Can Politics Help the Permian Basin in 2019?

Transcription

1 Can Politics Help the Permian Basin in 2019? September 20 th Petroleum Club of Midland January 31, 2019 Petroleum Club of Midland

2 Who is the PBPA The Voice of the Permian Basin Our Mission To advocate for safe and responsible oil and gas development and to provide education on safety, legislation, regulation, and support services for the industry.

3 PBPA Offices Midland, Texas Austin, Texas Santa Fe, New Mexico

4 The Permian Basin As of last week, there were 492 rigs operating the Permian Basin of West Texas and Southeast New Mexico. 46% of all rigs in the United States 73% of all rigs in Texas 97% of all rigs in New Mexico Through 2017, just in Texas 30 billion barrels of crude 75 trillion cubic feet of natural gas Santa Rita #1

5 BOE/Day Permian Basin Production 4,000,000 Oil & Natural Gas 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 Crude Oil 1,000, ,000 - Natural Gas Equivalent Data from U.S. EIA

6 Barriers to Continued Growth

7 The Permian Basin Periskope Shale Oil Report - January was another outperforming year for U.S. shale oil production, but 2019 faces much more challenges: The Q4 18 oil price decrease has been a game-changer for small- and midsized companies: completion activity is down more than 20%, while the rigs count was stable until recently. Halliburton highlighted last week a modest improvement in completion activity in Q1 19. Bottleneck issues are still present and, even if the risks decreased, they will limit the production upside potential until autumn Right now, Midland WTI is trading at the smallest discount to benchmark Nymex crude futures since March WTI Midland +$1.30/bbl. to $2.25 under WTI at Cushing. Port capacity is the next bottleneck by Last, but not least, with 2018 as a big vintage on production growth, so will the depletion be in 2019: More than two thirds of capex allocated to shale would be used to offset the production decline in our view. Capex increases for Big Oils and decreases for others.

8 Infrastructure/Safety

9 Planned Investment in Energy Sector Corridor For FY 2019 FY 2028 Abilene El Paso Lubbock Odessa San Angelo $538 million $612 million $718 million $1.1 billion $486 million Total planned investments equals $3.4 billion

10 Fatalities Safety Statistics in Energy Sector Areas ( ) Reportable Motor Vehicle Traffic Fatalities in Energy Sector Regions Eagle Ford Shale Permian Basin The Permian Basin contains 2% of Texas population but has 10% of the state s traffic fatalities.

11 PBPA Takeaway Task Force

12 PBPA Takeaway Task Force Gas NGL Crude

13 State Legislative Review 2017 Texas Legislature 6,499 bills were filled before deadline Tracked over 400 bills, focused on 123 RRC Sunset and Funding 2017 New Mexico Legislature 507 bills passed by legislature No bills were passed directly impacting O&G

14 Texas Focal Points for PBPA Railroad Commission Budget New State Road Projects and Funding COL Increase for RRC, TxDOT & DPS Employees Physician Education Loan Repayment Program Family Medicine Residency Program Eminent Domain School Finance

15 Texas Legislative Action So Far Railroad Commission Budget House & Senate both Cut RRC request New State Road Projects and Funding HB 42 White Severance Tax Allocation COL Increase for TxDOT & DPS Employees HB 917 Craddick Truck Safety Physician Education Loan Repayment Program Family Medicine Residency Program Eminent Domain HB 991 & SB 421 (companion bills)

16 Texas Legislative Action So Far Continued Taxes and Revenues Property Taxes Around 100 property tax bills introduced so far 1/3 deal with exemptions Tax rate transparency and the creation of real-time tax notices Reduction in roll back rates School Finance Stated to be a priority by the Governor, Lt. Governor, and Speaker of the House House budget adds $7 billion (no earmarks) Senate budget adds $4.3 billion (with earmarks) HB 569 Capriglione School Finance HB 665 K. King School Finance Still awaiting bill containing recommendations from the School Finance Commission final report Sales Tax Franchise Tax

17 New Mexico Legislative Focal Points Stem the bleeding. All statewide office holders, and the majority in both the House and the Senate are of the same party.

18 New Mexico Legislative Action So Far HB 6 Tax Changes HB 17 Water Leases & Use of Leased Water Road Funding HB 188 Motor Vehicle Excise Tax to State Road Funds HB 189 State Road Fund HB 201 County Road Fund Tax Refund Donation HB 206 Environmental Review Act HB 213 Paid Family and Medical Leave Act Renewable Energy HB 283 Increase Renewable Portfolio Standards HB 289 Fund Investment in Renewable Energy HB 291 Renewable Use of Energy Act Changes SB 186 Oil Conservation Division Powers & Duties

19 January 31 st Petroleum Club of Midland