Investment

Shale oil's slower investment sparks new tension with White House – Reuters

Published

3 years ago

November 23, 2021

Chevron fracking site near Midland, Texas, U.S. August 22, 2019. REUTERS/Jessica Lutz

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Nov 23 (Reuters) – As the Biden administration and allies scramble to deliver more oil to market through stockpile releases, shale producers are tapping the brakes on reinvestment, according to new data, a sign of the widening split between U.S. oil companies and Washington.

That restraint has become the latest friction point between oil producers and the White House. On Tuesday, President Joe Biden launched coordinated oil stockpile releases with China, India, Japan and South Korea after efforts to cajole OPEC and U.S. producers to speed up production failed. read more

The rate at which U.S. shale producers put cash from operations into drilling for oil and gas fell to a record low last quarter, data from consultancy Rystad Energy showed, as those firms returned cash to shareholders through dividends and stock buybacks.

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The third-quarter reinvestment rate was 46%, below the historical average of 130%, Rystad said in a report this week. Reinvestment could fall further, its analysts said.

LIMITED NEW OIL

U.S. shale companies are targeting flat to 5% production growth next year, while private companies and oil majors combined could add up to 500,000 bpd by December 2022, said Rystad.

The rate of growth has kept U.S. oil production below the peak. The United States in October pumped around 1.5 million barrels per day (bpd) fewer than the 12.97 million bpd peak two years ago, the U.S. Energy Information Administration said. Next year, output is forecast to average 11.9 million bpd.

Shale companies contacted by Reuters, including EOG Resources Inc (EOG.N) and Diamondback Energy Inc (FANG.O), declined to comment on the coordinated release of petroleum reserves, which could drive down oil prices. But their modest spending from rising profit shows they are not falling back on old habits.

“Prolific shale production was a buffer to market perturbations and it isn’t there any more,” said Kevin Book, managing director at research firm Clearview Energy. He attributes the limited gains to “a more cautious shale patch.”

It has not helped that Biden has criticized oil companies for putting shareholders ahead of the economy and has called on regulators to probe whether oil firms drove gasoline prices to a 7-year high. read more

“Biden is getting rid of pipelines and messing with permits and making it difficult to operate the company,” said Harris Kupperman, chief investment officer at Praetorian Capital. Administration talk about excess profits only aggravates producers, he said.

‘BANDAGE’ FOR CONSUMERS

“The release of the SPR is strictly a bandage and the only way to create a sustainable lower price and stability is encourage drilling in North America and create a regulatory environment that makes it economical and sustainable,” said Paul Mosvold, president and COO of oil drilling firm Scandrill.

The American Petroleum Institute, the industry’s top lobby group, also blamed the reluctance to invest more on Biden’s rejection of new oil pipelines and pause on leasing federal land.

“When the administration signals they want to move wholly off of fossil fuels within a foreseeable time period, that makes financing more difficult,” said Dean Foreman, the API’s chief economist.

Oil companies are having to spend more to keep output flat. This year’s outlays rose 15% over 2020 to get to modest increases, estimates investment firm Cowen. Next year’s outlays will rise between 20% and 25%, with some of the gains chewed up by inflation.

Higher costs for oilfield services will consume 10% to 15% of next year’s outlays, estimates Jonathan Godwin of energy tech firm Enverus.

Contributing to the weaker growth are declines in the number of wells drilled and waiting to be turned on. They fell to a 4-year low this fall. read more

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Reporting by Liz Hampton in Denver
Additional reporting by Stephanie Kelly in New York
Editing by Matthew Lewis

Our Standards: The Thomson Reuters Trust Principles.

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Investment

Tesla shares soar more than 14% as Trump win is seen boosting Elon Musk’s electric vehicle company

Published

3 days ago

November 6, 2024

Anne Joseph

NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.

Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.

“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”

Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.

Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.

Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.

Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.

In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.

The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.

And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.

Tesla began selling the software, which is called “Full Self-Driving,” nine years ago. But there are doubts about its reliability.

The stock is now showing a 16.1% gain for the year after rising the past two days.

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Investment

S&P/TSX composite up more than 100 points, U.S. stock markets mixed

Published

3 weeks ago

October 16, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.

The S&P/TSX composite index was up 103.40 points at 24,542.48.

In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.

The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.

The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.

The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.

This report by The Canadian Press was first published Oct. 16, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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Economy

S&P/TSX up more than 200 points, U.S. markets also higher

Published

4 weeks ago

October 11, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.

The S&P/TSX composite index was up 205.86 points at 24,508.12.

In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.

The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.

The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.

The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.

This report by The Canadian Press was first published Oct. 11, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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