Biden: How will ban on Fed land impact the Sweet-16?

[dan_s]

Short answer: Not much this year and not at all unless it is a permanent ban.

From BofA Equity Research

Moratorium on permitting and leasing on federal lands
24 January 2021

Last Thursday, the Department of the Interior, which oversees oil and gas activity on US federal lands, issued a 60-day moratorium suspending the power of the Bureau of Land Management (and other regulatory agencies) to issue new onshore or offshore drilling permits and issue, extend, or contract new leases. The moratorium only (hopefully) temporarily suspends new permitting and leasing activity on federal lands and, thus, does not limit existing operations under valid leases. However, it does appear that new permits on existing leases are included in the moratorium. And while this news doesn’t really have much of a near-term impact on the US Oil & Gas sector, investors are becoming increasingly concerned that this is the start of the Biden administration adding layers of regulation and taxes to the oil & gas sector. If this were to be the case, it would obviously be a negative for US-levered oilfield service (OFS) companies but a net positive for both int’l- levered OFS companies (oil has to come from somewhere) and also for oil prices.

E&Ps built a backlog of permits in anticipation of this
Leading up to the election (and thereafter), Biden had suggested the possibility of a ban of drilling and frac activity on federal lands. As a result, many E& Ps built big backlogs of drilling permits on federal lands over the last few quarters, when permitting on federal lands was up >50% last year despite the collapse in overall drilling activity. With more than 500 federal land well permits in backlog, EOG Resources (EOG) and Devon Energy (DVN) hold the biggest backlogs, which then shouldn’t surprise anyone that EOG (11 rigs) and Devon Energy (7) are currently the most active E&Ps on federal lands.

13% of current US rig activity on federal lands
We count 49 active US rigs on federal lands, or about 13% of the total US onshore rig count. To be clear, this doesn’t include any US offshore rigs, which will also be impacted at some point if this moratorium becomes more permanent. HP (Helmerich & Payne) and PTEN (Patterson-UTI ) operate 14 and 10 rigs, respectively, on federal lands, accounting for 15% and 18% of their total active rig counts.