Good read. You overlooked the German government's willingness to reconsider its ban on North Sea O&G exploration, which will be quite incredible if the Greens go along with that.
I would take issue with this line: "the industry, which has prioritized returns to shareholders over production growth at least in part because of the renewables pivot of the federal government". This is not the case - it is the industry's own failure to deliver returns to shareholders over the last decade. I suggest you read Arjun Murti's Super-Spiked newsletter. He describes the shale sector as 'not-for-profit' - reduced capex allocation today is really nothing to do with federal policy or renewables: https://arjunmurti.substack.com/p/from-not-for-profit-to-a-new-roce?s=r
You are correct that failure to deliver returns is a factor in the oil industry’s move to prioritize returns; however, other factors such as ESG attempts to starve oil companies of capital by activists taking over board positions (Exxon), investment companies putting pressure on funds to dump energy stocks (BlackRock), and activist pushing banks and insurance company’s to stop serving energy companies also played a role. On top of that, our government did make many very detrimental moves against the energy industry and the rhetoric before and after the election sent very clear signals to Big Oil that they were in the crosshairs. Investing in oil and gas wells is a long term investment and with that number of enemies plus a hostile government arrayed against you, taking it slow is the only sane coarse of action. Saying you are focusing on shareholders is a way to explain your actions without provoking those self-proclaimed enemies.
Don't disagree with any of that. But I would distinguish between the causes of lower production today (poor returns over last decade) and likely causes of constrained investment moving forwards (those same poor returns plus the factors you mention). Too many people are trying to pin the blame for lower investment 3/4/5 years ago manifesting today on Biden, which is obviously false.
You’re correct again. Also, two other factors constraining production today are labor and supply chain shortages. Whoever caused those will have to be decided by someone smarter than myself.
The two are not mutually exclusive. The cash-burning to grow production at any cost is a fact and so is the ESG pressure, including from the Democrats. Now, from a business owner's perspective, if I see a party with an anti-my business agenda is about to win the elections, I would make contingency plans and these would likely include curbing my activity. I'm sure you've seen Occidental's Hollub's statement about "If you did not plan for growth, you are not going to be able to achieve growth today," at CERAWeek. Of course, you could interpret it in more than one way but I would argue part of the interpretation would need to take into account the Biden administration's energy transition plans away from oil.
Very interesting article!
Good read. You overlooked the German government's willingness to reconsider its ban on North Sea O&G exploration, which will be quite incredible if the Greens go along with that.
I would take issue with this line: "the industry, which has prioritized returns to shareholders over production growth at least in part because of the renewables pivot of the federal government". This is not the case - it is the industry's own failure to deliver returns to shareholders over the last decade. I suggest you read Arjun Murti's Super-Spiked newsletter. He describes the shale sector as 'not-for-profit' - reduced capex allocation today is really nothing to do with federal policy or renewables: https://arjunmurti.substack.com/p/from-not-for-profit-to-a-new-roce?s=r
You are correct that failure to deliver returns is a factor in the oil industry’s move to prioritize returns; however, other factors such as ESG attempts to starve oil companies of capital by activists taking over board positions (Exxon), investment companies putting pressure on funds to dump energy stocks (BlackRock), and activist pushing banks and insurance company’s to stop serving energy companies also played a role. On top of that, our government did make many very detrimental moves against the energy industry and the rhetoric before and after the election sent very clear signals to Big Oil that they were in the crosshairs. Investing in oil and gas wells is a long term investment and with that number of enemies plus a hostile government arrayed against you, taking it slow is the only sane coarse of action. Saying you are focusing on shareholders is a way to explain your actions without provoking those self-proclaimed enemies.
Don't disagree with any of that. But I would distinguish between the causes of lower production today (poor returns over last decade) and likely causes of constrained investment moving forwards (those same poor returns plus the factors you mention). Too many people are trying to pin the blame for lower investment 3/4/5 years ago manifesting today on Biden, which is obviously false.
You’re correct again. Also, two other factors constraining production today are labor and supply chain shortages. Whoever caused those will have to be decided by someone smarter than myself.
The two are not mutually exclusive. The cash-burning to grow production at any cost is a fact and so is the ESG pressure, including from the Democrats. Now, from a business owner's perspective, if I see a party with an anti-my business agenda is about to win the elections, I would make contingency plans and these would likely include curbing my activity. I'm sure you've seen Occidental's Hollub's statement about "If you did not plan for growth, you are not going to be able to achieve growth today," at CERAWeek. Of course, you could interpret it in more than one way but I would argue part of the interpretation would need to take into account the Biden administration's energy transition plans away from oil.
“addressing the most pressing problems of bill-payers first.”
Wouldn’t that be nice? I hardly ever hear about bill-payers in all these discussions, or tax payers.
Great Article!