While the oil prices are lower today than they have been over the course of the last few years, the energy boom is still in full swing, and more oil producers are not yet feeling the pinch. Experts say that there would need to be another drop in oil of at least $20 a barrel in order to cause the boom to go bust. Some of the smaller producers in the United States have a different story to tell though, and they are seeing a bit of a decline in their profits overall.
These smaller companies are the unsung heroes behind the current oil output in the United States, which is at nearly 8.97 million barrels a day right now. The smaller companies were accruing a large amount of debt despite the output. When the price of oil was higher last year, this was easier for those companies to justify. Because of the drop in price though, it is starting to cause a bit of financial consternation among some companies.
Lower prices might seem like a great thing, at least to the end payer at the pump. However, the drilling companies extracting this oil from the ground are starting to have some issues. They have less cash, which is making it more difficult to cover what they borrowed. If the prices keep dipping, the smaller companies could take a serious hit. Larger companies, which have more resources, better technology, and time on their side, are not seeing quite as much trouble financially.
The experts differ on what they believe will happen. OPEC, the Organization of the Petroleum Exporting Countries believes that if the current prices, at $82.20 a barrel, stay, it could mean that companies will stop producing oil from shale for sale in the United States, as a means to stem the anemic prices.
However, others believe that the opposite will happen, and that if the prices were to remain steady, companies would continue their current output. They believe this is possible because companies are utilizing new technologies and better ways of extracting the oil from the ground. This reduces their initial costs, as well as the cost of operating, and that should in turn allow them to make money although the prices are lower.
Of course, all of this is still speculation, and the reality of what may come in regards to oil prices and outputs is still up in the air.
Oil Works, Inc. is a complete drilling rig equipment manufacturer and service provider based in the Permian Basin for over 20 years. OWI’s product and service offerings include Derricks, Substructures, Drawworks, Mud Systems, Rig Walking System, Power Generation (GENSETS), Control Systems, Iron Roughneck Service and complete Rig Solutions built to API and ISO standards. OWI is also proud to offer 24/7 Service and Support.