📈 Is The Permian Shale Boom Over?

s you haven’t been hearing much about:

• Exxon, Chevron Earnings Fall. Supermajors Spar Over South America’s Oil Jewel: ExxonMobil (XOM) and Chevron (CVX) reported first-quarter earnings and revenue declines early Friday as lower refining margins and natural gas prices took a toll on the energy giants. Meanwhile, the two U.S. supermajors continue to squabble over Chevron’s attempt to move into oil-rich Guyana.

On the face of it, the official narrative makes sense – if all we do is look at oil prices from Q4-’22/Q1-’23 to Q4-’23/Q1’24… they look pretty similar in terms of a price decline coming out of the holiday season.

And based on what we know about natural gas prices cratering due to oversupply in Texas, this tracks too.

But in early February, ExxonMobil and Chevron forecast nearly flat oil production for 2024 compared to 2023 levels.

And the Energy Information Administration estimates the Permian Basin in West Texas and New Mexico will produce more than six million barrels of oil per day in April.

But as we’ve covered in previous issues, what if the “story they’re not telling you” is the alleged record production we’re supposed to be seeing from the Permian Basin in 2024 simply isn’t going to happen?

Does this all point to the end of the record production coming from Permian Shale – not to mention, the catalyst that finally sends oil above $100?

That’s the topic of today’s Weekend Edition.
-Equifund Publishing

Is This The End of Permian Shale?

For the past several weeks in Private Capital Insider – both in the Weekday and Weekend Editions – we’ve been talking a lot about what’s going on in oil and gas.

Why? Two important reasons:

1. At the time of publishing, the only current listing on the Equifund Crowd Funding Portal happens to be a Permian-based oil and gas play, so we’re obviously providing some market coverage on the sector.
2. Because energy prices have such a noticeable impact across substantially all parts of the economy, the energy markets serve as a useful bellwether for what’s to come in the stock market.

Coming into 2024, there was a pretty clear narrative from one of the main “official” sources, the Energy Information Administration (EIA): global benchmark for crude oil, may average $93 per barrel, up from an expected 2023 global average of $84 per barrel.

However, as Yogi Berra allegedly said, “It is difficult to make predictions, especially about the future.” 

As such, forecasts have to get revised as new data comes in.

According to the EIA’s April 2024 Short-Term Energy Outlook (called the STEO),

While most people probably aren’t keeping track of the price of a barrel of oil…

A majority of Americans are aware what it costs to fill up their tanks, making gasoline prices (alongside food and rent) an important issue on the campaign trail.

President Joe Biden’s top economic advisor recently said the White House will “make sure gas prices remain affordable,” when asked whether the administration would consider tapping the Strategic Petroleum Reserve.

Despite the SPR’s low levels, the Biden administration has space to release another 60 million barrels of crude oil, according to JPMorgan.

But thanks to Iran’s attack on Israel – which for some reason, the market seemed to shrug off – if Israel retaliates, we could see an escalation in the Middle East that could cause a supply side shock.

According to the World Bank, a moderate to severe disruption could send prices soaring.

But as we covered previously… What if that shortfall in supply happened somewhere else, for reasons that have nothing to do with geopolitical conflict or voluntary supply cuts?

In previous issues, we’ve disclosed our skepticism that major downward revisions of January 2024 production numbers were due to “cold weather”…

And even though there was, in fact, cold weather that likely impacted production…

We’re not the only ones starting to question the official data coming from the EIA.

But if we can’t trust the data coming from government agencies… What can we trust?

In a few words, this is one of the key reasons why it’s important to have access to first-party data – especially if you’re planning to invest in early stage oil and gas deals.

In many ways, you can’t ever trust the “official” narrative coming from the “official” sources when doing due diligence. 

Not because there is some grand conspiracy to hide information from you (although maybe that’s also happening)…

It’s because of the value of proprietary information.

If you are relying solely on third-party data published by government agencies and mainstream sources, it means everyone else has access to that information as well.

And more to the point, unless the data is specific to the project you’re investing in, it doesn’t really help you in terms of making an investment decision in that specific opportunity.

If you don’t have proprietary data – and ideally, access to that information before other people do – it’s extremely difficult to gain any sort of “edge” when investing.

Generally speaking, oil and gas wells generate an enormous amount of data, which, oftentimes, must be manually transformed and interpreted by highly skilled labor.

However, by leveraging large language models, Josh Zuker – CEO of Pytheas Energy – believes he can significantly improve operating margins through data-driven asset management and artificial intelligence.