Rising oil prices have inflated the fortunes of the U.S. shale gas magnate, who has even been ranked among the world's 500 richest people for the first time.
The combined net worth of U.S. oil and gas industrialists on the Bloomberg Billionaires Index is now $239 billion, an increase of nearly 10% since Russia invaded Ukraine on February 24. This growth is being driven by near-record high energy prices due to government sanctions. The United States and Europe have threatened to block Russian exports.
Rising oil prices are inflating the fortunes of America's shale gas tycoons.
Brent crude oil prices have soared as much as 32% since the invasion began, to about $106 per barrel on Friday. The impact has sent markets tumbling for everything from airline stocks to tech stocks, but it's been a boon for many companies that make money producing, selling and transporting fossil fuels.
Harold Hamm, 76, co-founder of shale giant Continental Resources, rose 28 places to No. 93 on the Bloomberg wealth index and now has $18.6 billion in assets under management. Richard Kinder's net worth rises to $8.5 billion thanks to stake in pipeline and energy storage company Kinder Morgan Corp., and rising demand for liquefied natural gas makes Freeport LNG founder Michael S. Smith He was ranked on the 500 richest people list for the first time. .
“Expansion of production”
Even before the Ukraine war, U.S. oil and gas industry revenues were growing rapidly as demand recovered from the pandemic-induced downturn. One of the more lucrative segments of the hydrocarbon industry is private companies.
Previous oil booms in states like Texas and New Mexico have been fueled by publicly traded companies, as giants like Exxon Mobil and Chevron scrambled to consolidate their holdings to supply more products. That all changed with the pandemic. Publicly traded companies that once guzzled cheap debt are being forced to downsize by wary shareholders, while private companies are seizing opportunities to expand production.
“On the private side, shareholder pressure is not as severe,” said Andrew Dittmer, director of energy analysis and software company Enbels. “It makes economic sense for private companies to invest in expanding production.”
It also contributed to increasing the wealth of private businesses. Jeffrey Hildebrand, 63, founder and sole owner of Lafayette, Louisiana-based Hilcorp Energy, is now worth more than $12 billion, and founder of Endeavor Energy Resources. Autry Stevens, 84, is leveraging his company's vast holdings in the Permian Basin to expand his business. His net worth amounts to $5.2 billion.
One holding that is doing well is liquefied natural gas exporter Freeport LNG, which just recently shipped its first consignment in September 2019. The sale of a 25% stake to a Japanese energy company in November valued Freeport at an implicit $9.7 billion.
This moves Michael Smith, who owns about 63% of the company, to 409th place on Bloomberg's list of richest people, with a fortune of $6.2 billion.
Mr. Smith's Houston-based company stands to benefit if Europe, which currently gets 40% of its natural gas from Russia, relies on the United States for more supplies.
Even if that doesn't happen, increased demand will drive up prices and improve profits for companies. The price of LNG, a gas that is cooled into a liquid to make it easier to transport, is soaring.
“Michael Smith's bet on the U.S. gas industry has paid off,” said Taron Custer, an analyst at Bloomberg Intelligence. “And they have the option to grow.”
Freeport LNG spokeswoman Heather Brown declined to comment on Smith's net worth or the company's plans.
Freeport LNG has experienced delays in expanding its export infrastructure in recent years due to difficulties in obtaining government permits and low gas prices. But Smith told Bloomberg News last week that Russia's invasion of Ukraine could accelerate those plans as governments and industry officials reassess their reluctance to increase production.
“I hope this changes the narrative,” he said.
–With assistance from Tom Maloney.
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