Roy and Erika,
While there is concern for several factors mentioned in the article, I don't take it as an overall negative. The article reflects the transition underway in south central California energy and labor market.
1. There is a general tightness in the drilling companies, that is
not a new happening. Rig utilization is high, and will stay high
for some time, until more rigs are built.
2. Big companies selling (smaller) local California properties. This
has been happening as the bigco's seek larger pools of energy,
which unfortunately are now located elsewhere, likely in deeper
off-shore waters in the Gulf of Mexico and internationally. This
does leave an opportunity for smaller, quick moving local firms
like Royale Energy to go in and pick out properties that will
make a nice fit with their plans. These recent sales enabled
Royale to pick up properties that are located where they are
currently active and focused on. Over the longer term, this will
create synergies and economies of scale for them.
Royale has geologists and engineers on-staff, and contracts with local
geologists who know the fields and areas they are active in. The local drilling companies are busy, as when I inquire about Royale's
plans to drill a specific well and begin a new program, they mention
frequently about the tightness of the market, which gives some delay
to starting drilling of their wells. I think that is the most
important factor to watch..
Royale Energy does not need big field of targets to accomplish their
objectives, and I'm encouraged by this transition from big companies
to those with more motivation to squeeze out gas out of marginal areas
using the newer technologies, and at a very good success rate.
Roy, thanks for posting about an interesting article.
Wayne |
