American Oil and Gas Reporter - August 2022 - 89

sold. However, the prospect that elevated
prices will continue, amid sanctions
against Russia for its invasion of Ukraine,
is triggering renewed interest in traditional
oil and gas production. "
Oil and gas companies have competed
well for capital in 2022, PwC reports,
noting that Standard & Poor's Exploration
and Production Index has increased 76%
this year, compared with a 49% decline
for the Nasdaq. " As a result, many institutional
investors are rethinking their strategies, "
the firm says. " While public companies
have continued to focus on shareholder
returns and resisted the urge to significantly
expand drilling programs, private companies
are deploying capital more rapidly. "
PwC projects that natural gas demand-
specifically liquified natural gas-will
climb as U.S. LNG suppliers boost shipments
to Europe to replace Russian gas.
Therefore, the firm assesses, " Suppliers
may attract increased capital corresponding
with more long-term contracts from Europe
and Asia as those regions look to
secure supplies. "
Although environmental, social and
governance considerations recently have
influenced the market's view of hydrocarbon
producers, PwC suggests that the potential
for strong returns has its own pull.
" Investors remain cautious about oil
Targa Resources Closes
Lucid Energy Acquisition
HOUSTON-Targa Resources Corp.
says one of its wholly-owned subsidiaries
has completed its previously announced
acquisition of Lucid Energy Delaware
LLC for $3.55 billion.
Targa says it has funded the acquisition
with $1.5 billion in proceeds drawn under
its three-year term loan facility; $1.25
billion from the company's underwritten
public offering of senior notes that closed
in July 2022; and $800 million drawn on
its $2.75 billion revolving credit facility.
According to Targa, Lucid's assets will
be integrated into Targa's existing Permian
Basin footprint, and include about 1,050
miles of natural gas pipelines and approximately
1.4 billion cubic feet a day
of cryogenic natural gas processing capacity
in service or under construction, primarily
in New Mexico's Eddy and Lea counties.
Targa adds that Lucid's Delaware
Basin footprint overlays some of the
most economic crude oil and natural
gas producing acreage in North America.
Lucid's assets are anchored by more
than 600,000 dedicated acres from a
diverse set of high-quality customers
and underpinned by long-term, fixedfee
contracts.
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and gas, but the likelihood that sustained
prices above $100 a barrel will continue
for much of the year may generate more
activity, " the firm says. " After a year in
which ESG concerns and a desire for
dividends put a damper on transactions,
the market may be returning to a more
traditional outlook in which higher commodity
prices are indicative of increased
deal activity. While onshore oil plays
such as the Permian Basin will continue
to attract investment, capital also is likely
to continue flowing into projects in the
Rockies and North Dakota. "
While fundamentals appear especially
strong for LNG, PwC says most LNG
companies' structures lend themselves
more toward investments than acquisitions.
" Natural gas is likely to draw attention in
the year ahead as demand from Asia remains
strong and European countries looking to
replace Russian gas turn to the United
States for long-term contracts, " the firm
predicts. " Most U.S. LNG supplies are
owned by joint ventures, making acquisitions
more difficult. As a result, we expect more
investment deals rather than M&A transactions
during the second half of the year. "
However, the firm acknowledges, the
time horizon required to build new LNG
terminals may dampen enthusiasm for basing
construction decisions on current commodity
prices. " LNG terminals and infrastructure
require large investments totaling
billions of dollars that won't pay out for at
least three-five years, " PwC considers. " Investors
may be wary of the uncertainty of
such long-term horizons and issues related
to expanding capacity too rapidly. "
Robust Returns
In the United States, strong returns
from oil and gas companies relative to
technology and other sectors this year
have attracted new attention from investors.
Institutional portfolio managers are reconsidering
their earlier decisions to direct
capital away from oil and gas in favor of
renewables or other ESG strategies.
PwC concludes its update by noting
that the energy sector continues to account
for an uncharacteristically low proportion
of the Standard & Poor's 500, but that
may change. " Investors are trying to determine
how sustainable the returns will
be and how disciplined management will
remain if prices and cash flows stay at current
levels or go higher, " PwC says. " While
many remain on the sidelines, we believe
activity will pick up if returns remain high.
" Meanwhile, private companies are
stepping up investments in new drilling
to take advantage of the commodity price
environment, " it adds.
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LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . . . .
FROM PAGE 36
judicial and administrative decrees and
agreements governing department actions.
Such public records had to note fees or
legal costs paid (AOGR, July 2022, pg. 17).
Obermueller indicates he spent a good
portion of his decade as a congressional
staffer seeking ways to prevent activist
groups from improperly exploiting statutes
such as the Equal Access to Justice Act.
The administration's latest move flies in
the face of such efforts. " Environmental
groups have been taking advantage of
laws such as the EAJA to have the taxpayers
fund their efforts to change policy
through the federal courts, " he describes.
" We accepted compromise after compromise
to get to a bill called the OpenEAJA,
which merely requires federal
agencies to document how much money
they pay under certain settlement agreements.
It is disheartening to see the Biden
administration flouting that. "
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ALLIANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FROM PAGE 43
" We need to make sure power plants are
not relying on a spot market in the middle
of a storm, " he advises. " It has been a
constant challenge to educate both lawmakers
and generators. There needs to
be a robust conversation about contracts.
What does it take to secure firm supplies,
firm storage and firm delivery of that gas
during months of the year in which it can
be particularly challenging? "
Ultimately, Modglin stresses, only
an erroneous narrative fingers natural gas
as the culprit for disruptions. He points
out that utilities have a strong incentive
to keep gas flowing, even during price
spikes, because restoring flow after an
interruption involves relighting numerous
pilot lights and performing careful inspections
to ensure the system has been
pressurized adequately.
" During that week, 99.95% of the
gas meters in the state maintained flow
to prevent interruptions at homes and
hospitals, " he reports. " For all the talk
about a lack of natural gas supply,
99.95% of meters kept providing heat,
whether at a stove, fireplace or furnace.
That saved lives. "
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AUGUST 2022 89
American Oil and Gas Reporter - August 2022

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