RBN Energy

The transition of U.S. E&Ps to capital discipline has led to historic shareholder returns and won back legions of investors who had virtually abandoned the industry until a few years ago. But while it might be tempting to conclude producers must finally have their financial houses in good order, a lot of us have witnessed a few boom-and-bust cycles in our time and remain hypervigilant for any signs of financial instability, especially considering that commodity prices could weaken at any time. In today’s RBN blog, we analyze the impact of lower price realizations and capital allocation decisions on the balance sheets of the major U.S. independent oil and gas producers. 

Analyst Insights

Analyst Insights are unique perspectives provided by RBN analysts about energy markets developments. The Insights may cover a wide range of information, such as industry trends, fundamentals, competitive landscape, or other market rumblings. These Insights are designed to be bite-size but punchy analysis so that readers can stay abreast of the most important market changes.

By Jeremy Meier - Friday, 5/17/2024 (3:15 pm)

US oil and gas rig count was up slightly to 604 for the week ending May 16, up one vs. a week ago according to Baker Hughes. Rigs were added in the Anadarko (+2), Haynesville (+1) and Gulf of Mexico (+1), while the Permian (-2) and Eagle Ford (-1) both lost rigs.

By Kristen Hays - Friday, 5/17/2024 (11:45 am)

Navigator Holdings is planning a clean ammonia export project along the U.S. Gulf Coast. Executives said this week that Navigator has committed $2.5 million in initial funding with more to come when the company moves toward a final investment decision (FID) and construction.

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TradeView Report TradeView Crude Oil Price Analytics And Differentials - May 17, 2024 11 hours 48 min ago
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Daily Energy Blog

Permian production may have plateaued over the past few months — the shale play’s crude oil output has bounced between 6 MMb/d and 6.3 MMb/d for almost a year now, and natural gas production has hovered around 18 Bcf/d for about as long. But producer-backed plans to continue adding gas processing capacity in the Permian’s Delaware and Midland basins strongly suggest that E&Ps in West Texas and southeastern New Mexico see a lot more production growth “up around the bend.” As we discuss in today’s RBN blog, midstream companies haven’t tapped the brakes on their plans for new gas processing capacity in the Permian — in fact, they’ve been keeping the pedal to the metal. 

The growing number of energy-intensive data centers coming online across the U.S. is spurring utilities to ramp up their plans for adding new sources of power generation — including a slew of gas-fired plants — and also complicating their efforts to rely more on renewable resources and decarbonize the power grid. The push to quickly develop new energy infrastructure is also running into well-documented issues with permitting such projects. In today’s RBN blog, we discuss the proliferation of massive data centers — many of them catering to the surge in interest in artificial intelligence (AI) — and what that means for utilities and power-related demand for natural gas. 

LNG Canada, under construction for nearly six years on Canada’s West Coast, is rapidly approaching the time when first gas will be entering the plant for testing and calibration of equipment, marking an important transformation for the Western Canadian natural gas market. This will kick off what will likely be about a yearlong testing process before officially entering commercial service in mid-2025. In today’s RBN blog, we consider daily gas flow data from the startup of similar-sized LNG plants on the U.S. Gulf Coast and develop a conjectural timeline for LNG Canada to help assess how much gas will flow to the site — and how soon — and when LNG exports might begin. 

China regained its place as the world’s largest LNG importer in 2023, a title it lost in 2022 due to COVID-related shutdowns. Given that China only started importing LNG in 2006, the country’s demand growth — imports last year totaled 71.3 million metric tons (~9.5 Bcf/d), just under 18% of globally traded demand — can only be described as spectacular. But this unprecedented growth story is undergoing fundamental changes which are likely to result in major impacts to LNG commerce not only in China but in the Far East and possibly beyond. In today’s RBN blog, we look at some of these changes and ask how the Big Three national oil companies (NOCs) — CNOOC, PetroChina and Sinopec — could change their business models as smaller provincial gas utility buyers pursue their own LNG imports. 

Moss Lake Partners has announced plans to build a massive 42-inch pipeline known as the DeLa Express to take up to 2 Bcf/d of wet gas 690 miles from the Permian across the Texas state line into Louisiana. It’s an audacious plan, and there’s little doubt that a new natural gas pipeline from the Permian to the Gulf Coast is needed to facilitate continued production growth but the proposal faces serious challenges. In today’s RBN blog, we discuss how investors, producers and potential shippers might approach this newcomer and gauge whether it’s a project that could go the distance or become just another pipe dream. 

The U.S. may be in a monthslong pause in approving new LNG exports but that doesn’t change the fact that U.S. LNG export capacity will nearly double over the next four years, that most of the new liquefaction plants are being built along the Texas coast, and that their primary source of natural gas will be the Permian Basin. That helps to explain why three big midstream players — WhiteWater/I Squared, MPLX and Enbridge — recently formed a joint venture (JV) to develop, build, own and operate gas pipeline and storage assets that link the Permian to existing and planned LNG export terminals. In today’s RBN blog, we examine the new JV and discuss the ongoing development of midstream networks for crude oil, natural gas and NGLs. 

LNG commerce is composed of two primary models. One is the traditional point-to-point model, on which the industry was founded and still accounts for more than 60% of LNG trade. More recently, the portfolio model has emerged, pursued by upstream oil and gas majors, that would allow them to monetize their gas reserves by converting them to LNG and shipping the product worldwide in vessels under their control — an attractive strategy that also would allow them to increase their exposure in the LNG market to take advantage of international arbitrage opportunities. As such, they are always long in LNG and in the ships required to move it. However, the portfolio model is being infiltrated by a buyer community looking to become short-side portfolio players and increasingly committing to long-term offtake agreements or FOB sales, then shipping LNG not only to meet their domestic market needs but to take advantage of regional pricing differentials. In today’s RBN blog, we look at the rise of the short-side portfolio player model and ask who might prevail in a potential clash of titans over market share and dominance. 

Natural gas prices at the Waha Hub in West Texas have been below zero for going on two weeks — that’s outright negative cash prices, not basis, which means Permian producers are literally paying to have their gas taken away. Ample supply along with weak demand have prompted an early start to the injection season this year and are putting downward pressure on U.S. gas prices more broadly. But why all the craziness now? One of the best ways to get a handle on the Permian gas-market meshugah is to examine gas pipeline flows within the basin and without, which, as it turns out, is the focus of our upcoming School of Energy Master Class. Today's RBN blog is a blatant advertorial for that event where we’ll be discussing gas-flow analysis, pipeline modeling and how they help explain why Waha gas prices have gone sub-zero. 

It’s been a devastating few weeks for the natural gas market. Sure, Shale Era abundance was supposed to keep gas prices from skyrocketing — and it generally has. But seriously? Henry Hub gas sinking below $2/MMBtu — and staying there, in the depths of the winter heating season? Prices have stabilized a little as a few E&Ps announced cutbacks in capex and gas-focused drilling, but gas-storage levels are abnormally high, coal-plant retirements have trimmed opportunities for coal-to-gas switching, and any significant gains in LNG exports aren’t going to happen until this time next year. With all that, you’ve gotta ask — as we do in today’s RBN blog — how low could natural gas prices go? 

The uncertainties around solar power are well understood — when the sun doesn’t shine as much as expected, power grids that rely heavily on that generation must turn elsewhere to meet consumer demand. And while a shortfall in solar generation can be challenging to navigate, the difference between actual and forecast levels is typically only a few percentage points and power grids are usually ready and able to make up any difference. But what happens when the sun is largely obscured by the moon for several hours across a wide swath of the country? In today’s RBN blog, we’ll discuss the impact of the October 14 partial eclipse, preview the path of the April 8 total eclipse, and outline the steps being taken to ensure that power grids are ready for it. 

Many have argued that U.S.-sourced LNG can be instrumental in combating climate change by helping countries around the world replace coal-fired generation with natural gas-fired power. While this argument carries a lot of force in the eyes of many politicians and LNG marketers, the questions of exactly how — and to what extent — LNG can replace coal need to be asked. In today’s RBN blog, we’ll look at the challenges that the expanded use of LNG faces in countries with high coal utilization and the possible means of overcoming them. 

Listen to Paul Simon’s “The Sound of Silence” and you hear the words of a teenager coming to terms with the disconnect between the world his parents promised and the real world yet to come. In the LNG market, there’s a similar generational divide. A business built on long-term contracts, rigid trade patterns, and the promise of substantial growth potential is being met with a more skeptical outlook, one in which a large amount of incremental LNG supply has been locked up but serious questions remain about LNG demand. As we discuss in today’s RBN blog, an entire generation of LNG supply is being built on the presumption of selling it for $10/MMBtu or more, but a shortfall in demand growth could leave it selling for considerably less. And if that happens … sunk-cost economics, here we come. 

There’s already so much involved in developing new LNG export capacity: lining up offtakers, securing federal approvals, sourcing natural gas, developing pipelines ... the list goes on. Now, with the increased emphasis on minimizing emissions of methane, the folks involved in LNG exports are also wary of the methane intensity (MI) of their feedgas, which depends not only on the steps that gas producers, pipeline companies and LNG exporters themselves take to mitigate methane emissions but also on where the gas comes from. But with so many new export terminals coming online, gas flows are sure to change, right? So how can you possibly assess what those flow changes will mean for the MI of gas over time? In today’s RBN blog, we discuss the role that MI may play in sourcing natural gas for LNG. 

It’s that time of year, folks! March Madness is upon us — time to reboot the office pool and fill out your brackets. And not just for the NCAA Tournament field announced Sunday night, but for the natural gas pipeline projects out of the Permian you think will make it to the Elite Eight or even the Final Four. Matterhorn Express is like the UConn of the bunch as the reigning men’s champ with a chance of repeating — it’s already under construction and slated to come online later this year — and the odds for a Gulf Coast Express expansion look mighty good too, just like record scorer Caitlin Clark and her Iowa Hawkeyes are hoping to build on last year’s run to the women’s championship game. And don’t forget Energy Transfer’s Warrior and Targa’s Apex! Their names alone suggest a fightin’ spirit and a desire to make it to the top. But as we all know from our past bets on the Big Dance, there’s no such thing as a sure thing, especially in the topsy-turvy world of midstream project development, and it’s entirely possible an unknown — the pipeline equivalent of a 16th seed — will be among those cutting down the nets. In today’s RBN blog, we discuss the need for new gas pipeline egress from the Permian and assess the pros and cons of the projects that have a bid. 

In the three years since the deadly electrical outages caused by Winter Storm Uri, the Texas Legislature, the Public Utility Commission of Texas (PUCT), and the Electric Reliability Council of Texas (ERCOT) have been working overtime to design and implement changes to ensure a more reliable Texas power grid. But it hasn’t been easy. The state’s energy-only electricity market and its outsized reliance on intermittently available wind and solar power have forced policymakers, regulators and the electric-grid operator to develop a wide range of fixes aimed at maintaining a competitive atmosphere while at the same time incentivizing market players to have power available when it’s needed most. In today’s RBN blog, we look at what they’ve been up to.