Published: February 3, 2020 |

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West Texas is all about oil and gas. So, what’s the forecast for the future?

Diamondback Energy’s CEO spoke to Midlander’s about the state of the industry touching on the Permian Basin’s accomplishments over the past decade as well as headaches facing energy today.

“Just look at what we’ve accomplished the last decade here in the Permian Basin,” Stice said in his keynote speech. “It’s remarkable by any standards of human measure.”

It’s hard to argue with that.

Thanks to the Permian Basin, the U.S. has become the top oil producer in the world, producing nearly 13 million barrels of oil every day.

But it may not all be sunshine going forward.

“The public market sentiment has turned so negative toward oil and gas companies in the past couple of years,” Stice said.

Stice said the industry is being hit with capital starvation as investors are putting less into energy than they have in 30 years.

He said this is all because energy offers fewer returns than tech or healthcare.

“So, a combination of low public evaluations on cash flow multiples and poor sector returns is really slowing down the capital investments,” Stice said. “And slowing down capital investments also rolls over into production at some point in the future.”

On top of that, the rig count has dropped over the last year, and more oil companies are going bankrupt.

“And that’s really two things: It’s the oil commodity price and it’s also a lot of debt in the system,” Stice said. “And so, as companies are dealing with high debt and low commodity prices that forces them into bankruptcy or what we’ve seen also is industry consolidation, which we’ve continued to see and has been on the rise and will continue to be, to be on the rise.”

However, he said the basin can turn that tide if energy companies start sending more of their excess cash back into the pockets of investors. Hence, capital investment returns to boost oil production.

Despite some reporting that the Permian Basin is slowing down, Stice believes the U.S. will stay strong, so long as investment returns.

“It is a generational gift that we’ve offered the world,” he said.

On Thursday, the price oil dropped by more than a dollar, the sixth time it’s fallen in the past seven trading days.

That drop is being blamed on China’s coronavirus quarantine and OPEC’s output adjustments.

Source: CBS

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