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Craft Oil: The Lesser Known Side of America’s Energy Industry

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Craft Oil Infographic

Craft Oil: The Lesser Known Side of America’s Energy Industry

Go back a decade, and America’s energy industry was quite the hot button issue.

Oil prices were soaring past $100/bbl, the country was still reliant on OPEC for imports, and a lack of energy independence was becoming a costly issue. Meanwhile, the United States was being outclassed on the energy production front by both Saudi Arabia and Russia.

However, in the short span of eight years – and thanks to the use of technologies like horizontal drilling and hydraulic fracturing – the United States quickly went from having a questionable energy future to being in a clear position of strength. Today, even with lower prices, U.S. field production of crude is at a 43-year high.

America’s Independent Oil Producers

Since 2016, the U.S. has produced close to the equivalent of 30 million bpd in oil and natural gas, making the United States a champion of global energy production.

Today’s infographic from Jericho Oil focuses on a key part of the turnaround in the U.S. energy sector that often gets overshadowed by Big Oil players like ExxonMobil or Royal Dutch Shell. It covers the role of “Craft Oil” in the industry, an umbrella that includes many small, independent, and focused companies across America that produce oil and gas on a domestic basis.

The thousands of companies in this group, many which are community-driven or family-owned, actually drill 95% of the country’s oil wells to yield 54% of onshore oil and 85% of onshore gas production.

Comparing Big Oil to Craft Oil

Below is a comparison of ExxonMobil to the profile of an average Craft Oil company:

 
Big Oil
Craft Oil
Employees
71,300
12
Years in Business
108 years
23 years
Annual Gross Revenues
$218.6 billion
$9.25 million
Ownership
Publicly traded
75% private, 25% public
Level of Integration
Typically fully integrated, combining upstream and downstream activities to get the most out of the value chain
Usually a pure play, focused upstream on oil exploration and production
Focus
Produce, transport, refine, and market oil products
Develop new plays, and drive upstream trends such as technological innovation
Production
Domestic and international
Mostly domestic

Most Craft Oil companies are very small in comparison – but together, they contribute to a very significant portion of U.S. production, as well as the economy.

Investing in Craft Oil

Do these independent producers provide a strategic opportunity for investors?

Yes, but here are a few areas investors should consider evaluating before taking any action:

Location of Assets:
In the U.S. and Canada, independent oil companies undergo strong regulatory scrutiny to make sure their reporting and numbers give transparency to their operations.

Cash and Debt:
How much does the company have in cash? Will they have to raise more money soon?

Companies operating in junior oil and gas should not have more than 2x more debt than their current cash flow.

Management Team:
The strength of any management team is linked to their connections, past experience, and skill set. If the management team has built and sold successful projects in the past, that is a good sign of strength.

Economics:
Investors need to be aware of key metrics to gauge if junior oil and gas companies can make money in the current or projected cost environment. These include IRR (Internal Rate of Return), NPV (Net present value), and payback period. Companies that make their money back fast and with a good return can re-invest that capital into additional projects.

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Energy

Map: The Countries With the Most Oil Reserves

See the countries with the most oil reserves on this map, which resizes each country based on how many barrels of oil are contained in its borders.

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Map: The Countries With the Most Oil Reserves

There’s little doubt that renewable energy sources will play a strategic role in powering the global economy of the future.

But for now, crude oil is still the undisputed heavyweight champion of the energy world.

In 2018, we consumed more oil than any prior year in history – about 99.3 million barrels per day on a global basis. This number is projected to rise again in 2019 to 100.8 million barrels per day.

The Most Oil Reserves by Country

Given that oil will continue to be dominant in the energy mix for the short and medium term, which countries hold the most oil reserves?

Today’s map comes from HowMuch.net and it uses data from the CIA World Factbook to resize countries based on the amount of oil reserves they hold.

Here’s the data for the top 15 countries below:

RankCountryOil Reserves (Barrels)
#1๐Ÿ‡ป๐Ÿ‡ช Venezuela300.9 billion
#2๐Ÿ‡ธ๐Ÿ‡ฆ Saudi Arabia266.5 billion
#3๐Ÿ‡จ๐Ÿ‡ฆ Canada169.7 billion
#4๐Ÿ‡ฎ๐Ÿ‡ท Iran158.4 billion
#5๐Ÿ‡ฎ๐Ÿ‡ถ Iraq142.5 billion
#6๐Ÿ‡ฐ๐Ÿ‡ผ Kuwait101.5 billion
#7๐Ÿ‡ฆ๐Ÿ‡ช United Arab Emirates97.8 billion
#8๐Ÿ‡ท๐Ÿ‡บ Russia80.0 billion
#9๐Ÿ‡ฑ๐Ÿ‡พ Libya48.4 billion
#10๐Ÿ‡ณ๐Ÿ‡ฌ Nigeria37.1 billion
#11๐Ÿ‡บ๐Ÿ‡ธ United States36.5 billion
#12๐Ÿ‡ฐ๐Ÿ‡ฟ Kazakhstan30.0 billion
#13๐Ÿ‡จ๐Ÿ‡ณ China25.6 billion
#14๐Ÿ‡ถ๐Ÿ‡ฆ Qatar25.2 billion
#15๐Ÿ‡ง๐Ÿ‡ท Brazil12.7 billion

Venezuela tops the list with 300.9 billion barrels of oil in reserve – but even this vast wealth in natural resources has not been enough to save the country from its recent economic and humanitarian crisis.

Saudi Arabia, a country known for its oil dominance, takes the #2 spot with 266.5 billion barrels of oil. Meanwhile, Canada and the U.S. are found at the #3 (169.7 billion bbls) and the #11 (36.5 billion bbls) spots respectively.

The Cost of Production

While having an endowment of billions of barrels of oil within your borders can be a strategic gift from mother nature, it’s worth mentioning that reserves are just one factor in assessing the potential value of this crucial resource.

In Saudi Arabia, for example, the production cost of oil is roughly $3.00 per barrel, which makes black gold strategic to produce at almost any possible price.

Other countries are not so lucky:

CountryProduction cost (bbl)Total cost (bbl)*
๐Ÿ‡ฌ๐Ÿ‡ง United Kingdom$17.36$44.33
๐Ÿ‡ง๐Ÿ‡ท Brazil$9.45$34.99
๐Ÿ‡ณ๐Ÿ‡ฌ Nigeria$8.81$28.99
๐Ÿ‡ป๐Ÿ‡ช Venezuela$7.94$27.62
๐Ÿ‡จ๐Ÿ‡ฆ Canada$11.56$26.64
๐Ÿ‡บ๐Ÿ‡ธ U.S. shale$5.85$23.35
๐Ÿ‡ณ๐Ÿ‡ด Norway$4.24$21.31
๐Ÿ‡บ๐Ÿ‡ธ U.S. non-shale$5.15$20.99
๐Ÿ‡ฎ๐Ÿ‡ฉ Indonesia$6.87$19.71
๐Ÿ‡ท๐Ÿ‡บ Russia$2.98$19.21
๐Ÿ‡ฎ๐Ÿ‡ถ Iraq$2.16$10.57
๐Ÿ‡ฎ๐Ÿ‡ท Iran$1.94$9.09
๐Ÿ‡ธ๐Ÿ‡ฆ Saudi Arabia$3.00$8.98
*Total cost (bbl) includes production cost (also shown), capital spending, gross taxes, and admin/transport costs.

Even if a country is blessed with some of the most oil reserves in the world, it may not be able to produce and sell that oil to maximize the potential benefit.

Countries like Canada and Venezuela are hindered by geology – in these places, the majority of oil is extra heavy crude or bitumen (oil sands), and these types of oil are simply more difficult and costly to extract.

In other places, obstacles are are self-imposed. In some countries, like Brazil and the U.S., there are higher taxes on oil production, which raises the total cost per barrel.

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Energy

Mapped: Every Power Plant in the United States

What sources of power are closest to you, and how has this mix changed over the last 10 years? See every power plant in the U.S. on this handy map.

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This Map Shows Every Power Plant in the United States

Every year, the United States generates 4,000 million MWh of electricity from utility-scale sources.

While the majority comes from fossil fuels like natural gas (32.1%) and coal (29.9%), there are also many other minor sources that feed into the grid, ranging from biomass to geothermal.

Do you know where your electricity comes from?

The Big Picture View

Today’s series of maps come from Weber State University, and they use information from the EPA’s eGRID databases to show every utility-scale power plant in the country.

Use the white slider in the middle below to see how things have changed between 2007 and 2016:

The biggest difference between the two maps is the reduced role of coal, which is no longer the most dominant energy source in the country. You can also see many smaller-scale wind and solar dots appear throughout the appropriate regions.

Here’s a similar look at how the energy mix has changed in the United States over the last 70 years:

Energy net generation over time

Up until the 21st century, power almost always came from fossil fuels, nuclear, or hydro sources. More recently, we can see different streams of renewables making a dent in the mix.

Maps by Source

Now let’s look at how these maps look by individual sources to see regional differences more clearly.

Here’s the map only showing fossil fuels.

Fossil fuel power plants in the U.S.

The two most prominent sources are coal (black) and natural gas (orange), and they combine to make up about 60% of total annual net generation.

Now here’s just nuclear on the map:

Nuclear power plants in the U.S.

Nuclear is pretty uncommon on the western half of the country, but on the Eastern Seaboard and in the Midwest, it is a major power source. All in all, it makes up about 20% of the annual net generation mix.

Finally, a look at renewable energy:

Renewables power plants in the U.S.

Hydro (dark blue), wind (light blue), solar (yellow), biomass (brown), and geothermal (green) all appear here.

Aside from a few massive hydro installations – such as the Grand Coulee Dam in Washington State (19 million MWh per year) – most renewable installations are on a smaller scale.

Generally speaking, renewable sources are also more dependent on geography. You can’t put geothermal in an area where there is no thermal energy in the ground, or wind where there is mostly calm weather. For this reason, the dispersion of green sources around the country is also quite interesting to look at.

See all of the above, as well as Hawaii and Alaska, in an interactive map here.

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