EY lists four oil and gas trends for 2024
Jan 11, 2024
A gas flare burns past a pump jack in Loving County in this December 2018 file photo. Emissions management is one of the top four trends EY sees in the oil and gas space in 2024.
Angus Mordant/Bloomberg

ExxonMobil, Chevron and Occidental each made multi-billion-dollar acquisitions as 2023 came to an end while ConocoPhillips made two major acquisitions in the last two years.



That, according to Reuters, positions the four companies to control 58% of Permian Basin production. Mergers and acquisitions topped EY’s list of four oil and gas trends to expect in the new year.


Transformative Deals – While high interest rates and inflationary pressures cooled deal-making in many sectors in 2023, the oil and gas sector has seen a surge in announced M&A activity, driven by strong cash flows, renewed investor confidence and increasing recognition that oil and gas will continue to play an important role in the energy landscape. A wave of consolidations and strategic investments in low-carbon solutions – such as carbon capture, hydrogen, renewable natural gas and others – will continue in the year ahead, as creative dealmaking, partnerships and ecosystems emerge.
 
Emissions Management – With stringent new climate disclosure rules set to take effect in the EU, California and potentially the U.S., 2024 looms as a crucial staging year for both the industry and its extensive supply chain. This regulatory uptick has led companies to accelerate efforts to reliably monitor and report emissions, however shifting the thinking from compliance to innovation in future commercial opportunities will be front and center. For example, how the industry considers product differentiation and less carbon intensive products. 


Decarbonization Technologies – The oil and gas industry has responded to federal incentives for emerging energy technology, particularly in hydrogen and carbon capture. Oil and gas companies bring a unique level of financial wherewithal, technical skill and foresight in driving these new solutions forward. However, while legislation like the Inflation Reduction Act and Infrastructure Investment and Jobs Act provide incentives and funds for developing these technologies, its largely depended on participants to create demand. The real winners of the IRA and IIJA will be those companies that can best innovate new commercial approaches to these novel business areas.
 
Maximize Operations - Maximizing operations throughout the enterprise by using disruptive technology at speed and scale, all while upskilling the workforce will be important as companies transform. By focusing on operational efficiencies, the oil and gas industry can continue to solve complex issues while integrating new acquisitions, implementing emerging technologies like AI and utilizing real-time data and connected strategy to enable better, faster and more strategic decisions with the impact on its workforce.


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Oil eases on higher US crude output, hopes of Israel-Hamas ceasefire

By Emalee Springfield • 02 May, 2024
HOUSTON, April 30 (Reuters) - Oil prices fell 1% on Tuesday, extending losses from Monday, on the back of rising U.S. crude production, as well as hopes of an Israel-Hamas ceasefire. Brent crude futures for June, which expired on Tuesday, settled down 54 cents, or 0.6%, at $87.86 a barrel. The more active July contract fell 87 cents to $86.33. U.S. West Texas Intermediate crude futures were down 70 cents, or 0.9%, at $81.93. The front-month contract for both benchmarks lost more than 1% on Monday. U.S. crude production rose to 13.15 million barrels per day (bpd) in February from 12.58 million bpd in January in its biggest monthly increase since October 2021, the Energy Information Administration said. Meanwhile, exports climbed to 4.66 million bpd from 4.05 million bpd in the same period. U.S. crude oil inventories rose by 4.91 million barrels in the week ended April 26, according to market sources citing American Petroleum Institute figures on Tuesday. Stocks were expected to have fallen by about 1.1 million barrels last week, an extended Reuters poll showed on Tuesday. Official data from the EIA is due on Wednesday morning. Gasoline inventories fell by 1.483 million barrels, and distillates fell by 2.187 million barrels. Expectations that a ceasefire agreement between Israel and Hamas could be in sight have grown in recent days following a renewed push led by Egypt to revive stalled negotiations between the two. However, Israeli Prime Minister Benjamin Netanyahu vowed on Tuesday to go ahead with a long-promised assault on the southern Gaza city of Rafah. "Traders believe some of the geopolitical risk is being taken out of the market," said Dennis Kissler, senior vice president of trading at BOK Financial. "We're not seeing any global supply being taken off the market." Continued attacks by Yemen's Houthis on maritime traffic south of the Suez Canal - an important trading route - have provided a floor for oil prices and could prompt higher risk premiums if the market expects crude supply disruptions. Investors also eyed a two-day monetary policy meeting by the Federal Reserve Open Market Committee (FOMC), which gathers on Tuesday. According to the CME's FedWatch Tool, it is a virtual certainty that the FOMC will leave rates unchanged at the conclusion of the meeting on Wednesday. "The upcoming Fed meeting also drives some near-term reservations," said Yeap Jun Rong, market strategist at IG, adding that a longer period of elevated interest rates could trigger a further rise in the dollar while also threatening the oil demand outlook. Some investors are cautiously pricing in a higher probability that the Fed could raise interest rates by a quarter of a percentage point this year and next as inflation and the labor market remain resilient. U.S. product supplies of crude oil and petroleum products, EIA's measure of consumption, rose 1.9% to 19.95 million bpd in Feb. However, concerns over demand have crept up as diesel prices weakened . Balancing the market, output from the Organization of the Petroleum Exporting Countries has fallen in April, a Reuters survey found, reflecting lower exports from Iran, Iraq, and Nigeria against a backdrop of ongoing voluntary supply cuts by some members agreed with the wider OPEC+ alliance. A Reuters poll found that oil prices could hold above $80 a barrel this year, with analysts revising forecasts higher on expectations that supply will lag demand in the face of Middle East conflict and output cuts by the OPEC+ producer group. View on the Reuters Website

Oil and gas industry’s “strong” free cash flow to support increasing production targets

By Emalee Springfield • 01 May, 2024
Last year, the demand for loans from oil and gas companies fell 6% year-on-year, and that followed a decline of 1% in 2022. Oil and gas companies don’t need a lot of loans because they’re generating so much money these days from their underlying businesses, said Andrew John Stevenson, senior analyst at Bloomberg Intelligence. And that trend is likely to continue through the end of the decade, he said. “The oil and gas industry has experienced a number of booms and busts over the past few decades, but for now, it appears to be flush with cash,” he said. The healthy balance sheets reflect the boost that companies have received from rising oil prices, buoyed by robust demand and OPEC+ production cuts. The sector’s free cash flow is so strong that the group’s leverage ratio, which measures a company’s net debt relative to earnings before interest, taxes, depreciation and amortization, fell to 0.8 in 2023 from 2.4 in 2020, Stevenson said. The ratio will likely slide below zero by the end of the decade, he said.
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