At long last, it’s time to pull the shutters closed on 2016, one of the hardest years in oil and gas history. At the end of a multi-year slump the industry is finally beginning to show signs of life. It won’t happen overnight, but there’s every indication that 2017 will be a much kinder year for the thousands of Americans who rely on the oil and gas industry to thrive.
It’s a Good Thing 2016 is Nearly Over
Since the beginning of the oil and gas downturn in 2014, more than 220 upstream and oilfield service companies have declared bankruptcy and more than two thirds of those bankruptcies came in 2016. As a result of these closings, 2016 saw the oil and gas industry default on more than $39 million in loans. That’s almost three times more than 2015’s $15 million in defaults.
If you’re looking for a metric that indicates just how tough things have been it doesn’t get much clearer than that.
The Next 12 Months Are Looking Good So Far
For those companies that have survived the industry recession, the next year could be make or break. Fortunately, most industry experts predict that the industry could increase production by as many as 1.1 million barrels per day. This uptick in production will undoubtedly yield returns for oil and gas companies. As a result, the loan default rate is expected to drop to just 4 percent in 2017, a stark decline from this year’s default rate of 31 percent.
There’s Still a Lot of Ground to Make Up
This is all good news for the employees working oil and fracking projects across the globe, however, the toll the previous two years have taken on the industry shouldn’t be ignored and it won’t be easily overcome. Oil prices are trending upwards, but there are still 60 percent fewer active rigs than there were a few years ago which means that there is plenty of room for active growth.
It should also be noted that this industry growth should be handled carefully. A lot of the industry leaps were built on the backs of leases in Texas’ Permian Basin, for example, and some oil execs are hesitant that the expansion in the region can continue indefinitely. Some even referred to the soaring prices as a “bubble”.
In 2017, Be Hopeful, But Be Cautious
Though the growth of the coming months is a good sign that the oil and gas industry is on the rebound, it will still be important to move forward carefully, being sure to pick the safest products and the most reliable team to insure that things continue to rise.