We recently got the chance to sit down for a financial state of the union with Paul Midkiff who has been the Wells Fargo National Manager of Oil, Gas, & Mineral Management for almost a decade. Paul graduated from the University of Texas with a degree in Petroleum Land Management in 1981 and immediately began his career during the height of industry only to witness a historic crash within the next year. Since then he says he’s witnessed six to seven cycles of serious petroleum market fluctuations.
We all like to find a common denominator in oil price fluctuations to help prevent another bottom out, but Paul says each fluctuation has a unique combination of causes. Paul equates the current barrel pricing with oversupply and some geo-politics that we are seeing come into play. With the invention of the current fracking method, getting it out of the ground and where it exists on shales allows heavier production than ever before in the oil and gas industry, which leads to surplus. While the Permian remains very active, simple economics teach us that surplus means the cost of goods typically depreciate.
But for the sake of this post, we’re going to focus on the positive and we’ll live to bring you the bad news on a later day. With our current administration we have seen tremendous strides benefitting Oil and Gas. The main takeaways being
- The Dakota Access Pipeline has been approved.
- LNG Terminal restriction has been limited.
- EPA restrictions have been reduced.
- The Bureau of Land Management has 26 Millions of acres under lease for potential drilling.
- Additional tax breaks have been issued and more are on the way.
With the current fluctuations, Paul states companies and petroleum industry employees have essentially two options for their financial planning. One; they can have their eye on long term conservative wealth management and maintain a nest egg to help get through the downturn in barrel pricing… or Two; maintain the consistency he says he has seen for almost 30 years on bumper stickers, t-shirts and coffee mugs that says “Lord give me one more oil boom!”