COVID-19 North Sea Recovery by end 2020

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Which hydrocarbon sources are the highest Greenhouse Gas emitters?

The main culprit we are familiar with as a Greenhouse Gas ("GHG") is Carbon Dioxide CO2. However Methane CH4 is a worse polluter with 25 times the potency as a GHG than CO2.

Below is a comparison of GHG emissions intensity by hydrocarbon source. This includes CO2 and CH4 emissions. Unsurprisingly, energy intensity processes needed to extract hydrocarbons are high on the emissions list.

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Total Makes a New Gas and Condensates Discovery in the North Sea

Total, Operator, and its partners have made an encouraging discovery with the Isabella 30/12d-11 well on the license P1820, located in the Central North Sea offshore UK, about 40 kms south of the Elgin-Franklin field and 170 kms east of Aberdeen.

The well was drilled in a water depth of about 80 meters and encountered 64 meters net pay of lean gas and condensate and high-quality light oil, in Upper Jurassic and Triassic sandstone reservoirs. The analysis of the data and results are ongoing to assess the discovered resources and to determine the appraisal program required to confirm commerciality.

'The initial results at Isabella are encouraging. This demonstrates that our exploration strategy in the North Sea to explore for value adding prospects nearby to our infrastructure is working.' commented Kevin McLachlan, Senior Vice President Exploration at Total.

The P1820 license is operated by Total with a 30% working interest, alongside Neptune Energy (50%), Ithaca Energy (10%) and the wholly owned subsidiary of Edison, Euroil Exploration (10%).

Source: https://www.total.com/en/media/news/press-releases/uk-total-makes-new-gas-and-condensates-discovery-north-sea

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Forcing regime change in Venezuela

US attempts to force regime change in Venezuela continues despite the huge humanitarian crisis it is causing.

The sanctions on the Maduro government have been absolutely crippling with oil output down from 2.5mmbbl/d down to sub-1mmbbl/d and falling - due to inability to invest to maintain production, striking PDVSA staff with pay uncertainty, inexperienced generals taking over and running over PDVSA as well and shrinking importer base for its crude. On this note, the situation is worsened with the US' latest sanctions of Russian Rosneft which was a key buyer of Venezuelab crude on 18th February. In the meantime, Rosneft has continued purchases from a PDVSA subsidiary under US granted waivers which expire in April 2020.

In 2019 the IMF forecasts the country's GDP fell by 35% and inflation increased by 200,000%. Clutching at straws, President Maduro has launched a new Bolivar currency and cryptocurrency called Petro although many doubt this will solve anything apart from being smoke and mirrors.

The longer the crisis continues, the stronger the support for the topple of Maduro, paving the way for the internationally-backed pro-democratic Juan Guaido to come to power.

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Lest we forget

With coverage of Iranian tensions diminishing and more recently overshadowed by COVID-19, we review the likely direction of travel in light of recent events.

On 23rd February 2020, the country held its 11th parliamentary elections with Conservatives securing all 30 parliamentary seats in Tehran and winning control overt most branches of the State. This will continue the Conservatives run in parliament but does set the stage for a more extreme Presedential candidate from the Iranian Revolutionary Guards to win in 2021.

The country has been drastically crippled by the reinstatement of US sanctions with oil production down to c.400mbbl/d from pre-sanction highs of >2mmbbl/d. The public resentment grows stronger both against the US but also its own government after the shooting down of the passenger jet at the beginning of this year. We could well see the path to an escalation in conflict with the US together with further refinement of its nuclear stockpile, although this will only be a real threat and take maximum effect in a tight oil market. With current weak trajectory of oil prices during COVID-19, the US reaction could very well be so what...?

At the same time, COVID-19 has claimed over 200 lives in Iran and question is whether we could see it seek assistance in the international arena if things worsen.

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Premier announces landmark acquisitions with BP and Dana for USD816 million

Premier announced the below this morning.

Premier is pleased to announce the proposed acquisitions of the Andrew Area and Shearwater assets from BP for US$625 million, and an additional 25 per cent. interest in the Premier operated Tolmount Area from Dana for US$191 million plus contingent payments of up to US$55 million (together the “Acquisitions”). Premier is also pleased to announce the proposed extension of its existing credit facilities to 30 November 2023.

In addition, Premier today provides a separate trading update ahead of its 2019 Full Year Results including the proposed farm-out of part of its Sea Lion and Tuna assets.

Rationale and benefits of the Acquisitions

• Add c.23 kboepd of cash generative production in 2019 with development upside; acquired assets forecast to generate over US$1 billion of free cash flow to end 2023
• Add 82 mmboe of reserves and contingent resources at an implied cost of less than US$10/boe
• Contribute to rising Group production out to 2024 with pro forma 2019 production in excess of 100 kboepd
• Add low cost, low carbon emission assets with combined opex of less than US$20/boe
• Accelerate the use of Premier’s US$4.2bn tax losses
• Materially strengthen Premier’s financial position
• Additional free cash flow accelerates debt reduction
• Significantly reduce forward covenant leverage ratio towards 1x by 2022
• Extension of existing, non-amortising facilities to late 2023

Asset highlights

• Andrew Area (50%-100% interests in 5 fields, operatorship): currently producing c.18 kboepd (net to BP) with material near term upside through further development of the Andrew Lower Cretaceous reservoir
• Shearwater (27.5% interest): significant producing and infrastructure hub, adding 25 mmboe of reserves and resources with incremental investment opportunities and tariff income
• Tolmount (25% interest): consolidates interest in existing high return development, which is on schedule to deliver first gas by end-2020, with significant upside following recent drilling success at Tolmount East

The proposed Acquisitions will be funded via a US$500m equity raise (net of expenses) which has been fully underwritten on a standby basis, existing cash resources and, if required, an Acquisition Bridge Facility of US$300 million. Premier expects that the equity raise will include both a placing and rights issue component with any shares issued under the placing qualifying for the subsequent pre-emptive rights issue. It expects to confirm the structure and terms in Q1 2020 following consultation with major shareholders.

RBC Capital Markets and Jefferies are acting as Joint Corporate Brokers and Joint Underwriters.

RBC Capital Markets is also acting as Financial Adviser and Sponsor.

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Cameron LNG Liquefaction-Export Facility Begins Production At Train 2

Press release as follows:

Sempra LNG, a subsidiary of Sempra Energy, today announced that Cameron LNG has begun producing liquefied natural gas (LNG) from the second liquefaction train of the export facility in Hackberry, Louisiana.  

"We are pleased to reach this important milestone in the development of the liquefaction facility," said Lisa Glatch, chief operating officer of Sempra LNG and board chair for Cameron LNG.

Train 2 and Train 3 are expected to commence commercial operations under Cameron LNG's tolling agreements in the first and third quarter of 2020, respectively. The facility's first liquefaction train started commercial operations in August 2019.

Phase 1 of the Cameron LNG export project includes the first three liquefaction trains that will enable the export of approximately 12 million tonnes per annum (Mtpa) of LNG, or approximately 1.7 billion cubic feet per day.

Cameron LNG is jointly owned by affiliates of Sempra LNG, Total, Mitsui & Co., Ltd., and Japan LNG Investment, LLC, a company jointly owned by Mitsubishi Corporation and Nippon Yusen Kabushiki Kaisha (NYK). Sempra Energy indirectly owns 50.2% of Cameron LNG.

Sempra Energy is also developing other LNG export projects in North America, including Cameron LNG Phase 2, previously authorized by the Federal Energy Regulatory Commission, which could include up to two additional liquefaction trains and up to two additional LNG storage tanks; Port Arthur LNG in Texas; and Energía Costa Azul (ECA) LNG Phase 1 and Phase 2 in Mexico.

Development of any of these LNG export projects is contingent upon obtaining binding customer commitments, completing the required commercial agreements, securing all necessary permits, obtaining financing, other factors, and reaching final investment decisions. In addition, the ability to successfully complete construction projects, such as the Cameron LNG export project, is subject to a number of risks and uncertainties.

Sempra LNG develops and builds natural gas liquefaction facilities and is pursuing the development of five strategically located LNG projects in North America with a goal of delivering 45 Mtpa of clean natural gas to the largest world markets.

See also:
Cameron LNG Commences Commercial Operations For Train 1 Of Liquefaction-Export Project

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