For decades the Tulsa newspaper would report that week’s Baker Hughes rig count, the barometer for the US oil industry’s health, and each week they would reference “…the highest-ever weekly US rig count of 4,530 recorded by Hughes Tool Company on December 28, 1981…”  Even if that particular Friday’s rig count had doubled from the prior year with the industry booming, there sat the specter of 4,530 taunting us with our collective failure to achieve the prior glory days.  The newspaper carried that fact long after it had any meaning to decisions being made in the modern era.

I thought about this while having a conversation with a CEO a couple weeks ago.  He was reviewing a chart I sent that was backward looking and he said it was completely unhelpful to him.  He said, “I’ve got to run my business based on what I’m facing today, not on what was happening a year ago.” 

He’s right, of course.  In more normal times where oilfield markets surge up and down by +/- 25%, the trend and the timing matter, but when the world turns on its ear, when nothing is the same anymore, forget yesterday, focus on tomorrow. To illustrate, here’s a chart using North American frac stages as the metric:

If I show you this chart today in mid-May 2020, does it help you run your business better, plan your life and investments more cleverly, or make a decision you’ve been struggling with?  Probably not.  All this is doing is recording history, comparing the world today to a by-gone era that is no more relevant than the December 28, 1981 Hughes Rig Count.  By the time you get this news, the game is already afoot.

Freakonomics Radio had a recent episode called, “Reasons to Be Cheerful”.  In that episode the host explored our built-in negativity bias, which means we give bad news much more power than good.  For example, if your 401(K) has $500,000 in it and one day the stock market roars and now you have $550,000, you might be briefly happy, but if in the following day the market collapses and you find you have lost $50,000, this hurts way worse that the happiness you felt when you gained the same amount.  And this bad news sells.  Just read the headlines, watch the news, chat with your friends.  Fear and disappointment are powerful.  Last week one Tulsa hospital had a total of 7 COVID patients and 300 empty beds, but the news of the week was Oklahoma death toll reaches new high (because they only report the cumulative number, which will ALWAYS be a new high!).  This anchors us in the bad news, in how divorced we are from the good old days, in the despair of never getting back what we once had.  If you focus on the past, you pretty much lock yourself in to failure.

But if you are to succeed in business (and in life), you accept that the past is what it was and focus on marching ahead with the new hand you’ve been dealt.  That is what the great CEOs of the oil industry have already pivoted to; these people do not live in the past.  Here is the chart that is meaningful to the great CEOs working in the world of completions:

For this analysis, we’ve haven’t changed the words or the analysis, we have simply changed the focus to be ONLY the future, not the past.  If I have a composite bridge plug manufacturing company, how do I need to position my company for a market that will shoot 52,000 stages in Q3, but will then shoot almost 50% more just two quarters later?  How do I make sure I’m locked in with the oil companies doing this work in the fall?  If I’m an oil company CEO, which of my service companies has positioned itself to be alive and healthy 6 months from now when I need their help?

Our firm will keep track of history (we always have and always will), but the value we provide the industry is in our forecasts.  The outlook is for modest growth after we get through this quarter, with seasonal spikes in activity based on regional anomalies.  Be prepared.