This Could Be A Gamechanger For Natural Gas In Europe

Supergiants like Exxon are focused on big offshore venues like Guyana and Namibia, leaving behind prime onshore natural gas assets in Europe - a region that is now desperate for affordable domestic resources that aren’t controlled by Russian Gazprom. 

Prior to Russia’s invasion of Ukraine, Gazprom was calling the energy shots in Germany. 

Those days are over. 

But Germany, the European Union’s biggest economy, still needs natural gas, even if this winter’s storage is nearly full. It’s not full as a result of domestic sources. Germany has traded one form of dependence for another. The filling up of winter storage has come at a high price tag thanks to expensive LNG imports, which are now at risk, as well, due to the Biden administration’s pause on new LNG export projects. At the height of the crisis, the European Union was paying some 40% more for U.S. LNG imports than it was for Russian piped gas. 

While Germany is busy building grandiose, high-dollar LNG receiving terminals, there is a far cheaper domestic alternative, and it’s found in assets abandoned by the supergiants who are off chasing bigger oil and gas dreams offshore. 

What’s too small for Exxon and others, could be of huge potential value to smaller industry players. 

That’s what MCF Energy (TSXV:MCF; OTC:MCFNF) is focusing on. We believe this is the first new public company providing investors with exposure to European natural gas since Russia invaded Ukraine. 

The big names behind MCF Energy have a clear track record in developing energy assets for top-dollar exits, and they see the timing as the most propitious yet. 

The Top People in the Industry for Europe’s Energy Reset

The company is no stranger to Europe’s energy industry. 

It was co-founded by oil and gas investor Ford Nicholson who has a track record of developing billion-dollar international assets and offloading them for top dollar to giants such as Exxon. In total, Ford has exited around $4.5 billion in energy assets in Europe and Asia.

In the 1990s, after the fall of the Soviet Union, Nicholson launched an energy company in Kazakhstan that was sold in 2006 for approximately $1.6 billion. In 2004, he co-founded a company that developed Europe’s largest heavy oilfield, in Albania (Bankers Petroleum Albania, Ltd) worth about $2.25 billion by 2011.

The story here is one that MCF Energy could be aiming to repeat in today’s Europe, which is in the middle of an energy reset worth trillions of dollars--and the biggest near-term prize is natural gas. 

With its world-class team, Bankers Petroleum saw production grow by over 2,000% between inception in 2004 and 2015. Only 13 months after launch, its enterprise value increased by over 1,000% before being acquired by Geo-Jade Petroleum in 2016. But the story didn’t end there. BNK Petroleum was spun out of Bankers Petroleum in 2008 to explore for shale gas in Europe and developing gas assets in the United States. Between 2009 and 2011, BNK saw a market valuation increase of over 4,000% and became one of the largest holders of oil and gas rights in Europe. 

In 2017, as Deputy Chairman, Nicholson sold another oil and gas company, InterOil, to Exxon for approximately $2.6 billion. 

Now he’s back with MCF Energy (TSXV:MCF; OTC:MCFNF), which has rapidly acquired a portfolio of attractive natural gas projects in Germany and Austria. They have just started drilling in one of their most prospective areas.

Ford is backed by an impressive executive team and board, which includes former NATO Supreme Allied Commander of Europe, General Wesley Clark, who is committed to helping ensure Europe’s energy security and independence from Russian oil and gas.

MCF’s CEO is James Hill, the geologist behind BNK Petroleum which delivered major wins for early investors. The executive chairman is Jay Park, a renowned international energy lawyer based in London and Istanbul. Park is also the former Chairman of Reconnaissance Energy

Africa, which is exploring one of the biggest emerging oil plays in the world, in the African frontier of Namibia. 

Finally, director Richard Wadsworth, also a former Bankers Petroleum figure, is a 30-year petroleum engineer veteran who most recently led and developed a 55,000 bopd oilfield in Iraq that has a development plan for 230,000 bopd. 

Key Assets Where Europe Needs It Most

The first drill, that will launch next week, is in Austria, at MCF Energy’s Welchau prospect near the Austrian Alps. This prospect is analogous to large anticline structures discovered in the Kurdistan Region of Iraq and the Italian Apennines. 

Welchau is adjacent to an up-dip from a discovery that intersected at a gas column of at least 400 meters, testing condensate rich for pipeline quality gas. A national gas pipeline network is only 18 kilometers away, making for a short, cheap tie-in option for getting product to domestic markets. 

MCF will earn a 25% interest for exploration drill costs estimated and capped at 2.55 million euros. 

In Germany, MCF Energy (TSXV:MCF; OTC:MCFNF) has licenses secured for six large-scale project areas in the country’s northern and southern regions, with the Company stating that drill testing set to launch immediately after the Austrian drill is aimed to be completed.

These key projects are the result of MCF Energy’s strategic 100% acquisition of Germany’s Genexco GmbH. Genexco was established in 2014 by some of Europe's largest energy producer insiders. It carefully assembled a portfolio of exploration and developments assets when few others were paying attention.

The Genexco acquisition gave MCF Energy four key assets that include previously drilled wells and two discoveries. MCF got its hands on Reudnitz, a proven, large-scale natural gas development that also contains an oil exploration target. They also acquired the Lech  concession, a 10-square-kilometer play with three previously drilled wells and two discoveries; Lech East, which directly offsets the discoverys on the Lech block is much larger,  around 100 square kilometers; and the Erlenwiese concession in the Rhein Graben which covers about 80 square kilometers.

Reudnitz, some 70 km southeast of Berlin, was initially discovered in 1964 with multi-zone hydrocarbon potential and proven phases of Helium (~0.2%), methane (14-20%) and like most fields in norther Germany high nitrogen content (>80%). 

According to the company, pilot test production will start this year.  After testing development is planned using cryogenic technology for helium and nitrogen sequestration. The Company announced an independent assessment best estimate (P50) at 118.7 billion cubic feet (BCF) of methane, 1.06 BCF of helium and 4.4 million barrels of oil. 

But the next drill, right after Austria, currently scheduled in March, will be MCF Energy’s Bavarian concession, Lech , where they will re-enter the Kinsau #1 well. Back in 1983, this same well tested at a maximum flow rate of 24 MMCFD. MCF’s 20% interest in this concession (through its Genexco acquisition) means it won’t be paying for the cost of drilling, which the Company estimates to be up to 5 million euros. 

The Kinsau #1 well, originally drilled by Mobil in the ‘80s, encountered a primary gas reservoir with associated condensate.

In a recent interview with Oilprice.com, James Hill said Mobil (now Exxon) abandoned the well because “back then, it probably wasn’t economic”.

Gas wasn’t worth anything, so they drilled another well to a deeper target and got about 180 barrels of oil a day out it.  This was followed by a third well which hit the oil/water contact.   They didn’t pursue it much further at the time because oil prices were at the bottom of the barrel. But for some reason, they shot 3D after they drilled these three wells, which we have then inherited the information from,” Hill said. 

MCF has spent a significant amount of time analyzing the cores from these wells, and Hill isn’t just eyeing recoverable gas with associated condensates; he’s also eyeing an oil zone, noting that in the ‘80s, using only a vertical well, as the technology of the day afforded, this well produced almost 200 bpd. MCF is studying going back in and recreating this with a horizontal well to stimulate a zone that they know contains hydrocarbons already.

The infrastructure is already in place, as well. There is a pipeline connection less than two kilometers away, and a local pipeline company that potentially will connect up at zero cost in return for dedicated gas for the pipeline.

Right next door, in southwest Bavaria, lies Lech East, a vast 100-square-kilometer expanse solely under the ownership of MCF Energy. The company is now preparing for an ambitious 4.6-million-euro exploration program.

For the Lech concessions, MCF has 120 square kilometers of 3D and it’s identified using the latest AI, machine learning analysis and multiple firm locations. If they hit, they are potentially looking at multiple development locations from each of these.

At MCF’s Erlenwiese concession, 2D seismic has been acquired and is being reprocessed, with 3D on the way, along with AI analysis. 

Beyond this, MCF Energy’s Genexco acquisition gives it a proprietary database for 10 additional project areas, including geological, seismic, and well data, which is being used as the basis of further acquisitions. 

Is This Western Europe’s Last Chance at Domestic Natural Gas?

Right now, Western Europe is importing expensive gas from all over the world. It’s even gone back to dirty coal in its quest to shed Russia’s weaponized energy. 

Europe requires a safe, domestic source of energy, and since we are in the midst of an energy transition, it will have to be cleaner than coal. Natural gas is the obvious bridge fuel. Renewables alone are up to capacity, which Europe learned when Russia invaded Ukraine and Western sanctions sent the continent’s energy supply into a state of crisis.  

The fallout from that crisis had cost the European Union an estimated $1 trillion as of December 2022, according to Bloomberg. 

The only medium-term answer for Europe is domestic natural gas, with the gaps filled in with LNG. 

Europe’s under-investment in natural gas has been laid bare, and now we are in the middle of a historical energy reset, with trillions of dollars up for grabs. Natural gas is being reclassified as green and sustainable, which is a boon for the development of MCF Energy’s assets. 

LNG imports at huge volumes are not sustainable, and once China’s post-COVID economic recovery is complete, Europe will find itself priced out. 

MCF Energy already has a large portfolio of high-quality gas projects in Europe, with significant prospects in Austria and Germany at various stages of testing and development. And their world-class team has a long-running track record of billion-dollar exit transactions.

With drilling planned in multiple projects this year and next, and Europe desperate for domestic natural gas, MCF (TSXV:MCF; OTC:MCFNF) is expecting to gain a fair amount of attention. “Once the hydrocarbons start lighting up all over the 3D seismic in Germany, in the middle of winter, it’s going to get people’s attention in a big way,” says Hill. 

Other companies to watch as the race for energy security heats up:

One of the world's largest energy corporations, Chevron’s (NYSE:CVX) operations span the globe. In the realm of natural gas, Chevron has been assertive, investing heavily in exploration, production, and distribution. Their stakes in major LNG projects, especially in Australia and Africa, speak of their ambition to dominate this sector.

Concurrently, oil is the bedrock of Chevron's operations. With vast reserves and a strong downstream presence, Chevron's commitment to efficient and sustainable oil production remains unwavering. Their emphasis on innovative technologies and sustainable practices is evident in their oil extraction and refining processes.

Investors eyeing Chevron are looking at a global giant. Their extensive natural gas endeavors, combined with the company's foundational strength in the oil sector, make them a compelling player in the energy industry.

Exxon Mobil’s (NYSE:XOM) influence on the global energy stage is undeniable. Their strategic moves in the natural gas sector, especially with their investments in LNG projects and shale gas explorations, position them as a leader in this segment.

Oil, a staple of Exxon's legacy, continues to drive a significant portion of their revenues. Their global reach, combined with consistent efforts towards enhancing extraction efficiencies and refining capabilities, underscores their commitment to remain a top-tier oil company.

For investors, Exxon Mobil offers a blend of tradition and innovation. Their aggressive forays into natural gas suggest a vision for the future, while their robust oil operations ensure steady returns.

ConocoPhillips (NYSE:COP), with its global footprint, has shown a balanced approach to energy. Their investments in natural gas, especially in North America and Asia, mirror the world's shifting energy consumption patterns. Their LNG operations and investments in shale reserves particularly stand out.

At the same time, oil exploration and production continue to be major pillars for ConocoPhillips. Their operations span multiple continents, and the emphasis on sustainable production methods ensures they remain leaders in the sector.

ConocoPhillips offers a combination of growth potential in natural gas and stability in oil, making it a well-rounded choice in the energy market.

Talos Energy Inc. (NYSE:TALO) is a notable player in the exploration and production sector, focusing on oil and natural gas in the United States Gulf of Mexico and offshore Mexico. As a relatively young company, Talos Energy has quickly established itself through strategic acquisitions and a strong focus on exploration. Their portfolio includes both operated and non-operated assets with an emphasis on environmental stewardship and innovative technological applications to enhance efficiency and safety in operations.

Talos Energy's commitment to sustainability and reducing environmental impact is evident in their operations and strategic partnerships. They are involved in carbon capture initiatives and continuously seek ways to leverage technology to minimize their ecological footprint. For investors, Talos represents an agile and forward-thinking company with a growing presence in a critical energy-producing region.

The company's strategic vision includes expanding its footprint through exploration successes and strategic partnerships. With a keen eye on the evolving energy landscape, Talos Energy aims to balance growth with environmental responsibility, making it an intriguing prospect for investors interested in the energy sector's future.

Cheniere Energy, Inc. (NYSE:LNG) stands as a pioneer in the liquefied natural gas (LNG) sector in the United States, operating one of the first LNG export facilities in the country. Cheniere's business model spans the LNG value chain, from production to export, enabling it to capitalize on the growing global demand for natural gas as a cleaner energy source. Their Sabine Pass and Corpus Christi facilities are at the heart of their operations, showcasing their capacity to respond to the increasing international LNG demand.

Cheniere's commitment to sustainability is reflected in its efforts to improve the environmental performance of its operations and its product's role in enabling transition to a lower-carbon future. The company's focus on safety, environmental stewardship, and community engagement underscores its role as a responsible energy provider.

Cheniere Energy offers a unique opportunity to engage with a leader in the LNG market, with a proven track record and a strategic position to benefit from the global shift towards cleaner energy sources. The company's pioneering status, combined with its ongoing expansion and operational excellence, positions it well for future growth and profitability in the energy transition era.

Spain's Repsol (OTC:REPYY) is no stranger to Europe's energy fluctuations. Their robust efforts in the natural gas domain, especially in the Iberian Peninsula, make them a major force in Europe's push towards cleaner fuels. With assets in major gas fields and a network of distribution facilities, they're poised to cater to rising demands.

Oil remains integral to Repsol's identity. With both offshore and onshore operations, their commitment to sustainable and efficient oil production is apparent. Their refining capabilities are among Europe's best, ensuring the production of high-quality petroleum products.

Repsol offers a balanced mix. Their endeavors in the natural gas sector showcase growth potential, while the longstanding oil operations highlight reliability and expertise.

Birchcliff Energy Ltd. (TSX:BIR) is a key player in the Canadian oil and natural gas sector, with a primary focus on high-quality assets in the Montney/Doig Resource Play. This strategic emphasis allows Birchcliff to harness the potential of one of North America's premier resource plays, contributing significantly to its production and reserve growth. The company's dedication to operational excellence and cost efficiency has positioned it as a low-cost producer, optimizing returns even in fluctuating market conditions.

Birchcliff's commitment to sustainability and responsible development is a cornerstone of its operations. The company actively implements practices aimed at reducing its environmental footprint, ensuring the safety of its operations, and fostering positive relationships within the communities it operates. For investors, Birchcliff represents a blend of growth potential and commitment to corporate responsibility, underpinned by its strategic asset base and operational strategy.

Looking ahead, Birchcliff Energy is focused on sustainable growth, leveraging its strong asset base and operational efficiencies to navigate the evolving energy landscape. With an eye towards enhancing shareholder value, the company is well-positioned to capitalize on opportunities within the Montney/Doig Resource Play, making it an attractive proposition for those invested in the Canadian energy sector.

Enerplus Corporation (TSX:ERF) operates as a diversified North American energy producer, with a portfolio that spans both Canada and the United States. The company's strategy focuses on organic production growth within its core areas, emphasizing operational efficiency and cost management. Enerplus is known for its high-quality light oil assets, particularly in the Bakken/Three Forks formations in North Dakota, which drive a significant portion of its production and revenue.

Enerplus's approach to business is marked by a commitment to sustainability and responsible resource development. The company invests in technologies and practices that minimize environmental impact and enhance the safety and efficiency of its operations. For investors, Enerplus offers a balance of growth and sustainability, supported by its strong asset portfolio and strategic focus on key resource plays.

As Enerplus looks to the future, the company aims to continue its trajectory of disciplined growth and operational excellence. With a robust balance sheet and a strategic emphasis on its core areas, Enerplus is poised to adapt and thrive in the dynamic energy market. The company's focus on value-driven growth and sustainability positions it as a compelling investment opportunity within the energy sector.

Vermilion Energy Inc. (TSX:VET) is recognized for its international portfolio of assets across North America, Europe, and Australia. The company's diversified approach allows it to tap into various markets, optimizing its production mix to leverage global pricing dynamics. Vermilion is committed to delivering strong operational and financial performance, underscored by its strategic acquisitions and efficient resource management.

The company places a high emphasis on environmental stewardship, community engagement, and safety. Vermilion's operations are guided by a commitment to minimizing its environmental impact and investing in the communities where it operates. This approach not only supports sustainable development but also enhances Vermilion's corporate reputation and stakeholder relationships.

Vermilion Energy aims to sustain its production and cash flow through disciplined capital investment and efficient operations. The company's diversified asset base provides a platform for resilience and growth, making Vermilion an attractive option for investors seeking exposure to the global energy sector with a focus on sustainability and community partnership.

MEG Energy Corp. (TSX:MEG) specializes in sustainable in situ oil sands development and production in Alberta, Canada. MEG Energy is focused on enhancing the efficiency and environmental performance of its operations through technological innovations, such as its proprietary HI-Q® technology, which aims to reduce costs and improve resource recovery rates. The company's commitment to responsible development is evident in its efforts to reduce greenhouse gas emissions and water use.

MEG Energy's strategy is centered on maximizing the value of its substantial oil sands assets while maintaining financial discipline and operational excellence. The company's robust production base, combined with its focus on cost reduction and operational improvements, positions MEG to generate significant free cash flow.

As MEG Energy looks towards the future, the company is well-positioned to continue its path of operational excellence and financial strength. With a clear focus on sustainable development and technology-driven efficiencies, MEG Energy presents a compelling investment opportunity for those looking to participate in the Canadian oil sands sector with a company that prioritizes environmental and economic sustainability.

Whitecap Resources Inc. (TSX:WCP) is an oil-weighted growth company that acquires and develops conventional oil and natural gas resources in the Western Canadian Sedimentary Basin. Whitecap's strategy revolves around creating sustainable shareholder returns by combining a disciplined acquisition strategy with low-decline assets and a strong emphasis on operational efficiencies and cost control.

The company is dedicated to responsible energy development, with initiatives aimed at reducing its carbon footprint and enhancing overall sustainability. Whitecap's commitment to environmental stewardship is complemented by its efforts to maintain strong governance practices and positive community relations.

By. Michael Kern