In recent news, American Energy Partners, an Oklahoma-based energy company issued a statement announcing the upcoming merger of American Energy Utica and American Energy Marcellus. Both affiliates own more than 300,000 acres in the Utica and the Marcellus shale formations. American Energy Utica (AEU) and American Energy Marcellus (AEM) operate in Ohio and West Virginia and once the merger is complete, will create one of the largest natural gas and oil exploration and production companies in the Eastern United States.
Both AEU and AEM will continue to be wholly owned by their current shareholders, and the new company will be known as American Energy Appalachia Holdings, LLC. The merger allows the company to take advantage of the complementary nature of the two shale areas. The merger allows the company to maximize its advantages and returns by combining its administrative, operational and downstream marketing efforts so that they can take advantage of more opportunities.
With the upcoming Utica and Marcellus merger, some people are starting to question whether this is how the excess and inefficient energy companies will be squeezed out of the mix as the price of petroleum continues to settle. Since crude oil prices are below $50 a barrel, many small oil producers may be forced to reduce their expenditures. It looks like American Energy Partners has anticipated this and is adjusting their operations accordingly.
Although oil prices traditionally have brought about changes in US energy policies, today’s low prices are doing the opposite. According to United States Secretary of Energy, Ernest G. Moniz, there will still be oil production increases throughout 2015. Although oil production has slowed down a bit, it should still reach 9.3 million barrels per day. If low oil prices persist, some reductions in capital expenditure will have to be made later on down the road. Ultimately, the goal of the United States is to reduce its reliance on foreign oil and increase domestic crude oil production.
At some point, prices are going to rebound, and when they do the US needs to be in a position to take advantage. To ensure US energy producers can maximize their production and operations, there needs to a reduction in LNG and crude oil export restrictions. More policies that address changes in the climate and energy security need to be implemented as well.
Although the US is experiencing a boom in its shale industry, European and global markets are not experiencing as much economic growth as expected. If 2014 trends are any indication of what’s to come, US energy producers need to adjust their capital expenditures now. Sustained low crude oil prices could cause many small producers and large producers to experience some significant challenges from the refiners in the US Gulf Coast.
With weak global economic growth and unexpected consequences from long-term low oil prices, this year will be more challenging than most for many crude oil producers all over the world. As the United States continues to address its long-term energy needs by reducing its dependence on renewable energy, special consideration needs to be given to correcting any infrastructure deficiencies and the development of sustainable practices.