Rising U.S. Rig Counts: Impact on Global Energy Markets

Impact on U.S. oil and gas supply

Rising U.S. rig counts have significantly boosted oil production to over 13 million barrels per day, reduced gasoline prices, and increased refining capacity. However, temporary production decreases and planned shutdowns have caused fluctuations. Overall, U.S. natural gas production continues to grow, outpacing demand and lowering prices.

"The growth of total U.S. oil production to over 13 million barrels of oil per day has contributed to reduced gasoline prices for U.S. consumers." --- (PXD, press release, 2024/05/02)

"And we completed the last largest refinery expansion in the U. S. Since 2012, adding 250,000 barrels per day of refining capacity in Beaumont, Texas in early 2023. This growth in supply helps reduce rising price pressure, easing the impact on consumers and businesses." --- (XOM, event transcript, 2024/05/29)

"Excluding the impact of items affecting comparability, the decrease in oil and gas segment results for the three months ended March 31, 2024, compared to the three months ended December 31, 2023, was primarily due to lower domestic crude oil volumes largely due to a third-party shut-in of production in Eastern GOM, where production resumed in April 2024, and lower crude oil and domestic natural gas commodity prices." --- (OXY, sec filing, 2024/Q1)

"Refinery crude unit inputs, including crude oil and other inputs, was down 53,000 barrels per day, or 6 percent, primarily due to a planned shutdown at the Pascagoula, Mississippi refinery." --- (CVX, sec filing, 2024/Q1)

"NGL and gas prices decreased due to U.S. natural gas production continuing to grow and outpace demand." --- (PXD, sec filing, 2024/Q1)

Geopolitical implications of increased U.S. production

Increased U.S. oil production, amid geopolitical unrest in the Middle East and the Russia-Ukraine conflict, adds volatility to global energy markets. OPEC+ production cuts and firming oil demand help balance these effects, but changing geopolitical conditions and exploration spending remain critical factors.

"While easing inflationary pressures have reduced macroeconomic uncertainty, geopolitical unrest in the Middle East and the Russia-Ukraine conflict continue to be major sources of volatility for the oil and natural gas markets." --- (HAL, sec filing, 2024/Q1)

"In OFSE, on the back of slowing global demand growth and ongoing economic uncertainty, the recent Organization of the Petroleum Exporting Countries production cut extension, coupled with rising geopolitical risks and firming oil demand in June 2024 have helped to keep global oil markets more balanced." --- (BKR, sec filing, 2024/Q2)

"These statements are subject to risks and uncertainties, including, but not limited to, changing global economic and geopolitical conditions; changes in exploration and production spending by our customers, and changes in the level of oil and natural gas" --- (SLB, press release, 2024/07/19)

"While easing inflationary pressure has reduced macroeconomic uncertainty, risks associated with trade tensions and geopolitical unrest in the Middle East and the Russia-Ukraine conflict continue to be major sources of volatility for the oil and natural gas markets." --- (HAL, sec filing, 2024/Q2)

"In OFSE, a resilient global economy, a steeper than expected seasonal decline in U.S. oil production to start the year, and the roll forward of Organization of the Petroleum Exporting Countries (OPEC+) production cuts have helped to keep global oil markets more balanced." --- (BKR, sec filing, 2024/Q1)

Environmental impact of increased U.S. production

ExxonMobil and Chevron are addressing the environmental impact of increased U.S. production by committing to net-zero emissions, improving environmental performance, and investing in renewable fuels and hydrogen. ExxonMobil aims to achieve net-zero emissions in the Permian by 2030 and has accelerated Pioneer's Net Zero target to 2035.

"Environmental Impact ExxonMobil has industry-leading plans to achieve net-zero Scope 1 and Scope 2 greenhouse gas emissions from its Permian unconventional operations by 2030." --- (XOM, press release, 2024/05/03)

"We also grew production more than 10% from the same quarter last year and announced final investment decisions to grow our renewable fuels and hydrogen businesses." --- (CVX, earning call, 2024/Q1)

"As we've made these reductions, our environmental performance has improved." --- (XOM, earning call, 2024/Q1)

"By combining Pioneer's differentiated inventory and basin knowledge with our technologies, financial resources and industry leading execution excellence, we expect to generate double digit returns by recovering more resource, more efficiently and with a much lower environmental impact." --- (XOM, event transcript, 2024/05/29)

"In addition to increasing production, we plan to pull forward Pioneer's Net Zero ambition by 15 years, from 2050 to 2035." --- (XOM, sec filing, 2024/Q1)

Responses from major energy companies

Chevron and ExxonMobil are responding to rising U.S. rig counts by strengthening traditional energy supplies and investing in new energy ventures. Chevron achieved record production and is investing heavily in both traditional and innovative energy sectors, while ExxonMobil is planning its transition away from fossil fuels.

""We've strengthened our portfolio to grow both traditional and new energy supplies by advancing major capital projects and completing strategic acquisitions." Chevron delivered the highest production in company history with annual production of 3.1 million barrels of oil-equivalent per day in 2023, underscoring the company's track record of strong leadership and worldwide demand for affordable and reliable energy." --- (CVX, press release, 2024/05/29)

"Jim Chapman: All right. Next question. ExxonMobil is an energy company. With fossil fuels slowly being eliminated, what plans are in place or are being contemplated to transition ExxonMobil in the future?" --- (XOM, event transcript, 2024/05/29)

"spend is still going into our traditional business because the majority of the world's energy is still provided by our traditional business, and we've got an obligation to meet that demand as long as it's there." --- (CVX, earning call, 2024/Q1)

"We've also indicated that over a period of time, beginning in 2022 through 2028, I think it was when we announced, we had our energy transition spotlight that we expected to spend about $10 billion in our New Energies business over that period of time." --- (CVX, earning call, 2024/Q1)

"We have committed to investing $500 million in innovative energy businesses through Chevron Technology Ventures' Future Energy Fund III." --- (CVX, Twitter, 2024/05/01)

Technological advancements in U.S. drilling

Technological advancements in U.S. drilling have significantly improved drilling speed, reliability, and efficiency, while also reducing carbon emissions. These innovations have enabled longer horizontal drilling intervals and better data acquisition, enhancing market access and returns for companies like SLB and Halliburton.

"This cooperation resulted in technological milestones that enabled drilling horizontally for long intervals in the reservoir and acquiring a large volume of data critical to the field development while supporting a significant oil discovery." --- (SLB, press release, 2024/04/19)

"We deployed advancements that improved drilling speed and reliability and set several [general] (ph) records during the quarter." --- (HAL, earning call, 2024/Q2)

"Through the use of these SLB technologies, Pioneer was able to increase drilling efficiency in addition to reducing carbon emissions." --- (SLB, press release, 2024/04/19)

"We've got a good position in there, but I think with even more opportunity to grow, particularly with drilling technology that continues to advance." --- (HAL, earning call, 2024/Q1)

"But I would not overlook the importance of the improvement in drilling technology, particularly just because it's more access to a larger market and at a much better rate of return for us given the improvement over legacy technology." --- (HAL, earning call, 2024/Q1)

Regulatory changes and their impact

Regulatory changes, including timely approvals and climate policies, significantly impact U.S. rig counts and global energy markets. Companies like ExxonMobil and ConocoPhillips emphasize the importance of adapting to new laws and regulations, while Chevron highlights the progress made through regulatory approvals, underscoring the critical role of regulatory frameworks in shaping industry dynamics.

"to closing, including timely regulatory approvals; the capture of efficiencies within and between business lines and the ability to maintain near-term cost reductions as ongoing efficiencies; unforeseen technical or operating difficulties and unplanned maintenance; the development and competitiveness of alternative energy and emission reduction technologies; the results of research programs and the ability to bring new technologies to commercial scale on a cost-competitive basis; and other factors discussed under Item 1A." --- (XOM, press release, 2024/05/03)

"Climate Change Continuing political and social attention to the issue of global climate change has resulted in a broad range of proposed or promulgated state, national and international laws and regulations focusing on GHG or methane emissions reduction." --- (COP, sec filing, 2024/Q1)

"You've got regulatory approval through the FTC, and we're making good progress on that." --- (CVX, earning call, 2024/Q1)

"also adversely affect the future results or performance of the Company, including general economic, market or business conditions, future prices of minerals, changes in the financial markets and in the demand for minerals, changes in laws, regulations and policies affecting the mineral exploration industry, as well as the risks and uncertainties which are more fully described in the Company's annual and quarterly management's discussion and analysis and in other filings made by the Company with Canadian securities regulatory authorities under the Company's SEDAR+ profile." --- (XOM, press release, 2024/06/06)

"The Plan also outlines how we intend to apply our strategic capabilities and resources to meet the challenges posed by climate change in an economically viable, accountable and actionable way that balances the interests of our stakeholders." --- (COP, sec filing, 2024/Q1)

Impact on renewable energy investments

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"Contributions from new investments increased $0.12 per share year-over-year, primarily driven by continued growth in our renewables portfolio. Our existing clean energy portfolio increased $0.06 per share, primarily reflecting an increase in wind resources during the quarter." --- (NEE, earning call, 2024/Q2)

"We are now focusing the vast majority of our investments into supplying renewable energy to corporate customers in the US and our rapidly growing utilities. Including this sale, as well as others closed in 2023 and 2024, AES will have achieved more than half of its $3.5 billion asset sale proceeds target through 2027." --- (AES, press release, 2024/05/15)

"They have started to require suppliers to source 100% clean energy, they do A LOT on clean energy for themselves, including signing the world's largest renewable power purchase agreement, investing in fusion and nuclear, and they are by far the biggest buyer of durable carbon removal." --- (ED, Twitter, 2024/05/17)

"We are in the early development stages of that, and we're working with our industry partners, our suppliers and our regulators to really understand what that investment in wind is. Duke is and will continue to be a renewables energy investment leader and generation leader in the future." --- (DUK, event transcript, 2024/05/09)

"We continue to make the necessary investments to provide the reliable, affordable and increasingly clean energy that powers our customers every day, and we are 100% focused on execution." --- (D, earning call, 2024/Q1)