Bloomberg Writes Again

Bloomberg: Texas Land Bank Draws Investor Ire After CEO Pay Rises 10-Fold

Looks like this is a terminal only article right now so I won’t do my normal block quotation routine.

It is notable that Eric Marshall at Hodges commented in the article about executive comp as being “surprising.”  That’s another large holder that isn’t pleased.

Tim Schwartz commented that he is in the corner of HK management and will go with company’s proposed plan at the meeting in May.

Activist?

Bloomberg: Hedge Fund Challenges $6 Billion Texas Land Bank in Activist Play

Not sure I’d qualify a party that 1) has a 20yr+ history with a stock and 2) controls ~25% of the float as an “activist”.  Term seems too strong.  The rest of the article linked above is a good recap of what we’ve seen play out in recent SEC filings.

Horizon Kinetics LLC, which owns a 23 percent stake, has urged the trust to modernize its structure and appoint Eric L. Oliver after the previous trustee stepped down due to ill health. Texas Pacific said March 4 that its trustees nominated Preston Young for the position.

Chief Executive Officer Tyler Glover, in an email Monday, defended the company, pointing to a more than 40 percent increase in its stock price in the last year. He called it an “impressive market performance” he credited to “active management of our expansive asset base and other steps taken to position the Trust for continued growth.”

In its filing, Horizon Kinetics wrote that it wants to make Texas Pacific a Delaware corporation “subject to modern governance principles” and better develop a division that supplies the oil fields with water, it said.

Oliver, Horizon’s choice as a trustee, is one of the shareholders who signed the cooperation agreement through his SoftVest Advisors LLC, as is financier Allan R. Tessler, who owns stock through several entities. Horizon also wants management to provide more information to shareholders such as drilling updates, water production and engineering reports.

The fund “believes that the Trust should be more transparent and frequent on its updates to holders of securities,” it said in the filing. A Horizon spokesman declined to comment beyond the filing.

XOM Shooting for $15

Bloomberg: Exxon Aims for $15-a-Barrel Costs in Giant Permian Operation

If I had a nickel for every XOM/Permian story published this week I’d have at least a buck.

Development, operating and land acquisition costs will be “in and around $15 a barrel,” he said on the sidelines of the CERAWeek Conference by IHS Markit in Houston. West Texas Intermediate futures traded at almost $59 on Thursday. “The way we are approaching it is very unique compared to most, if not really everybody out there, as far as the scale,” he said.

Exxon plans to deploy 55 rigs in the Permian this year, by far the most of any driller, as it aims to increase output in the region fivefold to about 1 million barrels a day by 2024. Its strategy also includes building its own takeaway infrastructure from separation tanks to pipelines, and it’s even joining a giant conduit project to make sure its oil doesn’t get stuck in bottlenecks that have depressed prices in West Texas.

Exxon’s Permian expansion pits it against U.S. rival Chevron Corp., which is also aiming for strong growth there. The San Ramon, California-based company announced plans last week for 900,000 barrels a day by 2023. Royal Dutch Shell Plc is “actively looking” for deals to bulk up its Permian operations, Wael Sawan, the company’s upstream director-in-waiting said this week. Even so, its production will increase about 30 percent a year.

A Tortoise Named Chevron

WSJ: Chevron, Exxon Mobil Tighten Their Grip on Fracking

In the next five years, Chevron expects to more than double its production in the Permian Basin in Texas and New Mexico to 900,000 barrels of oil and gas a day, the company announced at an investor event Tuesday. That’s a nearly 40% increase from its previous forecast.

“The shale game has become a scale game,” Chevron Chief Executive Mike Wirth said in an interview. “The race doesn’t go to the one who gets out of the starting blocks the fastest. The race goes to the one who steadily builds the strongest machine.”

Not to be outdone, Exxon on Tuesday announced plans to increase its Permian output to 1 million barrels of oil and gas a day by as early as 2024, a day before it was expected to disclose growth at its own investor meeting Wednesday. BP PLC,Royal Dutch Shell PLC and Occidental Petroleum Corp. are also focusing on the region.

Five years ago, Exxon, Chevron, BP, Shell and Occidental collectively made up about 9% of crude production from modern fracking techniques in the Permian. In October, the latest period for which relevant figures are available, they made up about 16%, according to data on ShaleProfile, an industry analytics platform.

Meanwhile, the big companies are just getting started. Exxon is now the largest operator in the Permian, with almost 50 rigs. The company estimates its Permian wells can generate a 10% rate of return at an oil price of $35 a barrel. While many companies reduced fracking activity in the fourth quarter of last year, Exxon increased it significantly to over 80 wells, more than double the total in the fourth quarter of 2017, according to Rystad Energy.

Chevron is raising its production guidance to 900,000 barrels of oil and gas a day by 2023. Last year, it predicted 650,000 barrels a day by 2023. The company is boosting production without adding to its rig count, a testament to how size can lead to greater efficiencies.

Chevron employed what could be described as a tortoise-and-hare strategy in the Permian. While smaller companies at times paid more than $40,000 an acre to gain rights to prime drilling opportunities, Chevron held on to land it already owned in the region, which decades ago was one of the world’s biggest traditional oil fields, without having to join in the buying frenzy.

Couple more similar articles:

https://www.bloomberg.com/news/articles/2019-03-06/exxon-targets-32-billion-in-annual-spending-on-drilling-plants

‘Society needs us to make these investments,’ Woods says

https://www.bloomberg.com/news/articles/2019-03-05/exxon-plans-massive-permian-growth-to-offset-international-drops

Within hours of each other on Tuesday, the two largest energy companies in America announced they want to pump almost 2 million barrels a day combined in the Permian Basin of west Texas and New Mexico, a higher amount than most OPEC nations. Chevron plans to reach 900,000 barrels a day by 2023, while Exxon aims for 1 million by 2024.

“Our position in the Permian just continues to get better and underpins our resource base,” Chevron Chief Executive Officer Mike Wirth said in New York. The value of the company’s Permian position has doubled over the past two years with reserve additions, he said.

“Water Is The New Oil”

Bloomberg: Water Is Almost as Precious as Oil in the Permian Basin

Demand for water to use in fracking in the Permian has more than doubled from 2016 levels, according to industry consultant Rystad Energy. Demand should grow to more than 2.5 billion barrels by next year, accounting for nearly half of all U.S. oilfield needs.

“It used to be you’d get a great cow ranch that had good grass for your cattle, and hunting or recreation was an add-value revenue stream and discovery of oil or gas was also this cream on the cake,” Uechtritz said. “Now, it’s wind and water.”

Net Exporter

How OPEC Is Helping U.S. Oil Reach a Tipping Point

Quick read here but a good one.  The subtext is that US production keeps exceeding expectations.

Soaring U.S. production, driven by the extraction of oil from shale, has transformed the country’s prospects. Two years ago, when the EIA first started publishing its detailed forecast for 2018, it saw U.S. output ending the year at 9.44 million barrels a day. It now sees last month’s figures at a staggering 11.8 million.

Its most recent forecast shows the growth trend slowing for much of 2019, before picking up again in 2020, following the expected start-up of new pipelines to carry oil from the Permian Basin to the Gulf coast in the second half of this year. A similar pause in growth was forecast for the summer of 2018, but it didn’t materialize. The EIA has consistently underestimated the U.S. production rate, and could do so again.

Major Spending

Chevron Touts Nimble Shale as Electric Cars Dim Big Oil’s Future

Hot and heavy but ready to shut down at a moment’s notice.  A big operator’s dream.  Portends high quarterly earnings vol at $TPL but we’ll (I’ll) take it.

Chevron Corp. will spend about half its capital budget on projects that yield quick returns over the next three years, underscoring the importance of shale as it prepares for growing uncertainty in how the world consumes energy.

The U.S. oil giant will spend about $9 billion to $10 billion a year on “short-cycle investments” through 2022, primarily focused on the Permian Basin, the world’s biggest shale oil region, the San Ramon-based company said in a presentation on its website Friday. The Permian is on course to make up about one in five barrels the super major pumps worldwide.

But now they’re investing heavily, attracted by the ability to ramp up production quickly and potentially reduce it if oil prices crash.

That’s a particularly useful trait when the future of oil and gas consumption is unclear, with electric vehicle usage growing and governments clamping down on greenhouse gas emissions.