Editor OilPrice.com
Mon, January 23, 2023
At last week’s World Economic Forum gathering in Davos, several speakers had harsh words for the oil and gas industry, including UN head Antonio Guterres and the IEA’s chief Fatih Birol. Their message was clear: we need to stop producing oil and gas to solve the climate problem.
While this was happening, however, the world continued to need energy, and oil and gas continued to be the optimal form of energy for most of the things we need energy for. So, with demand forecast—including by the IEA—to surge this year above the growth rate of supply, new drilling is flourishing. Especially offshore.
In December last year, Oilprice reported that the stocks of offshore drilling contractors such as Transocean, Valaris, and Noble Corp were skyrocketing amid robust demand for their services, with day rates for drilling rigs surging as well.
Now, the Wall Street Journal is reporting that rates could top $500,000 per day, up from about $400,000 at the moment, with offshore drilling picking up everywhere as demand shows no signs it is about to start declining, no matter what apocalyptic visions climate speakers try to paint.
“Over the past year and a half, everyone started drilling again offshore, and they want to use the most efficient rigs and all of a sudden, bam!” Noble Corp chief executive Robert Eifler told the Wall Street Journal. “After eight years we basically have full utilization of the high-end drillship fleet.”
A roundup of the biggest deals signed in the offshore drilling industry last year reinforces the perception of a strong revival. The biggest deal was QatarEnergy’s contract with McDermott for expanding the production capacity at the North Field, which McDermott said is one of the largest single deals in its history.
Qatar was also involved in the second-largest offshore deal for 2022, with Italy’s Saipem, again for the North Field, which is understandable as the Qatari government plans to boost the country’s LNG production capacity from 77 million tons annually to 110 million tons. That means there will be a lot of work for offshore drilling contractors.
Adnoc is also boosting its production capacity with the help of Schlumberger and Halliburton, which got two contracts with the Emirati major last year worth some $4 billion. The same is true for Aramco, which has announced plans to increase its oil production capacity by 1 million barrels daily to a total of 13 million. According to Evercore, most of Saudi Arabia’s—and the UAE’s—new capacity will come from offshore developments.
Norway is also eyeing strong expansion of its oil and gas drilling, all of which takes place offshore, despite previous government pledges for a gradual reduction in oil and gas production and a shift towards renewable energy. Earlier this month, Norway’s petroleum ministry awarded 47 new exploration licenses to 25 companies.
Offshore drilling is booming in Brazil, Guyana, and Suriname as well, per the Wall Street Journal. Brazil’s Petrobras said it will boost spending between 2023 and 2027, with most of the money going into exploration and production. Guyana is enjoying the results of a string of offshore discoveries that have boosted the tiny nation’s oil exports by 164 percent in 2022, with revenues hitting $1.1 billion. Suriname is seemingly on Guyana’s path to oil riches, although it is meeting some challenges.
Analyst expectations about the offshore drilling market appear to be upbeat. Oil prices are higher than they were in 2019, oil demand is strong, and offshore drilling contractors are turning a nice profit. Deepwater drilling is particularly attractive since that’s where most of the world’s untapped oil resources are.
According to data from Westwood Global Energy Group, some 90 percent of the world’s offshore rigs were contracted to work or were already working as of last December. That’s up from about 60 percent five years earlier, the WSJ noted in its report.
This surge in demand for offshore drilling, especially in deep waters, has also revived demand for drillships that were put offline during the pandemic and the industry downturn it caused. Drillships cost about $100 million to put back online, and owners are demanding most of the money upfront.
And their clients are paying it: the WSJ notes a deal between Valaris and Equinor for a drillship that was sent to drill in the deep waters offshore Brazil. Of the total value of the deal—$327 million—$86 million was paid upfront, including for the reactivation of the vessel.
So, despite increasingly loud calls for what effectively amounts to shutting down the oil and gas industry, the real world is demanding more oil and gas, and the industry is delivering. From the shores of Brazil to the North Sea and the Persian Gulf, drilling contractors are putting up rigs to pump more oil and gas from underneath the seabed. Analysts are calling it a supercycle.
By Irina Slav for Oilprice.com
Oil and gas companies moving into Permian Basin in $100M string of deals, as region expands
Adrian Hedden, Carlsbad Current-Argus
Tue, January 24, 2023
An oil and gas producer based on the Texas side of the Permian Basin looked to capitalize on growth in the New Mexico portion of the region, looking to buy lands in the southeast corner of the state.
Permian Resources Corporation announced an agreement that will see it purchase about 4,000 leasehold acres and 3,300 royalty acres, mostly in Lea County for $98 million.
The lands were estimated to produce about 1,100 barrels of oil equivalent per day, at 73 percent oil, according to a company announcement.
The price reflected about $8,000 per leasehold acre and $7,000 per royalty acre, the release read, including operated and non-operated assets the company said it could include in future trading.
James Walter, co-chief executive officer at Permian Resources said the move was part of a broader effort by the company to manage its portfolio and shift its footprint to areas of the basin expected to bring higher production and revenue returns.
He said the deal included 45 operated locations and was expected to generate about $100 million in net cash proceeds.
The company also planned to divest in oil and gas properties on the Texas side of the basin in Reeves County, Texas, along the New Mexico border.
About 3,500 net leasehold acres were planned for sale for $60 million with about 1,800 barrels of oil equivalent per day at 44 percent oil, representing “the substantial majority,” the announcement read, of the company’s Texas assets.
Permian Resources also said it sold about 300 acres of non-operated leaseholds in Eddy County, at about $35,000 per acre and expected that deal to total about $10 million in proceeds.
“At Permian Resources, we believe our focus on portfolio management will continue to drive value for our shareholders,” Walter said in a statement.
International companies also showed interest recently in the Permian Basin, as Swiss international energy company Vitol’s U.S. upstream company VPX Energy Partners announced it plan to acquire Delaware Basin Resources (DBR), and its associated extraction and water infrastructure.
The sale included 35,000 net leasehold acres, and 46,000 surface acres in Reeves and Pecos counties in Texas within the Permian’s western Delaware sub-basin, with the company reporting production of about 40,000 barrels of oil equivalent per day.
VPX CEO Gene Shepherd said the acquisition will allow the company to target the southern region of one of the most productive oil plays in the U.S.
“The opportunity to go back to work in the southern Delaware Basin, combined with the opportunity to do so with the DBR asset base and team is very exciting,” Sheperd said. “With Vitol’s unique market insights, expertise and funding capabilities, we expect this transaction will serve as the foundation for growing a highly profitable US lower 48 focused upstream business over the next decade.”
Ben Marshall, Vitol head of Americas said the deal would help position the company to take advantage of the U.S. and Permian Basin’s growing role in supply fossil fuels to the rest of the world.
“We are pleased to announce the addition of DBR and its related businesses to our US upstream portfolio,” he said. “As we have said before, we are eager to continue growing our position in the US Lower 48 as we anticipate US oil to remain an important source of supply to global energy balances.”
The region’s oil production was expected to see more growth in the next month, as the Energy Information Administration (EIA) forecast the Permian would produce about 5.65 barrels of oil a day (bpd)in February, growing by 30,000 bpd from January.
The basin was also expected to increase natural gas production next month, rising by 466 million cubic feet per day in February to a total of 21.7 billion cubic feet per day, making the region the second-largest gas-producing basin in the U.S., according to the EIA report.
Adrian Hedden can be reached at achedden@currentargus.com or @AdrianHedden on Twitter.
This article originally appeared on Carlsbad Current-Argus: Oil and gas companies moving into Permian Basin in $100M string of deals
Adrian Hedden, Carlsbad Current-Argus
Tue, January 24, 2023
An oil and gas producer based on the Texas side of the Permian Basin looked to capitalize on growth in the New Mexico portion of the region, looking to buy lands in the southeast corner of the state.
Permian Resources Corporation announced an agreement that will see it purchase about 4,000 leasehold acres and 3,300 royalty acres, mostly in Lea County for $98 million.
The lands were estimated to produce about 1,100 barrels of oil equivalent per day, at 73 percent oil, according to a company announcement.
The price reflected about $8,000 per leasehold acre and $7,000 per royalty acre, the release read, including operated and non-operated assets the company said it could include in future trading.
James Walter, co-chief executive officer at Permian Resources said the move was part of a broader effort by the company to manage its portfolio and shift its footprint to areas of the basin expected to bring higher production and revenue returns.
He said the deal included 45 operated locations and was expected to generate about $100 million in net cash proceeds.
More:Pro-oil candidates lost out in New Mexico's 2022 election, as environment took center stage
The company also planned to divest in oil and gas properties on the Texas side of the basin in Reeves County, Texas, along the New Mexico border.
About 3,500 net leasehold acres were planned for sale for $60 million with about 1,800 barrels of oil equivalent per day at 44 percent oil, representing “the substantial majority,” the announcement read, of the company’s Texas assets.
Permian Resources also said it sold about 300 acres of non-operated leaseholds in Eddy County, at about $35,000 per acre and expected that deal to total about $10 million in proceeds.
More:Oil company goes to court with Intrepid Potash over freshwater sales in Permian Basin
“At Permian Resources, we believe our focus on portfolio management will continue to drive value for our shareholders,” Walter said in a statement.
International companies also showed interest recently in the Permian Basin, as Swiss international energy company Vitol’s U.S. upstream company VPX Energy Partners announced it plan to acquire Delaware Basin Resources (DBR), and its associated extraction and water infrastructure.
The sale included 35,000 net leasehold acres, and 46,000 surface acres in Reeves and Pecos counties in Texas within the Permian’s western Delaware sub-basin, with the company reporting production of about 40,000 barrels of oil equivalent per day.
More: Eddy County oil and gas collections near $10 million despite drop in oil prices
VPX CEO Gene Shepherd said the acquisition will allow the company to target the southern region of one of the most productive oil plays in the U.S.
“The opportunity to go back to work in the southern Delaware Basin, combined with the opportunity to do so with the DBR asset base and team is very exciting,” Sheperd said. “With Vitol’s unique market insights, expertise and funding capabilities, we expect this transaction will serve as the foundation for growing a highly profitable US lower 48 focused upstream business over the next decade.”
Ben Marshall, Vitol head of Americas said the deal would help position the company to take advantage of the U.S. and Permian Basin’s growing role in supply fossil fuels to the rest of the world.
More:Federal oil and gas reforms debated by New Mexico environmental, industry groups
“We are pleased to announce the addition of DBR and its related businesses to our US upstream portfolio,” he said. “As we have said before, we are eager to continue growing our position in the US Lower 48 as we anticipate US oil to remain an important source of supply to global energy balances.”
The region’s oil production was expected to see more growth in the next month, as the Energy Information Administration (EIA) forecast the Permian would produce about 5.65 barrels of oil a day (bpd)in February, growing by 30,000 bpd from January.
The basin was also expected to increase natural gas production next month, rising by 466 million cubic feet per day in February to a total of 21.7 billion cubic feet per day, making the region the second-largest gas-producing basin in the U.S., according to the EIA report.
Adrian Hedden can be reached at achedden@currentargus.com or @AdrianHedden on Twitter.
This article originally appeared on Carlsbad Current-Argus: Oil and gas companies moving into Permian Basin in $100M string of deals
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