Drilling activity in RR Districts 1-6 continues to slow as oil settles to below $30/bbl. today. Companies are drilling required wells only and deferring completions until prices rise, which adds to the already growing number of DUC wells. E&P companies have gone into a heighten state of capital conservation which means that the only money they are spending is on essentials to keep their enterprises alive, like debt service, payroll, and royalties to name a few. The M&A activity in the Texas area this quarter has been marginal and there are only a few companies with property packages on the market in the Eagle Ford, Eaglebine and Haynesville regions. These companies include Real O&G, Clayton Williams, AWE Ltd., and VirTex Operating. At this time most buyers are staying on the sideline until they find out ‘where the bottom is’ for the price of oil, but this sideline activity may change significantly in the months to come as companies will face a redetermination of their borrowing base. Any company that is out of compliance with their loan covenants will be forced to either sell their properties, merge, or seek bankruptcy protection. The good news is that this activity will generate work for landmen as the properties change hands.
A record number of landmen are currently out of work and unfortunately this number increases every day. Among those most recently unemployed are company landmen whose companies have cut in-house staff in order to restructure around their best assets. Southwestern Energy for example, just announced that they are reducing their in-house staff by 40+%. From the contract landmen, there are reports that clients are slow paying or in a few cases not paying for contracted work at all. If your client files for bankruptcy and they owe you money, you are at-risk of not only losing your day rate but all your out-of-pocket expenses such as copies, meals, mileage and recording fees. I urge all contracted landmen to stay in-touch and on-top of your clients so that they stay current with your invoices.
Prices WILL recover and companies WILL rehire landmen to reassemble lease blocks in their best asset areas. In the meantime, companies will need your help in packaging properties for sale and conducting due diligence for the buyer. Keep in mind that there still lies a need for someone to maintain leases and process royalty payments with any company that currently has leases, so you may consider looking for any open positions in their lease records or division order department. Check out the AAPL website for a plethora of educational and networking opportunities at discounted prices. These opportunities will keep you ‘in-the-know’ and further increase your marketability. Remember, “land is the basis for all wealth” so stay confident, keep those skills sharp and your connections fresh.
by Randy H. Nichols, CPL. This article was originally published in Landman 2, American Association of Professional Landmen (AAPL). Mr. Nichols has been writing the Field Report for AAPL, covering the Texas region, since 2012.