To close 2020, PESA President Leslie Beyer hosted John Daniel, Founder and President, Daniel Energy Partners LLC, for an end of year market outlook and look ahead at 2021. Daniel was joined by Bill Austin and Sean Mitchell, managing partners at Daniel Energy Partners, which is an independent energy market intelligence firm focused on delivering energy market intelligence and research, business consulting services and investor relations advisory services.
Daniel said he expects rig counts to continue to rise during the first quarter of 2021. He’s optimistic about activity increasing and thinks rig counts will go up another 20-25%.
Part of this increase has to do with the recently released E&P budgets, which Beyer said have reduced service margins. Daniel said the oil service industry has seen a significant reduction in its ability to reinvest. Additionally, increased ESG pressure from operators seeking to preserve their social license to operate has also increased costs. Daniel believes service companies will begin testing pricing over the next two quarters as the sector looks to increase profits and reinvest in their companies.
Daniel said OFS companies need money to invest in lowering emissions, increasing diversity and making progress on other key ESG metrics. E&P companies will begin to have ESG criteria for vendors and demand increased supplier transparency, which means ESG investments will no longer be optional.
“I’m increasingly a believer that ESG will be a differentiator for stock price performance for within our sector,” Daniel said.
Daniel believes this year will include testing and exploring of new technologies in the OFS sector due to the energy transition and push towards electric frac and low-emitting equipment.
Mitchell affirmed that Daniel Energy’s analysis shows that hydrocarbons will be around for the foreseeable future and that the world is decades away from a full-scale shift to renewables and alternatives. Austin said the OFS sector needs to understand how automation can increase efficiency and continue to implement these technologies, especially in a low-cost environment.