“Nothing to see here… Please Disperse!”  It’s been 16 days and true to their word, Saudi Arabia ensured the world oil market didn’t miss a beat.  As a result – the ‘disruption risk premium’ was re-set at $0/bbl and that chapter has been closed.

The timing couldn’t be better (or worse depending from whose perspective): the last day of Q3 is today; most companies have been running iterations on the 2020 budget and that means management teams have realized that a) oil price isn’t going to save them and b) they can’t grow production and pay off debt without asset sales or an equity issuance. Quite the pickle.

So we are back to consolidation as the only path forward for many companies. This week, the series will look the challenges, the benefits and the post merger social issues (and how to fix them).

Last December, I wrote that the only way for commodity prices to reflect economics of drilling was to drop rigs and stop growing production.  10 months later- the rig count is almost at my target.  Which means: if the past is any reflection of the future, we are 10 months away from any meaningful consolidation – which likely means even that will be too late and liquidation will be the only thing that remains.

#hottakeoftheday