Mitchell Progress Report

“Shutting it in”

As I ponder on what should be written in a progress report, I watch the world react in the abyss of the COVID-19 pandemic and wonder how will the oil industry and this world react as oil prices dropped to a NEGATIVE $40 /Bbl. Who will survive? How will the global oil market react and the oil price rebound? To alleviate the spread of this extremely contagious disease, Americans are socially and physically distancing themselves and directed to self-quarantine in their homes. This of course was instrumental in the cause of our Great Economic Machine grinding to a halt, therefore, no demand for energy consumption. Consequently, oil is in a place of heavy oversupply and very low pricing. To mitigate low oil prices; we must get our Great Economy rolling again.

While state, local, and federal Governments ask people to stay in, businesses “shut down”. The only people working are those in a business considered “essential”. Though the Oil Industry is considered essential, many employees are furloughed or terminated due to very low oil prices and wells “shut in” due to being non-commercial. With the price of oil trading at historical lows - sub $40/Bbl while earlier in 2020 selling at $60/Bbl - we found the industry in never-before-navigated waters. During 2019, global usage averaged +/-100 million Bbls/day, current consumption approximates 70 million Bbls. Prior to the spread of COVID-19 pandemic, a decline in oil pricing had already begun due to an ascending oil glut created by American success in shale drilling and production efforts. Also, bickering within OPEC between Russia and Saudi Arabia refusing to agree on oil cutbacks only accomplished continued stimulation for the downward spiral of oil pricing.

With the COVID-19 Pandemic at full strength, it is keeping people at home and commerce shut down, most all modes of transportation are greatly reduced. With no fossil fuels being used, their inventories began to build, refineries were slowing down and many idled. Oil storage was reaching capacity with no place to go. Imported oil tanker ships sit idled in ports waiting to off load, but nowhere to move their cargo, thus, paying large rental fees by the companies that had ordered the crude. Many oil production and service companies are in financial peril and several on the verge of bankruptcy. The Oil and Gas Industry is not healthy!

So, how is the Geo.N. Mitchell Drilling Company responding? We are remaining pro-active by keeping enough staff working to repair and restore equipment needing to be updated or replaced and to service our clients. We know there will eventually be a turn around, and our plan is to be as well prepared for that date as possible.Though this may be the worst downturn we’ve seen, it is not the first. There have been several severe negative swings in this Industry during the 70+ years the Mitchell family has existed in the Illinois Basin. The key to survival has always been to us – Stay financially prepared for a bust, live and work within your means, and have reserve capital. As the saying goes “This ain’t our first rodeo”.  We are eager, willing, and ready to attack the next upward swing.  We are also fortunate to have some younger staff that complement our seasoned veterans.  New and more modern and used equipment have been added to better facilitate the working environments we recognize as being in our future and to insure that our clients have the best and most efficient tools to complete their specific project.    

For our company, the progress of the past will be what propels us to the success of the future.

The Geo. N. Mitchell Drilling Company will be ready for that challenge.

‍Chris Mitchell
President
Geo. N. Mitchell Drlg. Co., Inc.