General
News
Oil
Majors Say They're Making Progress On Methane. According
to E&E News, “Major oil and gas producers say they’re making progress on lowering methane emissions even as critics wonder whether voluntary efforts are enough to meet global targets under the Paris climate accord. The Oil and Gas Climate Initiative (OGCI),
a group aiming to ‘accelerate the industry response to climate change,’ said its 12 member companies are on track to meet targets for reducing greenhouse gas emissions that it set in July. The group measures its progress in terms of upstream ‘methane intensity,’
which it said has dropped 25% since 2017, according to a performance report. ‘The progress to date is the result of member companies’ targeted work on emissions reduction and a variety of decarbonization measures,’ Jerome Schmitt, chairman of OGCI’s executive
committee, said in a press release announcing the reductions. The group, which includes Exxon Mobil Corp., Royal Dutch Shell PLC, Chevron Corp., BP PLC and Saudi Arabian Oil Co., said its overall upstream carbon intensity decreased by 7% from a 2017 baseline.
The oil companies aim to cut methane intensity, which is the volume of methane released as a percentage of gas marketed, by one-third from 2017 levels by 2025. Absolute upstream carbon emissions also fell by 4% from 2017 levels. The reduction is equivalent
to annual emissions released by 2.4 million U.S. homes, OGCI said. For many of these companies, natural gas flaring during the production process is the biggest source of methane emissions. OGCI says companies have made significant strides in decreasing that
major source of greenhouse gas emissions, even as oil and gas production increased from 2017 through 2019.” [E&E News,
10/20/20
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ConocoPhillips
Doubles Down On The Permian Basin And Fracking With Concho Acquisition. According
to Forbes, “As anticipated, ConocoPhillips COP -3.2% announced Monday morning that it has agreed to a deal to acquire big independent Permian Basin producer Concho Resources in an all-stock transaction valued at $9.7 billion. As such, it represents the largest
U.S. shale-focused acquisition thus far in 2020, far surpassing the $5 billion Chevron CVX -2.2% paid to acquire Noble Energy NBL +1.4% in July. ‘Together, ConocoPhillips and Concho will have unmatched scale and quality across the important value drivers in
our business: an enviable low cost of supply asset base, a strong balance sheet, a disciplined capital allocation approach, ESG excellence and great people,’ ConocoPhillips Chief Executive Ryan Lance said Monday morning in a press statement. Shareholders of
Concho will receive 1.46 shares of ConocoPhillips for each Concho share owned, which amounts to a 15% premium above current valuation. That level of premium had been widely anticipated by market analysts as rumors about the pending deal circulated since last
Wednesday. ConocoPhillips said in its release that the combined company would sport an asset base consisting of 23 billion barrels of oil equivalent and ‘an average cost of supply below $30 per barrel WTI.’ Although that enterprise-wide average cost of supply
is not specific to the new company’s Permian/Delaware Basin shale holdings, it would enable ConocoPhillips to continue to develop those rich underground assets at current market prices. Given that Lance also expects the deal to result in about $500 million
in annual cost and capital savings through 2022, it creates a very positive story for the company to communicate.” [Forbes,
10/19/20
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Group
Asks 10th Circuit To Toss N.M. Oil And Gas Leases. According
to E&E News, “An environmental group is appealing a court ruling this summer denying its request to toss out 192 oil and gas leases in New Mexico. WildEarth Guardians had challenged the Bureau of Land Management’s decision to authorize three lease sales in
2017 and 2018 in the Carlsbad and Permian Basin regions of the state. After a ruling against it in August, attorneys for the group are bringing their case to the 10th U.S. Circuit Court of Appeals in Denver. WildEarth Guardians had maintained that BLM failed
to consider the cumulative climate and environmental impacts of the leases in a state that already has a high level of fossil fuel development. In addition to asking a federal court to throw out the leases, the group sought to prevent the Interior Department
agency from approving any drilling permit applications in areas covered by the sales. WildEarth Guardians also asked the U.S. District Court for the District of New Mexico to find that BLM’s 2018 instruction memorandum had violated a host of federal laws and
regulations, and to block its continued use. The federal court declined to vacate the lease authorizations or find the 2018 memo was illegal. However, the court did grant the challenger’s request to block future leases that did not allow for public participation.
In his opinion, Senior Judge Robert Brack emphasized the importance of applying the law as it currently stands. He pointed to famed environmentalist Rachel Carson’s warning in her 1962 book ‘Silent Spring’ that ‘we stand at a fork in the road.’” [E&E News,
10/20/20
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States,
Environmentalists Preview Claims Against EPA Oil & Gas Air Rule. According
to Inside EPA, “States and environmental groups are outlining arguments they plan to make in litigation against EPA’s rollback of leak detection and other emissions requirements for oil and gas facilities, as the court fight takes shape over the agency’s rulemaking
‘technical’ changes to Obama-era new source performance standards (NSPS). The case is separate from, but related to, litigation challenging EPA’s ‘policy’ rule that made several broader changes to the NSPS, including dropping direct methane standards for sources
in the sector while also eliminating volatile organic compound (VOC) standards for transmission and storage facilities. The new state claims surface in preliminary statements of issues in State of California, et al. v. Andrew Wheeler, pending in the U.S. Court
of Appeals for the District of Columbia Circuit, which broadly accuse the agency of lacking reasoned explanation for its regulation, or otherwise claiming the rule is inconsistent with the Clean Air Act (CAA). The nonbinding arguments respond to EPA’s Sept.
15 reconsideration rule that softened or eliminated leak detection and monitoring requirements, boosted reliance on state programs and created new flexibility for compliance technologies to monitor fugitive emissions. An Oct. 16 statement of issues from nearly
two dozen states led by California cites five questions they want the D.C. Circuit to consider in determining whether EPA’s rule is arbitrary or otherwise unlawful. The states launched suit Sept. 15, the day the rule was formally published.” [Inside EPA,
10/19/20
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ConocoPhillips
To Buy Shale Rival Concho For $9.7 Billion. According
to the Wall Street Journal, “ConocoPhillips COP -3.17% has agreed to buy Concho Resources Inc. for $9.7 billion in what would be the largest U.S. oil deal since the coronavirus pandemic began roiling global energy markets. The acquisition gives ConocoPhillips,
the largest oil producer in Alaska, a much larger footprint in the hottest oil field in the U.S., the Permian Basin of Texas and New Mexico. The combined company would be the largest U.S. oil independent, with output in the Permian second only to Occidental
Petroleum Corp. , according to a JPMorgan Chase & Co. analysis of Enverus data. ‘Sector consolidation is both necessary and inevitable,’ ConocoPhillips Chief Executive Ryan Lance told analysts Monday after the announcement. ‘We both believe our industry needs
solutions that address the lack of scale, poor returns and, increasingly, the challenges and opportunities of environmental, social and governance matters.’ The all-stock acquisition values Concho at a 15% premium to its closing price on Oct. 13 and would
give shareholders 1.46 shares of ConocoPhillips stock for each share of Concho common stock. Bloomberg News reported the companies were close to a deal last week. It is the latest in a series of combinations in the U.S. oil patch, where companies are seeking
to bulk up to ride out weak demand and low prices, which have hovered around $40 a barrel since June, below the level many companies require to make money on new shale wells. Devon Energy Corp. agreed last month to a $2.6 billion merger with WPX Energy Inc.,
while Chevron Corp. agreed in July to buy Noble Energy Inc. for about $5 billion. Both were all-stock deals. ‘Scale has never been more important. Through this transaction, we’re joining Concho with a larger diversified energy company with even more size and
resources to create value in today’s markets and beyond,’ Concho CEO Tim Leach said Monday.” [Wall Street Journal,
10/19/20
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Kinda
Like A Big Deal.
According to the Washington Examiner, “U.S oil major ConocoPhillips announced today it will buy Concho Resources for $9.7 billion, the largest energy deal since the price collapse. The combination forms what promises to be one of the top producers in the Permian
Basin, rivaling Chevron and Occidental Petroleum, and signals the industry will continue to consolidate in the wake of the pandemic. ‘The combination is remarkable,’ said Robert Clarke, vice president of Lower 48 upstream at Wood Mackenzie in a note this morning.
‘The combination bodes well for the Permian’s longer-term outlook.’ Chevron made a similar bet on the Permian this summer, purchasing Noble Energy in a $5 billion all-stock transaction, which was previously the largest oil deal since the pandemic.” [Washington
Examiner, 10/19/20
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ConocoPhillips Nabs Concho In $10b Shale Mega-Deal.
According to Axios, “ConocoPhillips is buying Concho Resources in a $9.7 billion all-stock deal, the companies announced Monday, signaling how the pandemic is prompting new consolidation.
Why it matters: It’s the largest deal yet in the U.S. oil patch since the COVID-19 crisis, which has sharply cut demand and sent prices downward. What they’re saying: The companies said the deal will provide $500 in annual savings by 2022. They said their
combined resource base is competitive even at modest oil prices. The big picture: The combined company ‘will be one of the dominant operators in the Permian Basin of West Texas and New Mexico, rivaling only the likes of Occidental Petroleum Corp. and Chevron
Corp. in terms of crude output,’ Bloomberg notes. Catch up fast: It follows Chevron’s deal to buy the big independent Noble Energy announced in July (which also provided Chevron new gas assets in the Mediterranean Sea). And oil-and-gas producers Devon Energy
and WPX Energy announced a merger in late September.” [Axios, 10/19/20
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Chad Ellwood
Senior Research Associate
Climate Action Campaign
202.448.2877 ext. 119