Texas Land and Market Update | RR Districts 1-6

Originally published in AAPL Landman Magazine 

I recently watched the AAPL video, “The Path of the Landman-Powering the World,” which I highly recommend to all landmen, those considering a career as a landman, or the millions of people who think Matt Damon in “Promised Land” is an accurate depiction of a landman. The video provides insight on expanding AAPL membership to all sectors of the energy industry requiring landmen’s skill sets, including traditional oil and gas, renewable energy, and hard rock mining.

The Expansion of Renewable Energy

NAPE also reached out to renewable energy companies a couple years ago to participate in NAPE’s “Renewable Energy Pavilion” and provided the opportunity for renewable energy companies to host a booth and provide educational sessions on wind, solar, battery storage, and other renewable sources of energy. The decision to embrace renewable energy did not come easy. Some members opposed this move and even threatened to quit because they believed it signaled that AAPL was not supporting oil and gas. Of course, we are grateful for the oil and gas companies that have supported AAPL and landmen over the years. Still, renewable energy will only provide more opportunities for landmen, AAPL members, and participants at NAPE in the future, which translates into a “Win-Win-Win.”

The Impact of the Inflation Reduction Act

The passing of the Inflation Reduction Act (“IRA”) has some adverse effects on the oil and gas industry, primarily for the small to moderate-sized E&P companies, in the form of new taxes on crude oil and petroleum products and a $6.3 billion-dollar natural gas tax. Larger oil and gas companies investing in renewable energy and CCS will not likely be hurt by these new taxes since they will benefit from the tax credits, which will more than likely offset the harmful effects of the taxes. Since we all know it’s the small and medium-sized E&P companies that have created this world-class oil and gas industry and are the envy of other countries across the globe, I am hopeful we can find ways to mitigate the damaging effect of the Act allowing these companies to thrive.

In my last update, I explained why Texas has an advantage over every other oil and gas-producing state. Texas’s proximity to the Gulf of Mexico allows for the export of oil and natural gas in the form of LNG and the import of renewable energy wind turbines and solar panels. Texas also has a vast potential for wind, solar battery storage, and carbon capture and storage. With the passing of the IRA, these renewable energy sources will receive a massive stimulus in the form of tax credits. Four of the ten congressional districts in the country for operating and planned wind, solar, and battery storage are in Texas. As these projects are built out, the need for the infrastructure to connect these new energy sources will create thousands of jobs to help acquire rights-of-way for power, telecommunications, and carbon storage.  

Districts 1-6: Update and Outlook

In Districts 1-6, one hundred twenty-two rigs are running, with Districts 1, 2, and 4 consisting of 80 rigs primarily targeting the Eagle Ford and Austin Chalk. In District 6, 28 rigs are drilling the Haynesville shale. In Eagleford, EOG, Chesapeake, Conoco, Marathon, and Devon are the most active operators, with Karnes and Webb having the most drilling activity. Rockcliff, Sabine, Comstock, and Aethon are leading the drilling activity in Texas Haynesville. Devon bought Validus Eagle Ford assets for $1.8B, comprising 42,000 net acres on the acquisition front. As companies deploy the cash, they have banked from their disciplined approach to generating free cash flow, higher commodity prices, and more efficient operations, we expect to see more asset purchases in the 4th quarter. The trend is for companies to continue to grow production at a modest pace, while increasing earnings per share and paying dividends and distributions to stockholders.

After reading this update, I hope you will investigate the opportunities and education offered by AAPL in the renewable energy and oil and gas space. Cinco has worked on renewable energy projects since 2006, and I believe that oil and gas landmen have a lot to offer renewable energy companies in the form of title research, acquisition, and contract negotiations.