David Baggett, the founder and managing partner of Houston-based oil and gas consulting firm Opportune LLP, spoke with Hart Energy’s Jessica Morales about the types of strategic plans and organizational designs he sees taking shape during the current downturn.
First, to get into the oil and gas business, Baggett said, “you have to be an optimist.” Though, he noted these same optimists understand oil and gas is a high risk business based on commodities with cycles—even the current “historic” down cycle.
“I don’t think anybody is in denial anymore about where we are. Sometimes that is the first phase of a down cycle, is denial—no one is there now,” he said. “People are doing divestitures where they can. Obviously, there isn’t a great market for that, but I think an improving one.”
Looking to the path forward, Baggett, who is a 38-year industry veteran, said: “There is not really a game plan for exactly what’s happened and how to go forward that’s proven. But, certainly I believe we are going to see fewer companies. There doesn’t need to be hundreds of companies in some of these plays. So, you are going to see fewer companies being backed by private equity, more consolidation, a continued focus less on growth and more on free cash flows and cost rationalization, which I believe will lead to things like outsourcing becoming more popular. ... There is going to be a new normal.”
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- Strategic plans and organizational design (1:30)
- Bankruptcy/consolidation outlook (2:52)
- Need for technology/automation (4:42)
- How do we recover in the near term? (6:03)
- Oil industry’s path forward (7:25)
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