Pioneer Natural Resources founder and CEO Scott Sheffield isn’t mincing words about a two-pronged threat pressuring independent oil and gas producers.
The Irving, Texas-based company is teaming with other independents to force U.S. intervention in the Russia-Saudi Arabia standoff that’s threatening to drive crude oil prices below $20 a barrel, Sheffield said in an interview with CNBC.
Those same independents also are being squeezed by U.S. oil majors that would rather see them go out of business, he said. That’s why small and mid-sized producers want President Donald Trump to put “significant pressure” on Saudi Arabia to halt the price war and reduce production.
“We really need Trump to do something or he’s going to lose all the energy states in this election,” Sheffield said.
Without intervention, he warned, “we’re going to be importing 60% of our crude again from the Middle East.”
He characterized the threat to America’s energy independence as a war of wills between two strong personalities — Russia’s Vladimir Putin and Saudi Arabia’s crown prince, Mohammed bin Salman. But both nations also are quickly drawing down their foreign reserves.
“I believe one of them will blink,” he said. “I don’t know if it’ll be three months, six months or nine months. But something will happen.”
Independents also face opposition from oil majors such as Irving-based Exxon Mobil, which prefers to see “all of the independents go bankrupt and they can pick up the scraps,” he said. Others, like Marathon, are financially strapped and can’t afford to stop production, he added.
Asked if he’d ever seen such a destructive price war, Sheffield said it reminds him of 1986 — the year oil prices collapsed in the 1980s oil glut. Crude prices have fallen more than 60% since the beginning of this year.
“I’m probably the only CEO that’s still around since 1986,” said Sheffield, whose oil industry career began in 1979. “It’s going to take a long time to balance the market. … We have no solutions.”
He also had a dire prediction for the 74 publicly traded independents operating in the U.S.
“There’s only going to be about 10 left at the end of 20121 that have decent balance sheets,” he said, describing the others as “ghosts or zombies” trying to survive with high debt to cash flow ratios.
“Consolidation won’t happen because too many companies will have too much debt,” he said.
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