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Why U.S. Shale Firms Aren’t Likely To Change Their Growth Plans
Posted on 6/3/22 at 7:59 am
Posted on 6/3/22 at 7:59 am
quote:
With Brent crude at $120 per barrel and WTI close behind it, the fundamentals picture of crude oil globally is not a sight of comfort. It is a sight of worry. Many relied on the U.S. shale patch to alleviate this worry by ramping up production. Yet U.S. shale is not budging. This time, the swing producer is not swinging. "The US oil and gas supply system remains very potent, but at any given price, growth will be smaller and slower," Raoul LeBlanc, S&P Global vice president for North American upstream oil and gas, told Bloomberg last week. "Without the subsidy that shale shareholders provided, consumers can expect to pay higher prices."
That's because U.S. shale drillers have placed a priority on returns to shareholders after years of burning through their cash. Rystad Energy estimated earlier this month that the industry will pocket some $180 billion in free cash flow this year at current oil prices. That will go a long way towards fixing their previously loss-heavy balance sheets, but it won't change priorities.
quote:
"The industry was built on [oil and gas production] growth expectations, and company stocks were valued on growth expectations. That all had to get broken down," he added, echoing comments made earlier this year by fellow energy executives such as Devon Energy's Rick Muncrief.
"In the back of everyone's minds is, 'When is it going to be [production] growth??.?.?.?We have investors saying 'My gosh, if not now, when?' But for everyone saying that there's at least one other if not two others waiting to say, 'Gotcha! We knew that discipline would be shortlived.' We have learned our lesson," Muncrief told the FT in February before Russia invaded Ukraine.
Pioneer Natural Resources' Scott Sheffield said, also in February, "Whether it's $150 oil, $200 oil, or $100 oil, we're not going to change our growth plans. If the president wants us to grow, I just don't think the industry can grow anyway."
quote:
According to JP Morgan, U.S. retail gasoline prices could hit $6.20 per gallon by August. The reason: the mismatch between demand and supply. Diesel prices are already above $6 per gallon in the Northeast and are likely to continue up. The situation at the pump is so dire that the Biden administration has mentioned a ban on exports of crude oil as one of the options on their table of tools for fighting fuel price inflation.
Shale oil production is going to increase this year, that's for sure. Yet it is becoming abundantly clear that it will not increase as much as the White House or the average driver would like it to increase. The circumstances are quite unfortunate, really. The industry is still recovering from the pandemic, suffering the lingering effects of lockdown-related supply chain breakdowns that have now created shortages and pushed prices higher.
As one Permian independent put it to Bloomberg, "It's just more difficult to get some of the key products that we need, whether that's pipe or sand. If we wanted to increase activity, say from three rigs to four or five, we would certainly have to plan on that a lot further out than what you would have had to a year or two back," Travis Thompson, chief executive of FireBird Energy said.
The focus on shareholder returns is also unlikely to change anytime soon. Oil and gas might be raking in the cash because of high oil prices, but overall, it remains a pariah industry for many as the energy transition's momentum accelerates amid the struggle to regain some energy security when a sizeable chunk of the world's global oil supply is being targeted by sanctions. What this means is that U.S. shale, like OPEC, is not riding to the rescue. U.S. shale has its own priorities.
LINK
Posted on 6/3/22 at 8:00 am to ragincajun03
This administration is going to completely gut the middle class.
I'd love for the moron that downvoted this to explain their reasoning
I'd love for the moron that downvoted this to explain their reasoning
This post was edited on 6/3/22 at 8:09 am
Posted on 6/3/22 at 8:02 am to ragincajun03
quote:
The situation at the pump is so dire that the Biden administration has mentioned a ban on exports of crude oil as one of the options on their table of tools for fighting fuel price inflation.
We import more crude oil than we export. What we are exporting is finished fuels. We are exporting them because Europe shut their’s down and relied on Russia.
This administration is fricking retarded.
Posted on 6/3/22 at 8:03 am to LNCHBOX
There is no middle class in socialism
Posted on 6/3/22 at 8:05 am to ragincajun03
Why would they have growth plans? This administration is ending their industry. They need to shut the frick down. Pivot to something else.
Posted on 6/3/22 at 8:05 am to ragincajun03
The issue is two things:
1. Investors are requiring higher rates of return because they believe the government is going to kill their industry at some point in the future.
2. ESG mandates are also making it harder to attract investors. ESG and the SEC are doing the work for the Commies. Not your elected officials.
1. Investors are requiring higher rates of return because they believe the government is going to kill their industry at some point in the future.
2. ESG mandates are also making it harder to attract investors. ESG and the SEC are doing the work for the Commies. Not your elected officials.
This post was edited on 6/3/22 at 8:11 am
Posted on 6/3/22 at 8:05 am to Oilfieldbiology
quote:
We import more crude oil than we export. What we are exporting is finished fuels. We are exporting them because Europe shut their’s down and relied on Russia.
That and light crude is being exported because the refineries currently have more of that stuff than they can refine.
So yeah, a ban on exporting crude oil wouldn't do a single thing other than cause barrels of some grades to stack up.
Posted on 6/3/22 at 8:06 am to Oilfieldbiology
quote:
This administration is fricking retarded.
They are not retarded, they have an agenda.
People who think the left are retarded are retarded.
Posted on 6/3/22 at 8:07 am to LNCHBOX
quote:
This administration is going to completely gut the middle class.
That's the point. They're not this administration's voter base.
Posted on 6/3/22 at 8:08 am to ragincajun03
Biden has been such a dumbass from day 1. Now acting like these inevitable outcomes are a surprise.
Posted on 6/3/22 at 8:08 am to Meauxjeaux
And their agenda is fricking retarded because .. they are retarded
Posted on 6/3/22 at 8:11 am to lsu13lsu
quote:
Investors are requiring higher rates of return because they believe the government is going to kill their industry at some point in the future.
In 2018 I went to an internal training class on winning business for my company. The trainer explained to us how Wall Street investors shifted their demands of the oil and gas industry from market share to free cash flow. Publicly traded O&G companies were told we don’t really care how much of the market you have, we want to know how much profit you make on said market.
The executives and managers for these companies aren’t stupid, and shifted their 4-10 strategy to achieve this new business goal. Well folks, the goal is being achieved.
Posted on 6/3/22 at 8:19 am to Oilfieldbiology
I'm still waiting for these profits to really cause a ramping up of leftists demanding that the government nationalize the oil & gas industry.
If that were to ever happen, you can kiss private property rights goodbye.
You think the government is going to care if you don't want to execute an oil & gas lease on your mineral rights? You think the federal government is going to care about if your state has some sort of surface owner protection statutes to ensure the surface owner is fairly compensated for damages due to oil & gas activities on their lands?
The minute government deems it a "public necessity" to access your minerals, or access the minerals underneath your property, they will remove you from your land if they have to, and you can forget about being compensated the way private industry negotiates currently with landowners.
If that were to ever happen, you can kiss private property rights goodbye.
You think the government is going to care if you don't want to execute an oil & gas lease on your mineral rights? You think the federal government is going to care about if your state has some sort of surface owner protection statutes to ensure the surface owner is fairly compensated for damages due to oil & gas activities on their lands?
The minute government deems it a "public necessity" to access your minerals, or access the minerals underneath your property, they will remove you from your land if they have to, and you can forget about being compensated the way private industry negotiates currently with landowners.
Posted on 6/3/22 at 8:31 am to ragincajun03
quote:
If that were to ever happen, you can kiss private property rights goodbye.
Posted on 6/3/22 at 8:33 am to ragincajun03
oilprice has been on a heater lately. Always been a good read but last few months its been very good.
with the refining situation the way it is now, the rest of the nation better be praying a hurricane doesn't hit anywhere from baytown to the river
quote:
According to JP Morgan, U.S. retail gasoline prices could hit $6.20 per gallon by August. The reason: the mismatch between demand and supply.
with the refining situation the way it is now, the rest of the nation better be praying a hurricane doesn't hit anywhere from baytown to the river
Posted on 6/3/22 at 8:34 am to Meauxjeaux
quote:
They need to shut the frick down. Pivot to something else.
how’s that gonna work?
Posted on 6/3/22 at 8:46 am to Dire Wolf
quote:
oilprice has been on a heater lately. Always been a good read but last few months its been very good.
Agree, and especially the author of the piece in my original post, Irina Slav. I like her articles.
Posted on 6/3/22 at 9:00 am to ragincajun03
quote:
Agree, and especially the author of the piece in my original post, Irina Slav. I like her articles.
her and David Messler are really good.
Posted on 6/3/22 at 9:02 am to Oilfieldbiology
quote:
We are exporting them because Europe shut their’s down and relied on Russia.
Why don't we just let Europe learn the consequence of green energy?
Posted on 6/3/22 at 9:03 am to ragincajun03
quote:
leftists demanding that the government nationalize the oil & gas industry.
Socialism has always been the goal of the left, anything to reach it.
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