Energy Journal: Rising Crude Prices Tempt Shale Oil Producers to Branch Out

What to Watch

Shale Drillers Look Beyond Texas as Prices Rise

Rising crude prices are luring shale drillers back to previously tapped regions that are profitable again in $70-a-barrel world, writes The Wall Street Journal’s Rebecca Elliott.

From Oklahoma to North Dakota, companies are increasing investment in oil fields that fell out of favor several years ago, as high prices for hydrocarbons make fracking and horizontal drilling economical in more places again.

While the Permian Basin in Texas and New Mexico remains the fastest-growing shale spot, congested pipelines and shortages of labor and materials there are crimping profits, making other fields attractive alternatives.

EOG Resources Inc., one of the shale sector’s leaders, is active in the Permian but also in Colorado, North Dakota and Oklahoma. In Wyoming, the company has built up larger lease holdings and expanded production over the past two years.

Chief Executive Bill Thomas recently touted the “diversified assets” of EOG’s portfolio when discussing the company’s blockbuster first quarter, in which production rose 15% and profit surged more than 2,000% from a year earlier.

“Last year it was all about, ‘how much can you put in the Permian?’” said Daniel Romero, an analyst with the energy consulting firm Wood Mackenzie. “But now, a few months later, it’s what else are you doing outside of the Permian?”

Meanwhile, oil prices rose to multiyear highs on Tuesday, bolstered by signsthat major oil producers are still committed to reducing supply and the rising specter of U.S. sanctions against Iran.

Brent crude, the global oil benchmark, rose 0.3% to $78.46 a barrel on London’s ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 0.5% at $71.33 a barrel.

 

Energy News

Can China’s Red Capital Really Innovate?

China may have cornered the market for solar panels but its foray into becoming a technological innovation powerhouse is in doubt given strengths and weaknesses of its own state-led system, writes Nathaniel Taplin for Heard on the Street. To date, China has proven excellent at mobilizing capital and digesting foreign designs. Its record on real innovation is much patchier.

Former UN Climate Chief Says Drilling in the Artic Is Not Viable

Christiana Figueres, the former head of the U.N. Climate Change Secretariat in 2015, gave an interview to Reuters and said “the Arctic has been rendered undrillable,” due to climate change. She urged the energy sector to develop renewable energies such as solar and wind to cut carbon emissions in the face of rising global temperatures which have reached their hottest in the last three years since the record keeping began in the 19th century.

However the vanishing Arctic ice is also proving a boon for oil firms that have plans underway to increase exploration in the more easily accessible region. The New York Times published findings that by midcentury all the ice will have disappeared from the Arctic Ocean in the summer.

“We don’t expect China to reduce its imports of crude from Iran given their long-term signed contracts and the ability to pay in yuan.”

– Abhishek Deshpande head of oil market research & strategy at ‎J.P. Morgan

 A $5 Billion Oil Trust That Has Outperformed Shale Stocks Flies Under the Radar

 Texas Pacific Land Trust, which was created out of a railroad  bankruptcy in the 1880s, owns the rights to some of the hottest Permian land assets. Its stock has outperformed shale drillers and is now worth above $5 billion, as it collects royalties from firms such as Chevron Corp., which have to pay the trust when they drill from its holdings, Bloomberg reports.

Big Number

41.5 million

Even gas prices approaching $3 a gallon can’t keep drivers home during a holiday weekend, writes the WSJ’s Alison Sider. Motorist club AAA estimates that 41.5 million Americans will travel this Memorial Day weekend, nearly 5 percent more than last year. The bulk of those travelers will be hitting the roads, despite paying the highest gasoline prices since 2014.

FutureCurve

Wednesday: The International Energy Agency releases its oil market report.

June 5-6: The London Crude Oil Summit. The speakers include Franco Magnani, CEO of Eni Trading and Shipping.

Reporter’s Notebook

The WSJ’s Christopher Alessi on China’s appetite for gas. Asian demand for LNG is on the rise largely due to an uptick in Chinese imports, according to Marin van Diessen, senior engagement manager at McKinsey. And “we don’t expect a big change this year,” Mr. van Diessen said at the start of the Flame gas conference in Amsterdam on Tuesday. He expects Asian demand for LNG to continue to grow strongly until at least 2030, as border pipeline projects in China come online. Chinese demand, Mr. van Diessen, added, will have a “profound impact for the global LNG market.”

WSJ Reporter Erin Ailworth on the effects of California’s home solar power mandate. Just how much will California’s mandate for home solar installations increase solar demand when it goes into effect in 2020? GTM Research is raising its forecast for residential installations in the state by 14% from 2020 to 2023. In that time frame, GTM says, “new residential construction will account for over 900 [megawatts] of rooftop solar.” That’s roughly 650 more megawatts than GTM was forecasting before energy regulators in California approved the mandate earlier