(Bloomberg) -- A lame-duck Texas regulator who proposed mandatory oil-output cuts said the effort is “dead” a day before the biggest U.S. crude-producing state was set to vote on the measure.Texas Railroad Commissioner Ryan Sitton said in an interview on Bloomberg TV that the three-member agency wasn’t prepared to vote on curtailing supplies in a process known as “pro-rationing.” His comments likely mark the end of a month-and-a-half-long saga that divided the shale industry over whether regulators should adopt OPEC-style production caps amid a historic collapse in crude prices.The unprecedented implosion of the entire oil industry has been so swift and severe that American companies have been turning off drilling rigs, demobilizing fracking crews, slashing jobs and shutting wells without the need for a government order. Fracking activity in U.S. fields has slumped 82% in the past seven weeks, while oil drilling is down 52%, according to data compiled by Bloomberg.“At this point we still are not ready to act, and so it’s too late, so there is no proposal to make,” Sitton, one of three Republicans on the commission, said Monday. “I think that pro-ration is now dead.”Exxon, Chevron and ConocoPhillips plan to curb as much as 660,000 barrels a day of combined American output by the end of June. Permian Basin producer Concho Resources Inc. has shut in about 4% to 5% of total output and warned last week that it will likely be forced to curtail even more.“The market forces are stronger than the threat of proration ever was,” said Cye Wagner, chairman of the Texas Alliance of Energy Producers, which was opposed to state quotas. “It would be more harmful to the industry than the market-driven response that’s coming.”Sitton, who lost the primary election for his own seat earlier this year, had been the only member of the Texas Railroad Commission -- the state’s chief energy regulator -- to come out in favor of production caps. Chairman Wayne Christian recently stated his opposition to cuts in an opinion piece for the Houston Chronicle, and Commissioner Christi Craddick had expressed numerous concerns during the agency’s most recent meeting.Among oil companies, Pioneer Natural Resources Co. and Parsley Energy Inc., founded by a father and his son, had been the biggest champions of instituting mandated cuts.But Exxon Mobil Corp. and Chevron Corp., along with a long list of independent producers, had argued that the market was already driving curtailments and that it was best for the government to stay out of it. The chief executive officer of Enterprise Products Partners LP even went so far as to say that quota-supporting producers were simply trying to skirt contractual obligations.$1,000 PenaltySitton’s proposal called for a 20% cutback in the state’s output, conditional on other states and nations making similar moves. The measure would have penalized producers who exceeded quotas to the tune of $1,000 a barrel. But Christian and Craddick both said they feared legal repercussions that would make such an effort ineffective.“I may be the only lawyer in the group, but I guarantee you this is going to the courthouse,” Craddick said last month.While the debate over production caps may be sidelined in Texas, other states are still considering whether such a response is warranted. Oklahoma is scheduled to discuss quotas on May 11 and North Dakota will take up the issue on May 20. Still, those efforts are likely a long shot without Texas on board.(Updates with Oklahoma, North Dakota meetings in final paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

The White House is mulling taking stakes in U.S. energy companies in return for help so companies can survive the coronavirus pandemic, Treasury Secretary Steven Mnuchin said Friday.

They have a price-book ratio less than 1.5 Continue reading...

The big oil production curtailment in the U.S. shale patch continues as more companies announced on Monday output reductions to protect their balance sheets in the face of unsustainably low oil prices

(Bloomberg Opinion) -- Amid a historic oil crash, frackers are ditching rigs at a rapid pace. The number of operating horizontal rigs stood at 338 on Friday. That’s down more than half since February, though still above the trough in early 2016. So, churlish as it may seem, it must be asked: Why is anyone still drilling shale right now?Speaking on an earnings call a month after petitioning the Texas Railroad Commission to impose supply cuts, Matt Gallagher, CEO of Parsley Energy Inc., summed up the situation facing frackers:Currently, the world does not need more of our product, and we only get one chance to produce this precious resource for our stakeholders.The commission didn’t organize shut-ins of wells. So Parsley, taking its cue from prices instead, is just shutting in some of its own anyway. It has also suspended drilling and completing new wells.The economics of each well — and the companies that own them — differ enormously. But grab an envelope and imagine a well tapping one million barrels of oil equivalent, 75% of it crude oil, the rest natural gas. Benchmark prices: $30 oil and $2.50 gas, translating to, say, $27 and $2 at the wellhead. That implies total revenue from those resources of $23.3 million. Royalties and severance taxes take about $7 million of that; operating expenses and overhead take another $7 million(1). That leaves $9.3 million versus the $9 million spent drilling and completing the well upfront. Factor in time value of money, and that well is seriously underwater.Besides the back-of-crumpled-envelope quality of that calculation, there are other reasons a producer might keep drilling anyway. Rigs are often contracted for months at a time; for example, Helmerich & Payne Inc., a leading provider, reported roughly a third of its U.S. onshore rig fleet operated under fixed-term contracts at the end of March. Contracted pipeline space, too, must be paid for whether or not barrels flow through it. Taking a company’s activity down to zero is also traumatic for workers and, like a shut-in well, makes it harder to eventually crank back up. Hedges, meanwhile, shield against low spot prices and represent oil and gas contracted for delivery.Then again, hedges could be settled for cash; it’s not like anyone is screaming for more of the actual stuff these days. Rig and pipeline contracts can also be renegotiated (an order from the Texas Railroad Commission could have helped on that front, but still). And the difficulty of going into hibernation must be set against the implacable demands of low oil prices.On that note, another rationale for continuing to drill is an expectation of oil and gas prices recovering reasonably soon. Parsley and some other shale operators, such as Diamondback Energy Inc. (which is reducing but not suspending drilling), have indicated they could increase activity again if oil gets back above $30 a barrel (it was trading around $25 Monday morning). Because shale output is very front-loaded, movements in near-term prices matter a lot. For instance, using my basic example above, while the economics don’t work at flat $30 oil, assuming oil rises to $40 in year two and then $50 from year three would generate a low positive return. Those prices actually lag the consensus forecast, which averages $46 for 2021.On the other hand, that consensus stood at $58 only two months ago, so it’s fair to say expectations can change in the middle of an unprecedented oil shock. The current list of unknowns encompasses how quickly people resume something like normality even after lockdowns ease; whether Covid-19 inflicts a second wave; how long the glut of oil inventory building now lasts; and how quickly Saudi Arabia and Russia resume a market-share strategy.The rational thing to do is to wait for higher prices — indeed, conserving barrels, rather than pushing them into a glutted market, is a prerequisite for those higher prices. As EOG Resources Inc. said Friday, oil kept underground is “low-cost storage.”E&P companies carrying more debt (and there are more than a few) may be stuck on the treadmill. Covenants demand cash flow today even if that means destroying value over time. But this is a reminder of why the industry finds itself vulnerable in the first place: managing to production rather than value, and thereby dragging down prices by putting more sub-economic oil onto the market. The Saudi-Russian spat in early March was a warning the market won’t just absorb that from here on. Breaking the existing shale model, and redirecting cash away from wells toward creditors and shareholders, must be one outcome from all this.On that front, it’s worth noting the E&P sector now offers a higher dividend yield than the broader market for only the second time this decade.E&P stocks traded at a premium on yield because they weren’t valued on yield. Unlike the majors and refiners, frackers were owned for growth and a bet on oil prices. That rationale was fraying even before Covid-19, but is especially out of favor now. The yield spread to the market needs to widen, not just to compete against both other oil stocks and other sectors. It would also be a tangible sign of fewer dollars heading into drilling. Like Gallagher said, the world doesn’t need any more of the industry’s “product” right now. That includes investors.(1) Assumes royalties of 25% and severance taxes of 4.6% for oil and 7.5% for natural gas. G&A expenses of $2 per barrel of oil equivalent and $5 of other operating expenses.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Liam Denning is a Bloomberg Opinion columnist covering energy, mining and commodities. He previously was editor of the Wall Street Journal's Heard on the Street column and wrote for the Financial Times' Lex column. He was also an investment banker.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

Parsley Energy (NYSE:PE) shareholders are no doubt pleased to see that the share price has bounced 45% in the last...

Parsley Energy, Inc. (NYSE: PE) ("Parsley," "Parsley Energy," or the "Company") today announced that it has entered into an amendment to its revolving credit facility, which reaffirms the Company's $2.7 billion borrowing base, increases the elected commitment amount from $1.0 billion to $1.075 billion, and extends the maturity date by two years to October 28, 2023.

Parsley Energy, Inc. (NYSE: PE) ("Parsley," "Parsley Energy," or the "Company") today announced financial and operating results for the quarter ended March 31, 2020. Additionally, Parsley provided an update to its 2020 development program. The Company has posted a presentation to its website that supplements the information in this release.

Parsley Energy (PE) delivered earnings and revenue surprises of 16.00% and -4.22%, respectively, for the quarter ended March 2020. Do the numbers hold clues to what lies ahead for the stock?

(Bloomberg Opinion) -- The Texas Railroad Commission has been petitioned to go back in time.The commission just held a marathon hearing on whether it ought to do something it hasn’t done in almost 50 years: organize curbs on the state's oil output. I say “organize” because cuts are happening anyway; there’s simply no choice when the Covid-19 crisis has wiped out maybe a third of global oil demand. Several companies, including large frackers such as Pioneer Natural Resources Co., have called on the commission to “pro-ration” production to support oil prices.A recurring theme was “waste.” The person who raised it most often, outgoing commissioner Ryan Sitton, even parodied himself repeating the word in a video clip doing the rounds on social media.Clearly, this isn’t your grandfather’s oil market — a point reinforced by James Mann, attorney for the Texas Pipeline Association and formerly a commission employee in the 1970s. He observed that the folks familiar with the data-intensive work of apportioning quotas for thousands upon thousands of wells across the state were no longer contractually employed, so to speak:They’re all dead now. Everybody that knew how to do the arithmetic is gone.When I spoke with Mann the day after the hearing, he recounted other ways in which the world has changed. “Waste,” for example, meant actual waste when it was first used to justify pro-rationing. In the early 1930s, a swarm of wildcatters drawn by the gushing East Texas field sought to out-pump their neighbors, regardless of what the market could absorb. Plus ça change, as they say in Midland. Back then, though, “oil was coming out the ground with no place for it to go; they were putting it in dirt pits and leaky wooden tanks,” as Mann says. A lot of oil soaked into the ground or evaporated — waste in its very worst sense.That can’t happen today provided regulators do their job. If oil is running out of places to go, then futures prices will tell you ahead of time and wells will get shut in, with the weakest usually going first. Rather than a physical issue, “waste” today is a euphemism for lost money. As James Teague, co-CEO of Enterprise Products Partners LP, put it bluntly: “I think I’d define waste as inefficient producers continuing to produce at a time like this.”Speaking of which, much concern was expressed about the fate of smaller producers, in particular. There are over 2,900 producers that account for less than 10% of Texas’ output, according to Matt Gallagher, CEO of Parsley Energy Inc. This implies that, at best, they produce almost 1 million barrels of oil equivalent per day in aggregate but just a few hundred each on average. The vast majority of wells in Texas are dribblers rather than gushers:Bernstein Research estimates that when oil is at $25, a typical marginal well needs to produce 12 barrels a day just to break even, before counting any natural gas. Two-thirds of Texas’ wells produce less than 10 barrels a day equivalent, including gas, and benchmark West Texas Intermediate crude crashed below $13 on Monday morning. And low prices are only one problem; several small producers complained about getting shut out of pipelines, tanks and refineries altogether as those businesses prioritize bigger companies.The inescapable truth is that scale economies are vital in this business. Even before Covid-19 hit, the economic case for sinking money, water, labor and power into lifting maybe just one truckload of oil every other day from a backyard was hardly compelling.Yet the idea of bowing to that reality is anathema. Advocates argue shutting down these wells even temporarily could leave them unable to start up again, wasting the remaining oil and gas. But this presupposes the remainder has positive economic value, an increasingly dubious proposition in an oil market barreling toward peak demand. Factoring in the cost of decommissioning these wells only reinforces this math but, ironically, avoiding that cost also reinforces the desire to cling on.Pro-rationing would reinforce this further, especially if smaller producers were made exempt. It would mean more-efficient wells subsidizing higher-cost ones. Any number of factors may explain why there is such concern to preserve this part of the industry. Immediate impacts such as unpaid bills and layoffs often loom larger than considerations of long-term viability. Moreover, sheer numbers matter more than scale when it comes to one thing: Barrels don’t vote, people do. Zooming out, the state’s pro-rationing debate is a fractal, with the pattern repeating. Most obviously, OPEC+ tries to do the same thing at the global level, just as Texas used to. By holding cheaper barrels off the market, countries such as Saudi Arabia leave room for higher-cost ones, raising the price overall. OPEC+ does this for similar reasons. Like the small producers in Texas, countries such as Saudi Arabia and Russia have economic models that simply wouldn’t work too well if oil was priced like a regular commodity.Oil’s centrality to development over the past century made it indispensable, and demand both ubiquitous and inelastic. Combine that with the geographic concentration of resources, and the result is an edifice of political and economic structures built on the back of this miracle substance. The oil “market” is just different.But it is becoming less different. That’s the underlying reason for the commission’s virtual gathering this week. Covid-19 is like a fever dream of all the pressures that were bearing down on oil already. The last time Texas was pro-rationing, in the early 1970s, the conventional wisdom on resources and their fast-approaching exhaustion was captured in reports like “The Limits to Growth”. Such ideas supported both OPEC’s power and the notion it was better to ration oil supply and conserve resources — even under those Texas backyards — in the expectation prices would only rise in the future.Today, we know we won’t run out of oil. Mann makes the excellent point that the sheer “capability of oil production” holds prices down today rather than physical barrels being poured into bathtubs for want of a buyer. Capital markets have run out of patience with the industry’s current business model of high and often inefficient growth. There’s simply no economic justification for having thousands of operators with all their associated overhead. Meanwhile, the planet is running out of capacity to absorb oil’s emissions. Demand for oil remains high, but is no longer as inelastic as it was. That trend will intensify.It is striking that this enormous, vital market is now dominated by a shale industry that couldn’t pay a decent return even before Covid-19 showed up, and two sclerotic petro-states, Saudi Arabia and Russia, living off their foreign exchange reserves. These are the edifices built for a different time of dependable demand and managed supply.We are transitioning, painfully and chaotically, to a market with more competition, both between producers fighting for market share (and geopolitical influence) and between oil itself and encroaching rival energy sources. The edifices aren’t built for that and must reconfigure or fall. Like oil itself, the Texas Railroad Commission simply cannot deliver all that is being asked of it.This column does not necessarily reflect the opinion of Bloomberg LP and its owners.Liam Denning is a Bloomberg Opinion columnist covering energy, mining and commodities. He previously was editor of the Wall Street Journal's Heard on the Street column and wrote for the Financial Times' Lex column. He was also an investment banker.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

A proposed rule in Texas could force production cuts for U.S. oil producers—a prospect that could dramatically change the oil market in the U.S.

The rally is a bet—and a risky one—that economies around the world will open in an orderly fashion and demand for oil will rebound.

The oil company expects to "endure with relevance" as it battles through the market's current downturn.

With me on the call are Matt Gallagher, President, and CEO; David Dell'Osso, Chief Operating Officer; Ryan Dalton, Chief Financial Officer; and Stephanie Reed, Senior Vice President of Corporate Development, Land and Midstream. During this call, we will refer to an investor presentation that can be found on our website, and our prepared remarks will begin with reference to slide three of that presentation.

Of Parsley Energy's (PE) total Q1 capex amounting to $379 million, 98.2% is allotted to drilling and completion activities.

Parsley Energy (PE) doesn't possess the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.

Signs of a further drop in U.S. crude-oil production are everywhere, from a slowdown in fracking activity and sharp weekly declines in the active oil-rig count, to expectations of a May decline for all seven major shale-oil output regions.

RBC’s Helima Croft explains why the world is awash in oil, and which governments could fail as a result.

Shale oil stocks Diamondback Energy and Parsley Energy beat earnings forecasts and missed on revenue, while further curbing activity.

Q1 2020 Parsley Energy Inc Earnings Call