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Significant Rise in U.S. Crude Oil and Gasoline Inventory Levels
02/27/2024
This week, the American Petroleum Institute (API) reported that U.S. crude oil stocks increased by 7.168 million barrels, ending February 16. This rise exceeded analysts' expectations of a 4.298 million barrel increase. Last week, the API noted an 8.52 million barrel jump in crude inventories.
Brent crude saw a modest increase of 0.75% to $82.96, a $0.30 rise from the previous Tuesday, while the U.S. benchmark WTI went up by 1.05% to $77.85, gaining $0.10 from last week.
Cushing's oil inventories rose by 668,000 barrels this week, adding to the previous week's 512,000 barrel increase.
The Department of Energy (DoE) also highlighted a rise in the Strategic Petroleum Reserve (SPR) by 0.7 million barrels as of February 16, reaching a new high of 359.5 million barrels since May 2023.
Oil prices climbed before the API's announcement, fueled by expectations that U.S. refineries would boost operations post-maintenance, potentially reducing crude stockpiles. Market prices also found support from ongoing tensions in Russia and the Middle East.
Gasoline stocks also grew by 415,000 barrels this week, contrasting sharply with the previous week's 7.23 million barrel decrease. Current gasoline reserves are roughly 2% lower than the five-year average for this season, as per the latest Energy Information Administration (EIA) data.
Meanwhile, distillate stocks dropped by 2.908 million barrels, following a 4.016 million barrel decrease the week before. This places distillates 7% below the five-year average for the week ending February 9.
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SilverBow Successfully Completes $700MM Purchase of Chesapeake’s South Texas Holdings
SilverBow Resources Inc. finished buying Chesapeake Energy Corp.'s oil and gas areas in South Texas. They agreed to this $700 million deal back in August. The deal included SilverBow paying $650 million in cash when the deal was closed. They will also pay another $50 million in cash a year later, with some usual changes in the amount. Chesapeake might get an additional $50 million later, depending on the prices of oil and gas in the future. SilverBow paid for this big purchase with the money they had, by borrowing from their credit line, and by selling more of their second lien notes.
2022 A&Ds in O&G Summary and Trends for the past 4 years
More than 60% of all A&D deals by value are in US oil and gas companies. Despite their leading market position, U.S. fields are developing unevenly, and investors are quite cautious about investing in them at this stage. The top 5 oil & gas industry A&D deals in 2022 were concluded by Omega Acquisition, Tokyo Gas, Diamondback Energy, Suncor Energy, and IMM Private Equity. The main motives of oil and gas companies to carry out A&D transactions can be considered the achievement of the synergy effect, and the presence of fundamental shocks in the market.
Kinetik Holdings recently announced a series of transactions in the energy sector. They struck a deal to buy Durango Permian infrastructure for $765 million. At the same time, they're selling their 16% share in the Gulf Coast Express Pipeline to ArcLight Capital Partners for $540 million. The total purchase cost includes $510 million in cash paid immediately and an additional $30 million that will be paid later, depending on whether they decide to expand further.
Recently, the Permian has seen significant acquisitions: Exxon Mobil purchased Pioneer Natural Resources for about $60 billion. Diamondback Energy's $26 billion deal to acquire Endeavor Energy Resources is currently on hold due to requests from the U.S. Federal Trade Commission. Occidental’s acquisition of CrownRock for $12 billion in the Midland.
EOG Resources is pushing boundaries in Ohio's Utica oil play and now drilling on the Sable pad, also located in Noble County. This site features the 3.7-mile lateral currently under construction. The company's first multi-well pads in the area Timberwolf and Xavier have each produced over 200,000 barrels of oil since their inception—Timberwolf in August and Xavier in October. A third site, the four-well White Rhino pad in Noble County, is also showing promising early results, according to Keith Trasko, EOG’s Senior Vice President of Exploration and Production, who noted the wells are performing as expected in their initial weeks.