Oklahoma City-based Chesapeake Energy Inc. (NYSE: CHK) and 40 affiliates filed for Chapter 11 bankruptcy protection June 28.

The filing, in the U.S. Bankruptcy Court for the Southern District of Texas Houston Division, caps a long period of decline for the driller that saw it rack up billions of dollars in debt. It reported total debt of nearly $11.8 billion and assets of nearly $16.2 billion as of Dec. 31, 2019.

The long-expected filing came with a restructuring agreement with its lenders that included $925 million in debtor-in-possession financing, enough to keep Chesapeake’s operations going during the restructuring. There’s also agreements for a $1.75 billion revolving credit facility and $750 million term loan for exit financing.

“We are fundamentally resetting Chesapeake’s capital structure and business to address our legacy financial weaknesses and capitalize on our substantial operational strengths,” President and CEO Doug Lawler said in a press release.

The biggest creditor is Deutsche Bank Trust Co., accounting for eight of the 10 biggest claims totaling nearly $3 billion, including $1.1 billion in convertible senior notes due 2026 that is the largest single claim.

Bank of New York Mellon Trust Co. has three of the top-12 claims, all senior notes due between 2020 and 2021. They total $416.4 million, according to the filing. Several energy companies with headquarters or significant operations in the Houston area are among the top 25 creditors, including Halliburton Energy Services Inc. ($21,104,132), Williams Companies Inc. ($13,854,145), Enterprise Crude Oil LLC ($6,469,804), Hi-Crush Partners LP ($4,071,065), Baker Hughes ($3,586,155), Schlumberger Technology Corp. ($2,630,025), B&L Pipeco Services Inc. ($2,354,421), Patterson-UTI Drilling Company LLC ($2,282,158) and DNow LP ($2,154,723), all trade-related debt. Hi-Crush, now known as Hi-Crush Inc., is itself also planning to file for bankruptcy protection in the near future.

Chesapeake had 1,201 active wells and about 538,000 acres that produced about 980 million cubic feet of natural gas in the fourth quarter of 2019, according to a company presentation.

Chesapeake said that it had filed motions for first-day relief that would allow it to pay owner royalties as well as employee wages and benefits. The company ended 2019 with 2,300 employees and reported total revenue of nearly $8.6 billion, down about 14% year over year, but that translated to a $416 million net loss available to common shareholders, down from $133 million in net income in 2018. So far this year, the company has laid off at least 200 people in Oklahoma, according to Reuters.

By Paul J. Gough – Reporter, Pittsburgh Business Times

Olivia Pulsinelli with the Houston Business Journal contributed to this report.

Courtesy of The Houston Business Journal

https://www.bizjournals.com/houston/news/2020/06/29/chesapeake-energy-bankruptcy.html

Houston’s oil and gas sector isn’t done adjusting to the strain that came with the start of a global pandemic, but its executives are already casting their gaze downrange to make assumptions about how the pandemic ends.

As recently as mid-May, experts on the industry said a long-term period of social distancing terminating in mid-2021 was hard to even conceptualize. And as some states, including Texas, take steps to reopen businesses and remobilize consumers, the question becomes whether or not a second wave of Covid-19 infections and deaths send the market back into widespread social distancing until a vaccine can be produced.

“I tend to be an optimist, which is why it’s quite frankly hard to think about those realities,” Ken Medlock, a fellow of energy and resource economics at Rice University’s Baker Institute for Public Policy, said on a virtual panel hosted by the Houston Business Journal in mid-May. “If we continue to see wave after wave of this, and people keep social distancing, the future becomes really hard to predict.”

And yet, the people steering Houston’s largest oil and gas companies already have to try and make some predictions about what the market looks like in six months or a year despite the uncertainty still in the market.

“The challenge is, the oil companies need to make a decision today on the case they think will happen, and they’re going to be conservative,” said Paul Goydan, Houston-based managing director and senior partner at Boston Consulting Group. “Even if the best case happens in six months, standing here today as an oil executive, you’re going to make a decision on what you think will happen, and it’s probably not going to be the best case.”

Goydan outlined four broad tiers of responses that companies in the oil and gas business will likely take in response to the ongoing supply-demand imbalance: spending cuts, workforce cuts, portfolio changes and restructuring.

Tier I: Spending cuts

Faced with such severe supply and demand imbalance, capital projects are the first thing to go. This response has already seen wide use, especially among oil and gas producers.

For example, Houston-based Occidental Petroleum Corp. (NYSE: OXY) now plans to spend $2.4 billion to $2.6 billion in 2020, down from its initial estimation of $5.2 billion to $5.4 billion, according to the company’s financial reports. Houston-based Noble Energy Inc. (Nasdaq: NBL) now plans capital expenditures in 2020 between $750 million to $850 million. That’s more than a 50% reduction from Noble’s original 2020 capital expenditure plans. Houston-based Marathon Oil Corp. (NYSE: MRO) cut its original 2020 capital expenditure plans by $1.1 billion, landing at or below $1.3 billion for the year.

“The easiest thing to do, that every oil company goes out and does, is they stop drilling, they stop execution activities in the field,” Goydan said. “There’s a huge wave of activity reductions.”

Oil field equipment and service companies feel the pain from that first — their customers only demand their equipment and services  if they have work that needs doing. Goydan said BCG is generally seeing reductions of 20% to 40% at most companies. And the reductions likely look even more dramatic from the ground level — if the spending plan cuts are taking place partway through the year, that means 2020 spending was likely most intense in its first few months, leaving even less room in those budgets for the back half, Goydan said.

This tier of response results in broad layoffs at oil field service companies, many of which have already taken place.

Tier II: Producer layoffs

Once an extended industry downturn becomes more evident, oil and gas producers will turn their cost-cutting gaze inward and look to reduce their own workforces. By this point, capital spending reductions should have already sliced away jobs in the oil field services, as the producers would want to defend their own workforces.

“It’s much easier to cut a supplier than it is to dig into your own workforce,” Goydan said. “A lot of these companies have thousands and thousands of person-years of engineering and geological expertise. It is very hard to get back if you let go of it.”

Oil companies would rather hold onto that talent and experience so that they are ready to move when the market comes back. It takes a structural change in the way these companies view their prospects to induce them to let those people go, Goydan said.

“We saw in 2014 and 2015 a readjustment to $50-$60 oil,” Goydan said. “Now we’re seeing an adjustment to maybe a $30-for-two-to-three-years world.”

Essentially, if oil companies believe that the pandemic ends and demand recovers quickly, as though the pandemic never happened, oil field service companies probably bear the brunt of the layoffs. But once executives start to think that the demand impact of Covid-19 will outlast the disease itself, they have to start looking at broader changes within their own ranks, Goydan said.

In reality, the broader market is beginning to move on this tier of response now, Goydan said.

“What we’re starting to see is an emerging consensus that it will take an average of two years to get out of this, and probably five years to get back to where we thought we’d be at the end of 2020,” Goydan said.

That shift comes not from an assumption about how long the medical event of the pandemic lasts, but from a belief that the societal impacts of social distancing will change the fundamental demand for fuel as people change they way they work and socialize independent of the pandemic.

Tier III: Portfolio changes

In this stage, companies begin buying and selling assets to adjust their own portfolios to match the new reality. This tier serves the dual purposes of changing the composition of a company’s assets and injecting liquidity into the company’s balance sheet, Goydan said. While some companies that were perhaps predisposed to this solution have already started this sort of mergers and acquisitions activity — like Occidental with its recent megadeal acquiring Anadarko Petroleum Corp. — the market generally hasn’t yet reached the point at which buyers and sellers have an easy time coming together.

“This is not what we would call a transactable market,” Goydan said. “Extreme price volatility in commodities and uncertainty don’t create a good market for portfolio actions and M&A.”

These tiers of responses don’t happen all at once, they progress over time, Goydan said. And there’s still time for companies to start reaching for this sort of activity as a response to the downturn.

The first thing to happen will be distressed sellers coming to the market because they need liquidity to meet financial obligations, Goydan said. These distressed sellers will start to draw out opportunistic buyers.

“At some point, where there are good deals, you start to see buyers,” Goydan said. “And then, at some point, we will converge on a high degree of confidence that we’re in the swoosh (where the downturn bottoms out). When that confidence increases and volatility decreases, that’s where you start to see M&A.”

Tier IV: Restructuring

The final response to the downturn is restructuring. In many cases, this means bankruptcy, as companies that do the prior three tiers of responses find that they simply cannot survive.

“They will take all those actions, and they will find that those actions are not sufficient and they run out of cash,” Goydan said.

There has already been a surge in the number of companies filing for bankruptcy since March, when the market imbalance began to pressure oil prices, but the wave likely won’t hit its peak for several more months, said Jeff Nichols, a Houston-based partner at Haynes and Boone LLP and co-chair of the company’s energy practice group.

The companies that have already filed are still likely those that were already contending with balance sheet issues before March, and were thus probably already negotiating with creditors when the market took a turn for the worst, Nichols said. That means that the companies for which the latest downturn was the start of their problems probably won’t reach the courts until late summer or early fall, Nichols said.

Structurally, these bankruptcies are likely to generally be debt-for-equity deals, wherein a creditor erases debt in exchange for ownership over the debtor, said Sarah Foss, a restructuring analyst for Debtwire.

“The problem is there’s not really another restructuring scenario available other than debt for equity, aside from liquidating,” Foss said. “There’s really not a market out there where you can get a third party to buy your assets.”

But there will also be companies that manage to avoid bankruptcy and come out of the downturn on top, Goydan said. These companies, the “winners,” will end up rethinking their business models, especially around their use of technology.

“They do not want to come out of the downturn looking and acting like they did going in,” Goydan said. “Those are the companies that typically have the most success.”

The imbalance

Covid-19 pandemic has already put incredible strain on global fuel demand, but the balance is further complicated by economic conflict between Russia and OPEC member states.

The major players in the international oil and gas business have all taken oil production offline — production they will want to bring back as prices recover, Goydan said.

The base-case scenario has those producers acting with some level of coordination to ease production back into the market as prices go up, which still slows any recovery in oil prices. But there’s also a worst-case scenario, Goydan said.

“It’s more of a long-tail worst case, where geopolitical or other tensions lead to a complete breakdown in coordination and a fight for market share,” Goydan said. “There’s not really a best case. There’s a likely case that puts a ceiling on it, and then there’s a whole bunch of cases where things break down and it gets much less rational.”

Uncertainty about the future in the supply side combined with the already-weak demand to push crude oil futures into record-shattering negative-price territory for a couple of days in April, but even since then futures contracts have stayed close to the $30-$40 per barrel range, according to data from the U.S. Energy Information Administration.

“I don’t think any company has really stress-tested their strategy at these oil prices ($30 per barrel at the time of his interview),” Goydan said. “No one ever would have ever envisioned this destruction of demand. It’s unprecedented.”

The future

In a best-case scenario, in which the Covid-19 pandemic never hits a second wave and social distancing can cease sooner rather than later, these tiered responses probably stop partway through tier two for most companies.

“I would think that if you’re in a ‘best case,’ you see very little phase three or phase four activity,” Goydan said.

Conversely, as more time passes without an end to social distancing, more companies have to move onto the more extreme phases, Goydan said. As it stands now, the industry is already on a path to see job losses on the producer level — that’s tier two — but if there’s a “miracle recovery,” there will be many fewer bankruptcies and distressed portfolio adjustments, Goydan said.

Outside the oil patch

Further downstream from the oil and gas producers, refiners and LNG companies are also feeling some pain. Refinery utilization rates are down 20 to 25 percent across regions, and the pressure on refiners will continue as long as the pandemic is still suppressing demand, said Clint Follette, another Houston-based BCG managing director and partner. If social distancing continues deep into 2021, some of the smaller refineries might end up having to shutter their operations permanently, Follette said.

But refineries generally aren’t as cash hungry as the companies producing crude oil upstream. They still have certain sustaining costs, but most of the larger facilities, like those near Houston, are pretty resilient, Follette said.

“It’s not like the upstream, where it’s sucking up capital,” Follette said.

Petrochemical companies are also having a tough time, though demand for their products hasn’t sunk quite as low as that for fuels, Follette said.

“It was already a tough environment for the chemical industry, because a lot of capacity had already come online. You had a little bit of oversupply even before this disruption,” Follette said. “They went from a bad margin year to a worse margin year.”

Houston’s burgeoning liquefied natural gas industry is also contending with issues. Natural gas production as a byproduct of crude production, called associated gas, has gone down as oil companies cut spending. That has reduced U.S. feedstock supply for LNG exporters and pushed domestic natural gas prices up, making exports to international destinations — where the pandemic is hurting demand — less attractive, said BCG analyst Alex Dewar.

“It’s a bizarre situation where U.S. gas is pricing above Europe and Asia,” Dewar said.

LNG facilities along the Gulf Coast have been built or modified at great expense over the past several years to export the incredible quantity of natural gas being produced via onshore drilling.

That means that, even in a world where the pandemic ends in the short term, that probably pushes up domestic supply more quickly than international demand, further hurting LNG exporters in the short- and medium-term, Dewar said.

As an industry in its early stages, many U.S. LNG export hopefuls are still working on projects to increase their capacity. But none of those projects are likely to move forward as long as current conditions persist, Dewar said.

“It’s challenging to see how anyone reaches a final investment decision in the next several years,” Dewar said.

In fact, The Netherlands-based Royal Dutch Shell walked away from an export project in Lake Charles earlier this year, and Houston-based Liquefied Natural Gas Ltd. sold out of its flagship development project essentially at a total loss.

By Joshua Mann – Senior Reporter

Courtesy of the Houston Business Journal

https://www.bizjournals.com/houston/news/2020/06/19/oil-and-gas-cos-navigate-a-downturn.html

The COVID-19 Pandemic has affected millions across our nation, with unemployment rates soaring, small businesses failing, and far too many deaths. During this critical time, cities have pulled together to help out their fellow men, their neighbors, and their friends. We at IPS strive to lead by example, and are proud to give back to our community in any way we can.

On April 10th, Good Friday, we provided lunch to the amazing officers at the League City Police Department. We are proud to support those that are caring for our community during these trying times.

When we heard the awful news that over 100 residents at  “The Resort at Texas City” had tested positive for COVID – 19, we held a Parade to celebrate the residents who had completed their 14 day quarantine. We are forever grateful to Dr. Robin Armstrong for ensuring a smooth recovery for the residents. She is a local Hero.

We had the amazing opportunity to sponsor TAMUG Maritime Business Associates from Texas A&M University who served breakfast to the amazing ICU staff in the UTMB Healthcare Systems.

 

On National Police Memorial Day, IPS honored our hard working officers by taking a delicious Shipley’s breakfast to the Galveston County Sheriff’s Office. We wished them luck on the re-opening of county beaches and the annual Jeep Weekend.

IPS decided to hold a “Spring Cleaning” Clothing drive in June. With the help of the community, we were able to donate to the Resource and Crisis Center of Galveston County. Sadly, domestic violence has been on the rise during the state wide lock down. RCC helps those in need by promoting the safety and well being of those suffering from domestic abuse, and also advocates for the prevention of these crimes.

Through these challenging times, IPS will continue to help those in need, giving back to the community that has supported us through the years. Our first responsibility is to help support our local Houstonians, and we will continue to strive to meet those duties.

The Corona Virus Pandemic, and the subsequent lock down has shattered many lives and businesses. This has lead to a sharp increase in Domestic Violence cases across the world as people have become trapped in their own homes. IPS sponsored a “Spring Cleaning Clothing Drive” and donated the proceeds to the Resource and Crisis Center of Galveston County. RCC plays a crucial role in our community by promoting the safety and well being of individuals who have become victims to family violence, sexual abuse and child abuse. We had many generous donors from the community that helped us deliver much needed clothing to those in need. IPS appreciates the community’s support with this clothing drive, Thank you.

A lot of attention has been paid to the plight of upstream oil and gas companies — the hardest-hit subsector amid the Covid-19 pandemic — but further downstream, refiners and LNG companies are also feeling some pain.

Refinery utilization rates — a measure of how much of their production capacity refineries are using — are down 20% to 25$ across regions. Along the Gulf Coast in particular, utilization dipped to 71.8% in May, its lowest point since 2017, according to data from the U.S. Energy Information Administration. And at 77.8% during the first week in June, Gulf Coast utilization is still lower than any other week since the EIA began recording the data in 2010, aside from the trench in 2017. A more normal June utilization rate would historically have been between 90% and 95%, according to the EIA data.

The pressure on refiners will continue as long as the pandemic is still suppressing demand, said Clint Follette, a Houston-based Boston Consulting Group managing director and partner. If social distancing continues deep into 2021, some of the smaller refineries might end up having to shutter their operations permanently, he said.

But refineries generally aren’t as cash hungry as the companies producing crude oil upstream. They still have certain sustaining costs, but most of the larger facilities, like those near Houston, are pretty resilient, Follette said.

“It’s not like the upstream, where it’s sucking up capital,” Follette said.

Petrochemical companies are also having a tough time, though demand for their products hasn’t sunk quite as low as that for fuels, Follette said.

“It was already a tough environment for the chemical industry because a lot of capacity had already come online. You had a little bit of oversupply even before this disruption,” Follette said. “They went from a bad margin year to a worse margin year.”

LNG

Houston’s burgeoning liquefied natural gas industry is also contending with issues. Natural gas production as a byproduct of crude production, called associated gas, has gone down as oil companies cut spending. That has reduced U.S. feedstock supply for LNG exporters and pushed domestic natural gas prices up, making exports to international destinations — where the pandemic is hurting demand — less attractive, said BCG analyst Alex Dewar.

“It’s a bizarre situation where U.S. gas is pricing above Europe and Asia,” Dewar said.

LNG facilities along the Gulf Coast have been built or modified at great expense over the past several years to export the incredible quantity of natural gas being produced via onshore drilling.

That means that, even in a world where the pandemic ends in the short term, that probably pushes up domestic supply more quickly than international demand, further hurting LNG exporters in the short- and medium-term, Dewar said.

As an industry in its early stages, many U.S. LNG export hopefuls are still working on projects to increase their capacity. But none of those projects are likely to move forward as long as current conditions persist, Dewar said.

“It’s challenging to see how anyone reaches a final investment decision in the next several years,” Dewar said.

In fact, the Netherlands-based Royal Dutch Shell PLC — whose U.S. operations are headquartered in Houston — walked away from an LNG export project in Lake Charles, Louisiana, earlier this year, and Houston-based Liquefied Natural Gas Ltd. sold out of its flagship development project for just $2 million. Houston-based Tellurian Inc. (Nasdaq: TELL) also is behind schedule on reaching a final investment decision on its flagship project, the Driftwood liquefied natural gas export facility to be built in Louisiana.

By Joshua Mann – Senior Reporter

Courtesy of the Houston Business Journal

https://www.bizjournals.com/houston/news/2020/06/12/how-covid-19-hits-downstream-gulf-coast-energy.html

London-based energy giant BP PLC (NYSE: BP), which has its U.S. headquarters in Houston, plans to cut about 15% of its global headcount, Reuters and the Associated Press reported June 8.

Sources told Reuters that CEO Bernard Looney told employees in a global online call that about 10,000 of the company’s 70,100 positions would be cut. The cuts, most of which are expected by the end of the year, are in response to the Covid-19 pandemic and Looney’s plan to shift BP more toward renewable energy, per Reuters.

A company spokesman declined to comment to Reuters.

The AP notes that the cuts are slated to affect office-based roles and are expected to impact senior levels significantly, making the senior structure flatter.

BP already announced plans to cuts its leadership positions from 250 to about 120. The remaining leadership positions will include more than 100 so-called “Tier 2” managers who will lead the 11 divisions Looney created in February in an effort to reinvent BP, Reuters previously reported.

Part of those previously reported changes include David C. Lawler becoming chairman and president of BP America Inc., succeeding Susan Dio on July 1. Lawler will retain his current role as CEO of BPX Energy, the company’s Lower 48 division, which is based in Denver.

In April, BP announced it would cut its capital spending plans for 2020 to about $12 billion, down 25% compared to its original full-year guidance, in response to the pressures facing the energy industry. Social distancing as a response to the Covid-19 pandemic has gouged demand, while economic conflict between OPEC member-states and Russia is leading to increasing supply. Together, those two factors pushed oil prices to record low levels, even deep into negative value during April.

As of last fall, BP was No. 5 on the Houston Business Journal’s 2019 Largest Houston-Area Energy Employers List, based on its 9,537 local full-time employees.

By Olivia Pulsinelli, Assistant Managing Editor

Courtesy of The Houston Business Journal

https://www.bizjournals.com/houston/news/2020/06/08/bp-to-cut-10-000-jobs-reports-say.html

Two energy companies, Houston- and New Jersey-based NRG Energy Inc. (NYSE: NRG) and Houston-based Aramco Americas, have each committed over $2 million to Covid-19 relief efforts. Combined, $630,000 of the funds went toward Houston Methodist, according to recent announcements.

Houston-based Reliant Energy, part of NRG, made a $100,000 donation to Houston Methodist to establish the “Reliant Innovation Fund.” The innovation fund will go toward students enrolled in Texas A&M University’s Engineering Medicine (EnMed) program at Houston Methodist Hospital.

EnMed will be based at the $550 million Texas A&M Innovation Plaza campus being developed adjacent to the Texas Medical Center. The TAMU System’s two-degree program provides students the chance to earn a master’s degree in engineering from Texas A&M University and a medical degree from the Texas A&M College of Medicine. The renovated EnMed Building is slated to open later this year.

Reliant’s additional $30,000 donation to Houston Methodist will also expand patient-centric communication through MedTrak Inc.’s CareSense mobile app. The Pennsylvania-based digital platform will allow Houston Methodist to continue caring for its Covid-19 patients after they’re discharged by aiding in patient education, health recovery, risk-factor monitoring, goal setting, care coordination and medication adherence.

“Innovating is at the core of what we do at Houston Methodist, and this generous gift from Reliant will make a difference for patients both now and for years to come,” Faisal Masud, medical director of the Center for Critical Care at Houston Methodist Hospital, said in a May 28 press release. “The challenges that we have and will continue to face with the Covid-19 pandemic amplifies the need for fresh ideas to combat this disease and treat those who have been affected.”

Houston Methodist also received $500,000 from Aramco Americas to support the health system’s Covid-19 research, including convalescent plasma therapy. As other clinical trials are explored, the therapy may serve as a vital treatment option, according to a statement from Houston Methodist.

Aramco Americas, the U.S. subsidiary of Saudi Aramco, also provided funding for other coronavirus-related efforts:

  • $500,000 to the Houston Health Foundation will provide greater access to mobile Covid-19 testing. Testing will be operated by the Houston Health Department and will rotate through vulnerable neighborhoods over the next several weeks.
  • $100,000 to the Houston Health Foundation will provide 1,000 grocery gift cards for first responders and health care officials through Aramco’s “Our Houston Heroes” campaign.
  • $54,000 to the Houston Food Bank from an employee campaign with company match will result in the distribution of 162,000 meals.

In April, Aramco donated approximately $90,000 and delivered 30,000 KN95 protective masks to the city of Houston. The masks were distributed by the Houston Health Foundation and Houston Health Department to city employees.

“Aramco has made it a point to step up for Houston’s community during good times and challenging ones, and their donations – coming during a crisis of unprecedented scale – are needed support for our medical response and first responders,” Houston Mayor Sylvester Turner said in a May 20 press release.

The rest of Aramco Americas’ more than $2 million in donations will benefit organizations in other communities where it operates.

By Sara Samora – Reporter

Courtesy of Houston Business Journal

https://www.bizjournals.com/houston/news/2020/05/29/houston-methodist-reliant-nrg-energy-aramco-covid.html

An Exxon Mobil Corp. (NYSE: XOM) employee working at the company’s Houston-area campus has been confirmed to have contracted Covid-19, the disease caused by the novel coronavirus, just as the company is reopening the property, according to a May 22 internal memo.

A spokesman for the Irving, Texas-based company confirmed to the Houston Business Journal that an Exxon employee had tested positive for Covid-19.

In an email with the subject line, “Houston campus confirmed Covid-19 case,” Jon Gibbs, who leads Exxon’s Americas Emergency Support Group, said the affected employee “developed mild symptoms at the workplace” and went home shortly thereafter. The email was sent to the company’s 13,000 local employees.

While at home, the employee contacted medical professionals, the memo states. The employee was later diagnosed with Covid-19.

Gibbs said in the memo that the employee was wearing a mask and adhering to social distancing guidelines at the time they developed symptoms of Covid-19.

The employee’s workstation and common areas that might have been used were thoroughly cleaned, Gibbs said.

“In this case, there were no close contacts identified; had there been, those people would have been asked to leave the workplace,” Gibbs said. “While our hope is no other colleagues become unwell, we will continue to follow these careful procedures in the event of another suspected case.”

The confirmed case of Covid-19 comes just days after the company began bringing employees back to Exxon’s 385-acre Houston-area campus, which is located at 22777 Springwoods Village Parkway in the Springwoods Village master-planned community.

Sources close to Exxon said the campus reopened to employees this week, though only 25% were allowed on-site at any given time.

The company plans to increase capacity to 50% in the coming weeks, the sources said.

The Exxon spokesman confirmed the company has implemented a phased approach to bringing personnel back to the campus. He said that phased approach will remain consistent and in compliance with all government orders and directives.

“As a matter of practice we do not release information on details of individual staffing arrangements, but we will make adjustments if and when they are needed,” the spokesman said.

The company has adopted additional precautionary measures that have been taken to “prevent further spread of the virus among our workforce,” the spokesman said. Those measures include reducing workforce density, adjusting building layouts, modifying operating practices, enhancing cleaning procedures and providing the necessary supplies to maintain good personal hygiene.

Exxon is the Houston area’s largest energy employer, according to HBJ research.

In April, more than one employee at Exxon’s Baytown facility tested positive for Covid-19, media outlets including Reuters and The Baytown Sun reported at the time. However, Exxon is not the only local energy company that has had to respond to a case of Covid-19 on property it owns.

In March, Houston-based Kinder Morgan Inc. confirmed it had taken steps to respond to potential contamination at its downtown Houston building after one of its employee tested positive for Covid-19.

Kinder Morgan (NYSE: KMI) owns the 33-story Kinder Morgan Building at 1001 Louisiana St., and the employee worked in the company’s headquarters for up to a week before becoming aware of the diagnosis.

By Jeff Jeffrey – Reporter

Courtesy of the Houston Business Journal

https://www.bizjournals.com/houston/news/2020/05/22/exxon-mobil-employee-covid-19-springwoods-village.html

As the global pandemic continues to impact various industries in Houston, one of the hardest ones hit has been the energy industry.

In April, the Houston Business Journal reported how oil and gas companies are cutting costs and/or headcount. One example is Houston-based Halliburton Co. (NYSE: HAL). The company put 3,500 Houston employees on a 60-day furlough. However, in May, Halliburton laid off about 1,000 employees at its corporate headquarters in Houston, in addition to more job cuts in Oklahoma and two facility closures in Texas.

Experts within the energy industry speculated on how the downturn will affect Houston’s economy, and shared their thoughts about the sector after Covid-19 at the Houston Business Journal’s first energy and virtual panel of 2020.

The panelists

  • Chad Burke, president and CEO, Economic Alliance Houston Port Region
  • Ken Medlock, James A. Baker III and Susan G. Baker Fellow in Energy and Resource Economics; senior director of the Baker Institute of Center for Energy Studies
  • Maynard Holt, CEO at Tudor, Pickering, Holt & Co.

Moderator: Scott Nyquist, director emeritus and senior advisor of McKinsey and Co.


Can you start us off with an overview of what’s happened in the energy markets in the last quarter or so?

Medlock: This is literally a black swan event. There’s really no way to summarize what’s been going on. The current environment has seen crude oil inventories grow to levels not seen since March of 2017. Importantly, though, prices have been much more volatile and quite a bit lower than they were back then and that really is a reflection of a lack of absorption capacity in the marketplace.

The stressors really originated from the demand-side of the discussion. Make no mistake — this is not an energy-only event. This is an economy wide event that we’re living through.

How is the crude oil refining industry handling this kind of shift of environment?

Burke: Obviously, with the lack of movement for the last almost three months now, demand is down significantly. Refining capacity is at about 68 percent utilization a week or two ago. It is ticking up a little bit. I think the latest number I saw was at about 70 percent utilization. (But) that number should be between 90% and 100% utilization.

The interesting dynamic that exists here in Houston and along the Houston Ship Channel is we’ve got well over 130 plants or facilities in the Houston Ship Channel region. About six of those are crude oil refiners. The vast majority of the manufacturing going on here is the 130 or so chemical plants that get most of their feedstock from the natural gas side of the equation.

They have an array of products that are made from the chemicals that come out of these facilities. All of those products that we touch every day comes out of the chemical side of the business.

How is Houston, and Texas more generally, positioned to deal with the emerging energy market realities post Covid-19, maybe even after next year?

Medlock: You have to realize that Houston and Texas has what we call a comparative advantage. It’s obviously geology oil and gas, and as a matter of fact the oil and gas industry provides roughly 13% of gross state product, which makes it the largest single industry in the state.

When things are bad in that sector, it hurts across the board for the State of Texas and Houston. But geology aside, we also have a tremendous amount of capital already deployed refining chemicals, petrochemicals, pipelines, port facilities, all of these things really bode well because the capital’s not being destroyed right now. It’s still in place, so it bodes well when things do begin to turn for Texas to be able to respond very quickly.

The other thing that is unique about this part of the country is the human capital advantage that we have — the amount of engineering talent, industry knowledge and economics knowledge that exists in Houston. It is in many ways unparalleled, so that really does bode well for the city and the state in terms of recovery, regardless of what it looks like.

As we go forward post Covid-19, those sorts of things fit very well with the skill sets that we have already in the region. I don’t think you’re talking about a Herculean lift. I think they’re just talking about redeploying skills and really leveraging the advantages that we already have in this part of the country.

When you look at the range of companies that are operating at the port, what do you think it says about the future of investment and growth in the port region?

Burke: I like to explain it this way: With the advantage in feedstock and prices of natural gas that we’ve had and will continue to have for decades, you’ve seen a repositioning of manufacturing to the Gulf Coast from Brownsville over to Louisiana. Houston’s getting the lion’s share of that because we have what was, at the beginning of the last 10 years, the second largest petrochemical complex in the world. Now, after nearly a $100 billion worth of investment in manufacturing right along the ship channel, we surpassed Rotterdam in productivity or production capacity.

I think most of the experts in the industry have begun to look at the next three to five years max. At the Economic Alliance, our business is to land those capital investment projects here. With this Covid-19 stoppage, we postponed a lot of the large cap projects. The projects are still on our list, it’s just that nobody’s moving right now.

We may we may go up to 24 months and not see a brand new project be announced, but then two or three years from now, it’ll be time to re-engage and catch back up with the global GDP of 3%. You’ll see that continue because we will we still have the advantage, feedstock, technology and proximity to markets to our own feedstock here.

What are your views on whether or not unconventionals will be crushed by OPEC or make their way back?

Holt: Well, we’re very bullish on it, too. One reason why it’s taking such a big hit is because you can shut it down so quickly, and that’s one of its great advantages. It’s illustrating why companies want to own it because it’s something you can dial up and down.

I would feel very optimistic about the U.S. as a center of oil and gas production, with Texas being the leader in that. Oil and gas as a fuel is certainly not going away, but we do have to get through a super challenging period. We are not alone and we’ll get through this.

By Sara Samora – Reporter

Courtesy of The Houston Business Journal

https://www.bizjournals.com/houston/news/2020/05/15/panel-recap-energy.html

Today, IPS Pump Service decided to bring some breakfast to the Galveston County Sheriff’s Office to honor them on National Police Memorial Day, and to wish them the best of luck with the opening of County beaches and the annual Jeep Weekend.

Thank you to Sheriff Trochesset for your leadership, and to Chief Deputy Darrell Isaaks, Major Ron Hill, Captain Ray Nolen, and Captain Mark Bonner for making the time for me this morning.