US upstream oil companies downplay Biden risk

  • Market: Crude oil, Natural gas
  • 10/08/20

US oil and gas producers may have cheered the regulatory rollback of President Donald Trump's administration, but many are describing the prospect of a Democratic administration next year as a manageable risk.

A proposal by presumptive Democratic nominee, former vice-president Joe Biden, to ban new oil and gas permits on federal lands will have the biggest impact, with nearly 22pc of US oil output coming from federally owned land, much of it offshore the Gulf of Mexico. But recent interest in the offshore has been limited, and executives sound sanguine about US political prospects.

"Despite all the rhetoric we hear from the politicians, our view out there is it's pretty safe," leading upstream independent ConocoPhillips' chief executive, Ryan Lance, says. His firm is the largest oil producer in Alaska, with a significant position in the state's National Petroleum Reserve, where he says the most prospective acreage is already under lease. Even a ban on its federal land in New Mexico would be a minor concern. "If we were unable to drill on federal lands completely in New Mexico, we could just substitute that with non-federal lands for the next 10 years," chief operating officer Matthew Fox says.

Regardless, some firms are trying to secure as many federal permits as possible before November. Devon Energy, with about 20pc of its acreage on federal land, has been working quickly to get drilling permits approved. It is targeting over 550 new permits by this autumn, covering 75pc of its most prospective federal acreage.

Devon chief executive David Hager says that federal permits are eligible for two-year extensions — a routine process under any administration. "We've never been declined an extension," Hager says. "And, importantly, the environmental assessments that underlie those permits are good for a period of five years."

Concho Resources has enough permits on its federal land in New Mexico for another 1-2 years of drilling, but has developed scenarios in case it cannot drill there over the next five years. "We feel confident we can quickly shift our capital to other acreage in our portfolio without any significant impact to our capital efficiency over that period," chief operating officer Will Giraud says. About 20pc of Concho's acreage is on federal land.

A lighter shade of green

Biden's energy platform has taken some of the steam out of his most vociferous opponents by not endorsing the Green New Deal touted by many of the most progressive lawmakers in the Democratic party. He also says a hydraulic fracturing ban is not on the table, and focuses more on cutting power-sector CO2 emissions and restoring previously approved fuel-efficiency standards in cars. Biden can also remind the industry he was in the White House when the de facto 40-year ban on US crude exports was lifted, the path for LNG exports cleared and the first permit to drill in US Arctic Ocean waters granted.

Even Continental Resources chairman Harold Hamm, who has been a close advisor to Trump, concedes that Biden has backed off positions seen as most threatening to the industry. Hamm remains confident that Trump will be re-elected.

But other executives point to polls favouring his opponent. "It's obvious unless something happens we'll probably elect Biden," Pioneer Natural Resources chief executive Scott Sheffield says. "And there will be some significant changes."

Oil and gas companies do not appear to be taking their chances. They had pledged three-and-a-half times more cash to the Trump campaign than to Biden by 21 July, with $936,155 donated, according to data from non-profit research group the Center for Responsive Politics. For the 2016 election cycle, Trump raised just 20pc more than his Democratic opponent from oil and gas donors.

US upstream independents' results
2Q202Q19±% 1Q20
Profit $mn
Diamondback-2,393349na-272
ConocoPhillips-994486na-1,143
Marathon Oil-750161na-46
Pioneer-439-169na289
Concho-435-97na-9,277
Parsley-356116na-3,366
Continental-239237na-186
Production '000 boe/d
Diamondback2942805321
ConocoPhillips*9811,290-241,278
Marathon Oil390435-10422
Pioneer37533412375
Concho319329-3326
Parsley18314031197
Continental203331-39361
*excluding Libya

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