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THIRD QUARTER 2020, ALREADY? I’M GLAD SECOND QUARTER IS HISTORY. WHAT COULD BE NEXT?
In January, I could see a difficult second and third quarter looming. I thought $50/bbl oil was just not economically sustainable and felt we should start getting ready for mineral lien requests, litigation projects, and maybe even some bankruptcies. Oh, how simplistic my thought process was. I failed to factor in the worst-case scenario: a pandemic linked with a Russian-Saudi oil price war.
So, what do we actually expect to see in the third quarter of 2020?
• MSA Revisit Requests: We haven’t seen the surge yet, but it’s coming. You should expect to receive requests from your customers soon to revisit/review/update your master service agreements. Of course, this is code for, “Let’s shift some more risk to the service provider.” Our MSA review team regularly reviews MSAs for the oil and gas sector. As a result, we often see the same customer’s MSA several times over the course of a year. We know when one is pushing the envelope a bit. Yes, sir, the wave is coming! If you’d like to learn more, “. . . The general who wins a battle makes many calculations in his temple ‘ere the battle is fought. The general who loses a battle makes but few calculations beforehand. Thus many calculations lead to victory, and few calculations to defeat: It is by attention to this point that I can foresee who is likely to win or lose.”
our attorney Andre Stanojcic just finished a webinar on this topic. (Note: We separated out the three-minute portion covering new force majeure language, and it’s now up on our YouTube channel.) • Mineral Lien Activity: Most of you know that we often research, prepare, and file mineral liens against wells, SWDs, pipelines, gathering systems, refineries, etc. You may even be aware that our lien group is currently pushing 80-plus filings per month. I expect this to accelerate in the third quarter. • Requests to Toll the Lien Deadline: We are fully aware that your operations and management really don’t want to file anything right now. They’re likely waiting until the last possible day to make the call to proceed. Your customers may also ask to extend the statutory deadline to allow more time to pay or negotiate. Please be aware that no state will allow an agreement
to toll or extend a lien deadline . To ensure you get what you want when you want it, try getting the request to us early. With some preparation, we can get ahead of the deadlines but still stay in the background while you work up a plan with your customer. Think of our lien group as an extension of your own credit department. • Bankruptcies: Every analyst we follow is projecting an increase in bankruptcies in every industry sector this coming quarter, especially in oil and gas. We have our own list of historical bankruptcy filing data because the other information out there was just not comprehensive enough for us. Please let me know if you would like a copy. Also, make sure you’re on our distribution list for bankruptcy alerts.
• Job Disputes: We expect to see an increase in so-called “job disputes” in the
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–Sun Tzu, “The Art of War”
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