- Jul 14, 2021 2:32 am GMT
Financial discipline and investor returns are the watchwords, and the days of headlong debt-fueled growth in tight oil production are supposedly confined to history.
- A process of steady consolidation is rolling up control of the key assets into a smaller number of hands, as a group of larger and financially stronger E&P companies buy out the smaller players.
- It is also further evidence that there are likely to be a few key players in the industry’s consolidation, including Chevron, ConocoPhillips, EOG, Marathon Oil and Devon Energy as well as Pioneer.
- The trend of organic growth of production is giving way to inorganic growth through M&A (scale & consolidation)
- Scale is important, because of the benefits of having an extended contiguous acreage. It also makes it easier to handle demands from investors, governments and customers for improved ESG performance.
- Methane leakage and flaring in the Permian has been rising in prominence as an issue for operators, and several of the larger E&Ps (ExxonMobil, Pioneer ) have backed regulations on flaring and leakage for some time.
- The American Petroleum Institute, the industry group, in January came out in favour of direct regulation of methane emissions from new and existing sources, and said it would work with the Biden administration to develop “durable regulation that follows the law”.
It has long been argued that the burden of complying with leakage and flaring regulations will hit small producers the hardest because there are significant FIXED COSTS involved. The rising pressure for action, from investors as well as from the administration, is another reason to think that for Permian operators, bigger will indeed be better.