It’s been an action-packed 2019, but we are finally back with Energized, your weekly look into the geopolitics, news, and happenings of energy markets.
We are pleased to have Danny Foelber, of Eau Claire Writing, as our new contributing editor. Danny has worked with Gas Compression Magazine in Houston, Oilfield Technology in the UK, CompressorTech2 in Wisconsin, and CFE media in Chicago. Danny also works with Caterpillar Oil & Gas. Danny graduated from the Bauer College of Business at the University of Houston where he majored in finance and marketing. Danny is also a graduate of the Program for Excellence in Selling at the University of Houston, the nation’s number one sales program.
This issue of Energized will be a little longer so we can cover content from the past couple of months. Take a look!
Chevron V. Occidental: A Tale of Two Bidders
No one expected a bidding war for Anadarko Petroleum. The story started and seemed to end with Chevron casually buying Anadarko. The subsequent drama, that grows and grows every day has birthed a fight for Anadarko between heavy-weight Chevron and Occidental. Until the morning of April 30th, when Warren Buffett himself stepped into the ring and handed Oxy a pair of $10 billion brass knuckles. The tides have turned, with Oxy now the favorite to win a battle that everyone thought they would lose. Let’s look at how the story unfolded:
+Why Chevron Bought Anadarko – Forbes
On April 12th Chevron announced plans to buy Anadarko Petroleum for $33 billion in cash and stock. The deal shocked the oil and gas business community since merger and acquisition activity has been somewhat quiet as of late. Since the news, many experts are weighing the pros and cons of the deal, what it means for Chevron, and likely reactions from other oil companies in response to the deal.
Forbes gives a short and sweet list of how Chevron benefits from the deal. Additionally, the Texas Oil and Gas Podcast, which I highly recommend, covered the deal between minutes 7:30 and 14:30. You can listen to the podcast via the link above, or subscribe to the podcast on Apple Podcasts, Spotify, or wherever you get your podcasts.
My quick takeaways from the article and the podcast:
- Chevron and Exxon have already announced their big plans in the Permian by 2023. Chevron’s acquisition of Anadarko puts the company’s money where their mouth is.
- Anadarko is the largest player in Colorado’s DJ Basin, meaning this is more than just a Permian play.
- The acquisition boosts Chevron’s acreage by 240,000 net acres, giving Chevron a total of over 1.4 million net acres in the Delaware Basin side of the Permian.
- The acquisition opens the floodgates for more mergers and acquisitions. Many are speculating the supermajors will bid on other major producers in the Permian to compete with Chevron. Major Permian producers include ConocoPhillips, EOG, Pioneer, Noble, Devon, and Diamondback Energy.
+ Jordan Blum Interview –Yahoo Finance
On April 24th, Jordan Blum, senior energy reporter at the Houston Chronicle, went on Yahoo Finance and discussed the news of the day. Occidental Petroleum offered to buy out Anadarko for 20% more per share than Chevron. The offer has since ignited a bidding war for Anadarko. The industry hasn’t seen a bidding war for an E&P company of this magnitude for over a decade. Blum notes that Oxy doesn’t have the LNG infrastructure or offshore capabilities that Chevron has, but they do have Permian acreage. Still, other assets like Anadarko’s multi-billion dollar Mozambique LNG project are expensive and arguably better funded by a company like Chevron.
+Berkshire to make $10 billion investment in Occidental to finance Anadarko bid – Wall Street Journal
With Berkshire’s backing, Oxy now has the cash to increase their bid if Chevron increases theirs. Few expected Anadarko to be as valuable as Chevron, Oxy, and Buffett are making it out to be.
Berkshire’s investment is contingent on Oxy actually acquiring Anadarko. If that happens:
“Berkshire Hathaway will get 100,000 preferred shares and a warrant to purchase up to 80 million shares of Occidental at $62.50 apiece in a private offering…The preferred stock will accrue dividends at 8 percent per annum, compared with about 5 percent yield on common equity and 4 percent on term debt”. -Reuters
The Texas Oil and Gas Podcast does a good job of expressing why Oxy finds Anadarko so attractive. The episode is linked here.
+With AI, zero failure is more than a pipe dream – Oil & Gas Engineering
-Article discusses the benefits of automating the most time-consuming, repetitive parts of jobs
“Folks use the term “digital transformation” as a buzzword for the investments being made in technologies like artificial intelligence (AI), machine learning, augmented reality, robotics, wearables taking place across the business world. McKinsey and Accenture recently estimated digitalization has the potential to create as much as $1 trillion in value for oil & gas companies.”
+Offshore Rising – Gas Compression Magazine
In anticipation of the Offshore Technology Conference in Houston, Gas Compression Magazine released an article that discusses the recent attractiveness of an offshore market that has been lackluster in the wake of the booming shale market. Gas Compression Magazine mentions new offshore technology too. If you’re in the Houston area, consider signing up for the OTC here.
You can also prepare for the OTC with our very own EKTi founder Marty Stetzer by listening to last year’s podcast here.
Natural Gas/ LNG
+LNG Race Report- Gas Compression Magazine
Brent Haight, the publisher of Gas Compression Magazine, gives an excellent and concise report on the global race for LNG dominance.
+Early 2019 will see flurry of LNG activity– Houston Chronicle
Some additional activity in the space.
“The new analysis estimates annual methane emissions of just over a million metric tons (1.1 million U.S. tons) linked to oil and natural gas facilities including well pads, compression stations and pipelines — with the majority of emissions emanating from southeastern New Mexico.”
“A prior study by the Environmental Defense Fund based on 2015 data documented emission of about 570,000 annual metric tons across New Mexico.”
+Permian Natural Gas Flaring Persists with No Solution in Sight –Texas Standard (Segment of NPR broadcasted in Texas).
- The Permian production surge has led environmental groups to question the impact of flaring natural gas. Natural gas prices at the Waha Hub, which represents West Texas and SE New Mexico, turned negative in April as natural gas production continues to soar above pipeline capacity in the Permian Basin. The natural gas is being flared since pipelines don’t have the space to carry/sell the gas. Prices at the Waha Hub indicate that the gas is essentially a waste bi-product of oil production, hurting the environment and business for the time being.
+Copper’s Slide Signals Caution About Chinese Growth –Wall Street Journal
- “Prices for the metal, which is heavily used in construction and manufacturing, have fallen 2.4% since hitting a nearly 10-month high earlier in April. The drop is concerning to analysts who use copper prices as a gauge of economic activity.”
- “Copper is still up 10% for the year but remains well below last year’s peak of $3.30 a pound from early June. Prices have also been unable to cross the closely watched psychological level of $3 that some analysts think could unleash further gains.”
Most of you are already familiar with our Oil 101 course, at least the free version. Did you know that we have companies that license the course to use as internal training for sales, IT and operations teams? If your group needs this, let’s talk.
Have a great weekend!
EKT Interactive Contributing Editor
Head Writer | Eau Claire Writing
Houston-based freelance writing company specializing in gas compression, turbomachinery, onshore and offshore drilling, and well service content for the oil and gas industry.
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