Tag: production

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.

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.

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.

Recent Air Quality and Flaring Changes

Impacts from oil and gas development on air quality is a growing issue across the United States as the sector contributes additional amounts of greenhouse gases to those naturally occurring in the atmosphere, increasing the greenhouse effect and global warming. Since climate change has a huge effect on personal livelihood, health, and future plans, it is not surprising that air quality regulations have become some of the most prevalent legislative changes in recent years. With the federal government taking a bit of a step back on these issues, several states have made significant changes to create stricter regulations on emissions, air quality, and flaring rules recently. These new requirements may impact E&P operators in several ways, while providing opportunities for other areas of the oil and gas sector.

The Slide in Supply: Why Oil Supply is Lower than You Think

When the coronavirus pandemic destroyed global crude oil demand, supply was slow to respond until dramatic actions were taken. Now, with demand picking up at a rapid rate, supply is again being outpaced by its counterpart drawing down crude oil inventories around the world. While global forecasting agencies and oil companies alike predict slow demand growth to pre-pandemic levels, the supply picture will continue to lag behind well into the foreseeable future.

The Impact of U.S. Regulatory Bottlenecks on Domestic Production

Policy changes and regulation on domestic oil and gas activities have been enacted to ensure the oil and gas industry responsibly produces hydrocarbons while protecting both individual and environmental health and safety. Unfortunately, many recent changes to national or state level policies have hampered the advancement of the industry under the guise of public and environmental health and safety without foundational justification. In order to ensure the survival of a key pillar that supports the domestic economy as a whole, the true purpose of these policies must go hand in hand with the advancement of the industry without unjust hindrance.

Oil Profitability Around the World

The cost to produce a barrel of oil varies throughout the world and impacts the determination of global benchmark prices. If only a portion of global supply is economic at current commodity prices, global demand will be what influences the price floor. Once inventories are drawn down, supply/demand economics will drive up the price of oil to ensure supply can meet demand. Be sure to check out the periodical below for an in depth analysis of the economic price to produce a barrel of oil around the world, and why global demand will be the driver for oil prices to set a $55-60/bbl floor for the foreseeable future.