Energy Sector

[SharperDingaan]

2 hours ago, JRM said:

 

My advice would be to stop listening to people like Elon and talk to more engineers\scientists\physicists.  

 

I have no idea what launching a 500 ton reactor vessel into space has to do with reprocessing spent fuel. 

 

This discussion is off the rails, so back to the thread...

 

The discussion is permanent disposal of small nukes, typical of submarines and shipping; fuel rods is just a small part of disposal, the containment/processing areas in close contact with the rods are highly radioactive as well. Straight forward to remove/reprocess just the rods, not so much the rest of it ......  However, many of these reactors are now small enough, and rocketry now reliable enough, that the space solution is becoming a practical alternative. https://en.wikipedia.org/wiki/United_States_naval_reactors#:~:text=Reactor sizes range up to, rely on steam turbine propulsion.

 

Yes it means swapping one set of risks for another, but the result is a permanent solution vs sinking decommissioned nuclear ships in the Mindanao Trench and relying on subduction to take them into earths core. We just don't want to hear it, and don't want the ESG folks screwing up the existing 'bury and forget' disposal practices. https://en.wikipedia.org/wiki/Philippine_Trench

 

Few dispute that nukes are a good solution - but it will be materially different from the current full life-cycle approach. We routinely put small nukes on satellites, and they all fit/launch on rockets; yet apparently we can't routinely do the same thing with small nukes on 'terra firma' ? Of course we can, .... we just don't want to hear it.

 

Not a fan of Musk, but he has recognized that space is commercializing and is acting accordingly. Per o/g, the more the 'established' nuclear industry resists change, the more runway o/g has to run off its existing reserves. Goods/services still have to move, and for now - o/g remains the near-term transition fuel of choice. All good!

 

SD

Edited November 28, 2022 by SharperDingaan

[SharperDingaan]

12 minutes ago, mattee2264 said:

2022 oil price gains now erased as markets start to worry about zero COVID policy in China with cases starting to rise. The adage is oil stocks are for trading not holding but I think supply tightness will still dominate so continuing to hold 

 

You might want to research around the recent protests; lot of people are increasingly seeing it as a 'face saving' prelude to China modifying its zero COVID policy, in the name of 'keeping the peace'.   

https://www.cbc.ca/news/world/china-protest-covid-1.6665822

 

SD

[Pelagic]

2 hours ago, Spekulatius said:

What is the cost/kg to move payload  out of the earth gravity field (which is way higher than moving it into the near earth orbit)?

 

What happens when one of the payloads crashes or even worse explodes in the atmosphere due to rocket failure?

 

It is way safer and cheaper to burry it underground in a geological nonactive and remote area.

 

Yeah, the price per kg to solar orbit is absurdly expensive. And where do we draw the line on what get's disposed of conventionally and what get's shot into space? Are we loading up barrels of heavy water and sending them into the sun too?

 

There are lots of great solutions for dealing with waste, and none of the realistic ones involve launching it into solar orbit. Nuclear waste isn't anywhere near as big of a problem as people make it out to be and most of the issues surrounding it here in the US arise from uneducated legislators that don't want it in their backyard.

 

This thread gives a pretty good overview of the current storage solutions here in the US, and how they differ from those in Europe.

 

 

 

[maxthetrade]

Transmutex from Switzerland is working on a very interesting technology that burns long lived nuclear waste. It dramatically reduces nuclear waste and the half life of it.

https://www.transmutex.com/technology

 

[Mephistopheles]

Big news:

 

https://babylonbee.com/news/new-greta-thunberg-thermostat-scowls-at-you-when-turning-the-heat-up

[lnofeisone]

12 hours ago, SharperDingaan said:

 

You might want to research around the recent protests; lot of people are increasingly seeing it as a 'face saving' prelude to China modifying its zero COVID policy, in the name of 'keeping the peace'.   

https://www.cbc.ca/news/world/china-protest-covid-1.6665822

 

SD

I somewhat thought that but then was wondering why not just modify the policy without all the kabuki theater. 

[Spekulatius]

11 hours ago, Mephistopheles said:

Big news:

 

https://babylonbee.com/news/new-greta-thunberg-thermostat-scowls-at-you-when-turning-the-heat-up

I need this one for my sons room.

[SharperDingaan]

14 hours ago, lnofeisone said:

I somewhat thought that but then was wondering why not just modify the policy without all the kabuki theater. 

 

China relaxes zero-Covid, a lot of people die, they have to admit their approach failed, they have to start using western vaccines, and they have to start targeting. Big loss of face.

 

But if it is reaction to protestors demanding change in how Covid is managed?, and avoids another Tiananmen Square ??? Big gain of face ..... and a practical way out of the problem.

 

Very smart, and very much the party.

 

SD

 

Edited November 29, 2022 by SharperDingaan

[Ulti]

https://podcasts.apple.com/us/podcast/columbia-energy-exchange/id1081481629?i=1000587997192
 

synopsis of  iea 2023 energy report

some pie in the sky.. climate goals vs energy security needs.. I’m curious…. Desalinization and ng usage was connected .. How?

[SharperDingaan]

4 hours ago, Ulti said:

https://podcasts.apple.com/us/podcast/columbia-energy-exchange/id1081481629?i=1000587997192
 

synopsis of  iea 2023 energy report

some pie in the sky.. climate goals vs energy security needs.. I’m curious…. Desalinization and ng usage was connected .. How?

 

Fracking requires a lot of cleaned up water; hence return water is often treated (desalinated) through a series of osmosis membranes before it can be reused. In the old days you just continually took fresh water from a nearby river/lake, emptied into a descending series of pools, and drained the last pool back into the river/lake. Today, you have to clean up your act. Not a bad thing.  

https://www.watertechonline.com/wastewater/article/16211374/desalination-trends-in-the-oil-and-gas-industry

 

SD

Edited November 30, 2022 by SharperDingaan

[Dinar]

@SharperDingaan, what do you think of CNQ?  It seems very cheap to me, but I am an oil/gas tourist.

[klipbaai]

@SharperDingaan do you have a view on Spartan Delta? SDE today announced a "Strategic Positioning Process" which, amongst other possibilities discussed in their release, could include a sale.

[EBITDAg]

My favorite quarterly commentary on energy (and commodities more broadly) is out. http://gorozen.com/research/commentaries

[Libs]

1 hour ago, EBITDAg said:

My favorite quarterly commentary on energy (and commodities more broadly) is out. http://gorozen.com/research/commentaries

Thanks. Great perspective.

[Viking]

3 hours ago, EBITDAg said:

My favorite quarterly commentary on energy (and commodities more broadly) is out. http://gorozen.com/research/commentaries

@EBITDAg , yes, thanks very much for posting.

—————

The article you posted does a wonderful job of explaining why we are not seeing more aggressive drilling by oil and gas companies in the face of higher prices. And why this will continue - until Mr Market properly values the stock prices of oil and gas companies (at a much higher level than where they are at today).
 

A big part of the valuation problem is most of the large investors CAN’T invest in oil and gas (because of ESG constraints)… and this suggests to me the valuation discount could persist for years. The end result of low stock prices is oil supply will also remain constrained. And this will keep oil prices elevated.
 

We are in an oil boom where oil companies are generating record free cash flow. Which are being returned primarily to shareholders. And supply will remain constrained. So record free cash flow will be continuing, likely for years. It is such a good story that pretty much no one actually believes it! It’s got to be too good to be true, right? And that is why i love investing so much.
 

Despite the run-up in prices, most oil and gas companies continue to trade at crazy cheap valuations. Investors look at a stock price chart (vertical the past 2 years) and think… ‘missed that one’. 
 

But what have oil and gas companies done with most of the record free cash flow they have earned the past 18 months? Primarily the free cash flow has gone to 3 activities: 1.) Debt reduction 2.) Dividends 3.) Share repurchases. Some has also gone to M&A. And, yes, a little has gone to growing production. The end result is supply growth has been much slower than expected (forcing the US to aggressively tap SPR). And this will support higher prices in the future. 
 

As an example, i posted an update on Suncor yesterday. RBC is estimating free cash flow in 2022 of C$14.6 billion and $13.6 billion in 2023 (at US$91 WTI). Market cap today is C$60 billion. Stock is trading at 4.4x free cash flow. That is wicked cheap (i also expect oil to average more than $91 in the coming years… if so, the story gets even better). And what is Suncor doing with its free cash flow? Debt repayment, dividend, share buybacks. Minimal investment in growing production; any investments made have very high IRR.

—————

An investor in Suncor today is getting:

1.) dividend of almost 5%, growing at 10-15% per year moving forward

2.) annual share buybacks of around 8%; this will increase to around 12% end of Q1, 2023

3.) reminder going to debt reduction. 
Debt targets could be hit by the end of 2023; then 100% of free cash flow will becoming to investors. 
—————

Another oil-sands play, Cenovus, is just getting to 100% shareholder return (they have, or are very close to, hitting their net debt target)… it really is a crazy time for oil and gas investors. 

—————

Below is the conclusion from the article referenced at the start of my post

WHY WON'T ENERGY COMPANIES DRILL?

- https://4043042.fs1.hubspotusercontent-na1.net/hubfs/4043042/Content Offers/2022.Q3 Commentary/2022.Q3 GR Market Commentary.pdf

 

“When you think about the challenges now being faced by the industry in these terms, you can easily see why oil company executives would keep the pace of development subdued. On the one hand, you could increase activity, risk attracting the ire of policymakers, have your stock price go down (investors want capital return NOT production growth), and deplete your irreplaceable asset. On the other hand, you could return capital to shareholders, stay under the radar of policymakers, have the market reward your capital discipline, and keep your Tier 1 assets for a later time when the market will better value them.

Is it any wonder energy companies are not drilling?

In past cycles, the “signal to drill” has often been determined by the oil and gas price. When oil prices fell from $100 to $27 between 2014 and 2016, the industry laid down rigs because they could not generate a return on drilling. As prices recovered in 2016 and into 2018, the rig count rebounded by 600 rigs. Because of record low valuations, this is the first time we can recall where the “signal to drill” is driven by valuation instead of oil price. As a result, higher prices have not incentivized increased activity.

 

Until investors allocate capital to the space and valuation improves, we expect drilling activity to remain subdued and oil shale supply disappointments to continue.

Edited December 1, 2022 by Viking

[Ulti]

https://www.yahoo.com/finance/news/us-seeks-halt-oil-sales-191744937.html

SPR buyback plan

[lnofeisone]

1 hour ago, Ulti said:

https://www.yahoo.com/finance/news/us-seeks-halt-oil-sales-191744937.html

SPR buyback plan

Not selling is the new refilling. TIC

[Sweet]

3 hours ago, Ulti said:

https://www.yahoo.com/finance/news/us-seeks-halt-oil-sales-191744937.html

SPR buyback plan

Coincidence that this is a few days before the OPEC+ meeting?  Doubt it.

[RichardGibbons]

Does anyone have any opinions on the probability of the Liberals implementing a "windfall" tax on Canadian oil companies. Freeland recently said that they weren't looking at it, but I still wonder about it, because:

• Trudeau tends to be a follower, requiring external validation, and Europe's already validated that it's OK for him to impose a "windfall" tax on energy
• The NDP, with its first-order thinking, looks like it would support pretty well any tax on wealthy people or any corporation
• The energy sector is the most vilified sector in Canada, so an easy target
• The Liberals have already done something similar with their "large financial institution" tax (which targeted the third most vilified sector, those greedy banks.)

So, when thinking about Canadian energy investments, I'm curious if anyone has any thoughts about the odds of such a tax before the next federal election.

 

(I put windfall in quotes because for the energy sector, I don't think it's actually windfall in the sense that people who aren't politicians define the word.

 

Companies drill recognizing that in recessionary times, oil might fall so much that their wells will be unprofitable, but also understanding that in booms, the business can be wildly profitable.  If your business model depends on the idea that "profits in the good times make up for the losses in the bad times", then calling those "high profits in the good times" a windfall doesn't make any sense, because those aren't unusual, extraordinary profits. Rather, they're expected and necessary for the business to make economic sense.)

[SharperDingaan]

On 11/30/2022 at 11:24 PM, klipbaai said:

@SharperDingaan do you have a view on Spartan Delta? SDE today announced a "Strategic Positioning Process" which, amongst other possibilities discussed in their release, could include a sale.

 

No opinion. They are well managed, and are simply in the process of turning over their assets. Like everybody else, it's better to have scale and be the #1-2 in any given reservoir, versus scattered across many; concentrate in the best opportunities. Lot of ways that could be done, and the debutante is indicating a willingness to listen.

 

Swing trader at current prices, re the special dividend. Buy the day before ex-date to claim the div, sell on ex-date, and repurchase >30 days later to claim the tax loss. All else equal on ex-date, the price drops by the amount of the dividend; triggering the 'bots to pile on, and tax harvesters to add to the dump.

 

SD

 

 

[SharperDingaan]

On 11/30/2022 at 10:20 PM, Dinar said:

@SharperDingaan, what do you think of CNQ?  It seems very cheap to me, but I am an oil/gas tourist.

 

Don't follow CNQ.

 

SD

[lessthaniv]

6 hours ago, RichardGibbons said:

Does anyone have any opinions on the probability of the Liberals implementing a "windfall" tax on Canadian oil companies. Freeland recently said that they weren't looking at it, but I still wonder about it, because:

• Trudeau tends to be a follower, requiring external validation, and Europe's already validated that it's OK for him to impose a "windfall" tax on energy
• The NDP, with its first-order thinking, looks like it would support pretty well any tax on wealthy people or any corporation
• The energy sector is the most vilified sector in Canada, so an easy target
• The Liberals have already done something similar with their "large financial institution" tax (which targeted the third most vilified sector, those greedy banks.)

So, when thinking about Canadian energy investments, I'm curious if anyone has any thoughts about the odds of such a tax before the next federal election.

 

(I put windfall in quotes because for the energy sector, I don't think it's actually windfall in the sense that people who aren't politicians define the word.

 

Companies drill recognizing that in recessionary times, oil might fall so much that their wells will be unprofitable, but also understanding that in booms, the business can be wildly profitable.  If your business model depends on the idea that "profits in the good times make up for the losses in the bad times", then calling those "high profits in the good times" a windfall doesn't make any sense, because those aren't unusual, extraordinary profits. Rather, they're expected and necessary for the business to make economic sense.)

https://www.telegraph.co.uk/business/2022/12/01/total-pulls-investment-north-sea-response-sunaks-windfall-tax/

 

Total  joins Shell in cutting North Sea investments due to Windfall tax ..

[SharperDingaan]

21 hours ago, Viking said:

@EBITDAg , yes, thanks very much for posting.

—————

The article you posted does a wonderful job of explaining why we are not seeing more aggressive drilling by oil and gas companies in the face of higher prices. And why this will continue - until Mr Market properly values the stock prices of oil and gas companies (at a much higher level than where they are at today).
 

A big part of the valuation problem is most of the large investors CAN’T invest in oil and gas (because of ESG constraints)… and this suggests to me the valuation discount could persist for years. The end result of low stock prices is oil supply will also remain constrained. And this will keep oil prices elevated.
 

We are in an oil boom where oil companies are generating record free cash flow. Which are being returned primarily to shareholders. And supply will remain constrained. So record free cash flow will be continuing, likely for years. It is such a good story that pretty much no one actually believes it! It’s got to be too good to be true, right? And that is why i love investing so much.
 

Despite the run-up in prices, most oil and gas companies continue to trade at crazy cheap valuations. Investors look at a stock price chart (vertical the past 2 years) and think… ‘missed that one’. 
 

But what have oil and gas companies done with most of the record free cash flow they have earned the past 18 months? Primarily the free cash flow has gone to 3 activities: 1.) Debt reduction 2.) Dividends 3.) Share repurchases. Some has also gone to M&A. And, yes, a little has gone to growing production. The end result is supply growth has been much slower than expected (forcing the US to aggressively tap SPR). And this will support higher prices in the future. 
 

As an example, i posted an update on Suncor yesterday. RBC is estimating free cash flow in 2022 of C$14.6 billion and $13.6 billion in 2023 (at US$91 WTI). Market cap today is C$60 billion. Stock is trading at 4.4x free cash flow. That is wicked cheap (i also expect oil to average more than $91 in the coming years… if so, the story gets even better). And what is Suncor doing with its free cash flow? Debt repayment, dividend, share buybacks. Minimal investment in growing production; any investments made have very high IRR.

—————

An investor in Suncor today is getting:

1.) dividend of almost 5%, growing at 10-15% per year moving forward

2.) annual share buybacks of around 8%; this will increase to around 12% end of Q1, 2023

3.) reminder going to debt reduction. 
Debt targets could be hit by the end of 2023; then 100% of free cash flow will becoming to investors. 
—————

Another oil-sands play, Cenovus, is just getting to 100% shareholder return (they have, or are very close to, hitting their net debt target)… it really is a crazy time for oil and gas investors. 

—————

Below is the conclusion from the article referenced at the start of my post

WHY WON'T ENERGY COMPANIES DRILL?

- https://4043042.fs1.hubspotusercontent-na1.net/hubfs/4043042/Content Offers/2022.Q3 Commentary/2022.Q3 GR Market Commentary.pdf

 

“When you think about the challenges now being faced by the industry in these terms, you can easily see why oil company executives would keep the pace of development subdued. On the one hand, you could increase activity, risk attracting the ire of policymakers, have your stock price go down (investors want capital return NOT production growth), and deplete your irreplaceable asset. On the other hand, you could return capital to shareholders, stay under the radar of policymakers, have the market reward your capital discipline, and keep your Tier 1 assets for a later time when the market will better value them.

Is it any wonder energy companies are not drilling?

In past cycles, the “signal to drill” has often been determined by the oil and gas price. When oil prices fell from $100 to $27 between 2014 and 2016, the industry laid down rigs because they could not generate a return on drilling. As prices recovered in 2016 and into 2018, the rig count rebounded by 600 rigs. Because of record low valuations, this is the first time we can recall where the “signal to drill” is driven by valuation instead of oil price. As a result, higher prices have not incentivized increased activity.

 

Until investors allocate capital to the space and valuation improves, we expect drilling activity to remain subdued and oil shale supply disappointments to continue.

 

Key takeaway is a global industry in run off. Fundamental change that nullifies much of the historic investment experience over the last 70+ years; as well as many of the well-established historic trends and correlations.

 

Consolidated reservoir operation/ownership; drilling largely limited to delineation, fewer but more complex/expensive new wells, production enhancement (floods, longer laterals, rebores, etc.), and well decommissioning. Historic rig count largely meaningless, as today’s environment is quite different.

 

The best o/g reserve is the one that is never opened. So, expect much of the high cost off-shore and arctic reserves to permanently strand, Reserve Reports to remove it as ‘uneconomic’, and some potential debt ratio disruptions.

 

The 2nd-best o/g reserve is the one operating as efficiently/effectively as possible. Hence the consolidations, declining average inventory life, refinery/pipeline decisions, and carbon-offset CCS to counter the higher throughputs minimizing fixed costs/bbl. Lots of operating disruption.

 

The 3^rd-best o/g reserve, is the pollution offset. Reuse of spent reservoirs for CCS, investment in both green energies and electric versus gas, carbon-trading platforms, lands/water reclamation, ESG reporting, etc. Hated by many, but frankly – where the future opportunities are.

 

O/G has had a long and very good ‘run’ - but eventually everything comes to an end. However, if you have spent much of your working life in o/g the reality is that you are rapidly becoming obsolete – and it isn’t wearing well. Whether you’re an investor, analyst, or any of the myriad of industry support workers.

 

Creative destruction. Nobody likes it, but the result is almost always better. So …. if you are a young person, grab the disruption by the cohunes and squeeze!  This is your future!!

 

SD

 

Edited December 2, 2022 by SharperDingaan

[SharperDingaan]

1 hour ago, lessthaniv said:

https://www.telegraph.co.uk/business/2022/12/01/total-pulls-investment-north-sea-response-sunaks-windfall-tax/

 

Total  joins Shell in cutting North Sea investments due to Windfall tax ..

 

Canada has already had this, and for quite some time - in Alberta, it is the Alberta Carbon Trunk Line. Primarily funded by the six major tar-sands producers, and arguably - using monies that would otherwise have gone to a windfall tax.

 

While the media might argue otherwise, the reality is that the Canadian o/g industry is collectively both very proactive and very pragmatic; their families/kids want to save the planet as well. Sadly, it's a requirement, when the local provincial leadership is often useless.

https://enhanceenergy.com/actl/

 

SD

Edited December 2, 2022 by SharperDingaan

[Spekulatius]

Maybe the idea of national energy companies is making a comeback. The UK has BP, Spain - Repsol, France has Elf Aquitaine (now in Total), Italy - ENI, Brazil - Petrobas, Saudi Arabia - Aramco, Norway - Statoil (Equinor). Most Gulf states have national oil companies.

 

Lower cost of capital is an advantage.