The energy industry touts vast U.S. oil and gas resources, but increasingly limited volumes that can be practically and profitably developed have left producers struggling to replace proven reserves. Today, we analyze the trends that are limiting the industry’s ability to ramp up future output.
The term “exploration and production company” has been widely used for only four or five decades, but the activities it represents have a history that dates back to the first oil well drilled by Edwin Drake in Titusville, PA, in 1859. Ever since that world-changing event, discovering and developing new sources of oil and gas has remained the industry’s passion, exemplified by wildcatters and, more recently, by the technological wizards of the Shale Revolution. To this day, every major public upstream company still invests in finding and developing reserves — except one. In today’s RBN blog, we examine the unique approach taken by Diversified Energy Co., which has grown substantially by ignoring the “E” part of E&P.
U.S. E&Ps’ dramatic strategic shift from prioritizing growth to focusing on cash flow generation and shareholder returns has resulted in more earnings-call talk about dividends and share buybacks and less discussion about efforts to replenish and build their proven oil and gas reserves — a critically important factor in establishing company value. The emphasis on financial results has largely masked a sizable increase in the costs E&Ps are incurring to organically replace their reserves and a significant decrease in the volumes replaced. In today’s RBN blog, we’ll analyze the weakening in reserve replacement metrics over the last two years, a trend that has led many producers to grow their reserves through M&A.
U.S. natural gas producers had a rough start to 2023, with spot prices dipping to just above $2.15/MMBtu this past spring. But optimism was abundant in midyear earnings calls on expectations that demand will eventually soar, driven largely by a near-doubling of U.S. LNG export capacity by the end of the decade. A key question, however, is whether E&Ps have built the inventories of proved reserves to support future production increases to meet that demand. In today’s RBN blog, we analyze the crucial issue of reserve replacement by the major U.S. Gas-Weighted E&Ps.
While the weather-related headlines might still scream “summer” in some places — from stifling heat to powerful hurricanes to downpour-induced mud bogs at Burning Man in the Nevada desert — we’ve actually turned the corner into meteorological fall. Oil and gas prices have moved up from their Q2 2023 lows and supply issues, particularly for oil, are the chief concerns as the heating season approaches. Long-term production by the Diversified E&P peer group, whose production streams are weighted 40%-60% for gas and oil, respectively, are a major factor in U.S. supply. In today’s RBN blog, we analyze the crucial issue of reserve replacement by the major diversified U.S. producers.
From waves of reanimated corpses feeding on unfortunate strangers trapped in a western Pennsylvania farmhouse in Night of the Living Dead to the hordes stalking the beleaguered survivors in the current smash TV hit The Walking Dead, zombies have captivated audiences. But real life zombie companies aren’t as entertaining. The dramatic and sustained plunge in hydrocarbon prices since mid-2014 has ravaged the finances of oil and gas producers to the extent that some observers have labeled the weakest of these “zombie” companies. These cannot sustain themselves on current pretax cash flow and look to be shuffling slowly toward their ultimate demise. Today we take a walk through the living dead to uncover the zombies.
