Daily Energy Standup Episode #251 – China’s LNG Surge, US Sanctions Probe, and Anadarko Acquisition Unveiled

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China LNG deals come at an environmental cost

Top LNG importer China re-selling more cargoes, eyes trading gains

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Video Transcription edited for grammar. We disavow any errors unless they make us look better or smarter.

Michael Tanner: [00:00:14] What is going on? Everybody. Welcome to another edition of the Daily Energy News Beat Stand up here on this gorgeous Tuesday, November 14th, 2023. As always, I’m your humble correspondent, Michael Tanner, coming to you from an undisclosed location here in Dallas, Texas, joined by the executive producer of the show, the purveyor of the show and the director, publisher of the world’s greatest website, Energy News Beat Stuart Turley, my man. How are we doing today? [00:00:36][21.5]

Stuart Turley: [00:00:37] It’s a beautiful day in the neighborhood, just having a barrel of fun. [00:00:39][2.1]

Michael Tanner: [00:00:40] Absolutely. We have incredible show for you guys lined up, so we’ll waste no time and dive right in Our headlines for today. China LNG deal comes at an environmental cost. Well, as I would say, we’ll do so. We’ll see what is going on with these LNG deals in China. Of course, there’s going to be an environmental cost. The question is what will it be? And and all of that. Next up, top LNG importer China re selling more cargoes in ISE trading gains. So nice little to Chinese stories up there for us exclusive. Next up there’s an exclusive. According to Reuters, U.S. probes 30 ship managers for suspected Russian oil sanctions violation. Oh, this is a little spicy specifically considering this is going on in the U.S. those dual cover, everything that’s going on with those Russian sanctions. Next up, PG and E files extension to keep Diablo Canyon operational there in our favorite state of California. We’ve got a few California stuff coming up here considering we’re to be talking about China. But they look to keep Diablo Canyon operational. So Stu will cover what that looks like. He’ll then toss it over to me. I’ll quickly cover what happened in the overall markets today. Oil up a little bit, mainly off the back of a new forecast that came out of some big banks. So I’ll cover that. We do have a small little M&A deal. Macquarie sources who actually recently IPO’d about four weeks ago, is actually now picking up Paloma Partners, some Anadarko Basin and stuff, really targeting the Oswego formation. So we’ll do a quick overview of the prospectus and what that deal looks like and what to expect from Mark, and then we’ll let you guys get on out of here, get back to work and start your Tuesday. Appreciate everybody who’s checking us out. And before we dive into the show, as always, guys, stories and analysis you’re about to ears brought to you by world’s greatest website, EnergyNewsBeat.com. Check us out again. That’s www.energynewsbeat.com Stu and the team do an excellent job curating that making sure it up to speed with everything you need to know about the oil and gas business. Check us out Dashboard.EnergyNewsBeat.com. It’s our data news combo product We love that. Email the show [email protected] check out the description for all the links and articles that we are about to cover. I’m out of breathe tho Stu. Where do you want to begin? [00:02:43][123.6]

Stuart Turley: [00:02:44] Hey, let’s start with our buddies over there in China. China LNG deal comes at an environmental cost. Okay, this is kind of funny. Actually, Michael, just before I get into this, think about it. LNG is gas. Liquefaction of natural gas goes to a ship. That ship then chugs around the world and then gets declassified and then put into pipes. So let’s there’s a lot of transportation going on with that natural gas. Chinese gas importers have increased long term contracts with both Qatar and the U.S. by 50% since 2020 to both contracts 40 million tons per year. That is a lot of LNG traveling around the oceans. Here’s where it gets pretty wild. It shot up 72,000 and 800 million cubic meters. Wow. They are expected to contract LNG supply for more than 100 mtpa by 2026. That’s nuts. Let’s come in here. The CO2 emissions. This is a quote down here from a carbon brief report. China’s CO2 emissions are still increasing and we have returned to record levels. Really? It’s because all them coal plants that they’re putting in. [00:04:11][87.3]

Michael Tanner: [00:04:12] Exactly. I love this. This quote by LNG analyst Rob Rozanski. He’s from the Global Energy Monitor. I mean, this guy really gets paid to dig to give quotes like this. Switching from coal to natural gas probably improves local air quality, but gas fired power still produces harmful emissions linked to health impacts and premature deaths. I swear that guy got paid a salary to say that quote, That’s unbelievable. Sign me up still. [00:04:36][24.7]

Stuart Turley: [00:04:37] Oh, absolutely. And then factoring in the entire LNG lifecycle with methane gas leaks through the entire cycle, LNG chain and since methane is such a powerful greenhouse gas emitter, LNG has an outsized climate impact. That was from Rozanski. I got tickled at this one produce locally. You don’t have to ship around the world and become energy independent. Yep. [00:05:04][26.8]

Michael Tanner: [00:05:04] Now, I mean this I think is a good segway to this next article. China on now becoming the largest importer of LNG. It looks like they’re doing some crazy stuff with. [00:05:13][9.4]

Stuart Turley: [00:05:15] They’re doing the old shell game on this bad dog. Chinese customs data. There’s some big numbers in here. Michael shows that they reloaded. 617,000 metric tons of imported LNG during the nine months of this year compared with the 576,000 tons. And here’s where it gets funny. It comes down into here. We need to pull all the levers when it comes to managing market swings, says Zheng Yoi Bless you. Pieces galore, Pcci, global head of LNG, told Reuters. Here it comes down into here. China’s LNG receiving capacity is expected to expand 30% to nearly 182 million tonnes annually by 2025 from 139 million tonnes this year. Now here’s where it gets a little funny is that they’re trading gas shipments and I think that this is actually a let me find the quote numbers in here. South Korea has been taking 27% of China’s reloads and it’s even been going to Europe. I’m trying to find where that number it was buried in here. Anyway, China is getting the orders and then shipping them off somewhere else. [00:06:39][84.2]

Michael Tanner: [00:06:40] Well, because as as as Zheng Yao, the global head of LNG, pointed out, you know, this is using these financial derivatives and developing infrastructure like regasification terminals and underground storage, help offset market volatility and improve overall supply. So they’re doing things that, quite frankly, the U.S. should be doing, which was using their massive amount of infrastructure to obtain energy security at home. So as much as I’d love to hate China for this, they’re doing it in order to keep energy prices low at home. So. [00:07:12][31.4]

Stuart Turley: [00:07:12] Oh, absolutely. [00:07:13][0.3]

Michael Tanner: [00:07:13] You know, don’t hate the player, hate the game. [00:07:15][1.4]

Stuart Turley: [00:07:16] When they’re playing the game. Oh, that was air. Yeah. Okay, let’s go to the next one. Coming around the corner, we got our buddies over in Russia. Exclusive U.S. probes 30 ship managers for suspected Russian oil sanctions. Really, the Biden administration, the U.S. Treasury Department has sent notices to these ship managers. I don’t think anything is going to happen out of this. I got tickled out of it because the ship management companies in 30 countries were aimed at restricting oil revenues to Moscow as a punishment. They haven’t done anything to Iran. They haven’t done anything here. At last month, this imposed sanctions of owners of two tankers. They carried Russian oil priced above the cap. Okay, Michael, let me hold my breath for as long as this matters. Okay. Thank you very much. I mean, the only. [00:08:12][56.5]

Michael Tanner: [00:08:12] Thing I have to say here is is okay, I’m with you. We have these. We don’t enforce sanctions, but now we are trying to at least enforce them a little bit. I mean, your realistic was we don’t enforce sanctions. Why have sanctions? I’m with you. Sanctions don’t work. But if you’re going to have sanctions, you might as well enforce them at least are trying here. [00:08:31][18.6]

Stuart Turley: [00:08:31] And I love this the by enforcing a rely on ghost fleet of aging tankers, there’s no way they can touch that. My ghost fleet I mean, you know, it’s it’s not going to happen. Okay you shrinkage. There’s no way they can even enforce it. How do you how do you touch a ghost? Right. [00:08:53][21.6]

Michael Tanner: [00:08:53] So have you. There I am with you. If if if the way to cut this out is get rid of the Dark Fleet, then you’re in trouble because you have to be able to do that. It’s literally called the Dark Fleet for a reason. It operates somewhat off the grid. Now, you know, this article does point out that this is a routine step. They’ve really sent a notice that they’re intending to investigate. So it’s more a quest, a quest or and a request for information. So will anything happen out of this? I don’t know. Is could be more hand-waving to say, look, we’re even enforcing our sanctions and then they end up not know. [00:09:22][29.3]

Stuart Turley: [00:09:23] There’s no way they can. Anyway, let’s go to PG in Air Buddies over there, a PG and a PG, and he files an extension to keep Diablo Canyon operational. I find it funny that this was filed when President Z from China has come in. Oh, a miss producer. Can you fly in this thing? Here, let me get the ah, I found this on Twitter and I found it very interesting. This is from I want to give a Chuck Cohen a shout out and it’s before Z. And this is in San Francisco with the homeless. You know, you see the normal homeless after they ran through like goons beating the homeless and cleaning them up, just like in Princess Bride when they went, I need my goon squad to clean their. Everything they did. Okay, now, this is going to be the same thing, Michael. Here they are. They have lousy energy policies. President G shows up, and they’re going to add 20 years to Diablo Canyon. When Michael, you and I were covering it two years ago, they were shutting it down. All we have to do is get President z to tour the united states. Chicago would be cleaned up. New York would be cleaned up. This would be huge. I’m a G. Fan. All of a sudden, since he can get California cleaned up just by showing up this multiyear Diablo Canyon is just unbelievable. PG And he’s committed to answering the state’s call to ensure continued operation at the facility and safely delivered affordable, reliable and clean energy, said Patty Pope in a press release. She has to be our Person of the Week. [00:11:15][111.9]

Michael Tanner: [00:11:15] Yeah, I mean, you have to remember, for all of the flaws that we are forced down our throat from Diablo Canyon. Oh, it’s so bad. It’s so bad. It’s doing 10% of the state’s electrical supply is nothing to sneeze at. [00:11:27][11.4]

Stuart Turley: [00:11:27] No, it’s not. And it’s delivering less carbon than all of the oil that’s coming in from China’s wells out of the rainforest 24 hours a day, seven days a week, 365 rain or shine. I mean, I love me and you know. [00:11:46][19.4]

Michael Tanner: [00:11:47] You love it. And we do need we just need to take a tour of the United States. And it had me tickled. And then did you see I mean, not to sidetrack, but I saw a clip today of Newsom saying, well, hey, I know a lot of you think we just cleaned up the streets because President Gee is here and he’s like, wow. It’s true. It’s true. But we also did it because it was just he straight up just left. He admitted. [00:12:11][24.2]

Stuart Turley: [00:12:11] It. Well, did you do you remember when Biden made his first 15 minute drive by at the at the border? The border town was a wreck. They did the same thing. They brought the Princess Bride goon squad through, cleaned it up. You couldn’t find an illegal immigrant to save your life around the goon squad. And President Biden walked around with his bag. It depends under his arm, looking around, going, There’s no border crisis. Oh, just bring Biden and Z on a world tour around the U.S. and we would have no problem. [00:12:49][37.2]

Michael Tanner: [00:12:49] A world tour around the U.S.. I absolutely love it. Absolutely. Have you got anything else for us? [00:12:55][5.8]

Stuart Turley: [00:12:55] No. Biden would think he was on a world tour because he got out of the White House. [00:12:59][3.5]

Michael Tanner: [00:12:59] That’s a good point. We’ll go ahead and pivot, guys, to finance S&P 500, only down about a 10th of a percentage point. NASDAQ tumbles about 3/10 of a percentage point. Crude oil trades up about a you know, about a percent and a half sitting at 7852, mainly off the back of a new oil forecast. This comes at the hands of UBS, a UBS, FP, Eurasia and RBC Capital Markets. They really they come out and say that the OPEC leaders expected to extend its cuts by a million barrels, which were introduced last summer, and that will extend into next year. Here’s the quote from the bank leading it. Commerzbank Carsten Fritz Extension quote, now is very probable given that the oil market would likely otherwise. We’re seeing a high supply serve us in the first half of the year. Reason why I point this out is the fact that the reason why still we’re going to go ahead and actually keep these cuts okay, is because we’re now nervous that there’s going to be a, quote, supply surplus. I don’t know if that’s the bad signal before everything, but they’re saying there’s a supply shortage or a supply surplus. Where there goes that, where’s that hundred dollar oil prediction that if you’re telling me a million barrels a day production cut from OPEC is the only thing keeping us from an insane surplus? And where we are at now, still, I’m nervous. That makes me nervous. So right now they could be seeing something we’re not seeing. They could you know, again, there’s a lot that goes into this. I’d be remiss to say that that Saudi Energy minister Prince Abbes Salam insisted this week that global oil demand remains healthy, blaming Brant crude slide to $80 a barrel, a ploy by speculators. You know, he is right. World inventories still are tight. But this is interesting. This is the first time I’ve heard somebody come out and say the only reason we’re not in a surplus is because of these cuts. Spicy stew. [00:14:50][110.3]

Stuart Turley: [00:14:50] I’m telling you, I I’m not worried about it. I think we’re going to see high prices because demand, even with a global recession coming around the corner, demand will still be there. [00:15:01][11.1]

Michael Tanner: [00:15:02] Fair enough. Fair enough. I just I find it interesting that we’ve at least got a group of banks coming out and saying the opposite of what we would hear every day from Goldman Sachs. Well, quickly, covers do the the latest deal. I love the headline Mark Natural Resources adds a creative acquisition in Anadarko Basin. A creative quite possibly is my favorite I word. I’ll read you the headline here. Mock Natural Resources aside, in agreement with Paloma Partners, which is a and cap backed Port Co and they’ve gone ahead and acquired them for total cash consideration of about $815 million. Mark Natural Resources guys is led by Tom Ward, obviously of Chesapeake and the multiple different iterations out of that. Tom Ward has been I’m remember was the CEO and director over at Chesapeake for all those years back before Aubrey McClendon left. He then went over to Sandridge, also, then jumped over. Where else did he go? He went to another company. I forget it was Sandridge it then and another company. And now he’s here. Mark Resources. They actually just recently, about four, four or five weeks ago IPO’d and went ahead and turn their IPO cash into an eight $815 million position here by taking out plum partners they basically are acquiring about 32,000 body a day but 23% oil, 51% liquids, about 31.5 million barrels of oil equivalent. Again, you’re probably looking at 25% oil, 75% liquids even. They’ve got one rig currently running with six additional wells expected to be completed between the effect date and the closing day. 62,000 acres in the Anadarko Basin. Remember, that’s up there north of Oklahoma. Are middle Oklahoma kind of stretching into that that northern part of Texas There you’ve got scattered between Canadian Grady, McLane, Caddo, Custer, Dewey, Blaine and Kingfisher Counties are. Most of that, though is in Canadian and Grady counties. High drilling I love this do high return drilling locations over 12 years of operated inventory on a one rig program. Interesting. Interesting. One place. [00:17:01][118.8]

Stuart Turley: [00:17:01] Rig program. [00:17:01][0.4]

Michael Tanner: [00:17:03] Yeah. Well, here’s here’s my thing. Here’s my the interest that I think there’s two things about One, there’s no way they’ve got 12 years of operating inventory specifically because if you go look at their prospectus, they believe it’s all in the Oswego formation, where, trust me, I’ve got some experience with the Oswego formation. Not great. Trust me, guys. Oswego not great. Ace is also super interesting. MCC plans to fund the purchase with new debt financing. They received fully committed finance group Chambers Energy Management, EOC Partners, including Macquarie Investment Funds managed by Phalen, Capital Management, McGuire and other financials to build the 825 million security alone will close in conjunction with the closing of the acquisition. So not only do you IPO, you then decide to debt finance your Oswego formation purchase in Anadarko. You what I say to that good luck you and your 12 years of high return operated inventory. Haha good luck Stuart. I have to break this down a deal the week. This is going to have to be our deal of the week because I’d love to tear this apart. [00:18:02][59.7]

Stuart Turley: [00:18:03] Let’s do it. I’m ready. [00:18:04][1.0]

Michael Tanner: [00:18:04] I think. I think we know what’s next. Do but got to crack me up You know we we were remiss to say if they didn’t if they didn’t get it necessarily for a decent discount relative to PDP relative with their PDP was only about a 1.2 lever transaction. So, I mean, yes, they financed it all with debt, but you could argue they got it for an insanely cheap price and are really only financing about 20% of that out of pocket, considering you can back some of that with PDP adding more like 40%. But the matter is I don’t like the deal off the top of my head, but as we always do, we will dive into it more and you could check that out in some new content we have coming. Probably, Hopefully we can get one of these deal the weeks out. It’s not really going be deal the week. I love how we joke it’s deal the weeks probably like deal of the month but is to have one out by the end of November launch it beginning of December and then hopefully kind of roll one out each month as we go forward. We’re going to look at this one, Stu, because this one this one gets me tickled. What else should people be worried about? This week’s Do. [00:18:57][52.9]

Stuart Turley: [00:18:58] We need deal of the minute? Come on, man. Where’s where’s your sense of adventure? [00:19:01][3.4]

Michael Tanner: [00:19:02] I wish I had that time, Stu. What should people be scared about this week? [00:19:04][2.5]

Stuart Turley: [00:19:05] Well, Cap Tate’s coming up in a couple of weeks in a range. I’m trying to confirm three different people that are attending, and I can’t wait to have some. Why? I’ll even get up at two, 3 a.m. to have live productions going on. So it’ll be kind of fun. [00:19:23][17.9]

Michael Tanner: [00:19:24] I’m 28, man. What can we say? That is scary. I’ll give you that much. I’m 28 does scare me, but. Hi, guys. Well, with that, we’re going to let you get out of here, Get back to work, start your day. We appreciate everybody for checking us out. You’re on this gorgeous Tuesday, November 14th or 13th. Excuse me for Stuart Turley. I’m Michael Tanner. We’ll see you tomorrow, folks. [00:19:24][0.0][1130.0]

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