Crude-oil-focused production in the Bakken still hasn’t fully recovered from its pre-COVID high, partly because the western North Dakota shale play continues to face takeaway constraints, especially for natural gas and NGLs. A couple of NGL pipeline projects in the works will certainly help, but will they be enough to enable the Bakken’s increasingly consolidated E&P sector to ramp up its crude oil production? And one more thing: How will the incremental NGLs flowing south on Kinder Morgan’s soon-to-be-repurposed Double H Pipeline find their way to fractionation centers in Conway and Mont Belvieu? In today’s RBN blog, we’ll look at the Bakken’s complicated production-vs.-takeaway conundrum and the ongoing efforts to address it.
Bakken
Friday, 7/26/2024
There are two primary drivers for consuming more natural gas close to where it emerges from production wells. One is to eliminate routine gas flaring, which is wasteful and environmentally detrimental, and the other — especially true in takeaway-constrained plays like the Permian — is to add value to gas that otherwise would be sold downstream at steeply discounted prices. In today’s RBN blog, we discuss some innovative approaches to maximizing gas value by consuming it “in-basin” — and the potential for a lot more gas to be used in West Texas and southeastern New Mexico.
Monday, 7/15/2024
There’s been a frenetic scramble among oil and gas producers through the early 2020s to acquire top-tier acreage and production assets they think they will need to survive and thrive. Some of those acquisitions are still being done through smaller deals such as acreage swaps, but the expansion mode of choice for most has been big-time M&A, which in a single multibillion-dollar deal can add years to a company’s inventory life or perhaps give it a stronger foothold in a key production region or two. In today’s RBN blog, we discuss Devon Energy’s recently announced $5 billion acquisition of Grayson Mill Energy, yet another private-equity-backed E&P cashing in on the smart moves it has been making.
Friday, 6/28/2024
Mont Belvieu, TX and Conway, KS, are the two most significant U.S. hubs for NGL trading, storage and fractionation, with the much bigger Mont Belvieu hub primarily serving Gulf Coast and export demand, while the smaller Conway hub is focused on Midwest/Great Plains demand, especially for propane. The pricing dynamics between the two hubs are a key indicator of the supply/demand balance between the regions, but they don’t have the same kind of influence over the direction or magnitude of flows as price differential dynamics often do for other energy commodities. In today’s RBN blog, we will examine the gap between the price of the NGL “basket” in Mont Belvieu versus Conway and what that price spread tells us.
Thursday, 5/30/2024
Another day, another mega-deal between top-tier oil and gas producers — or so it seems. Now, it’s ConocoPhillips and Marathon Oil’s turn, and you’d be hard-pressed to find a more logical pairing among the ever-shrinking list of big E&Ps that hadn’t already found a partner during the ongoing frenzy to consolidate. In today’s RBN blog, we examine ConocoPhillips’s newly announced, $22.5 billion agreement to acquire Marathon Oil with a look at their similar histories, their complementary assets, and what will now be their joint effort to boost shareholder returns.
Friday, 5/24/2024
On the surface, the Bakken story in the mid-2020s may seem as boring as dirt. The boom times of 2009-14 and 2017-19 are ancient history. Crude oil production has been rangebound near 1.2 MMb/d — well below its peak five years ago. And that output has been getting gassier over time, creating natural gas and NGL takeaway constraints that have put a lid on oil production growth. But don’t buy into the view that the Bakken is yesterday’s news. Beneath the surface (sometimes literally), the U.S.’s second-largest crude oil production area is undergoing a major transformation that includes E&P consolidation, production (and producers) going private, the drilling of 3- and (soon) 4-mile laterals, novel efforts to eliminate flaring, and even a producer-led push for CO2-based enhanced oil recovery (EOR). As we’ll discuss in today’s RBN blog, these changes and others may well breathe new life into the Bakken and significantly improve the environmental profile of the hydrocarbons produced there.
Monday, 1/08/2024
The demand for ethane by Alberta’s petrochemical industry has experienced a slow expansion in the past 20 or so years. However, that demand is likely to increase sharply by the end of the decade now that Dow Chemical has sanctioned a major expansion at its operations in Fort Saskatchewan, AB, that will more than double the site’s ethane requirements. As we discuss in today’s RBN blog, this will call for an “all-hands-on-deck” approach to increasing Alberta’s access to ethane supplies from numerous sources.
Friday, 12/29/2023
Think energy markets are getting back to normal? After all, prices have been relatively stable, production is growing at a healthy rate, and infrastructure bottlenecks are front and center again. Just like the good ol’ days, right? Absolutely not. It’s a whole new energy world out there, with unexpected twists and turns around every corner — everything from regional hostilities, renewables subsidies, disruptions at shipping pinch points, pipeline capacity shortfalls and all sorts of other quirky variables. There’s just no way to predict what is going to happen next, right? Nah. All we need to do is stick our collective RBN necks out one more time, peer into our crystal ball, and see what 2024 has in store for us.
Wednesday, 10/25/2023
Rumors about potential oil and gas mergers are always swirling, but the announcement of ExxonMobil’s record-breaking deal to acquire Pioneer Natural Resources a couple of weeks ago generated a fever pitch of speculation about potential matchups. In the past week, we’ve seen media reports of possible courtships between Devon Energy and Marathon Oil and then Chesapeake Energy and Southwestern Energy. However, it was Chevron that shocked the oil patch by swiping right on former integrated oil company Hess Corp., opting for a $60 billion acquisition of an E&P with no Permian Basin exposure. In today’s RBN blog, we analyze the drivers and implications of what is now the second-largest U.S. upstream transaction ever.
Thursday, 10/05/2023
Even now, three-plus years after the start of the oil and gas industry’s biggest consolidation in a quarter century, hardly a month goes by without another major M&A announcement. Just this week, Civitas Resources said it will acquire acreage and production in the Permian from Vencer Energy for $2.1 billion. The primary drivers of these deals — many of which are valued in the billions of dollars — are clear. Among other things, E&Ps are seeking scale and the economies of scale that come with it. They also have come to believe that it makes more sense to grow production through M&A than through aggressive capital spending. And, for some producers not yet involved in the all-important Permian, acquiring even a smaller E&P there provides a foothold to build on. In today’s RBN blog, we discuss highlights from our newly released Drill Down report on the past 12 months of upstream M&A activity in the U.S. oil patch.
Thursday, 8/17/2023
Over the past four years, Energy Transfer (ET) has completed several major acquisitions, all aimed at giving the company the additional size and reach it will need to compete in an increasingly consolidated midstream sector. On Wednesday, ET announced one of its biggest purchases yet: a $7.1 billion deal to acquire Crestwood Equity Partners, which has extensive gathering and processing assets in the Permian, Powder River and Williston basins, as well as NGL terminal and storage facilities east of the Mississippi. In today’s RBN blog, we look at how the addition of Crestwood’s holdings will extend ET’s value chain and complement its fractionation assets at Mont Belvieu and its export capabilities at both its Nederland and Marcus Hook terminals.
Wednesday, 6/28/2023
With ever-increasing volumes of Permian crude oil being exported and the recent inclusion of WTI Midland in the assessment of Dated Brent prices, the issue of iron content — especially in some Permian-sourced crude — is coming to the fore. This has become such a point of emphasis for exported light sweet crude because many less complex foreign refineries do not have the ability to manage high iron content adequately. Iron content that exceeds desirable levels could have far-reaching repercussions, from sellers facing financial penalties for not meeting the quality specifications to marine terminals being excluded from the Brent assessment if they miss the mark. It’s a complicated issue, with split views on what causes the iron content in a relatively small subset of Permian oil to be concerningly high — and how best to address the matter. In today’s RBN blog, we look at iron content in crude oil, why it matters to refiners, how it affects prices, and what steps the industry is taking to deal with it.
Tuesday, 4/11/2023
It would be an understatement to say we’re sensing a trend here. Over the past couple of years, there’s been an absolute frenzy of producer M&A activity in the Permian, much of it involving big E&Ps getting bigger and private equity cashing in on assets they’ve been developing since the 2010s. The latest multibillion-dollar deal involves Ovintiv, whose recently announced plan to acquire the Midland Basin assets of three EnCap Investments-backed producers will nearly double Ovintiv’s oil and condensate output in West Texas, lower its per-barrel production costs, and add more than 1,000 well locations to its inventory. Oh, and via a separate but related deal, Ovintiv will exit the Bakken by selling its assets there to another EnCap affiliate. In today’s RBN blog, we look at what the M&A artist formerly known as Encana is up to.
Ebb and Flow - Commodity Pricing Currents Trigger Significant Regional Shifts in 2023 E&P Investment
Wednesday, 4/05/2023
The pandemic-induced shackles on U.S. E&P capital spending were shattered by rising commodity prices in 2022, and total investment for the 42 producers we follow rose a dramatic 54% over 2021. But E&Ps haven’t abandoned the fiscal discipline or focus on cash-flow generation that allowed them to survive COVID-related demand destruction and resuscitate investor interest. Their 2023 capital budgets generally sustain the pace of Q4 2022 spending and reflect a modest 17% increase over full-year 2022. However, commodity price trends and changes in investment opportunities have resulted in significant shifts in the allocation of the total investment among the major U.S. unconventional plays. In today’s RBN blog, we’ll analyze 2023 capital spending, region by region.
Monday, 8/15/2022
Buoyed by still-elevated crude oil, natural gas and NGL prices — and discipline on capital spending and production growth — U.S. E&Ps have been generating unprecedented cash flow and using much of that bounty to reduce debt, increase dividends and buy back shares. A number of producers have also been investing some of that cash to expand their holdings, mostly to complement their existing acreage in the Permian and other plays and thereby allow for increased efficiency and, in many cases, longer laterals. Few have been doing more in this regard lately than Devon Energy, the Oklahoma City-based E&P, which completed a big bolt-on acquisition in the Bakken in late July and just followed that up with a plan for an even bigger buy in the Eagle Ford. In today’s RBN blog, we look at the company’s strategy.