At roughly $40 a barrel, nobody’s going to be making big fortunes in oil anytime soon, even if that price is significantly better than $0, at the lowest point in the fall of consumption at the beginning of the coronavirus pandemic.
For Louisiana, despite all the economic fallout for businesses large and small and their workers, there may still be a little good news from the oil patch.
Yes, leading banks are shedding some energy loans, as more businesses are shuttering throughout south Louisiana. About half of the Louisiana Oil and Gas Association’s members have indicated they may be forced to seek bankruptcy protection. The industry workforce has already shrunk by about 7%, LOGA reported.
It's a tough blow to Louisiana’s oil patch, including in Acadiana, where good jobs were eliminated in the most recent oil slump in late 2014.
Of course, this time the crash is part of a wider and indeed worldwide malaise: The stock market has also hammered fuel-intensive customers of our refiners, such as airlines and cruise ship operators. Americans aren’t hitting the road much this summer, either, so they aren’t buying as much gasoline.
With so much tied to still-rising coronavirus caseloads, including the oil patch states of Louisiana and Texas, it is nevertheless the case that there are indications that an unquestionably troubled industry is looking ahead.
One big offshore player with operations and offices in Louisiana is Chevron. In the first big takeover during this coronavirus crisis, the company is buying Noble Energy in an all-stock deal, which includes assuming the debt of the big Houston independent.
Noble’s assets include Texas’ rich Permian Basin and Colorado’s DJ Basin, but also offshore of Israel in the Mediterranean Sea.
Chevron is one of the longest-running companies in offshore drilling, for about 80 years. Its Gulf of Mexico business unit is headquartered in Covington and maintains a significant presence in Houston. Offshore operations are also supported by onshore facilities located across southeastern Louisiana and in Mississippi.
Other big players, seeking to cut costs and load up on assets, will likely follow Chevron's lead, Gianna Bern, a finance professor at the University of Notre Dame’s Mendoza College of Business, told The Associated Press.
“This is the first wave of acquisitions," Bern said.
But it is also one of the vivid signs that companies used to dealing in long-term development of energy resources over years and decades are thinking of the days ahead when energy demand will once again rise.
The world economy continues to run on oil and gas. Those “plays” we see in the coming weeks are companies positioning themselves to operate in a post-virus world.