Digging Through Last Weeks Oil News
Michael is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
When it comes to oil there is always something to talk about. In the past week Exxon Mobil (NYSE: XOM) was told by the deputy of Iraq Oil Ministry Sabah Abdul Kadhim it would not be able to participate in its May auction on twelve promising exploration blocks because of its contracts with Kurdistan. The Environmental Protection Agency last week said that within two years (January 2015) oil and gas companies will have to capture the climate-altering gasses from wells, storage facilities and pipelines.
It seems like the Iraqi's are telling Exxon that it is their bat and ball and if they want to play in their oil fields it is by their rules. According to the Wall Street Journal at Iraq's West Qurna-1 field in southern Basra province Exxon and minority partner Royal Dutch Shell (NYSE:RDS.A) have raised output to 400,000 barrels a day from 244,000 barrels since 2010. The contract target of 2.8 million barrels a day by 2017 would cost them $1.8 billion a year if the target is met and if the contract is canceled. West Qurna-1 is one of Iraq's largest oil fields. According to the Associated Press the Kurd deal is much more profitable because it is not a fixed fee like Iraq's but a deal where the oil company shares in the profit of the oil produced. Besides what Exxon has going on in Iraq it must also be noted that its partnership with a Russian oil company to help untap about 35 billion barrels of oil locked in the Black Sea and the deep Arctic will begin drilling in 2015 and according to Forbes actual production could occur between 2018-2020.
It is funny that when I went to find companies that build the gas capturing equipment, known as “green completions” that an energy company popped up in my search. It didn't appear because they manufactured the equipment, but because they already employ it at their wells. There will be no additional cost for them to come in line with the E.P.A.'s new standard. Then to top it off I stumbled upon the same company featured in a Barron's article over the weekend. So what is the name of this energy company? Devon Energy (NYSE: DVN). It seems that about two-thirds of their recent output was natural gas. Ouch! We all know how down trodden natural gas has become. I am going to make a long story short. According to Forbes they have a “sound strategy, strong balance sheet, and shrewd joint ventures.” If that is true, I don't think their stock price will stay down for too much longer.
Well if you don't want to play ball with Exxon someone else will. As a company they are always searching for new crude reserves to tap into to replace the large amounts extracted every year. This way they continue to pump out the profits we are so used to. Sorry E.P.A., Devon Energy is already complying with your new regulations requiring “green completions”. If one can believe some of what one reads, they might be ready to see a jump in their share price.
mwm102 has no positions in the stocks mentioned above. The Motley Fool owns shares of Devon Energy. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.