Key Federal Oil Leasing Development Flagged
(The views and opinions expressed in this article are those of the attributed sources and do not necessarily reflect the position of Rigzone or the author)
In this week’s preview of what to watch in oil and gas markets, one of Rigzone’s regular energy prognosticators highlighted that a key development relating to federal oil and leasing is set to occur very soon. Read on for specifics, as well as other items Rigzone’s market observers are flagging up this week.
Gerrad Heep, National Partner in Charge of Energy at Grant Thornton: In the coming days, the U.S. Interior Department is set to release the results of its review of the federal oil and gas leasing program. The Biden administration put a hold on drilling auctions, pending this review, so its results could be impactful.
[Editor’s note: Biden’s Executive Order 14008, which was signed on January 27, directed the Secretary of the Interior to pause new oil and gas leasing on public lands and offshore waters pending completion of a comprehensive review of federal oil and gas activities. Last week, Bloomberg reported that there was no sign the Biden administration had resumed selling oil and gas leases on federal land several weeks after a federal judge had ordered it to do so].
Tom McNulty, Houston-based Principal and Energy Practice leader with Valuescope, Inc: Further enhancing the importance of natural gas, U.S. exports of LNG have continued to grow. Through June 30, 2021, the U.S. averaged 9.6 billion cubic feet per day exported. This is up 42 percent over last year. Expect more natural gas to be produced as prices stay around $4.00 and Asia continues to ask for more and more LNG.
Mark Le Dain, Vice President of Strategy at Validere: As energy companies continue to report, there has been significant discipline in using cash for everything but drilling. We’ve seen increased buybacks, debt reductions, and dividend announcements and all of this should lead to a stronger back half of the year for the equities.
Jon Donnel, Managing Director, B. Riley Advisory Services: Air travel has rebounded to about 80 percent of 2019 levels with over two million passengers going through TSA checkpoints per day on average during July. This is a clear indication of improving demand, but supply chain issues have become more pronounced. Multiple airlines indicated they were experiencing fuel shortages at regional airports, prompting changes in routes and procedures. Supply chain inefficiencies, and particularly labor shortages, have been prevalent across industries, and are worth monitoring in the oil patch.
Service companies were forced to cut headcount dramatically during 2020 and have had varying degrees of success in matching experienced employees with increasing activity levels. All else being equal, persistence of these dislocations would support oil prices on the margin by limiting supply, but that benefit may not fall all the way to bottom line for operators or service companies as inflation and operating inefficiencies offset pricing gains.
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