Good morning, this is the Oil Patch. We're the PF Flyers of oil & gas news. Run faster, jump higher.

Here's what the Oilman has for you today:

• Missile Trade-Off

• BofA Reports on Oil Demand

• Matador Strikes Oil

• Tweet of the Day

Missile Trade-Off: Russia and Iran's Strategic Partnership

Russia's war against Ukraine is about to get a little more dicey, because Moscow is reportedly looking to Iran to spice up their missile shortages.

According to several news outlets, the Kremlin has got its eye on two Iranian missile systems in particular: the Fateh-110 and Zolfaghar. The main reasons for acquiring these missiles are their availability, cost, and survivability.

And let's be real, who doesn't love a good deal? Amirite?

Iran has been more than generous in supplying Russia with the weapons systems it needs in Ukraine, and in return, Moscow may potentially receive critical military technology.

It's a "you scratch my back, I'll scratch yours" kind of situation.

The unit costs for Iranian missiles are much lower than Russia's Kalibr cruise missiles, and the latter has become vulnerable to advanced air defense systems.

But let's not forget that Iran's ballistic missile program has a history of being used in battle.

The Iran-Iraq War of the 1980s marked Tehran's first strikes outside Iranian territory, and in 2017, Tehran launched a medium-range missile attack on Islamic State positions in eastern Syria.

Not only has Iran been arming its proxy groups with these missiles, but they've also been sharing the technology with rogue states, like North Korea.

So, it's clear that Tehran's ballistic missiles are not just designed to provoke fear in the Persian Gulf Arab countries and Israel, they're also meant to be used opportunistically in conflict regions throughout the world.

And with Russia looking to acquire more missiles, it's possible that we may see Iranian ballistic missiles on the Ukrainian battlefield in the coming weeks.

But what about the energy situation in the region?

Both Russia and Ukraine are heavily dependent on oil and gas production, and this war isn't doing their energy supplies any favors.

With Russia's economy heavily dependent on energy exports and Ukraine's energy security uncertain, it's no surprise that Iran may look to increase its oil and gas production to make up for lost revenue.

To sum it all up, the energy situation in Russia and Ukraine is complicated enough. With new Iranian missiles coming into Russia, the situation just gets more complex.

Don't be surprised if this news further destabilizes energy pricing and energy security in the region.

Or worse, worldwide.

BofA Reports on Oil Demand

As the world watches and waits for the Chinese economy to fully reopen, a new report from BofA Global Research has shed light on why global energy prices have yet to significantly increase.

According to the report, the following have had negative effects on short-term oil prices:

• A wave of Covid-19 cases

• An increase in domestic mine supply

• Increased inventories of key commodities such as oil and coal in China

• Warmer weather

• Less strict sanctions on Russian energy

However, as we approach the second and third quarters of 2023, the reopening of the Chinese economy could unleash a large wave of pent-up demand that could drive prices higher. The report predicts a modest global oil deficit for the second half of the year, which could push Brent oil prices to $110 per barrel by the summer.

But as always in the fast-paced world of energy markets, nothing is certain. A stronger-than-expected Chinese recovery could further distort expectations of falling inflation, while a deep recession in the US and Europe could move oil markets into a surplus and push prices lower.

Goldman Sachs also weighed in on the situation, noting that while the abrupt end of China's Covid controls may hamper growth in the short-term, they expect a sharp rebound in the coming months.

In fact, Goldman Sachs recently raised their full-year GDP growth forecast for 2023 to 5.2% due to China's earlier than expected reopening.

As always, the world watches and waits to see how this will play out.

Will the Chinese economy bounce back with a vengeance, driving energy prices higher and setting the stage for a new era of growth? Or will global recession and a surplus of oil keep prices low? Only time will tell...

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Matador Strikes Oil: A Look at the Company's Latest Acquisition in the Permian Basin

Matador Resources Company just made a big move! They've just announced that a subsidiary of the company will be acquiring Advance Energy Partners Holdings, LLC.

This acquisition includes some pretty sweet oil and natural gas producing properties, as well as undeveloped acreage in Lea County, New Mexico and Ward County, Texas.

The total cost? A mere $1.6 billion, plus a little extra cash for each month in 2023 that the average oil price exceeds $85 per barrel ($7.5MM per month).

But Matador's CEO, Joseph Wm. Foran, isn't just excited about the acquisition for the sake of it. He's bullish about the quality of the acreage they're getting and the potential for growth in the northern Delaware Basin, which is part of the larger Permian Basin formation.

This region is no stranger to consolidation, as it's the largest and most productive U.S. oil patch.

This move comes hot on the heels of Fort Worth-based oil firm HighPeak Energy Inc. announcing that they're considering selling. They own 110,000 acres in the Permian and their CEO believes that now is the perfect time to "capture the value we do not consider is presently reflected in our share price."

The Permian Basin is also seeing Fort Worth-based TXO Energy Partners LP launch an initial public offering of 5 million shares, with the price per share expected to be between $19 and $21. This is the first IPO in the master limited partnership industry since 2019.

It's clear that the Permian Basin is heating up, and Matador Resources Company is positioning itself to take advantage of the energy market outlook.

The Oilman sure is interested in seeing what the future holds.

Tweet of the Day

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PS – Don't forget to check out the latest Energy Builders Podcast with James Van Alstine