April 4, 2025
Things I Learned This Week in DC. Again.
Again! This week was the Annual Meeting of NOIA, a group focused on America’s offshore energy industry, held every year in Washington DC where we hear from interesting people. NOIA represents and advances a dynamic and growing offshore energy industry, providing solutions that support communities and protect our workers, the public and our environment. I am honored to have been on the board for a while. Speakers included Doug Burgum (Secretary of the Interior), Scott Jennings (one of THE most patient men on earth), Congressman Wesley Hunt of Houston, known as “The Oil and Gas Congressman” (we gave him a plaque that says so) and Arjun Murti. Since 26-year-olds in DC actually run the country, we had a luncheon with staffers from important House and Senate members. It was VIPs on both ends, except us people in the cheap seats!
Safety First. The industry puts a great deal of emphasis on safety. You usually can't get 10 people together without getting a safety lecture before a meeting starts. In Washington DC this week, NOIA gave a couple of awards that matter. The Safety and Seas Award and the Culture of Safety Award were both given to Seacor. Proceanic earned the Safety Practice Award. These are all significant and should be significant points of pride for both companies. Congratulations on continuing excellence in our industry.
Resilient. When the meeting opened on the 2nd day, oil prices had tumbled $5 a barrel overnight. But it was very interesting. If this had been the EWTC Annual Meeting, which is next week, the mood would likely have been different. But this was offshore. Much longer planning and execution timelines. Whereas U.S. shale can be turned on and turned off in time measured in weeks, offshore is in years. Exxon set records with its find in Guyana, with discovery to first oil done in a record 4½ years. With projects already approved, funded and in motion, the mood was very much just taking it in stride. No panic, no bolting to the doors for some phone privacy. It was more “oh well, prices will be volatile.” No one was happy with it, people look first after their own self-interest, but any near-term volatility in oil prices, especially due to events that will eventually pass, doesn’t directly affect many of the players here.
Politics. From a legislative view, the focus needs to be on permit reform, we were told. It must be bipartisan because, to codify, it needs 60 votes in the Senate. At the EWTC Washington fly-in recently, that is the message we carried to everyone we met with. And it did seem to be a hot topic with all whom we met on both sides of the aisle. With everything that is going on in DC, bipartisan on anything seems remote but with the pervasiveness of commentary, we are optimistic. Congressman Hunt made some of what I thought were very poignant comments that revolved around the fact that what President Trump is doing will cause some pain and dislocation. It is to be expected. He is right and he gave several examples but also discussed the benefit on the other side. The goal of moving fast is to stay ahead of a recession. There is some opposition to Mr. Trump who want to see the economy go into recession to give them an argument against him, but that is politics.
The Arctic. Greenland is mostly ice with only 57,000 inhabitants. Importantly, 2/3 of the country is in the Arctic. Why does that matter? It will be the next major power battleground. For oil, gas and minerals, there is huge strategic value in an area that in the past had been written off as just ice. Case in point – Equinor spent $8 billion to bring the Johan Castberg field online, the northernmost oil production ever, in the Barents Sea. 12 of the 30 wells have already been drilled. Peak production for the play is expected to reach 220,000 BOPD later this year. That is almost 1,000,000 gallons every day. Look in your refrigerator at the milk carton. A half-gallon? Now imagine filling 2 million of them every day, from a facility north of the Arctic Circle. Easy business this oil business. The $8 billion cost is expected to be fully covered within two years with an estimated production life of 30 years. Norway’s Arctic region is estimated to hold 60% of the country’s undiscovered oil reserves. No wonder Greenland looks so good.
E&P Keeps Changing Hands.
Conoco is selling its Midcontinent assets, which it acquired with Marathon last year, and expects to get close to $1 billion for it.
Tokyo Gas, the 4th largest Haynesville producer, bought a 70% stake in east Texas gas assets from Chevron for $525 million.
Diamondback closed the acquisition of Double Eagle 4.
Private equity player, Waterous Energy Fund, has raised nearly $1 billion to invest in Canada's oil & gas sector.
Whitecap Resources and Veren are merging in a $14 billion deal creating the seventh-largest Canadian oil & gas producer, with a combined production of 370,000 BOPD.
Movin’ On Up! It looks like natural gas from the northeast to Louisiana is in the works. Borealis Project, by Boardwalk Pipeline, would add 2 Bcf/d of natural gas deliverability all the way from Ohio to the Gulf. There had been concern that the Biden administration wouldn’t permit any new deliverability of the natural gas from the gas-rich Utica and Marcellus, which turned out to be a good thing. If it had been built four years ago, natural gas prices would have been even lower for the past couple of years. Now, when needed, it looks like it’s moving along. Texas Gas Transmission called for a non-binding open season on the proposed capacity expansion. “Today, the Marcellus production profile is capped because it doesn't have takeaway capacity. Boardwalk is studying that issue and evaluating how we can help the Marcellus continue to grow through creating new and different takeaway options that don't exist today,” said the Boardwalk CEO.
PPHB – U.S. Energy Market Update Highlights:
Commodity Prices: WTI crude oil is currently $66.69 per barrel (down ~4.2% week-over-week) and natural gas is $4.06 per MMBtu (up ~3.3% week-over-week).
Crude Oil Production: U.S. crude oil production is currently ~13.6 MM BOPD (up ~3.7% year-over-year).
Crude Oil Inventories: U.S. crude oil inventories increased by ~6.2 million barrels week-over-week vs. an estimated decrease of ~0.2 million barrels.
Frac Spread Count: There are currently 209 frac spreads operating in the U.S. (an increase of 6 spreads week-over-week).
Onshore Drilling Rig Count: There are currently 575 drilling rigs operating in the U.S. (a decrease of 1 rig week-over-week).
It Feels Odd. The industry has struggled over the last three months. No one in energy was buying Crystal Champagne or hiring Pitbull for a birthday party. Oil in the $60s doesn’t excite many. So, we can only imagine what the expectation is for the rest of the economy! Why, you ask? Because the Energy Select Sector SPDR Fund ETF, which tracks the S&P 500 energy sector, was up 7.8% in the first quarter of 2025, creaming the S&P 500 index, which was down 4.4% for Q1. The ETF outperformed all other industry sectors, and oil prices fell throughout the quarter. The sector is considered defensive in the face of inflation and investors were searching for stability. Stability and oil & gas in the same sentence? For the first quarter of 2025, the Energy Equipment & Services industry sector was up 4.3%, while Oil, Gas & Consumable Fuels were up 8.5% in the quarter. The best-looking guy in a room of ugly guys?
Technology. TGS is deploying its Gemini enhanced frequency source, which is designed to deliver lower frequency and better signal-to-noise for ultra-long offset OBN seismic than conventional seismic sources. The single-element, omnidirectional source is designed to remove variability caused by angle or azimuth, leading to more accurate AVO/AVA analyses and faster convergence in full-waveform inversion (FWI) algorithms. Now that everyone knows exactly what I’m talking about when I congratulate TGS on acquiring ultra-long offset ocean-bottom node (OBN) data for the Amendment 4 project in the U.S. Gulf of Mexico, seismic isn’t dead. Covering more than 25 square miles, the goal is to provide a more accurate image of the subsurface. Sounds very complicated for just a better picture, but those are the small things that have big impacts. It will be done by mid-year, processed and available next year.
Getting Better, for Now. Well productivity has surprised many with improvement after several periods of decline. JP Morgan’s Shale Productivity Tracker says that productivity has increased in 5 of the 7 major oil basins on a per lateral foot basis, reversing a trend of last year where many were extrapolating to significantly lower efficiency and production. That appears to be overly pessimistic. The Powder River Basin and Eagle Ford came in first and second, at 15% and 12%, in terms of improvement, and the Delaware and Midland basins improved as well but at a lower rate. The Bakken came in last, down 5%. It is likely to trend down over time as the quality of the next reservoir is usually lower, but this recovery leads one to think the worst-case scenario is less likely. Productivity declined last year in every basin but the DJ Basin.
Bid Deal. SLB, the company formerly known as Schlumberger, has won a contract where it will “oversee the delivery of 18 ultra-deepwater wells” in Mexico for Woodside. An integrated services approach, using AI to optimize operational efficiency and the quality of the wells drilled and completed, is the goal. The breadth of work includes digital directional drilling services and hardware, logging while drilling (LWD), surface logging, cementing, drilling and completions fluids, completions and wireline services, all in water depths up to 7,500 feet. The project starts in 2026 with first oil expected in 2028. I could understand National Oilwell Varco changing their name to NOV. It makes sense. “Oilwell” in your company name can be problematic in this day and age. Why Schlumberger? Which does not have oil, or gas, in its name and has been the most recognized name in the industry, would change its name to SLB is hard to understand.
One Man’s View. “Oil is finally puking—and it should. This is the most bearish setup in years (ex-COVID): stagnant demand, +2 MM BOPD new supply, a weakening global economy, falling U.S. consumer confidence, OPEC+ disarray, Saudi output normalizing and Trump pushing for lower prices.” - Alexander Stahel
Oil Prices. Historically, Raymond James has been a shop that was very bullish on crude oil prices. Marshall Adkins is a very good friend, and he does very deep analytical work. And he has been generally more bullish than most. At our annual Xmas Soirée luncheon, Marshall is consistently the highest guess. I ran across the below commentary, none of which I disagree with particularly. If this is now considered bullish, we may have problems.
“Our oil model points to a balanced market in 2025 and 2026, but it’s also a model that allows OPEC+ to gradually bring back volumes. In short, the tightening is happening, but non-OPEC supply growth still persists, and so it’s not a “rapid” tightening — hence our view of a range-bound oil market. There’s clearly event risk that could push oil prices above or below this range, but we model a gradual tightening of the market through 2026 that can push oil prices toward the midpoint (or higher) of its recent range (~$65-85 per barrel).” – Raymond James Research.
Tariffs. Senator Ted Cruz put it well in the meeting we had with him. He said he doesn’t like tariffs, and he has let his opinion be known, but he isn’t the guy in charge. Well put. Reciprocal tariffs are hard to fault. As we have written, the average U.S. tariff is 30% of what the average runs for the rest of the world. People are getting their knickers in a twist because of the 25% tariff on cars. Did you know that the U.S. has had a 25% tariff on pickups and light-duty trucks since 1964? It’s nothing new, just the latest. Reciprocal seems very fair. Ham-handed, not so much. Or at least not as controversial. If they charge us 10%, why shouldn’t we charge them 10%? Because we are a richer country, and we need to help them out? How has that worked out? Why do I care? Oil prices dropped $5 in the 16 hours after the tariff announcement. Of course, OPEC+ announced it was going to triple up in May on putting more oil back on the market sooner with 411,000 BOPD now expected versus 133,000 BOPD before. Who knows, but it certainly isn’t fun.
Discrimination. After the hikes in insurance rates in Texas over the past couple of years, it came as no real surprise that there would be some things they wouldn’t insure. I was thinking they wouldn’t insure specific assets, but it turned out to be advocacy groups, and not only that, but because they advocate for energy. The Hartford Insurance Group, an insurance giant, terminated the policy of a Texas-based energy advocacy organization, the American Energy Institute, simply because of its support for American energy production. The insurance company explicitly stated that AEI’s advocacy for affordable, reliable energy falls outside of its business guidelines. The Texas Senate has stepped in and has started hearings about potential violations of Texas laws prohibiting corporate discrimination based on political beliefs and whether the actions violate these laws. The state helped bring BlackRock around. Maybe we can do the same here.
Valaris. The high-spec 7th generation drillship, DS-10, has “won” a 2-year contract for offshore West Africa at a rate of ~$480,000 per day, plus additional revenues when using the firm’s managed pressure drilling services. The contract starts in the middle of next year. This follows on the heels of the Noble Venturer, which got a one-year contract at $475,000 per day for offshore Africa as well. Other markets are softer, with some expecting rates to break below $400,000 per day until next year, when more tenders are expected to be released. The DS-10 negotiations started mid-last year when the market was tighter, leading to the belief of lower fixtures. There are some short-term projects off West Africa and that work could be in the $350,000 to $375,000 per day range, but longer-term contracts, going at higher rates, are expected to pick up next year, from West Africa to Brazil to other parts of South America.
Fabulous Update. We have been writing for some time about the situation in Venezuela. Biden agreed to lift sanctions and reinstate Chevron’s production licenses in an effort to bring down gasoline prices. The Maduro regime in Venezuela was in a very frail state and close to collapse. The lifting of the sanctions injected billions into the coffers. In return, the U.S. insisted on free and fair elections. As we noted just last week, that never occurred, and nothing was ever done. But importantly, the deal made Maduro realize the leverage that exists in oil and gas. He immediately disavowed the treaty signed in 1899 that set the dividing line between Guyana and Venezuela. He claimed part of Guyana as part of his country and began to move troops to the border. Then we didn’t hear about it for a while. The Biden administration didn’t confront Maduro on much of anything. But it looks like the new administration has a different view, and when a Venezuelan naval vessel “menaced” an Exxon platform, it was enough for Secretary Rubio to step in. I’m reminded of the scene in the TV show, Landman, where he promised to bring the full force of the U.S. military against the cartels, saying “you don’t know who you’re f****** with.” You don’t mess with Exxon. Rubio said, “It was unacceptable and a clear violation of Guyana’s internationally recognized maritime territory” and warned of action if there is any “further provocation.” Secretary Rubio and the Guyanese President jointly addressed the issue, stating “regional threats based on illegitimate territorial claims by a narco-trafficking regime will not be tolerated.” The question of what was going to happen has been hanging out there ever since Maduro moved troops. Now he’s on notice and between those two and Exxon. I’ll take the under on Maduro.
None of My Business. So, a politician used almost $5 million that was meant for assistants to EU lawmakers and instead paid assistants who weren’t working for EU lawmakers. Imagine if Ted Cruz used $5 million in government money to pay staffers, some of whom worked on state issues, and since it was state, not federal, he stole the money. Now imagine him going to prison for years and not being allowed to run for office again, even though he was favored to win. Imagine the political climate we would have to be in for something like that to happen. Imagine. Welcome to France.
Maybe I'm Wrong. The following statement was in a report by an unknown analyst. “The company excels in oilfield services, leveraging digital platforms and turnkey projects to ensure stable revenue and reduced volatility.” Leveraging digital platforms has been the goal of every company that talks about technology, regardless of how much or how well they do it. And while I'm a big fan of turnkey projects, the associated risk can be significant, as demonstrated many times in my career. If “well managed” is always the proviso given, but everybody believes they can manage it well, by definition, some have to fail. But reduced volatility? But this is what passes as bread and butter for these guys, I guess.
Learned View. Spears & Associates has kept the bible on OFS business segments and revenues for decades. Richard recently posted something I thought I would pass along.
“This year's U.S. land frac market will be a little over $17B. This is the amount that operators will pay frac service companies... in addition to that will be the cost of water, fuel, some of the sand and chemistry - whatever the operator pays to other vendors directly.”
“The Rockies (Colorado, Wyoming, Utah mainly) is not quite 10% of the U.S. land market - $1.2B this year (with upside to $1.5B).”
“Spears #DrillSource goes live shortly and will show which frac service companies work for which oil companies and how many dollars we believe each frac service company is earning from each oil company. Or how much each oil company is spending with each service company.”
If anyone has an issue with any uncited charts, please remind me and I will accredit retrospectively!
Any and all comments, arguments and rebuttals are welcome!
In addition to my association with PPHB, I serve on three private company boards. Merit Advisors is a property valuation company and I have long been a fan of optimizing how a business is run, not just the tools we make. Merit is in the business of savings companies’ money, actual cash, by doing a much more in-depth and realistic view of equipment and reserve valuations and I am very impressed with their work. I am also on the advisory board of Preng & Associates, a leading executive search boutique that specializes in all things related to Energy & Power. Nova is a gas compression company run by a very dynamic CEO with a very strong board and ownership.
I serve on the Advisory board of the Energy Workforce & Technology Council (formerly PESA), the National Ocean Industries Association (NOIA), and the Maguire Energy Institute at SMU my alma mater.
jim
214-755-3914 | james.wicklund@pphb.com
Leveraging deep industry knowledge and experience, since its formation in 2003, PPHB has advised on more than 180 transactions exceeding $11 Billion in total value. PPHB advises in mergers & acquisitions, both sell-side and buy-side, raises institutional private equity and debt and offers debt and restructuring advisory services. The firm provides clients with proven investment banking partners, committed to the industry, and committed to success.
