Planes, trains, and automobiles: One man’s take on current Oil & Gas market conditions

One of our technology partners recently asked our VP of Business Development, Henry Rosen, for his perspective on how the current Oil & Gas market would impact Geoforce’s customer base and our outlook on the future.

Given Henry’s extensive experience in Industrial IoT and Oil & Gas technology, and his close relationships with our customers, partners, and resellers, we thought his insights would be worth sharing.

Here are excerpts from his response:

“There are two concurrent factors at work:

1. COVID-19 has drastically affected the demand side for Oil & Gas. No planes, no trains, no busses, no automobiles. In addition, huge swaths of worldwide industrial production and retail (brick & mortar) operations are sidelined.
2. At the same time, the recent price war between Saudi Arabia and Russia – in which both countries promised to ramp up production – has created a massive supply side.

The result of course is lower oil prices, at least for the short term – down from a fairly consistent range of $50-$60 per barrel for most of the past few years. We are seeing immediate negative impact to the Oil & Gas portion of our customer base. But as always, they are a resilient, entrepreneurial, and resourceful industry.

The good news is Geoforce has weathered a storm like this before and came out stronger. In 2015-2016, the world suffered from a drastic supply increase from Saudi Arabia, which attempted to impact the USA’s Oil & Gas industry, which was then dramatically increasing production as a result of horizontal drilling, hydraulic fracturing (aka “fracking”) and other innovations. As a result, oil prices skidded from a range of $80-$100 per barrel to reach a low of $26 on January 20th, 2016.

During the 2015-16 downturn, Geoforce focused intently on staying close to customers and emerged to experience extremely high growth rates from 2016 to now. And we are doing so this time as well. The Oil & Gas business is highly “relationship oriented”, and people do remember (and reward) those individuals and companies that help them in times of need. During normal times, that means high support levels, quick shipping, and constant technology innovation. During down times, it means working together to weather the storm. One of many things we’re doing is using this time (with people confined at home) to step up training on our Track and Trace software platform. There’s a lot of power in the Geoforce software that companies often don’t use to its fullest advantage. Dots on a map are one thing. But understanding utilization rates (for example) is even better.

This downturn is obviously grim when considering our aggressive growth plans. But we also think there is some light at the end of the tunnel. The virtual lockdown of the global economy won’t go on forever. When life reopens, planes, trains and automobiles will again be worthy of movie-making. Industrial facilities which use natural gas will reopen. Power generation demands will increase. So, on the demand side pressure will push prices up. On the supply side, the Saudis, Russians, and OPEC+ countries have recently reached agreement.

Ultimately, we expect prices to level off in the $40-$50 range. That’s enough for many companies in areas like the Permian Basin to get back into the black. The world needs our oil and the US economy needs the Oil & Gas industry to get back to work. Innovation will be key, and GPS tracking solutions can be part of that by helping companies understand their equipment utilization and avoid downtime. Improvements in both those metrics help lower capital expenditures, which are being severely restricted right now.

To be sure, no one knows exactly how this will all shake out. But having ridden through a storm before and emerged stronger, there’s definitely no sense of panic. All told, Geoforce feels pretty good for the medium/longer term, despite the dark days right now.”