Miller/Howard Investments
Miller/Howard Podcast Series
2018 Energy Outlook
Upstream, Exploration & Production Series—
Part 3: The Oil Majors Move In
Oil majors are coming back to North America in a big way.
Adam Fackler, CFA, Senior Research Analyst  |  Full Bio (PDF)
Upstream, Exploration & Production Series—Part 1: The Shale Revolution
Upstream, Exploration & Production Series—Part 2: The Industry Has Matured
Upstream, Exploration & Production Series—Part 3: The Oil Majors Move In
Upstream, Exploration & Production Series—Part 4: Investing Upstream


Rigs in the Permian and Marcellus have become four and a half times and three times, respectively, more efficient over the last five years. While tight oil and gas development was once the domain of smaller, more nimble E&Ps, the majors have certainly taken notice and made meaningful entries into a number of onshore plays, including the Permian Basin. Exxon recently announced it will spend $50 billion on capital investments in US shale–related businesses over the next five years, tripling production in the Permian. Chevron plans to spend $3.3 billion in the Permian this year, and expects production to increase by at least 50% by the early 2020s.

Royal Dutch Shell entered the Permian roughly six years ago with the purchase of more than half a million acres. The company plans to invest $2–3 billion in shale development through 2020. We think it’s worth noting these investments because we view them as implicit endorsements of US onshore’s competitive advantage over many other international opportunities.

Note: As of March 21, 2018, Miller/Howard Investments held Royal Dutch Shell in its portfolios Miller/Howard Investments did not hold Exxon or Chevron.


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MLP Tax Considerations. The tax treatment for investors in MLPs is different from that of an investment in stock, including: (a) the investor’s share of the MLP's income, deductions, and expenses are reported on Schedule K-1, not Form 1099; (b) because of the possibility of unrelated business taxable income, charitable remainder trusts should not invest in this strategy, and other nontaxable investors (such as ERISA and IRA accounts) should carefully consider whether to invest in this strategy; (c) investors may have to file income tax returns in states in which the MLPs do business; and (d) MLP tax information is sent directly from the partnership, which generally has until April 15th to provide this information. You should discuss these and any other tax implications with your tax advisor.

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