Q4 2019 - Presidents Remarks
The seasons are definitely changing as we are now in our final quarter of the year. The overall market is going through two dynamics which I’ll explain in more detail.
First, we are maturing as an industry in the non-conventional Shale plays. When the Marcellus/Utica started in the mid 2000’s it was a land grab; tie up as much property as you could. Then we moved into the prove out the assets, quantify the best areas of production phase. Then we moved into the massive ramp up in production phase. Now we are clearly into the stay within cash flow phase characterized by more disciplined expenditures of operating and capital budgets. This defines a maturing industry cycle. This cycle is fairly common to nearly all fast growing industries. I think there is no going back to the previous phases. Those that learn how to be more efficient while providing high quality services will survive and those that don’t, won’t. Our clients more than ever will require “value” from us. Think of that as quality services per unit of price. The higher the quality for the lower the price the more “value” we provide. It is a good way for all of us to look at what we contribute.
Second, the price of natural gas is probably going to stay fairly low for the foreseeable future. The massive amount of production and the speed with which producers can increase production create a scenario where supply can hardly ever drop below demand. The amount of gas in storage used to be a big indicator of potential price swings. If you entered the winter season with low gas storage inventories and it was a really cold winter, gas prices would spike up (high demand with below normal supply). The notion of traditional gas storage has changed. The non producing wells, under producing wells and the shale formation itself can be thought of as significant additional storage due to how quickly that gas can be brought on line and how large the volume of that gas is.
Against that challenging backdrop, Shalepro is doing well. We continue to expand our services to more and more clients. I think it is because they see high value in our services vs many of our competitors. I also believe we are taking market share away from weaker competitors. I hear a lot of our new hires saying they wanted to come to work for ShalePro because we seem to have a lot going on while their old companies don’t. Last week we held an internal strategy planning session where we talked about these two industry dynamics and where we as a company stand in our evolution. We believe our strategy has proven to work so far and are committed to continuing to refine our plans in response to current and future industry dynamics and opportunities. As always, thanks for everyone’s hard work and please stay focused on safety.