How is Energy Independence Affecting US Oil Companies?

Energy independence has been on the United States wish list for decades. Now, thanks to record crude oil and natural gas production, this dream could become a reality. Oil production in the United States has soared by more than 60% since 2013, with domestic producers now churning out a huge 12 million barrels a day. This has slashed the need for imports and seen the United States emerge as the world's biggest producer of oil and natural gas.

Energy companies struggle to reap production boom benefits

Though despite the boom, many companies have yet to benefit from the country's newfound energy independence. A global glut is pushing down prices and has seen the value of oil and gas stocks drop from 8.7% to around 4.6% over the past six years when calculated as a proportion of the S&P 500. This means many companies are now losing money on sales, taking on more debt and being forced to sell assets to stay afloat in the competitive market.

Texas-based company Parsley Energy is one entity feeling the sting, with chief executive Matt Gallagher calling the pattern "a psychological punch in the gut.” He says that while the company has tripled output over the last three years, shares have tumbled from US$38 to US$19. "There’s a lot of risk in this industry, people are working very hard, and we feel we have made the right moves and it doesn’t show up in the share price," he says.

Oil and gas majors feel the sting

It's not just small companies that are struggling, with shares in Exxon Mobil, North America's largest oil company, barely rising above prices listed 10 years ago. Hydrocarbon and petrochemical company Occidental Petroleum is also at a loss, with the recent acquisition of Anadarko Petroleum failing to bolster shares and instead seeing them slip by 10% since sealing the deal in May. The downturn is starting to materialise as a long-term trend, with around 175 Stateside oil and gas companies filing for bankruptcy protection in the last four years. In total, their debts exceed around US$100 billion.

Climate change technologies

Climate change is also a major factor, with the oil and gas industry under pressure to invest heavily in environmentally friendly technology and equipment. While large companies such as Chevron can afford to channel cash into carbon capture and greenhouse gas sequestration technologies, most smaller businesses can't afford the outlays.

Want to know more about how the energy industry is working to minimise its environmental footprint? Don't miss 'Lubricants and the Environment' which offers expert insight from Dr. Raj Shah, a Director at Koehler Instrument Company, NY