What to Expect From the U.S. Upstream Oil & Gas Industry

Current Production Levels and Trends

Current U.S. upstream oil and gas production levels are robust, with companies like ConocoPhillips and ExxonMobil reporting strong outputs. Chevron's production increased by 12% due to acquisitions and growth in key U.S. basins. However, market demand and strategic reinvestment decisions are influencing production trends, as noted by EOG Resources.

"The primary driver of that is our once every 5-year turnaround at Surmont, which will impact production by about 50,000 barrels per day during the quarter. For the full year, we have raised the midpoint of our production outlook, reflecting strong second quarter results." --- (COP, earning call, 2024/Q2)

"you've got a bigger recognition on just the idea of does the market actually need the barrels that we're producing, balance versus what are the optimal levels of reinvestment to really optimize near term cash flow generation, long term free cash flow generation and ultimately the returns on the investment." --- (EOG, conference, 2024/05/29)

"So when we talk about fluctuations in the Midstream business with respect to crude marketing, normally that -- some of that's associated with picking up the third-party barrels that are associated with the capacity that we need to fill with incremental barrels above and beyond our current production." --- (OXY, earning call, 2024/Q1)

"We achieved record levels of reliability and record production levels in both upstream and refining. And we kept £45,000,000 of plastic out of landfills through advanced recycling and cut operated methane emissions intensity by more than 60% since 2016." --- (XOM, event transcript, 2024/05/29)

"Production The company’s worldwide net oil-equivalent production in the first three months of 2024 averaged 3.35 million barrels per day, an increase of 12 percent from the first three months of 2023 primarily due to the acquisition of PDC Energy, Inc. (PDC) and production growth in the Permian and Denver-Julesburg (DJ) Basins in the U.S. and the Tengizchevroil affiliate in Kazakhstan, partly offset by planned downtime in Nigeria." --- (CVX, sec filing, 2024/Q1)

Capital Expenditure and Investment Plans

Capital expenditures in the U.S. upstream oil & gas industry have increased significantly in 2024, with Chevron, ConocoPhillips, ExxonMobil, and Occidental Petroleum all reporting higher investments. However, EOG Resources highlights potential fluctuations in costs and expenditures due to market uncertainties.

"Capital expenditures totaled $8.1 billion in the first six months of 2024, up $1.3 billion from the year-ago period largely due to higher investments in upstream, including post-acquisition spend on legacy PDC assets." --- (CVX, sec filing, 2024/Q2)

"Also in the first quarter of 2024, we re-invested $2.9 billion into the business in the form of capital expenditures and investments, with over half of the expenditures related to flexible, short-cycle unconventional plays in the Lower 48 segment, where our production has access to both domestic and export markets." --- (COP, sec filing, 2024/Q1)

"Capital and exploration expenditures were $12.9 billion, up $0.3 billion from the first six months of 2023." --- (XOM, sec filing, 2024/Q2)

"Capital expenditures, of which the majority were for the oil and gas segment, were approximately $3.6 billion for the six months ended June 30, 2024, compared to $3.1 billion for the six months ended June 30, 2023." --- (OXY, sec filing, 2024/Q2)

"Further, EOG expects the market for drilling and completion services and related labor and materials will continue to fluctuate and, as a result, there can be no assurance regarding the timing and impact of any future price changes on EOG's operating costs and capital expenditures and, in turn, on EOG's cash flows, results of operations, liquidity, capital resources, cash requirements or financial position or its ability to conduct its day-to-day drilling, completion and production operations." --- (EOG, sec filing, 2024/Q2)

Impact of Regulatory Changes and Policies

Regulatory changes and policies significantly impact the U.S. upstream oil and gas industry. Companies like ExxonMobil and EOG Resources highlight the material effects of obtaining necessary regulatory permits. ConocoPhillips and Chevron emphasize the need to adapt to legislative initiatives and maintain flexibility, while Occidental Petroleum underscores the importance of lobbying disclosure in managing regulatory impacts.

"Actual future results, including project plans, schedules, initial capacities, production rates, and resource recoveries could differ materially due to: changes in market conditions affecting the oil and gas industry or long-term oil and gas price levels; political or regulatory developments including obtaining necessary regulatory permits; reservoir performance; the outcome of future exploration efforts; timely completion of development and construction projects; technical or operating factors; and other factors cited under the caption "Factors Affecting Future Results" on the Investors page of our website at exxonmobil.com and under Item 1A." --- (XOM, press release, 2024/04/12)

"• Legislative and regulatory initiatives addressing environmental concerns, including initiatives addressing the impact of global climate change or further regulating hydraulic fracturing, methane emissions, flaring, water disposal or LNG exports." --- (COP, sec filing, 2024/Q2)

"The company will continue to maintain flexibility in its portfolio to be responsive to changes in policy, technology, and customer and consumer preferences." --- (CVX, sec filing, 2024/Q1)

"For example, Occidental believes in addressing climate change, yet its membership in the U. S. Chamber of Commerce has been a central actor against climate change legislation for 2 decades. Lobbying disclosure is a safety mechanism for our company, its reputation and shareholders as what gets disclosed gets managed." --- (OXY, AGM, 2024/05/02)

"We found a beautiful four way closure that we think is liquids. And we've been for the last year and a half, we've been in the permitting process working through the regulatory on it." --- (EOG, conference, 2024/06/17)

Technological Innovations and Efficiency Improvements

Technological innovations in the U.S. upstream oil & gas industry are driving significant efficiency improvements. Companies like Chevron, ConocoPhillips, Occidental Petroleum, EOG Resources, and ExxonMobil are leveraging breakthroughs in data technology, steady state programs, subsurface expertise, and low carbon solutions to enhance operational efficiency, asset productivity, and sustainability.

"For instance, the breakthroughs we’re seeing in data technology offer significant opportunities for both efficiency, asset productivity, improved safety and other performance." --- (CVX, earning call, 2024/Q2)

"So, as we've done since the second half of twenty twenty two, we're really going to focus on level loaded steady state programs where we can drive that operating efficiency, which leads to the improved capital efficiency." --- (COP, M&A Announcement, 2024/05/29)

"Our subsurface expertise, technical excellence and operational strength allow us to continuously achieve basin-leading well performance while simultaneously driving efficiency and savings." --- (OXY, earning call, 2024/Q2)

"Through EOG’s differentiated approach to organic exploration, the utilization of technology to improve operational efficiencies, vertical integration of certain parts of the supply chain and our diverse marketing strategy, EOG remains focused on being among the highest return, lowest cost and lowest emissions producers offering sustainable value creation through the cycles." --- (EOG, earning call, 2024/Q1)

"All of our businesses, including low carbon solutions, we're developing innovative new technologies or applications to reliably meet society's evolving needs affordably." --- (XOM, AGM, 2024/05/29)

Market Demand and Consumption Trends

Market demand and consumption trends in the U.S. upstream oil & gas industry are influenced by supply and demand factors, with natural gas showing significant growth. LNG sales contracts and global supply-demand dynamics also play a role, while industry margins remain volatile due to these balances. Oil demand remains healthy, contingent on managing supply.

"Prices are market driven and future prices will fluctuate due to supply and demand factors, availability of transportation, seasonality, geopolitical developments and economic factors, among other items." --- (PXD, sec filing, 2024/Q1)

"So there is an emerging demand on the natural gas side of, quite frankly, growth, a market growth that is quite a bit larger than what we see on the oil side." --- (EOG, conference, 2024/05/29)

"Maybe can you speak more broadly in terms of what you’re seeing on -- as you’ve got out and market the gas, what you’re seeing more broadly on appetite and market dynamics for LNG sales contracts, and maybe how you think about global supply-demand dynamics over the next couple of years in those markets?" --- (COP, earning call, 2024/Q2)

"Industry margins are sometimes volatile and can be affected by the global and regional supply-and-demand balance for refined products, petrochemicals and renewable fuels, and by changes in the price of crude oil, other refinery and petrochemical feedstocks, and natural gas." --- (CVX, sec filing, 2024/Q2)

"So demand continues to be fairly healthy from an oil standpoint. It is just a question of working through the supply that is coming on." --- (XOM, earning call, 2024/Q2)

Geopolitical Influences and International Relations

Recent geopolitical activities have driven up oil prices, adding complexity to international exploration. EOG Resources is cautious about international exposure, adapting strategies based on agreements and market structures. The emergence of new LNG plants influences their preparedness to increase international operations.

"At the same time, I think you see just in the last couple of years with some of the geopolitical activity driving up oil price, you kind of see the higher end." --- (EOG, conference, 2024/05/29)

"When we think about a percentage of our portfolio that we would necessarily like to have exposed to international, I'm not sure if we have a set percentage that we publicize right now because it really is dependent on the types of agreements and the marketing structures that we see available at the time." --- (EOG, earning call, 2024/Q2)

"International exploration, not in the U. S, it's got another layer of complexity on that comes with the surface, and everybody can appreciate that and appreciate how what that fits for us." --- (EOG, conference, 2024/05/29)

"But in terms of your preparedness to step up your international exposure, what are you thinking as we see incremental LNG plants start to come out of the wood work, like the Woodside deal with Wheelan [ph], for example." --- (EOG, earning call, 2024/Q2)

"So, it's we've got international exploration that we're working on right now." --- (EOG, conference, 2024/05/29)

Environmental Concerns and Sustainability Initiatives

Chevron, EOG Resources, and ExxonMobil emphasize their commitment to environmental stewardship and sustainability initiatives, focusing on conservation, emissions reduction, and innovative technologies. However, ConocoPhillips faces criticism for potentially removing greenhouse gas reduction targets from executive compensation, indicating a mixed approach within the industry.

"The company is also deeply committed to conservation, education, and sustainability career training by partnering with local and national organizations that help protect land and oceans." --- (CVX, press release, 2024/04/10)

"Maintaining the lowest possible operating cost structure, coupled with efficient and safe operations and robust environmental stewardship practices and performance, is integral in the implementation of EOG's strategy." --- (EOG, sec filing, 2024/Q2)

"Item 5 on the agenda is a stockholder proposal for our Board of Directors, Human Resources and Compensation Committee to revisit its pay incentives for executive pay and consider eliminating greenhouse gas reduction targets from compensation." --- (COP, event transcript, 2024/05/14)

"You have our commitment that we'll keep working to deliver energy and products safely and with fewer emissions in the years ahead." --- (XOM, event transcript, 2024/05/29)

"EnerCom Denver - The Energy Investment Conference will once again include The Energy Transition and Emerging Technology Session featuring quick-pitch investment presentations from promising start-up energy and technology companies focused on innovation and operations in alternative energy, advanced oil and gas technology, environmental sustainability and carbon solutions." --- (CVX, press release, 2024/07/17)

Workforce Dynamics and Labor Market Trends

The U.S. upstream oil & gas industry is witnessing a dynamic shift in workforce adaptability and mobilization. Companies like ExxonMobil emphasize the skilled workforce's role in leading energy transitions, while ConocoPhillips focuses on combining and rationalizing workforces to optimize operations and achieve cost savings.

"With respect to the proposal, our history is filled with examples of the company and its employees adapting successfully to societal change, creating or expanding businesses that grew our company and the livelihoods of our employees, while also listening to and supporting communities and spurring local economic growth. Our current workforce has the skills needed to participate in and lead a thoughtful energy transition." --- (XOM, event transcript, 2024/05/29)

"And we'll mobilize the workforces and combine that footprint again sort of seeing the savings there. But then sort of more sort of the tackling side of running the assets, we see pretty good opportunities to rationalize the work over rigs that we're running on that combined footprint." --- (COP, event transcript, 2024/05/29)