5th August 2024

Good morning team - this is Both Barrels. Your daily dose of all things oil, gas, and energy, without the hot air. Here’s what hit the wires today:

• 📉 Crude still sinking

• 🤡 Go woke, go broke

• 🚨 Middle East on high alert, again

• 🤢 Rough day for Wood Group shareholders

• ➕ plus Exxon’s record production; OPEC+ reconsidering cut unwind; first LNG cargo at Arctic LNG; output down at Libya’s largest oilfield; the world’s deepest offshore well.

Let’s take a look…

📈 THE NUMBERS

After a rough week last week oil prices have continued their slide today.

The sharp decline across equity and commodity markets is being driven by recession concerns (and good old herd mentality) as US government data hinted at a weakening jobs market.

Everybody stay calm…

🗞️ WELL-HEADLINES

 🗽 North America

• Chevron ditching California for Texas - the major is moving its HQ from California, where it has been based for over a century, citing “adversarial" policies towards oil & gas in the state. The company joins a growing list of corporations leaving California due to high taxes, crime, and a perceived hostile business environment. Go woke, go broke.

• Venture Global suing contractor for info leak - the LNG developer claims that a construction contractor, Kiewit, at its Calcasieu Pass LNG facility, gave thousands of pages of confidential information to Shell. Calcasieu Pass is the subject of a long-running supply contract dispute between Venture and cornerstone customers including Shell.

• Oxy completes CrownRock takeover - the $12.4bn cash and stock deal was announced last year.

• Kosmos hoping for Tiberius FID this year - the oil discovery in the US GoM holds an estimated gross resource of ~ 100 mmboe.

• Oil rigs flat - the Baker Hughes rig count showed that the oil rig fleet stuck at 482 last week, 43 lower than this time last year. Gas rigs fell by 3 to 98, a loss of 30 active gas rigs over the year.

• Some earnings highlights - Exxon achieves highest ever production (4.1 mmboe/d) and beats estimates; Chevron misses expectations on weaker refining margins.

🏰 Europe

• Wood Group’s shares sink 40% as Sidara ditches takeover - Sidara has tried to buy Wood Group 4 times, and been rejected on each occasion over value. But now the company is walking away from its latest offer, citing geopolitical risks and uncertainty in the financial markets. Not a good day (or indeed few years) to be a Wood Group shareholder.

• Arctic LNG loads first cargo onto “dark fleet” tanker - Russia’s sanctioned mega LNG project, which was abandoned by its international investors and offtakers earlier this year, appears to be loading its first cargo onto an unidentified tanker, according to satellite images. Russia has been turning to "dark fleets” where the ships’ tracking devices are turned off, to try and avoid Western sanctions.

🦁 Africa

• Libya’s largest oilfield in partial shutdown - details are sketchy but it seems like the 300 kb/d El Sharara field has so far lost ~50 kb/d of production. The field has been plagued by above-ground disruption for years as the country struggles to find any semblance of stability.

• BP targets Q4 for first gas from GTA - the floating LNG facility at the offshore gas field in Mauritania and Senegal has been troubled by delays and cost overruns.

🗿 Central & South America

• The world’s deepest offshore oil well - Oxy and Ecopetrol are set to the drill the well offshore Colombia in water depths of 3,900 meters. For context, that’s about 10x the height of the Empire State Building. I’ve said it before and I’ll say it again, the engineering magic in this sector is second to none. Offshore drilling is poised for a renaissance as energy security comes back into focus and growth slows in the US shale patch.

• Not so fast for the Vaca Muerta - potential investors into Argentina’s shale patch are holding off for longer than expected while they wait for the impact of President Javier Milei’s reforms to take effect.

🌍 GEOPOLITICS & MACRO

• Middle East on high alert, again - the US is sending additional warships and fighter jets to the Middle East as Iran ups its threats against Israel following the assassination of Hamas leader in Iran and a key commander of the Lebanese militant group Hezbollah. The US, UK, France and others have asked their citizens to leave Lebanon while many troops in the region have been placed on high alert.

• OPEC+ re-evaluating cuts as market weakens - the group had been planning to start gradually unwinding its production cuts as of Q4 this year but unstable oil prices may be giving them pause for thought. Given that Saudi needs at least $80/bbl to balance its bloated budget (some estimates say >$100/bbl), I think a change of plan is highly likely if oil prices stick around the $70-$80 range.

💨 CARBON, CLIMATE, & OTHER ENERGY STUFF

• Slow news day on this front. As you were.

🛢️ BOTTOM OF THE BARREL

👋 BEFORE YOU GO 

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

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