Newsletter No. 19
Good afternoon!
Hope everyone had a great week last week.
Today’s Headlines
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Father’s Day Reflections
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U.S. is Replenishing Strategic Reserves at $73 a Barrel
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Merger Creates the Largest Shale Drilling and Completion Company
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Deal of the Week: Gibson Energy set to purchase STGT
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Well of the Week: Santa Rita #1
Father’s Day Reflections
Yes, it has been said that anyone can father a child. But, what does it take to mentor that child and help them to grow into a good human being and not expect anything in return? That’s what I call being a Dad.
King’s Chief Growth Officer, Eric Rice, said it best in a text message he sent: “Our days on earth are limited and the most honorable aspect of what a father can do with a child is to make sure they have a relationship with Jesus Christ. When we are gone, they will carry this with them for the rest of their life and this is important for their well-being.”
I started thinking about what God says about fathers on Father’s Day. In Genesis 18:19, it says, “For I have chosen him, so that he will direct his children and his household after him to keep the way of the Lord by doing what is right and just, so that the Lord will bring about for Abraham what he has promised him.”
What a powerful message that is. As a father on earth, our job is to direct our children to follow the Lord and do what is right. They will carry that with them for the rest of their lives.
U.S. is Replenishing Strategic Petroleum Reserves (SPR) at $73 a barrel
Does the Biden Administration feel like oil prices won’t go any higher? Do they feel like they need to buy oil to replenish our Strategic Petroleum Reserves?
Well, the U.S. is buying 3.1 million barrels of oil from several oil companies at an average price of $73 a barrel to help replenish the country’s SPR. Since President Biden took office in January of 2021, the SPR have been depleted by 300 million barrels. Much of that happened when Russia’s invasion of Ukraine sent oil prices to more than $100 a barrel. The SPR is at a current level of 353.57M, down from 526.59M one year ago.
The administration had announced in October that they would begin to buy more and replenish the reserves once prices were between $67-$72 a barrel. The average of $73 is lower than the $95 a barrel prices that it was purchased at in 2022, but quite a bit higher than when former President Trump wanted to purchase oil for the reserve in early 2020.
Trump, in March 2020, proposed that the U.S. buy 77 million barrels of oil to add to the reserve when it averaged $24 a barrel, but the Democrat-controlled Congress blocked it. I guess knowing the future would have been nice in March of 2020.
Two Companies Create the Largest Shale Drilling and Completion Company
Patterson-UTI Energy has merged with NexTier Oilfield Solutions in an all-stock deal. The merger with 33 NexTier crews will form a conglomerate of companies with drilling, completion, and directional companies. According to an article in Hart Energy, the CEOs of both companies felt they had great synergies. I think that makes sense.
Patterson-UTI is located in Snyder, Texas, which is very close to King’s Believer’s Project in Borden County, Texas. Patterson Energy was founded in 1978 by Cloyce Talbott and Glenn Patterson. They acquired UTI Energy in 2001 and were renamed Patterson-UTI Energy.
Patterson has gone through many cycles in the oil/gas industry. They currently have 172 super-spec drilling rigs and 12 frac crews.
In order for Patterson-UTI to gain market share, they would have to increase rig count substantially and the same would be true for NexTier. If they increased rigs, and prices softened in the future it would not be good for business.
To combine the companies, they have created a $5.5 billion enterprise value and escaped the commodity price ups and downs. By consolidating, they can find work for companies as they have vertically integrated their products and services.
Deal of the Week: Gibson Energy Set to Purchase STGT
Canada’s midstream oilfield service company, Gibson Energy, is set to purchase South Texas Gateway Terminal from Buckeye Partners and partners Phillips 66 Partners LP and Marathon Petroleum Corp.
South Texas Gateway Terminal (STGT) is the second-largest oil export facility in the United States, which operates a deep-water, open-access marine terminal at the mouth of the Corpus Christi Bay.
STGT had record numbers in March of 2023, achieving more than 670,000 bbl/d of oil.
This transaction is of interest, in part because it puts the largest liquids export terminals in the U.S. in the hands of Canadian companies. In 2021, the Ingleside Energy Center was purchased by Canada-based Enbridge Inc.
Hart Energy reported that the deal would increase Gibson’s terminal capacity by 63%.
Well of the Week: Santa Rita #1
Staying with oil and gas history again this week, we’re talking about the Santa Rita #1 well. A little research explains that this well was the first to produce crude oil on acreage in West Texas managed by University Lands (UL), changing the trajectory of the American oil industry and bringing the Permian Basin to the front lines of global oil production.
The Santa Rita #1 well is significant to Texas as it was integral in positioning the state as a major world energy provider.
As of 2021, Santa Rita #1 received a major renovation as it neared its 100th anniversary. The restoration began in 2020 when Phoenix 1 Restoration and Construction, which is headquartered in Farmers Branch, TX, was hired to handle the project. The site is located in Reagan County.
The well is named for the patron saint of the impossible and after two years of drilling, the well began producing oil on May 28, 1923.
The original equipment used to drill is housed at the University of Texas Austin campus, where it was moved to in the 1940s. The Santa Rita #1 well was plugged in 1990 after producing oil for more than 65 years.
Saudi Arabia is Slashing Oil Supply
Talk Radio WVLK broadcasting in Lexington, Kentucky asked Jay Young to come on for an interview
Recommended Reads
Gas prices could spike after Saudi Arabia oil production cut
US drillers cut oil and gas rigs for seventh week in a row
Which USA Oil Major Produced the Most in 1Q?
There are some outstanding results developing in the current program… KOPX Program 4. If you are not in it, and you are accredited, it’s a good time to have a conversation! You can schedule a Zoom here.
Lastly, if you have a subject you would like me to discuss, please do not hesitate to reply to this email. I will do my best to include it as soon as I can.
All the best,
Jay
