Iran Vows Revenge For Drone Attacks

Politics, Geopolitics & Conflict

The above-mentioned attack on Iran's Isfahan ministry of defense facility earlier this week was conducted using drone parts that Tehran claims were smuggled into Iran via the Kurdistan Region of Iraq by a Kurdish dissident group on behalf of a "foreign intelligence agency". This will give Iran another (easier) target for revenge, Iraqi Kurdistan, which it has already been targeting for its alleged role in spurring protests in Iran. A day later, Tehran officially identified the "foreign agent" as Israel, vowing revenge "whenever and wherever".

Another item of interest to keep an eye on in the coming months in relation to Russia's war on Ukraine is the status of the head of the Wagner Group-Russia's private mercenaries who have been playing a leading role on the Ukraine battlefield. There are some indications that Wagner chief Yevgeny Prighozin has overstepped and moves may be underway to sideline him to some extent. Prigozhin has been taking credit for Russia's minor victories on the battlefield, suggesting that his mercenaries are better organized and more adept than the Russian military, putting Prigozhin in direct competition with the Ministry of Defense.

Turkey continues to up the ante in its negotiations with the U.S. over F-16 fighter jets, which Washington has so far refused to supply due to Turkey's refusal to approve Sweden's NATO membership bid. Turkey is now warning the U.S. that if Washington failed to agree to the F-16 deal, there would be "a price to pay", which could include Russian alternatives. The F-16 deal is off the table for Washington because of Turkey's controversial purchase of a Russian air defense system.

Deals, Mergers & Acquisitions

Sources are saying that ADNOC thinks the gas business it will list this quarter could be valued at at least $50 billion which will surely attract a lot of attention after announcing its intention to list in November. ADNOC is banking on Europe's continued appetite for gas as it moves away from Russian dependence. The idea is for ADNOC to combine its LNG subsidiary with its gas processing arm into a single entity. Deliberations over its valuation are still ongoing, and the size of the offering has yet to be determined. The IPO could be listed as soon as February.

Ontario Power Generation (OPG), GE Hitachi Nuclear Energy, SNC-Lavalin, and Aecon have signed an agreement for a small modular reactor at OPG's Darlington site-it would be North America's first commercial contract for a grid-scale SMR. The same SMR is being reviewed by the Tennessee Valley Authority and is in collaboration with OPG to move the technology for SMR forward.

Mexico's Pemex has completed its $2B bond that will be used in large part to refinance some of its considerable debt-namely bonds that are set to mature this year. The coupon rate has not been disclosed, but Pemex said it was five times oversubscribed. Some sources suggest that it is a bond with a 10-year maturity. Pemex is estimated to hold around $100 billion in debt, in addition to posting losses of around $2.5B in Q3 2022.

Discovery & Development

The EU's thirst for gas is triggering investments in gas. BP has commenced drilling 2 exploration wells in the Caspian Sea in its search for gas while much of the world hope to shun Russian gas. Azerbaijan is for now continuing to import gas from both Iran and Russia to meet its own needs and to fulfill its export obligations. Its ambitions go beyond that, with hopes to take advantage of Europe's gas needs by doubling its gas exports to Europe within five years. The first well is below the existing Shah Deniz gas field and is expected to take a year to complete, and the second is below the Azeri-Chirag-Guneshli oil field and is expected to be completed in just three months.

Indonesia said it would auction off ten oil and gas working areas this year, including in the South China Sea, as it tries to increase crude oil production to 1 million bpd and gas production by 12,000 million standard cubic feet per day by the end of this decade. Indonesia has seen delays in some of its energy production plans, such as the Masela mega project and the Indonesia Deepwater Development.

Energy Earnings

Shell delivered blowout earnings for Q4 2022, posting nearly $10 billion in profits, bringing total 2022 profit to $42.3 billion. Of particular note, ??Notably, Shell delivered 194 LNG cargoes to the EU and UK (5x more than usual).

ConocoPhillips reported fourth-quarter 2022 earnings of $3.2 billion, or $2.61 per share, compared with fourth-quarter 2021 earnings of $2.6 billion, or $1.98 per share. Conoco missed earnings estimates by a penny.

Equinor will report earnings on Feb 8, coming after the Norwegian government announced that the country's wartime oil profits will be used to finance military and civilian aid to Ukraine.