Miles Matter, Embark Energy Practices Managing Director, joins Yahoo Finance to discuss oil production, earnings outlook for oil companies, and outlook on gas prices.
ALEXIS CHRISTOFOROUS: We know that the demand for oil has been on the rise as consumers emerge from their homes and businesses rev up to serve them. However, a trend we keep seeing, oil companies are dragging their feet when it comes to ramping up production. Here to talk about it is Miles Matter, Managing Director of an Embark Energy Practices. Miles, it is good to see you. So you know, usually when production doesn't keep up with demand, it drives prices higher, and oil companies respond pretty enthusiastically to rising prices by drilling more. Why aren't we seeing that happen now?
MILES MATTER: Yeah, that's a great question, Alexis. I think we're seeing a lot of discipline in the activity of oil and gas companies. Capital expenditure has been pulled back. You're seeing a focus on long-term stability. The last five years has been very up and down. We saw negative oil prices a year ago. We've seen upwards to the 80s, we've seen down to the 20s. That is very bad for investments, that's very bad for investors. You're seeing that Capex discipline across the board, from small and gas companies all the way to the super majors, and I think it's helping splash and signal across the board that we want a stable-- a more stable commodity price if possible.
ALEXIS CHRISTOFOROUS: Absolutely. But are we going to get it I guess is the million-dollars question. What-- what might help to stabilize this market in the short-term?
MILES MATTER: Oh gosh. It's challenging to say, right? It's always going to be-- always has been a boom-and-bust market that will advance or retract based on what consumers do. We are entering a bull period. The economy is on fire. People are now back to traveling. I think stability in terms of-- of rig count, in terms of Capex dollars spent, in terms of what OPEC does, that's the highest probability for some sort of longer-term stability.
But really, I think investors and investor dollars are what's controlling the game at least domestically in the United States. People told their investors we're only going to spend X dollars in Capex for 2021, into 2022. We'll obviously re-evaluate with frequency. But there is discipline there, and people are trying to maintain a-- a cash flow-positive upstream environment for operators. People are trying to distribute cash back to their investors, and I think that's really, really important and a big focus coming out of this last downturn. So people aren't jamming the gas pedal, to use a pun, as fervently as they have in the past.
ALEXIS CHRISTOFOROUS: So Miles, tell me what you're expecting from earnings season from a lot of these big oil companies when they start to-- to reveal their bottom lines. Who might some of the winners be in the energy sector?
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