Oil Executives Fuel Trump’s $40MM Texas Fundraising Haul

Donald Trump raised $40 million from oil executives and other deep-pocketed donors in Texas, marking Wednesday’s haul as one of the most profitable days for the presumptive Republican nominee seeking to close a fundraising gap with President Joe Biden. 

The one-day cash raise from events in Houston and Dallas, described by people familiar with the events, comes as Trump directly appeals to the oil industry for support in his presidential bid with promises to dial back environmental regulations, which are drawing congressional scrutiny. 

Trump first met with donors at Houston’s posh Post Oak Hotel — a 700,000 square-foot mixed-use site owned by billionaire Houston businessman Tilman Fertitta that houses a Rolls Royce dealership and is topped with a helicopter pad. Hotel guests have the option to purchase one of the Rolls Royce cars and charge it to their rooms. Trump later attended a dinner in Dallas.

Trump made pledges to those in attendance in Houston — many of whom donned luxury fashion brands and cowboy boots — to “drill, baby, drill” and open up more areas for energy development. Continental Resources Inc. Chair Harold Hamm and Occidental Petroleum Corp. Chief Executive Officer Vicki Hollub were among those present.

The oil and gas industry has increasingly shelled out to support Trump’s bid. It’s a relationship that has come under scrutiny by congressional Democrats, with two US Senate committees on Thursday opening an investigation into whether Trump is soliciting campaign donations from oil companies and their executives in exchange for policy decisions. 

The probe is tied to Trump’s entreaties for $1 billion in donations during an April meeting with oil and gas executives at his Mar-a-Lago resort, described by people familiar with the exchange. 

Trump’s day of fundraising in Texas came close to the more than $50 million raised last month at a Palm Beach event hosted by billionaire John Paulson. The former president has ramped up fundraising efforts since he became the presumptive Republican nominee in March.

Of the $40 million raised, $15 million is money specifically for the Trump campaign, the Republican National Committee and the state parties, according to a person familiar. The rest is super political action committee money, which can be used to support Trump, but the PAC organizers can’t coordinate directly with the campaign.

Biden, with $192 million in the bank, has roughly twice as much cash on hand as Trump. However, in April, Trump outraised Biden for the first time, signaling the former president may be able to tighten that gap.

Political Allies

During his Wednesday luncheon speech in Houston before roughly 150 donors, according to people at the event, Trump highlighted Biden’s verbal and physical stumbles, criticized the number of undocumented immigrants crossing the southern border and, with Texas Attorney General Ken Paxton looking on, discussed the state’s legal fights against the administration. 

Trump, who has said he would consider Paxton to serve as attorney general in a potential second administration, praised the Texas Republican for being legally attacked after his impeachment last year by his state’s House of Representatives before being acquitted by the Senate. Trump called Paxton a “great Texan,” one person in the room said.

Taken together, Trump’s luncheon remarks were “all about winning in November,” Texas Republican State Senator Mayes Middleton said.

With some of the biggest oil and gas company bosses in front of him, Trump only briefly touched on energy issues during his lunchtime speech, people in the room said. One billionaire oilman said he left early because of the lack of policy specifics.

Energy Discussions

Detailed energy policy talk came later in a smaller roundtable at the Post Oak Hotel with fewer than a dozen donors. Trump was flanked by North Dakota Governor Doug Burgum, a potential pick for vice president, who handled some of the finer points, one person in the room said.

The group discussed China’s dominance in electric vehicle manufacturing and other matters, said Canary Drilling Services LLC Chief Executive Officer Dan Eberhart.

Industry officials emphasized their fear that the current regulatory approach in Washington amounts to death by a thousand cuts for oil and gas companies, Eberhart said. Trump, in turn, repeatedly stressed that he stands for what’s good for America, and that we need energy to thrive and keep the economy growing, Eberhart said.

Concerns were also raised about California’s unique legal authority to set more stringent air pollution standards than the federal government, Eberhart said.

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Suncor Stocks Surge after Pump-Up in Buyback Program

Suncor Energy Inc. shares rose to an almost 16-year high after the oil-sands producer accelerated plans to ramp up share buybacks, marking a win for activist investor Elliott Investment Management LP.   

Canada’s second-largest oil producer by market value said it boosted spending on share repurchases to 75 percent of its free funds flow this quarter. Buybacks will ramp up to essentially all of its free funds when it cuts net debt to C$8 billion ($5.9 billion), discarding its previous target of C$5 billion. Suncor has just under C$9 billion in debt currently.

The stock rose as much as 3.2 percent to hit C$56.30 in Toronto, the highest intraday price since September 2008. The shares are up about 32 percent this year, the fourth-best performance in the 41-company S&P/TSX Energy Index. 

Suncor’s gains mark a major turnaround for a company that was a laggard of the Canadian oil industry two years ago, beset by a string of worker deaths. The poor performance prompted activist investor Elliott to demand a major shakeup of the company and ultimately resulted in the appointment of former Exxon Mobil Corp. executive Rich Kruger as CEO last year.

When Elliott launched its campaign two years ago, it held a 3.4 percent economic interest in Suncor. The activist now holds a 4.1 percent direct stake that makes it the company’s fourth-largest investor, according to data compiled by Bloomberg.

Elliott has increased its stake in Suncor because of the positive results on its performance and safety and still believes the stock has the potential for significant gain, according to a person familiar with the matter.

The shares are up about 33 percent since Elliott revealed its stake. That’s in line with the performance of rival Canadian Natural Resources Ltd. over that period and tops that of Cenovus Energy Inc.

Suncor has halted worker fatalities since the appointment of Kruger, who previously led Exxon’s Imperial Oil Ltd. Canadian division and came out of retirement to take the CEO position. He also has cut jobs to trim expenses and struck a C$1.47 billion deal to buy TotalEnergies SE’s stake in an oil-sands mine to secure more bitumen supplies for the upgraders at its Base Plant.

Kruger said Tuesday that Suncor expects to reach its new debt target — which reflects the company’s confidence in its momentum — by the middle of next year, or possibly by the end of this year. The company also announced that it would add C$3.3 billion to free funds flow by 2026 and would lower its breakeven oil price level by $10 a barrel — to $43 a barrel — in the same period.   

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Iraq Stops Diesel Import Deals as Refinery Upgrades Boost Output

Iraq halted contracts to import diesel after the upgrade of some refineries helped bolster local output, putting the country on track for fuel self sufficiency. 

The country wound down purchase deals at the end of last year and hasn’t bought the fuel under long-term contracts so far in 2024, according to traders involved in the market. It has bought three diesel cargoes this year, according to market data provider Vortexa, but traders said those were spot shipments.

Iraq, however, is still buying gasoline under term deals, according to the traders who asked not to be identified because the information isn’t public. It’s targeting eliminating imports of the motor fuel as early as this year. The country is refurbishing refineries that were damaged during two decades of war, with the Al-Shamal plant restarting in 2024, and others to follow, Hamid Younis, deputy oil minister for refining affairs, said in February.

A spokesman for the oil ministry couldn’t immediately be reached for comment outside normal business hours. 

Iraq imported 2.83 million barrels of diesel last year, or about 7,800 barrels a day, according to Vortexa. It also tendered to buy about 55,000 barrels a day of gasoline on average through the end of this year, according to traders. That’s up from about 43,000 barrels of seaborne gasoline supplied daily on average last year, according to Vortexa. 

Baghdad is buying gasoline from trading units of Saudi Aramco, Reliance Industries Ltd. and Oman’s state energy company OQ, among others, according to traders and data from ship tracking firm Vortexa. Those companies are supplying under long-term contracts that Iraq continued this year, the traders said.

The country has a designed refining capacity is 1.26 million barrels a day, though actual processing is lower. 

Iraq is the second-largest crude oil producer in the Organization of Petroleum Exporting Countries, behind Saudi Arabia. Iraq’s oil output has been in focus in recent months as the country struggles to meet a limit pledged to the OPEC+ group that includes allied countries like Russia. The amount of crude the country actually refines along with its exports are some of the main factors used to assess Iraq’s production.

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Pembina Renews Buyback Program

Pembina Pipeline Corp. has received clearance from the Toronto Stock Exchange (TSX) for the renewal of its share repurchase program, allowing the Canadian midstream oil and gas company to reclaim up to five percent of its issued common stocks.

The approved normal course issuer bid (NCIB) provides for the buyback of nearly 29 million units, Pembina said in a press release Monday.  A prior NCIB saw Pembina redeem close to 1.2 million shares at a weighted average price of CAD 41.76 ($30.5) per share.

Pembina said the actual number of shares and their prices that the company would purchase under the new NCIB depend on “a number of factors, including Pembina’s financial performance and flexibility in the context of its financial guardrails, the availability of discretionary cash flow in excess of dividend and capital funding requirements, and the risk-adjusted returns of repurchasing common shares compared to other uses of cash, including accretive capital investment opportunities and debt reduction”.

However, it specified, “Subject to exceptions for block purchases, Pembina will limit daily purchases of common shares on the TSX in connection with the NCIB to no more than 25 percent (664,745 common shares) of the six-month average daily trading volume of the common shares on the TSX from November 1, 2023 to April 30, 2024 (2,658,980 common shares) during any trading day”.

“Purchases under the NCIB will be made through open market purchases at the prevailing market price”, Pembina added.

Purchases can be made on the TSX, the New York Stock Exchange (NYSE) and other Canadian trading platforms from May 16, 2024, to May 15, 2025.

“Pembina believes that, from time to time, the market price of its common shares trade at prices that may not adequately reflect their underlying value and the repurchase of common shares for cancellation may represent an attractive use of the Company’s financial resources”, it explained.

Pembina closed higher on TSX at CAD 50.39 ($36.84), as well as on the NYSE at $36.87.

Pembina’s board of directors earlier approved CAD 0.69 ($0.5) in dividend per common share for the second quarter of 2024, up 3.4 percent, according to the company’s quarterly financial report released last Thursday.

“The increase reflects the continued growth of Pembina’s fee-based business, which is benefiting from rising volumes and increasing utilization across many of its assets in the Western Canadian Sedimentary Basin”, the report said.

Pembina logged earnings of CAD 438 million ($320.2 million), or CAD 0.74 ($0.54) per common share post-dilution, for the first quarter of 2024. Revenues totaled CAD 1.5 billion ($1.1 billion). Earnings before income tax, depreciation and amortization stood at CAD 1 billion ($731.1 million) after adjustment from extraordinary or nonrecurring items, with a CAD 40 million ($29.2 million) negative impact from an outage that hit the Northern Pipeline system.

Pembina pipelines transported 2.6 million barrels of oil equivalent per day in the first three months of the year.

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Magnolia Profit Drops, Production Rises

Magnolia Oil & Gas Corporation reported net income of $97.6 million for the first quarter, down nine percent from the same period in 2023.

The Houston-based company posted adjusted net income of $101.0 million for the quarter, a decrease of 15 percent from the previous-year figure of $119.3 million, according to its latest earnings release.

Magnolia’s total production in the first quarter grew seven percent on a year-over-year basis to 84.8 thousand barrels of oil equivalent per day (boepd), including 37.5 thousand barrels per day of oil. Production at its Giddings and Other segment was 61.4 thousand boepd, providing overall growth of 17 percent compared to last year’s first quarter, including oil production growth of 16 percent, the company said.

Magnolia said its total production volumes benefited from continued strong well performance, in addition to some production from assets acquired last year, as well as a” slightly oilier development program”. Its first-quarter capital spending on drilling, completions, and associated facilities was $119.0 million.

In April, Magnolia acquired oil and gas properties in Giddings from a private operator encompassing roughly 27,000 net acres for approximately $125 million. The assets include total production of approximately one million boepd, in addition to leasehold and royalty acres. The acquisition “significantly increases Magnolia’s working interest in future high-return development areas and adds new acreage which further expands the company’s leading position in the Giddings area,” it said.

“Magnolia’s first quarter performance delivered a solid start to 2024, continuing our strategy of disciplined capital spending, while delivering steady production growth with strong pre-tax margins and consistent free cash flow,” Magnolia President and CEO Chris Stavros said. “Our growing production and continued low reinvestment rate provided free cash flow generation of roughly $117 million. We returned 68 percent of our free cash flow to our shareholders through our recently increased dividend and share repurchase program. Higher oil production of 37.5 thousand barrels per day during the quarter was driven by strong well performance and additional volumes from assets acquired last year”.

“A key objective of Magnolia’s business plan and strategy is to utilize some of the excess cash generated by the business to pursue attractive bolt-on oil and gas property acquisitions. Properties are targeted not to simply replace the oil and gas that has already been produced but importantly, to improve the future opportunity set of our overall business and enhance the sustainability of our high returns,” Stavros outlined.

“We continue to look for bolt-on oil and gas property acquisitions utilizing our technical expertise and where we have a competitive advantage in the development of the Austin Chalk and Eagle Ford formations in South Texas,” he continued.

“While I am proud of our teams’ accomplishments, we continue to seek out areas where we can improve. Our field operations team recently initiated a field-level optimization and cost reduction program throughout our assets. Part of these efforts will employ improved field management systems that will increase efficiencies and optimize processes across the field while capturing synergies from acquired assets. These and other initiatives are expected to deliver a 5 to 10 percent reduction in cash operating costs (LOE) per boe during the second half of the year compared to the first quarter. Our goal is to improve on our track record for generating high operating margins while providing additional free cash flow to either return to our shareholders or reinvest in the business,” he concluded.

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FTC’s Surprise Attack on USA Oil Icon Rattles Shale Sector

The Federal Trade Commission’s allegations that shale trailblazer Scott Sheffield tried to collude with OPEC to prop up crude prices is unnerving US oil executives pursuing more than $100 billion in deals.

While Thursday’s green light from the FTC for Exxon Mobil Corp.’s $60 billion takeover of Pioneer Natural Resources Co. provided some relief to an industry undergoing unprecedented consolidation, a key condition of the approval is triggering shockwaves.

Sheffield, Pioneer’s founder and a high-profile figure in the shale industry, has been barred from joining Exxon’s board, according to the agreement reached between the companies and the FTC. That represents a step-change for the US antitrust agency, which in the past usually sought asset sales before assenting to deals, legal observers say.

“It’s definitely avant garde antitrust,” said Jeffrey Oliver, a partner at law firm Baker Botts LLP and former FTC official. “It’s way for them to appear tough on a deal that they couldn’t find a route to try and block on any other grounds.”

Chevron Corp., Occidental Petroleum Corp., Diamondback Energy Inc. and Chesapeake Energy Corp. are among the companies with pending transactions currently under FTC review. 

The notion of the FTC scrutinizing individual executives has some companies with pending deals reviewing their regulatory-review strategies, as they are uncertain what the agency could throw at them next, according to people familiar with current deals.

The FTC hasn’t sought to block an oil or gas deal outright in recent memory, preferring to reach settlements. Last year, the agency required a Quantum Energy Partners founder to give up a board seat on shale-gas driller EQT Corp. before it could proceed with an acquisition.

The FTC cited “voluminous evidence” that Sheffield, 71, sought to co-ordinate production levels across the US shale sector and align the industry with the Organization of Petroleum Exporting Countries, with whom he communicated extensively in private messages and dinners. The agency also cited public comments in which Sheffield advocated production discipline among American peers. 

‘Predatory Practices’

In an 850-word rebuttal of the FTC allegations, Pioneer defended its co-founder, citing his role in driving US crude-production growth. His efforts to encourage discipline among drillers was aimed at improving investor returns and steeling the shale sector against OPEC’s “predatory practices,” the company said. 

“Until today, the FTC has taken non-adversarial stances against oil industry mergers,” Jim Lucier, managing director at Capital Alpha Partners, wrote in a note to clients. “Now that stance is different. We will be on the lookout for other consent decrees, based on dubious legal theories, to be applied to oil industry mergers.”

The FTC’s decision comes agains a backdrop of hostility from Democratic lawmakers that accused oil executives of “deception and doublespeak” over climate change in an investigation in the House of Representatives this week. Liberal advocacy group Climate Power seized on the FTC move as evidence that Big Oil is “price gouging consumers so that Americans pay more at the pump even after years of record profits.”

13.1 Million Barrels

A positive note for the industry from the FTC ruling was its decision to define the oil market globally rather than a narrow, localized one that could have competition concerns. And on the whole, the agency hasn’t been seeking to outright block oil and gas transactions.

“The good news is, they’re not hamstringing these deals, not forcing divestments of assets, not doing anything that makes either party want to walk from a deal,” said Dan Pickering, founder of Pickering Energy Partners. “Ultimately, the deals are moving ahead pretty much as the two parties envisioned when they struck the deals.”

US oil production is currently about 13.1 million barrels a day, close to record levels and 40% higher than OPEC leader Saudi Arabia. US crude output more than doubled in the past 15 years, a result of the shale-oil revolution that Sheffield helped champion. 

“This is the government trying to save some face — it’s irrelevant to the whole issue of antitrust,” said Leo Mariani, managing director at Roth MKM. Through Sheffield’s 50 years in the industry, “he’s never really had issues where people thought he was engaging in anti-competitive behaviors,” Mariani said. 

“So it’s silly,” he added. “This whole thing is just politics ultimately. In an election year it helps to be tough on Big Oil.”

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Afentra Progresses Angola Stake Acquisition

London-based upstream oil and gas company Afentra PLC has received approval from the Angolan government for the acquisition of a 12 percent non-operating interest in Block 3/05 and a 16 percent non-operating interest in Block 3/05A from Azule Energy Angola Production B.V.

The acquisition follows the sale and purchase agreement between Azule and Afentra’s wholly-owned subsidiary Afentra (Angola) Ltd in July 2023, Afentra said in an announcement Thursday. The closing of the acquisition is expected in the second quarter.

According to the July 2023 announcement regarding the acquisition, the initial consideration will be for $48.5 million. There will be contingent consideration of up to $21 million over three years subject to certain oil price and Block 3/05 production hurdles and an annual cap of $7 million, as well as contingent consideration of up to $15 million linked to the successful future development of certain Block 3/05A discoveries and associated oil price and production hurdles.

“The Angolan government’s approval of the Azule Acquisition allows us to proceed with the completion of our third transaction in Angola providing Afentra a material equity position in these world-class assets,” Afentra CEO Paul McDade said.

“The improved fiscal terms for the Punja Discovery is another clear indication of the support given by the Government of Angola to parties willing to invest in their oil and gas sector. This further encourages us to continue to work with Sonangol and our joint venture partners to grow production and reserves as we develop the vast potential of both the producing fields in Block 3/05 and the significant discoveries within Block 3/05A,” McDade added.

Further, following a request by the Block 3/05A partnership, the Government of Angola has declared the Punja Development Area located in Block 3/05A as a marginal discovery. As a result, the applicable fiscal incentives will be applied to this marginal discovery, significantly enhancing the commercial value of this potential development, Afentra noted.

The Azule acquisition follows Afentra’s completion of the acquisition of a 14 percent non-operating interest in Block 3/05 and a 40 percent non-operating interest in Block 23, offshore Angola, from Sonangol in December 2023. The payable cash consideration at completion of $21.1 million. Afentra said in an earlier announcement that the initial cash consideration of $56.5 million was reduced by impact of cash flow adjustments as of the transaction effective date of April 20, 2022.

The Sonangol acquisition increased Afentra’s interest in Block 3/05 to 18 percent, which will increase to 30 percent upon completion of the ongoing Azule acquisition.

Afentra is an upstream oil and gas company focused on opportunities in Africa. The company’s stated purpose is to support a responsible energy transition in Africa by establishing itself as a credible partner for divesting international oil companies and host governments.

Afentra has 18 percent non-operated interest in the producing Block 3/05 and four percent non-operated interest in the adjacent development Block 3/05A offshore Angola in the Lower Congo Basin. Afentra has a current carried interest in the Odewayne Block onshore southwestern Somaliland, according to the company’s website.

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Storegga Makes a Change at the Helm

Tim Stedman will take the post as the new chief executive officer (CEO) at Storegga effective May 1, the decarbonization project developer said.

The company said in a media release that Stedman, who was chosen following an extensive global search process, brings vast experience in corporate development and across the value chain.

Upon assuming the role, Stedman will join the company’s board of directors. He succeeds Nick Cooper, who will remain involved in Storegga and has been appointed to the role of executive chair, also effective May 1. Alan Booth will step down as executive chair he will remain on Storegga’s board of directors in a non-executive role, the company said.

“Our objective has been to position Storegga as a leading, independent decarbonization project developer with the financial firepower to be a meaningful driver of global industrial decarbonization efforts, through deployment of carbon capture and storage (CCS) and hydrogen projects. We have made good progress in the early years of this effort but there is much work ahead of us. The timing is now right to reinforce Storegga’s delivery capability and Tim’s strong record of accomplishment in this area, plus his broad industrial and corporate development experience make him the right leader for Storegga’s next phase”, said Cooper.

“I am excited for the opportunity to lead this ambitious company in delivering a growing portfolio of global decarbonization projects”, said Stedman. “Storegga has made an impressive transformation under Nick’s leadership, and I welcome his insights to the company’s strategic direction in his role as Executive Chair. I am looking forward to working with the rest of the management team to build on the strong foundation laid by Nick, focusing on operational execution to deliver value for our shareholders, build our customer base and contribute to the communities where we operate”.

Stedman is the former CEO of Agilyx Corp., a leader in recycling technologies that unlock value from plastic waste to enable a circular economy, where he served from 2020 to 2024, Storegga said. Before his role at Agilyx, he held the position of senior vice president for strategy and corporate development at Trinseo, where he spearheaded the development of a mergers and acquisition strategy. Stedman also served as senior vice president of the Plastics and Feedstocks businesses for the global supply chain, and sat on the board of Americas Styrenics, a joint venture between Trinseo and CP Chem. Before his time at Trinseo, Tim accumulated over 20 years of experience at ExxonMobil, holding various leadership positions, Storegga said.

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Biden Plans Sweeping Effort to Block Arctic Oil Drilling

The US set aside 23 million acres of Alaska’s North Slope to serve as an emergency oil supply a century ago. Now, President Joe Biden is moving to block oil and gas development across roughly half of it.

The initiative, set to be finalized within days, marks one of the most sweeping efforts yet by Biden to limit oil and gas exploration on federal lands. It comes as he seeks to boost land conservation and fight climate change — and is campaigning for a second term on promises to do more of it.

The changes wouldn’t affect ConocoPhillips’s controversial 600-million-barrel Willow oil project in the National Petroleum Reserve-Alaska. But oil industry leaders say the plan is more expansive than initially anticipated and threatens to make it nearly impossible to build another megaproject in the region. 

That’s spooking oil companies with holdings in the National Petroleum Reserve, which — along with the rest of Alaska’s North Slope — was viewed as a major growth engine for the industry before the shale boom. Interest has surged again in recent years, fed by mammoth discoveries. Tapping the region’s reservoirs could yield decades of production.

Company executives and Alaska lawmakers have increasingly raised alarm over the plan, saying it could thwart oil and gas development across much of the reserve, even on existing leases. The opposition has united a broad spectrum of foes, from Alaska Natives to lower-48 oil producers.

Santos Ltd., which leases more than a million acres within the reserve and is developing the nearby Pikka Unit joint venture with Repsol SA, said in a filing with the Bureau of Land Management that the proposal would infringe on its holdings, with impacts “as extensive as whole projects being denied.” ConocoPhillips, which has 156 leases in the reserve, warned the regulation would violate its contracts and “drive investment away from the NPR-A.” And Armstrong Oil & Gas Inc., whose leases there span 1.1 million gross acres, said the measure could block it from building the infrastructure needed to access those tracts.

The proposed rule would effectively nationalize the company’s leases, Chief Executive Officer Bill Armstrong told White House officials in a March 21 meeting, according to people familiar with the discussion. A company spokesman declined to comment on the matter. 

Administration officials argue the changes are necessary to balance oil development with the protection of sensitive landscapes that provide habitat for polar bears, migratory birds and the 61,500-strong Teshekpuk caribou herd. “We must do everything within our control to meet the highest standards of care to protect this fragile ecosystem,” Interior Secretary Deb Haaland said in announcing the measure last year. 

The regulation would limit future oil development in some 13 million acres (20,000 square miles) of designated “special areas” within the Indiana-sized reserve, including territory currently under lease. There’d be an outright prohibition on new leasing in 10.6 million acres. 

The proposal would create a formal program for expanding protected areas at least once every five years — while making it difficult to undo those designations. And it would raise the bar for future development elsewhere in the reserve.

The Interior Department said in a preamble the regulation wouldn’t affect existing leases. But the proposed rule text doesn’t offer similar, explicit assurance. Instead, it proposes to give the government broad authority to limit or bar access to existing leases, “regardless of any existing authorization.” Oil leasing and infrastructure development would be presumed not to be permitted unless specific information clearly demonstrates the work can be done with “no or minimal adverse effects” on the habitat.

Environmentalists and some Alaska Natives have widely praised Biden for setting aside territory for conservation. 

“These are resources that once they’re gone, they’re gone forever, and we can’t wait until they have disappeared to go and get them back,” said Rachael Hamby, policy director for the Center for Western Priorities. “We need to manage now to protect those resources and values for present and future generations.”

The Interior Department says the proposal would not have a significant effect on the nation’s energy supply. Still, the reserve could be a notable source of fuel, with the rock formations beneath it holding an estimated 8.7 billion barrels of recoverable oil, according to a 2017 assessment by the US Geological Survey. Enthusiasm for the region picked up after recent discoveries in the Nanushuk field, and the state of Alaska expects crude production from the reserve to climb from 15,800 barrels per day in fiscal 2023 to 139,600 barrels per day in fiscal 2033. 

Opponents say the plan would shift the role of the reserve to conservation instead of oil development, contrary to congressional intent. “The current statute says that the primary purpose is to increase domestic oil supply as expeditiously as possible,” said Kara Moriarty, president of the Alaska Oil and Gas Association. “But the rule takes a completely different premise.”

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Big Oil Is Beating Big Tech as Eyes Turn to Crucial OPEC Meeting

Big tech may be driving the stock market, but after a blow-out first quarter, big oil would like a word.

After finishing 2023 in the red as the broader market soared, energy stocks have started 2024 with a sharp rally that has them beating tech indexes this year. Specifically, the closely watched Energy Select Sector exchange-traded fund, or XLE, is up more than 13% since the start of January while the Nasdaq 100 Index has gained just 8.7%. Rising oil is helping, as West Texas Intermediate crude broke above $80 a barrel in mid-March for the first time since November and held there. 

“Most investors coming into 2024 weren’t expecting anything out of energy,” Roth analyst Leo Mariani said by phone. But the stocks “roared back like a lion with an awesome March.”

Energy led the the S&P 500’s 11 market sectors last month, rising more than 10% compared with the next closest group, utilities, at 6.3%, and the 3.1% gain in the broader index. Following that performance, energy investors are now looking to the April 3 OPEC oil-market monitoring meeting for clues on crude’s direction, which could add fuel the rally or cause it to stall.

“Right now, investor sentiment could go either way,” Pickering Energy Partners Chief Executive Officer Dan Pickering said. He likened energy’s first-quarter to the beginning of a binge-worthy TV show. “A number of people 1.5 episodes in, trying to commit to whether they binge this season — and Q2 may be the point where you say, I’m staying up all night.”

What OPEC Says

Some of that will depend on what OPEC+ members say this week, particularly if they signal plans to hold the line on previously announced voluntary cuts through the first half.

“I think at this point, the market is expecting OPEC to maintain restraint,” Hennessey Funds portfolio manager Ben Cook said by phone. He likened the OPEC meeting to a Federal Reserve decision, where the outcome may be expected, but the messaging is equally important.

Russia’s decision to cut production could push Brent crude to $100 a barrel this year, JPMorgan analysts led by Natasha Kaneva wrote. It’s currently trading in the high $80s and could reach the $90s by May, they wrote. 

Amid that bullishness, some investors are snapping up shares in mid-sized oil producers, which offer more torque to the rising commodity price. Diamondback Energy Inc., for example, is up 28% this year and climbed every day but two in March while posting 15-day winning streak, the longest for any S&P 500 stock this year.

“You’re going to see the most rapid pickup in earnings estimates will not be on the largest producers because they have lower costs,” said Cole Smead, president of Smead Capital Management. “It will be on the smaller producers.” Some of the stocks he’s buying are Apa Corp. and Ovintiv Inc., as well Canadian producers such as MEG Energy Corp. and Strathcona Resources Ltd.

Refining stocks have been hot for even longer than oil companies. The VanEck Oil Refiners ETF is up up over 15% in the last five months, outperforming integrated companies such as Exxon Mobil Corp. and Chevron Corp. as well as gains in crude.

Refining Bets

The refined products market has been tight, and capacity has only gotten more precious as Ukrainian military strikes knock out Russian facilities. That’s why some investors see the refining business as a way to play the rally in energy from here.

“We have spare capacity in crude, but refining capacity is what’s really being constrained by the Red Sea and by what’s happening with Russia,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Group. “So the story behind the scenes is really in the products.”

To be sure, Wall Street widely expects energy stocks to post declining earnings this year, including an almost 27% drop in first-quarter profits thanks to lower year-over-year oil prices. That’s by far the worst expected performance of any S&P 500 sector, according to data compiled by Bloomberg Intelligence.

However, some analysts are starting to flip those expectations. Morgan Stanley US equity strategist Mike Wilson, for instance, upgraded energy to overweight on a combination of rising oil prices, “inflecting earnings revisions, strong breadth and compelling valuations.” Energy valuations continue to trade at a historic discount to the S&P 500 and, with higher free cash flow yields, there is “a path to further outperformance,” he wrote in a note to clients on March 25.

Indeed, energy is also the cheapest sector in the market, which is helping draw new investors in, even as the rally remains somewhat lowkey so far. 

“There’s been a quiet rally in this sector that is catching a few people by surprise,” BMO Capital Markets analyst Jeremy McCrea said, adding that investors who were betting on an electric future are beginning to think that “maybe we’re going to be using oil and gas for a bit longer than expected.”

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