Good morning, here's what the Oilman has for you today:

• Exxon, Chevron Warn of Massive Writedowns on California Ops

• Gas Prices Slip to Three-Year Low in 2023

• Upcoming Oil and Gas Events

• Tweet of the Day

Exxon, Chevron Warn of Massive Writedowns on California Ops

Exxon and Chevron warned this week they will write down billions on California assets.

The reason: “harsh” regulation.

The specific reason is the margin penalty law.

California against oil

California has not exactly been hiding its distaste for the oil industry.

It must be annoying to still have to use its products.

But use them it does, and state regulators don’t like it.

What they also don’t like are high fuel prices, which they decided to blame on Big Oil.

Even though California has the highest fuel taxes in the country.

So, last year, Newsom signed a law against what he called “price gouging.”

The law will limit the profits that refiners can make on their fuels.

And that’s just part of making the environment extremely unfriendly for Exxon, Chevron, and their peers.

As a result, both are taking writedowns of several billion dollars on their California assets.

A warning for other industries

“These arbitrary attacks on a disfavoured industry signal to every industry, entrepreneur, manufacturer, and employer that California is closed for business.”

That’s what a senior Chevron exec wrote in a letter to the state’s energy regulators.

He’s right.

If the state authorities can target any industry with penalizing regulation, then no industry is safe.

Except for EV makers, that is, and solar developers.

Oil producers, on the other hand, are unwelcome.

It’s so much better to import your oil from places like Saudi Arabia and Ecuador.

Which is what California does while Exxon’s Santa Ynez field can’t restart production.

Because of local regulations.

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Gas Prices Slip to Three-Year Low in 2023

U.S. natural gas prices dropped to the lowest since 2020 last year.

Record production and flat consumption drove them there.

Even record LNG exports couldn’t push prices higher.

Good news for LNG buyers

Low natural gas prices mean lower LNG prices.

Sure, it’s still more expensive than pipeline gas, but it’s cheaper than it was in 2022.

That’s good news for the many buyers of U.S. LNG.

A guarantee of continued strong exports.

For producers, the news is not so good…

Unless we’re talking about those that pump the gas as a by-product of oil extraction.

They are not exclusively exposed to the effects of price changes.

Still, the current price level might encourage a moderation approach among gas producers.

It’s why they call the industry cyclical.

All it takes is a cold spell

Mild weather last winter was a big reason why consumption of gas remained largely flat.

That’s what pressured prices to lower.

But one mild winter is not a pattern.

A cold spell will change consumption levels very quickly.

Keep an eye on Europe in the next two weeks.

The forecast is for freezing temps.

Just watch their gas storage drain.

It will be instructive, especially for those seeking to ban gas heating and cooking.

Upcoming Oil & Gas Events

• January 16: TIPRO/IPAA Leaders in Industry Luncheon, Petroleum Club of Houston, Houston, TX

• January 17: IPAA Private Capital Conference, The Post Oak at Uptown Houston, Houston, TX

• January 17-18: GO-WV Winter Meeting, Marriott Town Center Hotel, Charleston, WV

• January 18: Kansas Oil and Gas Day Legislative Reception, Kansas State Capital, Topeka, KS

• January 23-25: POWERGEN International, Ernest N. Morial Convention Center, New Orleans

Around the Global Patch

🇨🇦 Revitalized hopes: Canada's oil renaissance 2024.
🇮🇷 Iran leverages oil and seeks China's terms.
🇦🇷 Argentina's bold economic shift sparks debate.

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