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Permian Mega Deal | Is This The Next?

The Wall Street Journal reports that ExxonMobil, (NYSE: XOM), and Pioneer Natural Resources, (NYSE: PXD) are in preliminary discussions about a permian mega deal merger. There has been a good bit of M&A activity the last year or so in shale country. Quite a bit of which was in the Eagle Ford play in South Texas. I have discussed this activity in a couple of recent OilPrice articles, here, and here. Now it appears the liquids rich Midland, sub-basin of the massive Permian basin is drawing the acquisitive eye of companies looking to bulk up their acreage footprint. There have been some smaller deals focusing on the Midland basin over the last six months. Examples would be Diamondback Energy’s pick up of Firebird Energy last fall and early this year, a buyout of Lario Oil and Gas’ interests in the Permian.

It was clear that the late 2022 lull in M&A activity was coming to an end when news broke last week, that megadeal might be in the works for the Midland basin’s, and indeed the entire Permian basin’s largest producer, Pioneer Natural Resources

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Source: Oil Price

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Oil Up Slightly as Market Awaits Key US Inflation Data

Oil prices slightly rose on Wednesday as the market waited for U.S. inflation data later in the day. It will likely influence the Federal Reserve’s policy on future interest rate hikes.

U.S. West Texas Intermediate rose 77 cents, or 0.95% to $82.29 a barrel.

Brent crude climbed 87 cents, or 1.02% to $86.28 a barrel.

Prices had risen about 2% on Tuesday amid optimism that the U.S. Federal Reserve is getting closer to ending its cycle of interest rate hikes. It is making dollar-priced oil cheaper for buyers holding other currencies.

The U.S. consumer price index is expected to show March core inflation rose 0.4% on a monthly basis and 5.6% year-on-year, according to a Reuters poll of economists.

Philadelphia Federal Reserve Bank President Patrick Harker said on Tuesday that he feels the U.S. central bank may soon be done raising interest rates, while Minneapolis Federal Reserve Bank President Neel Kashkari said he believes inflation, now at a rate of 5% by the Fed’s preferred measure, will get to “the mid-threes” by the end of this year.

Yeap Jun Rong, a market analyst at IG said in a note to clients, however, that any “higher-than-expected inflation print could lay the ground for another 25 basis-point rate hike in June”

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Source: Oil & Gas 360

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AAA Texas: Gas prices climb following OPEC+ move to cut global crude supplies

The statewide gas price average in Texas is $3.22 for a gallon of regular unleaded fuel. This is according to the AAA Texas Weekend Gas Watch. That price is six cents more per gallon than it was on this day last week and is 56 cents less per gallon. This is in comparison to this day last year.

Of the major metropolitan areas surveyed in Texas, drivers in El Paso are paying the most on average at $3.38 per gallon while drivers in San Angelo are paying the least at $2.99 per gallon. The national average price for a gallon of regular unleaded is $3.55, which is six cents more when compared to this day last week and 61 cents less than the price per gallon at this same time last year.

A surprise move earlier this week by the Organization of the Petroleum Exporting Countries and other major oil producers, including Russia, known as OPEC+ caused a ripple effect that is leading to higher gas prices. OPEC+ announced plans to cut output to global crude oil markets by one million barrels per day through 2023. The move, which is set to begin in a month, caused crude oil prices to spike back above $80 per barrel.

Retailers’ Response

Retailers quickly responded by increasing pump prices in Texas and across the United States. In addition to the announcement by OPEC+, demand for gasoline in Texas and many parts of the U.S. are already at summertime levels as the weather warms and more people travel for leisure.

“Rising crude oil prices are sending retail gas prices back up to levels not seen since early November,” said AAA Texas spokesperson Daniel Armbruster. “Crude accounts for 55 to 60 percent of the cost of each gallon of gas. If crude oil prices remain higher, drivers could be looking at another expensive summer when it comes to filling up. However, if concerns of an economic slowdown in the U.S. persist, price increases may be limited.”

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Source: Your Basin

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It’s Not Just Willow: Oil and Gas Projects Are Back in a Big Way

The Biden administration greenlighted the enormous $8 billion Willow oil project on Alaska’s North Slope last month. Many decried the move as a betrayal of the United States pledge. A pledge to move away from fossil fuels in the fight against climate change. This is just a fraction of all the oil and gas projects in the whole world.

But an analysis of global data shows that Willow represents a small fraction of hundreds of new oil and gas extraction projects. These are projects in the past year across the world. It includes many more in the United States. And in the coming months, dozens of additional projects are on the way for approval.

ConocoPhillips’ Willow Project is a massive and decadeslong oil drilling venture on Alaska’s North Slope in the National Petroleum Reserve, which is owned by the federal government.

The area where the project will hold up to 600 million barrels of oil. That oil would take years to reach the market since the project has yet to start construction.

ConocoPhillips is a Houston-based energy company that has been exploring and drilling for oil in Alaska for years. The company is the only one that currently has oil drilling operations in Alaska’s National Petroleum Reserve, though its two operating projects are smaller than Willow would be.

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Source: The New York Times

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Oil And Gas Industry Growth Worth Is Set To $8670 Billion By 2027

The Business Research Company’s research on the oil and gas market industry growth forecasts the global oil and gas market size to grow from $6,989.6 billion in 2022 to $7,330 billion in 2023 at a compound annual growth rate (CAGR) of more than 4%. The Russia-Ukraine war disrupted the chances of global economic recovery from the COVID-19 pandemic, at least in the short term.

The war between these two countries has led to economic sanctions on multiple countries, a surge in commodity prices, and supply chain disruptions, causing inflation across goods and services and affecting many markets across the globe. The oil and gas industry revenue is expected to grow to $8,670 billion in 2027 at a CAGR of more than 4%.

Low-interest rates in the majority of developed countries will benefit the oil and gas industry during the forecast period. For example, in March 2020, the UK cut interest rates to 0.1%, the lowest level ever. In addition, the central banks of North Macedonia, South Africa, Malaysia, Kenya, Argentina, Ukraine, Sri Lanka, and Azerbaijan, as well as Turkey, cut interest rates in 2020.

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Source: GlobeNewswire

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Energy Transfer Acquires Lotus Midstream To Expand Permian Market Share

Energy Transfer LP announced on Monday that it had acquired pipeline operator Lotus Midstream. It is for a a $1.45 billion cash-and-stock deal to boost its presence in the Permian Basin.

The acquisition is expected to solidify ET as one of the top midstream companies in the region. It will also provide greater access to crucial markets for both producers and consumers.

The acquisition includes Lotus Midstream’s Centurion Pipeline assets.  It is giving Energy Transfer access to more than 1,000 miles of pipelines and related infrastructure in West Texas. This will allow Energy Transfer to increase its capacity for transporting crude oil, natural gas liquids (NGLs), and other hydrocarbons from production sites in the Permian Basin to refining centers along the Gulf Coast.

The deal also includes an agreement with Plains All American Pipeline LP (PAA) that will allow Energy Transfer access to PAA’s existing network of pipelines and storage facilities in the region. This agreement is expected to significantly expand Energy Transfer’s presence in the Permian Basin by providing additional transportation options for producers and consumers alike.

In addition, Energy Transfer has agreed to acquire a 50% interest in certain NGL processing assets owned by Lotus Midstream. These assets include fractionation plants located near Odessa, Texas, capable of processing up to 40,000 barrels per day (bpd) of NGLs into ethane, propane, butane, and other products used by petrochemical manufacturers.

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Source: yahoo!finance

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$14 Billion In Oil And Gas Deal Signed This Week, And It’s Only Monday

As the oil sector deal-making starts to show signs of recovery. Brookfield Renewable Partners will acquire Australia’s Origin Energy utility for over $10 billion. On the other hand, the Permian basin has scored oil and gas deal. It was a sweeping victory with a $1.45-billion asset sale.

On Monday, a consortium led by Brookfield said it had agreed to acquire Origin (OTCPK:OGFGF). It is a whopping $12.4-billion deal including debt.

The deal will render Origin Australia’s biggest energy retailer and integrated power provider. Separately, one of the consortium partners, MidOcean Energy, will own Origin’s gas segment. This includes upstream interests and a hefty stake in Australia Pacific LNG. Origin is eyeing a minimum of $20 billion in new investment over the next ten years. It is for the construction of up to 14 GW of renewable power generation and storage facilities in Australia. Also on Monday, in the Permian basin, Energy Transfer Lp (NYSE:ET) said it would acquire Lotus Midstream pipeline operator in a $1.45-billion deal. Energy Transfer will pay $900 million in cash and the remainder in shares.

The Permian deal saw shares of Energy Transfer gain 1% in premarket trading. But then pared those gains to a slight increase of 0.17% by 10:30 a.m. EST on Monday. Energy sector deals have lagged since the COVID pandemic. It started to show signs of recovery over the past 12 months, with investment in S&P 500-listed oil and gas companies up more than 26% in the past year, according to Forbes, outperforming the rest of the index, which lost 5% in the same time period.

The waning notion of peak oil demand has injected more life into dealmaking in the oil and gas sector, with the International Energy Agency (IEA) now projecting that consumption will not only hit a new high this year but will continue on the upward trend beyond the next decade and a half.

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Source: Oil Price

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Oil Market Fundamentals Push Oil Prices Higher

Oil prices appear to have taken a break from focusing on macro events, with increasing demand and disruptions in supply pushing oil prices higher at the start of the week. The real news for oil markets this week, however, will come from the Fed’s meeting. Let’s talk more about oil market fundamentals.

As French strikes are moving into their third week and at least four refineries are winding down operations due to blocked ports and overflowing stocks, Europe’s diesel woes are making a counter-seasonal comeback.

French refining, recording 990,000 b/d in the last reported month of January 2023, is heavily geared towards diesel, but cannot meet the country’s hefty 850,000 b/d demand for the product.

– Consequently, the spread between the prompt and second month of Europe’s diesel benchmark contract, the ICE low-sulfur diesel, rose to a premium of $35 per barrel, the highest since November 2022.

– France might be the epicenter of the diesel squeeze because the blockage of import terminals across the country is limiting diesel importers from buying products, with diesel imports falling 50% this month compared to February.

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Source: Oil Price

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Oil Rises Again for Second Day as Banking Fears Ease for Now

Oil rises again on Tuesday, extending a recovery from a 15-month low hit the previous day, as the rescue of Credit Suisse eased worries about global banking sector risks that could hit economic growth and fuel demand.

After jitters initially, on Monday the mood across financial markets has lifted in the wake of UBS’ takeover of Credit Suisse and after major central banks said they would enhance market liquidity and support the banking system.

Brent crude was up 70 cents, or 0.95%, at $74.49 per barrel. U.S. West Texas Intermediate (WTI) also gained 81 cents, or 1.20%, trading at $68.45.

“Banking jitters may have taken a breather yesterday but remain in play,” said Stephen Brennock of oil broker PVM.

“Although an immediate crisis appears to have been averted there are still fears of another sell-off.”

The next focus for investors is the decision by the U.S. Federal Reserve on Wednesday on whether and by how much to raise interest rates when it concludes its two-day meeting.

Since the banking strife began this month, markets have revised expectations for the next Fed rate hike to 25 basis points from 50 bps.

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Source: Oil & Gas 360

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US Oil and Gas Output on the Rise

Drilling activity in the US oil and gas output increased by 51.3pc on an average yearly basis in 2022, driving crude production up to 11.9mn bl/d and marking a 6.4pc increase compared with the 11.2mn bl/d averaged in 2021. The increased output was augmented by US companies completing a large backlog of drilled-but-uncompleted (Duc) wells in two major oil shale basins.

WTI started 2022 at $83.22/bl and climbed steadily throughout the year, despite rising interest rates, fears of economic recession, and restricted Russian supply caused by the war in Ukraine. Crude prices hit a 15-year high in June 2022, at $114.84/bl, before falling back down and ending the year at $76.44/bl.

In 2024, we forecast that crude oil production in the Permian will increase by 350,000 b/d, while production in the GOM declines slightly. We forecast that production in other U.S. crude oil-producing regions increases by 70,000 b/d in 2024.

We forecast the U.S. benchmark West Texas Intermediate (WTI) crude oil price will average $77 per barrel (b) in 2023 and $72/b in 2024, down from $95/b in 2022. Despite declining crude oil prices, we expect the WTI price will remain high enough to support crude oil production growth, especially in the Permian, where data from the Dallas Fed Energy Survey indicate that average breakeven prices range from $50/b to $54/b.

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Source: PE Media Network

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