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All-in: Chevron Invests $3 Billion in Alternative Fuels

With the purchase of Renewable Energy Group Inc. for $3.15 billion, Chevron makes its largest investment in alternative fuels.

In a statement on Feb. 28, the second-largest U.S. oil and gas company said it would pay $61.5 for each share of Renewable Energy, higher than its February 25 closing price by nearly 40%. In premarket trading, renewable energy shares rose more than 37% on the backdrop of this staunch.

This turn in investments highlights the shift in the world’s attitude toward climate change. Since oil companies contribute heavily to global emissions, governments and investors are increasingly urging them to reduce their carbon footprints and join the fight against emissions.

As state and federal subsidies to decarbonize fuels increase, U.S. refineries have likewise increased the production of renewable diesel.

In line with this, by 2050, Chevron aims to cut gas emissions to zero and in September committed to investing $10 billion to reduce its carbon emissions through 2028, with about $3 billion dedicated to renewable fuels.

In the biofuel industry, agricultural waste and traditional food crops are grown specifically for use as fuel. The feedstock for biodiesel and renewable diesel is similar, however renewable diesel goes through a separate refining process so that its chemical composition is the same as ultra-low-sulfur diesel.

At the moment, various markets are being explored by Chevron as potential sources for blending biodiesel into renewable diesel.

The executive vice president of downstream products and chemicals, Mark Nelson, believes that biodiesel is viewed by business people as a blendstock to achieve optimal margins since it is less expensive than renewable diesel.

As a result, the EIA estimates that renewable diesel capacity in the U.S. may grow more than fivefold by 2024, from a current capacity of 1 billion gallons to over 5 billion gallons.

It is intended that this deal will accelerate Chevron's goal of increasing the production of renewable fuels to 100,000 barrels/day by 2030, and it will provide additional feedstock supplies and pre-treatment facilities.

According to Reuters, Chevron is not likely to break out its renewables business' financials separately immediately. But the possibility of such an outcome will grow with each year.

After the start-up of Renewable Energy Group's Geismar expansion plant in Louisiana, the transaction is expected to add earnings to Chevron in its first year and cash flow to its free cash flow. While the deal itself is expected to close in the second half of the year.

Guggenheim Securities advised Renewable Energy on the deal, while Goldman Sachs provided financial advice to Chevron.

And if you are interested in learning more about greenhouse gas emissions, and how various companies and initiatives try to combat them across the U.S., please contact our Houston sales office or SCHEDULE A DEMO to see our energy data for yourself.

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Winds of Change: Admiral Sold Its Assets in Delaware Basin

And Petro-Hunt E&P is the new sheriff in town with 21,430 net acres of leasehold in the Basin, production of which surpasses 7,000 bbl/d and 100 MMcf/d respectively. To take advantage of it, Petro-Hunt plans to begin an active development drilling program on these assets in the coming months heavily upgrading the numbers of its 775 operating oil wells and contributing to over 8,100 non-operated wells. Time will tell, however, whether or not this move will be able to deliver such results.

Looks like Pine pulled the plug on its properties in Caddo Parish, Louisiana, and Harrison and Panola counties, Texas. Which includes a total of 12,500 acres and ownership interests in 10 operated wells with a production capacity of 100 million cubic feet per day along with 18 miles of naturalgas gathering pipelines. Did Pine just give up on Haynesville?

Oil output in the Permian Basin in Texas and New Mexico is supposed to go up 88,000 bbl/d to a record 5.219 million bbl/d in June, as the U.S. Energy Information Administration (EIA) announced in its report on May 16. Additionally, gas productivity in the Permian Basin and the Haynesville in Texas, Louisiana and Arkansas will rise to record highs of 20 Bcf/d and 15.1 Bcf/d in June, respectively. Given that this growth has been expected, recent global market changes make forecasting the output even more challenging. Learning how production will change is easier with early activity tracking, a new service recently launched by Rextag – Pad Activity Monitor. With the help of PAM, you are able to monitor well pad clearing, drilling operations, fracking crew deployment and completions with new data collected approximately every 2 days. Additionally, it cuts down activity reporting lag times by at least 98%, from 120-180 days down to just 5-8 days. In order to access reports, charts, tables, and mapping visualizations via Rextag’s Energy DataLink use a web-based application allowing users to filter, download and identify activity on a map or data table. Moreover, customers will be able to set up daily, weekly, and monthly email report notifications.

The EIA forecasts that total output in the main U.S. shale oil basins will increase 142,000 bbl/d to 8.761 million bbl/d in June, the most since March 2020. Oil productivity in the Permian Basin in Texas and New Mexico is supposed to go up 88,000 bbl/d to a record 5.219 million bbl/d in June, as the U.S. Energy Information Administration (EIA) announced in its report on May 16. In the largest shale gas basin, the productivity in Appalachia in Pennsylvania, Ohio and West Virginia will grow up to 35.7 Bcf/d in June, its highest since beating a record 36 Bcf/d in December 2021. Gas output in the Permian Basin and the Haynesville in Texas, Louisiana and Arkansas will rise to record highs of 20 Bcf/d and 15.1 Bcf/d in June, respectively. Speaking of the Permian future output, putting hands on upcoming changes in production has recently been made easier with the new Rextag's service - Pad Activity Monitor. Thanks to satellite imagery and artificial intelligence, customers are able to monitor the oil and gas wells and are provided with near real-time activity reports related to drilling operations. However, it is noticed that productivity in the largest oil and gas basins has decreased every month since setting records of new oil well production per rig of 1,544 bbl/d in December 2020 in the Permian Basin, and new gas well production per rig of 33.3 MMcf/d in March 2021 in Appalachia.

No sooner had the crude prices soared above $100/bbl than the industry professionals believed in an incredible growth of drilling activity in North America’s largest shale patch. Analysts speculate that additional output of 500,000 barrels of oil daily would become a significant part (4%) of overall U.S. daily production. That is going to flatter oil and gasoline prices. Drilling permits in the Permian Basin are persistently growing, averaging approximately 210 at the beginning of April. Moreover, the permits trend is noticed as an all-time high as a total of 904 horizontal drilling permits were awarded last month. Nowadays, learning and analysing the current situation and predicting the future development become easier with early activity tracking, a new service recently launched by Rextag. Rextag's Pad Activity monitor (PAM) allows you to see well pad clearing, drilling operations, fracking crew deployment and completions with new data collected approximately every 2 days with the help of satellite imagery and artificial intelligence. While the increase in drilling will result in higher production, U.S. shale producers will have to overcome several hurdles including labor shortages and supply constraints.

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