Insights > Looming Supply Constraints, Clean Energy Policies, and Other 2022 Trends: Q1 Oil and Gas Industry Update

Looming Supply Constraints, Clean Energy Policies, and Other 2022 Trends: Q1 Oil and Gas Industry Update

At the end of the first quarter of 2022, the reopening of economies and increased travel as pandemic restrictions relax worldwide has created higher demand for crude. Meanwhile, the global energy market faces potentially the biggest supply crisis in decades due to the disruption of oil flows from Russia, the world’s largest oil exporter. The Russian invasion of Ukraine has caused commodity prices to surge because many companies around the world refuse to do business with Russia despite strained oil inventory levels elsewhere.

The International Energy Agency (IEA) notes that the surge in crude prices, if sustained, will have a marked impact on inflation and economic growth for the foreseeable future. Although many people believe that current events could accelerate a global transition away from oil, this scenario is a virtual impossibility in the near future, given the global dependence on crude to fuel the economy.


Oil Rig Count
March 2021 vs March 2022: 337 vs 533


Gas Rig Count
March 2021 vs March 2022: 91 vs 138


Total Rig Count
March 2021 vs March 2022: 428 vs 671
(56.8% increase)

Commodity price drivers and rig counts

Given the high demand for crude, supply constraints, and ongoing uncertainty surrounding the outcome of the Russia-Ukraine conflict, oil prices continue to fluctuate at record-high levels.

West Texas Intermediate (WTI) crude closed March 2022 at $100.28 per barrel (bbl), a 5% increase from the previous month and a 33% increase from the fourth quarter of 2021. Year over year, WTI prices have increased 70%. Brent crude closed March at $107.91/bbl — up 7% from February, up 39% from the prior quarter, and up 70% from 2021.

The US Energy Information Administration’s (EIA) short-term energy outlook continues to emphasize uncertainty. This year, global crude consumption has averaged 98.3 million barrels per day (b/d), an increase of 2.4 million b/d from the first quarter of 2021. The EIA forecasts that total crude consumption is likely to average 99.8 million b/d this year, also an increase of 2.4 million b/d from 2021. In the first quarter of 2022, the United States increased crude oil production, averaging 12 million b/d. The EIA has also updated its forecast for US crude oil production to 13 million b/d for 2023, which would surpass the 2019 record of 12.3 million b/d.

Unusual weather patterns influenced natural gas prices. The Henry Hub (HH) spot price for natural gas ended the first quarter at $4.90 per million Btu (MMBtu) and an average price of $4.66/MMBtu for the quarter. HH year-over-year prices were up 31% from an average of $3.56/MMBtu during the first quarter of 2021 in response to colder-than-normal weather in January and February in the Northeast and Midwest regions of the United States. Prices continued to rise in March in response to warming weather along the Gulf Coast and in the southern United States, which increased gas-fired power demand.

Rig counts and drilling permits: According to the Baker Hughes rig count summary, the United States added 85 total active rigs (53 oil and 32 natural gas) during the first quarter, bringing the total US active rig count to 671. This increase represents a 15% change from the prior quarter and a 57% change from all of 2021. The Railroad Commission of Texas calculated 2,575 new drilling permits issued so far this year, which is a 57% increase compared to 1,643 during the same period last year.

Capital projects and clean energy policies

Silicon Ranch Corporation, a Tennessee-based solar project developer backed by Royal Dutch Shell, raised $775 million in equity capital from new and existing investors. The new funding will enable the construction of nearly two gigawatts of solar projects over the next 24 to 36 months, doubling the company’s current capacity and enabling it to power more than 380,000 additional homes.

BP and the Ministry of Energy and Minerals in Oman agreed to develop a renewable energy and green hydrogen facility in Oman by 2030. BP plans to evaluate solar and wind data from 8,000 kilometers of land, enabling the government of Oman to approve future developments of renewable energy hubs and take advantage of the area’s resources, which could also supply renewable power for green hydrogen in domestic and global export markets. The agreement enables BP and Oman to collaborate and create a renewables strategy, regulate and establish a renewable energy hub, and continue to develop the local workforce.

The Biden Administration announced that Section 201 tariffs on imported solar cells and panels will be extended for four years. Furthermore, the tariff rate quota for solar cells will increase from 2.5 to 5 gigawatts. Bifacial panels, which absorb light on both sides and are common in utility-scale projects, will continue to be excluded from the tariffs. The tariff extension has received mixed reviews among clean energy advocates, with some preferring the complete removal of tariffs, while others believe the exclusion of bifacial panels gives companies time to adjust their manufacturing to appropriate levels. The tariffs cause solar projects to be 55% more expensive in the United States compared to Europe, and the prices are causing US-based solar companies to trade well below 52-week highs.

The United States launched the largest-ever sale of offshore wind-development rights for shallow waters between Long Island and New Jersey. The area, known as New York Bight, covers nearly half a million acres and is divided into six lease areas. Among dozens of bids, the auction reached $28.4 million for the lease area with the most development potential, and this represents major progress in offshore wind power in the United States, which lags in wind technology developments compared to Europe. The wind energy generated from New York Bight could power up to two million homes.

As part of the Biden Administration’s climate-change initiative, the US Securities and Exchange Commission (SEC) unveiled a proposal requiring US-listed companies to disclose their contributions to greenhouse gas emissions.  Companies would also be required to disclose the actual or likely material impacts of climate change on their business. The proposal aims to help the public understand climate-related investment impacts; although many corporations argue that emissions calculations methodologies are lacking, providing such data would be burdensome, and unintentional inaccuracies could cause exposure to costly litigation.


Crude WTI Commodity Prices
Q1 2021 vs Q1 2022: $59.16 to $100.28
69.5% increase



Brent Crude Commodity Prices
Q1 2021 vs Q1 2022: $63.54 to $107.91
69.8% increase



Natural Gas (HH) Commodity Prices
Q1 2021 vs Q1 2022: $2.62 to $4.90
87.0% increase

M&A activity slows

The volume of mergers and acquisitions (M&A) deals slowed during the first quarter of 2022, a stark contrast to previous historic increases in M&A activity. According to S&P Global, the main driver of the decline in M&A volume is inflation. Prices for everything from energy to food have increased. Additionally, central banks have implemented higher interest rates. Compared to the same period in 2021, the number of M&A deals has fallen by more than 15%, while the value of those deals dropped by 30%.

January: Royal Dutch Shell sold its remaining 50% interest in Deer Park Refining Limited Partnership to Mexico’s national oil company, Pemex, in a deal valued at $596 million. Earthstone Energy, Inc. plans to acquire the assets of Bighorn Permian Resources, LLC, for approximately $860 million, which will likely increase Earthstone’s net production by 70%.

February: Cureton Midstream, LLC acquired Gilcrest System, a pipeline in the Denver-Julesburg Basin, from Aka Energy Group, LLC. As a result, Cureton now owns and operates pipelines with more than 100 MMcf/d of processing capacity and 45,000 HP of field compression across 225,000 acres. Hannathon Petroleum, LLC, listed for sale approximately 18,000 acres of land in the Northern Midland portion of the Permian Basin of Texas. The assets are valued at approximately $500 million and produce about 5,800 b/d of oil and gas.

March: Sixth Street Partners bought a 49% stake in Enipower, the power generation unit of Eni, the Italian supermajor. The deal will give Enipower an estimated value of $1.4 billion. Completing its second deal in five months, Chesapeake Energy Corporation acquired Chief Oil & Gas Inc., a privately owned natural gas producer, for an estimated $2.6 billion.

Restructuring updates

According to Debtwire’s Data on Transactions report, the energy sector had seven Chapter 11 bankruptcy cases and one Chapter 15 bankruptcy case during the first quarter of 2022, compared to four cases in the prior quarter.

January: Seadrill New Finance Limited, an offshore drilling contractor, emerged from Chapter 11 bankruptcy under the new name: Paratus Energy Services Ltd. Prior to its bankruptcy filing, the company owed $557 million in debt.

February: Activa Resources, LLC, a San Antonio-based oil and gas exploration and development company, filed for Chapter 11 bankruptcy, listing around $10 million in debt. Tilden Marcellus, LLC, a natural gas exploration and production company based in Pennsylvania, filed for Chapter 11 bankruptcy. The company owed $35 million in debt prior to its bankruptcy filing. MIE Holdings Corporation, a Chinese upstream oil and gas exploration company, filed for bankruptcy in New York, and accumulated $576 million in debt prior to its Chapter 15 filing.

March: Ruby Pipeline, LLC, a natural gas pipeline joint venture operated by Kinder Morgan Inc., filed for Chapter 11 bankruptcy, listing $710 million in debt. Rockall Energy Holdings, LLC, a privately held oil and gas company based in Dallas, listed $100 million in its Chapter 11 bankruptcy filing. Volunteer Energy Services, Inc., an Ohio-based natural gas provider, filed for Chapter 11 bankruptcy with $30 million in debt. Footprint Power Salem Harbor Development LP, a natural gas-fired power plant based in Massachusetts, filed for Chapter 11 bankruptcy, citing $336 million in debt.

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