March 25 (Reuters) - Texas oilworkers are not known for being genteel, and the market’s crash this month brought out some colorful takes as the drama unfolded, visible in the Dallas Federal Reserve Bank’s survey of economic activity in the oil patch.
The bank’s quarterly survey of economic activity released on Tuesday illustrates how swiftly things turned. The numbers are bad. The comments are dire.
“We will likely shut down drilling next month, pay an early termination penalty to our rig contractor, and liquidate excess hedges to pay down debt. We are in survival mode now,” wrote one of the survey respondents, who was from an exploration and production firm.
The Dallas Fed’s survey fell from minus-4.2 in the fourth quarter (not great, not awful), to minus-50.9 in the first quarter (worst ever). The survey apparently arrived as the price war between Saudi Arabia and Russia erupted and the coronavirus pandemic worsened, so it caught producers and service companies at a notable moment of panic.
“The administration talks about their great relationship with Russia and Saudi Arabia. Why won’t they place one of their ‘perfect’ phone calls to help negotiate the end of this oil war?” one respondent wrote.
That comment was one of many referencing a need for government intervention, a view that has made the rounds among even larger producers in recent days - and a departure from the oil industry’s traditionally jaundiced view on the role of government.
But tough times make for strange bedfellows. It was only last week when a Texas oil regulator floated the notion of making a deal with OPEC, which had generally been anathema to oil producers.
The United States produces nearly 13 million barrels of oil per day, about half from the Dallas Fed’s coverage region, which includes all of Texas, northern Louisiana and southern New Mexico. Estimates for the crash in demand have gone from bad to worse, with some firms now saying consumption will fall as much as 20% in the next quarter.
“I am shutting in everything I can and cutting general and administrative expenses to minimal levels to try and ride out the storm. Those who are in debt will not survive,” another respondent said.
The twin shocks of supply and demand come at a time when the shale industry was already struggling to make good on returns desired by investors and is now facing a months-long economic calamity.
Some, at least, were more droll in their view of the decline.
“What is the difference between a Texas oilman and a pigeon? The pigeon can put down a deposit on a new Mercedes. For those of us in the distressed-asset side of the oil patch, things are looking up,” they wrote. (Reporting by David Gaffen in New York Editing by Matthew Lewis)