The last year was a difficult one for many of us in the oil and gas business. The assets so carefully accumulated by our companies were devastated by low commodity prices. It didn’t matter how perfectly the wells were drilled or how cleverly the contracts were drafted. The assets simply did not make money. Treasuries were depleted, debt payments were missed, and companies started failing.
Until recently, I served as the General Counsel of a NASDAQ-listed Eagle Ford shale developer. The company’s stock price plummeted more than 99%, wiping out half-a-billion dollars of market value. I owned about 2% of the stock. It was all gone. Even worse, the company had stopped paying salaries. Like most executives, I had an employment contract, but its provisions were worthless, too.
Joining another energy company in the midst of falling prices risked hopping from the pot into the frying pan. There also were law firm partnerships, but their high hourly rate structures were under pressure by energy firms looking to reduce costs. My wife pointed out the obvious. The oil crash had created the perfect environment for launching a boutique law firm – offering the same quality of work as the big firms but at a lower price point. That’s exactly what I did.
Others are similarly finding ways to prosper. Rock-bottom natural gas prices are spurring construction of gas-fired electricity plants and the pipelines that go along with them. Investors are buying up the assets of failed companies at steep discounts and mothballing them, knowing that prices will eventually recover. Displaced engineers are starting their own consulting firms to fill (via outsourcing) the gaps created by the industry’s widespread layoffs.
This week was particularly uplifting for me, as I just moved into my new Galleria-area offices. Looking out on the towers of Marathon Oil, Apache, and others, I am emboldened by our industry’s resilience. The motif of the mythical phoenix is an apt one. The phoenix dies by self-combustion, in a brilliant show of flames. It then rises anew from the resulting ash heap. May the energy phoenix rise and soar again in 2016.
About the Gaille Energy Blog. The Gaille Energy Blog discusses innovative proposals in the field of energy law, with a new issue being posted each Friday at http://www.gaillelaw.com. Scott Gaille is a Lecturer in Law at the University of Chicago Law School, an Adjunct Professor in Management at Rice University’s Graduate School of Business, and the author of two books on energy law (Shale Energy Development and International Energy Development).