Republican Presidential nominee Mitt Romney's proposed energy plan could be positive for the oil services and drilling industry, with its goals of streamlining and improving the permitting process, opening up new areas for drilling and boosting overall drilling activity, according to a recent research note from Barclays Capital.
Seismic companies and eventually offshore drillers could benefit from Romney's plan to open acreage offshore Virginia and the Carolinas for exploration, Barclays analyst James C. West said in the Aug. 24 research note.
Barclays views as favorable Romney's plan for approving permits for seismic surveys to "immediately update decades-old information", as well Romney's call for collaboration with Canada and Mexico on geological data and requiring onshore domestic geological and geophysical data to be shared with the Interior Department.
"We view recently enacted and forthcoming regulations as supportive for stimulating offshore activity in light of the heightened safety conscious post-Macondo world, and see little scope for these to be overtuned regardless of the election outcome," said West, referencing an Aug. 21 research note.
In the Aug. 21 note, Barclays analysts said they expected high-spec equipment makers and drillers to benefit from recent regulatory developments, such as the Bureau of Safety and Environmental Enforcement (BSEE) issuing its final drilling safety rule.
The final drilling largely cleans up the interim rule through minor edits, with minimal additions or material changes, noted West. The rule also removes language stating operators "must" adhere to certain American Petroleum Institute (API) suggestions, providing greater flexibility for interpretation and limiting adverse unintended operational consequences.
"We think this update will lead to operational improvements in the U.S. Gulf of Mexico and less back and forth between regulators and operators," West said.
Barclays believes industry will keep moving forward with the implementation of its own set of best practices and standards for blowout preventers, even if BSEE misses the cut-off date for issuing a proposed rule this year.
Romney's plan to empower states to oversee energy production on federal lands ? and including language for all-around increased state control ? could elevate the fracking debate in the general election and, if Romney won the presidential election, would help quell questions surrounding hydraulic fracturing being regulated by the U.S. Environmental Protection Agency, West said.
Two energy industry groups, the American Petroleum Institute (API) and the Western Gas Alliance (WEA) on Thursday applauded the plan.
API President and CEO Jack Gerard on Thursday said proposals such as Romney's that promote the safe production of more domestic energy are critical to the nation's economic future, providing economic stimulus and job creation.
"The proposals released [Thursday] by the governor will assist in encouraging that public conservation on how more North American made energy can be an economic game changer," Gerard said in a statement.
Gerard pointed to results from a recent API poll that showed more than 70 percent of U.S. voters favor increased access to U.S. oil and gas resources, believing it will lead to more U.S. jobs and lower energy costs.
Denver-based WEA applauded the plan, saying that Gov. Romney's plan "recognizes that empowering states, rather than imposing a one-size-fits-all government approach, is the right way to increase American energy, create jobs, and grow the economy" said Kathleen Sgamma, vice president of government & public affairs for WEA.
"By empowering states and modernizing bureaucratic processes, our nation can unlock energy resources on non-park, non-wilderness federal lands while achieving a better balance between economic growth and environmental protection," said Sgamma.
T. Boone Pickens told CBSNews on Thursday that he was disappointed that Romney didn't mention natural gas, noting that the United States has more natural gas than any other country in the world.
While Romney's proposed energy plan mimics efforts in Congress, the fact that Romney has tried to set tangible goals by specific dates sets it apart from other initiatives. However, it may very well be more talk than anything else, a trend also seen in Congress, said Andrew Schrage, co-owner of the financial website Money Crashers.
Schrage notes that Romney's promises of adding 3 million jobs, significantly reducing the unemployment rate and increasing the U.S. economy by approximately $500 billion, are long-term goals at best.
Romney's claim that opening government lands for drilling would result in trillions of dollars in revenue contradicts a recent report from the Congressional Budget Office that the revenues created by more access to federal lands would be closer to $7 billion.
Romney's plan to reduce government regulation should be easy to implement.
"In a nut shell, I think the general basics behind Romney's politics can be implemented," Schrage commented. "I'm just not quite sure they'll yield the lofty goals he's currently touting."
The proposed plan can only succeed when combined with some serious energy conservation on the part of Americans, something Romney has not yet discussed.
"And of course, his chance of success in implementing his energy policy also highly depends on who controls the House of Representatives and the Senate," Schrage noted.
Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com.
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