The grey steel girders of Platform Holly rise 235ft (72m) above the waters of the Pacific Ocean, just a couple of miles off the Santa Barbara coast. Above the water, this decommissioned oil rig is dull and lifeless, but the view below the surface is very different. Beneath the waves, colourful fish, crabs, starfish and mussels congregate on the huge steel pylons, which stretch for more than 400ft (120m) to the ocean floor.

There are more than 12,000 offshore oil and gas platforms worldwide. As they drain their reservoirs of fossil fuels below the sea, they eventually become defunct when they produce too little fuel for extraction to be profitable to their operators.

The big question is what to do with these enormous structures when the fossil fuels stop flowing. With curbing climate change rising up the international agenda, and with some questioning whether we have already passed peak oil, hastened by the coronavirus pandemic, the number of defunct rigs in the ocean is set to get bigger. Removing them from the water is incredibly expensive and labour-intensive. Allowing them to rust and fall into disrepair is an environmental risk that could seriously damage marine ecosystems.

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Source: BBC

The U.S. government is forecasting oil production to rise about 3.5% next year spurred by higher crude prices and a rebound in shale drilling.

Oil output will average 11.49 million barrels a day in 2022, according to the Energy Information Administration. The agency, which left its production estimate for this year unchanged at 11.1 million, said that recent crude price increases and rig additions will help production in the Lower 48 states begin to rise in the second quarter of this year.

U.S. crude production is hovering at about 11 million barrels a day, after climbing above 13 million early last year before the pandemic crushed demand.

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Source: Bloomberg

We have seen strong moves higher in the key crude oil benchmarks-WTI, and Brent, in the last several months. This was initiated by the advent of positive news on the Covid front that the vaccines in development were extremely efficacious, promising an endpoint to the spread of the virus. This upward trend in crude was boosted by the gradual decline in U.S. shale production and inventories over the same period.

Finally, the move in early January, by OPEC+ to restrain output into mid-2021, and an extra “gift” from Saudi Arabia to remove another 1-million BOPD from the market, provided the impetus for WTI to rise firmly into the $50s. In this article, we will discuss key reasons that we think the upward trend for crude will continue this year. Why

Demand will return

In spite of the current lockdowns which inhibit demand, the trend is higher. As implementation of the vaccines increases the pool of the virus-immune population, business activity will resume creating demand for refined petroleum products. The graph below shows the EIA’s, Energy Information Agency, forecast of the trend for refined products over the next couple of years.

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Source: Oil Price

2020 has been an extraordinary year for the oil and gas industry. When Rigzone asked several informed industry-watchers what they considered the biggest oil and gas trends during such a momentous year, their responses focused largely on two areas: digitalization and consolidation. Read on for their insights.

Bob Benstead, Vice President, Strategic Planning with business cloud software firm Infor: One of the biggest trends I’ve seen in oil and gas in 2020 has been a reduction in operating costs through fewer full-time equivalents (FTEs) and the deferral of capital projects. Another is the growing desire for companies to take on digital initiatives hat require them to look outside of their traditional industry.

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Source: Rigzone

Canada’s oil landscape looks encouraging for 2021 as Whitecap Resources Inc. acquires two oil and gas companies in addition to merger mania between other energy companies, with anticipated growth through the coming year as demand for energy steadily increases. In November, Whitecap Resources announced a plan to acquire rival company TORC Oil & Gas through an all-stock transaction of $704.12m equivalent. The deal is expected to go through by 25 February 2021, providing an encouraging outlook for the first quarter of next year.

This merger would mean an estimated 100,000 bpd equivalent in production making it one of Canada’s major players. The expected value of the combined company is around $3.13 billion.

Since demand for energy has steadily increased since the slump in early 2020, so has Whitecap’s share price, going from C$2.29 ($1.80) in early July to C$4.96 ($3.89) in December, with a market cap of C$2.025 billion ($1.58bn) on the Toronto stock exchange.

Whitecap CEO Grant Fagerheim stated of the acquisition, “We are combining two strong Canadian energy producers to form a leading large-cap, light oil company geared towards generating sustainable long-term returns for shareholders while prioritizing responsible Canadian energy development’”.

The TORC acquisition comes just months after Whitecap announced its plan to buy NAL Resources for nearly $119 million in August. Manulife, an insurance and financial company, will have a 12.5 percent stake in the combined company as Whitecap issues it with 58.3 million shares. The move to acquire both companies drives forward Whitecap’s aim to increase its Alberta and Saskatchewan assets and operations.

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Source: Oil Price

If you have further questions related to any merger mania, feel free to reach out to us here.