The Shale Daily Update – 8.11.2020

You have to believe that Oxy CEO Vicki Hollub would take a pass on that $55 billion acquisition of Anadarko Petroleum, knowing what she knows now.
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What You Should Know About Oil and Gas Today

The Big Story

If only she could get a do-over. – You have to believe that, if she could go back in time to April of 2019, Oxy CEO Vicki Hollub would take a pass on that $55 billion acquisition of Anadarko Petroleum, knowing what she knows now.

To be fair, no one could have foreseen the price war that erupted in March between Russia and Saudi Arabia or the advent of the COVID-19 pandemic at the time Oxy stole Anadarko out of from under Chevron at the end of their hugely expensive bidding war. But even at the time, most analysts questioned the wisdom of acquiring so much additional debt to pay a premium price for Anadarko and its assets.

All of this comes up again this week as Oxy reported a huge loss of $8.4 billion for the second quarter of 2020, a loss that equates to $9.12 per share. The loss includes a write-down of its oil and gas assets of $6.2 billion by the company, which remains saddled with $36 billion in debt.

“We continue to make progress on our debt structure and have significantly exceeded our cost savings targets while delivering operational excellence across our business,” Hollub said in a statement. But at the same time, the company acknowledged that, while it is attempting to sell off non-core assets in order to reduce its debt load, it may not be able to execute those sales quickly enough to service the debt in a timely manner, especially after Total backed out of a deal to buy the company’s Ghana assets in May.

Tough times at Oxy. Sometimes the best deals are the deals that don’t get made.

Meanwhile, in other news…

The Houston Chronicle’s Sergio Chapa has a really interesting piece about a plan to use the tailings from the project to deepen and widen the Houston Ship Channel to construct man-made islands that would help with flood control, while at the same time serving as prime recreation spots. Well worth giving it a read.

Somehow this made its way into Bloomberg. Tyler Corder of the Texas Public Policy has a strong opinion piece laying out why real environmentalists should support the building of more pipelines instead of opposing them.

Speaking of fake environmentalists… – Noted energy experts Paul Simon and Willie Nelson have an op/ed in today’s Houston Chronicle opposing Kinder Morgan’s Permian Highway. Just exactly what in the hell does Paul Simon know about Texas or energy? Good lord. Make better editorial decisions, please, Houston Chronicle.

Economist Karr Ingam says the Texas oil and gas industry is now recovering slowly – with the emphasis on the word “slowly.” Ingam projects that getting back to a state of semi-normalcy could take another year for the industry to achieve.

It’s good advice, but don’t expect it to be followed. Former Democrat congressman Gene Green writes in the Dallas Morning News today that Joe Biden could improve his chances of being elected – and carrying Texas in the process – by embracing natural gas:

I’m old enough to remember President Barack Obama’s pride in American natural gas and his willingness to embrace the resource. As the 44th president put it, “The natural gas boom has led to cleaner power, and greater energy independence … natural gas isn’t just appearing magically … we’re encouraging it and working with the industry.”

As recently as 2018 Obama praised his role in helping develop American natural gas, suggesting to a Baker Institute audience at Rice University that “suddenly America’s like the biggest oil producer and the biggest gas producer … that was me, people.”

Despite the shrillest members of our party villainizing natural gas, candidate Biden can improve his November chances by following in Obama’s footsteps and acknowledging that natural gas will do much of the heavy lifting toward his economic and climate goals.

Congressman Green is right, of course. But with Biden taking his energy advice from the likes of Bernie Sanders and Alexandria Ocasio Cortez, his energy policy proposals are going to be based on the standard leftist unicorns and rainbows as his party continues its efforts to drive America into a world that will never really exist.

That’s all for today.