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Midstream energy companies hurting amid economic slowdown

2 min read

The nation’s energy industry continues to feel COVID-19’s impact.

Substantial budget and production cuts undertaken by exploration and production companies across the nation are having devastating impacts on a variety of others that provide needed services to get oil and natural gas from wells to markets.

Some of those companies, generally referred to as midstream operators, provide gathering and shipping services for oil and produced water, as well as gathering, processing and shipping services for natural gas.

Others provide well completion jobs, or various ancillary services making it possible for wells to be drilled and produced.

Many midstream operators laid off substantial numbers of employees this year who no longer had anything to do, and had to significantly cut prices for their services, just to continue to be called upon to meet the needs of what customers remain.

The pandemic’s impact is forcing midstream companies to rethink their operational footprints, evaluating whether to close entirely or merge with a competitor in order to survive.

Robert Grisaffe, Oklahoma’s market president for Embark, a company that provides oil and gas operators with financial services, said its business continues to grow.

The Texas-based company opened offices in Oklahoma City and Tulsa in October, and companies it has provided services to include Kosmos, Schlumberger, Presidio and Citizen Energy.

Current conditions, he observed, are forcing all kinds of oil and gas operators to evaluate potential paths they could follow to survive.

Midstream businesses, he said, are volume-driven businesses that depend upon continued development of new wells to prosper and grow.

“So, there is a trickle-down effect from what is going on in the exploration and production segment of the industry,” Grisaffe said. “To the extent that companies are shutting in and through natural decline, you see reductions in volumes.

“And frankly, volumes are the cash register” for many midstream companies...

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