Market Movers
- The International Monetary Fund issued a dire warning to the oil-rich Gulf Arab states this week: Rein in your spending or risk exhausting all of your oil savings within the next fifteen years. Even powerhouse Saudi Arabia was on the list, along with gas-rich Qatar. Low oil prices, the rise of renewables, climate change, and slower oil demand growth all threaten the livelihood of the fossil-fuel dependent states, the IMF said - and no one is immune. The region’s total wealth, estimated at $2 trillion, will turn negative by 2034 if oil were to trade at $55 per barrel - a price that would see the region becoming a net borrower.
- Goldman Sachs delivered a sharp blow to Exxon this week, downgrading XOM.N from neutral to sell after the oil giant reported rather grim Q4 financial results. Exxon managed to miss analysts’ earnings estimates, which fell to just $5.6 billion - down from $6 billion a year ago. The disappointing results came on the back of lower oil and gas prices, as well as unfavorable downstream segments. Goldman’s downgrade sent Exxon stock tumbling. It is trading nearly $8 down over the last 30 days.
- The Russian government will grant energy companies tax incentives worth $231 billion to boost oil and gas production in the Arctic, after the passage of new legislation last week.
- Libya’s National Oil Company said this week that it has lost nearly $1 billion in oil revenue since the closure of its oil…
Market Movers
- The International Monetary Fund issued a dire warning to the oil-rich Gulf Arab states this week: Rein in your spending or risk exhausting all of your oil savings within the next fifteen years. Even powerhouse Saudi Arabia was on the list, along with gas-rich Qatar. Low oil prices, the rise of renewables, climate change, and slower oil demand growth all threaten the livelihood of the fossil-fuel dependent states, the IMF said - and no one is immune. The region’s total wealth, estimated at $2 trillion, will turn negative by 2034 if oil were to trade at $55 per barrel - a price that would see the region becoming a net borrower.
- Goldman Sachs delivered a sharp blow to Exxon this week, downgrading XOM.N from neutral to sell after the oil giant reported rather grim Q4 financial results. Exxon managed to miss analysts’ earnings estimates, which fell to just $5.6 billion - down from $6 billion a year ago. The disappointing results came on the back of lower oil and gas prices, as well as unfavorable downstream segments. Goldman’s downgrade sent Exxon stock tumbling. It is trading nearly $8 down over the last 30 days.
- The Russian government will grant energy companies tax incentives worth $231 billion to boost oil and gas production in the Arctic, after the passage of new legislation last week.
- Libya’s National Oil Company said this week that it has lost nearly $1 billion in oil revenue since the closure of its oil export facilities by General Haftar last month. With oil exports stymied and inventories rising, crude production has been decimated to below 200,000 bpd, down from more than 1.2 million bpd before the blockade. The loss of 1 million bpd of oil production, while profound for Libya, seems to have but a limited effect on global oil prices, with the coronavirus spooking the market and eating into China’s appetite for crude oil amid strict travel restrictions.
Discovery & Development
- Two of the UAE’s largest emirates have managed to make a significant gas discovery that could be the world’s largest in 15 years - and it could catapult the UAE into gas self-sufficiency by 2030 - a pre-existing goal that until now, had no specific plan attached to it. The find, known as the Jebel Ali reservoir, is positioned between the two large emirates. If the UAE is successful in finding enough gas to make it sufficient on its own, it could wean itself off of Qatar. The reservoir, the UAE said, holds 80 trillion cubic feet of gas - a quantity that not only could allow it to disentangle itself from Qatar but could supply its own country for the next three decades.
- Shell has committed to building its first large-scale solar project in Australia as part of a global push into the power business and cleaner energy. The 120-megawatt Gangarri project in central Queensland, expected to be finished next year, will supply electricity to its gas and power its trading business.
Deals, Mergers & Acquisitions
- Shell’s subsidiary Equilon Enterprises has concluded the $1.2bn divestment of the California Martinez Refinery to PBF Energy subsidiary PBF Holding. The Martinez high-conversion refinery produces premium gasoline, diesel and jet fuel.
- Brazilian state-run Petrobras and Chevron have begun the process of selling the Papa-Terra deep-water oilfield in Brazil’s Campos Basin. Petrobras owns a 62.5% stake in the project, while Chevron holds a 37.5% stake. The field began operations in 2013, and last year it produced 17,300 boepd. It’s a complex project as far as geology goes, but Petrobras says it will offer attractive terms. However, Brazil has not had a lot of success in attracting bidders to its recent auctions - a black eye for Brazil’s oil industry. The oil riches are plentiful, but the terms of the auctions have been pricey and complex, scaring away foreign oil companies.
Politics, Geopolitics & Conflict
- Six U.S. Citgo executives detained in Venezuela more than two years ago and released under house arrest in December 2019 were rounded up by Venezuela’s intelligence police just after opposition leader Juan Guaidó met with Trump in Washington. The six have been moved to prison, eliciting sharp criticism from the US, which has called for their immediate release.
- European Union diplomats have agreed to impose travel bans on two Turkish nationals and freeze their assets in retaliation to Turkey’s gas prospecting in disputed waters near Cyprus in the Mediterranean. The ban comes as Turkey announced it would continue exploring and drilling activities in the region amid an ongoing dispute with Greece and Cyprus.
- ISIS has claimed responsibility for blowing up a gas pipeline in Egypt's restive Sinai Peninsula, targeting Israeli gas. We expect an uptick in attacks of this nature with the launch of a major gas supply deal from Israel to Egypt. The attack did minimal damage and has not interrupted the gas flow between the two countries, damaging only a local gas line feeding a power station for homes and factories in central Sinai. In 2011 and 2012, this was a preferred type of lower-level target for ISIS.
- Trinidad and Tobago is canceling an agreement with Venezuela for the joint development of a natural gas field straddling the border due to the US sanctions on Venezuela's PDVSA. The Trinidad and Tobago government said that the current sanctions on Venezuela make it impossible to develop the joint gas project in the Loran-Manatee, located on the continental shelf of the Atlantic Ocean.
Q4 Financials
- Equinor reported earnings this week - a rare bright spot amid disappointing Q4 results in the oil industry. Equinor reported adjusted earnings of $3.55 billion, higher than analyst projections that had it pegged at $3.37 billion. Its production was up thanks to Johan Sverdrup, and it announced ambitious carbon reduction goals. But it’s not all good news. While exceeding analyst expectations, Equinor’s Q4 was down from Q4 2018 of $4.39 billion.
- Suncor Energy failed to live up to expectations when reporting its Q4, although year over year the results improved. Analysts had predicted a 50 cent earnings per share, but Suncor logged in just 38 cents. However, that’s up from 27 cents per share in Q4 2018. Production was down year over year in Q4, at 778,200 boepd. Total expenses for the quarter were up, from C$9,057 million to C$12,667 million.
- National Oilwell Varco reported Q4 this week as well in yet another disappointment for the industry. NOV reported earnings per share of 13 cents, missing analyst estimates of 16 cents. However, earnings per share a year ago were just 3 cents per share. Revenues came in at $2.28 billion for the quarter, beating analyst estimates, but below the $2.4 billion in revenues from a year ago.
