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Strike Oil? Depends on Your Perspective

Leader Board: Jeffrey C. Hampton

I hope that you joined us at the TMA Distressed Investing Conference in Las Vegas. It was a terrific event, and we were very happy to see so many of you back in person. TMA will continue putting on great networking and education events in 2022, so if we missed you in Las Vegas, we hope to see you soon, whether at a global, national, or local TMA event.

With this JCR issue focused on energy, we look at the global impact of oil prices and their effect on companies, consumers, and the economy. We’ve got another great lineup for you with this JCR issue.

Do you remember April 20, 2020? Probably not, but that was the day that West Texas Intermediate (WTI) crude oil traded at negative prices. We all know the cause—it does take a global pandemic shutdown to trigger such an event—but did any of us expect this? How many of us who work in the oil and gas industry (myself included) started off the year thinking WTI would go from over $60 per barrel to negative and then to $40 per barrel in 2020 and then to more than $90 per barrel recently. That’s quite some volatility.

So, is that a good thing? Well, it depends on which side of the business you are on.

During the oil crash, many oil exploration and production companies just stopped pumping and producing oil. There was no economic reason to continue producing. Now, with oil prices recovering, the economics start to work again, but with wild volatility, these companies still must be careful, as they can’t turn on and off their operations so quickly. Their strategic decisions today are looking many months and, in some cases, years ahead—and where will oil prices be then based on customer demand, inflation, economic growth, drilling levels, decisions by oil producing countries, and even potential global conflict? Who knows?

On the other side of the business are the fuel distributors, retail stations, businesses, and consumers who use oil and gas products. Lower oil prices are generally great for them: if you sell fuel, higher margins; if you use fuel, lower costs for your business, personal, or home needs. What happens when oil prices shoot up? Higher working capital needs, higher operating expenses, less profit, and less disposable income. And how will this price volatility affect the move toward renewable and alternative energy, electric car adoption, home battery systems, and electrification of trains?

Further, what oil price is the happy medium and supports a robust economy that allows businesses on both sides of the spectrum to perform? Where does the supply and demand curve intersect for optimal outcomes?

Fortunately, we have our experienced TMA members to help. While our crystal balls may be a bit cloudy, it is at the extremes where the opportunities lie for smart investors, lenders, turnaround advisors, liquidators, and attorneys. And they are all here at TMA.

So, with this issue of the JCR, we hope you will learn something new about this long-standing industry and its many challenges. We’ve assembled experts in the field that will provide you with additional insights and knowledge.

Thanks, stay safe, and be #TMAProud.

Best Regards,

Matthew English

Matthew English, CTP
TMA Global Chair 2022

Matthew English

Matthew English, CTP

Matthew English, CTP, is a senior managing director with Arch + Beam. An experienced strategy, operations, and turnaround consultant, he works with a wide variety of top corporate clients across many industries, often in the roles of CRO, financial advisor, or turnaround consultant, helping clients improve performance and restructure operations. His areas of expertise include restructuring, bankruptcy, receiverships, assignments for the benefit of creditors, organizational redesign, cost optimization, operations, mergers and acquisitions, financial analysis, and cash flow management.

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