Latest news with #PermianBasin
Yahoo
11 hours ago
- Business
- Yahoo
The Permian Basin is Fueling America's Electric Future
The growth in US power demand is surging to its highest rate in decades, driven first by the electrification of oil and gas production and then by the build out of data centers. While still below the 5-10% growth seen in China, the world's first 'electrostate," the US power sector is experiencing rapid structural growth. The country is delivering more than a 3.5% annual power demand growth rate for the first time in several decades, potentially positioning the US as the world's next 'electrostate,' despite the strong oil and gas focus of the Trump administration. Nationwide electricity consumption increased by around 200 terawatt-hours (TWh) in the last 10 years, with data centers already accounting for about 50% of the growth. Our updated assessment suggests that in the next decade, growth is likely to be four times faster, with more than 800 TWh of consumption added between 2024 and 2034. We expect the commercial sector – largely data centers – to drive ~60% of the growth. Meanwhile, the electrification of the transport, industrial and residential sectors are expected to deliver 90-150 TWh of growth each. While the market attention is focused predominantly on these data centers, we note that the electrification of the Permian Basin has been one of the most significant contributors to the nationwide demand growth in recent years. In fact, there is no other load zone in the country that has experienced the roughly 4 GW increase in average demand that Texas has seen since 2021. This translates into 30-35 TWh of added consumption and accounts for the entire industrial demand growth in Texas in the last four years. Using a combination of industry surveys, public data and Rystad Energy's proprietary data tools and models, we have been able to deconstruct the current 7.5 GW of Permian Texas grid power demand into individual contributors. Roughly 2.5 GW comes from residential and commercial sectors in West Texas and ~30% of that came on the back of accelerated Permian oil and gas development since 2017-2018. Upstream pad operations (mainly electric submersible pumps and other pad equipment) and gas compression contribute with ~2 and ~1 GW to the demand, respectively. The remaining 2 GW comes from direct electricity use at gas power plants, other oil and gas midstream facilities and liquids transmission. Some of these segments are positioned for significant growth in 2025-2035 regardless of oilfield activity outlook amid ongoing electrification of the basin. Hence, the Permian Basin will inevitably remain a critical contributor to nationwide demand growth. By Rystad Energy More Top Reads From this article on
Yahoo
a day ago
- Business
- Yahoo
The $54 Billion Asset Wall Street Ignores.
Introduction: A Legacy of Patient Capital Founded in 1920, Occidental Petroleum (NYSE:OXY) has steadily built a formidable position in the Permian Basin through patient, disciplined capital allocation, underscored by strategic acquisitions supported notably by Berkshire Hathaway. With Anadarko Petroleum acquired in 2019 and CrownRock more recently, Occidental now holds extensive acreage in the Delaware sub-basin, famous for its multiple, deeper, highly productive geological layers. Warning! GuruFocus has detected 6 Warning Sign with FANG. The company's position today is rooted in legacy assets that stretch back decades. The acquisition of Anadarko brought more than 6,000 wells, many drilled into only a subset of the available zones. Occidental now controls an estimated 20,000 producing wells and holds thousands of permitted or identified drilling locations, including underdeveloped zones left untouched by prior operators. As disclosed in its Q1 2025 investor presentation, Occidental estimates it has approximately 18,000 future drilling locationsrepresenting a decades-long inventory of high-quality wells. What Are We Buying? Investing in an exploration and production (E&P) company means buying two things: current productionrepresented by existing wellsand the potential for future production, which in Occidental's case includes a vast backlog of undeveloped drilling locations. Occidental dramatically reduces capital expenditure by drilling new wells on long-depreciated sites. Much of its acreage is held by production (HBP), and many leases were originally granted on legacy federal terms that include a 12.5% royalty ratewell below current Permian norms. Recent legislation has increased federal royalty minimums to 16.67%, while some New Mexico state leases in premium zones now demand up to 25%. This means Occidental avoids paying an additional 412.5% per barrel in royalties relative to new entrantsequating to a $3$9 per barrel advantage at $70 oil and materially enhancing the net present value of each new well. The recycling of infrastructureroads, water systems, and drilling padsminimizes the need for costly surface development and accelerates returns on new production. In 2024, Occidental drilled 550 new wells and allocated $2.8 billion to that activity, representing only the portion of total capex dedicated to well development. This results in a per-well cost of approximately $5.09 million.: Occidental further benefits from its strategy of increasing pad density by adding new wells to existing sites. This approach spreads fixed costsleases, compressors, oil-handling infrastructureacross more output and enhances late-life economics as operating costs replace capital expenditure as the dominant cost category. Furthermore, the fixed and substantial costs required to return each site to its original stateknown as plugging and abandonment liabilitiesare also spread across more wells. This means Occidental's wells are not only cheaper to drill and operate, but also cheaper to shut in, even though they tend to recover their investment more quickly thanks to higher early production. Occidental also benefits from its leadership in CO? injection for enhanced oil recovery. It is by far the largest operator in the U.S. in this field, injecting roughly 2.6 billion cubic feet per day. Because current legislationspecifically the Inflation Reduction Act of 2022awards tax credits for CO? sequestration, Occidental's dominance in this area results in lower effective tax rates, further strengthening its cash generation. These benefits are not yet fully visible in the earnings statement, as the credits only began scaling significantly in 2023 and continue to ramp up in 2024 and beyond. The inventory of 18,000 locations represents a $54 billion hidden asset when considering Occidental's $3 million per-well cost advantage across 18.000 wells. It is capital efficiencyearned through years of disciplined developmentthat now sets the company apart. In addition to being cheaper to drill, Occidental's wells are also more productive initially. The same Q1 2025 presentation shows that Occidental leads the industry in first-year production per well. Because its pay zones are deeper, reservoir pressure is greater, and wells yield more upfront. This means capital is returned more quicklya vital advantage in a volatile commodity market. What Are We Paying? Despite its structural advantages, Occidental trades at a lower valuation than many of its peers. Its price-to-free-cash-flow ratio and market cap per barrel of daily production are both below average: This means investors today are paying nothing for Occidental's hidden assetsits inventory of long-depreciated pads that can be revisited at low cost, or its leadership in CO? injection, which materially lowers its tax rate. These advantages enhance both return on capital and capital efficiency but the market gives Occidental no credit for them. Margin of Safety: Getting More for Less Occidental is not simply a low-cost operatorit is a low-cost operator with a long runway of growth, significant tax advantages, and industry-leading productivity. Yet it trades at a lower price-to-free-cash-flow multiple and market cap per BOE than many peers. That gapbetween what you're buying and what you're payingis what value investing is all about. A Long View: Who Is Buying? Some of the most patient and respected value investors in the world have built stakes in Occidental. Berkshire Hathaway continues to add to its position. Other shareholders include Francis Chou (Trades, Portfolio), Bruce Berkowitz (Trades, Portfolio), and Prem Watsa (Trades, Portfolio)figures known for their focus on long-duration compounders. These investors are not reacting to next week's rig count. They're not looking for a quarterly popthey're buying long-term optionality backed by physical resources and long-cycle infrastructure. They are allocating capital based on decades-long advantages in geology, tax structure, infrastructure, and cost discipline. Their involvement provides a final vote of confidence in Occidental's long-term value proposition. Risks and Resilience One long-term risk to oil producers is a structural decline in demandso-called "peak oil." Occidental is better positioned than most for such a scenario, thanks to its small market share. Even if global oil demand falls 50% by 2040, Occidental can still grow by displacing higher-cost barrels, particularly in industrial, chemical, and fertilizer markets that remain oil- and gas-dependent. Geopolitical risks are also relatively muted. Occidental's operations are concentrated in the United Statesmainly Texas and Oklahoma. These regions offer robust physical security and minimal risk of activism or expropriation. These regions are socially and politically aligned with energy development, making them inhospitable terrain for activists to disrupt. Finally, while Occidental carries significant debt, it has successfully pushed most maturities out beyond the near term. This reduces refinancing risk and gives management the flexibility to prioritize long-term capital allocation over short-term market volatility. Sources and Methodology Occidental Petroleum 2024 10-K Diamondback Energy 2024 10-K EOG Resources 2024 10-K Pioneer Natural Resources 2023 10-K Occidental Q1 2025 Investor Presentation Estimated CO? tax credit benefit ($1.20 per barrel) based on current legislation (~$60 per metric ton CO?). Typical well NPV ($12 million) sourced from TGS Weekly Spotlight This article first appeared on GuruFocus. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
a day ago
- Business
- Yahoo
The $54 Billion Asset Wall Street Ignores.
Introduction: A Legacy of Patient Capital Founded in 1920, Occidental Petroleum (NYSE:OXY) has steadily built a formidable position in the Permian Basin through patient, disciplined capital allocation, underscored by strategic acquisitions supported notably by Berkshire Hathaway. With Anadarko Petroleum acquired in 2019 and CrownRock more recently, Occidental now holds extensive acreage in the Delaware sub-basin, famous for its multiple, deeper, highly productive geological layers. Warning! GuruFocus has detected 6 Warning Sign with FANG. The company's position today is rooted in legacy assets that stretch back decades. The acquisition of Anadarko brought more than 6,000 wells, many drilled into only a subset of the available zones. Occidental now controls an estimated 20,000 producing wells and holds thousands of permitted or identified drilling locations, including underdeveloped zones left untouched by prior operators. As disclosed in its Q1 2025 investor presentation, Occidental estimates it has approximately 18,000 future drilling locationsrepresenting a decades-long inventory of high-quality wells. What Are We Buying? Investing in an exploration and production (E&P) company means buying two things: current productionrepresented by existing wellsand the potential for future production, which in Occidental's case includes a vast backlog of undeveloped drilling locations. Occidental dramatically reduces capital expenditure by drilling new wells on long-depreciated sites. Much of its acreage is held by production (HBP), and many leases were originally granted on legacy federal terms that include a 12.5% royalty ratewell below current Permian norms. Recent legislation has increased federal royalty minimums to 16.67%, while some New Mexico state leases in premium zones now demand up to 25%. This means Occidental avoids paying an additional 412.5% per barrel in royalties relative to new entrantsequating to a $3$9 per barrel advantage at $70 oil and materially enhancing the net present value of each new well. The recycling of infrastructureroads, water systems, and drilling padsminimizes the need for costly surface development and accelerates returns on new production. In 2024, Occidental drilled 550 new wells and allocated $2.8 billion to that activity, representing only the portion of total capex dedicated to well development. This results in a per-well cost of approximately $5.09 million.: Occidental further benefits from its strategy of increasing pad density by adding new wells to existing sites. This approach spreads fixed costsleases, compressors, oil-handling infrastructureacross more output and enhances late-life economics as operating costs replace capital expenditure as the dominant cost category. Furthermore, the fixed and substantial costs required to return each site to its original stateknown as plugging and abandonment liabilitiesare also spread across more wells. This means Occidental's wells are not only cheaper to drill and operate, but also cheaper to shut in, even though they tend to recover their investment more quickly thanks to higher early production. Occidental also benefits from its leadership in CO? injection for enhanced oil recovery. It is by far the largest operator in the U.S. in this field, injecting roughly 2.6 billion cubic feet per day. Because current legislationspecifically the Inflation Reduction Act of 2022awards tax credits for CO? sequestration, Occidental's dominance in this area results in lower effective tax rates, further strengthening its cash generation. These benefits are not yet fully visible in the earnings statement, as the credits only began scaling significantly in 2023 and continue to ramp up in 2024 and beyond. The inventory of 18,000 locations represents a $54 billion hidden asset when considering Occidental's $3 million per-well cost advantage across 18.000 wells. It is capital efficiencyearned through years of disciplined developmentthat now sets the company apart. In addition to being cheaper to drill, Occidental's wells are also more productive initially. The same Q1 2025 presentation shows that Occidental leads the industry in first-year production per well. Because its pay zones are deeper, reservoir pressure is greater, and wells yield more upfront. This means capital is returned more quicklya vital advantage in a volatile commodity market. What Are We Paying? Despite its structural advantages, Occidental trades at a lower valuation than many of its peers. Its price-to-free-cash-flow ratio and market cap per barrel of daily production are both below average: This means investors today are paying nothing for Occidental's hidden assetsits inventory of long-depreciated pads that can be revisited at low cost, or its leadership in CO? injection, which materially lowers its tax rate. These advantages enhance both return on capital and capital efficiency but the market gives Occidental no credit for them. Margin of Safety: Getting More for Less Occidental is not simply a low-cost operatorit is a low-cost operator with a long runway of growth, significant tax advantages, and industry-leading productivity. Yet it trades at a lower price-to-free-cash-flow multiple and market cap per BOE than many peers. That gapbetween what you're buying and what you're payingis what value investing is all about. A Long View: Who Is Buying? Some of the most patient and respected value investors in the world have built stakes in Occidental. Berkshire Hathaway continues to add to its position. Other shareholders include Francis Chou (Trades, Portfolio), Bruce Berkowitz (Trades, Portfolio), and Prem Watsa (Trades, Portfolio)figures known for their focus on long-duration compounders. These investors are not reacting to next week's rig count. They're not looking for a quarterly popthey're buying long-term optionality backed by physical resources and long-cycle infrastructure. They are allocating capital based on decades-long advantages in geology, tax structure, infrastructure, and cost discipline. Their involvement provides a final vote of confidence in Occidental's long-term value proposition. Risks and Resilience One long-term risk to oil producers is a structural decline in demandso-called "peak oil." Occidental is better positioned than most for such a scenario, thanks to its small market share. Even if global oil demand falls 50% by 2040, Occidental can still grow by displacing higher-cost barrels, particularly in industrial, chemical, and fertilizer markets that remain oil- and gas-dependent. Geopolitical risks are also relatively muted. Occidental's operations are concentrated in the United Statesmainly Texas and Oklahoma. These regions offer robust physical security and minimal risk of activism or expropriation. These regions are socially and politically aligned with energy development, making them inhospitable terrain for activists to disrupt. Finally, while Occidental carries significant debt, it has successfully pushed most maturities out beyond the near term. This reduces refinancing risk and gives management the flexibility to prioritize long-term capital allocation over short-term market volatility. Sources and Methodology Occidental Petroleum 2024 10-K Diamondback Energy 2024 10-K EOG Resources 2024 10-K Pioneer Natural Resources 2023 10-K Occidental Q1 2025 Investor Presentation Estimated CO? tax credit benefit ($1.20 per barrel) based on current legislation (~$60 per metric ton CO?). Typical well NPV ($12 million) sourced from TGS Weekly Spotlight This article first appeared on GuruFocus. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
2 days ago
- Business
- Yahoo
Chevron To Eliminate 200 Jobs In The Permian Basin, Bloomberg Reports
Chevron Corporation (NYSE:CVX) is among the 13 Best Hydrogen and Fuel Cell Stocks to Buy According to Analysts. It has disclosed plans to lay off 200 people in the Permian Basin, revising the Texas Workforce Commission's prior, inaccurate announcement of 800 layoffs. A tanker truck making its way through a refinery facility. . The company informed the commission and explained the disparity. These layoffs are a part of its larger restructuring initiative, which aims to cut costs by $3 billion and reduce its global workforce by 20%, or 9,000 employees, by the end of 2026. The action is a reflection of Chevron Corporation (NYSE:CVX)'s strategic change toward operational efficiency in the face of volatile oil prices. The business is simplifying its operations under CEO Mike Wirth in order to increase free cash flow. It is anticipated that the Permian Basin, a key production center for Chevron Corporation (NYSE:CVX), will produce one million barrels of oil equivalent per day, or almost one-third of the world's total production. The company expects a plateau later this decade, despite the fact that production is increasing. The impacted employees are receiving transition assistance and severance payments from the company. Chevron Corporation (NYSE:CVX) is a major producer of hydrogen, producing around 1 million tonnes a year, mostly for use in refining processes. The company plans to grow its hydrogen business and supply hydrogen to a wider consumer base by utilizing its existing refineries, distribution networks, sales channels, and well-known brand. While we acknowledge the potential of CVX as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock. READ NEXT: 10 High-Growth EV Stocks to Invest In and 13 Best Car Stocks to Buy in 2025. Disclosure. None. Sign in to access your portfolio
Globe and Mail
2 days ago
- Business
- Globe and Mail
Where Will Energy Transfer Be in 5 Years?
Energy Transfer (NYSE: ET) has changed a lot over the past five years. In 2020, the master limited partnership's (MLP) financial profile had weakened to the point that it needed to slash its distribution by 50% to retain additional cash to fund its expansion projects and repay debt. Fast-forward five years, and the midstream giant is in the best financial shape in its history. It reduced debt and increased its earnings by more than 50%. Its improving financial flexibility has enabled it to raise its cash distribution well past its prior peak. Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue » The MLP expects to continue growing over the next several years. Here's a look at where Energy Transfer is on track to be by 2030. The coming growth spurt Energy Transfer is currently investing heavily in expanding its energy midstream network. The company plans to invest $5 billion into capital projects this year, an increase from $3 billion last year. Fueling the higher spending level is a wave of expansion projects it has approved over the past few months. The biggest project is the Hugh Brinson Pipeline, which will transport natural gas from the Permian Basin to market hubs. The company has started work on the first phase of the 400-mile pipeline that will have the capacity to ship 1.5 billion cubic feet per day when it enters service at the end of next year. Energy Transfer is working on securing customers for phase two, which would increase its capacity to 2.2 billion cubic feet per day. The combined cost for both phases is $2.7 billion. Energy Transfer is also building more natural gas processing plants, expanding its Nederland Flexport terminal, and building another NGL fractionator. These and other projects have in-service dates from mid-2025 through the end of 2026. Given that time frame, "we continue to expect the majority of the earnings growth from these projects to significantly ramp up in 2026 and 2027," stated co-CEO Tom Long on the company's first-quarter earnings conference call. Because of that, Energy Transfer should have plenty of fuel to continue increasing its high-yielding distribution (currently over 7%) for at least the next several years. Multiple growth catalysts Energy Transfer's current backlog of expansion projects should all enter service by the end of next year. However, that doesn't mean the MLP is running low on fuel. It has a large pipeline of projects under development. The biggest is its long-delayed Lake Charles LNG export terminal. After encountering many roadblocks, Energy Transfer is getting close to finally making a final investment decision on this project. It has signed several commercial contracts backing the project. On top of that, it secured MidOcean Energy as a joint development partner (30% equity interest). Building Lake Charles LNG would enhance and extend Energy Transfer's growth outlook. It would earn incremental income from its retained stake in Lake Charles LNG. On top of that, it would benefit from increased volumes flowing through its natural gas pipeline network to Lake Charles, which would provide it with substantial incremental cash flows. Lake Charles is one of many expansion projects the company is currently developing. It sees three major catalysts fueling its growth over the next several years: Continued strong Permian Basin volume growth Increasing natural gas power demand Strong global demand for U.S. NGL production The company is seeing significant demand for natural gas from new and existing customers. It has requests to connect more than 60 power plants to its gas pipelines and over 200 data centers. It has already signed a contract to supply gas to CloudBurst's artificial intelligence (AI) data center in Texas. Energy Transfer is also exploring lower-carbon investment opportunities (carbon capture and sequestration and blue ammonia). In addition, the company has a long history of making accretive strategic acquisitions. It has made several deals over the past five years, including Enable Midstream (2021), Crestwood Equity Partners (2023), and WTG Midstream (2024). Given its financial strength, Energy Transfer has ample flexibility to continue making acquisitions over the next five years. A bigger company with an even higher distribution Energy Transfer will likely be a much bigger company in five years. It has several expansion projects under construction and more in development. It also has the financial flexibility to continue its strategy of consolidating the energy midstream sector. That growth should give the MLP more fuel to increase its high-yielding distribution. The MLP aims to raise its payout by 3% to 5% per year. Given what seems ahead, Energy Transfer will likely be a much bigger company with an even higher distribution payment in five years. That growth and income should give it the fuel to produce attractive total returns in the coming years, making it look like a compelling long-term investment opportunity. Should you invest $1,000 in Energy Transfer right now? Before you buy stock in Energy Transfer, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Energy Transfer wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $660,821!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $886,880!* Now, it's worth noting Stock Advisor 's total average return is791% — a market-crushing outperformance compared to174%for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of June 9, 2025
