So, here we are, biding our time with our core oil portfolio, watching oil idle in the mid-$40’s and as the John Mayer song goes, “Waiting on the World to Change”, send oil back upwards through $50 and our stocks with it. We’re no longer looking for new ideas for our portfolio or grand scheme changes, instead, let me give you one more reason we remain confident in our portfolios and convinced they’re solidly positioned for the long haul – the oil services group.
Nowhere has oil and gas been more decimated than in the oil services subsector. While Exploration and Production companies have gotten the most attention, with their inherent stresses of debt and reserves, breakeven costs and well completions, the oil services companies have had arguably an even tougher time.
That’s because their services are the first that are cut back during an oil price recession, like the one we’ve been experiencing since the Fall of 2014. Oil production depends upon continued renewal of resources, both in finding and completing new wells. But in a deep oil recession, producers are forced to hunker way down and decrease or completely eliminate new projects, while concentrating capital on getting the most out of existing ones. Whether those resources are conventional or non-conventional; onshore or offshore; sweet, sour or bituminous, the budget for oil services has continued to plummet.
This has been disastrous for particularly the…