The Memorial Day weekend is often viewed as the unofficial start of the summer season, and gives us a good opportunity to look forward.
Today, oil prices are back down a little but active contracts are up for the 10th straight week. At a minimum, many have taken some comfort in the fact that prices largely have stabilized in the last few weeks in the $55-60 range.
At a recent conference, there seemed to be a consensus that the price recovery was not going to be J-shaped or U-shaped, but W-shaped. That is, most people expected a price decline in the next few weeks/months, though few seemed to expect a steep plummet. Most of the panelists agreed the issue is less the exact price of a barrel of oil but more some consistency and certainty.
At that same conference, most people I heard from or talked to seemed to think activity in the M&A and A&D markets would remain relatively quiet through the summer and fall, continuing the slowdown in Q4 2014, Q1 2015 and, presumably, Q2 2015. Reports are that maybe as much as $80 billion in private equity funds are sitting on the sidelines waiting for investment opportunities.
Moreover, more than 20 E&P companies have reportedly issued equity in 2015, raising nearly $8.5 billion in capital. That is a lot of money ready to fund a lot of activity.
In Denver, it has been an unnaturally rainy, cloudy spring, made gloomier by the almost weekly reports of layoffs or office closings.
But summer is almost here. Maybe the sun will start to shine, prices will find a stable range and we will start to see a light at the end of the depressed activity tunnel. For that is the promise of summer, as wrote F., Scott Fitzgerald in The Great Gatsby: "And so with the sunshine and the great bursts of leaves growing on the trees, just as things grow in fast movies, I had that familiar conviction that life was beginning over again with the summer."
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