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As the shale industry matures, the biggest oil and gas producers, with their efficiencies and lower cost of capital, are moving in.

Changing of the guard in the Permian

As the shale industry matures, the biggest oil and gas producers, with their efficiencies and lower cost of capital, are moving in.

 

When extraction of oil and gas from shale deposits took off a dozen years ago. It sparked a revolution that enabled the U.S. to become a global mega-producer of fossil fuels due to technological breakthroughs in hydraulic fracturing and horizontal drilling. Now, energy analysts say, the guard is changing as shale production matures and the capital requirements to maintain production intensify.

Changing of the guard in the Permian

Shale now accounts for 10% of worldwide crude oil and 32% of global natural gas that is currently recoverable, according to the U.S. Energy Information Administration. West Texas’s Permian Basin is the second largest oil field in the world, behind Saudi Arabia’s giant Ghawar field. That makes the Permian the dynamic center of oil and gas extraction in the U.S., and the place where this latest chapter of the energy saga is being written.

Sold Out To The Oil-And-Gas Majors

In a series of major deals last fall, some of the pioneers of shale production in the region sold out to the oil-and-gas majors, greatly consolidating the U.S. industry. Highlighting the trend were Exxon Mobil’s $60 billion purchase of Pioneer Natural Resources in October and Occidental Petroleum’s $10.8 billion deal to buy CrownRock in December. Oil and gas deals totaled more than $250 billion last year, the largest figure in nearly 10 years.

These deals are big, and expensive—Oxy is paying some $5 million per location for CrownRock’s assets, which Andrew Dittmar, a director at Enverus Intelligence Research, described a “nose-bleed territory”—but are unlikely to move the needle on global oil prices more than marginally. Their real importance, analysts say, is in what they signal about shale production in the Permian over the remainder of the decade.

 

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Source: Global Finance

 

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The Permian Basin produced nearly 6M barrels of oil a day in 2023. That’s more than Iraq, the UAE or Kuwait, according to Peter McNally.

Oil-rich Permian Basin attracts buyers with resources

2023 was a big year for the U.S. oil and natural gas business. The country, Oil-rich Permian Basin, remained the world’s largest oil producer for the sixth straight year, and a wave of consolidation swept through the industry. A good chunk of that merger and acquisition activity was concentrated in the Permian Basin of West Texas and New Mexico, which has been helping the U.S. hold on to the world’s top spot.

Oil-rich Permian BasinThe Permian Basin produced nearly 6 million barrels of oil a day in 2023. That’s more than Iraq, the United Arab Emirates or Kuwait, according to Peter McNally, analyst at Third Bridge.

“This year was another new high, you know, for the Permian. And that has attracted a lot of interest,” he said.

The Permian Basin has another thing going for it. “It’s almost like real estate: location, location, location,” said Robert McNally of consulting firm Rapidan Energy.

Industry-friendly regulation in Texas is part of that. There’s also less federal regulation when it comes to exporting the oil because it doesn’t have to cross state lines.

 

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Source: Marketplace

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Last year was big for Texas oil companies as they jockeyed for access to petroleum-rich plots of the Permian Basin and branched into new territories.

How a spree of oil and gas mergers are setting the stage for 2024

The Spree of Oil and Gas Topic. Last year was big for Texas oil companies as they jockeyed for access to petroleum-rich plots of the Permian Basin and branched into new territories.

Recent megadeals struck by Chevron and Exxon put pressure on others in the oil industry to catch the consolidation wave, potentially kicking off a new round of mergers and acquisitions that could have a profound impact on Houston for years to come. Additionally, milestone acquisitions made by Exxon and Occidental Petroleum in the carbon capture space also set the stage for Houston to be ground zero for the growing industry.

Exxon to buy Pioneer for $59.5 billion

Exxon said in October that it would buy Irving-based Pioneer Natural Resources for $59.5 billion in the oil giant’s largest deal since it merged with Mobil more than two decades ago. Expected to be settle in 2024, the deal would make Spring-based Exxon the largest operator in the Permian Basin of Texas and New Mexico and bring the company’s daily production to almost 4.5 million barrels of oil equivalent a day — 50% more than the next largest supermajor.

Source: Houston Chronicle

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The US oil industry is now in a post-boom era, focusing on smart growth aligned with demand rather than rapid expansion.

US Oil Industry’s Year: 2023 may have been the best year yet

Last year, U.S. oil industry or crude oil production broke another record. This in itself is not exactly news. The shale oil industry has been breaking records for breakfast for years. But that was before the pandemic.

After the pandemic, many pronounced the shale boom dead. Of course, those same people found out in 2023 that this wasn’t strictly true. Despite a continued focus on capital discipline and the flurry of cash they returned to shareholders, U.S. drillers managed to boost their overall output to over 13.2 million barrels daily in September. And they did it with fewer rigs, at that. And with zero—if not negative—support from the federal government.

“Smart money knows to never bet against this industry,” Tim Stewart, President of the US Oil & Gas Association, recently told David Blackmon, energy industry vet and Forbes author. “We are going to be around a lot longer than any politician. Why is that? Because we produce wealth while they produce nothing.”

Indeed, if 2023 proved anything that many may have suspected, it was that an industry does not need a friendly government to flourish—at least when it comes to the oil industry, that is. Alternative energy industries, on the other hand, do need government support to survive.

 

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Source: Oil Price

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Amidst attacks on US energy production and continued global instability, the US oil & natural gas industry exceeded expectations in 2023.

US oil & gas industry continues to innovate despite headwinds in 2023

Amidst attacks on U.S. energy production and continued global instability, the U.S. oil and natural gas industry managed to not only meet but exceed expectations in 2023. The industry broke production records and supplied critical energy resources at home and abroad, all while reducing methane emissions.

Oil and Gas Industry Continues to Innovate Amid Record Production

US oil & gas industry

 

In 2023, the oil and natural gas sectors continued to innovate and reach record breaking levels of production. After becoming a net energy exporter in 2019, the United States has emerged as a behemoth in the global energy market, hitting prolific levels of oil and natural gas production and exports in the past year.

U.S. liquified natural gas (LNG) had a tremendous year with the United States becoming the top LNG exporter in the world.

 

 

These record-breaking levels of production have not come at the expense of Americans as some activists claim. To the contrary, record energy production levels have successfully been able to meet both domestic and international demand, providing crucial energy security at home and abroad, all while keeping prices stable.

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Source: Energy in Depth

 

 

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Unlock wealth with oil and gas property leasing! Dive into this comprehensive guide, exploring how it works, benefits, risks, lease types, and strategies for success. Learn from real-world success stories and get started on a lucrative investment journey in the thriving energy industry.

Leasing oil and gas properties: A lucrative investment opportunity

DISCLAIMER: We are not financial advisors. The content on this website is for educational purposes only and merely cites our own personal opinions. In order to make the best financial decision that suits your own needs, you must conduct your own research and seek the advice of a licensed financial advisor if necessary. Know that all investments involve some form of risk and there is no guarantee that you will be successful in making, saving, or investing money; nor is there any guarantee that you won’t experience any loss when investing. Always remember to make smart decisions and do your own research!

Leasing oil and gas properties is a compelling investment opportunity that has piqued the interest of savvy investors looking to diversify their portfolios and tap into the wealth-generating potential of the energy industry. This comprehensive guide explores the intricacies of leasing oil and gas properties, delving into how it works, the benefits, associated risks, types of leases, strategies for success, and the broader implications of this lucrative investment avenue. In a world constantly seeking energy resources, this investment option holds the promise of significant returns and long-term stability.

What is Oil and Gas Property Leasing?

Leasing oil and gas properties involves the contractual agreement between landowners (lessors) and energy companies (lessees) to explore, drill, and extract oil and gas resources from a specific tract of land. In exchange for granting access to their land and resources, landowners receive lease payments and royalties based on the production or sale of these resources.

How Oil and Gas Property Leasing Works

When a landowner leases their property for oil and gas exploration, the lessee typically conducts geological surveys and exploration activities to determine the potential reserves. If the results are promising, the lessee proceeds to drill and extract the resources. The landowner receives lease payments, and if oil and gas are produced, they also receive royalty payments based on the production volume.

Lease terms can vary widely and typically span several years. During this time, lessees have the right to access the property, and they bear the financial responsibility for drilling and operational costs. Landowners, on the other hand, benefit from a steady stream of income without directly participating in the exploration process.

The Advantages of Investing in Oil and Gas Leases

Leasing oil and gas properties offers numerous advantages, making it an attractive investment option:

  • Passive Income: Investors receive lease payments and royalties without being involved in the daily operations of the drilling and extraction processes.
  • Portfolio Diversification: Oil and gas leases provide diversification in an investment portfolio, helping to reduce risk by having assets in different industries.
  • Inflation Hedge: Lease payments and royalties often increase with rising energy prices, serving as an effective hedge against inflation.
  • Potential for High Returns: Successful oil and gas leases can yield substantial returns, especially in areas with abundant reserves.

Risks and Considerations

Before venturing into oil and gas property leasing, investors should be aware of the following risks and considerations:

  • Market Volatility: Oil and gas prices are prone to significant fluctuations, which can affect the value of lease payments and royalties.
  • Environmental and Regulatory Risks: Energy companies must comply with environmental regulations, and changes in laws can impact the viability of a lease.
  • Resource Uncertainty: Drilling can yield unsuccessful results, leading to dry wells and lower returns.
  • Geopolitical Factors: Global events, like supply disruptions or political instability in oil-producing regions, can impact the industry and investment.

Types of Oil and Gas Leases

Various types of oil and gas leases exist, including:

  • Mineral Leases: Cover the rights to extract specific minerals (oil, gas, coal, etc.) from the property.
  • Non-Participating Royalty Interest (NPRI) Leases: Grant the right to a share of production, but not involvement in exploration and drilling.
  • Working Interest Leases: Involve active participation in exploration and drilling processes, with a share in both costs and profits.
  • Overriding Royalty Interest (ORI) Leases: Offer a share of production revenues, typically without responsibility for operational costs.

The choice of lease type depends on an investor’s level of involvement and risk tolerance.

Investment Strategies for Oil and Gas Property Leasing

To maximize the potential of oil and gas property leasing investments, consider these strategies:

  • Due Diligence: Thoroughly research the energy company, the property, and the geological potential of the lease area before investing.
  • Diversification: Spread investments across various leases to minimize risk associated with a single property.
  • Risk Management: Stay informed about market conditions, industry trends, and regulations to make informed investment decisions.
  • Legal and Financial Advisors: Consult with experts in the field to ensure you understand the lease terms and have a solid investment strategy.

Tax Implications

Oil and gas lease income is typically subject to taxation. Consult a tax advisor to understand the tax implications in your jurisdiction and develop a tax-efficient strategy for your investments.

Real-World Success Stories

Several investors have achieved significant success in oil and gas property leasing. Notable examples include:

  • Permian Basin: Investors in this prolific oil-producing region have witnessed substantial returns through productive leases.
  • Marcellus Shale: Landowners in this gas-rich area have enjoyed lucrative royalties from successful drilling operations.

How to Get Started with Oil and Gas Property Leasing

If you’re interested in pursuing oil and gas property leasing, follow these steps:

  • Education: Learn about the energy industry, lease types, and the exploration and drilling process.
  • Research: Identify reputable energy companies and potential lease opportunities in regions with known resources.
  • Consult Professionals: Seek advice from financial advisors, lawyers, and industry experts to guide your investment decisions.
  • Negotiate Leases: Engage in negotiations with lessees to secure favorable terms and agreements.

 

Leasing oil and gas properties presents an enticing investment opportunity with the potential for substantial returns and passive income. However, it is not without risks, and investors should approach it with diligence and careful consideration. A well-researched investment strategy, diversification, and the guidance of experts can help unlock the wealth-generating potential of this lucrative investment avenue. In a world with a growing energy demand, oil and gas property leasing stands as a valuable and promising addition to a diversified investment portfolio.

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A surge of supply from non-OPEC nations like US, Brazil, and Guyana has surprised oil markets this year.

No matter how much OPEC cuts oil production, other countries will ‘fill the hole,’ trader says

Despite efforts by Saudi Arabia and Russia to prop up crude prices by cutting production, countries like Guyana, Brazil and the US have pumped more oil than ever.

That supply is now so strong that even if OPEC+ slashes more production, the spigot of oil from non-members will continue to douse the market.

“I think it’s more of a supply story going into 2024,” Rebecca Babin, senior equity trader for CIBC Private Wealth, told CNBC on Monday. “There’s a lot of fear that no matter what OPEC does, no matter how much they cut, there are producers — non-OPEC producers — that are just going to fill the hole they keep digging.”

She added, “We’re looking at 2024 and we’re concerned that the market is actually going to end up being oversupplied.”

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Source: yahoo!finance

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North Dakota Mineral Resource Director, Lynn Helms said 2023 was a good year for the state's oil and gas industry.

2023 a ‘good year’ for oil and gas in North Dakota

North Dakota Mineral Resource Director said 2023 was a good year for the state’s oil and gas industry.

“Prices were good,” said Lynn Helms. “And the companies were able to attract enough frack crews, to get into the mid to upper teens.”

Helms said the companies weren’t as successful with drilling crews.

“There are still workforce issues,” Helms said.

Helms said the year began with North Dakota producing just over a million barrels of oil per day. He said the hope was to get to the 1.3 million barrel mark by the end of the year. He said those final production numbers aren’t in yet.

As for next year?

“2024 looks to be slower growth,” Helms said. “But people are pretty optimistic.”

North Dakota Pipeline Authority Director Justin Kringstad echoed Helms’ comments.

“In 2023, what stands out is the month we got down to 4 percent flaring,” Kringstad said. “We’re continuing to see dedication by all sides — producers, mid-stream companies — to stay on top of this.”

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Source: Prarie Public NewsRoom

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Oil prices have moved higher following news that producer BP will temporarily halt shipments through the Red Sea after reported attacks on vessels delivering on this route.

Oil price rises as shipments through Red Sea are halted

Oil price rises (CL=F, BZ=F) have moved higher following news that producer BP (BP) will temporarily halt shipments through the Red Sea. After reported attacks on vessels delivering on this route. Analysts estimate 12-15% of the global oil supply moves through this passage from the Middle East. Meaning any prolonged closure could impact availability in relevant markets.

Yahoo Finance Ines Ferré breaks down the details and what these pressures will mean for oil and natural gas prices (NG=F).

And what we’ve seen today is a bump for WTI for crude oil. Let’s take a look at the chart so you can see where we’re at. With WTI and crude both jumping more than 2% during today’s session. This is after British oil giant, BP, said that it was pausing ship shipments via the Red Sea. After Houthi rebels were attacking ships. This was a precautionary pause.

Several shipping companies have been pausing their shipments, including Evergreen, that’s a global container shipping company. Now, the Red Sea, that’s connected to the Mediterranean Sea by the Suez Canal. Anywhere between 12 and 15% of oil is move via the Suez Canal, so it is a very important area that’s connecting– that is a shipping route connecting Europe to Asia.

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Source: yahoo!finance

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About $8.5 billion was deposited into two key state funds that wouldn’t exist without oil and natural gas production tax revenue.

$8.5 billion to highway, rainy day funds financed by Texas oil and gas industry

Two Key State Funds

About $8.5 billion was settle into two key state funds that wouldn’t exist without Texas oil and gas industry and production tax revenue, according to state data.

Texas Comptroller Glenn Hegar announced that his office transferred $3.06 billion into the State Highway Fund (SHF) and $5.46 billion to the Economic Stabilization Fund, otherwise known as the Rainy Day Fund.

The two funds normally receive the same amount of money from Texas oil and natural gas industry taxes. However, because another general revenue surplus was write down at the end of fiscal 2023 – after the industry paid record-breaking amounts in taxes – the Rainy Day Fund received $2.41 billion more because of constitutional requirements.

“The strong Texas economy and judicious budgeting by lawmakers netted a surplus that, for the first time in more than a decade, allows us to set aside an additional bucket of money to ensure we are able to weather future downturns,” Hegar said. “The Rainy Day and State Highway funds are tremendous assets for the taxpayers of Texas and help provide the foundation needed for the future of this great state.”

1987 Collections

The combined $6.11 billion severance tax transferred to the Rainy Day Fund and SHF are based on crude oil and natural gas production tax revenues in excess of 1987 collections, in accordance with state constitutional requirements. If either tax generates more revenue than the 1987 threshold, an amount equal to 75% of the excess is move, the comptroller said.

A Constitutional Amendment

In November 2014, voters passed a constitutional amendment requiring at least half of these severance taxes to be allocated to the Rainy Day Fund. The remainder is required to be allocated to the SHF to be used for non-toll highway construction, maintenance and right-of-way acquisition. Additionally, the Texas Constitution provides for a second transfer to the Rainy Day Fund equal to one-half of any unencumbered general revenue surplus at the end of each biennium. This year, an additional transfer of $2.41 billion of unobligated general revenue fund dollars went to the Rainy Day Fund, the comptroller said. The last time such a transfer occurred was in 2008.

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Source: The Center Square

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