A recent survey conducted by the Federal Reserve Bank of Dallas indicates that U.S. energy executives are optimistic about faster permitting times for drilling on federal lands under President-elect Donald Trump. The survey, which included responses from 134 energy firms in Texas, Louisiana, and New Mexico, reflects a brighter outlook for the industry as uncertainty decreases and activity levels rise in the final quarter of 2024.
Key Highlights:
Optimism in the Energy Sector:
A significant portion of executives, about one-third, believe that the permitting process will become significantly faster over the next four years.
Executives anticipate a decrease in regulatory compliance issues due to a pro-business and pro-fossil-fuel administration.
Trump’s Energy Policy:
President-elect Trump has pledged to lower gasoline prices and expedite permitting for energy projects, aligning with his “drill, baby drill” campaign.
His transition team plans to implement a comprehensive energy package that includes approving export permits for new liquefied natural gas (LNG) projects and increasing oil drilling on federal lands and offshore.
Impact on Oilfield Services:
Executives expressed optimism for oilfield services firms, suggesting that the new administration could revitalize this sector, which has been struggling.
The survey highlighted a disparity in greenhouse gas emission reduction plans between larger and smaller producers, with nearly two-thirds of larger firms planning to cut methane emissions compared to only 29% of smaller firms.
Potential Challenges for 2025:
Natural Gas Price Pressures:
Weak natural gas prices have continued to impact exploration and production firms, with prices at the Waha Hub in West Texas falling into negative territory multiple times in 2024.
Negative gas prices can force operators to pay for gas removal, adversely affecting oil profit margins.
Mergers and Acquisitions:
Mergers and acquisitions have muted growth in the services sector, as firms consolidate and either maintain or reduce capital spending budgets.
Lower oil demand and advancements in extraction technology have increased efficiency but have not significantly boosted activity levels.
Market Expectations:
On average, survey respondents expect West Texas Intermediate (WTI) oil prices to reach $71 per barrel by the end of 2025, with estimates ranging from $53 to $100 per barrel.
Participants also anticipate a Henry Hub natural gas price of $3.19 per million British thermal units over the same period.