US oil and gas producers find themselves in a quandary as 2021 comes to a close: commodity prices have many looking to increase production in 2022, but funding is becoming increasingly difficult to come by.
According to a report released this week by the Dallas Federal Reserve, Texas, 75% of the 134 oil and gas companies which responded to the Fed’s questionnaire said they intended to increase their capital budgets in 2022.
Just 16% said they would keep budgets steady, while only 8% expected to decrease their budgets.
Respondents in the survey, which includes the major producing regions of Texas, Louisiana and New Mexico, were bullish when it came to oil prices for the coming year, with 52% of respondents saying they expected West Texas Intermediate crude to average between $70 and $80 per barrel in 2022.
Another 22% said they expected prices to average between $80 and $85 per barrel.
The outlook was not all rosy for producers, with a number of respondents telling the Dallas Fed that they were concerned about obtaining adequate funding for operations in a sector has become increasingly unpopular among banks and other lending sources.
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“The political pressure forcing available capital away from the energy industry is a problem for everyone. Banks view lending to the energy industry as having a ‘political risk.’,” one respondent said.
While some respondents blamed Wall Street and a new emphasis on environmental and social governance among shareholders for some funding problems, others put the blame directly on the Biden administration’s embracing of energy transition.
“It is impossible to make realistic assessments for capital expenditure budgets given the current administration’s policies and, for that reason, capital expenditure commitments are being restrained and limited,” one respondent said.
“Why would any rational person feel comfortable with expanding capital commitments beyond minimum maintenance requirements at most when nominees at the federal level are hoping for bankruptcy and closure of the oil and gas sector?”
