Friday, February 28th, 2020
Happy Friday and welcome to Energized, your weekly look into the geopolitics, news, and happenings of energy markets.
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Now, onto this week’s issue.
Curated weekly oil and gas newsletter
Oil Prices and Markets
+ As of 1:30 pm on Friday, February 28th
Light, sweet crude (dollars per barrel): $44.74
Last Week: $53.38
Natural Gas (dollars per million British thermal units): $1.723
Last Week: $1.905
Rig count (United States): 790
Last Week: 791
Oil and Natural Gas Prices
“Crude has fallen about 16% for the week, the biggest weekly decline since December 2008.”
“Investors are increasingly worried as the virus has spread beyond its epicenter in China to more than 40 other countries.”
As of writing, the stock market is likely to have its worst week since the 2008 financial crisis, largely a result of the global toll the coronavirus is having.
The epidemic is interrupting any company with a global supply chain from retail to industrials, and of course, energy.
A massive supply paired with a sharp drop in short-term demand has pushed WTI so low that it’s now below the $45 mark. Natural gas is well below the $2.00 MMBtu mark as well. These drops have led to a massive sell-off in oil and gas stocks because many of them cannot be profitable with prices this low.
If you look anywhere on the internet you’ll see droves of articles commenting on this historic price drop. Below are some worth reading.
+ The perfect storm sends natural gas crashing – Oil Price
A discussion on natural gas inventories and its effect on prices.
+ ExxonMobil and the two Cs: coronavirus and climate change – Seeking Alpha
A deep dive into ExxonMobil’s business model and measuring its susceptibility to the coronavirus.
“Even if OPEC cuts production by 600,000 barrels a day, oil prices could remain weak until April, according to Kang Wu, head of Asia analytics at S&P Global Platts.”
“”“A lot of inventory build up right now needs to be absorbed in April,” he said. “In terms of prices, (the market) could still be weak in March and April, before it improves in the summer.””
+ Occidental Petroleum reports $965 million loss in 2019 – Houston Chronicle
“Oxy said it lost $965 million or $1.22 per share in 2019, compared with a $4.1 billion profit or $5.39 per share in the previous year. The company said it took on more than $1.3 billion in costs related to its $38 billion acquisition of Anadarko Petroleum last year.”
“Oxy has been slashing costs, laying off workers and selling assets to pay down its $38.5 billion debt and to maintain healthy dividend payments to skeptical investors after its high-profile acquisition of The Woodlands-based Anadarko in August.”
Selling off assets, laying off workers, it remains to be seen if it will be worth it in the end for Oxy. In the interim, the company is struggling to stay afloat.
+ LNG industry watching Tellurian as Trump visits India – Houston Chronicle
As discussed in Energized #29, Tellurian is a small LNG startup that has its eyes set on tapping into LNG opportunities in developing nations. March 31st was meant to be the company’s deadline to finalize its $2.5 billion supply deal with India’s Petronet LNG. That changed when Tellurian extended the deadline to May 31st to support Petronet’s review process.
Tellurian is in desperate need of the cash as investors have heavily sold off the stock, doubting the ability for Tellurian to succeed in the current price environment.
+ Kinder Morgan CEO offers new guidance on Permian Pass Pipeline – Houston Chronicle
“Houston pipeline operator Kinder Morgan plans to build the company’s third pipeline to move natural gas from the Permian Basin of West Texas to the Gulf Coast but the project may have to wait until more customers sign up.”
Kinder Morgan’s Gulf Coast Express Pipeline began operating in September. Construction continues for the Permian Highway Pipeline. The new Permian Pass Pipeline is expected to be the company’s third pipeline and is geared towards moving Permian gas to interstate pipelines, as well as current and expected LNG export terminals along the Gulf of Mexico. It’s Kinder Morgan’s pipelines that can help LNG players get the gas they need to export.
The Permian Pass Pipeline isn’t expected to be in-service until 2022 or later.
Each of Kinder Morgan’s three pipelines is expected to be able to move around 2 billion cubic feet per day (bcfd) of natural gas.
+ Biofuel could save oil companies as more transit goes electric – Houston Chronicle
Biofuel is the process of taking agriculture and food waste and turning it into fuel. It’s been a process that been around for a while but is finally getting more interest.
“After years stuck in the doldrums of the American energy industry, biofuels are getting new attention from both established oil companies and a wave of startups that are quickly expanding capacity to produce so-called advanced biofuels as states move to enact low-carbon fuel standards and industries become increasingly cognizant of their carbon footprints.”
The article quotes top oil executives about the advantages, from a chemistry perspective, of integrating biofuels for airplanes, cargo ships, and other large processes that require liquid fuels.
“Airlines such as Delta and manufacturers such as Boeing are already rushing to find new sources of biojet fuel, as they seek to lower their planes’ carbon footprint without the option of heavy lithium-ion batteries, which are impractical for flight.”
Environmental benefits paired with the potential for increased fuel efficiency are some of the topics addressed in this article.
Guyana is holding an election on Monday.
“It comes at a time of heightened global intrigue, given the International Monetary Fund (IMF) has projected the country will record the fastest rate of economic growth worldwide this year.”
“Late last month, Exxon Mobil estimated that total recoverable oil and gas resources in Guyana had climbed to more than 8 billion barrels.”
It is estimated that Guyana has “the highest amount of oil per person of any country in the world”.
Guyana’s GDP is expected to increase by 86% in 2020 since it’s the hottest new oil-producing country in Latin America.
““The country of about 750,000 people produces around 52,000 barrels per day at present — but, after 2025, production could be over 750,000 barrels per day. That’s one barrel per day for every Guyanese person.””
With crude prices where they are, Guyana’s economic trajectory may not be as smooth as it hopes. An economy tied to oil, commonly called a “petrostate” also means volatility based on prices. For Guyana, this also means close ties to Exxon and other large firms interested in its reserves.
Have a great weekend!
EKT Interactive Managing Editor