First and foremost, I pray that this finds you doing well as the world endures through these difficult times. As we all seek to find solutions to the issues currently facing us, as well as those ahead, it is my sincerest hope that your basic needs are met, and you can find things to be thankful for despite any uncertainty of the future.
As we turn the focus to oil and gas, our industry has been hit extremely hard by the combination of a price war between Russia and Saudi Arabia and the impacts of the coronavirus. Due to the excessive oversupply of product and weak demand caused mostly by the shelter-at-home order, commodity prices have plummeted. At the time of this writing, the WTI crude oil price is $16.94, and the Henry Hub gas price is $1.75, both well below what operators need to merely break even. Simply put, the industry is currently in dire straits, and this will have an impact on you as a royalty owner.
There is a lack of storage capacity for the glut of oil that has been and continues to be produced. Wells are being shut in, as companies are reducing production along with their workforce. Additionally, there is a very real possibility that many companies will go bankrupt in the coming weeks and months. All of this will impact your mineral income, as well as our state economy. As companies are forced to curtail operations, many jobs will be lost across the state.
Please know that these issues are being discussed by the Louisiana NARO board members. Earlier this year, we made the proactive decision to cancel our convention as a precaution. However, we are currently working with professionals in our state to provide content to help keep you informed during this unprecedented time. Additionally, our board is working to schedule a video meeting where we take your calls and answer your questions. We will be sending this information out via email; but, please continue to check our chapter website and Facebook page for updates.
In the meantime, stay safe and please feel free to reach out to me or any of the other board members directly with questions.
With kindest regards,
David C. Smith