Oil Companies Are Starving for Air
National Oilwell Varco (NYSE: NOV) has its finger firmly on the pulse of the oil industry. As the sector's leading oil-field equipment manufacturer, it's in constant contact with its customers and knows what they need. One thing many of them have told the company is that they're starving for capital, which is the air the capital-intensive industry needs to breathe. That was the central theme on the company's fourth-quarter conference call, where CEO Clay Williams addressed the impact this issue is having on the sector and what it means for investors.
Conditions in the oil market remain as challenging as ever. While the continued volatility in oil prices is playing a role, it's a secondary issue for the sector. Williams addressed the primary problem by stating:
2019 was a pivotal year for the energy industry. We entered 2019 with commodity and equity markets signaling strongly to market participants that growth for growth's sake without commensurate returns to capital providers would no longer be tolerated. Sources of all forms of capital to the industry -- public equity, private equity, bank debt, public debt -- became scarce and expensive, as evidenced, for example, by the collapse in trading multiples of oil-field public equities in early 2019. At the time, we interpreted this as the evaporation of a widely held narrative, gauzy conventional wisdom that a commodity price spike would someday soon lead us back to a more prosperous oil field and save us all.
Source Fool.com
