The Shale Daily Update – 8.4.2020: The Last Oil Rig Exits Venezuela

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The Big Story

The last oil rig has officially left the premises. In Venezuela, that is. There, Nabors said it had shut down its final active drilling rig as of Monday. As reported by Sergio Chapa at the Houston Chronicle, this action now brings the active rig count in that formerly prosperous socialist nation to ZERO.

Think about that for a moment: Venezuela is home to larger oil reserves than any other nation on earth, including the United States, Saudi Arabia and Russia. Yet, because of the nature and brutish stupidity of its government, not a single company is any longer willing to try to explore for that massive sunken treasure.

The final Nabors rig had been operating in the prolific Petropiar Field at the behest of a joint venture between Chevron and PDVSA, the national Venezuelan oil company. But as the situation in Venezuela has spiraled into chaos over the past half-decade, the operations there had been plagued by delays, equipment theft and power failures.

As Chapa reports, the breakdown of Venezuelan society at the hands of the brutal regime has cost Chevron dearly: The company reported an operating loss of $8.3 billion for the second quarter, $2.6 billion of which was due to a forced write-down of the value of its Venezuelan reserves.

At its peak, Venezuela produced almost 3 million barrels of oil per day. Just 10 months ago, the number stood at 912,000 bopd. In July, the number had collapsed to just 393,000 bopd. If something does not change soon, it is possible that the number could actually go to zero.

The absolute disintegration of the country’s once-booming oil and gas industry is just one of many elements in the story of Venezuela’s sad collapse. But it’s a big one.

Meanwhile, in other news…

In the oil and gas industry, political contributions tend to flock to the perceived leader in the race. Company PACs and industry executives work hard to curry favor with those likely to win, or at least not to offend them by supporting their opponents, for fear of retribution after the election. In a tight race, you see the donations run very close between both contenders.

That was certainly the case in 2016, when executives at many leading oil and gas firms lavished hundreds of thousands of dollars on the surefire winner according to all the “experts,” Hillary Rodham Clinton, despite her opposition to the industry. Donald Trump, who in fact won the race, only collected slightly more than Ms. Clinton. The industry is very lucky the President hasn’t held a grudge over that slight, as so many politicians would have done.

This year, however, the story is reversed: As the Houston Chronicle reports this morning, most of the industry’s contributions are flooding to the President despite the sage advice from all the “experts” that Joe Biden has a big lead in the race. Hey, maybe it’s because Mr. Biden has at various points in his campaign promised to ban hydraulic fracturing, stop new leasing on federal lands and in the Gulf of Mexico and even to end the use of oil and natural gas entirely.

Yeah, that might have something to do with it.

According to James Osborne, The oil and gas sector has given Trump $935,000 in campaign donations as of July 21, more than three times what they have given Biden, according to the Center for Responsive Politics, a think tank that tracks corporate contributions and lobbying. That is a sharp shift from four years ago when Trump collected $1.2 million in donations from the industry, only $200,000 – or 17 percent – more than Democratic nominee Hillary Clinton.

The only surprising thing there is that anyone in the industry is actually contributing to a candidate who is promising to put them out of business. Inexplicable.

Sergio Chapa also reports that Castleton Resources is expanding its footprint in the Haynesville Shale region via a $245 million lease acquisition from Range Resources.

Marathon Petroleum, in a rarity for the 2nd quarter in the oil and gas business, actually reported a profit on Monday. It’s a small profit of just $9 million, but hey, at least it’s not in the red like pretty much everyone else is for this quarter. Marathon also notified investors that it is selling its Speedway chain of convenience stores to 7-11 Corp. in a major $21 billion transaction.

That’s all for today.









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