RBN Energy

Tuesday, 1/31/2023

“Top-tier rock, massive scale, and ever-improving efficiency” — that’s the mantra of the largest publicly held E&Ps in the Permian, many of which have only added to their heft during the pandemic/post-pandemic era by acquiring complementary production and midstream assets from private equity funds and old-time oil-and-gas families. Yes, it’s either/or time in the U.S.’s leading oil and gas basin: Either you get bigger, high-grade the acreage you control and supercharge your free cash flow (and your stock buybacks and dividends) or you accept your fate as an also-ran or, if you’re lucky, an acquisition target. Just last week, Matador Resources announced a $1.6 billion deal to acquire Advance Energy Partners, which will boost Matador’s Delaware Basin output by 25% and give it a foothold in the Permian’s big-boy league. In today’s RBN blog, we discuss this and other recent asset acquisitions in West Texas and southeastern New Mexico and what they say about the Permian’s future.

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Daily Energy Blog

Tuesday, 01/31/2023

“Top-tier rock, massive scale, and ever-improving efficiency” — that’s the mantra of the largest publicly held E&Ps in the Permian, many of which have only added to their heft during the pandemic/post-pandemic era by acquiring complementary production and midstream assets from private equity funds and old-time oil-and-gas families. Yes, it’s either/or time in the U.S.’s leading oil and gas basin: Either you get bigger, high-grade the acreage you control and supercharge your free cash flow (and your stock buybacks and dividends) or you accept your fate as an also-ran or, if you’re lucky, an acquisition target. Just last week, Matador Resources announced a $1.6 billion deal to acquire Advance Energy Partners, which will boost Matador’s Delaware Basin output by 25% and give it a foothold in the Permian’s big-boy league. In today’s RBN blog, we discuss this and other recent asset acquisitions in West Texas and southeastern New Mexico and what they say about the Permian’s future.

Tuesday, 01/24/2023

New, stiffer rules on well siting, drilling and production undoubtedly pose potential challenges to producers. After all, these changes typically impose further limits on what E&Ps can do on the acreage they control as well as new requirements. But like death and taxes, environmental regulation is a certainty that producers need to deal with and, if they’re lucky, they can find a way to work with new rules and minimize their impact on their businesses. That seems to be what’s happening in Colorado — home to the rebounding Denver-Julesburg (DJ) Basin and other production areas — which enacted a new oil and gas permitting law a couple of years ago and subsequently developed and implemented related regulations. As we discuss in today’s RBN blog, most producers seem to have figured out how to manage the new regs.

Monday, 01/23/2023

Sixty percent of crude oil produced in the U.S. is exported, either as crude or in the form of gasoline, diesel, jet fuel or other petroleum products. Sure, a lot of crude and products are still imported, but the net import number is dwindling toward zero — and if you throw NGLs into the liquid fuels balance, the U.S. has been a net exporter since 2020. Yes, exports are now calling the shots in U.S. liquid fuel flow patterns, price differentials, infrastructure utilization and, to a great extent, the winners and losers in crude oil and product markets. It’s going to get way more intense as export economics increasingly dominate which pipelines, refineries and port facilities capture production growth from the Permian and other basins. In today’s RBN blog, we begin a series to explore this revolutionary shift in fortunes, why barrels move where they do and what it all means for U.S. producers, midstreamers, refiners, marketers, and exporters. And a warning! This is a subliminal advertorial for our upcoming xPortCon-Oil conference.

Sunday, 01/15/2023

Worried about 2023? Well, you’ve got good reason to be. This year energy markets are at the mercy of a hot war in Europe, the threat of a global recession, looming China/Taiwan hostilities, the impending onslaught of new energy transition programs from recent legislation, and all sorts of other random black swans paddling around out there. With so much uncertainty ahead, predictions this year would be just crazy talk, right? Nah. No mere market murkiness will dissuade RBN from sticking our collective necks out to peer into our crystal ball one more time. Let’s hope it’s no bad bunny.

Wednesday, 01/11/2023

You probably won’t be surprised to hear that we believe the Permian Basin is set for another year of crude oil and natural gas production growth. Everyone’s come to expect that from the Permian. What is new, though, is that the vast production area in West Texas and southeastern New Mexico has taken on some serious global significance over the past year — especially as an increasingly important energy supplier to Europe. That emerging role is likely not only to support continued production growth in the Permian but also to shape how the basin’s infrastructure is built out through the rest of the 2020s. And we also know that infrastructure development is critical to the Permian’s ongoing success — in 2023, new gas pipeline takeaway capacity is needed pronto and it may not be long before new oil-pipeline capacity from the Permian to Corpus Christi is required too. In today's RBN blog, we provide this year’s outlook for Permian natural gas and oil markets.

Wednesday, 01/04/2023

Over the past few years — and with a big boost from Permian production growth — the South Texas coast has transformed itself into a top-tier hub for hydrocarbons. Crude oil exports stand out, of course, with marine terminals in Corpus Christi/Ingleside accounting for 60% of U.S. export volumes in 2022. But Corpus also is home to the nation’s second-largest LNG export terminal (which is now being expanded), as well as a half-dozen refineries, and the broader region has the Agua Dulce natural gas hub, nine NGL fractionation plants, and four massive, NGL-consuming ethylene plants, including ExxonMobil/SABIC’s giant new steam cracker in San Patricio County. All of these assets are interconnected by a maze of crude oil, natural gas, NGL, “purity product,” and ethylene pipelines. And the region is well-positioned for additional growth as crude, gas, and NGL production in Texas continues to increase. In today’s RBN blog, we discuss our latest product: a digital, interactive map that helps makes sense of a spaghetti bowl of pipelines, plants and related assets in South Texas.

Monday, 01/02/2023

Worried about 2023? Well, you’ve got good reason to be. This year energy markets are at the mercy of a hot war in Europe, the threat of a global recession, looming China/Taiwan hostilities, the impending onslaught of new energy transition programs from recent legislation, and all sorts of other random black swans paddling around out there. With so much uncertainty ahead, predictions this year would be just crazy talk, right? Nah. No mere market murkiness will dissuade RBN from sticking our collective necks out to peer into our crystal ball one more time. Let’s hope it’s no bad bunny.

Sunday, 12/11/2022

Shipping Alberta’s fast-rising bitumen production to market through pipelines or on insulated rail cars depends on sufficient supplies of diluent, a variety of light hydrocarbons that, when blended with molasses-like bitumen, reduce the viscosity of the resulting mix. The problem is, in-region production of diluent — an economically favorable alternative to pipeline imports from the U.S. — has been growing more slowly than it was a few years ago, and increased demand for imported condensate could result in those pipelines being maxed out. In today’s RBN blog, we delve into what may be behind the slowing pace of Western Canadian diluent production and what the implications might be.

Monday, 12/05/2022

It's been almost a year since the co-owners of the massive Capline crude oil pipeline initiated southbound service between Patoka, IL, and St. James, LA, on what for a half-century had been a northbound conduit. How’s it working out? So far, so good, it seems. As expected, for the first several months the volumes of heavy Canadian crude oil flowing down the 632-mile, 40-inch-diameter pipeline to the St. James hub were modest. Since June, however, Capline has been offering a temporary incentive rate to attract more heavy oil, and starting December 1 it’s also been offering a temporary buck-a-barrel rate for light oil too. In today’s RBN blog, we discuss the latest Capline developments, the challenges associated with batching heavy and light crude on such a big pipe, and the prospects for much higher flows.

Tuesday, 11/15/2022

As U.S. E&Ps deal with a slew of shorter-term challenges such as broken supply chains, labor shortages, and infrastructure constraints, they’re also paying increasing attention to a longer-term concern: “inventory exhaustion.” There is a growing chorus of analysts asserting that oil and gas producers’ inventory of top-tier drilling locations has been significantly depleted as the nation’s major unconventional resource plays mature. Many producers have continued to rein in their capital spending and husband their current resources and several have boosted inventories through bolt-on acquisitions. Premier E&P EOG Resources has taken a different approach, emphasizing organic exploration that has led to the discovery of two new significant plays over the past two years, including the recent announcement of a new Utica Shale combo play that it describes as being “almost reminiscent” of the early Delaware Basin. In today’s RBN blog, we discuss EOG’s dramatically different approach to building inventory and dive into the details of its new Utica discovery.

Monday, 11/14/2022

Way back in 2015, the Eagle Ford Shale in South Texas was big news, duking it out with the Permian and the offshore Gulf of Mexico for the #1 spot in crude oil production and with the then-preeminent Haynesville for top honors in natural gas output. But the mid-decade crash in oil and gas prices hit the Eagle Ford harder than any other U.S. production area — in fact, production there remains below its peak seven years ago. Lately, however, M&A activity in the shale play has been surging, suggesting that the Eagle Ford may finally be on the verge of a serious, sustained comeback. In today’s RBN blog, we discuss this renewed interest in South Texas and whether this time the play’s recovery is for real.

Sunday, 11/13/2022

Infrastructure constraints in the energy sector come in all shapes and sizes, and don’t think for a second that they only involve pipelines. For many producers of crude oil, refined products and other liquids, the Mississippi River is a critically important conduit for barging commodities to market. Lately though, water levels on sections of the river have been near historic lows, reducing both the volume of liquids that each barge can carry and the number of barges the Mississippi can handle. Among other things, the low water situation has been putting a squeeze on condensate producers in the “wet” Marcellus/Utica, who depend on barges to transport a significant portion of their superlight crude oil down the Ohio and Mississippi rivers to refineries and for blending into Light Louisiana Sweet (LLS). In today’s RBN blog, we discuss the situation.

Tuesday, 11/08/2022

Despite global energy insecurities, many countries continue to push forward with efforts to incentivize an energy transition and fulfill emission-reduction targets. Canada has been no exception, with its federal government earlier this year introducing detailed climate goals for each of its major economic sectors, with particular emphasis placed on oil and gas, the country’s largest emitter. With the aim of a 42% emissions reduction for this sector by 2030 versus 2019 levels, Canada has set a target that may well be beyond reach, raising the possibility that production cutbacks later this decade will be the only alternative. In today’s RBN blog, we examine this potentially disruptive prospect.

Wednesday, 10/26/2022

Earlier this month, the price discount for Western Canadian Select (WCS) versus WTI at Cushing blew out to more than $30/bbl — 2.5x what’s typical and a signal that something was seriously out of whack. Well, it turns out that several things were — and to some degree still are — off-kilter, combining to drive down the price of Western Canada’s benchmark heavy-oil blend to its lowest levels relative to WTI in four years. The culprits? Everything from renewed pipeline constraints to a deadly refinery fire in Ohio to the aftereffects of Russia’s invasion of Ukraine, including releases from the U.S.’s Strategic Petroleum Reserve (SPR). In today’s RBN blog, we discuss the recent ups and downs in WCS pricing and the prospects for WCS-WTI differentials to return to a more normal range in the weeks to come. (Hint: This roller-coaster ride ain’t over.)

Tuesday, 10/18/2022

It would be tough to find a large U.S. E&P with a clearer, more consistent geographic focus than Diamondback Energy. Over the past four years, the Permian-centric producer has closed on four 10-figure deals — total value $13.7 billion — that together have added more than 200,000 net acres in the nation’s leading shale/tight-oil play. Just this month, Diamondback went to the Permian well yet again, this time with a $1.6 billion deal to acquire FireBird Energy, a privately held Midland Basin producer that has been on a Permian buying spree of its own. When the deal closes later this year, Diamondback’s total production in the Midland and Delaware basins will approach 400,000 barrels of oil equivalent per day (Mboe/d), or more than 100x what it was producing 10 years ago when the company had just gone public. In today’s RBN blog, we discuss the company’s latest acquisition and its rapid rise to Permian prominence.