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Although the production and price forecasts in our January presentation to the Gulf Coast Gas Measurement Society may look unreal in April, the year isn’t over yet. There a lot of similarities to the Covid-19 situation here.
By then we were seeing warning signs in both the E&P industry and the world of public health of a “disturbance in the force” of business as usual. Southeast Asia used lessons learned from past pandemics to prepare to handle the next one, and several of those countries were able to minimize the damage to their economies and their citizens.
The US shale industry cut costs and improved productivity after its own version of the business flu when oil prices crashed in 2015-2016. But once prices stabilized, attention returned to the wellbore. Boosting cash flow and minimizing logistics costs weren’t top of mind.
Clients and our own business experience have taught us that scenario planning needs to include situations we’d rather not deal with, or run numbers for. A “that will never happen” dismissal of a case undercuts risk management and puts us at a disadvantage to other players who know if they can think it up, it could happen even if the odds may be low.
Business “prepping” for possible downside scenarios is an investment – in developing options that can set us up for opportunities we couldn’t have imagined last year.
During these scary times when markets rise and fall almost daily, we know having cash on hand can buy both opportunity and peace of mind for our families. For a business, prepping with cash reserves, hedges, and strong commercial relationships can create optionality and even be a company maker at times like these.
If you’re prepping your business to be able to pivot to a world that’s looking for execution excellence and sustainable cash flow more than ever, contact us. Let’s create commercial and operating strategies to survive and thrive in challenging times.