Energy Prospectus

BTU Analytics provides market analysis services for the oil and gas industry. Coincidently, they’re based in CO.

Here’s their take on 112. Summary - it’s a toss up...

https://btuanalytics.com/proposition-112-a-coin-flip/

That is a good article.

I have talked to several people that I know in Denver. They work in the oil & gas industry and they are afraid that Prop 112 will pass. Colorado is now a left-leaning state. Folks that are against fossil fuels seldom stop to think how important the products made from oil, gas and NGLs are to their standard of living. Of course these are the same voters who think the Federal Government can just keep printing money and should pay for everyone's education, healthcare and whatever else they need. By "everyone" I am including non-citizens as well.

If Prop 112 passes it will cost Colorado an estimated $31 Billion per year in tax revenues and increase unemployment in the state, but (sadly) most people do not care about stuff like that.

Keep in mind that EIA's rosy estimates of U.S. production growth will need to be adjusted down if Prop 112 passes.

Have you seen the open interest on Nov 16, 2018 puts/calls for SRCI? Open interest on 11/16/18 $10 calls are 137 contracts as of yesterday. Conversely, open interest on 11/16/18 $7.50 puts are 12,469 contracts as of yesterday. I would have expected this to be more in parity with an expected 50/50 outcome...

PDCE and SRCI will be hurt by the passage of Prop 112, but they will not be crushed. Production growth for 2019 will be cut to near zero, but it should still go up.

If Prop 112 passes it will tighten an already very tight global oil market, so it should raise oil prices.

FWIW the CO House Majority Leader (a Democrat from Boulder County) thinks Prop 112 won't pass. We'll see, the "ayes" had a lead in other reports.
https://www.bloomberg.com/news/articles ... ly-to-pass

Yikes. Did not know this. Much worse than I thought. The ballot wording shows Prop 112 to be open-ended, that would authorize local governments to increase a setback distance to more than the minimum 2500 feet. Local government could use apparently any fabricated "reason" - or no reason at all.

From the Loveland, CO Reporter-Herald.com on 10/18, the ballot language:
"Shall there be a change to the Colorado Revised Statutes concerning a statewide minimum distance requirement for new oil and gas development, and, in connection therewith, changing existing distance requirements to require that any new oil and gas development be located at least 2,500 feet from any structure intended for human occupancy and any other area designated by the measure, the state, or a local government and authorizing the state or a local government to increase the minimum distance requirement?"

I just hope the citizens of Colorado realize that Prop 112 is estimated to cost Colorado over $30 Billion per year in tax revenues from upstream companies, primarily severance taxes, sales & use taxes, property taxes and employment taxes. Plus, the state will loose a lot of jobs. I think I saw a report that estimated as many as 50,000 jobs would be lost.

Are there any proven examples of damages caused by oil & gas drilling operations in the state?

This is an interesting YouTube video. A follow up to the Petrovalues.com site is also worthwhile. The PV site clearly shows that the bulk of the prop 112 impact is in the DJ basin. Sure looks like other CO basins are much less impacted, so much so I want to double check it.... this is meaningful if you own Midstreams that operate in Colorado, understanding what they’re true exposure is, versus the worst case, and what the opportunity could be in the presence of this exogenous event.

https://youtu.be/st0M-Xd_Uhw

Be sure to look at the comments that follow the video, just one sampling of random opinions, although I wonder about people who comment about YouTube videos.

This week, the Fort Collins City Council refused to back an anti-112 stance, and at the meeting, those in attendance were quoted at about 3:1 FOR the proposition. I have a feeling this could be more along the lines of what most Colorado citizens think...

The fun will start if 112 passes. The massive loss which will be imposed on mineral owners has to wind up in the courts, especially if the compensation prop does not pass...

Studying PetroValues more closely, it’s clear that all the basins in CO are significantly impacted, some more than others...