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The growth of the U.S. oil and gas industry in 2022 will come from smaller companies and private businesses

The U.S. is expected to see an increase in oil production thanks to little-known private companies that are unaffected by stock market pressures. By 2022, oil output is expected to grow by 800,000 bbl/d, increasing sharply from this year and making the U.S. the fastest-growing oil producer outside of the OPEC cartel.

Surprisingly, the rise is not being driven by major oil companies. More than half of total U.S. output growth next year will come from privately-held producers, versus regularly expected 20%.

Currently, oil prices are hovering around $70/bbl, which makes most shale wells profitable to drill. Yet, despite huge losses resulting from the pandemic as well as unsustainable drilling rampage, the majority of leading oil companies have promised their shareholders to limit the amount they spend on growth for now. In contrast, private companies decided to bite the bullet, and have been leading the rise in oil and gas rigs drilling in the U.S. this year, which has more than doubled over from past September.

The onset of the Coronavirus pandemic of late 2019 dethroned the American oil industry from the leading position — which it got thanks to active shale field development — by forcing States to slow production from a peak of about 13 million barrels/day in late 2019 to about 11.1 million barrels/day by the end of 2020 due to low oil prices and falling demand.

Nevertheless, increasing crude oil production is now on the government agenda after the impact of Hurricane Ida, and expects production to reach 12.2 million barrels/day by the end of 2022. It is projected that drilling and bringing new oil wells online will grow more than $15 billion in one year.

In times of tight oil supplies, U.S. growth will impact world oil market balances. Currently, OPEC+ nations alone have been bringing about 400,000 bbl/d of new production volumes to the market each month in response to the unprecedented cuts last year.

Bank of America also expects to see new supplies from the United States of about 800,000 barrels per day in 2022 in a bid to ease supply concerns. And even with a strong comeback from the U.S., crude prices should still hold well above $70/bbl next year and could, potentially, even jump as high as $100/bbl.

Despite these prospects, many leading oil companies still decided to bow down to their shareholders, putting profits overproduction increases.

Although the oil and gas sector has been on a decline for the past couple of years, changes in the public’s perception of the industry might not be too far away. A recent rise in oil prices is being accompanied by a continued level of capital discipline from producers, which could lead to a healthier reputation for the sector.

At Rextag we also expect to see some fairly major shifts in perception, in line with the way other sectors dealt with shifts in business models.

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Restructuration is in a full-speed: Comstock to sell Bakken for $154 million

Comstock Resources decided to go through with asset divestment, selling its Bakken Shale actives for $150M to Northern Oil and Gas. The proceeds from these sales will be reinvested by Comstock Resources Inc. into the Haynesville Shale, at which point the company may acquire additional leasehold and fund drilling activities starting in 2022. Meanwhile, Northern clearly gunning for the pack leading position in the Texas shale play, but whether they succeed or not is remains to be seen.

Penn Virginia announced a rebranding to Ranger Oil on 6 Oct. following the close of the Lonestar acquisition. This Texas oil & gas giant reinvents itself anew, shifting its energy development in the lone star state towards safer and more efficient oil and gas operations. The company's consolidated assets now amount to over 140,000 net acres strategically positioned in the Eagle Ford play of south Texas, making it one of the biggest players. It is anticipated that the full rebranding will be complete by the year-end of 2021. For the full rundown of the situation visit our blog.

Shareholder’s payout target was increased by 50% after the largest U.S. independent oil producer surpassed Wall Street’s earnings estimates on growing energy prices, said Houston-based Conoco Phillips Co. on Aug. 4. Due to Western sanctions on major producer Russia throttling energy supply amid a rebound in demand from pandemic lows, oil and gas #prices have soared. Crude has been trading more than 25% higher since the start of the year and results also benefited from high natural gas prices. Meanwhile, shares were down a fraction, to $91.03, in early trading but are up about 26% year to date. Conoco Phillips stated, that the average price obtained for a barrel of oil and gas accelerated 77% from a year earlier to $88.57. The company acknowledges that it has not hedged any of its oil and gas sales to make the most of higher market prices. The capacity of 1.69 million boe/d was in line with Wall Street estimates, however, the company expected the current quarter’s output would be between 1.71 million and 1.76 million boe/d.

California oil joint venture, Aera Energy, of Exxon Mobil Corp. and ShellPlc is being sold to German asset manager IKAV, according to the agreement of Sept. 1. Shell noted that the sale of its 51.8% membership interest in Aera Energy is for a total consideration of about $2 billion in cash with additional contingent payments based on future oil prices, subject to regulatory approval. However, the total transaction value was not disclosed. Being one of California’s largest oil and gas producers, Aera Energy accounts for nearly 25% of the state’s production. The sale by Exxon Mobil and Shell ends a 25-year-long partnership in California, meanwhile, it persists a streak of divestments of mature oil and gas properties by the two supermajors. Aera Energy LLC operates about 13,000 wells in the San Joaquin Valley in California, producing oil and associated gas. In 2021, Aera took out about 95,000 boe/d. Exxon Mobil’s interests in the Aera oil-production operation in California contained a 48.2% share of Aera Energy LLC and a 50% share of Aera Energy Services Co. held by Mobil California Exploration & Producing Co. Moreover, Exxon Mobil affiliates have signed a separate agreement for the sale of an associated loading facility and pipeline system. The sale effectively ends Shell’s upstream position in California. The company reported that the divestiture is valued to result in a post-tax impairment of $300 million to $400 million, subject to adjustments.

The completion of the merger between Centennial Resource Development Inc. and Colgate Energy Partners II LLC happened on Sept. 1, sealing the debut of Permian Resources Corp., which is considered the largest pure-play E&P company in the Delaware Basin. Permian Resources’ idea was to combine two successful E&P companies, creating a better, stronger, and more strategically compelling company. Centennial and Colgate announced an agreement to merge in May, denying rumors that Colgate, a privately held independent Midland-based company, had been seeking an IPO. The merger estimated Colgate at about $3.9 billion and consists of 269.3 million shares of Centennial stock, $525 million of cash, and the assumption of approximately $1.4 billion of Colgate’s outstanding net debt. Permian Resources, being the combined company, has a deep inventory of “high-quality” drilling locations on around 180,000 net acres the companies anticipate will provide more than $1 billion of free cash flow in 2023 at current strip prices, in accordance with the company release on Sept. 1.

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