EOG hits multi year low.........is it all about Warren??

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bobs
Posts: 221
Joined: Mon Apr 26, 2010 2:32 pm

EOG hits multi year low.........is it all about Warren??

Post by bobs »

I would doubt her ban would take effect but apparently EOG would suffer the most from what I understand...comments??
dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Re: EOG hits multi year low.........is it all about Warren??

Post by dan_s »

As I pointed out at both of our luncheons this week: The Democrats will NEVER ban fracking unless they can come up with a new energy source to replace oil & gas, which of course isn't going to happen. Banning fracking would send the price of gasoline to $5.00/gallon and consumers natural gas bills and their electric bills would double.

There is nothing wrong at EOG.
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Re: EOG hits multi year low.........is it all about Warren??

Post by dan_s »

Note from Credit Suisse this morning.

What exactly is Elizabeth Warren proposin g? It is not entirely clear. On September
Research Analysts
6 th , Democrat presidential primary contender Elizabeth Warren again echoed her pledge via
Twitter: “On my first day as president, I will sign an executive order that puts a total
William Featherston
moratorium on all new fossil fuel leases for drilling offshore and on public lan ds. And I will
ban fracking — everywhere.” Warren’s 2020 website has dropped the reference to an
outright fracking ban , though this continues to grab headlines . Distinguishing campaign
Betty Jiang, CFA
rhetoric from actual policy proposals is difficult and several uncertaint ies remain: namely
whether Warren’s “ plan ” would simply end new federal leasing (less dire) , or if new
permitting/drilling /fracking on existing onshore and offshore federal leases would also be
William Janela, CFA
impacted ( much more severe impact for certain E&Ps and the broader oil and gas macro).
■ What prompted E&P investors to begin pricing in the risk ? Sen ator Warren’s steady
rise in national polls & recent momentum after launch of the impeachment inquiry & Bernie
Michael Ziffer, CFA
Sanders’ health scare has the market much more focused on implications of a Warren
nomination/presidency. A large percentage of our inbound questions this week centered on
the issue as investors attempt to quantify risks & determine which E&Ps are most exposed .
Christopher Zhang, CFA
We see a ban on existing leases as unlikely; total “fracking ban” untenable. Even if
a drilling and/or fracking ban on existing federal leases w ere to be pushed through by
executive order , we’d expect it to be tied up in courts as E&Ps attempt to overturn the
Chris Baker, CFA ruling or seek compensation for lost inco me . Political ramifications also need to be
considered . State s like solidly - blue New Mexico – by far the largest recipient of oil & gas
royalties on federal land and heavily reliant on that revenue to fund public initiatives (tuition -
free state college, he alth & human services , etc.) – would push back. Banning fracking on
private land would require an act of Congress (even if the Senate flips in 2020, it’s hard to
see the seven current Dem ocrats from CO, MT, NM, OH, PA & WV voting in favor) , and
even then f ace a number of legal /regulatory challenges . T he rhetoric alone could have
severe implications in key swing state s ( PA, OH ) & those leaning/aspiring purple (CO, TX) .
■ What ’s baked in to E&P stocks ? E&Ps with the greatest exp osure to onshore federal
land include CHK, CXO, DVN, EOG and XEC, while MUR is most exposed to offshore
GoM & OXY has leverage t o both. We see more mode st exposure for CDEV, COP, HES,
MRO and WPX . For E& Ps most at risk , we see ~10% downside to NAVs on average in
the event of a total ban on existing federal onshore + offshore leases ( which we view as a
worst - case scenario ), or a ~ 7 - 8% hit to share prices at current P/NAV valuations. Since
the Sept. 6 th tweet, the most exposed E&Ps ha ve underperformed the XOP by >30 0 bps,
suggesting nea rly half the worst - case risk has already been priced into the se stocks.
Potential macro impact in perspective. The broader implication is a potential spike in oil
prices, as onshore federal leases represent ~6% of total US oil prod uction , with federal
offshore accounting for another ~15% ( a combined >2.5 MMBbld in 1H19, or ~2.5% of
global supply ) . While Warren’s energy policy details are unclear, a drilling ban on existing
federal leases would potentially tighten S/D balances, but also likely be offset as E&Ps re -
allocat e capital from federal to state lands and abroad


MY TAKE: All the promises being made by the Democrats are total BS to please the Left Wing Wackos in the party. 99% will never happen even if Warren is elected.
Dan Steffens
Energy Prospectus Group
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