in the Mahoning Valley based on production results for the first quarter of 2015.
Chesapeake, CNX and Hilcorp were among the top producers most active in the Utica Shale, according to OOGA.
Guy Coviello, the Regional Chamber’s vice president of government affairs and media, said Chadsey’s presentation “affirms what we’ve been saying” – that the industry will recover from low oil prices.
“[But] nobody knows when,” Coviello said.