Blog – Page 226 – Pecos Operating

Energy News Beat

The West’s sanctions proposals against Russia are becoming increasingly absurd, President Vladimir Putin said on Wednesday during a televised government meeting on economic issues.

Earlier this month, Lithuania suggested including an embargo on buttons, nails, and sewing appliances in the 12th round of EU sanctions against Russia, which is currently being debated by the bloc’s member states.

Last week, the Australian government added tools used to drill, press, stamp, punch or press, as well as television and sound recorders to a broader export ban against Russia that also includes boilers, machinery, and mechanical appliances.

“Our partners are now taking their fantasies to the absurd, banning the import of screwdrivers, needles, and so on to Russia,” Putin said. “Well, the less junk, the better. There is less chance that bed bugs will be exported to us from major European cities,” he added, referring to the recent infestation in some EU countries.

According to the Russian president, the West has so far adopted countless sanctions packages, but has “practically become entangled” in its own restrictions.

“They tried to punish us, but in the end, as we see… they hit their own economies,” Putin stated.

The president added that he expects sanctions to be intensified, while calling on the Russian government to be ready for potential acts of sabotage on important infrastructure facilities.

Putin warned that acts similar to the destruction the Nord Stream natural gas pipelines could be taken once sanctions options are exhausted.

For more stories on economy & finance visit RT’s business section

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Oil Price

The U.S. gasoline crack spread – a leading refining profitability indicator – slumped in October to the lowest level in nearly three years amid seasonally weaker American gasoline demand and the switch to the cheaper winter-grade gasoline, the Energy Information Administration said on Wednesday.

Source: Reuters

In October, the crack spread, or the difference between the price of a wholesale petroleum product and the crude oil price, averaged 16 cents per gallon, the lowest monthly average since December 2020.

The crack spread between New York Harbor RBOB and Brent Crude hit a summer high on July 27 at 94 cents per gallon. The spread has since dropped for two consecutive months in August and September, ending the month of September at 17 cents/gal, per EIA data.

The decline continued in October, due to lower gasoline consumption and above-average U.S. gasoline production.

EIA estimates suggest that U.S. refinery runs this year were above average in September and were near average in October.

“Despite the low crack spreads, refineries have continued to produce gasoline at an average rate because the other products they produce alongside gasoline have remained sufficiently profitable to continue gasoline production despite low demand,” the administration said.

Meanwhile, the national average price of gasoline has dropped to the lowest since March, with further potential to drop by up to 20 cents by the end of the year, fuel savings platform GasBuddy said on Tuesday.

Seasonally weaker demand and the switch to cheaper winter-blend gasoline are pushing U.S. gasoline prices lower despite the potential for further spikes in case of a widening Hamas-Israel conflict in the Middle East.

According to GasBuddy, “At $3.44 per gallon, the national average price of gas now stands at its lowest since March 28, and is projected to drop another 10 to 20 cents by the end of the year, while drivers in 33 states can now find at least one gas station at $2.99/gal or lower.”

By Charles Kennedy for Oilprice.com

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Oil and Gas 360

Calgary, Alberta–(Newsfile Corp. – October 31, 2023) – Pine Cliff Energy Ltd. (TSX: PNE) (OTCQX: PIFYF) (“Pine Cliff” or the “Company“) is pleased to announce that it has entered into a definitive agreement (the “Agreement“) to offer to acquire all of the issued and outstanding common shares (the “Common Shares“) of Certus Oil & Gas Inc (“Certus“), a privately held oil and natural gas producer, for a cash purchase price of $100.0 million (the “Offer“).

The Offer will be funded through a combination of available cash and a new secured term debt facility (“Term Debt Facility“). The board of directors of both Pine Cliff and Certus have unanimously approved the Offer. The Offer is expected to close by the end of 2023, subject to certain customary conditions and regulatory approvals.

Acquisition Highlights

Pine Cliff expects the proposed acquisition of Certus (the “Acquisition”) will have the following benefits:

Expands Pine Cliff’s core operations into the Caroline area of Western-Central Alberta, adding production (September 2023) of approximately 5,300 Boe/d1 (49% liquids).
Adds an initially identified 31 gross (15.4 net) deep basin liquids rich natural gas and oil development locations2 that are expected to compete for capital in Pine Cliff’s annual spending program for the next several years.
Strengthens Pine Cliff’s operating netback3 through increased exposure to crude oil and natural gas liquids (“NGLs“) production.
Before-tax PDP4 reserve value of the acquired reserves at a 10% discount rate is $112.5 million based on externally estimated PDP reserves of 12.3 MMBoe5 effective July 1, 2023.
Based on September 2023 average production, the Certus assets are expected to generate net operating income6 of approximately $38.4 million in 2024 at strip pricing.
Pine Cliff’s pro forma base production decline rate is expected to remain less than 10%, ranking among the lowest for publicly traded Canadian upstream oil and gas companies.

Strategic Rationale

Since inception, Pine Cliff has grown by acquiring strategic, low decline assets through an ongoing commitment to providing reliable returns to its shareholders. The Acquisition is consistent with this strategy and is expected to improve Pine Cliff’s operating netback at current commodity prices by increasing its liquids exposure while adding future development locations that offer attractive economic returns. Funding the Acquisition without equity will result in accretion to per share metrics and is expected to increase the free funds flow3 generated by Pine Cliff at current commodity prices.

Since introducing a dividend in June 2022, Pine Cliff’s conservative balance sheet has helped backstop the monthly dividend payment, with cumulative dividends paid from adjusted funds flow3. The Company will continue with a prudent hedging program to support the dividend and debt repayment post-acquisition. Pine Cliff expects to issue annual guidance in the first quarter of 2024.

New Term Debt Facility

Pine Cliff has entered into a non-binding term sheet for a three-year Term Debt Facility provided by a private institutional investor (the “Lender“). The Company expects to enter into a binding commitment with the Lender concurrent with the closing of the Offer. The Term Debt Facility will be subject to interest of Canadian Prime Rate plus 3.65 percent and includes scheduled amortization with options for prepayment after twelve months.

Pine Cliff will maintain its current demand operating loan of $8.0 million with a Canadian chartered bank as part of its normal course of business.

Dividend

Pine Cliff has declared a regular monthly dividend of $0.01083 per common share to be paid November 30, 2023, to shareholders of record on November 15, 2023. The dividend is designated as an eligible dividend for Canadian income tax purposes.

Transaction Details

Under the Agreement, Pine Cliff has agreed to mail the Offer and accompanying take-over bid circular, notice of guaranteed delivery and letters of transmittal (collectively, the “Offer Documents“) to all registered shareholders of Certus and other persons who are entitled to receive these documents under applicable law. Concurrently, the board of directors of Certus will mail to shareholders a directors’ circular containing the unanimous recommendation of the board that shareholders accept and tender their Common Shares to the Offer.

In connection with the Offer, certain shareholders of Certus who collectively hold approximately 51% of the Common Shares, have entered into lock-up agreements with Pine Cliff agreeing to, among other things, deposit their Common Shares under the Offer.

As specified in further detail in the Offer Documents, the Agreement contains customary deal protections in favour of Pine Cliff for a transaction of this kind. Full details of the Offer will be set out in Offer Documents which will be mailed to shareholders and filed on Pine Cliff’s SEDAR+ profile at www.sedarplus.ca.

Advisors

Haywood Securities Inc and Paradigm Capital are both acting as financial advisors to Pine Cliff with respect to the Offer.

TPH&Co, the energy business of Perella Weinberg Partners, is acting as the strategic advisor to Pine Cliff with respect to the Offer.

Stifel Canada is acting as strategic advisor to Certus with respect to the Offer.

About Pine Cliff Energy

Pine Cliff is a natural gas focused company with a long-term view of creating shareholder value. Further information relating to Pine Cliff may be found on www.sedarplus.ca as well as on Pine Cliff’s website at www.pinecliffenergy.com.

Reader Advisories

Currency

All amounts in this news release are stated in Canadian dollars unless otherwise specified.

Notes to the Press Release

September estimated production comprised of approximately 51% conventional natural gas, 26% NGLs and 23% light and medium crude oil and condensate. Annual decline rate is estimated at 16%.
Estimated by Pine Cliff based on internal review. There is no certainty that Pine Cliff will drill all unbooked drilling locations and if drilled there is no certainty that such locations will result in additional oil and natural gas reserves, resources or production. The drilling locations on which Pine Cliff will actually drill wells, including the number and timing thereof is ultimately dependent upon the availability of funding, regulatory approvals, seasonal restrictions, oil and natural gas prices, costs, actual drilling results, additional reservoir information that is obtained and other factors.
See Non-GAAP Measures.
Reserves have been externally estimated by independent reserve evaluators, McDaniel & Associate Consultants Ltd. in accordance with National Instrument 51-101 – Standards of Disclosure of Oil and Gas Activities and the Canada Oil and Gas Evaluation Handbook with an effective date July 1, 2023 using the average forecast price and costs of McDaniel & Associate Consultants Ltd., GLJ Ltd and Sproule Associated Ltd. as of April 1, 2023 before income taxes.
July 1, 2023 PDP Reserves comprised of 49% conventional natural gas, 34% NGLs, 15% light and medium crude oil and 2% condensate.
Net operating income is calculated using expected revenue $77.9 million less royalties of $11.8 million, transportation costs of $2.5 million and operating expenses of $25.2 million, based on annualized September production of 5,304 Boe/d (51% conventional natural gas, 26% NGL’s and 23% light and medium crude oil and condensate) at October 26, 2023 strip prices of $102.60/Bbl Edmonton light oil, $3.01/mcf AECO natural gas and US$0.725/C$.

Reserves Data

The reserves data set forth in this news release is based on estimates prepared by McDaniel & Associates in accordance with National Instrument 51-101 – Standards of Disclosure of Oil and Gas Activities and the Canada Oil and Gas Evaluation Handbook with an effective date July 1, 2023. There are numerous uncertainties inherent in estimating quantities of crude oil, natural gas and NGL reserves and the future cash flows attributed to such reserves. The reserve and associated cash flow information set forth above are estimates only. In general, estimates of economically recoverable crude oil, natural gas and NGL reserves and the future net cash flows therefrom are based upon a number of variable factors and assumptions, such as historical production from the properties, production rates, ultimate reserve recovery, timing and amount of capital expenditures, marketability of oil and natural gas, royalty rates, the assumed effects of regulation by governmental agencies and future operating costs, all of which may vary materially. For those reasons, estimates of the economically recoverable crude oil, NGL and natural gas reserves attributable to any particular group of properties, classification of such reserves based on risk of recovery and estimates of future net revenues associated with reserves prepared by different engineers, or by the same engineers at different times, may vary. Pine Cliff’s actual production, revenues, taxes and development and operating expenditures with respect to its reserves will vary from estimates thereof and such variations could be material.

BOE Equivalency

Natural gas liquids and oil volumes are recorded in barrels of oil (“Bbl“) and are converted to a thousand cubic feet equivalent (“Mcfe“) using a ratio of one (1) Bbl to six (6) thousand cubic feet. Natural gas volumes recorded in thousand cubic feet (“Mcf“) are converted to barrels of oil equivalent (“Boe“) using the ratio of six (6) thousand cubic feet to one (1) Bbl. This conversion ratio is based on energy equivalence primarily at the burner tip and does not represent a value equivalency at the wellhead. The terms Boe or Mcfe may be misleading, particularly if used in isolation.

Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of oil, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.

Non-GAAP and Other Financial Measures

This news release uses the terms “adjusted funds flow”, “free funds flow”, “net operating income” and “operating netback” which are not recognized under International Financial Reporting Standards (“IFRS“) and may not be comparable to similar measures presented by other companies. These measures should not be considered as an alternative to, or more meaningful than, IFRS measures including net income and cash provided by operating activities. The Company uses these measures to evaluate its performance, leverage and liquidity. Adjusted funds flow is a non-Generally Accepted Accounting Principles (“non-GAAP“) measure that represents the total of funds provided by operating activities, before adjusting for changes in non-cash working capital and decommissioning obligations settled. Free funds flow is a non-GAAP measure calculated as adjusted funds flow less decommissioning obligations settled and capital expenditures. Net operating income is a non-GAAP measure calculated as revenue before financial hedges less royalties, transportation costs and operating expenses. Operating netback is a non-GAAP measure calculated as net operating income divided by average daily production. Please refer to the annual report for additional details regarding non-GAAP measures and their calculations.

Cautionary Statements

This news release contains forward-looking information and statements (collectively, “forward-looking information”) within the meaning of applicable securities laws. The use of any of the words “forecast”, “expect”, “anticipate”, “continue”, “estimate”, “objective”, “ongoing”, “on track”, “may”, “will”, “project”, “should”, “believe”, “plans”, “intends” and similar expressions are intended to identify forward-looking information. More particularly and without limitation, this news release contains forward-looking information concerning Pine Cliff’s plans and other aspects of its anticipated future operations, management focus, objectives, strategies, financial, operating and production results and business opportunities, including the following: the completion of the Offer including the timing and terms thereof; the benefits of the Offer and the characteristics of the acquired assets including that the Offer is expected to be accretive to the Pine Cliff’s free funds flow and per share metrics in 2024, the anticipated net operating income to be generated from the acquired assets, and that Pine Cliff expects potential debt repayment in 2024 at current commodity prices. The forward-looking information is based on certain key expectations and assumptions made by Pine Cliff, including expectations and assumptions concerning the following: prevailing and future commodity prices and currency exchange rates; applicable royalty rates and tax laws; interest rates; future well production rates and reserve volumes; operating costs, the timing of receipt of regulatory approvals including in connection with the Offer; the performance of existing wells; the success obtained in drilling new wells; anticipated timing and results of capital expenditures; the sufficiency of budgeted capital expenditures in carrying out planned activities; the timing, location and extent of future drilling operations; the successful completion of the Offer and the benefits to be derived therefrom; the state of the economy and the exploration and production business; the availability and cost of financing, labour and services; and ability to market crude oil, natural gas and NGL successfully. Without limitation of the foregoing, future dividend payments, if any, and the level thereof is uncertain, as the Pine Cliff’s dividend policy and the funds available for the payment of dividends from time to time is dependent upon, among other things, free funds flow, financial requirements for the Pine Cliff’s operations and the execution of its development strategy, fluctuations in working capital and the timing and amount of capital expenditures, debt service requirements and other factors beyond the Pine Cliff’s control. Further, the ability of Pine Cliff to pay dividends is subject to applicable laws (including the satisfaction of the solvency test contained in applicable corporate legislation) and contractual restrictions contained in the instruments governing its indebtedness, including its credit facility.

Statements relating to “reserves” are also deemed to be forward looking information, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described exist in the quantities predicted or estimated and that the reserves can be profitably produced in the future.

All such forward-looking information is based on certain assumptions and analyses made by us in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate in the circumstances. The risks, uncertainties and assumptions are difficult to predict and may affect operations, and may include, without limitation: foreign exchange fluctuations; equipment and labour shortages and inflationary costs; general economic conditions; industry conditions; changes in applicable environmental, taxation and other laws and regulations as well as how such laws and regulations are interpreted and enforced; the ability of oil and natural gas companies to raise capital; the effect of weather conditions on operations and facilities; the existence of operating risks; volatility of oil and natural gas prices; oil and gas product supply and demand; risks inherent in the ability to generate sufficient cash provided by operating activities to meet current and future obligations; increased competition; stock market volatility; opportunities available to or pursued by us; and other factors, many of which are beyond our control. The foregoing factors are not exhaustive.

Actual results, performance or achievements could differ materially from those expressed in, or implied by, this forward-looking information and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking information will transpire or occur, or if any of them do, what benefits will be derived there from. Except as required bylaw, Pine Cliff disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could affect Pine Cliff, or its operations or financial results, are included in the Pine Cliff’s most recently filed Management’s Discussion and Analysis (See “Forward-Looking Statements” therein), Annual Information Form (See “Risk Factors” and “Forward-Looking Statements” therein) and other reports on file with applicable securities regulatory authorities and may be accessed through the SEDAR+ website (www.sedarplus.ca) or Pine Cliff’s website (www.pinecliffenergy.com).

The forward-looking information contained in this news release is made as of the date hereof and Pine Cliff undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, unless expressly required by applicable securities laws.

Certain Definitions:

MMBoe millions barrels of oil equivalent

Boe/d barrel of oil equivalent per day

PDP proved developed producing

For further information, please contact:

Philip B. Hodge – President and CEOAlan MacDonald – CFO and Corporate SecretaryKristopher B. Zack – Vice President, Finance

Telephone: (403) 269-2289Fax: (403) 265-7488Email: [email protected]

The TSX does not accept responsibility for the accuracy of this release.

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Weekly Crude Oil Storage as of October 27, 2023

Click for EnerCom Analytics Dashboard.

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 0.8 million barrels from the previous week. At 421.9 million barrels, U.S. crude oil inventories are about 5% below the five year average for this time of year, according to the EIA crude oil and petroleum weekly storage data, reporting inventories as of October 27, 2023.

Summary of weekly petroleum data for the week ending October 27, 2023

U.S. crude oil refinery inputs averaged 15.3 million barrels per day during the week ending October 27, 2023, which was 62 thousand barrels per day more than the previous week’s average. Refineries operated at 85.4% of their operable capacity last week.

Gasoline production decreased last week, averaging 9.5 million barrels per day.
Distillate fuel production decreased last week, averaging 4.6 million barrels per day.

Imports

U.S. crude oil imports averaged 6.4 million barrels per day last week, increased by 412 thousand barrels per day from the previous week. Over the past four weeks, crude oil imports averaged about 6.2 million barrels per day, 1.4% more than the same four-week period last year.

Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 557 thousand barrels per day, and distillate fuel imports averaged 71 thousand barrels per day.

Products inventories

Total motor gasoline inventories increased by 0.1 million barrels from last week and are about 2% above the five year average for this time of year.
Finished gasoline inventories increased while blending components inventories decreased last week.
Distillate fuel inventories decreased by 0.8 million barrels last week and are about 12% below the five year average for this time of year.
Propane/propylene inventories decreased by 1.2 million barrels from last week and are 16% above the five year average for this time of year.
Total commercial petroleum inventories decreased by 3.1 million barrels last week.

Products supplied

Total products supplied over the last four-week period averaged 20.4 million barrels per day, up by 0.5% from the same period last year. Over the past four weeks:

Motor gasoline product supplied averaged 8.8 million barrels per day, up by 1.6% from the same period last year.
Distillate fuel product supplied averaged 4.0 million barrels per day over the past four weeks, down by 4.5% from the same period last year.
Jet fuel product supplied was up 8.0% compared with the same four-week period last year.

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World Oil

(WO) – Zephyr Energy plc provided updates on its non-operated asset portfolio in the Williston basin, North Dakota, U.S. In December 2022, the company announced that it had acquired a working-interest in six recently spudded wells operated by Slawson Exploration Company. The working interests acquired range from 11% to 32%.

Zephyr’s management estimated the Wells to contain 2P reserves, net to Zephyr, of circa 550,000 Boe.

Following the recent completion of the associated production facilities, the company has been notified by Slawson that the wells are scheduled to be brought online Nov. 1, 2023.

The wells will provide a significant near-term production boost and are expected to generate substantial cashflows for the company, which can be reinvested into the development of its project in the Paradox basin, Utah, U.S., or into additional non-operated investment opportunities.

Zephyr Energy plc is a technology-led oil and gas company focused on responsible resource development from carbon-neutral operations in the Rocky Mountain region of the United States.

Zephyr’s flagship asset is an operated lease holding of over 46,000 gross acres located in the Paradox basin, Utah, 25,000 acres of which has been assessed to hold, net to Zephyr, 2P reserves of 2.6 MMboe, 2C resources of 34 MMboe and 2U resources of 270 MMboe.

In addition to its operated assets, the company owns working interests in a broad portfolio of non-operated producing wells across the Williston basin in North Dakota and Montana. Cash flow from the Williston production will be used to fund the planned Paradox basin development.

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Oil Price

The U.S. offshore wind industry is “fundamentally broken” and needs a reset, a clean energy executive at supermajor BP said at the FT Energy Transition summit on Wednesday. But the regulatory and permitting environment for the industry can be fixed, Anja-Isabel Dotzenrath, head of Gas and Low Carbon Energy at BP, said on the conference, as carried by Reuters.

Source: Reuters

Currently, the U.S. regulatory environment is challenging for developers due to a lack of mechanisms to adjust for inflation, permitting issues, and a lag between the signing of the power purchase agreement and the construction of the projects, according to BP’s green energy boss.

BP itself booked a pre-tax impairment charge of $540 million in the third quarter related to U.S. offshore wind projects.

BP and Equinor’s filing to renegotiate the power purchase agreements associated with the Empire Wind 1 and 2 and Beacon Wind 1 wind farms off the coast of New York was rejected last month.

“Equinor and BP are assessing the impact of the decision on these projects and future development plans,” BP said.

Norway’s Equinor, which is BP’s partner in the ventures, recognized a $300 million impairment to its offshore wind projects on the US North East Coast following the rejection of petitions related to offtake agreements.

“Offshore wind projects on the US Northeast Coast are negatively impacted by cost inflation and supply chain constraints. New York Public Service Commission rejected price increase petitions from Equinor and other companies and Equinor is assessing the implications for its projects,” Equinor said in its Q3 results release last week.

Ørsted, the world’s biggest offshore wind developer, added insult to injury on Wednesday, saying it would cease the development of two offshore wind projects in the United States due to supply chain delays, higher interest rates, and changed project assumptions including tax credit monetization and the timing and likelihood of final construction permits.

By Tsvetana Paraskova for Oilprice.com

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The G7 and EU have imposed a $60 per barrel price ceiling mechanism in an effort to curtail Moscow’s energy revenues

The average price of Russia’s flagship Urals blend of crude oil was $81.52 a barrel in October, the Ministry of Finance reported on Wednesday, 35% above the $60 price cap imposed by G7 and the EU in December.

The discount to the Brent benchmark last month stood at $9.57 per barrel.

Data shows that in annual terms, the average cost of Urals has increased by 15%. In October 2022, a barrel of Russian oil traded at $70.62.

However, in monthly terms the cost of Urals decreased by nearly 2%. In September, a barrel of Russian crude cost an average of $83.08. During the first 10 months of this year, the average price of Urals decreased significantly compared to the same period of 2022, standing at $61.84 per barrel versus $79.57.

The International Energy Agency (IEA) said last month that Russian oil export revenue surged by $1.8 billion in September, describing the spike as a combination of growth in total export volumes and higher average prices for Russian crude and oil products. Russia netted $18.8 billion from oil exports in September, making it the most profitable month since July 2022, according to the IEA.

The EU and G7 countries have largely failed to enforce a $60 per barrel price cap on Russian seaborne oil exports which was agreed in December 2022, according to data. Similar restrictions were introduced in February for exports of Russian petroleum products. The measures were aimed at reducing Russia’s energy revenues.

Russian President Vladimir Putin subsequently signed a decree, which took effect on February 1, introducing retaliatory measures to the price cap on Russian oil exports. It bans the supply of oil and petroleum products to countries applying a price cap in their contracts and also prohibits deliveries if a contract directly or indirectly mentions the cap.

For more stories on economy & finance visit RT’s business section

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Daily Standup Top Stories

Russia’s Oil Exports Climb Despite Its Commitment To Cut Supply

November 1, 2023 Mariel Alumit

By Tsvetana Paraskova of OilPrice.com Russia’s crude oil exports by sea have been exceeding the country’s targeted export reductions as part of the OPEC+ pact for weeks, with the most recent week’s observed shipments as […]

Russia poised to ‘sharply increase’ oil exports in November – Kpler

November 1, 2023 Mariel Alumit

Analysts link the move to maintenance works at several refineries and higher global crude prices Russia is likely to sharply increase oil exports in November, business daily Kommersant reported on Tuesday, citing Kpler analysts. According […]

EU looks to expand sanctions on Russia – Bloomberg

November 1, 2023 Mariel Alumit

The bloc has so far imposed 11 packages of restrictions against Moscow over the Ukraine conflict The European Union is in talks on a new round of sanctions that would impact some €5 billion ($5.3 […]

Why Norway — the poster child for electric cars — is having second thoughts

November 1, 2023 Mariel Alumit

OSLO, Norway — With motor vehicles generating nearly a 10th of global CO2 emissions, governments and environmentalists around the world are scrambling to mitigate the damage. In wealthy countries, strategies often revolve around electrifying cars — and […]

California’s EV conundrums

November 1, 2023 Mariel Alumit

Without crude oil that is the basis for most of the products now in society, citizens of developing nations may never be able to enjoy the abundant lifestyles available to wealthier countries. As California is […]

Highlights of the Podcast

00:00 – Intro
03:47 – Russia poised to ‘sharply increase’ oil exports in November – Kpler
05:09 – Russia’s Oil Exports Climb Despite Its Commitment To Cut Supply
06:38 – EU looks to expand sanctions on Russia – Bloomberg
08:58 – Why Norway — the poster child for electric cars — is having second thoughts
12:14 – California’s EV conundrums
14:25 – Markets Update
19:10 – Earnings: Northern Oil and Gas reported strong earnings with record quarterly production.
22:12 – Outro

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– Get in Contact With The Show –

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

Michael Tanner: [00:00:15] What is going on? Everybody, welcome in to another edition of the Daily Energy News Beat. Stand up here on this gorgeous Thursday, November 2nd, 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 and publisher of the world’s greatest Web site, EnergyNewsBeat.com Stuart Turley, My man. We do this. [00:00:38][23.2]

Stuart Turley: [00:00:38] It’s is a beautiful day in the neighborhood. And what a great day we’ve had. And you crack me up right before the show. You’re sitting there. I got to travel. Shoot me. Oh, my goodness. [00:00:47][9.3]

Michael Tanner: [00:00:48] I do have to do some traveling this both of the next two weekends, actually. Luckily, it’s not going to impact the show. But I’ll be honest, I despise traveling and I’m now forced to do it these next two weekends. But the things you do for people you enjoy. So that’s beside the point. Regardless of my travel schedule, we have an absolutely banger of a show lined up. We’re going to fly all the way over to Russia and we’re going to start there first. Russia up to, quote, sharply increased oil exports in November. That’s according to our favorite data rig data provider, Kepler. Next up, oil exports. Russia’s oil exports climb despite its commitment to cut supply. Next up, EU looks to expand sanctions on Russia. That’s according to Bloomberg. Yikes. Next up, why Norway? The poster child for electric cars, is having second thoughts. And then after our tour of the EU, we finally come back to our favorite state. California’s The Conundrum stool. Then toss it over me will lightly touch on what happened in the markets. Considering the Fed’s decision to hold rates at current. What that means, hopefully for the energy markets. We did see oil and gas prices react to that. Natural gas holds fairly flat. We did see the EIA come out and release their crude oil storage numbers and we also had two earnings that we will slightly dive into. One of the issues favorite company north. And so, you know, we had to cover them and then we’ll dive into another earnings that I find I found very interesting and then we’ll let you guys get on out of here and and finish up your Thursday. We appreciate everybody who stuck with us. Stuck with us so far, man. I’m tongue tied today. Hopefully, hopefully this show gets better for the listener. But before we dive into all of this, guys, remember the news and analysis you’re about to hear is brought to you by the world’s greatest website www.energynewsbeat.com the best place for all of your energy news still in the team do a tremendous job keeping that up to speed with everything that you need to know to stay at the tip of the spear when it comes to the energy business. You could check us out on Apple Podcasts, Spotify, YouTube at Energy News Beat. Go give us a subscribe there. That’s really the best way to to support the show. You can email us [email protected] you can interact with the show via [email protected] Kind of our new data news combo. So check it out. Give us your feedback. You can also check out the description below, whether you’re on YouTube or podcast, see all of the links to the articles timestamps. You can jump ahead. See here about northern oil and gas is great quarter or learn what the you know the EIA crude oil numbers did or just you can’t get enough of you’re ready to hear about Russia you can do all of that by clicking on the timestamps again we appreciate our team for keeping that all up to speed. I’m going to Brett those Stu, where do you want to begin? Let’s buckle. [00:03:27][159.0]

Stuart Turley: [00:03:28] Up. Buckle up. It’s going to be a crazy flight and hopefully we don’t run into that flight lady or whatever her name. I don’t care what you send me. I mean, if you if you see that, we’ll you know, if you see that on your flight tomorrow, run. Okay. That was weird. Okay. Russia poised to sharply increase oil exports and no exports. But now you got me. Can’t talk exports in November. I’ll tell you what this is. Analysts link the move to maintenance works in several oil refineries and higher global crude prices. Russia is likely to increase all exports in November. Here’s some key numbers, Michael. 200,000 barrels per day increase in next month, reaching up to 3.7 billion barrels per day. That’s a bunch. [00:04:22][53.9]

Michael Tanner: [00:04:23] It is, but. [00:04:23][0.3]

Stuart Turley: [00:04:23] Billion barrels per day. That is a bunch. And here’s that’s even. [00:04:26][3.3]

Michael Tanner: [00:04:27] What’s interesting is this comes in the face of the fact that the next article you’re about to cover, which is or one of the articles that we’re looking at, is EU looks to expand sanctions on Russia. So I know I’m jumping ahead here, but just the sharp decrease between what’s going on on the actual ground level, which is Keppler they’re a data provider. They’re not going to just say that without having some underlying facts. Well, then why would the EU be looking to increase sanctions? It’s almost as if what you’ve been saying this whole time is absolutely true. So do sanctions don’t work? [00:04:59][31.5]

Stuart Turley: [00:05:00] Absolutely they don’t work. And all they do. Putin laughs. Eh? He laughs all the way to the bank. So anyway, let’s go ahead and go to the next article here. Russia’s oil exports climb despite commitment to cut. Supply. Here’s where I got a little tickle at this article here. A little bit. What? Politicians actually tells the truth, right? So is it Novak, their head of their oil and energy? Is he over there going, Oh, yeah, okay. He’s going to do an imitation of Putin. So this is Stuart Turley imitating Novak. Who’s imitating Burton? Hey, I will cut. Right. So if you sit back and kind of take a look, the four week average crude shipments out of Russia were slightly lower than 3.48 million in the week of October 29th, around 20,000 barrels per day compared to the four week average the week before. Here’s where it goes. Russia has pledged to reduce its oil exports by 300,000 barrels per day until the end of 2023. In a show of solidarity with its Opec+ partner, Saudi Arabia. They’re wanting to help increase the price because, Michael, if you remember our article a couple of days there. Saudi Arabia wants it at that 122 107 to 120 mark. So Russia is saying yes, but they’re doing the old is shaking their head. Yes. And your wife is saying, did you take the trash out and you’re going, Yeah. No, I didn’t. So it’s pretty interesting when you take a look at this. But what is pre this is a precursor to the other article. You gave a hint that the EU looks to expand sanctions on Russia. Why did the sanctions cross the road? It was to try to penalize somebody. And this was not what happened. I mean, so BLOCK has so far imposed 11 packages of restrictions against Moscow over the Ukraine. They are now talking about the next round, which would impact some $5.3 billion trade with Russia. This is nuts. It’s going to they’re targeting trying to skirt the bans through third countries. They can’t even, you know, manage their way out of a paper bag, let alone a crisis. [00:07:17][137.3]

Michael Tanner: [00:07:18] Yeah, I mean, I don’t want to make it seem like we’re just we’re standing up for Russia. It’s clearly what they’re doing in Ukraine is wrong, But it’s pretty funny to the level at which we will go to attempt to sanction somebody without really doing it. I mean, they’re trying to go after the loopholes in which they’re using to get around the current sanctions. But all this rules into it’s clear sanctions don’t work. And if they’re able to skirt and get access to the dark fleet, I guarantee now they’re going to have access and get around these. So it all comes back to say, you know, like you said, you can say you’re in you’ve passed sanctions on one hand without really enforcing anything on the other. [00:07:53][35.0]

Stuart Turley: [00:07:53] Oh, it’s like I’m President Biden and I use the word loosely because he doesn’t even know he’s president. And when you sit back and think he listened. Do you remember right before we were on this, right as he released these sanctions on the Nord Stream? He goes, oh, yeah, you guys go ahead, put in the Nord Stream. And then they did not enforce the sanctions on Iran in two different ways. And that went from Trump under Trump. They were doing less than 300,000. They were lucky to do the 250000 to 300000 in Iran under Trump. Now they’re up there with Russia at that 3 million barrel mark, 3.5 million. This is not. [00:08:41][47.8]

Michael Tanner: [00:08:42] So. It really is nuts. And I think it goes to show, unfortunately, you’ve been right from the beginning. Sanctions don’t work. Let’s go to Norway. [00:08:50][7.4]

Stuart Turley: [00:08:51] Let’s go around. I really want to go to Norway. I just really think this is going to be a fun one. And Michael, why Norway? The poster child for electric cars, is having second thoughts. This article is not just 100% bashing on EVs. It’s because this is their way of life. And just as t this article up a little bit, Norway has so much electric hydro that it makes sense. Everybody was all on board because their cost of energy is very low when it comes in and you’re using hydro. You know I love me some hydro. I got some right over here. Okay, let’s go through this. So he flew across the Atlantic to see what the fuss about was this. The evening TV boom has really taken a look. No Norway one really took their cities and their towns and became more like the U.S. and they people really enjoyed being able to get out and see all the beautiful sights. And then you take a look at everybody, all of the world controlling folks. They’re wanting to shut down everything. Norway does not have any public transportation. So even if you don’t want a car, people in town wanted to get to their lake houses. So. When you take a look at this now, it fizzled. Norway’s dreams of becoming a global hub of TV manufacturing fizzles when the companies ran into financial problems. Look at this. If our producer can roll this cam, this picture in Michael, scroll down in the in the thing. Do you see the little red car in the center that that. [00:10:36][104.9]

Michael Tanner: [00:10:37] Toy things you got as a kid where like you is like a Flintstone car where you have to use your feet to pedal. [00:10:41][4.8]

Stuart Turley: [00:10:42] Oh, no kidding. I’m over here going for would not want to get into that. You know, if Thor was out of Norse mythology, he would laugh that it’s about as big as his hammer is this car. So when you come down, even subsidies, fuel, car sales. But Norway’s cities wanted fewer cars and the citizens wanted more cars. They didn’t want to follow this. What are you seeing in this trend of the story? It’s the same thing that’s happening in the U.S. People aren’t going to give up their cars. So I can see that this is also going to be a resurgence in the ice engines as well, too. [00:11:25][42.6]

Michael Tanner: [00:11:25] Well, and I mean, again, you have to remember, Norway is a small country. It may slightly work. Now, again, I think the the point of this article is that something that went was intended to be good, which was a big subsidy for EVs, turned out to basically only be a subsidy for the rich because they started buying EV Porsches and the lower income people still didn’t move the needle to even give them a car. So it is interesting considering that fact. I mean, you’re talking about, you know, only the, you know, $45,000 of tax free incentives to order and buy EVs. That’s insane. Clearly, the United States can’t do that. But I think it’s an interesting it’s an interesting article, but I think there’s not much analogy that we can really compare other than what’s going on in our favorite state, California, which I think is up next. [00:12:11][45.8]

Stuart Turley: [00:12:12] Oh, it is. All right. California’s EV conundrums. You got to love a good California. And you know, I got to give a shout out to half of the state that is listening to us because we get such huge numbers out of California. We got to love it. And so I think that there is there is hope for California since half of them listen to the podcast. But so yeah, exactly. [00:12:35][23.6]

Michael Tanner: [00:12:36] So we only know that we at least know there’s four people on board. [00:12:40][4.1]

Stuart Turley: [00:12:41] All right. So, you know, California followed Germany and tried to lead the world to zero crude oil. So if we take a look at this, the conundrums around California TV is a nice list here of eight things. We’re not going to go through all of them. But due to the EV battery fire, this is number four on the list, Michael. Questionable means of transporting EVs from foreign manufacturers to the U.S. And when you and I talked about this on the other show, insurance is causing it. So they don’t want them on the transports coming across the pond. Conditions have grown so dire for the supply chain that one’s another one. And so now it’s links to the Chinese slave labor unions. So it’s one thing to have a slave labor, a labor union, it’s another to have a slave labor union. Maybe they would go on strike. That was funny, by the way. [00:13:35][54.2]

Michael Tanner: [00:13:36] Okay, I’m going I’m about to go on strike. [00:13:38][1.7]

Stuart Turley: [00:13:39] So the rate is you guys. [00:13:40][1.5]

Michael Tanner: [00:13:41] The Energy News Beat podcast is unionizing, right? [00:13:43][2.2]

Stuart Turley: [00:13:43] Except your H.R.. How in the world are you going. [00:13:46][2.3]

Michael Tanner: [00:13:46] To I mean, your hand management. So how does that work? [00:13:48][2.4]

Stuart Turley: [00:13:49] Oh, my gosh, You’re in trouble, dude. Okay. The regulatory tax landscape led the steady drop in the number of California refineries. It’s not going to happen, dude. I mean, California cannot. Absolutely. I in our story yesterday on yesterday’s podcast, natural gas, compressed natural gas, I guarantee you that’s the road for shipping. And if California wants to eat, they’re going to love natural gas or compressed natural gas coming around the corner for those engines. So. [00:14:21][32.5]

Michael Tanner: [00:14:22] Yep, absolutely. [00:14:22][0.3]

Stuart Turley: [00:14:23] After you, dude. [00:14:23][0.8]

Michael Tanner: [00:14:24] All right. Well, go ahead. Move over to the finance segment then. You know, pretty decent day for the overall markets. We saw the S&P 500 up one percentage point, NASDAQ up one and three quarters percentage points, mainly off to the back of the Federal Reserve, confirming what I think people mostly expected to happen. But it’s still you know, I think the market breathed a sigh of relief because, you know, we didn’t know what was going to happen considering all of the things that the Fed has done. But the Fed has come out and officially not raised rates. They’ve kept their their base base interest rate at five and a quarter to five and a half, which is really where it’s been since July. You know, this is the basically the second meeting where they’ve chosen to hold out of a string of 11 rate hike, which include four in 2023. You know, Jerome Powell came out was a little bit more optimistic that these higher rates are doing what they think. I love how he continued to talk about how the labor market was still tight. And, you know, if you’re if you’re I somebody who understands Fed speak, that means that they’ve got to get that unemployment rate higher because that’s going to now bring inflation down. So, you know, you got to remember, you know, they actively are raising rates to put people out of work so that inflation comes down and does what they want to do. Now, they’ll give you Fed speak for all the other junk. And Jerome Powell is probably one of the more what I would call least fed speak of all the Fed. I mean, it was hard to listen to Greenspan. It was even it was hard to listen to Ben Bernanke. I mean, that guy was that was he was probably the one that perfected the idea of Fed speak. Janet Yellen was had a little bit of that. But, you know, Jerome Powell coming from the investment banking world is actually fairly straight up and down considering the fact that you know what his predecessors are. So I think that really that decision, I think, filter both through the financial, you know, the overall financial markets, but really into energy. We saw, you know, with rates where they were, we did actually see a drop of oil down to 80, 97. That could have also been due to the fact that we saw a crude oil inventory build of about 800,000 barrels. That was a little bit less. It was less than what was expected. So you think the Street would like it? But I think the overall sentiment is that this this this war that’s going on in Israel and know we keep coming back to it, it doesn’t seem like there’s going to be any supply disruptions. And I think that’s beginning to settle in as we move forward. And that premium that we’ve been trading on due to the fact that this, you know, supposedly the heightened tension war between Israel and Gaza, it seems like it’s going to be you know, I hate to say it so long as a fear, but a conventional war, Israel’s going to invade Gaza and that’s it. Nothing. You know, it’s like nothing’s going to happen when it comes to the overall energy markets. You know, you know, not that we want that to happen, but that’s the sentiment that I think is settling in right now. STU So I don’t know how you see that conflict going from an energy standpoint, but I think the market has sort of extracted about all of that premium that was trading into it when it comes to war. I mean, we’re sitting at 80, 95 right now. [00:17:18][173.9]

Stuart Turley: [00:17:18] I know and I disagree with you. I do think there is some coming around the corner where they are kind of confused on them. But now let me go back to speak in Fed. I think that Powell actually I would understand the Coneheads better than a Fed if he’s beaten. Half the guard thought. I understand that more than what I understand from Powell. So that’s pretty sad when you say you know, naff all the Garth thought and it makes more sense. There is no way that they can fix inflation. Now let’s come back over here to the other side of this coin. I think the war is going to really dramatically impact energy prices. And there’s because several reasons, and that is the lack of investment in oil. And you’ve heard several of the big boys, Exxon, come out and say it and everything else and they must listen to the podcast as well, Michael, because they did actually say, you know, we need trillions invested in order to keep it going. Even if there is a recession, a global recession, there still is not enough production in order to lower it very long. I almost personally believe that there is somehow price manipulation going on on the oil. I don’t I have no nothing to base it on, but nothing from all the experts I’ve talked to in the last several days says that it absolutely makes sense. Yeah. [00:18:52][93.5]

Michael Tanner: [00:18:52] No, I mean, you’re you’re you’re you’re you’re absolutely right. And you know, it very well could increase. I just think what we’re seeing is the shrinking of that premium. But no, you’re absolutely right. Crazy things could happen. I want to point out, Stu, we had you know, we’re in the midst of earnings season right now. You go to energynewsbeat.com, look at our finance tags. You be able to see all of the different earnings that are rolling in to companies that I wanted to highlight to northern oil and gas your favorite. I love that you know you always say good management good numbers pretty good month for the are pretty good quarter for no other oil and gas. They get record quarterly production of about 102,000 bogey per day that’s 62% oil adjusted net income at 61,000,161 million with adjusted well at 385 million. IT technical gap net income was only 26,000,026.1 million. But that was just due to some charges. Excluding net working capital. They had some cash flow from operations about $263.9 million, which was an increase of 29% from the third quarter of 2022. It generated about $127 million of free cash flow. You got to remember, that’s a non-GAAP financial number. I always like to look at. You know, there are non-op companies do. So one of the big things you worry about is capital expenditures. Their third quarter CapEx budget was 260,000,120 182.3 million. That DOE was actually drilling a completion, drilling and completion or AFI buys. You know, there it was a little bit higher than the prior quarter due to the fact that they saw a slight increase in development activity occurred at one of their successful leases, ground game. So they went ahead and authorized, you know, two extra wells, one at 9.7 and 9 million. To give you an idea, their CapEx is spent about us is spent at about 59% of it is spent in the Permian. So you can tell they’re heavy in the Permian. They end with about 870 million of liquid eight or 879 million of liquidity. 166 of that is borrowing available under the credit facility, and they only sent about 13 million of cash. You got to love non-op business. Maybe you could just sit on a little amount of cash. It’s really nice. They got 2.2 billion of debt, but it’s sort of spread out. You know, I just say this because I got a little bit on our business do and they do it right? [00:21:10][138.1]

Stuart Turley: [00:21:11] Oh, absolutely. I’m I’m all in on non-op, especially when you got somebody that actually can understand the charts, they can understand the geological data and you can actually verify and validate drill, but verify. Oh, that’s a new one. [00:21:27][16.4]

Michael Tanner: [00:21:28] Drill bit there, but verify. [00:21:29][1.2]

Stuart Turley: [00:21:30] I like. [00:21:30][0.2]

Michael Tanner: [00:21:31] That. No fun. No, no, no. [00:21:32][1.8]

Stuart Turley: [00:21:33] Fine wildcat. There’s no wildcat. There’s no wildcats when you drill, but verify, That’s a T-shirt waiting to happen, dude. [00:21:40][7.5]

Michael Tanner: [00:21:41] Yeah. Some of the other earnings we’ve got available, guys. You know, marathon drop today, California Resources drop today. Pacific Land. We saw Apache, Silver Bow, Viper Energy Partners, Magnolia, Permian, Reese and and and bury Petroleum Earth stone or we ran those so me talking to a myriad of earnings go check those out on energy news beat you want to dive in more I mean they’re going to be good we saw commodity prices go up again. The headline really is this M&A space. So, Stu, we will continue to stay up to speed on that. Anything else, though? Well, what should we leave these folks with? [00:22:14][33.8]

Stuart Turley: [00:22:15] Buckle up. It’s going to be a lot of fun. I mean, feds big scares me. [00:22:20][4.3]

Michael Tanner: [00:22:20] Well, in so-to-speak. Buckle up, folks. So I will let you guys get out of there and get back to work. We appreciate you guys. Check this out. Have a great weekend. You’ll hear an interview from Stu. We dropping the ball on Friday. Stu, who drops interview wise? [00:22:33][13.5]

Stuart Turley: [00:22:34] We just dropped This one was a really good thank you for asking. We just dropped the secretary general of the African Petroleum Producers. They’re 18 member nations. It’s the African version of OPEC. They carry a big stick and they are phenomenal. I now have several new African leaders that are coming online that are going to be on the podcast. I’ll be able to share those names. And we also have about four others that I’m trying to work with the team on and which ones are going to send down. But we have, I think, six that are coming out very quickly though. [00:23:10][36.0]

Michael Tanner: [00:23:10] Yeah, you’ll see those on Friday and then Saturday you guys can hear the weekly recap where we cover, where we were, the suit, the team picks out some of their favorite favorite segments, slices it up and we send it out for a little Saturday news. You get a Sunday off and we will be back in your year on Monday, guys. So we appreciate it. Enjoy the rest of the week, guys. Enjoy the podcast on Friday, enjoy the weekly recap on Saturday. And Stu and I will see you on Monday, folks. [00:23:10][0.0][1352.0]

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