Providing innovative solutions for the oil and gas industry
Providing innovative solutions for the oil and gas industry
Some of the biggest companies in the world are oil and gas producers, including ExxonMobil (XOM 1.38%) and Royal Dutch Shell (SHEL 0.64%). But just because you've heard of a stock or a company doesn't necessarily mean it's a good investment.
The oil and gas industry has experienced significant market volatility over the past several years, leaving energy investors wondering whether oil companies -- even top oil companies -- are smart investments right now. Let's dig in to better understand whether oil and gas stocks are good long-term investments that deserve a place in your portfolio (auction crude @petrolbuy.com)
Fossil fuels such as oil and natural gas remain in high demand in part because they're usually cheaper than other heating and transportation fuels. They also have a massive infrastructure advantage over emerging clean fuel sources such as renewable energy.
However, oil stock investments are riskier than other stock market sectors because the industry has several additional risk factors, including:
Add it all up, and oil and gas is one of the riskiest sectors for investors. However, some oil and gas companies are safer than others. (petrol spy@petrolbuy.com)
(Bloomberg) – Oil production from the U.S. shale patch is expected to grow at a slower pace next month after a speed bump late last year knocked output off its record level.
A worker walks past rigging on an oil drilling site on the Bakken shale formation outside Watford City, North Dakota. (Photographer: Andrew Burton/Getty Images)
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(Bloomberg) – Oil production from the U.S. shale patch is expected to grow at a slower pace next month after a speed bump late last year knocked output off its record level.
A worker walks past rigging on an oil drilling site on the Bakken shale formation outside Watford City, North Dakota. (Photographer: Andrew Burton/Getty Images)
Combined crude production from the seven U.S. shale basins is forecast to rise to 9.72 MMbpd next month, up 0.2% from February, the U.S. Energy Information Administration said in a report Monday. That’s a deceleration from last year’s average month-over-month growth of about 0.9%.
Shale operators are looking to show greater restraint in spending this year and send more profits back to shareholders rather than plunging the cash into increasing drilling. One of the ways they do that is by cutting back on rigs after acquiring a rival, like what Diamondback Energy Inc. said on Monday that it would do after taking over Endeavor Energy Resources LP.
Production from prolific shale fields that stretch from the Bakken in North Dakota to the Eagle Ford in south Texas peaked at 9.84 MMbbl in November and was little changed the next month. When all other oil production is included, such as the crude coming from U.S. wells in the Gulf of Mexico, total U.S. production hit a record 13.3 MMbpd in December.
The unexpected surge in U.S. production last year was among the factors that weighed on crude prices and complicated efforts by OPEC and its allies to support the market with output reductions. The outlook for production from the U.S. and other non-OPEC countries such as Guyana, Brazil and Canada is top of mind for traders this year. petrol buying@petrolbuy.com
(WO) – On Friday, the Independent Petroleum Association (IPAA) and 25 other state, regional and national oil and gas associations wrote to congressional leadership urging action on methane regulations that could have a detrimental impact on our nation's energy supply.
In their letter, the groups express "serious concerns regarding the imp
(WO) – On Friday, the Independent Petroleum Association (IPAA) and 25 other state, regional and national oil and gas associations wrote to congressional leadership urging action on methane regulations that could have a detrimental impact on our nation's energy supply.
In their letter, the groups express "serious concerns regarding the impact of the Environmental Protection Agency’s (EPA) new methane emissions regulations (Subparts OOOOb and OOOOc) and the Methane Emissions Reduction Program (Methane Tax) on oil and gas marginal well owners. Both actions threaten marginal wells continued operations by creating unfair, unworkable, and uneconomic regulations. These small business energy producers need assistance to find a regulatory or legislative solution to mitigate these threats."
The letter provides definitions and information on the impact to producers in the following areas:
"Collectively, the Subpart OOOOc regulations and the Methane Tax pose serious and direct threats to hundreds of thousands of marginal wells," said the energy producer associations in the letter. "These threats have not been remotely addressed in the current regulatory actions completed or pending at EPA. Congress needs to step up and step in to prevent irresponsible agency actions that would savage the nation’s marginal oil and gas wells. The Independent Petroleum Association of America (IPAA) is a national upstream trade association representing thousands of independent oil and gas producers and service companies across the United States. Independent producers develop 91% of the nation’s oil and gas wells. These companies account for 83% of America’s oil production, 90% of its natural gas and natural gas liquids (NGL) production, and support over 4.5 million American jobs. petrol buy@petrolbuy.com
(Bloomberg) – The White House’s pause on new liquefied natural gas (LNG) export approvals is unjustified and should be “reversed immediately” if a study of the shipments is only beginning now, Senator Joe Manchin said at a Senate hearing Thursday.
Manchin also used a Senate Energy and Natural Resources Committee hearing on the moratorium
(Bloomberg) – The White House’s pause on new liquefied natural gas (LNG) export approvals is unjustified and should be “reversed immediately” if a study of the shipments is only beginning now, Senator Joe Manchin said at a Senate hearing Thursday.
Manchin also used a Senate Energy and Natural Resources Committee hearing on the moratorium to cast doubt on the impartiality of the administration’s study of the effects of LNG exports on climate change, the economy, and national security, according to a written copy of Manchin’s opening statement.
“Unfortunately, it seems the White House has already sided with climate activists determined to block any more LNG exports, and I am deeply concerned the White House will put its thumb on the scale at DOE to get the political outcome they want,” Manchin told the committee, which the West Virginia Democrat chairs.
The hearing, which featured testimony from Deputy Energy Secretary David Turk, was called by Manchin after the Biden administration announced Jan. 26 it was halting approvals of new licenses to export LNG.
The White House said part of the reason a new study is needed is because the government’s existing analysis doesn’t reflect evolving information about how much methane — the prime ingredient in natural gas — could warm the atmosphere. The study will also cover concerns about domestic natural gas price impact and global energy markets.
Charlie Riedl, executive director of the Center for LNG, a Washington-trade group that represents exporters including Cheniere Energy Inc. and Sempra, said the administration’s rationale for pausing new approvals while conducting the review was flawed.
“The administration is ignoring the facts,” Riedl plans to say, according to a copy of his opening statement. “This ‘pause’ is inconsistent with the DOE’s longstanding policy and precedent and the free-market principles that have allowed our country to remain the world’s most prosperous.
The administration’s pause has potential implications for more than a dozen proposals now awaiting review at the Energy Department, including ventures in Louisiana by Commonwealth LNG and Energy Transfer LP.
The Senate hearing comes amid a growing chorus of criticism over the Biden administration’s freeze from not only industry, but also congressional Republicans as well as some moderate Democrats.
“We just don’t agree with the president on this one issue,” Senator John Fetterman, a Pennsylvania Democrat, said in an interview earlier this week, referencing fellow Pennsylvania Democratic Senator Bob Casey, who has also voiced opposition to the export permit freeze. “Senator Casey and I believe energy security is national security and that it’s about jobs.”
Still, it’s not clear how many Democrats would support legislation that would strip the Department of Energy of their role in approving LNG export permits and instead require the Federal Energy Regulatory Commission to deem the export of gas to be consistent with the public interest. The House may vote on the measure by Texas Republican Representative August Pfluger as soon as this week . crude auction@(auctioncrude.com)
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Investors could be forgiven for believing there was no future in the oil and gas sector when listening to global politicians talk about 2030 targets of renewable energy production and emissions reduction. Clearly a world that is powered by green renewables is a desired outcome, but calling the death of oil and gas would seem premature.
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Investors could be forgiven for believing there was no future in the oil and gas sector when listening to global politicians talk about 2030 targets of renewable energy production and emissions reduction. Clearly a world that is powered by green renewables is a desired outcome, but calling the death of oil and gas would seem premature.
Josh Snyder, global investment strategist at GQG Partners, says there is no truth in the belief that if everyone drove electric vehicles (EVs), the air quality will suddenly improve. Snyder is very much for renewable energy, but believes the global discussion around the energy transition is unrealistic; he thinks the role of oil and gas in the energy transition is likely to be measured in decades, not years.
He cites Norway, where 80 per cent of new car sales are EV and more than a fifth of the country’s fleet is battery-powered, and yet total oil consumption has only fallen about 10 per cent over the past decade. While automotive petrol usage has dropped by 37 per cent in Norway in the past 10 years, demand for diesel (to power heavy transport) and jet fuel has grown.
The International Energy Agency forecasts that oil demand will continue to rise at least until 2028, at which point demand is forecast to be 5 million barrels a day higher than in 2019. Snyder says that it may be an uncomfortable truth, but oil is central to everyday life in a way that will be difficult and expensive to change without affecting living standards.
Consider these everyday items that use petroleum products in their manufacture: solar panels; plastic packaging for medical, computer components, electrical goods, cosmetics and furnishings; clothing in the form of polyester; and aspirin (petrol spy@petrolbuy.com)
Hugh Dive, chief investment officer at Atlas Funds Management, cites China’s signing of a 27-year LNG purchase agreement with Qatar starting in 2027 for 4 million tonnes a year, and an equity stake in the expansion of Qatar’s North Field LNG project. The Chinese government (the world’s second-largest economy) clearly believes gas won’t b
Hugh Dive, chief investment officer at Atlas Funds Management, cites China’s signing of a 27-year LNG purchase agreement with Qatar starting in 2027 for 4 million tonnes a year, and an equity stake in the expansion of Qatar’s North Field LNG project. The Chinese government (the world’s second-largest economy) clearly believes gas won’t be a useless molecule from 2030.
Put simply, the demand for oil remains elevated while supply is constrained due to a general underinvestment in exploration since 2014 – in particular during COVID-19 when oil prices fell, which resulted in oil companies conserving cash.
To some, hydrogen is a threat to the oil and gas sector, but Dive says it is also an opportunity, as hydrogen is difficult to transport since it is flammable and corrosive to steel. Oil and gas companies have experience in handling hydrogen as it is used to scrub sulphur and crack heavy oils into lighter blends. Oil companies have the experience and assets – such as pipelines, storage and tankers – to transport green hydrogen globally.
The environmental, social and governance focus has been positive and negative for the oil and gas sector. Snyder highlights that large banks have shrunk their lending exposures to the sector which has led to management teams being more disciplined in allocating capital. The savings from this are going to shareholders in the form of higher dividends.
Dive sees the US shale oil producers as an indicator of the marginal cost of oil, with their cost of production about $US60 a barrel. This is an important likely floor for the oil price. The oil price is about $US70 a barrel.
Dive’s top pick in the energy sector is Woodside Energy because it has the lowest production cost ($US8.50 a barrel) and the lowest gearing (7 per cent). He prefers Woodside to Santos as it has minimal exposure to Australia’s east coast market, which is subject to great political uncertainty, and he is attracted to Woodside’s 7 per cent fully franked dividend .(petrol spy@petrolbuy.com)
Snyder’s top pick is Brazilian operator Petrobras. It has some of the lowest oil breakeven costs globally and the richest reserves outside the Middle East and Russia, providing resilience through commodity cycles. Petrobras generates tremendous free cash flow (more than Chevron despite being a third of Chevron’s size) and an aggressive c
Snyder’s top pick is Brazilian operator Petrobras. It has some of the lowest oil breakeven costs globally and the richest reserves outside the Middle East and Russia, providing resilience through commodity cycles. Petrobras generates tremendous free cash flow (more than Chevron despite being a third of Chevron’s size) and an aggressive capital return policy. It trades at a 12-month forward price-to-earnings ratio of four and is expected to pay a dividend yield of about 20 per cent this year.
Oil and gas will be around for some time, and investors could miss handsome dividends by ignoring this sector.We are committed to reducing our environmental impact and promoting sustainability. We have implemented green initiatives such as reducing carbon emissions, minimizing waste, and using eco-friendly products. We believe that by being environmentally responsible, we can contribute to building a better future.((petrolbuy@petrolbuy.com)
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