Dan Pickering of Tudor, Pickering, Holt & Co., an energy investment and merchant banking firm, told attendees at the RMI Oilfield Breakfast in Houston on April 8 that the industry should not expect a “normal environment” for the next six to 12 months. “We’re about a year and change into this process,” Pickering said, noting that the slowdown is expected to last three years. Pickering prefaced his observations with the comment that he would touch on a number of subjects, but not delve deeply into any of them because of time constraints. Because of attention constraints, I’ve selected only a few of his remarks to share. On the subject of natural gas prices, Pickering said that although weather has helped, the economy continues to hurt the gas industry. LNG imports will be up over the next few years, he said, and LNG imports are hurting the US gas market. “We expect gas prices to stay low and get worse,” he said, estimating a 2009 average price of $5 and a 2010 price of $5.50. “It’s going to be rough getting to that better patch.” Pickering took a look at dropping US drilling rig activity and commented that the count will probably continue to go down. And when it recovers, it will not rise to previous heights. “The US recovery will not look the same,” he said. Pickering expects 1/3 utilization of the rig fleet through 2009 and 50% to 60% utilization at the point that he considers a recovery. There wasn’t a lot of good news on the service side either. On the brighter side, although business is not going to be fantastic for the next 18 months, the balance sheets for the five big service companies (BJ, Baker, Schlumberger, Halliburton, and Weatherford) are very strong. “This is not the 1980s,” he said. The “good” news is that Pickering believes we will see $50 oil this year, $60 oil in 2010, and $80 oil in 2011. So there is a light at the end of the tunnel, and the prediction is that things will begin to pick up later this year, albeit slowly. Given the cyclical nature of the industry, the sad fact is that fluctuating highs and lows are “normal.” And although our recent highs and precipitous lows were extreme, none of us was surprised to see oil and gas prices spike and plummet. The only surprise was the magnitude. The world needs energy, and much of that energy will come from hydrocarbons for the next 30 to 40 years. “The bright spot is that the industry has staying power,” Pickering said. And although Pickering didn’t close on this note, I will. I like a happy ending.