![]() Private producers have been able to ramp upstream activity more meaningfully given that they do not have to answer to a public investor base.” It takes time for producers to respond to prices, though, and the price signal was not strong enough for E&Ps to potentially veer from their plans for moderate growth until recently. The geopolitical situation and oil price level may give US producers a license to grow volumes more meaningfully. However, that sentiment may be changing with oil prices where they are and the potential need to replace Russian barrels on the global market. Up until recently, a producer planning to significantly grow production volumes would likely have been punished by investors. “Investors have demanded that producers maintain capital discipline and grow volumes modestly. That leads me to another issue with the oil companies themselves, where Ms. There are a number of steps between securing a permit and actually bringing a well to production, and issues like labor constraints and fracking sand shortages are added obstacles.” Companies stockpiled permits on federal lands leading up to the President’s inauguration, because several Democratic candidates, including the president, supported banning new drilling permits on federal lands. The permit number is inflated from stockpiling. “The President mentioned thousands of permits on federal lands. But it can take years for a permit to translate into oil production (if the location even yields oil).īut why did they stockpile so many permits? Stacey Morris, who is Director of Research for midstream index and data provider Alerian elaborated on these issues when I reached out to her for comment: The number of rigs drilling for oil and gas has risen by 60% over the past year. It’s not simply that oil companies are sitting on permits. Thus, we have oil production that can’t bounce back quickly because some has been shut in, and new production that can’t proceed as quickly due to manpower and material shortages (e.g., fracking sand). ![]()
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