Category: Oil and Gas

Offshore Energies UK (OEUK) has responded to the Autumn statement, recognising its focus on business investment as fundamental to energy security, jobs and a pragmatic energy transition. Homegrown energy is at the heart of the nation’s economic growth and central to maintaining the UK’s position as an energy and net-zero leader in the G7. 

OEUK believes the Chancellor’s announcement of £4.5 billion of investment, including £960 million in manufacturing capabilities for the clean energy sector, is one of a number of important steps in building the nation’s future low carbon infrastructure and economy.  

“The Chancellor hit the right notes today, now we must fully orchestrate our approach to making the UK an irresistible place in which to invest and innovate. The decarbonisation of our economy is one of the greatest challenges of our time, but we must also seize its opportunities,” says OEUK’s chief executive David Whitehouse.

“The fiscal announcements, allowances, apprenticeships, planning and grid reforms announced today will help firms invest in low carbon infrastructure, R&D and our world class workforce. We need these investments to grow the economy, support jobs and deliver reliable homegrown energy to people across the UK.” 

“It’s heartening to see an emerging cross-party consensus on the need for long term investment. The UK needs reliable supplies of homegrown energy that boost our economy and help us reach net zero. By the mid-2030s, oil and gas will still provide 50% of our domestic energy needs. The UK’s offshore energy industry has the skills, people and supply chains we must nurture to build a UK business-led energy transition. Today’s statement helps to give businesses the right conditions to invest in these critical components of our low carbon future and drive UK growth.” 

To guarantee the future of more than 200,000 jobs, unlock £200 billion in investment before 2030 and allow the UK to develop its pathfinding capacity for wind and hydrogen power generation, OEUK has asked government to prioritise: 

Protecting UK energy security and driving economic growth by incentivising investment in domestic energy production through effective tax policy, including headline rates and reliefs.  

Delivering a homegrown transition which champions UK technology and innovation by accelerating UK offshore wind, hydrogen, and the carbon capture and storage. There must be a better strike price in the wind Contract for Difference scheme and a properly linked UK and EU emission trading schemes.  

Supporting and growing a diverse workforce with good jobs now and in the future by anchoring and expanding job opportunities in the UK with a skills passport that engages the current and future workforce. 

The companies investing in new opportunities like fixed and floating offshore wind, hydrogen and carbon capture and storage require the cashflow from a stable and predictable oil and gas business. The long-term goal should be to grow these sectors in a way that avoids long term government subsidies. The Office for Budget Responsibility (OBR) says net zero will take £1.4 trillion of investment, £1.2 of which must come from the private sector.  

To make sure this happens, OEUK says we need: 

• Fiscal and regulatory reform supporting all forms of energy investment and associated infrastructure 
• Political consensus at the start of the next parliament to reduce the headline tax burden from its current 75% 
• Statutory mechanisms to speed up approval for new offshore energy projects and avoid further flight of capital, people, and supply chain.  
• Green policy levers that accelerate growth and reduce reliance on state support.  
• Reform of the Contract for Difference process to make it competitive for all companies to invest in wind energy 
• Clear route to market for wind developers and linking of UK and EU energy trading schemes,  
• Cohesive policy developed in partnership with industry to define the long-term plans for energy infrastructure including offshore wind, CCS, and hydrogen 
• A strategic approach to meet the UK’s infrastructure requirements, including upgrading ports, transmission systems, storage, and other facilitating infrastructure including a coherent national security investment act. 
• Retention of the extension of 100% first year allowances for plant and machinery and consideration of special rate assets.  
• Investment mechanisms to support decarbonisation and low carbon technologies which should become a permanent feature of the tax regime, along with clarity around investment and a commitment to regular funding allocation rounds. 
• Market mechanisms that deliver long term certainty to support hydrogen production in the UK, including demand options such as a decision on blending.  
• Diverse and growing offshore energy workforce with the skills needed to deliver energy today and in the future  
• Develop and fund local and regional centres of energy excellence in universities, further education institutions, vocational and non-formal learning, and training routes to secure a skilled workforce for the future 
• Alongside longer-term planning of the energy transition clusters, policy must deliver national and local infrastructure such as rail networks, roads, digital connectivity, and housing stock. 

Many companies that support energy production are mobile and operate internationally in a multitude of supportive fiscal and regulatory regimes. The Energy Profit Levy and Electricity Generator Levy risk further undermining the UK’s homegrown future success and there is already evidence of capital, supply chain and work force flight.  There is always intense competition for capital investment and the government must use every available lever to ensure it stays in the UK. Our domestic energy needs confidence to invest in the next generation of energy security through fiscal certainty, competitive returns, and long-term commitments by policy makers.

The UK government is planning for the introduction of a new tax mechanism for North Sea oil and gas operators following the scheduled end of the windfall tax in 2028

The Treasury’s Oil and Gas Fiscal review, which was released today, confirmed the Energy Profits Levy (EPL) will end in March 2028, or earlier if prices fall below the Energy Security Investment Mechanism (ESIM) levels, set at $71.40 per barrel of oil and £0.54 per therm of gas.

However, the review states to “ensure a fair return for the nation at times of unusually high oil and gas prices” the government will develop a new mechanism which could be used to respond to market price shocks post-2028.

The government will ensure the introduction of any new mechanism happens “in a more predictable way” in order to not deter investment.

Included in the review are a set of principles for supporting investment which will inform the development of a future tax response to price shocks.

These include measures the government providing details on how price shocks will be defined before the end of the EPL, regular engagement with stakeholders including a twice-yearly ministerial forum and assessing the benefits of capturing a “share of revenue resulting from high prices”, rather than profits.

Oil and gas taxes to raise £6.1bn in 2023-24

In its November Economic and Fiscal Outlook, the Office for Budget Responsibility (OBR) said oil and gas taxes will raise an estimated £6.1 billion in 2023-24.

This figure represents a reduction of £3.7 billion compared to the year before.

© Photo: Elisabeth Sahl – Jonny Engelsvoll / Equinor

The OBR said the decrease in tax revenues is in large part due to lower than expected energy prices and (to a lesser extent) lower production and higher expenditure by operators, including for investment and decommissioning.

The OBR said it expects oil and gas receipts to fall relatively in the coming years to reach £2.1 billion by 2028-29 as energy prices and production declines.

The oil and gas tax revenues include offshore corporation tax, petroleum revenue tax (PRT) and the EPL, which together place a 75% tax on North Sea profits until the end of March 2028.

Energy transition and decarbonisation

The review also confirmed the government will “remove the tax barriers to oil and gas assets being repurposed for use in CCUS projects”.

This will be included as part of legislation for a future finance bill to introduce tax relief payments made by oil and gas companies into decommissioning funds.

The review also includes measures to decrease tax relief provided for investment in decarbonisation measures such as electrification.

Currently, the government’s decarbonisation investment allowance provides £1.0925 in relief for every £1 spent.

After the end of the EPL in 2028, this tax relief will reduce to £0.4625 per £1 spent on investment, including for decarbonisation.

“The relatively lower value of tax relief available in the permanent regime will rightly reflect the lower rate of tax applicable after the end of the EPL,” the review states.

Offshore industry enthusiasm may be ‘dampened’

Responding to the measures outlined by the Treasury, PwC UK energy and infrastructure tax partner Colin Smith said oil and gas businesses will welcome the confirmations relating to the EPL in the review and the removal of tax barriers related to energy transition activities.

“But the industry’s enthusiasm may be dampened by the proposals for a new mechanism,” he said.

Offshore Energies UK (OEUK), the trade association for North Sea energy firms, responded to the Autumn statement recognising its “focus on business investment as fundamental to energy security, jobs and a pragmatic energy transition”.

© Supplied by Unsure

However the organisation warned the EPL and the Electricity Generator Levy “risk further undermining the UK’s homegrown future success and there is already evidence of capital, supply chain and work force flight”.

“There is always intense competition for capital investment and the government must use every available lever to ensure it stays in the UK,” OEUK said in a statement.

“Our domestic energy needs confidence to invest in the next generation of energy security through fiscal certainty, competitive returns, and long-term commitments by policy makers.”

Chancellor ‘hit the right notes’

OEUK chief executive David Whitehouse said while the Chancellor “hit the right notes today” the government must work to make the UK an “irresistible place” to invest and innovate.

“The decarbonisation of our economy is one of the greatest challenges of our time, but we must also seize its opportunities,” Mr Whitehouse said.

“The fiscal announcements, allowances, apprenticeships, planning and grid reforms announced today will help firms invest in low carbon infrastructure, R&D and our world class workforce.

“We need these investments to grow the economy, support jobs and deliver reliable homegrown energy to people across the UK.”

Mr Whitehouse said it was “heartening to see an emerging cross-party consensus on the need for long term investment” in the offshore sector.

“The UK needs reliable supplies of homegrown energy that boost our economy and help us reach net zero,” he said.

“By the mid-2030s, oil and gas will still provide 50% of our domestic energy needs.

“The UK’s offshore energy industry has the skills, people and supply chains we must nurture to build a UK business-led energy transition.”

OEUK outlines policy priorities

OEUK put forward a range of proposals it wants to see the UK government prioritise.

The association said it wants government to incentivise investment in domestic energy production through “effective tax policy, including headline rates and relief”.

OEUK also called for a “better strike price” in the wind Contract for Difference scheme and “properly linked” UK and EU emissions trading schemes, as well as establishing a skills passport for workers in the energy sector.

“The companies investing in new opportunities like fixed and floating offshore wind, hydrogen and carbon capture and storage require the cashflow from a stable and predictable oil and gas business,” OEUK said.

“The long-term goal should be to grow these sectors in a way that avoids long term government subsidies.”

 

More follows…

Oil and Gas 360

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HIGHLIGHTS

• Bolt-on acquisitions of core non-operated working interest properties in the Northern Delaware and Appalachian Basins for a combined initial purchase price of $170 million in cash and 107,657 shares of common stock, subject to typical closing adjustments

• Combined average expected 2024 production of ~6,500 Boe per day (26% oil, 2-stream)
• Combined cash flow from operations for the acquisitions expected to be $57.5 – $62.5 million in 2024, representing a 2.8 – 3.0x purchase price multiple, based on recent commodity strip pricing
• Expecting approximately $33 – $38 million in total 2024 capital expenditures on the combined assets
• NOG has existing ownership interests in approximately 90% of the Delaware Basin leasehold
• Transactions expected to be accretive to key financial metrics in 2024 and on a multi-year basis
• Acquisitions to be financed with cash on hand, operating free cash flow and borrowings under NOG’s revolving credit facility
• NOG hedged a portion of the expected production on a multi-year basis, at higher than current pricing levels, prior to signing

MINNEAPOLIS–(BUSINESS WIRE)– Northern Oil and Gas, Inc. (NYSE: NOG) (“NOG” or “Company”) today announced two acquisition transactions.

NORTHERN DELAWARE BASIN TRANSACTION

NOG has entered into a definitive agreement with a private party to acquire non-operated interests across ~3,000 net acres located primarily in Lea and Eddy Counties, New Mexico. NOG owns existing interests in approximately 90% of the leasehold. Current production is ~2,800 Boe per day (2-stream, ~67% oil). NOG expects 2024 production to average ~2,500 Boe per day (2-stream, ~67% oil) but expects significant future growth on the assets, with average production of >3,500 Boe per day for 2025 through 2030. Capital expenditures on the assets are expected to be in the range of $25 – $30 million to be incurred in 2024, with similar expected levels annually through 2027.

The acquired assets include 13.0 net producing wells, 1.0 net well in process and an estimated 26.3 net undeveloped locations, representing approximately 13.5 years of inventory at sustaining capital levels. The undeveloped assets are of extremely high quality, with an average pre-tax PV-10 breakeven of less than $45 per barrel. Mewbourne Oil is the largest operator, controlling approximately 80% of the assets.

The effective date for the transaction is November 1, 2023. NOG has placed a $17.1 million deposit for the acquisition with the balance of the funding to occur at closing, which is expected in the first quarter of 2024, subject to the satisfaction of typical closing conditions.

APPALACHIAN BASIN TRANSACTION

NOG has entered into a definitive agreement with a separate private party to acquire non-operated interests in Jefferson, Harrison, Belmont, and Monroe Counties, Ohio. The primary target zone is the Point Pleasant/Utica Shale.

Current production is approximately 23 MMcfe per day (~3,800 Boe per day, ~100% gas) and NOG expects average production in 2024 at slightly higher levels. NOG expects to incur approximately $14 million of capital expenditures on the assets in 2023 (which may be included in whole, or in part, as a portion of the initial closing settlement, depending on timing), and $8 million of capital expenditures in 2024.

The acquired properties include approximately 0.8 net producing wells and 1.7 net wells-in-process. Substantially all the assets are operated by Ascent Resources, one of the top Utica producers in Ohio.

The effective date for the transaction is November 1, 2023, with an expected close in the fourth quarter of 2023, subject to the satisfaction of typical closing conditions.

MANAGEMENT COMMENTS

“These transactions demonstrate our continued ability to successfully acquire high quality assets in the core of their respective basins, with best-in-class operating parties,” commented Nick O’Grady, Chief Executive Officer of NOG. “We expect the assets to be accretive in 2024 and to accelerate further in future years. We are also pleased to expand our Appalachian presence into some of the best parts of the Ohio Utica Shale as we continue to grow our natural gas portfolio in the region over time. Notably, at the current pricing strip, we still expect to reach our ~1x leverage ratio target in 2024 and cash generating assets such as these should add to dividend capacity over time.”

“After closing, our Permian lands will approach ~40,000 net acres and definitively become our most active and largest basin in terms of activity and production,” commented Adam Dirlam, NOG’s President. “Our focus remains on low-breakeven, resilient inventory that works in nearly any price environment, and these assets deliver in spades. On the Appalachian front, we are acquiring assets in the core of the Utica under one of the most prolific operators, with a focus on near-term development. As we continue to build data in the area, there is significant potential for longer term expansion.”

ADVISORS

Citi served as financial advisor to NOG for the Delaware Basin transaction.

TPH&Co, the energy business of Perella Weinberg Partners, served as financial advisor to the Delaware Basin seller.

Kirkland & Ellis LLP is serving as NOG’s legal advisor for the Delaware Basin transaction. Steptoe & Johnson is serving as NOG’s legal advisor for the Utica transaction.

ABOUT NOG

NOG is a real asset company with a primary strategy of acquiring and investing in non-operated minority working and mineral interests in the premier hydrocarbon producing basins within the contiguous United States. More information about NOG can be found at www.northernoil.com.

SAFE HARBOR

This press release contains forward-looking statements regarding future events and future results that are subject to the safe harbors created under the Securities Act of 1933 (the “Securities Act”) and the Securities Exchange Act of 1934 (the “Exchange Act”). All statements other than statements of historical facts included in this release regarding NOG’s financial position, common stock dividends, production, cash flows, capital expenditures, business strategy, plans and objectives of management for future operations and industry conditions are forward-looking statements. When used in this release, forward-looking statements are generally accompanied by terms or phrases such as “estimate,” “project,” “predict,” “believe,” “expect,” “continue,” “anticipate,” “target,” “could,” “plan,” “intend,” “seek,” “goal,” “will,” “should,” “may” or other words and similar expressions that convey the uncertainty of future events or outcomes. Items contemplating or making assumptions about actual or potential future sales, market size, collaborations, and trends or operating results also constitute such forward-looking statements.

Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond NOG’s control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following: changes in crude oil and natural gas prices, the pace of drilling and completions activity on NOG’s properties and properties pending acquisition, NOG’s ability to acquire additional development opportunities, changes in NOG’s reserves estimates or the value thereof, general economic or industry conditions, nationally and/or in the communities in which NOG conducts business, changes in the interest rate environment, legislation or regulatory requirements, conditions of the securities markets, NOG’s ability to consummate any pending acquisition transactions (including the transactions described herein), other risks and uncertainties related to the closing of pending acquisition transactions (including the transactions described herein), NOG’s ability to raise or access capital, changes in accounting principles, policies or guidelines, financial or political instability, acts of war or terrorism, and other economic, competitive, governmental, regulatory and technical factors affecting NOG’s operations, products, services and prices.

NOG has based these forward-looking statements on its current expectations and assumptions about future events. While management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory, and other risks, contingencies, and uncertainties, most of which are difficult to predict and many of which are beyond NOG’s control. NOG does not undertake any duty to update or revise any forward-looking statements, except as may be required by the federal securities laws.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20231120044408/en/

Evelyn Leon Infurna
Vice President, Investor Relations
(952) 476-9800
[email protected]

Source: Northern Oil and Gas, Inc.

Released November 21, 2023

Nasdaq

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LONDON – Giant batteries that ensure stable power supply by offsetting intermittent renewable supplies are becoming cheap enough to make developers abandon scores of projects for gas-fired generation world-wide.

The long-term economics of gas-fired plants, used in Europe and some parts of the United States primarily to compensate for the intermittent nature of wind and solar power, are changing quickly, according to Reuters’ interviews with more than a dozen power plant developers, project finance bankers, analysts and consultants.

They said some battery operators are already supplying back-up power to grids at a price competitive with gas power plants, meaning gas will be used less.

The shift challenges assumptions about long-term gas demand and could mean natural gas has a smaller role in the energy transition than posited by the biggest, listed energy majors.

In the first half of the year, 68 gas power plant projects were put on hold or cancelled globally, according to data provided exclusively to Reuters by U.S.-based non-profit Global Energy Monitor.

Recent cancellations include electricity plant developer Competitive Power Ventures decision announced in October to abandon a gas plant project in New Jersey in the United States. It cited low power prices and the absence of government subsidies without giving financial detail.

British independent Carlton Power dropped plans for an 800 million pound ($997 million) gas power plant in Manchester, northern England, in 2016. Reflecting the shift in economics in favour of storage, this year it launched plans to build one of the world’s largest batteries at the site.

“In the early 1990s, we were running gas plants baseload, now they are shifting to probably 40% of the time and that’s going to drop off to 11%-15% in the next eight to 10 years,” Keith Clarke, chief executive at Carlton Power, told Reuters.

Without providing price detail, which companies say is commercially sensitive, Clarke said Carlton had struggled to finance the planned gas plant in part because of uncertainty over the revenues it would generate and the number of hours it would run.

MODELS UNDER SCRUTINY

Developers can no longer use financial modelling that assumes gas power plants are used constantly throughout their 20-year-plus lifetime, analysts said.

Instead, modellers need to predict how much gas generation is needed during times of peak demand and to compensate for the intermittency of renewable sources that are hard to anticipate.

“It does become more complex,” Nigel Scott, head of structured trade and commodity finance at Sumitomo Mitsui Banking Corporation, said.

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Learn how to optimize your analytics reports with these 10 best practices, including data integrity, visualization, storytelling and more.

Image: iStockphoto/NicoElNino

While we work hard to produce important and useful data analytics reports, we know that not all of the data we present is being used to its fullest extent. In August 2023, IDC reported that unstructured data is underutilized, undervalued and underfunded. Its survey of 400 IT leaders revealed that most of businesses’ unstructured data stays in silos, with only a fraction of it being analyzed and acted upon, leading to missed opportunities for valuable insights and actionable recommendations.

So now the question is: How much of the data we analyze and report on is being actively used?

The report usage question has plagued IT from the beginning. Most IT staff know that the 80:20 rule applies: 20% of the reports produced for the business do 80% of the informing. Meanwhile, unused and seldom-used reports pile up on servers.

To prevent wasted efforts in dashboard and analytics report development, here are eight best practices to follow:

1. Stay tuned with the business
2. Visualize dashboards, and enable easy drill-down
3. Ask next-generation report questions
4. Enable multi-level usage clearance and universal access
5. Verify data integrity
6. Synchronize data with like data in the enterprise
7. Standardize report development and formats
8. Measure for use and perform post-mortems
9. Incorporate data storytelling techniques
10. Select the right data analytics tool

1. Stay tuned with the business

How many times does IT meet with users about a report design and then go away to develop something else? More often than you think.

What happens is that IT, as it works on the report back in the office, thinks of new ways to slice and dice the data and decides to embellish the original request with additional functions and features.

This is a great practice — and can pay off “big” for users — as long as the embellishments don’t create so much report drift that the original business request is missed.

2. Visualize dashboards, and enable easy drill-down

Interactive features such as filters, drill-through capabilities and tooltips can enhance the usability of the report, enabling users to explore the data from different perspectives and obtain the insights they need.

Financial departments are comfortable working with spreadsheets and figures, while sales might prefer a pie chart, manufacturing might prefer bar charts and logistics might prefer a worldwide map (Figure A).

Figure A

Sample user panel template infographic dashboard. Image: Freepik

Finding the optimal visualization of summary-level data for each user is a major victory in itself. It immediately creates a level of comfort for the user.

Another usability factor is an easy drill-down into more detailed analytics data. For example, if a user is working with a map summary visualization and wants to know more about their truck fleet in Atlanta, they should be able to click on Atlanta so they can get to the details.

3. Ask next-generation report questions

Must-read big data coverage

Today, a user might be asking for a report that tells them how much product flows through each of their production lines hourly, daily and monthly. Next year, they might want to know how much product was returned for defects and which production lines produced it.

From a data standpoint and from a report data field definition standpoint, it’s always a good idea to ask the user what he might want to see from a given report in the future, so businesses can easily scale to that and keep the report relevant.

4. Enable multi-level usage clearance and universal access

At any given point, a new user in a new business area might request access to a report. At all points in time, the controlling user of a given report will also want to give out security clearances at different levels to people, such as a vice president of manufacturing being able to see all manufacturing activity, but the manager of Plant B only being able to see information for Plant B.

SEE: Building analytics data access paths for the best results.

Analytics report designs should clearly designate security access levels and who should control and authorize them (Figure B). These reports should also have the technical flexibility to be accessed by anyone in the enterprise who is cleared for use.

Figure B

Secured data access. Image: Freepik

5. Verify data integrity

Before any analytics report or dashboard is cleared for use and moved to production, the data it uses and reports should be cleaned and verified for accuracy. This involves performing data preparation and validation processes, such as data deduplication, outlier detection and checking for missing or inconsistent values.

Rigorously verifying data integrity before deploying analytics reports to production reduces the risk of making decisions based on inaccurate or incomplete information. This, in turn, enhances the credibility of the reports.

6. Synchronize data with like data in the enterprise

If sales reports use the data field of “customer,” which refers to individual buyers, and manufacturing systems uses the term “customer,” which refers to individual buyers but also to a rework shop within the company, this data should be synchronized so there is a common definition that enables sales and manufacturing to talk about the same thing.

Data synchronization is done in the database area of IT (Figure C). It’s important because information discrepancies and internal disagreements can arise when two different departments think they are talking about the same thing but aren’t.

Figure C

Data synchronization. Image: DZone

7. Standardize report development and formats

Standardizing the report-producing tools used as well as the formats various reports used ensures uniformity across the enterprise and lessens confusion for users. This includes standardized templates, data definitions, naming conventions, report layout and design principles.

8. Measure for use and perform post-mortems

Annually, IT should review analytics reports for the amount of use they’re getting. If a report hasn’t been used or was seldom used, IT should check with end users to see if the report is still relevant.

It’s equally valuable to conduct a post-mortem evaluation. Which content, feature and function characteristics of the reports were most widely used? What in the reports wasn’t used? What can be taken away from the evaluation to improve the quality of analytics reports? These are all important questions to ask to ensure the reports meet the end users’ needs.

9. Incorporate data storytelling techniques

Data storytelling is the art of building a compelling narrative based on complex data and analytics to effectively communicate insights and make them more memorable (Figure D).

Figure D

Data Storytelling. Image: Datacamp

Data analysts or business leaders looking to inspire action on the part of their teams must include the four elements of data storytelling: character, setting, conflict and resolution. By adding these components, organizations can elevate the impact of analytics reports and make them more engaging and persuasive.

10. Select the right data analytics tool

Choosing the right data analytics tool is important for the effectiveness of analytics efforts. The best tools are usually easy to use and are scalable. They also include data integration capabilities and visualization options, allowing businesses to connect to various data sources and create interactive reports easily.

PREMIUM: Compare features for data analytics software and services.

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WTI (Dec) $72.90 -$3.76, Brent (Jan) $77.42 -$3.76, Diff -$4.52 u/c.

USNG (Dec) $3.06 -13c, UKNG (Dec) 116.25p -2.75p, TTF (Dec) €46.3 -€0.265.

Oil price

Oil has bounced today after a bad day yesterday, but nothing that I hadn’t already mentioned. Worries about inventories, economic data, refiners run rates and even that the KSA might stop their voluntary cutbacks…

Jersey Oil & Gas

Jersey Oil & Gas has announced that the owners of the Buchan field licences, JOG and NEO Energy, have executed agreements to acquire the “Western Isles” floating production, storage and offloading vessel.  The FPSO will be used as the processing facility for the planned redevelopment of the Buchan field.

Highlights:

§ Western Isles FPSO, which has been operational since 2017, acquired for planned redevelopment of the Buchan field – high-quality vessel that is currently operating in the UK North Sea

§ JOG to receive a $9.4 million cash payment from NEO pursuant to the terms of the farm-out transaction announced on 6 April 2023 – the milestone payment in respect of finalisation of the Greater Buchan Area development solution

§ Work progressing at pace on Front-End Engineering and Design activities in order to facilitate Field Development Plan approval in 2024

 

 

Andrew Benitz, CEO of Jersey Oil & Gas, commented:

“Finalising the terms for the joint venture partners to acquire the FPSO, which is less than eight years old and requires relatively modest adaptation for our planned GBA redevelopment, is a tremendous milestone for the project. 

“Re-using existing high-quality infrastructure and modifying it to be electrification-ready is exactly in line with our stated low carbon strategy and the net zero related objectives of the industry.  The vessel is the cornerstone to completing the engineering work required to facilitate FDP approval for the Buchan redevelopment next year.”

This is another piece of good news from JOG who are clearly working extremely hard in order to deliver the GBA in a remarkably short time frame. Firstly it is a really good, young piece of kit, I think that it is a really good boat and has only been operating since 2017 which makes it a perfect fit for Buchan and I’ve seen a few FPSO’s…

Costs will be within the capex as defined in the FEED process which is making ‘good progress’ as is the FDP where the draft and environmental data is expected to be submitted later this year with approval at present hoped for in H2 2024. And of course JOG benefits from triggering of payments following the NEO farm-out, today’s transaction results in a $9.4m credit and another $12.5m on FDP approval. 

The company are also in negotiations with regard to further farm-out of the GBA and today’s announcement will surely have accelerated that process, discussions are continuing but there is no formal guidance as to how long it will take. Overall this is a superb result, it gives tangibility to the project both from an investor and an industry perspective and firms up the overall time scale, apart from anything else it proves that electrification and movement towards a low carbon strategy can and will happen and thus this is a leading light project for the whole industry.  

I have always said that the value of JOG is significantly above current levels and as progress like this keeps happening that value realisation becomes more visible. The GBA project is of such scale that once it is fully underway my Target Price for JOG of £10 per share could easily be an underestimate…

GBA Development Solution

In July 2023, it was announced that the preferred solution for the redevelopment of the Greater Buchan Area (“GBA”) was via the redeployment of an FPSO.  This solution benefits from being both the lowest cost development option and the one that results in the lowest full-cycle carbon footprint of all the potential options evaluated.  This conclusion was driven by the ability to re-use existing infrastructure that can be located directly at the Buchan field and, with limited modifications, make the FPSO “electrification-ready” upon its redeployment.  This will enable the vessel to have the potential to be connected to one of the anticipated third-party floating wind power developments that are intended to be located in close proximity to the GBA following the recent Innovation and Targeted Oil & Gas (“INTOG”) licence awards made by Crown Estate Scotland.  

Importantly, the preferred development solution aligns with the North Sea Transition Authority’s (“NSTA”) obligations to maximise the economic recovery of reserves and assist with achieving the UK government’s net zero target.  Consequently, the NSTA issued a letter confirming it had no objections to the Concept Select Report submitted in support of the Buchan re-development programme utilising the redeployment of the Western Isles FPSO. 

FPSO Acquisition

The Western Isles FPSO that is being acquired by NEO on behalf of the Buchan field partners is currently operating in the UK North Sea and is owned by Dana Petroleum (E&P) Limited (76.9188%), as operator, and NEO (23.0812%).  The FPSO is a high-quality vessel that has been in operation since early 2017 and is scheduled to come off-station as part of the planned cessation of production of the Western Isles fields around the second half of 2024.  The operational capabilities of the vessel, along with its relatively limited service-life to date, make the FPSO an excellent fit for use on the planned redevelopment of the Buchan field.

Following handover of the vessel to NEO, as the Buchan field operator, it is planned for a relatively modest work programme to be undertaken in order to prepare the FPSO for redeployment on Buchan.  The works will essentially involve the installation of water injection booster pumps, produced water injection modifications and preparation of the vessel for future electrification.  These modifications are expected to be completed by early 2026, such that the vessel can be deployed to the field location and hooked up ready for the anticipated start-up of production in late 2026.

Agreements have been executed to acquire the 76.9188% interest in the vessel not currently owned by NEO.  The main terms of the acquisition commit the Buchan field partners to acquire the vessel upon the approval of the Buchan FDP.  Prior to this milestone being achieved, the Buchan partners are responsible for the costs of storing the vessel from the date of handover, which is anticipated to be in the second half of 2024.  The FPSO acquisition and associated costs forms part of the previously announced farm-out carry arrangements agreed between NEO and JOG.

NEO Farm-out Transaction

As a result of executing the FPSO acquisition agreement, the Company is now due to receive a further cash payment from NEO of $9.4 million associated with finalisation of the GBA development solution.

Further to the farm-out transaction completed with NEO earlier this year, the Company has a 50% working interest in the GBA licences.  Through the expenditure carry arrangements agreed with NEO, the Company is being fully carried for its 50% share of the estimated $25 million cost to take the Buchan field through to FDP approval. The Company will also be carried for 12.5% of the Buchan field re-development costs (equivalent to a 1.25 carry ratio). 

In line with JOG’s stated strategy to farm-out a further interest in the GBA licences, it is targeted for the Company to ultimately retain a fully carried 20-25% interest in the Buchan re-development.

Buchan Development Activities

Work is currently progressing well on the FEED studies that require completion ahead of FDP approval and the development moving into the execution phase of activities.  This work primarily involves specification of the planned drilling programme, the design of the subsea infrastructure connecting the wells to the FPSO, and finalisation of the modifications programme that is required to prepare the FPSO for redeployment.  Additionally, preparation of the Environmental Statement for the Buchan redevelopment is on-going and it is expected that this will be submitted to the regulator prior to the end of the year, along with the draft FDP. 

The first phase of the planned GBA work programme involves re-development of the Buchan field, with the start-up of production targeted for late 2026.  Subsequent phases are expected to involve the tie-back of the Verbier and J2 discoveries that lie within the GBA licence area and the potential for regional third-party discoveries to be tied back to the FPSO.

Corporate Presentation

An updated presentation with further details on the Buchan redevelopment project has been uploaded to the Company’s website.

Reabold Resources

Reabold has announced that it has agreed to increase its interest in LNEnergy Limited by 0.8% through a partial exercise of the Second Option, whereby the Company has subscribed for 11 new ordinary shares in LNEnergy’s share capital for a cash consideration of £150,000. The Partial Exercise has been executed pursuant to an amendment of the Second Option agreement between LNEnergy and the Company, which will be funded by Reabold from its existing cash resources. This will take Reabold’s shareholding in LNEnergy to approximately 18.4% of LNEnergy’s enlarged share capital.

The Company will retain the right, at its sole discretion, to invest a further £1,650,000 under the Second Option, as announced on 9 May 2023 and 12 September 2023, in share capital of LNEnergy which, if exercised by Reabold, would result in the Company holding a 26.1% interest in the enlarged share capital of LNEnergy.

LNEnergy’s primary asset is an exclusive option over a 90% interest in the Colle Santo gas field. The Colle Santo gas field is a highly material gas resource with an estimated 65Bcf of 2P reserves^[1], with two production wells already drilled and flow-tested, making the field development ready. LNEnergy believes that the field has the potential to generate an estimated €11-12m of gross post-tax free cash flow per annum.

Reabold has published a competent person’s report in relation to Colle Santo, which can be found on its website at the following hyperlink: www.reabold.com/investors/reports-presentations

The cash proceeds received by LNEnergy from the Partial Exercise will be used to accelerate the work programme at the Colle Santo gas project. Reabold’s additional investment through the Partial Exercise will increase its exposure to this material gas resource, as well as progressing the work programme associated with the early production programme. 

Sachin Oza, Co-CEO of Reabold, commented:

“We are delighted once again to be able to further increase our interest in LNEnergy, and therefore our exposure to the Colle Santo gas project. Colle Santo holds significant gas reserves and can be a valuable source of domestic energy supply for Italy. We are pleased with the progress that has been made so far, including the recent Letter of Intent signed between LNEnergy and the Italian EPC company to provide vendor financing for the project, thereby substantially reducing the upfront capex for the development. We look forward to updating our shareholders as the project progresses.”

This modest increase in RBD’s direct holding in LNEnergy is good news as it shows that the project is very much underway following positive permitting news and is moving into the operational phase. In addition and perhaps more importantly, the partnership between LNEnergy and an Italian EPC company has been cemented by a Letter of Intent signed between LNEnergy and the Italian EPC company which will provide vendor financing for the project. 

¹ RPS estimate, September 2022

Unless otherwise defined, capitalised terms used in this announcement have the same meanings as ascribed to them in the Company’s announcement of 9 May 2023 entitled “Investment in LNEnergy”.

And finally…

After 40 years in the planning and a star studded opening night, the new Las Vegas F1 Grand Prix lasted just 8 minutes after a manhole cover lifted underneath Carlos Sainz’s car and ripped out the bottom. But given the noise you would have thought a real tragedy had happened, it’s only a manhole cover and it’s happened before…

It’s an international break for the Euro qualifiers and Scotland who are already through drew 2-2 in Georgia last night. Tonight England host Malta and Northern Ireland go to Finland, tomorrow Armenia host Wales and on Sunday Scotland entertain Norway.

The Toffees have been docked 10 points by the Premier League for breaching profit and sustainability rules which puts them at the bottom of the table. There is much more to come from this story you mark my words.

And the Cheltenham three day weekend starts today which is a brilliant way to spend hours watching the racing, I wish…

Markets soured on nuclear following the Fukushima Daiichi nuclear power disaster in March 2011, but the push toward net zero, rising global energy insecurity, and growing appetite for next generation reactor technology is restoking interest.

Uranium spot prices, a barometer for investor interest in nuclear power, rose by 55% between January and October.

Prices fell steadily following the Fukushima disaster in 2011 but have begun a gradual turnaround from a low in 2016 and currently hover at the highest point since January 2008, according to data by Cameco, the world’s largest publicly traded uranium company.

Uranium spot prices stood at $74.38 per pound at the end of October, based on month-end prices published by nuclear research companies UxC and TradeTech, up from just $18 in October 2016 and $47.68 at the end of 2022, Cameco said.

“Ongoing geopolitical events coupled with the global focus on the climate crisis have created what we believe are transformative tailwinds for the nuclear power industry, from both a demand and supply perspective,” Cameco said on their website.

Nuclear necessity

A monthly report by Bank of America’s Research Investment Committee (RIC) in May focused on what it called ‘The Nuclear Necessity’ and forecast a 20 to 40% upside on uranium and nuclear power after a decade of underinvestment.

“From the raw matter to the end user, [Bank of America] global analysts are bullish,” the report says after declaring a third bull market for uranium.

Global demand for nuclear has grown with 60 new reactors being built, 100 more approved and plans for old reactors to be refurbished, and this adds to the positive investor sentiment, the bank said.

Resource nationalism, energy security, war and inflation echo the nuclear build-out of the 1970s and ‘80s, it said.

“Every analyst I spoke to was bullish on prospects for nuclear power as a technology that’s clean and meets the kinds of goals that so many policymakers are eager to hit in terms of reducing emissions,” says Bank of America Investment and ETF Strategist Jared Woodard.

There are plentiful supplies of uranium for nuclear power, in theory, but current supplies are tight, adding to the attraction for investors, he says.

The nuclear industry includes something for both sides of the political spectrum. According to Woodard, environmentally conscious progressives are drawn to the low emissions capacity of nuclear while conservatives like the national energy security aspect.

Global policymakers who were less focused on nuclear as an option just 10 years ago are changing their attitudes, especially since the start of the Russian invasion of Ukraine, he says.

Policymakers in countries such as the United States, China and Japan are starting to include the prospect of nuclear power as one of the “workhorse providers” in their forecasts for the future in order to achieve the goals they’re focused on and “because other sources won’t be feasible to hit those goals,” he says.

The Bank of America report also highlights some of the more mature companies operating in the nuclear space, including reactor developers such as BWX Technologies, power plant operators such as Vistra and Constellation, nuclear exchange-traded funds (ETFs) such as URA and Global X Uranium ETF, and miners, such as Cameco.

The report steers clear of some of the new, advanced reactor companies but Woodard says those startups are being watched and analysts have been especially impressed by the participation of big names from other industries, such as Bill Gates and CEO of OpenAI Sam Altman.

Advanced nuclear plants remain an investment for a longer timeframe, he notes.

“To get up to a production stage it still requires some risky capital to be committed so that’s something you have to be thoughtful about,” he says.

‘New’ technology

Investors excited by nuclear power in general are cautious of what advanced, generation IV reactors can bring to the table as the untested technology seeks regulatory approval and real-world demonstrations.

However, as investor interest grows, much of the upcoming technology could reach commercialization more quickly than many anticipate.

Many new advanced reactors are, mostly, based on old technological designs that have been built and operated in the past but not made it out of the national laboratories, according to Christine King, Director of the U.S. government’s Gateway for Advanced Innovation in Nuclear (GAIN).

Once new iterations of those plants are closer to being commercially deployed, investor interest will follow.

“Checking the boxes, meeting the commitments, and getting projects done is going to start to convert some of the risk averseness into real dollars and investment in projects,” says King.

Demonstration projects are being developed in the U.S. and individual states are signing up for nuclear power, both very positive signs for the industry, King says. Some 13 states are conducting feasibility studies for advanced nuclear projects, she notes.

The Bank of America study is just another example of a changing attitude toward nuclear.

“The [study] is seen as a good example of the market opportunity around nuclear energy and people are thinking about what the opportunities are here and whether they want to position themselves as an early adopter,” King says.

The changing attitude from within the investment community could be a major turnaround for a technology that has struggled in the past to raise funds at a reasonable rate of return amid consumer resistance and uncertain legislation.

“You see this grassroots energy, from not just the innovators but from the investors as well,” says Bo Feng, Group Manager for Reactor and Fuel Cycle Analysis at the Argonne National Laboratory.

“They understand that something like this doesn’t pay off until it produces electricity, but there is a market for this, and so it’s really an exciting time to be in nuclear.”

Based in Toronto, Canada, Paul writes about nuclear power and hydrogen. Paul began his career as a journalist in Mexico City covering the power industry, economics, and fiscal policy for Market News International, the Financial Times, the Economist, and local English-language publications. In the early 2000s, Paul moved to Madrid, Spain where he worked for Reuters as macroeconomic and political correspondent.

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias. Reuters Events, a part of Reuters Professional, is owned by Thomson Reuters and operates independently of Reuters News.

Labour Party leader Keir Starmer has visited the north-east of Scotland where he has heard the “frank and honest” views of the region’s energy industry, however, this trip has created a “positive step” for the politician’s relationship with the sector.

During his trip to Aberdeen Sir Kier Starmer has laid out plans to “harness the expertise and experience that exists today across Aberdeen and the North Sea” if his party is to form the UK’s next government.

Labour will look to “unlock” private sector investment in energy to ensure the energy transition while committing to oil and gas for “decades to come.”

This has been received positively by industry, trade body Offshore Energies UK’s (OEUK) chief executive David Whitehouse explains.

Mr Whitehouse said: “There is much we agree on with the Labour Party and this visit is a positive step forward for our working relationship. The best way to cut bills, get to net zero, grow the economy and retain jobs is with our own homegrown offshore energy industry. “

Earlier this year, Sir Keir received criticism from the energy sector as he set out plans to ban new oil and gas licences if Labour wins the next general election, which is set for next year.

© Supplied by OEUK

With the Labour leader’s softening of oil and gas policy, he is unlocking the investment from the private sector he is looking to “harness”, the OEUK boss outlined.

“Our members are delivering a homegrown energy transition to net zero with the potential to spend almost £200 billion in private capital over the decade,” said Mr Whitehouse.

“This could be spent across our energy mix, from oil and gas to offshore wind, carbon capture and storage and hydrogen if we have the right investment environment.

“By the mid-2030s, oil and gas will still provide 50% of our energy needs in the UK. The reality of the transition is that the UK needs both homegrown oil and gas and renewables to cut bills and power homes, businesses and industries.”

‘Refreshing’ approach

Energy transition industry skills training provider X-Academy, part of Xodus Group, also welcomed Sir Keir’s comments during his visit to Aberdeen.

X-Academy managing director Peter Tipler said the UK had the potential become a “clean energy superpower”, but the country needed to harness that potential as a “matter of urgency”.

“Scotland has the potential to become a world leader in low carbon and renewable energy – ensuring our energy security, powering a new net zero economy and creating a green jobs revolution,” Mr Tipler said.

“However, to realise this opportunity, we must act together now and accelerate the jobs transition.”

Mr Tipler welcomed the proposed jobs bonus policy for “key North Sea industries” and the 50,000 jobs Labour estimated it would create in Scotland.

“By rewarding clean energy developers that are actively investing in jobs and supply chains in energy and industrial communities, it is also estimated to attract tens of billions of pounds of investment from the private sector,” he said.

“This approach is not only refreshing, but vital in unlocking the energy transition workforce that will power Britain’s future.

“We must take strategic, targeted action that will create jobs, ensuring there is a pathway into work.”

Mr Tipler said public investment must be accelerated to better attract and develop the skills of people not already working in the energy industry or who “may need to move from one sector to another”.

“We want to work with industry and government to not only to deliver training, but to create visibility and accessibility of jobs, and ensure there is sufficient, experienced capacity to deliver the transition,” he said.

Aberdeen visit ‘too little too late’

However, for Scottish Conservative shadow secretary for net zero, energy and transport and north-east MSP Douglas Lumsden, this trip to Aberdeen and Keir Starmer’s commitments to the energy sector is “too little too late.”

Jobs are at the heart of what the Labour Leader is speaking about while he visits the north-east, however, to Mr Lumsden the policies presented will throw energy workers “under a bus.”

Mr Lumsden said: “Keir Starmer’s pitiful attempt at finally showing face in the north-east is too little too late.

“His energy plan lacks any credibility and is a feeble attempt to pull the wool over the eyes of workers whose jobs he wants to throw under a bus.

“It’s no surprise industry leaders like Sir Ian Wood have condemned Labour’s proposals which are economically and environmentally illiterate.

“Not only would their plans threaten tens of thousands of jobs, they would undermine our energy security, leaving us at the mercy of barbaric regimes like Putin’s Russia for more expensive imports carrying a greater carbon footprint.”

The north-east MSP says that the region he represents is “at the very bottom of Keir Starmer’s priority list,” condemning the visit as a “tick-box exercise.”

© DCT

Stephen Flynn, SNP Westminster leader and MP for Aberdeen South, said: “It’s taken more than 3 years but Sir Keir Starmer has finally travelled North in order to assess Aberdeen’s riches – our energy, our workforce and our potential.”

The SNP leader argued that Scotland’s energy future should be in the hands of Scotland, rather than determined by Westminster.

Flynn added: “The big question he has repeatedly failed to answer is why we should continue to trust Westminster with Scotland’s energy wealth when we all know they’ve squandered it in comparison to the likes of our Norwegian neighbours.

© Scott Baxter / DCT Media

“Make no mistake, the Scottish people should have their fair share and benefit from these revenues both in terms of cheaper bills, but also jobs and investment.

“The fact is Scotland’s energy should be in Scotland’s hands. We know Scotland has the energy, we just need the power.”

However, both the SNP and Labour’s outlook for the UK’s energy sector has come under fire from Douglas Lumsden, who added: “While Labour and the SNP want to end the oil and gas industry as soon as possible, the Scottish Conservatives are the only party standing up for the future of the sector and the jobs it supports while delivering a successful energy transition.”

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