*Source – www.iea.org/reports/oil-2021

Hard Assets For Uncertain Times

Historic & Projected Demand

01

Ever Growing

Oil consumption worldwide reached 94.1 Million Barrels per day in 2021 (19.89 Million in the USA) and, even in the face of economic pressure due to the pandemic, is expected to reach 104.1 Million Barrels per day by 2026*.

02

West Texas Intermediate

WTI Crude Oil’s average price increased dramatically over the last few years ($94.53 in 2022).

03

Immediate Future

Oil is predicted to continue at its elevated rates for the foreseeable future, $80 – $90 being the new norm, and potentially going as high as $150 per barrel.

Industry leadinng Analysts Predict Higher Energy Prices In 2024 And 2025

AI-Powered “Stripper Wells” Could Offer Investors Significant Upside Potential, While Supporting American Energy Independence

U.S. Energy Information Administration

Predicts prices for Brent crude, which is the global benchmark for crude oil, may average $93 per barrel, up from an expected 2023 global average of $84 per barrel. 

Bank of America

Predicts Brent prices may average $90 per barrel in 2024, with West Texas Intermediate crude – the U.S. benchmark – may average $86 per barrel next year. 

Goldman Sachs

Predicts Brent prices may average $94 a barrel next year (2025).

OIL’S BOOM BUST CYCLE EXPLAINED

Unlike software startups that can be launched quickly and cheaply… producing, transporting, and refining O&G products requires considerable infrastructure and upfront capital expenditures to bring new projects online.

However, because the price of O&G is determined by supply and demand, changes in price can have significant impacts on investment activity in the sector.

“The biggest oil deals follow oil price crashes. Since 1995, more than 50 deals have been completed in the sector valued over $10 billion.

The priciest deals, excluding pipeline partnership reorganizations, all came after the market collapse in the late 1990s or the price fall that began in the second half of 2014.”

five predictable stages that drive the Boom Bust Cycle

At the bottom of the cycle, there’s too much supply. This creates low oil prices and a period of under-investment by the oil industry. Generally speaking, low prices stimulate higher demand.

As demand increases demand increases relative to supply, this causes prices to rise.

As prices rise, marginal projects become economically viable, and companies begin to deploy capital into expansion. The higher prices climb, and the longer they stay elevated, financiers and investors become more attracted to the opportunity.

As speculators begin to enter the market, price action begins to separate from underlying fundamentals. This inevitably leads to inflation, as high energy prices drive up the cost for everything else.

Eventually, a market shock causes a crash, likely leading to bankruptcies and consolidation, and the cycle begins again.

CURRENT LANDSCAPE

IS AMERICA RUNNING OUT OF OIL?

Although the United States is currently the top producing country, every year of record production that isn’t replaced by new supply means our reserves are shrinking.

Over the past 10 years, the world has replaced less than half of the oil that was produced.

Discoveries of new oil and gas fields have dropped to a fresh 60-year low, as companies put a brake on exploration and large fields have become harder to find.

The offshore industry accounted for about 95% of exploration spending this year to date but only about two-thirds of discovered volumes.

However, Big Oil drills only 5% of all American oil wells. 

The other 95% of all domestic wells are drilled by the smaller “Craft Oil” companies who focus mainly on the large North American oil basins.

A NEW ERA OF OIL

The Shift From Big Discoveries To Asset Management

Previous 100 Years

All about long-term bets on land assets, innovation at the wellhead, and maximizing short-term profits to capture windows of favorable pricing.

Next Decade Prediction

We’ll see a shift toward managing assets, maximizing long-term profitability, and handling environmental issues.

By current estimates

the United States has 760,000 stripper wells in production

About 400,000 oil and 360,000 natural gas wells total. 

~1M active oil and gas wells in the u.s.

76% of Active U.S. wells are low production stripper wells

In addition to this, researchers estimate that there are between 2-3 million abandoned (a.k.a. “orphaned”) oil and gas wells in the United States that may have producible reserves, but simply aren’t in operation.

“From 1993 to 2000, about 150,000 of these marginal oil wells were abandoned, costing the nation more than $3.5 billion in lost economic output and leaving about 150 million barrels of crude in the ground.”

–Science Daily

If all of these wells could be brought under management, and production could be increased by one BOED, that could mean hundreds of thousands – if not millions – of additional barrels per day could be produced each year.