California Governor Jerry Brown’s decision to replace the official in charge of drilling permits may encourage Occidental Petroleum Corp. (OXY) and other companies to invest more to produce oil and natural gas in the state.
Brown dismissed Elena Miller, the state’s oil and gas supervisor, on Nov. 3, Richard Stapler, a spokesman for the California Natural Resources Agency, said last week. The Western States Petroleum Association had expressed frustration at the slow pace of drilling permits from Miller’s division.
A change of direction by Brown, a Democrat, may lead Occidental, Chevron Corp. (CVX), Plains Exploration & Production Co. (PXP), Berry Petroleum Co. (BRY) and Venoco Inc. (VQ) to spend more money next year in the state, said Rock Zierman, chief executive officer of the California Independent Petroleum Association, an industry association.
“We believe a more pro-business policy will be adopted by the regulator in an attempt to help lower unemployment rates in the state,” Paul Sankey, a New York-based analyst with Deutsche Bank AG, said in a note to clients yesterday. “Oil jobs and tax revenues will win the day.”
Sankey increased his share-price target for Occidental by $12 to $125 because its California assets are “now less constrained by the pace of permitting.”
Occidental, based in Los Angeles, rose 0.9 percent to $98.52 at the close in New York. Melissa Schoeb, a spokeswoman for the company, declined to comment.
The number of permits granted for injection projects, a first step for new drilling, declined 73 percent since 2008, the last year before Miller took over. That decline came during a fourfold increase in applications as energy companies sought to tap the vast potential of the Monterey Shale, which holds more than 15 billion barrels of oil, according to the U.S. Energy Information Administration.
Occidental holds about 870,000 acres of land in the prospect and has 26 rigs in the state, Phil McPherson, an analyst with Global Hunter Securities LLC, said in a Sept. 9 note. The next-highest rig count is 11, held by Aera Energy LLC, a jointly held subsidiary of Exxon Mobil Corp. and Royal Dutch Shell Plc. (RDSA)
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