Tag Archive for: oilandgas

The IER has just released its latest annual North American Energy Inventory report showing that North America has 1.66 trillion barrels of technically recoverable resources, and at current rates of consumption, the report calculates that it would take 227 years to deplete it all.

Report: America has up to 227 years of oil & gas remaining

Latest Oil & Gas Remaining or The Annual North American Energy Inventory

The Institute for Energy Research (IER), a free market think tank focusing on energy. Has just released its latest oil & gas remaining or the annual North American Energy Inventory. The report shows that North America has 1.66 trillion barrels of technically recoverable resources. And at current rates of consumption, the report calculates that it would take 227 years to deplete it all.

The report provides valuable insights into the current state of fossil fuel reserves. Particularly focusing on coal – renowned for being one of the most abundant fossil fuels available. It highlights that the proved reserves of coal stand. At a level that could potentially meet the global demand for over four centuries at the consumption rates witnessed in 2022.

The Significant Supply of Coal and its Enduring Presence

This substantial figure underscores the significant supply of coal and its enduring presence in the global energy mix. Contrary to the notion of imminent depletions such as “peak oil” or “peak gas”. The report challenges these concerns when it comes to coal. Urging against heeding the radicalized left’s rhetoric that often perpetuates such fear-mongering narratives.

The extensive longevity of coal reserves as indicated in the report serves as a compelling reminder of the need for a balanced and evidence-based approach to discussions around fossil fuels. By debunking the myth of an impending “peak coal,” the report encourages a more nuanced understanding of the energy landscape, emphasizing the importance of rational analysis over sensationalized claims.

In a time where energy security and sustainability are paramount considerations. The enduring reserve capacity of coal presents an opportunity for thoughtful consideration and strategic planning in meeting the world’s energy needs for the foreseeable future.

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Source: Marcellus Drilling News

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Dive into ORRI vs. mineral rights: ownership, benefits & risks. Learn which investment suits your portfolio and goals. Explore now!

ORRI vs. Mineral Rights: Key Differences and Benefits

DISCLAIMER: We are not financial advisors. The content on this website is for educational purposes only and merely cites our own personal opinions. In order to make the best financial decision that suits your own needs, you must conduct your own research and seek the advice of a licensed financial advisor if necessary. Know that all investments involve some form of risk and there is no guarantee that you will be successful in making, saving, or investing money; nor is there any guarantee that you won’t experience any loss when investing. Always remember to make smart decisions and do your own research!

When it comes to investing in natural resources, understanding the distinctions between Overriding Royalty Interests (ORRIs) and mineral rights is crucial. While both offer opportunities for passive income from oil, gas, and mineral extraction, they differ significantly in terms of ownership, control, and financial benefits. In this in-depth analysis, we explore the key differences and benefits of ORRIs versus mineral rights, providing valuable insights for investors, landowners, and stakeholders in the energy and mining sectors.

Understanding Overriding Royalty Interests (ORRIs)

An Overriding Royalty Interest (ORRI) represents a contractual right to a share of production revenue from oil, gas, or mineral leases, separate from the ownership of the underlying mineral rights. ORRIs are typically granted to third parties, such as landowners or investors, by the lessee or operator of the property. ORRI holders receive a predetermined percentage of the gross production revenue, often without assuming the associated costs or liabilities of exploration and development activities.

Exploring Mineral Rights

Mineral rights, on the other hand, confer ownership and control over subsurface resources, including oil, gas, coal, metals, and other minerals. Holders of mineral rights have the exclusive authority to explore, extract, and develop these resources from the land or mineral estate they own. Unlike ORRIs, which are contractual interests, mineral rights represent a property interest in the underlying minerals, granting the holder significant control and financial benefits from resource extraction.

Key Differences between ORRI vs. Mineral Rights

Ownership and Control: The primary distinction between ORRIs and mineral rights lies in ownership and control. While mineral rights grant full ownership and control over subsurface resources, ORRIs entail a contractual entitlement to a share of production revenue, without ownership of the underlying minerals.

Financial Benefits: ORRIs provide passive income in the form of royalty payments based on the gross production revenue generated from the leased property. In contrast, holders of mineral rights not only receive royalty payments but also bear the costs and risks associated with exploration, development, and operation of the mineral resources.

Risk Exposure: ORRI holders typically have minimal exposure to operational risks, liabilities, and capital expenditures related to oil, gas, or mineral extraction. Conversely, holders of mineral rights assume the full spectrum of risks associated with resource development, including geological risks, environmental liabilities, and market volatility.

Transferability and Duration: ORRIs are often created through contractual agreements and may have limited transferability or duration, depending on the terms negotiated between the parties. In contrast, mineral rights are real property interests that can be bought, sold, leased, or inherited, with potentially perpetual duration, subject to legal and regulatory restrictions.

Benefits of ORRI vs. Mineral Rights

Passive Income: Both ORRIs and mineral rights offer opportunities for passive income from resource extraction, providing holders with a steady stream of royalty payments based on production volumes and market prices.

Portfolio Diversification: Investing in ORRIs or mineral rights can diversify investment portfolios, offering exposure to the energy and mining sectors, which may perform differently than traditional asset classes such as stocks, bonds, or real estate.

Inflation Hedge: Revenue generated from ORRIs and mineral rights may serve as a hedge against inflation, as commodity prices tend to rise over time, preserving the purchasing power of income streams.

Tax Advantages: Royalty income derived from ORRIs and mineral rights may be subject to favorable tax treatment, including depletion allowances, capital gains treatment, and potential tax deferral strategies.

 

ORRIs and mineral rights represent distinct yet valuable investment opportunities in the natural resources sector. While ORRIs offer passive income without the burdens of ownership and operational risks, mineral rights provide ownership and control over subsurface resources, with the potential for greater financial rewards but also higher levels of risk and responsibility. Understanding the differences and benefits of ORRIs versus mineral rights is essential for investors, landowners, and stakeholders seeking to capitalize on opportunities in oil, gas, and mineral exploration and production. By evaluating their investment objectives, risk tolerance, and financial goals, individuals can determine the most suitable strategy for participating in the dynamic and rewarding world of natural resource investing.

 

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As a group, the oil and gas industry’s free cash flow-to-capital expenditures ratio rose to 1 last year from 0.4 in 2020, and it’s forecast to approach 1.4 by 2030.

Gas & Oil companies are swimming in so much cash that they’re cutting back on borrowing at a faster pace

Demand for Loans

Last year, the demand for loans from Gas & Oil companies or fossil-fuel companies fell 6% year-on-year and that followed a decline of 1% in 2022.

From a climate perspective, this may sound like good news because the drop in bank lending to oil, gas and coal companies should mean less investment and less production over time.

The reality, however, is that oil and gas companies don’t need a lot of loans because they’re generating so much money these days from their underlying businesses, said Andrew John Stevenson, senior analyst at Bloomberg Intelligence. And that trend is likely to continue through the end of the decade, he said.

Its Fair Share of Ups and Downs

The oil and gas industry has seen its fair share of ups and downs in recent years, marked by cycles of booms and busts. However, the current landscape seems to be favoring a more prosperous outlook, with companies reporting healthy balance sheets and increased cash flow.

This financial stability can largely be attributed to the upward trend in oil prices, which have been driven by a combination of factors such as strong global demand and coordinated production cuts by OPEC and its allies under the OPEC+ agreement.

A Much-Needed Boost

The resurgence in oil prices has provided a much-needed boost to companies within the industry, enabling them to capitalize on the improved market conditions. With a steady stream of revenue coming in, many firms are now in a stronger position to invest in exploration, production, and technological advancements.

This influx of capital not only benefits the companies themselves but also has a ripple effect on the broader economy, as it creates jobs, drives innovation, and contributes to overall economic growth. As the industry continues to navigate through this period of relative stability, it will be interesting to see how companies leverage their newfound financial strength to drive long-term growth and sustainability.

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Source: FORTUNE

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Explore key clauses and terms in oil and gas leasing agreements. Understand roles, rights, and obligations for effective energy development.

Oil and gas leasing agreements: Key clauses and terms

DISCLAIMER: We are not financial advisors. The content on this website is for educational purposes only and merely cites our own personal opinions. In order to make the best financial decision that suits your own needs, you must conduct your own research and seek the advice of a licensed financial advisor if necessary. Know that all investments involve some form of risk and there is no guarantee that you will be successful in making, saving, or investing money; nor is there any guarantee that you won’t experience any loss when investing. Always remember to make smart decisions and do your own research!

Oil and gas leasing agreements serve as the foundation for the exploration and production of hydrocarbon resources on land or offshore. These contracts outline the rights and obligations of both parties involved, setting forth crucial clauses and terms that govern the relationship between the landowner and the energy company. In this comprehensive guide, we delve into the key clauses and terms commonly found in oil and gas leasing agreements, providing insights for landowners, energy companies, and stakeholders involved in the industry.

Before exploring the specific clauses and terms, it’s essential to understand the purpose and significance of oil and gas leasing agreements. These contracts establish the legal framework for the exploration, development, and production of oil and gas resources on a particular tract of land. Whether it’s a surface lease granting access to land for drilling operations or a mineral lease conveying subsurface rights, oil and gas leasing agreements play a pivotal role in facilitating energy development while safeguarding the interests of landowners and mineral rights holders.

Primary Clauses in Oil and Gas Leasing Agreements

Granting Clause: The granting clause is the core provision of an oil and gas lease, conferring upon the lessee (energy company) the exclusive right to explore, drill, and produce oil and gas on the leased premises. It delineates the scope of the rights conveyed and any limitations or restrictions imposed by the lessor (landowner).

Royalty Clause: The royalty clause specifies the percentage of gross production revenue payable to the lessor as compensation for the extraction of oil and gas from the leased property. Royalty rates typically range from 12.5% to 25%, although they can vary based on factors such as market conditions, negotiating leverage, and regional practices.

Bonus Clause: The bonus clause stipulates the upfront payment made by the lessee to the lessor upon execution of the lease agreement. This bonus payment serves as consideration for granting the lease rights and can vary widely depending on factors such as the property’s geological potential, competition among energy companies, and prevailing market conditions.

The Duration of the Lease

Term and Termination Clause: The term clause establishes the duration of the lease, delineating the initial primary term and any subsequent renewal or extension periods. Additionally, the termination clause outlines the circumstances under which the lease may be terminated, such as nonpayment of royalties, cessation of operations, or breach of contractual obligations by either party.

Surface Use and Access Clause: Given the potential impact of oil and gas operations on surface land, the surface use and access clause governs the lessee’s right to access the surface for drilling, construction, and other activities necessary for oil and gas production. It typically addresses matters such as surface damage mitigation, restoration obligations, and compensation for surface disturbances.

Shut-in Royalty Clause: The shut-in royalty clause provides the lessee with the option to maintain the lease in force during periods of temporary cessation of production due to operational constraints or market conditions. In exchange for paying a shut-in royalty fee, the lessee can defer actual production while retaining the lease rights until conditions improve.

Additional Terms and Considerations

In addition to the primary clauses outlined above, oil and gas leasing agreements may include various ancillary provisions and considerations tailored to the specific circumstances of the transaction. These may encompass:

  • Assignment and Subleasing Provisions: Governing the lessee’s ability to assign its lease rights to third parties or sublease portions of the leased premises.
  • Drilling and Development Obligations: Establishing timelines and requirements for drilling exploratory and development wells, as well as minimum expenditure commitments to maintain the lease in force.
  • Indemnity and Liability Protections: Allocating risks and responsibilities between the parties for environmental liabilities, personal injuries, property damage, and other potential claims arising from oil and gas activities.
  • Force Majeure and Regulatory Compliance: Addressing unforeseen circumstances beyond the parties’ control, such as natural disasters or regulatory changes, that may impact the performance of contractual obligations.
  • Governing Law and Dispute Resolution: Designating the applicable jurisdiction and governing law for interpreting and enforcing the lease agreement, as well as specifying mechanisms for resolving disputes through arbitration, mediation, or litigation.

Oil and gas leasing agreements are intricate legal instruments that require careful negotiation and drafting to protect the interests of all parties involved. By understanding the key clauses and terms commonly found in these agreements, landowners, energy companies, and stakeholders can navigate the leasing process effectively and maximize the value of their assets. Whether negotiating royalty rates, delineating surface use rights, or addressing regulatory compliance issues, a well-crafted lease agreement forms the cornerstone of successful oil and gas development ventures. With informed decision-making and attention to detail, parties can forge mutually beneficial arrangements that balance economic objectives with environmental stewardship and community interests in the exploration and production of vital energy resources.

 

 

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Enverus reports this week that oil & gas upstream mergers and acquisitions reached a new 1st quarter high over the initial 3 months of 2024.

Oil and gas mergers hit record Q1 levels in 2024

Big energy analytics and advisory firm Enverus reports this week. That oil and gas upstream mergers and acquisitions reached a new first quarter high. Over the initial three months of 2024. In a release sent out Tuesday, report author Andrew Dittmar. Principal Analyst at Enverus Intelligence Research (EIR), says M&A activity for Q1 2024 totaled to more than $51 billion in deal value.

In an interview, Dittmar says the action started right after the holidays. “We woke up on January 4 to the news that Apache Corp. was doing a $4.5 billion deal to acquire Callon Energy,” he says. “We knew Callon had been on the block, so that wasn’t surprising. Although it was a little surprising. Apache was the acquiring company, just since they haven’t been all that active in the space.”

The record first quarter comes on the heels of the 21st century-high deal total of $192 billion for 2023. Although the Q1 total deal value of $51 billion maintains the pace set last year. Dittmar says he doesn’t expect it to continue for much longer. “The remaining inventory for potential deals remains in the Permian Basin.” He points out, adding, “and the Permian is increasingly controlled by ExxonMobil, ConocoPhillips, Diamondback Energy, Chevron, and Occidental.”

All of those companies have executed major Permian-heavy deals in recent years. And Dittmar says they are now content to own as big a position in the most active basin in the country as they can.

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Source: Forbes

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EIA data shows that average daily production in 2024 is 13.12M bpd — 7.1% ahead of the production level a year ago & 1.4% higher than last year’s record pace.

US oil and gas production are ahead of last year’s record pace

US Oil and Gas

Last year marked a record for US oil and gas production with an average daily production of 12.93 million barrels per day (BPD). That record was 5% greater than the previous record of 12.31 million bpd set in 2019.

However, current data from the Energy Information Administration (EIA) shows that average daily production thus far in 2024 is 13.12 million bpd — 7.1% ahead of the production level of a year ago and 1.4% higher than last year’s record pace.

U.S. natural gas production tells a similar tale. The EIA recently confirmed that 2023 marked a record for U.S. natural gas production at 125 billion cubic feet per day (CFD). That was 4% ahead of the previous record set in 2022.

Natural gas data isn’t reported as often as petroleum data, but January’s natural gas production level was 124.6 billion CFD. That followed a monthly production record in December 2023. It was slightly behind last year’s record level, but there are some seasonal effects in natural gas production. If we compare January 2024 to January 2023, this year’s production level was 1.1% higher than a year ago.

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Source: Forbes

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Discover the intricacies of leasing oil and gas land: from identification to negotiation, regulatory approval, and exploration. Maximize asset value now!

The steps involved in leasing oil and gas land

DISCLAIMER: We are not financial advisors. The content on this website is for educational purposes only and merely cites our own personal opinions. In order to make the best financial decision that suits your own needs, you must conduct your own research and seek the advice of a licensed financial advisor if necessary. Know that all investments involve some form of risk and there is no guarantee that you will be successful in making, saving, or investing money; nor is there any guarantee that you won’t experience any loss when investing. Always remember to make smart decisions and do your own research!

Leasing oil and gas land involves a series of intricate steps that require careful consideration and adherence to legal and regulatory requirements. This comprehensive guide explores the process from start to finish, providing valuable insights for landowners and companies seeking to engage in oil and gas exploration and production.

Understanding the Leasing Process: Leasing Oil and Gas Land

Before delving into the steps involved, it’s crucial to understand the leasing process’s fundamentals. Oil and gas leasing typically entails granting exploration and production rights to energy companies in exchange for financial compensation, known as lease bonuses, and royalties on any extracted resources. These leases are contractual agreements that outline the terms and conditions governing the use of the land for oil and gas activities.

Identifying Prospective Land: Leasing Oil and Gas Land

The first step in the leasing process is identifying land parcels with potential oil and gas reserves. This often involves geological assessments, seismic surveys, and analysis of existing well data to evaluate the subsurface’s hydrocarbon potential. Landowners may also receive inquiries from energy companies expressing interest in leasing their property for exploration and development purposes.

Negotiating Lease Terms

Once prospective land has been identified, negotiations between landowners and energy companies ensue to determine lease terms. Key considerations include lease duration, royalty rates, surface use provisions, environmental protections, and financial considerations such as upfront bonuses and rental payments. Negotiating favorable terms requires careful consideration of both parties’ interests and consulting legal and financial experts as needed.

Executing the Lease Agreement

After reaching a mutual agreement, the next step is to formalize the lease through a written contract. This lease agreement, often drafted by attorneys specializing in oil and gas law, outlines the rights and responsibilities of both parties. It typically includes provisions related to access to the property, payment terms, environmental safeguards, and dispute resolution mechanisms. Once executed, the lease becomes a legally binding document governing the relationship between the landowner and the energy company.

Securing Regulatory Approvals

Before commencing exploration and production activities, energy companies must obtain various regulatory approvals and permits from government authorities. These may include permits for drilling operations, environmental assessments, and compliance with land use regulations. Securing these approvals entails navigating a complex regulatory landscape and may involve public consultation and environmental impact assessments.

Commencing Exploration and Development

With the lease agreement in place and regulatory approvals obtained, energy companies can begin exploration and development activities on the leased land. This typically involves drilling exploratory wells to assess the presence and viability of oil and gas reserves. If successful, production wells may be drilled to extract the resources, leading to ongoing operations to extract, process, and transport the oil and gas to market.

Monitoring and Compliance

Throughout the lease term, both landowners and energy companies must adhere to the terms of the lease agreement and comply with applicable laws and regulations. This includes ongoing monitoring of operations to ensure environmental protection, safety, and adherence to contractual obligations. Landowners may receive royalty payments based on the production volumes and prices of extracted resources, while energy companies must meet production targets and fulfill lease requirements.

Leasing Oil and Gas Land

It involves a multifaceted process that requires collaboration between landowners, energy companies, and regulatory authorities. By understanding the steps involved—from identifying prospective land to negotiating lease terms, securing regulatory approvals, and commencing exploration and development—parties can navigate the leasing process effectively and maximize the value of their assets. With careful planning, diligence, and adherence to legal and regulatory requirements, oil and gas leasing can be a mutually beneficial arrangement that supports economic development while protecting landowners’ rights and environmental interests.

 

 

 

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Smaller regional U.S. banks have boosted significantly their lending to oil and gas firms over the past two years.

Small banks significantly boost loans to oil and gas firms

While major European banks are competing to announce new policies limiting funding to oil and gas projects, smaller regional U.S. banks have boosted significantly their lending to oil and gas firms over the past two years.

Regional banks BOK Financial, Citizens Financial, Truist Securities, Fifth Third Securities, and US Bancorp have seen their combined loans to the fossil fuel industry jump by over 70% on an average annualized basis since the beginning of 2022, compared to the previous six years, according to data compiled by Bloomberg.

These five banks are now among the world’s top 35 banks in terms of the number of deals they have signed with the fossil fuel industry, Bloomberg’s data showed.

Total global financing for fossil fuels since the Paris Agreement has been led by the biggest U.S. banks, with JP Morgan Chase, Citi, Wells Fargo, and Bank of America placing #1 through #4, respectively, with billions of U.S. dollars of financing for oil and gas between 2016 and 2022, according to research by environmental campaigners.

Regional U.S. banks are also seeing a growing pool of customers in the fossil fuel industry. This comes as European banks are re-evaluating their funding for oil and gas, and energy-rich U.S. states are leading an anti-ESG drive to blacklist major financial corporations and asset managers, which they believe are discriminating against the oil and gas industry.

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Source: Oil Price

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Discover how Overriding Royalty Interests can provide passive income in oil & gas. Learn benefits & risks for savvy investors. Dive in now!

The role of overriding royalty interests in passive income

DISCLAIMER: We are not financial advisors. The content on this website is for educational purposes only and merely cites our own personal opinions. In order to make the best financial decision that suits your own needs, you must conduct your own research and seek the advice of a licensed financial advisor if necessary. Know that all investments involve some form of risk and there is no guarantee that you will be successful in making, saving, or investing money; nor is there any guarantee that you won’t experience any loss when investing. Always remember to make smart decisions and do your own research!

In the realm of passive income, investors constantly seek avenues that offer lucrative returns with minimal effort. Overriding royalty interests (ORIs) emerge as a promising option in this landscape, providing investors with a unique opportunity to generate passive income streams. This article delves into the role of overriding royalty interests, exploring their definition, benefits, and considerations for potential investors.

Understanding The Role of Overriding Royalty Interests

At its core, an overriding royalty interest represents a share of production revenue from a specific oil and gas lease. Unlike traditional royalty interests owned by mineral rights holders, ORIs are typically granted to third parties, such as landowners or investors, without ownership of the underlying mineral rights. Instead, ORI holders receive a percentage of the gross revenue generated from the production of oil, gas, or other minerals from the leased property.

The Benefits of Overriding Royalty Interests

One of the primary advantages of ORIs lies in their passive nature. Once acquired, ORIs require minimal ongoing effort or involvement from the investor. Unlike active business ventures or real estate management, ORIs offer a hands-off approach to generating income, making them an attractive option for individuals seeking to diversify their investment portfolios without significant time or resources.

Additionally, ORIs can serve as a hedge against inflation and market volatility. The value of mineral resources, particularly oil and gas, tends to rise over time, providing ORI holders with a potential for long-term appreciation. Furthermore, ORIs often come with contractual protections, such as minimum royalty payments or lease terms, offering investors a degree of stability and predictability in their income streams.

Considerations for Potential Investors

While ORIs present compelling opportunities for passive income generation, potential investors should approach them with caution and conduct thorough due diligence. Several factors warrant consideration before investing in overriding royalty interests:

Market Conditions: The profitability of ORIs is closely tied to the performance of the oil and gas market. Fluctuations in commodity prices, geopolitical factors, and technological advancements can impact the viability of ORIs as an investment vehicle. Investors should stay informed about market trends and assess the long-term outlook for the industry.

Legal and Regulatory Risks: Oil and gas operations are subject to a complex web of regulations at the local, state, and federal levels. Changes in legislation or environmental policies could affect the profitability of ORIs or impose additional compliance burdens on operators. Investors should seek legal counsel to ensure compliance with applicable laws and regulations.

Operator Reliability: The success of ORIs hinges on the competence and integrity of the operating companies responsible for extracting and selling the mineral resources. Investors should evaluate the track record and financial stability of potential operators before entering into agreements involving ORIs.

Diversification: As with any investment strategy, diversification is key to mitigating risk. While ORIs can offer attractive returns, investors should not allocate their entire portfolio to this asset class. Diversifying across different sectors and asset types can help safeguard against downturns in specific industries.

A Compelling Avenue

Overriding royalty interests represent a compelling avenue for passive income generation, offering investors a share of production revenue from oil, gas, or mineral leases. With their hands-off approach and potential for long-term appreciation, ORIs can serve as valuable additions to investment portfolios. However, prospective investors must conduct thorough due diligence and consider various factors, including market conditions, legal risks, operator reliability, and diversification strategies. By weighing these considerations carefully, investors can harness the benefits of overriding royalty interests while minimizing potential drawbacks.

 

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BP expects high levels of upstream production and a strong performance from its trading business will help it offset the negative impacts of lower oil and gas prices

BP says high production and strong trading will offset oil and gas price slump

Oil and Gas Price Slump

BP on Tuesday said it expects high levels of upstream production and a strong performance from its trading business. It will help offset the negative impacts of lower oil and gas prices. And a drop in the value of Egypt’s currency. That could hit its profits by $1.2 billion in the first quarter of 2024.

The British oil major said it expects to take a $0.2-0.4 billion hit from lower natural gas prices. A $0.3-0.6 billion hit from lower oil prices, and a $0.2 billion hit from the drop in the value of Egypt’s pound.

In a trading update, BP, however, said a strong performance from its oil and gas trading businesses, higher upstream production, and good refining margins will boost its first quarter results and help offset the negative impacts of lower prices.

Shares in BP BP, +0.49% BP, +1.58% increased 2% on Tuesday having gained 11% in the year-to-date. BP is scheduled to publish its first quarter results on May 7.

 

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Source: Market Watch

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