HOUSTON - Over the last half-century Houston, Texas has suffered through a handful of major oil busts, but none will likely compare to the crushing, industry-wide shakeout that’s descending on the Lone Star State.
Renowned Raymond James energy analyst Marshall Adkins says the scope of the pull-back will reach epic proportions with production and drilling in the Texas Permian basin and the Eagle Ford shale shut-down and shut-in as rapidly as possible.
“We are staring at least a 75 percent reduction in oil service activity which means massive lay-offs within the oil service infrastructure throughout Texas and other oil-producing regions,” said Adkins.
With a global glut and a COVID-19 driven collapse in domestic demand, U.S. Senator John Cornyn says there’s little that can be done other than a concerted effort to gradually increase consumption by kick-starting an economy stalled by the pandemic.
“We need to create some economic activity and grow our way out of this because, in the end, that’s going to be the solution, Getting our economy on track and getting the demand side in balance with supply,” said Cornyn.
In the meantime, Adkins says deeply rattled energy companies fighting for survival, will shave every job possible off of their pay-rolls and the economic pain is certain to cascade through Lone Star State communities for at least 12 and as many as 24 months.
“We could be going to 200 rigs in the next three months. We have never been that low since the John D. Rockefeller era. Bottom line, this is really ugly,” said Adkins.
Adkins says there’s another wild card impacting future demand.
With Americans forced to live differently, many may choose to travel less for both work and pleasure once COVID-19 is gone.