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Analysis

Energy and resources M&A update: Q2 2021

The amount of debt and equity issued among publicly traded US exploration and production (E&P) companies totaled $4.4 billion as of March 2021. E&P companies are taking advantage of increasing crude oil prices, averaging $65/b in March 2021, and extremely low interest rates, at a target of 0.00 percent to 0.25 percent, in order to refinance existing debts, resume drilling activities, and purchase new acreage.

Energy sector trends

  • Exploration and production companies raising capital
    The amount of debt and equity issued among publicly traded US exploration and production (E&P) companies totaled $4.4 billion as of March 2021. E&P companies are taking advantage of increasing crude oil prices, averaging $65/b in March 2021, and extremely low interest rates, at a target of 0.00 percent to 0.25 percent, in order to refinance existing debts, resume drilling activities, and purchase new acreage.1
  • Increased air travel resulting in more jet fuel consumption
    The four-week average in jet fuel consumption from April 9 through April 23 was more than 1.2 million barrels per day. US jet fuel demand decreased in response to travel limitations during the COVID-19 pandemic. According to the TSA, the number of travelers decreased to only 100,000 passengers a day in April 2020. However, that number grew to an average of 1.4 million passengers a day in April 2021.2
  • Proposal to mitigate climate change
    On Friday, April 23, President Joe Biden convened with heads of state and government, as well as leaders and representatives from international organizations, businesses, subnational governments, and indigenous communities, to rally the world in tackling the climate crisis. In addition, President Biden promised to target a carbon emission reduction of 50 percent to 52 percent in the United States compared with 2005 levels, noting that countries who take decisive action will reap economic benefits.3
  • Increase in electricity consumption
    The US Energy Information Administration expects more electricity consumption this summer as the economy continues on the way to recovery. Much of the increased demand in electricity is expected to come from the commercial and industrial sectors as people start heading back to the office and spending less time in their homes in response to easing restrictions from the COVID-19 pandemic.4

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References

1White House, “FACT SHEET: President Biden’s Leaders Summit on Climate,” April 23, 2021.
2US Energy Information Administration (EIA), “U.S. exploration and production companies are issuing new debt and equity,” April 23, 2021.
3White House, “FACT SHEET: President Biden’s Leaders Summit on Climate.”
4EIA, “Increased air travel is beginning to increase U.S. jet fuel consumption,” April 29, 2021.

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