24th January 2024

Rise and shine. Here’s all you need to know today in oil, gas, and energy:

• ⚛️ Woes pile up at Hinkley Point

• 🤑 US M&A records smashed in 2023

• 🏦 More stimmy in China

• ➕ plus Trump’s win; India’s latent oil demand; bumper earnings for OFS; they’re coming for your coffee.

Here goes…

📈 THE NUMBERS

🗞️ WELL-HEADLINES

 🗽 North America

• M&A records smashed in 2023 - a cool $190bn was spent on US O&G M&A last year, according to Enverus. “Oil and gas is undergoing a historic consolidation wave comparable to what occurred in the late 1990s and early 2000s giving rise to the modern supermajors…After a decade of lowered investment in exploration and with the major U.S. shale plays largely defined, M&A has become the preferred tool to replace declining reserves and secure longevity in these companies’ profitable upstream businesses”, the research company said.

• Bumper earnings for OFS majors: Halliburton raised its dividend after beating profit expectations and Baker Hughes’ profits rose on international demand and LNG activity. After SLB’s strong results last week, it’s been a bumper earnings season for the major OFS so far as drilling activity picks up around the world.

• Crude stocks build, gasoline declines - crude inventories fell by ~6.7 mmbbls, compared with an expectation of a 3 mmbbls decline, while gasoline stocks spiked by 7.2 mmbbls, according to the API.

⛩️ Asia & Oceania

• “No certainty” on Woodside / Santos merger - Woodside’s CEO said there was still plenty of work to be done to reach an agreement and that a deal would only be signed if it was “value accretive for shareholders”. It sounds like there’s a bit of a divide over the size of the takeover premium that Woodside should pay.

• Petronas want more Suriname incentives - the Malaysian NOC has called on Suriname to improve the incentives for O&G players to develop fields. Various promising offshore discoveries have been made by international oil companies but the lack of infrastructure is deterring investment.

🦁 Africa

• Tullow turning to cashflow - the African-focused player said it has undergone a “major inflection point as we moved from a period of investment focus to delivery of free cash flow growth.” The ramp up of its Jubilee field in Ghana is set to help the indy turn a profit and pay down its large debt levels.

🗿 Central & South America

• BP sees Trinidad FID in 2025 - the company expects to greenlight the 3.5 tcf deepwater Calypso gas project next year. Trinidad's government is desperate to bring gas discoveries to market as it struggles with shortages due to dwindling production.

🌍 GEOPOLITICS & MACRO

• Trump heading for the nomination - he won the Hew Hampshire primary, beating his last remaining rival, Nikki Haley, all but securing the Republican presidential nomination. It’s a done deal. Trump vs Biden, here we go.

• China’s latest stimmy measures - the People’s Bank of China will cut banks’ reserve requirement ratio (RRR) by 0.5% in February to try and boost the country’s economy. The lower the RRR, which is like a bank’s cash safety buffer, the more money a bank can lend out to be used for various economic activities.

• Rystad bullish on oil prices - the energy consultancy thinks investors have been underestimating oil demand which may surprise to the upside again in 2024 after strong growth last year. Rystad noted large crude stock draws and sees a potentially tight market in 2024, even if OPEC+ cuts are unwound.

• India set to become the key driver of oil demand growth - urbanization, industrialisation and the growth of the middle class are driving a rapid increase in consumption of oil products in India, and by 2030 it will overtake China as the key source of global demand growth. India still consumes just 1/3rd of the amount of oil that China does on a per capita basis. Most of Africa is even further behind. There’s lots more oil demand to come…

💨 CARBON, CLIMATE, & OTHER ENERGY STUFF

• Troubled Hinkley Point costs jump higher - the long delayed and over budget nuclear power plant being built in the UK will now cost up to £46bn, an increase of a third compared to previous estimates, according to developer EDF. Completion is likely to be delayed by another 3 years to 2030. EDF said British regulations meant that thousands of changes needed to be made to the site, with 35% more steel and 25% more concrete needed than originally planned. Restarting Britain’s nuclear industry is proving to be one hell of a challenge.

• Total buying German batter developer - the French major is paying ~$100m for Kyon Energy which has 120MW in operational batter projects and another 2.5GW in the pipeline. Total, like other European majors, is on a strategic push to increase their exposure to downstream energy and power markets.

🛢️ BOTTOM OF THE BARREL

How to turn billions of people against the climate movement in one fell swoop:

These are the low crude stocks that Rystad is talking about:

👋 BEFORE YOU GO 

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Thanks for reading. Have a day out there. 🛢️🛢️