(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.)
Large oil and gas companies are under increasing pressure from shareholders to reduce greenhouse gas (GHG) emissions from their refineries and other facilities. A relatively straightforward approach to addressing concerns about emissions is to sell assets. While shrinking a company’s portfolio may improve the environmental profile of the individual business, is the overall environmental value of such an action plan essentially zero? One of Rigzone’s regular tipsters examines the issue in this week’s review of the successes and failures of the oil and gas market. Read on for his ideas and more.
Rigzone: What were the market expectations that actually happened over the past week – and which didn’t?
Tom McNulty, Houston-based Senior Director and Head of Energy Practices at Valuescope, Inc .: OPEC + has announced that it will bring more oil to the market next month. That should add up to an additional 2 million barrels per day (bpd), if you count what they claim to have added in May and this month. The market seems to think this is not enough, as demand for fuel continues to rise in North America and Asia, and Brent and WTI continue to rise. I keep repeating that US production can and will increase as well, putting more barrels on the market. Producers here have learned how to make barrels more efficiently and with less debt.
Phil Kangas, Energy Advisor, Natural Resources and Mining Partner, Grant Thornton LLP: As US economic activity picks up with each additional vaccination, so does the demand for oil. Demand factors for the world’s largest oil consumer, such as the return to the summer travel season, have continued to drive up the price of oil. Additionally, OPEC + ‘s decision to continue its plans to return a measured supply to the market further boosted the upward trend in prices this week, with Brent surpassing $ 70 a barrel and WTI only rising. not far behind. With oil prices now at levels not seen since before the pandemic, it is not surprising to see the steady increase in the number of drilling rigs. Baker Hughes (NYSE: BKR) noted operating assets this week reaching 457, up more than 50% from the same period last year.
Rigzone: What were the surprises of the market?
Mark Le Dain, vice president of strategy at oil and gas data firm Validere: After the Announcement of Cimarex (NYSE: XEC) and Cabot (NYST: CBT) there are still questions about Cabot’s remaining inventory. It will be interesting if the increased focus on inventory results in additional transactions, as there are several names that are potentially only a few years old to the left of Level 1 (i.e. highly developed) locations that can see this answer and look to increase their own track before they get the same questions. This is a tough business because at a time when things are working well on the price side with a restriction on supply across the world, the market is wondering how many years you can profit from your assets.
Kangas: In the United States and Europe, the past week has seen crucial developments for oil majors navigating the market transition into operating models driven by climate change. For the first time in history, a company was ordered to align its policies with the Paris Climate Agreements when a Dutch court ruled that Shell (NYSE: RDS.A) must reduce its emissions of 45% carbon by 2030 from 2019 levels. At ExxonMobil (NYSE: XOM), an activist hedge fund successfully elected new independent directors as board members to shake up the transition strategy energy efficiency and better align its economic model with decarbonisation objectives. At the annual meeting of Chevron Corp. (NYSE: CVX), shareholders voted 61% in favor of a proposal to reduce emissions from the use of the company’s products, reflecting frustration that the company is not doing enough to fight change climate. Even the French oil company Total (NYSE: TOT) announced it was renaming TotalEnergies, a move almost unanimously approved by shareholders, reflecting its strategic transformation into a vast energy company “producing and supplying ever more affordable energy, reliable and clean ”.
McNulty: A Dutch court has ruled that Shell must reduce its greenhouse gas (GHG) emissions by 45% by 2030, based on its reported levels for 2019. Putting aside a moment, if that’s even physically possible, what could be the fastest way to do it? Assignments. Shell will sell heaps and heaps of assets. But if you sell assets that produce GHGs to someone else, if they don’t shut them down, how have you reduced net global GHG emissions in any way?
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