Dore Law - March 2021

Dore Law - March 2021

THE D

or É R eport

D ore L aw . com

MARCH 2021

FUTURE LOOKS BRIGHT FOR OIL AND GAS ... MOSTLY

What would the oil field services (OFS) sector look like if over the next year or so a lot of things improved a little? The sum of the small positive changes might add up to a big result for your company. Let’s look at what “little” improvements might be on the horizon in the next few months. How could the market improve? First, the prediction for product prices is favorable but by no means guaranteed. West Texas Intermediate (WTI) oil prices have already recovered from below $40 a barrel to just above $50. The increase was largely due to the OPEC/non-OPEC decision to reduce overall crude production by 500 million barrels per day (BOPD), albeit temporarily. In the past few weeks, natural gas flirted with $3 after staying below $2 for most of 2020. On the supply side, foreign crude suppliers returned to policies restricting exports to maintain higher product prices and seem likely to continue these policies in the near term. Domestic production has dropped and probably will not return to previous levels for some time (if ever) due to declines in existing wells and insufficient capital for new development. Inventories have retreated from record highs. The outlook is for supply to gradually increase for the near term. On the demand side, the pandemic-induced economic slowdown created sharp reductions in the demand for oil and gas in 2020. The energy sector, including oil and gas service companies will undoubtedly feel the effects of this year-long slump for years to come. Nevertheless, as the world emerges from the pandemic this year, the foundational economics

will generally rebound. The net effect should be a steady rise in demand. In fact, it is easy to project how demand could rise faster than supply, resulting in higher product prices for crude and natural gas in 2021 and 2022, at least until distribution catches up. The COVID-19 vaccine rollout and an associated increase in travel remains the largest X-factor for demand. Next, will improving product prices be a boon for oil field services? Yes and no. Exploration and production (E&P) work will be greater over the next two years than in 2020. However, for the foreseeable future, we’re unlikely to have the work levels that were seen during the shale field boom days. Expected product prices will not support large budgets for exploration, and work will largely be limited to development of existing fields, particularly where production costs are the lowest.

their capacity. Fewer workers employed, older equipment retired, and no spare capital to expand is the norm in the industry. After the past few years, it is unlikely that companies will be anxious to expand any time soon. Instead, expect management to focus on returning to profitability and owning their share of the market by securing a reliable, solvent customer base. As mergers and bankruptcies continue this year at a slower rate, survivors are expected to see improvement in the bottom line. Just don’t count on any windfalls. How could things change inside your company? A lean staff means a smaller footprint. Focusing on newer, more advanced equipment means operating with fewer, more experienced crews. The impact on commercial real estate is creating some room for renegotiation of office leases. Less office space is required for the remaining staff,

Some OFS service companies are gone from the scene, and those that remain have reduced

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WHAT CAN A NETFLIX CEO TEACH YOU ABOUT BUSINESS?

If you ask Marc Randolph about his favorite place, he’ll mention an office building in Dallas, where Blockbuster had its corporate headquarters on the 27th floor. Randolph, one of the founders of Netflix and its first CEO, has no illusions about what happened to the former retail giant. In his new book, “That Will Never Work: The Birth of Netflix and the Amazing Life of an Idea,” Randolph shares how Netflix disrupted an industry and took the world by storm, an example every business leader can learn from.

in five months of R&D.” Randolph addresses these issues and more in “That Will Never Work,” all the while explaining their relevance to entrepreneurs. If you’re looking for more salacious details, he spends much of the first chapter debunking the stories about who had the idea for Netflix and whether or not it was an epiphany. “That story is beautiful,” Randolph writes. “It’s useful. It is, as we say in marketing, emotionally true. But as you’ll see in this book, that’s not the whole story.” The whole story is one we’ll let you read for yourself, and there is plenty more where that came from. Anybody can research Netflix online, but “That Will Never Work” is a rare glimpse into the inner workings of one of the 21st century’s most lucrative and secretive companies. Juicy stories pair well with marketing lessons, and the writing style is easy to get lost in — it really is a page-turner.

Randolph himself is fascinated by the nuts and bolts of business and entrepreneurship: “How does your

business test new ideas? Can it happen faster? What’s the cost of having sloppy content hit the internet if it gets you out there sooner?” He examines how quickly you can put an idea in front of a customer where “you will learn more than you could

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and gig workers will be readily available for hire at reduced cost to supplement full-time employees as needed. Fewer offices and reduced travel may save more money. The cost of the big-ticket items that your business buys has probably declined slightly during the recession. While costs should gradually rise, they’re unlikely to soar. In other words, your company’s goal should be to fully embrace “lean and mean” going forward. Collections have seen a lot of changes as the O&G industry’s woes unfolded in the past few years. In 2020, it became common for accounts to be paid in 120 days or more. And with OFS company collections being further and further delayed, these same companies have had to delay payments to vendors as well. The improving conditions of the next two years should reverse this trend, but it will take time for the benefits to reach OFS companies. While companies will probably need to finally recognize their uncollectable accounts and make write-off decisions, collections from continuing customers should return to 60 days or less. Accordingly, OFS companies can get back in the good graces of their suppliers by bringing accounts current. Overall, the world did not fundamentally change in 2020. Most reasonable predictions show energy demand rising in the near-term and continuing to grow throughout 2021. While the world probably has the means to produce all the oil and gas required for the next few years, longer term supply requires new discoveries, new drilling,

and new technologies. While technology for renewables will continue to get better, nothing will replace the role of the O&G industry in our lifetimes. Over the past decade, companies in the industry have become the most efficient in the world. As a result, improving conditions can quickly translate to financial rewards. You may not yet need sunglasses to see it, but the future is mostly bright. We’re proud of our 30-plus years of service to the oil and gas industry, including our many OFS clients. We look forward to standing with you in the tough times and celebrating new opportunities in the future. Don’t hesitate to reach out to our team if there is anything we can do for you.

-Carl Doré Jr.

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LIENS 101 Do you have people working for your company who would benefit from spending an hour learning from one of the foremost experts on filing mineral liens? Beginning in January, our law firm began offering Zoom classroom presentations entitled “LIENS 101.” We’ve offered this class to selected clients to address the specifics of each client’s billing and collections systems as well as answer all questions. In the first month, more than 100 client-employees, from CFOs to credit analysts, attended the sessions hosted by Lisa Rothberg, our director of liens and transactions section. In the past eight years, Lisa has supervised the filing of more than 2,500 mineral liens, probably more than any other lawyer nationwide. Attorney Christina Heeth also explained how liens affect business collections, litigation, and bankruptcies.

• Documents we request from the client when beginning a case • Brief discussion on PMSI (Purchase Money Security Interest) • BRIEF touching on mechanic and materialman’s (M&M) liens • How M&M liens are more complicated, with different deadlines • Why lien notices are typically expected in the industry If your company would like to schedule this one-hour Zoom presentation for a group of people who are involved in your collections work, please contact either Lisa Rothberg ([email protected]) or Christina Heeth ([email protected]) to discuss the specifics of date and time.

The LIENS 101 class covers:

• Lien deadlines and the differences in deadlines in various states • Invoicing • Our process (lien chart and deadline calculation) • Mineral liens in Texas in general • Importance of mineral liens in litigation and bankruptcy (with examples from each)

WORD SEARCH

ASPARAGUS AND SMOKED MOZZARELLA PIZZETTES Inspired by EatingWell.com

INGREDIENTS •

1 lb prepared whole-wheat pizza dough, divided into 6 equal portions 12 oz asparagus spears, trimmed and cut into 1-inch pieces 1 tbsp extra-virgin olive oil

1 cup shredded smoked mozzarella cheese

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1/3 cup scallions, thinly sliced 2 tbsp walnuts, toasted and chopped

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1 sprig of fresh mint leaves, torn

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1/4 tsp salt

Zest of 1 orange

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DIRECTIONS 1. Preheat oven to 500 F and ensure there are two racks in your oven. 2. Line a large baking sheet with parchment paper, stretch each piece of dough into a 7-by-3-inch oval and arrange evenly on the pan. 3. On a second baking sheet, toss asparagus with oil and 1/4 tsp salt. 4. Place dough on top rack and asparagus on bottom and bake for 3 minutes. 5. Remove both trays from the oven, sprinkle cheese over the dough, then top with asparagus and scallions. 6. Return pizzettes to oven and bake until the crusts' edges are golden, about 8–10 minutes. 7. Remove from the oven and sprinkle with walnuts, mint, and orange zest before serving.

AQUAMARINE BASKETBALL BUTTERFLY CLOVER

DAFFODIL GREEN IDES LEPRECHAUN

MADNESS SPRING TANGERINE WOMEN

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Future Looks Bright for Oil and Gas

Netflix’s CEO on Pursuing Your Ideas

Here’s Your Chance to Learn All About Liens

Asparagus & Smoked Mozzarella Pizzettes

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Don’t Let This Tiny Distraction Destroy Your Productivity

A LITTLE DISTRACTION Distractions in your workplace destroy your productivity, regardless of where you actually work. But here’s the kicker: Some distractions don’t always register as distractions because they’re often minor, like a knock at the door or a conversation you can hear from two cubicles over. However, even when a distraction doesn’t feel like a distraction, it still kills your productivity. But one distraction in particular can absolutely ruin productivity. It isn’t as obvious as an unexpected phone call or a meeting that could have been an email. It’s a small, normal part of our everyday lives: the notification . We get notifications on our phones, tablets, laptops, desktops, and even our smartwatches. Notifications are everywhere, and we’re conditioned to accept them. Take email, for example. You’re likely in the habit of checking email periodically — or whenever you get a notification. It can feel natural to quickly check your email and then get back to what you were doing. Except that never happens. When an email, text, or other random notification distracts you, it completely diverts attention away from what you were doing. If it’s spam, you may delete the email. Or, if you need to respond, it might

take a few minutes or more. You may spend anywhere between 20 seconds to 20 minutes on any given email. However, this isn’t where time is lost. If you’re responding to a

customer email, for instance, that is part of your productivity. The time is lost when you attempt to get back to what you were doing before checking your notifications. A University of California, Irvine study found that it takes an average of 23 minutes to get back to your task after every distraction, not just email. Over the course of a day, that adds up to a significant amount of wasted time. How do you overcome this? Your best bet is to turn off notifications. Most devices let you customize your notifications so you can turn them off during working hours. Here’s another quick tip: Set aside time during the day to check emails, texts, and other messages. You will significantly reduce the amount of time spent trying to refocus on the important tasks at hand.

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