Dividends and Low demand dampens Trump drilling auction in Arctic refuge

President Trump had a policy that any federal land which has minerals including oil should be opened up for drilling. The policy had favor among the western states but it also included Alaska. The Trump administration would take a look at millions of acres in Alaska and consider it would allow drilling on some of them, why leave them fallow?

In an article by Nichola Groom and Yereth Rosen of Reuters, the Trump administration opened up the sale of drilling leases in a pristine Arctic wildlife refuge, it is highly suspected there is oil there, but found few takers. The sale generated $14.4 million in high bids, a marked difference than in 2018 where bids brought in $1.8 billion.

The new Biden administration has pledged to protect the area and ban new oil and gas leasing on federal lands. JPMorgan Chase has said they would not raise money for the Arctic Refuge Area.

The winners on the tracts of land were the Alaska Industrial Development and Export Authority which won 9 tracts and 2 relatively small companies – Knik Arm Services and Regenerate Alaska won 2 tracts.

The Interior Department had pushed the sale for months, the big oil companies did not bid and in all likelihood the tracts will not be developed. The American Petroleum Institute cited weaker oil demand and changing federal policies. Note if you are in the drilling of oil and gas, you are not looking at this year’s forecast – it is 3 to 5 years down the road. (the drilling would happen, a commercial discovery would have to found and then the infrastructure to move the oil to the pipeline would have to be put into place, at of that takes time).

Linking to dividend paying stocks, all companies are connected to events in the world. Over the past decade we have seen the planet grow warmer or Climate Change, some of that is connected to the oil and gas industry. The risk reward model also includes the public attitudes and whether a company wants to hunker down and do what it does or attempt to work with the public opinion. No public company works in a vacuum, and eventually the public buys your product or service.

There are more questions than answers, till the next time – to raising questions.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s