Tag: Kevin Crowley

E&P Consolidation

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Bloomberg: Big Oil Circles Permian Riches as Shale Stocks Collapse

Pioneer Natural Resources Co. or Concho Resources Inc., which have both struggled this year, would be a good fit for Exxon, while Shell may look at smaller players like WPX Energy Inc. and Cimarex Energy Co., according to Tudor, Pickering, Holt & Co.

The collapse in valuations has been so severe that the biggest shale producers may also come into play. EOG Resources Inc. and Occidental Petroleum Corp. could also be targeted, Ben Cook, a portfolio manager at BP Capital in Dallas, said earlier this year. Activist investor Carl Icahn is pushing for a shakeup of the board at Occidental.

 

Bloomberg Writes Again

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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?

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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

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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.

Major Spending

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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.

XOM Turns It Up

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Bloomberg: Exxon Becomes Top Permian Driller to Combat Falling Oil Output

I was asleep at the switch here.  This article is a few days old but worth reading.

It’s not hard to see why the Permian has become so important to Exxon. A series of strategic mistakes sent the oil giant’s overall production careening to a 10-year low by the middle of this year. Drilling wells in the the Permian, the world’s premier shale field, yields low-cost oil in months rather than the years required for megaprojects to begin producing crude.

Exxon isn’t alone in tapping U.S. shale after years of pursuing overseas resources. Chevron Corp. will spend the highest portion of its capital budget at home in at least a decade. The Permian now accounts for about 10 percent of Chevron’s overall production.

BP Plc this year agreed to spend $10.5 billion on BHP Billiton Ltd.’s shale assets to gain access to the Permian while Royal Dutch Shell Plc is mulling a bid for one of the basin’s largest private companies, people familiar with the matter said Monday.

Exxon’s escalation in the Permian is essentially a bet that it can drill wells so cheaply that they’ll be profitable despite crude’s tumble since early October. The company says its shale wells can make double-digit returns with oil at just $35 a barrel. On Tuesday, prices for oil produced from the Permian in Midland, Texas, dropped below $40 for the first time since August 2016. West Texas Intermediate traded at $47.25 at 2:03 p.m. in New York.

“The business we build in the Permian, we’re building for the long term,” Woods said in a Bloomberg TV interview last month. “It needs to be efficient, low cost and effective.”

Safe Haven

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Bloomberg: U.S. Shale Becomes Oil Industry’s Safe Haven as Prices Languish

The cost of shale production has fallen so much since then that it’s becoming a safe haven for major oil companies in times of volatile prices, providing rapid, reliable growth and quick returns even with crude trading for just over $50 a barrel, down by almost a third since the start of October.

ConocoPhillips said Monday it’s spending half its 2019 budget in the continental U.S., while Chevron Corp. is investing more at home than it’s done for more than a decade, with $3.6 billion going to the Permian Basin alone. Anadarko Petroleum Corp. and Hess Corp., both global operators, plan to increase spending on their American assets more than 40 percent.

Oil’s recent collapse caused “some different allocation going on within the budget,” Conoco Chief Executive Officer Ryan Lance said on Bloomberg TV. “We’re putting more toward our U.S. unconventional position,” he said, referring to shale.

Production growth “slows down at $50 but I don’t think it stops at $50, and it certainly continues if prices get back to $60,” Lance said. Skeptics thought shale “wouldn’t last long, but it’s here, it’s a huge resource and it’s going to be resilient and long lasting.”

 

Duc Duc Goose

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Bloomberg: End Is Near for ‘Frack Holiday’ While Permian Readies 2019 Boom

But with at least three major pipeline projects scheduled to come online next year, producers are now seeing the problem as a mere footnote in the basin’s ongoing story of surging production growth. Pioneer Natural Resources Co. has enough pipe space to transport all its oil out of the basin through 2020 while Diamondback Energy Inc. has substantial capacity coming on new pipelines next year, the companies said Wednesday.

This year, the number of wells drilled but waiting to be fracked has increased 50 percent to 3,722, indicating a new wave of production is set to be unleashed once the pipes are ready, spending budgets are approved and frack crews are available.

TPL reports being party to 303 DUCs.  Could it be true that they have partial royalty rights on 8% of all the wells in the Permian?

 

 

Link Roundup : 10/25/18

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Bloomberg: What the Permian Oil Boom Looks Like

It was between Carlsbad and Loving, I think, that I saw my first natural gas flare. In the Permian, oil is usually the first priority, and while natural gas production in the region is large and rising, the infrastructure to capture and convey it has lagged, so lots gets burned off in the field. Farther south, there were times when I could see flare after flare after flare all the way to the horizon, until the land got so flat that I couldn’t see the horizon anymore.

Bloomberg: The Permian Oil Boom Is Showing Signs of Overheating

When U.S. shale emerged as a threat to OPEC in 2014, the cartel tried to kill it off by flooding the market with crude, sending oil prices below $30 a barrel. The move backfired: While some of the weaker U.S. players were swamped, others cut costs aggressively and invested in new technology. The American industry emerged leaner and stronger. Today, U.S. drillers are unshakably confident. “The Permian is huge,” says Vicki Hollub, chief executive officer of Occidental Petroleum Corp., the basin’s biggest producer, in an email. It “has the capability to sustain its position with respect to the rest of the world for another decade or two at least.”

The Permian, however, is also showing signs of overheating. Sand, which is used to prop open the fractures in rock that allow the oil to flow, has become a precious commodity that fetches about $60 a ton. Truck drivers command salaries of $150,000 a year. Getting a child into day care “is like you’re scalping tickets to a Rolling Stones concert,” says Jessica McCoy, a mother in Midland, Texas, the Permian’s unofficial capital. And the region’s roads, overwhelmed by the sheer volume of trucks barreling down thoroughfares designed for farm traffic, are among the deadliest in the country.

Meanwhile, a shortage of pipelines to transport crude from the Permian’s fields to refineries and tankers on the Gulf Coast threatens to cap production growth at least until next year, when new conduits come online. The basin’s total output has been growing by an estimated 31,000 barrels a day, down from the 134,000 barrels-a-day gains logged in October of last year.

Operators will have to spend more than $300 billion in the next five years to meet the industry’s goal of boosting the Permian’s production by half, according to Arthur D. Little, a Boston-based consulting firm.