As we welcome April, it’s important to reflect on the energy landscape of the previous month. Our Enverus Intelligence® | Research (EIR) team has examined critical trends and developments, providing insightful analyst takes that can inform your business decisions. By staying informed, you’ll be in a strong position to capitalize on upcoming energy opportunities in 2023. Read on and discover the latest energy market insights.
How solar and wind capacity factors can slash energy costs by more than 20% (March 30, 2023)
Our estimates suggest that just a 5% increase in solar and wind capacity factors could result in a 25% and 22% reduction in levelized cost of energy (LCOE), respectively. By using our proprietary project tracking database and scrutinizing more than 3,000 operational solar and wind projects, we derived insight into which design decisions developers need to prioritize to maximize outperformance. For example, choosing the optimal solar inverter could boost the capacity factor by around 6%.
Montney Assets acquisition by CPG: A new frontier in energy investment (March 29, 2023)
The acquisition of SDE’s Gold Creek and Karr area Montney assets by CPG adds a second core asset to the company’s portfolio that compliments its nearby Duvernay position and significantly extends core inventory. CPG paid $1.2 billion, which we calculate works out to $0.8 million each for approximately 520 net risked locations on the asset. That is less than what WCP paid for XOM’s position ($1.5 million per location) or what Hammerhead was valued at in its SPAC deal ($1.3 million per location) in two nearby deals in 2022. CPG says it can hold production flat with approximately 25 wells per year, giving it more than 20-years of inventory life on the asset. For SDE, the sale is a monetization of a position it built at a low cost during an earlier stage of delineation in the play with capital returned to shareholders. The company will likely look to replicate that success with new spinout Logan Energy, which will hold SDE’s less proven Montney properties (we estimate approximately 160 net locations) while legacy SDE will focus on generating dividends for shareholders from its more mature Deep Basin gas assets.
Behind the scenes: The risks and rewards of developing the world-class Zama oilfield (March 24, 2023)
TALO, Wintershall Dea, Harbour Energy and operator PEMEX submitted a development plan for the world-class Zama oilfield offshore Mexico on March 23. TALO’s stock outperformed peers’ on the news, which injects important momentum into the field’s slow-moving approval process. But the project remains susceptible to significant above-ground risks and a harsh PSC regime. Due to a high government take, we estimate a development-forward breakeven of $52/bbl.
Silicon Valley Bank’s $2.25B sale sends shockwaves through crude markets (March 16, 2023)
A week ago today, Silicon Valley Bank (SVB) announced it would sell $2.25 billion in common equity and preferred convertible stock to make up for losses from investments in long-term bonds. In the 72 hours following, the collapse of SVB created credit instability fears driving front-month Brent prices down almost $10/bbl. EIR believes this is temporary turbulence on the flight to $100/bbl Brent in the back half of 2023. We reaffirm our call assuming Russian supply falls to 9.6 MMbbl/d by the end of the year, global demand grows by 1.5 MMbbl/d and U.S. supply is limited to 600 Mbbl/d of growth E/E in 2023. To figure out what direction Brent takes from here, weekly crude/product inventory reports, signals from U.S. Federal Reserve Board and high frequency economic indicators will be key to follow.
Shale’s last stand: Operators struggle to optimize remaining inventory (March 13, 2023)
The shale revolution is coming to an end after more than 15 years, as the industry runs out of repeatable low-cost inventory. As such, North American production is expected to peak by the end of the decade. In the short term, operators are focusing on optimizing their remaining inventory to avoid the degradation that comes with child wells. In the longer term, the future of shale looks different with consolidation likely leading to less companies executing on the development of remaining inventory. The global need for oil and gas remains significant, and a swift transition to a low carbon future seems much less feasible than it did 18 months ago, without the necessary long-term infrastructure investments. Government regulations currently driving the transition are detached from the reality of what it takes to achieve a net-zero energy economy, and operators are now left to decide whether to double down on expensive second-tier inventory or find the next basin outside of NAM.
Gasoline cars left in the dust as China’s electric vehicle market booms (March 13, 2023)
China’s electric vehicle sales continue accelerate at a torrid pace. For the first two months of 2023, new energy vehicle (NEV) sales are up 23% year-over-year despite expiring incentives. Conversely, gasoline powered car sales are down 25% over the same period. February NEV sales made up 32% of total vehicle sales in the country. Overall, we expect electric vehicle sales to continue to accelerate, with EV sales alone (excluding hybrids) to make up 30% of total 2023 Chinese passenger vehicle sales (up from 22% in 2022), as stated in our latest EIR report. Total Chinese NEV sales will exceed 9 million in 2023, which would be approximately 14% of 2022 global vehicle sales.
A full tank: What Europe’s high gas storage means for consumers (March 9, 2023)
European natural gas storage currently stands at 58% full versus the five-year average of 36%. If the EU matches the injection pace from last year, EIR projects European storage to reach maximum capacity by mid-July. On the flip side, if EU’s injection pace matches the lowest injections in the past six years, 2021’s pace, they would still reach max capacity by October.
Why the oil forward curve may not be a reliable predictor of Brent prices (March 7, 2023)
Some argue the oil forward curve is good predictor of future Brent prices, not forecasts. We think not. Our analysis shows EIR forecasts, or consensus forecasts, are better at giving future oil price guidance. That said, no forecast secures revenue or expenses, whereas the Vegas-like “strip” is transparent, tradeable and timely. Armed with a bullish EIR view, we believe risk managers should embrace costless collars and turn away from swaps, to avoid cringeworthy mark-to-market losses.
World-class rock: CapturePoint’s storage potential in Louisiana (March 1, 2023)
We believe CapturePoint’s recent FID cements the operator as a leader in the U.S. CCS arena. Located northwest of the southern Louisiana core, our analysis shows the position of CapturePoint’s first storage site still sits above world-class rock, with storage potential in the range of 1.2 Mt/section at a 1% efficiency factor. Should the operator secure its first Class VI well permit by next year, with its second shortly behind, we believe it will drop the regulatory risk and subsequently attract several emitters. With co-developer Energy Transfer’s FID expected later this year, the CCS hub model is beginning to take shape in Louisiana. We believe the joint development of these CCS programs will be essential to amplify the chances of project success while minimizing operational risks.
Make better business decisions with EIR’s energy expertise
At Enverus Intelligence® | Research (EIR), we know that keeping up with the fast-paced energy sector is crucial for making informed business decisions. That’s why we encourage you to follow us on LinkedIn for the latest updates and insights on the energy outlook. Count on EIR to equip you with the guidance you need to navigate the constantly changing energy landscape.
About Enverus Intelligence Research
Enverus Intelligence Research, Inc. is a subsidiary of Enverus and publishes energy-sector research that focuses on the oil and natural gas industries and broader energy topics including publicly traded and privately held oil, gas, midstream and other energy industry companies, basin studies (including characteristics, activity, infrastructure, etc.), commodity pricing forecasts, global macroeconomics and geopolitical matters. Enverus Intelligence Research, Inc. is registered with the U.S. Securities and Exchange Commission as a foreign investment adviser.