Forbes | November 11, 2016 | Mark Druskoff and Chad Watt
After nearly two years of depressed commodity prices and a host of regulations and activist opposition, the U.S. oil and gas industry is hopeful a Donald Trump administration can help re-ignite growth in the sector, said industry sources.
The 45th president will likely remove regulatory impediments imposed by the Obama administration that have stymied oil and gas drilling and infrastructure buildout, said Frank Murphy, managing director, RW Baird.
One area of likely change is the opening up of more federal lands to drilling activities, said Murphy. A Trump administration is also added insurance against a general ban on fracking, said a midstream investor.
Trump’s election will put more emphasis on expanding U.S. oil and gas production, an industry banker said. The banker did not see Trump as being particularly helpful in the big-ticket offshore drilling projects. Yet the Trump administration could positively impact bonding in the offshore oil and gas sector, an industry lawyer said. The amount and type of bonding companies need to operate in the arena was set to rise under Obama administration efforts and a Trump administration could change that.
Industry observers believe a Trump administration represents a friendlier environment for the building of pipeline projects, which has the potential to improve the economics of numerous plays that are constrained by lack of takeaway capacity.
Both Murphy and the midstream investor believed more friendly federal agencies could benefit midstream players in the Bakken, such as Dakota Access-owner Energy Transfer Partners, said Murphy and the midstream investor. The Dakota Access Pipeline requires the input of the Army Corps of Engineers, for example, noted Murphy.
More broadly, Trump is seen as reducing the risk premium investors are imposing on midstream companies seeking to build a pipeline, said the midstream investor. In recent months, sector observers have been noting that pipe in the ground is worth more than a large inventory of organic growth projects.
Improving infrastructure will enhance economics for upstream operators like Hess Corp, which owns a substantial Bakken position, said Murphy. It could also help Hess’s plans to take public Hess Midstream, its Bakken-focused subsidiary, as an MLP, said Murphy and the midstream investor. Takeaway capacity alone will not push forward an IPO, however, and rising oil prices will play a critical role in showing the viability of Hess’s drilling, and by extension its midstream operations, said Murphy.
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