Geopolitics
Fighting continues to intensify around Yemen’s Marib province, the Saudi-backed Yemeni government’s last remaining stronghold. The Saudi-proposed ceasefire is still not being accepted by the Iranian-backed Houthis, though secret talks have been held between Iran and Saudi Arabia in Iraq recently. We have yet to see anything come of that unconfirmed development. In the meantime, the Houthis have the upper hand, and if they take Marib they will be negotiating a peace/power-sharing deal with much more leverage, which makes a ceasefire increasingly less likely--even as it would come with a lifting of Saudi blockades (not the Yemeni government’s).
In a continuation of pressure from pro-Iranian militias in Iraq, Friday saw another rocket attack on a Baghdad airport base housing US troops. One Iraqi soldier was wounded on the base, which is a launch point for the US-led anti-ISIS coalition in Iraq. Last week, a rocket attack hit another airbase, wounding five. There has been no claim of responsibility for either attack.
Idriss Deby, the president of Chad for three decades, was killed by a Libya-based rebel group on Monday. He was considered an important Western ally in the fight against ISIS. The rebel group is not connected to ISIS; rather, the rebels belong to FACT, the Front for Change and Concord in Chad, which is based in Libya. The group had made gains moving towards Chad’s capital, and Deby was killed visiting troops on…
Geopolitics
Fighting continues to intensify around Yemen’s Marib province, the Saudi-backed Yemeni government’s last remaining stronghold. The Saudi-proposed ceasefire is still not being accepted by the Iranian-backed Houthis, though secret talks have been held between Iran and Saudi Arabia in Iraq recently. We have yet to see anything come of that unconfirmed development. In the meantime, the Houthis have the upper hand, and if they take Marib they will be negotiating a peace/power-sharing deal with much more leverage, which makes a ceasefire increasingly less likely--even as it would come with a lifting of Saudi blockades (not the Yemeni government’s).
In a continuation of pressure from pro-Iranian militias in Iraq, Friday saw another rocket attack on a Baghdad airport base housing US troops. One Iraqi soldier was wounded on the base, which is a launch point for the US-led anti-ISIS coalition in Iraq. Last week, a rocket attack hit another airbase, wounding five. There has been no claim of responsibility for either attack.
Idriss Deby, the president of Chad for three decades, was killed by a Libya-based rebel group on Monday. He was considered an important Western ally in the fight against ISIS. The rebel group is not connected to ISIS; rather, the rebels belong to FACT, the Front for Change and Concord in Chad, which is based in Libya. The group had made gains moving towards Chad’s capital, and Deby was killed visiting troops on the front line. A military council led by his son, General Mahamat Idriss Deby, has now taken power and dissolved the government, while the opposition is up in arms, calling this a coup d’etat. There is now concern that the military ranks are not fully on board with Mahamat’s takeover, and that this could lead to more dangerous instability and civil war that will spill over borders (Nigeria is on edge, for one).
Deals, Mergers & Acquisitions
Texas oil and gas investment firm Belatorum Resources LLC, founded by former energy worker Christopher Bentley, has closed up shop after Bentley confessed to U.S. prosecutors that he had purchased mineral rights in Texas shale fields that were both “bad” and “non-arm’s length” deals. He turned himself in after professing to be unable to live a lie any longer. Bentley had hoped to hit at least one solid winner with his dealings, but the deal-making grew slim with the pandemic. One analyst has suggested that less than half of the money investors put into the fund was actually used to buy assets.
In addition to refinancing $10 billion in loans it took out six years ago, Saudi Aramco is said to be taking a long, hard look at its upstream oil and gas segment for a stake sale. Aramco operates all of Saudi Arabia’s upstream assets under a decades-long concession. Aramco could sell off oilfields or embark on JVs to develop new nat gas resources. Any such stake sale could mean billions for Aramco, whose profits dipped sharply last year as oil demand plummeted.
Iraq’s Basra Oil Co (BOC) is hoping to finalize Exxon’s 32.7% stake sale of West Qurna-1 by the end of Q2, even though Chevron has decided not to bite on the opportunity. BOC is leading talks for the stake sale, and has no objection to a Chinese oil company snapping it up. Exxon is the operator of the field. PetroChina already owns 32.7% in West Qurna-1. Should another Chinese oil major purchase an additional 32.7% stake, it would increase China’s influence over Iraq’s oil industry considerably.
Discovery & Development
Australia’s Invictus Energy continues its oil and gas search in Zimbabwe after reaching a deal with Canada-based Polaris Natural Resources, Inc., who will provide acquisition services for a 2D seismic program. They are looking in the Muzarabani district, which was explored--and abandoned--in the ‘90s by Mobil. Its first test well will be drilled in Q4 2021. Invictus raised $6 million for the project last month, and has an EDP agreement with the government of Zimbabwe.
Equinor, along with partners Total E&P Norge AS and Var Energi AS, has found a modest but commercial amount of oil and gas at the Tyrihans oilfield offshore Norway. Production is expected to start immediately. Recoverable reserves are expected to fall between 19 and 26 Mboe. The exploration well encountered a 43 meter gas column and a 15 meter oil column in Jurassic reservoir rocks. It is the sixth exploration well drilled in the field.
UK-headquartered E&P company Neptune Energy has begun drilling production wells in the Duva field in the Norwegian section of the North Sea. Four wells have been pre-drilled and cased off at 2,500 meters before the final drilling campaign began. Neptune is in the final stages of the project that will see production increased and the life of the Gjoa platform extended.
Regulation & Legislation
The U.S. Bureau of Land Management has officially canceled all scheduled lease sales through Q2 2021. This fits nicely with Biden’s suspension of oil and gas lease permits. The lease sales affected by the cancelation were due to be held in Nevada and Colorado. The U.S. has not suggested any timeframe for the completion of the review of the permitting process, which it says will ultimately ensure that the federal oil and gas leasing program gives appropriate returns to the people of the U.S.
The controversial bill in Mexico that would hand its state-owned oil company more power over its fuel markets is closer to becoming law. The lower house of Mexican parliament passed the bill this week. Now, the bill will head to the Senate. If passed, it would dissuade foreign energy companies from taking part in the industry there.
Renewables
Amazon is increasing the amount of renewable energy it purchases as the retail giant continues to battle unfavorable public perception after a series of worker-driven/media-fueled complaints. The purchase makes Amazon the single largest corporate buyer of renewable energy in Europe, and boasts 206 renewable energy projects around the world capable of generating 8.5GW of electricity. It’s latest projects include solar energy storage facilities in California, Oklahoma, and Ohio, as well as a solar project in Canada and a wind farm in Scotland.
Jumping on the renewables bandwagon, the World Bank this week issued a recommendation to avoid LNG bunkering, instead promoting hydrogen and ammonia the best long-term solutions for the shipping industry. The announcement was met with a fiery backlash from industry representatives who say the industry cannot afford to wait for a perfect solution to address climate change. The shipping industry favors the adoption of technologies that can boost LNG's carbon credentials.
Financials
CNOOC: China’s state-run CNOOC’s revenue increased by 21% in the first quarter as oil and gas prices rebounded and sales picked up. The company’s total net production for Q1 came in at 137.7 million boe--an increase of 4.7% YoY. The increase in production was largely due to several new projects including Liuhua16-2/20-2 and Lvda16-3/21-2. Its average realized oil price jumped by 20.5% YoY by $59.07/bbl, in line with the changes seen in intl oil prices.
Kinder Morgan: CNOOC wasn’t the only winner in Q1. US-based energy infrastructure company Kinder Morgan made out like a bandit from the Texas Freeze, capitalizing on the short period of time when product prices went through the roof. As a result, KMI’s total revenues shot up to $5.21B, compared to Q1 2020 revenue of $3.10B, blowing analyst estimates out of the water. The company that owns stakes in tens of thousands of miles of pipelines had earned net income of $1.41 billion, compared to a $306 million loss in Q1 2020.
Halliburton/Baker Hughes/Schlumberger: In the oilfield services corner, Baker Hughs and Halliburton also beat estimates. BKR’s free cash flow nearly doubled for Q1 to $498 million compared to the same quarter last year. HAL’s revenue rose by 13% to $1.4B. For SLB, while it, too, exceeded analyst estimates, the oilfield services giant posted Q1 revenues of $5.22B compared to estimates of $5.1B.
Q1 2021 earnings are in for NextEra (NYSE:NEE), showing $1.33 billion of adjusted earnings ($0.67 per share), up almost 14% from the same period last year. NextEra’s Florida Power & Light (FPL) subsidiary (the largest rate-regulated utility in the US) saw earnings up by 12% in Q1.
