Periodicals

The Rare Petro Periodical series is an ongoing deep dive into the macro-level events that have, currently are, and will continue to shape our industry, in a condensed research paper format.

Energy Market Report Card – Oasis Petroleum (OAS)

Energy Market Report Card – Oasis Petroleum (OAS)

Chevron Corporation is a publicly traded upstream and downstream integrated energy company with NYSE ticker CVX. Following the FY2020 earnings release and company 10-K, a financial ratio analysis was performed to evaluate the firm. Several performance metrics were benchmarked to competitors in the industry as well as Chevron’s prior years. Although CVX showed declines year-over-year in several of these areas, a major driver appeared to be lost revenue due to commodity prices and the results also outperformed competitors in several areas.

Rising Chinese GHG Emissions

Rising Chinese GHG Emissions

For the first time since national greenhouse gas emissions have been measured, China’s annual emissions in 2019 exceeded those of all developed countries combined. While their per-capita demand is still lower than the average of other OECD countries, China has been trending in the wrong direction in terms of emissions growth. With GHG emissions continuing to grow while the rest of the world commits to reductions, China appears to be focused on its own economic recovery over meeting global climate goals.

CVX  Market Report Card

CVX Market Report Card

How does Chevron's balance sheet stand up to its competitors, along with its past couple years of performance? Find out through this short video! https://youtu.be/waf50F0wYXA https://soundcloud.com/user-32242361/chevrons-report-card Written Periodical Here Disclaimer:...

Hedging to Hemorrhaging

Hedging to Hemorrhaging

The implementation of an effective hedging program can be a tool that helps ensure certainty of cash flow and provide longer reaction time in the event of a market price collapse. On the flip side of the coin, if prices rebound as they did in the first quarter of 2021, producers are left behind while the market surges. With United States E&P Companies projecting $7 billion in hedging losses for the quarter, it will be important to keep a close eye on which companies choose to continue to hedge early for guaranteed revenue protection and those that hold out or hold off to risk the market volatility in hopes of even more revenue.

Energy Market Report Card – Chevron Corporation (CVX)

Energy Market Report Card – Chevron Corporation (CVX)

Chevron Corporation is a publicly traded upstream and downstream integrated energy company with NYSE ticker CVX. Following the FY2020 earnings release and company 10-K, a financial ratio analysis was performed to evaluate the firm. Several performance metrics were benchmarked to competitors in the industry as well as Chevron’s prior years. Although CVX showed declines year-over-year in several of these areas, a major driver appeared to be lost revenue due to commodity prices and the results also outperformed competitors in several areas.

Biden’s Earth Day Summit

Biden’s Earth Day Summit

United States President Joe Biden hosted a two-day virtual summit of world leaders coinciding with Earth Day to address the global climate crisis. With a commitment to cut greenhouse gas emissions 50-52% by 2030 relative to 2005 levels, Biden intends to cement his leadership in the global fight against climate change and develop credibility in his plea for other countries to join the cause.

California’s Battle Over Oil

California’s Battle Over Oil

California Senate Bill 467 set out to gradually phase out oil and gas extraction processes that account for most of the state’s petroleum industry but failed to muster the five necessary votes needed to advance in the state legislature. Key points on the bill were to ban enhanced oil recovery techniques, add a 2,500-foot setback clause, and encourage CalGEM to utilize displaced oil and gas workers for the abandonment of old oil and gas sites. But, California Governor Gavin Newsom took matters into his own hands after the bill did not move to the legislature. He has since tasked state agencies to move away from fossil fuels and combat climate change by halting the issuance of hydraulic fracturing permits by 2024 and planning to phase out oil and gas extraction two decades later.

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Energy Sector Tax Credits

Energy Sector Tax Credits

President Joe Biden’s recently unveiled a tax plan to accompany his $2 trillion infrastructure proposal that takes direct aim at fossil fuel subsidies in favor of clean energy incentives. The “Made in America Tax Plan” is set to raise the corporate income tax rate from 21% to 28% and replace fossil fuel subsidies with clean energy incentives. The plan outlines several clean energy tax credits, including a 10-year extension of wind, solar, and battery tax credits, but does not specify which fossil fuel subsidies could face the chopping block.

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Post-COVID Global Oil Demand Update – Vaccinations and the Summer Travel Bug

Post-COVID Global Oil Demand Update – Vaccinations and the Summer Travel Bug

Hopes were high as the world entered a new year that 2021 was going to be the year that things went back to “normal,” but the first few months made those hopes seem like a far fetched idea. Improved economic activity and global mobility in the first quarter of 2021 was stalled by slow vaccine rollouts around the world and a stubborn third wave of lockdowns imposed throughout Europe. Luckily the second quarter has seen an explosion in global crude oil demand as vaccination campaigns have picked up the pace and travelers worldwide seem to have caught the summer travel bug. While the timeline to pre-crisis demand has been delayed, people around the world will still need plastics for their daily activities, roads and vehicles to travel from place to place, goods and services created and shipped with hydrocarbons, and other consumables derived from crude oil which will continue to boost demand through 2021.

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The Folly of Corn

The Folly of Corn

With fuel demand returning as individuals emerge from lockdowns to enjoy the fresh spring air and a new national focus on the climate crisis, the folly of corn-based ethanol gasoline must be addressed. Historically, scientists viewed biofuels as inherently carbon-neutral but new studies performed over the past decade suggest that once all the emissions associated with growing feedstock crops and manufacturing biofuel are factored in, biofuels actually increase carbon dioxide emissions rather than reduce them. While renewable fuels are important to America’s clean energy future, growing corn for fuel instead of food never has been an environmental or economic solution.

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Bringing The Law

Bringing The Law

Like many of their fossil fuel producing counterparts, the Bakken states of North and South Dakota are fighting new federal regulations from the Biden Administration threatening fossil fuel development. As President Biden attempts to lead the country towards a carbon-neutral future, leaders in the Dakota’s are rallying support in their attempt to lead the states towards sustained revenue and prosperity through the development of the area’s natural fossil fuel resources. State leaders have realized that halting new oil and gas leasing on federal lands as well as the revoked permit for the Keystone XL Pipeline project will slash investment, cut jobs, drop wages, and pummel tax revenues throughout the region. As their fight continues, they are working to evaluate the impact of the climate related executive orders and enact legislation for the state to decide how their state’s resources should be developed.

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Energy Producers Ramp Up ESG Initiatives

Energy Producers Ramp Up ESG Initiatives

As the world continues to battle climate change, energy companies have begun to release environmental, social, and corporate governance (ESG) policies and implement carbon capture, utilization, and storage (CCUS) techniques in order to lower their carbon footprint. While renewables, nuclear, and energy efficiency will all be critical tools in the armory for lasting change, the fact remains: fossil fuels are not going anywhere soon. This means the world must find effective new ways to manage emissions in order to balance increased regulatory oversight with the globe’s growing energy demand. Major oil and gas companies have taken various routes to accomplish this goal, and time will tell which of the initiatives provide best results.

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Wyoming’s Battle For Economic Survival

Wyoming’s Battle For Economic Survival

For hundreds of Wyoming workers and companies involved in oil and gas exploration and development, the ripple effect of pausing new federal leases generates an enormous amount of fear and uncertainty. The lost jobs and revenue caused by Biden’s actions inhibit Wyoming’s ability to invest in new energy projects and generate revenue from future lease sales. In the longer run, Wyoming may find itself with no choice but to increase the costs of doing business with other energy sources in order to balance their budget.

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Frozen Texas Power Grid

Frozen Texas Power Grid

A major winter weather system characterized by extreme cold spread across much of the central United States, disrupting energy systems and causing serious health and safety issues, particularly in Texas. As the storm blew in, the cold weather increased energy demand as consumers and businesses turned up the heat and stayed inside to avoid the weather. It also affected energy supply, causing intense and widespread energy market disruptions. Since this is not the first time an arctic blast has plunged Texas into darkness, it has left many people wondering: why did this happen and could energy producers and regulators have done more to prepare for this cold spell?

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Revenue or Political View: How New Mexico is Navigating the Federal Moratorium

Revenue or Political View: How New Mexico is Navigating the Federal Moratorium

President Joe Biden’s executive order halting all leasing of Federal land for oil and gas activities indefinitely will be felt nationwide but nowhere else more so than New Mexico. Since energy production is the backbone of New Mexico’s economy, much of which sits on Federal land, no bigger impact of halting Federal oil and gas leasing would be felt than in New Mexico. The state has worked to reduce greenhouse gas emissions in the sector long before Biden took office and now only time will tell the full impact of Joe Biden’s Federal lease ban and temporary drilling moratorium.

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Oklahoma’s Battle For Federal Lands

Oklahoma’s Battle For Federal Lands

Shortly after being sworn into office, President Joe Biden signed an executive order to indefinitely ban lease sales for oil and gas development on all federal lands and offshore waters. Since energy production, namely oil and gas, is the backbone of Oklahoma’s economy, Oklahoma Governor Kevin Stitt went to bat with an executive order of his own in an attempt to overrule the order. While there is no certainty Oklahoma will be able to ignore or become exempt from Biden’s executive order, they can certainly let policy makers in Washington, D.C. know the problems that the new restrictions will cause.

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Dr. Copper – An Oil Price Indicator

Dr. Copper – An Oil Price Indicator

In the modern age, copper is so essential across multiple industries that its price is widely seen as a proxy for modern development and economic vitality. Similarly, oil has long been the lifeblood of current economies by generating energy to make development possible. Since copper can be considered a barometer of global economic health, it is no surprise a correlation to oil and gas demand exists as a healthy, growing economy requires more and more energy. Unfortunately, an unexpected divergence has occurred since the beginning of the global pandemic. Luckily, there appears to be market energy building for a large commodity price upcycle in which crude closes the gap and corrects upward to its industrial cousin, copper.

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Biden’s Energy Policy – Part Three: The Clean Energy Revolution And What It Means For The Global Energy Industry

Biden’s Energy Policy – Part Three: The Clean Energy Revolution And What It Means For The Global Energy Industry

President Joe Biden is using his presidential powers to make climate change a central issue of the new administration and is taking immediate action to prove his commitment to the environment. After Biden took executive action to tackle the climate crisis at home and abroad, create jobs, and restore scientific integrity across the federal government; he finished the structure of his clean energy policy by surrounding himself with like-minded, climate-forward individuals to lead the country towards carbon neutrality. He is not only focusing on climate change at the national level, but also on a global scale. His actions have put the climate crisis at the center of United States foreign policy and national security and utilize a whole-of-government approach to accomplish his climate goals. Only time will tell how much of Biden’s energy policy will be implemented during his tenure in the White House, but the process to create a unified global front for attacking the climate crisis is well underway.

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Biden’s Energy Policy – Part Two: Laying the Groundwork for Climate Initiatives

Biden’s Energy Policy – Part Two: Laying the Groundwork for Climate Initiatives

Incoming United States President Joe Biden wasted no time putting the climate crisis back on the U.S. government agenda, proving to the world he meant business to become the “climate president”. With new executive orders detailing far-ranging plans to shift the U.S. away from fossil fuels in order to create millions of jobs in renewable energy while conserving vast swaths of public lands and water, it appears there is a new sheriff in town. But, Biden has taken office at an inflection point in U.S. energy policy, where fossil fuels still dominate transportation and electricity generation, even as they are starting to lose ground to both market forces and shifting public opinion. Now, even though the United States and the world face a profound climate crisis, Joe Biden needs to take his foot off the gas to implement small steps in order to tackle the climate crisis on a united front instead of waging war against fossil fuels.

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Biden’s Energy Policy – Part One

Biden’s Energy Policy – Part One

In his first 48 hours in office, the 46th President of the United States, Joseph Biden Jr. cranked out about 30 executive actions, 14 of which target a broad range of former President Trump’s executive mandates, focusing on themes such as climate change, clean energy, and decarbonization. The chasm between Biden’s agenda and Trump’s legacy is one of the widest in recent decades and nowhere is that contrast more pronounced than on climate change and the environment. Biden comes to power with a sense of urgency about climate change that is unmatched by any previous occupant of the White House, and he is installing people who share his views throughout the government. Biden’s plan for the future of energy in America sets the country down a new path – one aimed at transition and lasting change during his “Clean Energy Revolution – that will have reaching implications both domestically and abroad.

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2021 Hedging Forecast

2021 Hedging Forecast

The recent and dramatic decline in the price of oil illustrates the risk every oil and gas producer faces with energy commodity price volatility. Although depressed prices forced operators to shut-in production to save their bottom lines, companies with hedges were left in a much better position than those who had forgone the option to reduce the impact of unanticipated revenue declines. Without the protection of an effective hedging program, an upstream company’s cash flows are wholly subject to the volatility of the market. Luckily, with upward price projections for the coming year, institutions distributing hedges to major oil companies for a portion of anticipated production may see greater returns than recent years, most certainly greater than 2020. As the story of 2021 continues to show upward crude price projections, it will be important to keep a close eye on which companies choose to hedge early for guaranteed revenue protection and those that hold out or hold off in hopes of a better tomorrow.

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Driving Away Investors

E&P companies have driven away investors in the energy sector by not delivering returns amongst a global pursuit for decarbonization. While investor disenchantment within the United States oil industry isn’t new, it appears to have worsened with the COVID-19 market environment. From 2015 to 2016 at the start of the “lower-for-longer” downturn, the market seemed optimistic about the industry. By 2020, the double impact of the global pandemic and the Russia/Saudi price war seems to have led many investors to avoid oil stocks and as they start seeking new opportunities. Moving forward into 2021 and 2022, capital will be difficult to source until investors feel comfortable that the industry can develop resources without squandering their money again.

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Natural Gas Update – The Delayed Bull Market

At the end of October, natural gas prices soared to a 19-month high and after such impressive upward price movements, the RARE PETRO team predicted prices would sustain prices near the $3 per MMBtu range for the final months of 2020 and into 2021. With a cold winter ahead, a historic Hurricane season in full swing, depressed oil production, and soaring LNG exports; the gas futures market appeared to have plenty of price support to maintain its upward momentum into the foreseeable future. Unfortunately, the final months of 2020 were fairly lackluster for the surging gas market but luckily, the new year brings new hope for the struggling sector.

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Post-COVID Global Oil Demand Update – EOY 2020 & the Impact of Second-Wave Shutdowns

Data shows world crude oil demand in the first quarter of 2020 declined by the largest volume in history – even exceeding declines during the 2009 financial crisis. As economic recovery resumes, the demand for hydrocarbons will begin to rise and will quickly surpass pre-pandemic levels. While the timeline has been delayed as a result of a second wave of lockdowns and sustained travel restrictions, people around the world will still need plastics for their daily activities, roads and vehicles to travel from place to place, goods and services created and shipped with hydrocarbons, and other consumables derived from crude oil. While initial recovery estimates by RARE PETRO, the IEA, and EIA have changed, hydrocarbon demand will still eventually recover to pre-pandemic levels for several reasons.

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Falling Short of Demand

The year 2020 has certainly been a wild one in all aspects of both society and the global economy, but has also left the global petroleum industry in disarray. When global oil demand eventually returns to pre-pandemic levels and ultimately continues to grow, will the world have enough crude to meet demand for the upward trajectory of energy consumption? According to Rystad Energy, the answer is no. They predict the world is on track to run out of sufficient oil supplies to meet its needs through 2050, despite lower future demand due to the COVID-19 pandemic and the accelerating energy transition. There may not be enough supply in the next 30 years unless exploration speeds up significantly and exploratory capital expenditures of at least $3 trillion is put to the task.

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Does The World Really Want High Oil Prices?

With global economies opening back up with the release of a vaccine for the global pandemic, global oil demand is returning and with it, higher oil prices. Unfortunately for consumers, higher oil prices mean higher prices at the pump in addition to increased costs of many manufactured goods. Since hydrocarbons are wound deep into nearly every facet of our society, price changes are inevitably felt in many sectors of the economy. As oil prices rise, associated production costs will be passed through to consumers rather than kept at the bottom line of operators or refineries. When oil prices rise in the near term, it will be better for investors and the remaining companies in the industry at the expense of people consuming the final products produced.

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Carbon Capture and The Race Against Climate Change

As the world continues down the path of the energy transition, there arises an opportunity to deliver new, clean energy and industry jobs with the potential to sustain economies well into the future. As fossil fuels continue to sustain the global energy mix, carbon capture and storage has emerged as a frontrunner in the race against climate change. This technology can be a key, cost effective option for reducing carbon dioxide emissions from industrial applications where deep emission reductions can only be achieved through CCS. The road ahead is challenging, but if policies are set to meet standards mitigating climate change, CCS is an additional tool to make significant and necessary contributions towards achieving net-zero emissions around mid-century.

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