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The world felt its way along in an uncertain 2022 — a year marked by market volatility, an uneven M&A environment, war and energy transition breakthroughs.
The energy industry weathered it, right down to the end when a powerful winter storm knocked out energy production across the U.S. Through the highs and lows of the year, the energy industry persevered through political turmoil, energy insecurity and inflation rates not seen since the early 1980s.
Energy prices, already rising, spiked after Russia’s February invasion of Ukraine spurred an upheaval in energy security in the west, particularly in Europe. Although heavy importers of Russian energy, such as India and China, have neglected to impose sanctions against the country, the EU has spent the majority of the year debating legislation to cut down its consumption of Russian energy imports.
The U.S. was poised to assist Europe in its energy crisis, though setbacks struck, including a June explosion at Texas-based Freeport LNG that forced the export facility to close. Expected to fully restart in March 2023, Freeport anticipates additional LNG volumes going toward the U.K. and Europe once the 15 million tonnes per annum (mtpa) facility is operational.
Global governments saw the largest amount of inflation in 40 years, with the U.S. Consumer Price Index for All Urban Consumers up 9.1% over the 12 months ended June 2022, according to the U.S. Bureau of Statistics. Energy prices rose 41.6%, the highest increase since April 1980. Other notable inflation surges include:
• A 70.4% increase in fuel oils and other fuels;
• A 60.2% increase in motor fuels (gasoline, etc.);
• A 13.7% increase in electricity; and
• A 38.4% increase in natural gas (utility piped).
Although U.S. inflation peaked in June 2022, it has fallen steadily since, with the inflation rate landing at 7.1% in November 2022, the Statista Research Department reported in December.
Rounding out the year, scientists at a California facility conducted a groundbreaking controlled fusion energy experiment that resulted in higher energy output than input. The fusion fuel used 2 megajoules of energy while producing 3 megajoules, providing another route toward clean energy in the future.
Listed chronologically, here’s a look back at 10 of Hart Energy’s top stories – plus a remembrance of one of the shale revolution’s leaders.
1. “Why the Haynesville Has an A&D Problem (and the Market is to Blame)” by Darren Barbee, Hart Energy
A&D in the U.S. overall was up and down in 2022. However, due to the natural gas producers taking a hit in the first half of the year, the Haynesville saw a particularly noticeable hit in A&D activity.
“The chief villain in the deal market is price dislocation,” Hart wrote. “In the present, prices are up. But years into the future, their value collapses—a phenomenon known as backwardation.”
With A&D transactions plateauing, RBC Richardson Barr’s Grant Butkus said at Hart’s DUG Haynesville conference that companies could be forced to get deals done through mergers and stock inducements.
2. “Inside Look at Houston-area Renewable Natural Gas Operations” by Velda Addison, Hart Energy
During a year rife with renewable natural gas (RNG) transactions, including deals such as Shell’s $2 billion acquisition of Nature Energy and BP’s $4.1 billion acquisition of Archaea Energy, Republic Services gave an inside look at its joint venture with Archaea Energy to develop 39 RNG facilities.
The company compresses trash as it decomposes, creating biogas, which is then transformed into pipeline-ready gas that contains considerably less carbon. While the U.S. RNG market was only about 185 MMcf/d midway through 2022, Republic Service’s $1.1 billion joint venture with Archaea is expected to contribute to the demand growth.
“When we first got into it, it was about utilizing an available resource to generate energy. It wasn’t necessarily about carbon intensity or climate change or those types of things,” Republic Services’ Pete Keller told Hart Energy. “We were just early adopters using a resource, but now it’s really about opportunities to decarbonize, to clean up grids, to clean up pipelines. It’s just been an evolution in the landscape.”
3. “EQT’s Toby Rice on How Environmentalists Can Truly Make an Impact” by Jennifer Pallanich, Hart Energy
Speaking at Hart Energy’s DUG East conference in Pittsburgh, Toby Rice, CEO of EQT Corp., emphasized the importance of pipelines in the fight to reduce emissions – and how environmentalists can help the cause. It was a year in which Rice emerged as a champion of natural gas as a reasonable alternative to renewables-only policies.
Although viewed by some environmentalists as detrimental to the planet, natural gas is a “major green initiative” that requires sufficient infrastructure to make a significant impact, Rice said. Through reframing the narrative and realizing the good that natural gas can do, well-meaning activists can help make a long-term impact on emissions reduction.
“They take us for granted to the point where they don’t think they need us,” Rice said. “But we provide a real solution to a global problem.”
4. “Outstanding in Her Oil Field: The Networking Challenge of an Isolated Engineer” by Joseph Markman, Hart Energy
Follow Nabila Lazreg’s journey navigating the oil and gas industry, a business dominated by white men, as a woman of color. Lazreg, Schlumberger’s shale and hydraulic fracturing expert, reflects on the challenges women face working in the oil field.
According to Katie Mehnert, founder and CEO of Ally Energy, women have the potential to rise to the tops of their companies by gaining experience in the field and thus establishing credentials, but they must also leave to join the corporate side of the business.
“There’s only so far you can get in the field on the ladder to the top,” she said. “If you’re not in the corporate office, you may not have that ability to move up the ladder because of the access to the people, access to the information.”
5. “C-suite Chat with Charif Souki—The LNG Godfather” by Nissa Darbonne, Hart Energy
In an exclusive interview with the industry-proclaimed godfather of LNG, Hart Energy spoke to Tellurian executive chairman Charif Souki on Europe’s economic outlook and energy emergency.
Under Souki’s leadership, Cheniere Energy became the first LNG exporter in the U.S. Lower 48 and has plans to build a second LNG export terminal, Driftwood.
6. “Shell CEO Says Governments Obsessed with Energy Affordability” by Pietro Pitts, Hart Energy
Global governments are obsessed with energy affordability, Shell CEO Ben van Beurden told attendees at the Energy Intelligence Forum in London.
Although sustainability previously took precedence over affordability or stability, in light of European sanctions against Russian energy, governments cannot afford to be too selective about how they provide their countries with power, especially with winter fast-approaching, he said.
“There was a time when we only focused on sustainability of energy and nobody really cared about stability or affordability and that was sort of taken for granted,” van Beurden said. “And now we are saying you can’t take the affordability for granted and it is, therefore, something that we have to manage.
7. “Investors to Top Permian Producers: Go Get ’Em!” by Joseph Markman, Hart Energy
Despite a withdrawal from oil and gas over the last few years, investors are returning to the industry after E&Ps continued to demonstrate strict capital discipline.
Leading Permian producers have benefited from investors’ change of heart, brought on by the combined factors of Russia’s Ukraine invasion and the industry’s embrace of renewables, with energy share stocks rising 77.7% for equal weight and 75.8% for market cap weight on the S&P Equal Weight Index.
“This longer-term investment case has appealed to more generalist investors as the S&P 500 energy weighting has increased from a low of 2.5% versus 9% to 10% in 2007 to 2008,” Capital Innovations’ Michael Underhill told Hart Energy.
8. “Continental Resources Agrees to Harold Hamm’s Boosted Take-private Offer” by Emily Patsy, Contributing Editor
With a cash value of $4.3 billion, founder Harold Hamm took energy giant Continental Resources Inc. private after presenting the offer to the board in June.
Partially due to feeling undervalued in the market, Hamm’s offer led to speculation regarding other motivations – including a desire to dodge stringent ESG regulations – as well as whether independent E&Ps should follow suit.
“We have consistently said that as long as we were appreciated in the market, we would remain a public company, but if our opportunities were limited by being public, we should look at alternatives,” Hamm said.
9. “Latin America Can’t Solve Europe’s Energy Crisis in the Short-term” by Pietro Pitts, Hart Energy
“There's no short-term solution for Europe's crisis coming from Latin America,” according to Jeremy Martin, vice president of energy and sustainability of the Institute of the Americas, during the Energy Outlook in the Americas webinar.
With winter well underway in Europe, energy analysts have made it clear that Latin America and the Caribbean will not be coming to the rescue, despite housing 341 billion bbl of oil.
Most recent significant production from the area has come from Brazil and Guyana to add to the continent’s reserves, with underdog Argentina holding oil reserves on par with the Permian Basin in its Vaca Muerta shale.
10. “Marathon, Devon’s $4.8 Billion in Deals Puts Spotlight on Eagle Ford” by Darren Barbee, Hart Energy
While the Haynesville experienced stunted A&D growth this year, Marathon Oil’s purchase of Ensign Natural Resources for $3 billion and Devon Energy’s acquisition of Validus Energy for $1.8 billion brought fresh attention back to the Eagle Ford shale as dealmakers discussed the possibility of private companies in the region sparking large transactions.
To larger E&Ps shopping in the Eagle Ford, the shale has the capacity to provide more activity over the coming years compared to some of its rivals.
“You’re finding ways to bring some additional inventory life out of what people thought of as a fairly mature play,” Enverus’ Andrew Dittmar told Hart Energy. “I think that's one thing that's spurring this new interest in M&A in the play.”
Bonus: In Memoriam – “Industry Vet, Long-time Occidental Exec Stephen Chazen Dies at 76” by Hart Energy Staff
Hart Energy paid homage to former Occidental Petroleum leader Stephen Chazen, who passed away at the age of 76.
Chazen held the roles of president, CFO, CEO and independent board chairman over the course of his 30-year tenure at Oxy. In addition, he founded Eagle Ford and Austin Chalk focused independent Magnolia Oil & Gas Corp. following his departure from Oxy in 2016.
2023-12-18 - A land grab for top-quality drilling locations fueled record Permian Basin M&A activity in 2023. To preserve inventory, E&Ps are radically slashing drilling activity on their new assets, East Daley Analytics reports.
2024-01-04 - APA and its subsidiary Apache Corp. are plucking Callon Petroleum off the board for $4.5 billion in stock as a historic wave of Permian consolidation enters a new year.
2023-12-26 - Following M&A in 2023, four companies are now positioned to control about 58% of future production in the Permian Basin.
2023-12-21 - Several Canadian E&Ps are adding scale and undrilled inventory in prolific resource plays in Alberta, while in the Permian Basin, Ring Energy finalized an acquisition in the Central Basin Platform.
2024-01-30 - Permian Resources acquired two properties in New Mexico for approximately $175 million.