U.S. Sanctions on Venezuela Snap Back Into Place

Politics, Geopolitics & Conflict

At midnight on Thursday, the six-month temporary oil sanctions relief Washington granted Venezuela last October expired, and the Biden administration moved to reimpose those sanctions, which was met with backlash in Caracas, where the move was described as a U.S. attempt to "control and manipulate the Venezuelan oil industry". Nicolas Maduro was given every opportunity to comply with the conditions of the sanctions relief, yet, has continued to work to ban, arrest, or otherwise prevent the rise of a solid opposition candidate for elections scheduled for July 28. 

Instead of another draft call-up, Russia is believed to be gearing up to fill its ranks with more contract soldiers to avoid a domestic backlash following a major terrorist attack and devastating floods since Putin was re-elected in March.

The civil war in Sudan is intensifying once again, a year since it began, with the Sudanese Armed Forces failing to gain any real advantage over the paramilitary Rapid Support Forces, and vice versa. Fighting is now expanding into new areas and violence is at an all-time high. The venue is fast becoming a dangerous African proxy venue, with the West largely lining up behind the recognized government and Russia working its Wagner mercenaries and involving Libya (fuel smuggling to the Sudanese paramilitary forces), and the Central African Republic on the other side. 

Deals, Mergers & Acquisitions

EQT is selling a 40% interest in its non-operated natural gas assets in northeast Pennsylvania to Equinor USA. As part of the deal, EQT will get Equinor's onshore assets in the Appalachian basin and $500 million in cash. With natural gas prices now at three-year lows, producers' output and drilling activity have been affected. EQT's move to divest non-operated assets aligns with its strategy to reduce debt and enhance shareholder returns, with the company anticipating nearly $75 million in free cash flow from the acquired assets in 2025. The deal completes Equinor's complete divestment of all its operated positions onshore in the United States, reflecting the growing trend of prioritizing offshore operations.   

Uniper's H2Maasvlakte green hydrogen plant startup in Rotterdam, Netherlands, has been delayed due to power purchase agreement challenges and high grid fees. The startup is now expected in 2028 instead of 2026. The delay highlights hurdles in securing financing and navigating regulatory frameworks in renewable energy projects amidst market uncertainties. The plant represents a significant part of the energy transition.

Nigeria reached an agreement with Shell for the oil and gas company to supply gas to the proposed $3.8 billion Brass methanol facility. The agreement resolves a significant obstacle to the project's FID. Nigeria, possessing Africa's largest natural gas reserves, faces challenges in fully exploiting its resources due to capital constraints and infrastructure deficiencies. With the GSPA set to be executed next month, the project will secure a long-term gas supply from a Shell-operated joint venture. This development underscores Nigeria's pivotal role in the global gas industry and its efforts to leverage its abundant natural resources for economic development.

Discovery & Development

88 Energy Limited has announced a second light oil discovery from its Hickory-1 well in Alaska's North Slope, further advancing Project Phoenix. The flow test results revealed a peak estimated flow rate of roughly 50 bpd from the SMD-B reservoir, showcasing the potential for commercial production. The presence of light crude oil with little to no measurable gas indicates a promising low GoR production rate, enhancing the project's economic viability. With multiple oil samples recovered, the company anticipates further analysis to refine appraisal and development plans, aiming to capitalize on the reservoir's considerable resource potential. The proximity of Hickory-1 to existing infrastructure, including the Dalton Highway and Trans Alaska Pipeline, offers strategic advantages for future commercialization efforts.

VÃ¥r Energi has discovered oil in the Ringhorne Nord area, with preliminary estimates suggesting recoverable reserves of 13-23 million barrels. Considering a tieback to existing infrastructure indicates potential for cost-effective development. These discoveries are crucial for future area development and extending the lifetimes of the Balder and Ringhorne Øst fields. 

BP is now producing oil from its new ACE platform in the Caspian Sea off Azerbaijan, marking a significant addition to the ACG field development project. Situated between existing platforms, ACE operates in a water depth of 137 meters and is controlled from onshore. Initial production is anticipated to reach 24,000 bpd, with facilities designed to process up to 100,000 barrels per day. The ACE project, sanctioned in 2019, aims to produce 300 million barrels over its lifetime. This $6 billion investment aligns with the extended ACG production-sharing agreement, maximizing economic benefits for Azerbaijan and shareholders.

Earnings Beat

Canadian Natural Resources reported net earnings of $3.1 billion ($2.63 EPS) for Q1, more than doubling from $1.38 billion ($1.16 EPS) in Q1 2023. The company's average realized price per barrel surged to $93.54 in the first quarter of 2022-a 77% y/y increase. Quarterly free cash flow after dividends and net capital expenditures amounted to $3.4 million. Approximately $1.8 billion was returned to shareholders through dividends and share repurchases in the first quarter. CNRL raised its dividend by 28% to $0.75 per share in March.

Santos reported a sales revenue of $1.39 billion for the January-March period, marking a decline from both the previous year and the prior quarter. Production for the first quarter totaled 21.8 mmboe, slightly lower than the same period last year and the prior quarter. Despite a rise in the average realized LNG price to $12.68 per MMBtu compared to the previous quarter, it dropped from the same quarter in 2023.