1. DVN and EOG exposed to federal lands drilling ban
- With Joe Biden leading in the polls, the odds of access to federal lands for U.S oil and gas producers getting curtailed now looks reasonably high.
- Devon Energy (NYSE: DVN) and EOG Resources (NYSE: EOG) hold about half of their Permian acreage on federal land, making them the most exposed. ConocoPhillips (NYSE: COP) also has high federal land exposure, plus large holdings in Alaska, which is also facing heightened scrutiny.
- The prospect of more limited access to federal lands has these stocks “out of favor,” according to Goldman Sachs. An end to new leasing would be the least impactful move by a potential Biden administration, as it would not stop new drilling on already-leased lands. An end to drilling permits would be much more impactful.
- The vast majority of the land in question is located in New Mexico and to a lesser extent in Alaska.
2. U.S. shale to contract in 2021, but by less than 2020
- The U.S. is now the marginal oil producer, which makes production growth extremely challenged at $40 prices.
- OPEC may reprioritize market share, and that, combined with the long-term energy transition away from fossil fuels, “leaves little room for US shale growth,” according to a note from Morgan Stanley. The bank sees shale output falling by 3 percent next year.
- The investment bank says that WTI at $40 is “here to stay.”…