Energy Sector

[rkbabang]

4 minutes ago, Castanza said:

Assuming most of you saw the breakthrough in Nuclear Fusion. I'm assuming this is a relative big deal in the long run but also not very actionable in the near term. Easy headline to print for news organizations. Could draw some attention from more serious funding sources moving forward. 

 

Anyone on here invest in the nuclear space or have any insights to share?  

 

They created excess energy, but it is still a long long way from commercialization. My feeling is that there will be a huge ramp up of modern advanced fission nuclear generation long before fusion becomes commercially available.   It looks like many in the US are awakening to the fact that we have a safe, dependable, environmentally friendly option already available to us which we aren't using.  Many states are studying this issue now and have repealed laws banning new nuclear generation. 

 

https://www.nei.org/news/2022/states-continue-to-recognize-value-of-nuclear

 

I was just listening yesterday to presentations given to New Hampshire's new Nuclear Study Commission by Oklo, Inc and by Meredith Angwin,  author of “Shorting the Grid,”.   You can find the meeting and slides here:

 

https://nuclearnh.energy/event/regular-meeting-dec-12-2022/

 

I'm going to listen to one of their past meetings today where they heard from NuScale power and someone from the Nuclear Energy Institute 

https://nuclearnh.energy/event/regular-meeting-nov-21-2022/

 

 

[Spekulatius]

@Castanza I agree with @rkbabang here - net energy gain is a technological milestone, but it's not really a commercial breakthrough. I think we are decades away from using fusion to generate meaningful energy and many technical hurdles are still ahead.

[Castanza]

14 minutes ago, rkbabang said:

 

They created excess energy, but it is still a long long way from commercialization. My feeling is that there will be a huge ramp up of modern advanced fission nuclear generation long before fusion becomes commercially available.   It looks like many in the US are awakening to the fact that we have a safe, dependable, environmentally friendly option already available to us which we aren't using.  Many states are studying this issue now and have repealed laws banning new nuclear generation. 

 

https://www.nei.org/news/2022/states-continue-to-recognize-value-of-nuclear

 

I was just listening yesterday to presentations given to New Hampshire's new Nuclear Study Commission by Oklo, Inc and by Meredith Angwin,  author of “Shorting the Grid,”.   You can find the meeting and slides here:

 

https://nuclearnh.energy/event/regular-meeting-dec-12-2022/

 

I'm going to listen to one of their past meetings today where they heard from NuScale power and someone from the Nuclear Energy Institute 

https://nuclearnh.energy/event/regular-meeting-nov-21-2022/

 

 

 

Thanks for the links, will have to give them a listen.

 

@Spekulatius Oh for sure, I don't see any reason to be overhyped about the results. But it is a hurdle that was crossed and if you're looking at a 50 year investment horizon like myself I think it's worth looking into angles which could benefit from that. Currently though I'm not aware of any great options out there. Seems like most of the interesting things are still private sector. I think nuclear energy being used as base load is inevitable. The fear is mostly overblown and being carried over from the past imo.  

 

Edited December 15, 2022 by Castanza

[Spekulatius]

9 minutes ago, Castanza said:

 

Thanks for the links, will have to give them a listen.

 

@Spekulatius Oh for sure, I don't see any reason to be overhyped about the results. But it is a hurdle that was crossed and if you're looking at a 50 year investment horizon like myself I think it's worth looking into angles which could benefit from that. Currently though I'm not aware of any great options out there. Seems like most of the interesting things are still private sector. I think nuclear energy being used as base load is inevitable. The fear is mostly overblown and being carried over from the past imo.  

 

Way to early for investment angles imo.

 

One thing to keep in mind is that nuclear fusion will likely also create nuclear waste. while fusion does not uses radioactive fuel (unlike nuclear power), the output is lot's of gamma radiation and neutrons, both of which make the surrounding material radioactive over time. So while it likely creates less radioactive byproducts than nuclear power, there will be some and they might be harder to deal with, depending on the reactor layout.

[rkbabang]

31 minutes ago, Castanza said:

 

Thanks for the links, will have to give them a listen.

 

@Spekulatius Oh for sure, I don't see any reason to be overhyped about the results. But it is a hurdle that was crossed and if you're looking at a 50 year investment horizon like myself I think it's worth looking into angles which could benefit from that. Currently though I'm not aware of any great options out there. Seems like most of the interesting things are still private sector. I think nuclear energy being used as base load is inevitable. The fear is mostly overblown and being carried over from the past imo.  

 

 

 

I don't see any way currently to invest in fusion right now.  I do own some SRUUF however which is a bet on fission.  Also I just turned 50, so my investment horizon is probably less than 50 years unless there is some massive improvement in life extension technologies in the coming decades.

 

 

[Spooky]

Fusion energy will still need transmission lines. Bet on BRK

[JRM]

I don't have any special insights on the nuclear fusion technology.  The most sober analysis I saw said that the reaction was an energy net negative process even though it was a big technological breakthrough.  Even if the technology was ready for prime time, it would be on the order of decades before we see commercial plants online.  

 

Most all of the operating nuclear plants in the world right now were 1950's technology, designed in the 1960's, built in the 1970's, and brought online in the late 1970's and early 1980's.  I'm not implying that implementing a fusion reactor would necessarily take this long, but its not changing any of the energy trends in the next 10-15 years.  

[james22]

https://hotair.com/david-strom/2022/12/14/my-take-fusion-breakthrough-a-total-dud-n517800

[Gamecock-YT]

Did any of these Canadian O&G announce going to 75% buybacks for this year? Or is it all 55% and below?

Edited December 16, 2022 by Gamecock-YT

[SharperDingaan]

11 hours ago, Gamecock-YT said:

Did any of these Canadian O&G announce going to 75% buybacks for this year? Or is it all 55% and below?

 

Expect to be disappointed. Differentials blew out this quarter, WTI is quite a bit lower than it was in Q3, and most are adjusting capex budget (lower)/still plugging away on target debt levels. It's a lot smarter to simply do nothing, wait on Q123 results (hopefully a lot better), and hold excess FCF back for potential Q223 M&A. Buybacks may be high on investors minds, but they are a relatively low priority at present.

 

SD 

[Castanza]

20 hours ago, Spooky said:

Fusion energy will still need transmission lines. Bet on BRK

 

Ha probably right! KISS method 

[UK]

On 12/16/2022 at 5:02 PM, Castanza said:

 

Ha probably right! KISS method 

 

At this point BRK is also my only solution re energy/oil/utilities/etc too.

[Warner]

The integrated will do well with the lower WCS. Their downstream crack spreads will benefit from the cheaper feedstock. Also, these integrated are selling a good portion of synthetic which has a high distillate and priced around Brent prices currently. 
 

If you look at boring old Imperial oil they have bought back 20% of their shares in the past 18 months and increased production with little debt. They are going to continue significant buybacks. 

[Jaygo]

Yes imperial has been an amazing example of capital allocation. Certainly rivaling cnq. 
 

the CoVid prices of these companies were the equivalent of buying Florida real rate in the GFC.  
 

You could basically buy these companies for the capex of Kearl  and horizon. Now the mines are built and decades of oil will be drawn out at pretty low cost. 
 

I remember seeing cnq at some 7 or 11 bucks and thinking.  Wow, a little lower and I’m going all in.  Well I did not, and ended up going in at 25 then more in the high 50’s. Still a good result  but in smaller volume and not the life changer had my fear and greed not been so powerful.  
 

 

[UK]

https://www.bloomberg.com/news/articles/2022-12-18/europe-s-1-trillion-energy-bill-only-marks-start-of-the-crisis?srnd=premium-europe

 

Europe got hit by roughly $1 trillion from surging energy costs in the fallout of Russia’s war in Ukraine, and the deepest crisis in decades is only getting started. After this winter, the region will have to refill gas reserves with little to no deliveries from Russia, intensifying competition for tankers of the fuel. Even with more facilities to import liquefied natural gas coming online, the market is expected to remain tight until 2026, when additional production capacity from the US to Qatar becomes available. That means no respite from high prices. While governments were able to help companies and consumers absorb much of the blow with more than $700 billion in aid, according to the Brussels-based think tank Bruegel, a state of emergency could last for years. With interest rates rising and economies likely already in recession, the support that cushioned the blow for millions of households and businesses is looking increasingly unaffordable.  “Once you add everything up — bailouts, subsidies — it is a ridiculously large amount of money,” said Martin Devenish, a director at consultancy S-RM. “It’s going to be a lot harder for governments to manage this crisis next year.”

[Kupotea]

8 hours ago, UK said:

https://www.bloomberg.com/news/articles/2022-12-18/europe-s-1-trillion-energy-bill-only-marks-start-of-the-crisis?srnd=premium-europe

 

Europe got hit by roughly $1 trillion from surging energy costs in the fallout of Russia’s war in Ukraine, and the deepest crisis in decades is only getting started. After this winter, the region will have to refill gas reserves with little to no deliveries from Russia, intensifying competition for tankers of the fuel. Even with more facilities to import liquefied natural gas coming online, the market is expected to remain tight until 2026, when additional production capacity from the US to Qatar becomes available. That means no respite from high prices. While governments were able to help companies and consumers absorb much of the blow with more than $700 billion in aid, according to the Brussels-based think tank Bruegel, a state of emergency could last for years. With interest rates rising and economies likely already in recession, the support that cushioned the blow for millions of households and businesses is looking increasingly unaffordable.  “Once you add everything up — bailouts, subsidies — it is a ridiculously large amount of money,” said Martin Devenish, a director at consultancy S-RM. “It’s going to be a lot harder for governments to manage this crisis next year.”

 

If this is the case, I continue to think coal producers with exposure to Newcastle pricing are the biggest beneficiaries. Local nat gas suppliers are going to see those heady profits taxed away.

[Spekulatius]

The LNG terminal in Wilhelmshafen received its first load. This terminal can import 5% of the German There is a other one going operational soon and a couple more after this later.

 

 

The NG shortage is not over yet but I think the worst case scenario is pretty much off the table unless the winter continues to be very gold (as it happens to be right now).

[Dinar]

1 hour ago, Spekulatius said:

The LNG terminal in Wilhelmshafen received its first load. This terminal can import 5% of the German There is a other one going operational soon and a couple more after this later.

 

 

The NG shortage is not over yet but I think the worst case scenario is pretty much off the table unless the winter continues to be very gold (as it happens to be right now).

Incredible how fast this was built

[lnofeisone]

5 hours ago, Dinar said:

Incredible how fast this was built

Definitely a feat but mostly in bureaucracy. It's incredible how fast they got permits but all they did was build around 30 km of pipeline. The actual gasification is done by a ship from Hoegh. Germany did bring it online quickly which is what they needed. In 10 years, the math starts to favor land-based facilities but those take a lot longer to build and by then who knows what gas utilization will be like? 

[gokou3]

I have a question re: global natural gas supply growth.

 

For oil, I think the consensus, at least among energy investors, is that global supply growth will be limited in the next few years due to lack of capex / ESG craziness / etc. Is it the same situation for natural gas?  Seems like there will still be a low single-digit growth in north america, partly due to lack of egress capacity growth.  What about the rest of the world - middle east, Australia, etc?

[mattee2264]

What are people's view on 2023 outlook for oil?

Obviously most people are expecting a recession which is bearish.

But on the other hand if suppliers are expecting a recession they aren't going to go crazy increasing production so supply will stay tight and another bullish factor is that the US is surely running out of SPR reserves to release and China will eventually abandon zero COVID which will add to demand and OPEC ever since COVID has been pretty good at coordinating to offset weak demand with production cuts.

 

A few commentators are saying $80 is going to be a floor and oil could go above $100 next year. 

 

 

[StevieV]

22 minutes ago, mattee2264 said:

What are people's view on 2023 outlook for oil?

Obviously most people are expecting a recession which is bearish.

But on the other hand if suppliers are expecting a recession they aren't going to go crazy increasing production so supply will stay tight and another bullish factor is that the US is surely running out of SPR reserves to release and China will eventually abandon zero COVID which will add to demand and OPEC ever since COVID has been pretty good at coordinating to offset weak demand with production cuts.

 

A few commentators are saying $80 is going to be a floor and oil could go above $100 next year. 

 

 

 

I don't know what oil will do in '23, but I think that if supply growth in the US and elsewhere is constrained OPEC will try to support oil prices if demand falters.

[Viking]

30 minutes ago, mattee2264 said:

What are people's view on 2023 outlook for oil?

Obviously most people are expecting a recession which is bearish.

But on the other hand if suppliers are expecting a recession they aren't going to go crazy increasing production so supply will stay tight and another bullish factor is that the US is surely running out of SPR reserves to release and China will eventually abandon zero COVID which will add to demand and OPEC ever since COVID has been pretty good at coordinating to offset weak demand with production cuts.

 

A few commentators are saying $80 is going to be a floor and oil could go above $100 next year. 

The key to pricing for any commodity will be demand and supply. Looking out 12-24 months i am quite optimistic oil prices will be higher and probably much higher. Over the next year, absent a severe global recession, i expect oil to do ok ($75) to very good (+$100). So lots of volatility just like 2022.

 

Demand: 

- China ending zero covid should add +1 million barrels per day, but likely with a delay into Q2

- slowing global economies is a big unknown. Hard landing is only scenario where global demand actually goes down and i don’t think that is in the cards.

- US. will need to re-filling SPR at some point.

 

Supply

- capex across the globe remains muted so supply will increase but modestly.

- US will be ending releases of SPR at some point in 2023 = reduction of 800,000 to 1 million barrels per day. 

- Russia: given sanctions and much lower capex spend (lower in 2023 than during covid in 2020) i would expect supply from Russia to decline over time. No idea of cadence (how much how fast).

- OPEC: appears to want oil in $80-90 range. Given how tight oil market currently is OPEC might get their wish.

 

Ukraine war is a wild card. Weather in Europe is a wild card.

[Dinar]

34 minutes ago, Viking said:

The key to pricing for any commodity will be demand and supply. Looking out 12-24 months i am quite optimistic oil prices will be higher and probably much higher. Over the next year, absent a severe global recession, i expect oil to do ok ($75) to very good (+$100). So lots of volatility just like 2022.

 

Demand: 

- China ending zero covid should add +1 million barrels per day, but likely with a delay into Q2

- slowing global economies is a big unknown. Hard landing is only scenario where global demand actually goes down and i don’t think that is in the cards.

- US. will need to re-filling SPR at some point.

 

Supply

- capex across the globe remains muted so supply will increase but modestly.

- US will be ending releases of SPR at some point in 2023 = reduction of 800,000 to 1 million barrels per day. 

- Russia: given sanctions and much lower capex spend (lower in 2023 than during covid in 2020) i would expect supply from Russia to decline over time. No idea of cadence (how much how fast).

- OPEC: appears to want oil in $80-90 range. Given how tight oil market currently is OPEC might get their wish.

 

Ukraine war is a wild card. Weather in Europe is a wild card.

Yes, but what about Venezuela?   Can its production recover?  Could it go back from 400K barrels a day to 2MM?  

[SharperDingaan]

1 hour ago, mattee2264 said:

What are people's view on 2023 outlook for oil?

 

Most would expect volatility, but any numbers are little better than 3-month guesses.

As/when the US starts filling the SPR, the NA floor for heavy sour crude is supposedly USD 70-75 landed, and sourced primarily from Mexico, VZ, and Canada. If US/UK LNG exports are to double over winter, the SPR will also be filling with associated light crude from mostly southern US fields.  Ukraine severely damages a Russian oil/gas facility in a reprisal raid, and o/g prices materially spike upwards overnight.

 

A VLCC transports roughly 2M bbl/trip. It's not how long it takes to fill one up, it's more about how many VZ VLCC tankers get offloaded in 3 months starting Jan 01

 

SD

Edited December 20, 2022 by SharperDingaan