Biden Administration Focused on Increased U.S. Oil & Gas Production

Ever since the transition from the Trump Administration to the Biden Administration, rank-and-file leaders of the US O&G industry have been outspoken in expressing frustration with the Biden Administration declaring it as being “anti” fossil fuel.  Sometimes, actual anecdotal examples surface some of which hold water.  More often, the criticisms border on irrational hysteria with no concrete complaints.  Many seem to forget that The Great Shale Revolution flourished under the aegis of the Obama Administration.  In fact, Biden has done very little to impede[1] upward activity of the oil & gas industry.  If impedances include tight restrictions on methane emissions, then – as long as those regulations are sensible – that would be a good thing. 

Today, in the heat of a new Cold War, the criticisms leveled at the Biden Administration are crumbling as it laser-focuses on combatting the Russian menace.  Level-headed advisors have finally gotten Biden’s ear and successfully pointed out that the U.S. has ascended into a global powerhouse as a producer of oil & gas.  And, the Administration realizes that it has the capability to upgrade U.S. capacity, and thereby offset ultra-sensitive dependencies on Russian-supplied oil that exists in select European countries (e.g., Italy and Germany).  Respected energy prognosticator, Daniel Yergen, weighed in with an excellent opinion piece published by the Wall Street Journal (before the Ukraine war broke out) – click here to read.  Yergen points out that the U.S. has shifted the power dynamic away from OPEC (e.g., Iran and Saudi Arabia) and even Russia by being able to supply LNG in vast quantities to Northern Europe.

Let’s hope the pronouncements coming from the Biden Administration (e.g., Secretary of Interior Granholm) are not undercut by frivolous regulations that slow down the progression of a strategic ramp-up in US O&G production.  What’s an example of “frivolous”, you say?  How about silly attempts to prohibit cooking stoves using natural gas?  Another example that might be truly important?  That would be the federal judge instructing the federal government to take into account the carbon footprint associated with oil & gas produced from a federal lease.  Do you know what that means?  It means that the U.S. has decided that it will buy oil from foreign sources that aren’t dumb enough to self-impose UNILATERALLY a carbon penalty on its own production.  The rational solution would be to apply a carbon tax across all oil consumed in the United States regardless of where it comes from.  Why shackle U.S. producers?

First Keystone is taking steps right now to aid the increase in U.S.-based O&G production by accelerating our construction program to make available for lease a 5,000 s.f. office/warehouse located in Pecos.

The opinions expressed above reflect only those of the author and do not represent those of the First Keystone Pecos Industrial Park organization.  First Keystone welcomes responsible fact-based discourses on these topics.

[1] It is a fact that the number of leases offered by the Biden Administration are comparable to those offered by the Trump Administration under comparable time periods.

Independents Leading the Charge to Surge U.S. O&G Production!

Please check out this brief, but very interesting, video report from the Washington Post covering the actions of our good friend in Oklahoma City, Joe Brevetti (founder of Charter Oak Production).  In a nutshell, this small – but feisty – independent is punching way above its weight in making a difference in terms of America’s effort to bolster O&G production – this is a patriotic move (and, you don’t hear any moaning about impedances from the Biden Administration). 

First Keystone supports the needed increase in US-based O&G production, and accordingly, we are fast-forwarding our program to develop more warehouses for lease in Pecos.

The opinions expressed above reflect only those of the author and do not represent those of the First Keystone Pecos Industrial Park organization.  First Keystone welcomes responsible fact-based discourses on these topics.

The Resolve of the Allies and the United States to Impose a Total Embargo on Russian Energy

This topic has gone from 0 to 60 in a record amount of time!  Major publications are awash with articles on which country is willing to do what.  The Wall Street Journal has gone out of its way to fire off round after round of criticisms aimed directly at the Biden Administration.  In my opinion, some of them have merit and others come out of the same playbook used by those Philadelphians who threw snowballs at Santa during an Eagles game (40 years ago).  A much more dispassionate treatise on this subject came from Max Fisher of the New York Times in his excellent piece, “Russia’s Other Contest with the West: Economic Endurance”.  Please, take a few minutes to read it as it is about as good a rendition of forces on each and every party with respect to this very tough matter.  (https://www.nytimes.com/2022/03/09/world/europe/russia-ukraine-economy.html)  For the average American, it simply translates into some pain at the gas station.  It is far different for a middle class family living in Germany or Italy.  And the offset is that the average Russian citizen, many of whom barely grasp what’s going on in Ukraine thanks to Russia’s powerful disinformation campaigns, are utterly bewildered by the implosion of their own economy.  The article has an excellent section near the end that delves into the potential collapse of support for Putin that has traditionally come from “Russian political elites…[who prize his] stabilizing the country and winning it respect abroad”.  Many also expressed concern over his handling of the economy – an opposition to military adventurism in Ukraine.

I mentioned the Wall Street Journal, and I should not have omitted Fox News, but some of the claims leveled at Biden, such as complaining about the cancellation of the Keystone XL pipeline, are spurious if they are meant to explain why gas prices are so high.  This link is a FACT-CHECK piece by Linda Qui writing for the New York Times.  (https://www.nytimes.com/2022/03/09/us/politics/fact-check-republicans-biden-gas.html)

Lastly, under the heading of macabre comedy, is this editorial from the March 8^th Wall Street Journal where the editorial board unrelentingly lambastes Biden for cozying up to such nice folks as Maduro (Venezuela) or MBS (Saudi Arabia).  Finally in the last few words of the barrage of criticism, they point out that “shale producers can increase production twice as fast…” – well, let’s get on with it! (https://www.wsj.com/articles/joe-bidens-u-s-oil-embargo-russia-energy-natural-gas-vladimir-putin-ukraine-11646780609)

Right now, to support the needed increase in US-based O&G production, First Keystone is fast-forwarding our program to have ready-for-delivery warehouses for lease. 

The opinions expressed above reflect only those of the author and do not represent those of the First Keystone Pecos Industrial Park organization.  First Keystone welcomes responsible fact-based discourses on these topics.

What is the Appropriate Role for the U.S. O&G Industry in the Response to the Russian Invasion?

Very little was written about this subject until most folks went to their local gas station and experienced a big surprise.  The “Big Picture” is that our gasoline prices are driven by global forces and it is virtually impossible to insulate an American consumer from these forces without a massive federal subsidy to support a lower gasoline price.  These concepts are used in countries such as Egypt, India, Venezuela, and Saudi Arabia for gasoline.  And, it places a tremendous stress on the public treasury.  European countries are considering subsidizing natural gas prices right now.  In my opinion, that would be a really bad idea in this country.  In fact, open discussion about eliminating the federal tax on gasoline is moving in exactly the wrong direction – Americans can and should pay more to improve their roads via this tax!  To learn a little more about the interplay of these forces, take a look at this article https://www.cnn.com/2022/03/10/politics/record-gas-prices-wont-be-solved-by-drilling-more-oil-climate/index.html. 

A sober viewpoint comes from Bret Stephens of the New York Times advocates… “Be honest about energy. The world will need carbon-based fuels for decades to come. And we are better off extracting more of it in North America — including on U.S. federal land — than by asking Saudi Arabia to ramp up production or hoping to get more from Venezuela and Iran with sanctions relief. The alternative to increasing domestic oil and gas production isn’t only clean alternative energy. It’s also filthy petrostate energy.” 

But, will the O&G industry actually respond and ramp-up production?  As reported last week, the industry seemed to greet this crisis with a big yawn as senior management genuflected in the direction of Wall Street.  So, is Wall Street to blame for this unpatriotic and counterproductive stance?  It’s impossible to not hear blame directed at the Biden Administration.  Well, the CNN article points out that criticizing the Biden Administration for insufficient permits is factually inaccurate.  But, its report also points out that the Administration really ought to cut through the red tape in order to to speed up construction of new LNG terminals. 

One of the better summarizations of the debate of who is to blame – Wall Street or the federal government? – was provided by CNBC’s Stephen Liesman – check out this clip from Morning Joe (https://www.msnbc.com/morning-joe/watch/-they-want-to-be-on-the-right-side-of-history-inside-the-white-house-s-ban-on-russian-oil-134962245593) to get his understandable explanation on who should do what.  (Spoiler alert:  They each need to do something!) 

First Keystone is taking steps right now to aid the increase in U.S.-based O&G production by accelerating our plans to make available for lease warehouses by adding a 5,000 s.f. version of our Bobcat line of products.

The opinions expressed above reflect only those of the author and do not represent those of the First Keystone Pecos Industrial Park organization.  First Keystone welcomes responsible fact-based discourses on these topics.

The Permian Basin Community’s Response to the Russian Invasion of Ukraine

I do not know what to believe. Here is a link to the New York Times article (3/3/22) in the Business section (https://www.nytimes.com/…/02/business/oil-prices-opec.html). It’s pretty good, and it points out that OPEC Plus has turned a blind eye toward the conflict. (After all, the Vice Chair of this organization is a Russian minister. I guess OPEC Plus is a formal organization???) It is obvious to any American citizen who shares this writer’s concern for the citizens of the Ukraine, that a component of the American response ought to be to ramp up crude oil production in all possible ways. From my perspective, I was appalled at the indifferent remark made by Vicki Hollub (CEO OXY) who did not seem to care nor have the breadth of knowledge to grasp that her company is strategic who told analysts that there was “no need and no intent to invest in production growth”. I don’t want to single her out for criticism because there are others: Pioneer, Devon, and Continental, which the article states “were committed to limiting production to avoid oversupplying the market and pushing down prices to unprofitable levels”. Some people have called me gullible. (That was about 50 years ago.) This report, if accurate, is unbelievable – these stances are an outrage. It’s not collaborating with the enemy, but it is darned close. But does this tell the whole story? Maybe not. A friend of mine shared with me conversations he’s had with his friends in Midland who are working with privately-owned producers, and “the buzz” is that they are ramping up. By the way, what capitalist would not ramp up right now!? (God help those shareholders who still own shares in these publicly-traded companies.) But, from an overall American point of view, any patriot who is opposed to the totalitarian brutality going on in Russia/Ukraine would make these moves. I hope that these entrepreneurial oilmen (and ladies) represent the mainstream of thinking in the Permian Basin community. In my view, this would be the quintessential response from a strategic American industry! First Keystone, although not a producer, is doing our part by ramping up our own production to provide industrial buildings for sale in the Delaware Basin.

The opinions expressed above reflect only those of the author and do not represent those of the First Keystone Pecos Industrial Park organization. First Keystone welcomes responsible fact-based discourses on these topics.

Daniel Yergen Lauds U.S. Energy Resurgence

Respected oil prognosticator, Daniel Yergen, weighed in on February 15, 2022 with an opinion piece published by the Wall Street Journal on the U.S.’ ascendancy into a global O&G powerhouse.  Yergen points out that power has shifted toward the U.S. in some ways due to the U.S.’ achievement of much more self-sufficiency in energy than was the case prior to the shale revolution.  In particular, having grown into being the #1 producer of crude oil in the world, the U.S. is no longer as sensitive to the vagaries of odious regimes that control large reserves of oil (think Iran).  Yergen lauds this emergence of the US-based oil industry and emphasizes that it has translated into a strengthened American ability to significantly diminish the leverage that is being exerted by Russia today in its powerplay to force Western Europe to helplessly stand by and watch the Russians annex Ukraine. 

It is an article well worth reviewing. 

If you are ready to locate to the heart of the Delaware, First Keystone has warehouses to lease in Pecos!

The opinions expressed above reflect only those of the author and do not represent those of the First Keystone Pecos Industrial Park organization. First Keystone welcomes responsible fact-based discourses on these topics.

When Will Activity Shift Into a Higher Gear?

As previously reported, 2021 was a head-scratcher because of a tepid “ramp-up” during the year punctuated by strong oil prices and a booming economy.  (Take a look at previous commentaries for more details.)  As the new year dawns, there are promising signs that a genuine acceleration of activity is right around the corner.

Case (1) in point:  Oil prices recently pierced through the $80/bbl level less than 6 weeks after hitting a low at a price point nearly ¼ lower – what a sign of resiliency! 

That low point was caused by extreme fear in the marketplace over a repeat of the spring ’20 implosion that was anticipated at the inception of the Omicron variant.  But, it is turning out that the world was able to adapt successfully.

Case (2) in point:  NG prices in Europe on a BTU basis are equivalent of $200 per barrel of oil.  Even though the European market appears to be de-coupled from the North American market, development of LNG port facilities is feverishly underway as a means to take advantage of this massive arbitrage condition.

Case (3) in point:  Permitting for new wells, although erratic on a month-to-month basis, clearly is on the uptick.  For example, permits for new wells in Reeves County in December was 65, a level 25% above the average of all of 2021.  It is a leading indicator and it is 100% logical given that the very strong prices for oil show no sign of tanking.  Indeed, there appears to be a long way to go in terms of a bounce-back of permits as the average numbers 4 years ago were far higher than they are now.

Case (4) in point:  Finally, and perhaps most important, one of the US’ most significant independents, EOG Resources, has broken with the tacit “pact” among the shale producers and has declared that it is getting ready to ramp-up production to pre-pandemic levels.

EOG’s breakout move could turn out to be an inflection point for the US shale industry. 

• Will most of the other shale players continue to adhere to the unwritten alliance with OPEC+? 
• If that alliance disintegrates, how much will oil field activity pick up in order to get back to 13MM BBLs per day that existed immediately prior to the pandemic shut-down?
• Then, what happens to WTI/Brent – do they take a nosedive into the $50s or do they hold up? 

For First Keystone Pecos Industrial Park, these are all harbingers of the importance of ramping up our inventory of industrial land in Pecos, TX available for warehouses, offices, and yards. 

Responsible Transitioning from Fossil Fuels – Part 2

Recently, we talked about the importance of having a PLAN to execute a phase-out of legacy sources of energy (i.e., fossil fuels) and replacing these sources with “renewables”.  In that report, we cited an editorial from The Economist published in October.  Another authoritative, albeit biased, source would also be worth listening to as it has equally responsible opinions to be shared.  The editorial excerpted below is from Steve Toon, the Editor in Chief of Oil & Gas Investor, points out that the new criteria for measuring performance of oil & gas companies have shifted away from surviving the recent recession to something he called “value versus momentum”.  I’m not sure what he’s even talking about, but he does point out – very importantly – that capital has been choked off into the oil & gas sector, and the net effect is that capacity (i.e., daily production) is dissipating.  He explains that super-majors, especially European based companies like Equinor and Shell, are actually disinvesting in shale assets.  He points out that the amount of capital being deployed into the sector is so low that required daily production volumes, needed for the next decade, are destined to fall short. 

Just like The Economist warned in that October editorial, short squeezes are going to emerge because the transition plan to some sort of other energies is far from ready for prime time.  So, from a policy point-of-view or an investor’s viewpoint, one’s focus ought to shift back to the Permian Basin’s plentiful oil & gas reserves. 

First Keystone has industrial buildings ready-to-go for sale or lease in Pecos (the heart of the western Permian Basin) to serve those service & supply companies that will be crucial if these short squeezes are going to be abated. 

Responsible Transitioning from Fossil Fuels

We at First Keystone are supportive of taking steps towards a greener economy in West Texas, the U.S., and the world.  With the exception of a few mega-economies, such as the U.S. or China, no one state or company can accomplish much more than a spoonful in a bucket, but that limitation should not function as an excuse for doing nothing.  And, we at First Keystone are going to do what we can to contribute to that goal.  It may sound trivial, but our latest line of industrial buildings to rent or buy come equipped with 220V external receptacles to enable the set-up of EV charging stations. 

But, what’s the point I’m making right now?  It’s this:  There are no magic bullets, and a transition to a significantly greener approach to energy generation is not going to occur without a full-blown plan that works at the local level, national level, and worldwide. 

In this installment, we would like to share with you the thoughts of the Editorial Board at the esteemed magazine, The Economist (October 16, 2021 issue).  As is the norm with this level-headed publication, they caution the world that severe shortages of critical forms of energy are right around the corner.  And when they emerge, significant economic and even health repercussions are going to emerge.  They caution that politicians waving their magic wands and declaring goals of 50% renewables by 2030 or whatever cannot be achieved without a transition plan.  And, prematurely forcing a detachment from legacy systems – that involve hydrocarbons – will backfire without a concomitant replacement with comparable levels of alternative energies. 

We will not comment on the replacement schemes, but we will point out that hydrocarbons are absolutely here for decades to come until the many, many trillions of dollars necessary to change out energy infrastructure have been properly deployed. 

So, check out this editorial from The Economist and let us know your thoughts!  But while pondering all of this, remember that First Keystone is a supplier of state-of-the-art industrial warehouses for rent or purchase in the vital Pecos, Texas region!  Our industrial buildings (to rent or for sale) are state-of-the-art energy efficient and we aim to keep America energy independent.  We are Part of The Solution!

Do Rig Counts Tell Us Everything We Need to Know? – Part 5

Oil industry business cycles are unavoidable – but, no two are alike.   However, this recovery, way slower than the rate of recovery in oil prices, has stalled.  Look at this graph of rig counts for Reeves County and the Delaware since early ’20.  Compared to all other recoveries, when the price of oil rebounds as sharply as indicated in this graph, the drilling rig counts would also zoom up.  This is an outlier situation. 

But drilling permits are starting to (finally!) show real signs of a recovery.  This is the first genuine signal that the operators are responding to oil prices that are irresistibly high!

The bottom line is that permits are an irrefutable leading indicator of operating activity.  The ramp-up may be just around the corner.  However, the stock of small and medium-sized industrial/warehouse buildings (under 10,000 sf) in Pecos is very limited; but First Keystone has them to rent or for sale.  Act now to avoid the coming bottleneck!