If you would like to ask our webinar guest speakers from WS Blue Whale Growth Fund, Taseko Mines, Kavango Resources and CQS Natural Resources fund a question please submit them here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
"Is it better to demonise the Big Oil Companies or to recognise that they are a key transition component?"
=================================================================
Boyobach, 'big oil' have to be part of the solution IF we manage to tackle climate change....or at least avoid the worst effects. But there will always be mistrust by the green lobby...which is probably healthy & well-founded. Turkeys don't vote for Christmas and currently big oil's business model is still built on producing fossil fuels...there is 'probably' a certain amount of green washing in some of the 'transition' plans being announced ('obviously' not by Shell!!).
Are you living in Asia or just like to post at night. lol
I am in Asia.
oil and gas are indispensable and will continue to be indispensable for the observable future and beyond it....
https://oilprice.com/Energy/Crude-Oil/World-Leaders-Have-To-Face-The-Truth-About-Oil-Demand.html
Is it better to demonise the Big Oil Companies or to recognise that they are a key transition component?
https://www.reuters.com/article/oil-conference-pioneer-natural-resources-idUSKBN2IM1NP
It seems plain that OPEC+ are steering a path that aims to stabilise oil in the region of $75 (Brent). Although they would undoubtedly like it higher, that carries consequences and risks which, for the moment, they do not seem keen to test.
So how representative of ‘normal’ are the current prices of Oil and Natural Gas?
This chart rebases the two from an arbitrary date - 8/8/2015 - when Brent was about $50 and NG was about $2.8 (the 0% line):
https://invst.ly/wu1rj
Comparisons like this can be very selective, but it seems to show that the relationship between NG and Brent is currently near a ‘norm’ (if there is such a thing), with both near the upper end of their price range of the last six years. However, it’s unusual to see Brent above $70 in December (it fell back to $50 in Dec 2018 after hitting the last peak) and the price usually climbs through Q1/Q2 whilst, for NG, the seasonal effect is weighted differently as it is more dependent on Northern hemisphere heating. 2022 looks set to be interesting.
Capital spending has indeed been cut, deliberately as a result of the cash preservation and cash conservation requests instigated by BVB. The allocation of the reduced spend has also been changed, as a result of the transformation journey the Company is on… The traditional cash cows are needed as BVB has said, and as the balanced population realise, but come 2050 the footprint of RDS will be different.
It’s really no wonder the reserves ratio is slipping, again it’s deliberate as RDS focus on ‘the hubs’,,,, Do they need a little more? Perhaps…. Can they get it, for sure, they have the cash.
All told, a strong strategy and playing out well IMO.
Shell has already cut spending dramatically over the last decade. After having peaked at $39 bn in 2013, upstream capital spending fell to only $17 bn in 2020 – a drop of nearly 60%. Spending has barely recovered in the three quarters of 2021. A lack of spending has already impacted production. Proforma for the 2016 acquisition of BG Group, Shell’s total production has fallen 13% since capital spending peaked in 2013. These trends are accelerating: Shell’s production over the first nine months of 2021 have fallen 7% compared with the same period last year.
If Royal Dutch Shell’s upstream capital spending remains at today’s depressed levels, we estimate the company will only be able to replace 30% of production with new reserves and that production will fall 40% over the next nine years. If spending is further curtailed (as is being proposed), Shell’s oil and natural gas production would collapse – something that may have already started.
As we have outlined many times in these letters, we believe growth in non-OPEC+ oil supply will turn negative this decade. The issues faced by the super-majors are a great example of pressures exerted on the energy industry as a whole.
As non-OPEC+ production declines, OPEC will gain ever more market share and pricing power. The first oil crisis of the 21st century is now upon us. You have to look no further than the plight of the super-majors to see why.
What should Chevron expect?
It was recently reported by The Wall Street Journal that Exxon was considering abandoning two massive natural gas projects: the 75 trillion cubic foot (tcf ) Rovuma LNG project (capital cost $30 bn) and the 5 tcf Ca Voi Xanh offshore-Vietnam as project (capital cost $10 bn). Exxon board members (most likely including the three supported by Engine No. 1) have publically expressed concerns about both projects.
According to internal reports, these projects are among the highest CO2 producers in Exxon’s pipeline; it is no surprise these projects have been called into question. However, we find the plight of both fields to be perplexing since production would almost certainly be used to displace coal in electricity generation, cutting CO2 emissions by nearly 50%. This fact seems to be lost on the new Exxon board members.
Vietnam’s electricity generation is 50% coal-based while only 8% comes from natural gas. The country has stated its long-term goal is to have 80% of its electricity come from natural gas. If Vietnam is successful in its ambitious goal, it would reduce carbon emissions by nearly 30%. The development of the Ca Voi Xanh field is a critical part of this plan.
Similarly, large volumes of Rovuma LNG will likely go to displacing coal in India. Only 7% of all Indian electricity comes from natural gas while coal represents 55%. India wants natural gas to represent 15% of its energy mix by 2030. Cancelling the Rovuma LNG project would certainly complicate this goal with large implications for CO2 reduction.
A global natural gas shortage has already developed and we believe this is only the beginning of a long period of structural deficit. The world desperately needs the development of massive natural gas fields like Ca Voi Xanh and Rovuma to meet demand going forward.
Royal Dutch Shell’s ESG challenges continue unabated. A Dutch court ruled in May that Royal Dutch Shell must cut its CO2 output by 45% by 2030 to align their policies with the Paris Climate Accord. In a statement issued after the verdict, a Shell spokesperson acknowledged that “urgent action is needed on climate change and the company is accelerating efforts to reduce emissions.” If the pressure from the Dutch court system was not enough, an activist shareholder has proposed breaking the company apart to address ESG concerns. On October 27th, Third Point Management announced the following.
“If Shell pursues this type of strategy it would probably lead to an acceleration of carbon dioxide reduction. […] Breaking Shell into two operating units would create a standalone legacy energy business (upstream, refining, and chemicals) that could slow capex beyond what is has already promised, sell assets, and prioritize return of cash to shareholder which can be reallocated into low-carbon areas of the market.”
http://gorozen.com/research/commentaries/3Q2021_Commentary
The super-majors’ problems continue to mount. Last quarter in “The Incredible Shrinking Oil Majors,” we discussed their inability to replace production with new reserves and how production of both oil and gas would significantly disappoint as we progressed through this decade -- especially considering the collapse of upstream capital spending budgets last year. We also discussed the forces now being applied to the companies by various ESG groups, both shareholders with de minimis ownership and various court systems, and how these forces would only exacerbate the reserve replacement and production problems being faced by these companies today.
A number of recent developments merit discussion. Both capital spending and production of oil and natural gas continue to fall for the four super-majors (Exxon, Chevron, Royal Dutch Shell and Total Energies). In 2019, upstream capital expenditures averaged $15 bn per quarter for these four companies. Upstream spending collapsed in tandem with oil prices in 2020; by 1Q21 it had fallen by over 50%. Even though oil prices have rebounded, capital spending has lagged far behind, trending upward in 2021 off last year’s low, but still well below 2019 levels.
The large drop in capital spending has already put notable pressure on oil and gas production across the four super-majors. The surge in finding and development costs over the previous decade, combined with any extended drop in upstream capital spending, will produce large drops in reserve replacement and production going forward.
Our models originally suggested hydrocarbon reserve replacement will fall to only 40% while production itself will fall over 30% by 2030 unless capital spending trends move much higher. It now looks like the severe drop (and weak subsequent rebound) in capital spending over the past 20 months is already pressuring oil and natural gas production. Super-major production has now fallen over 10% since the beginning of 2019.
Three out of the four super-majors face intense ESG-related scrutiny. (2 very interesting graphs follow)
After successfully replacing 25% of Exxon’s board of directors despite owning just 0.02% of the outstanding equity, Engine No. 1, the climate-focused activist hedge fund, met with Chevron’s management late last summer. In discussions that were later described as “cordial,” Chevron executives shared their plan to reduce carbon emissions. Subsequently, Chevron announced new plans to further reduce carbon output, along with their intention to appoint a new director with “environmental expertise.” Although it remains unclear exactly what Engine No. 1 is planning, rumors suggest the fund has contacted other investors, strongly suggesting they intend to launch a second campaign in the not-too-distant future.
Cheers -just thinking out loud, which helps me assess how RDS is performing .
BP is very similar, it has to be said.
Enjoy reading those too :)
Boyobach, please keep up the analysis, really appreciate your posts and graphs.
With Brent back up to $76, it’s interesting to see how RDSb compares today with its performance back on Sept 22nd - when Brent was also at $76: https://invst.ly/wts-h .
This chart of RDSv Brent demonstrates that RDS has gained about £1.70 relative to Brent since it peaked at 1520 intraday on the 22/9. Much of that relative gain has occurred since Brent fell sharply in November, with RDS finding support around 1560 despite Brent’s continued plunge. The last three days, however, have seen Brent making a sharp recovery and this has presumably helped to keep the RDS rally going, although there were signs today that it may be peaking. For its part, Brent may yet latch back onto the 19 month trend (blue) that it dramatically dropped through when it fell: https://invst.ly/wtsv5 , although that does seem unlikely given seasonal and covid factors.
"When the truth comes out it will make fossil fuel extraction look green by comparison."
=============================================================================
Getagrip, to some extent you have a point. Not enough research has gone into the environmental impact of 'going green'. The same could 'probably' be said about nuclear, it isn't a perfect solution but it will 'probably' be needed for energy security...i.e. when the sun don't shine & the wind don't blow.
converting this to nice clean hydrogen off piste! The Green lobbies in the Western Democracies are going to have to wake up to the chicanery that is taking place over countries pursuing net-zero emissions. It is not just about buying a heavily subsidised EV.
Ask the estimated 255,000 (almost exclusively black in terms of ethnicity) cobalt miners, essential for EV battery manufacture, producing an estimated 70% of world cobalt production, how "green" they feel the Democratic Republic of Congo is!!! The tools that they are using are picks and spades. Health and Safety barely exists!
This is a typical quote lifted from the Internet:
"Of the 255,000 Congolese mining for cobalt, 40,000 are children, some as young as six years. Much of the work is informal small-scale mining in which laborers earn less than $2 per day while using their own tools, primarily their hands."
This is without going into the wider extraction of Rare Earth Metals in China and Africa, with the vast associated contaminated & toxic lakes, moonscape areas & great swathes of the local populations with associated health difficulties.
At Government level the approach to going green needs to be much more joined up and honest! Otherwise buying an EV in Europe will simply mean the DRC buying more picks and spades for its population once they reach 6-years of age. As a country we have matured and learned from the children in mines stage, but even now we are unsuspectingly inflicting a similar fate on others, whilst world governments play with smoke and mirrors. When the truth comes out it will make fossil fuel extraction look green by comparison.
It was an interesting take on the direction Japan is taking, also showing environmentalists concerned at Japan building its latest coal-fired power station & stating that the Japanese are importing 200 million tons of coal each year, largely from Australia. Then as BE says
News on the BBC last evening how Japan are going to import 'blue' hydrogen from Australia to generate their electricity. The rather bizarre claim is they will then be a zero carbon society....basically they are exporting their carbon emissions to Australia who will use coal to generate the hydrogen. liquefy it & ship it to Japan. The long term goal is to develop carbon capture to presumably make the hydrogen 'green' in the future.
[https://www.bbc.co.uk/news/world-asia-59525480]
An example of the reality of 'going green'....there isn't an easy & perfect solution.
PS Japan was relying on nuclear for their energy production until the Fukushima nuclear disaster destroyed that plan.
Another renewable partnership investing in Hydrogen...
https://www.bluescope.com/bluescope-news/2021/12/bluescope-and-shell-sign-mou/
So after last weeks fire the problems still continue for Prelude......
Bloomberg) --Royal Dutch Shell Plc has evacuated non-essential staff from its floating liquefied natural gas facility in northwest Australia as the operator struggled to restore power that knocked out operations earlier in the week, according to people familiar with the matter.
The delay in bringing essential power generators back online at the Prelude LNG export plant had left workers without ventilation, potable water services and a sewage treatment system, said one of the people, who spoke on the condition of anonymity as they’re not authorized to speak to media. The evacuation of non-essential staff was assisted by Inpex Corp.’s helicopter and rescue vessel, the people said.
Shell said in an emailed statement that work to restore main power is underway, without commenting on the evacuation.
The world’s biggest floating LNG plant suspended production and delayed the loading of a prompt cargo on Friday after suffering an issue that tripped power at the facility. The evacuation indicates that the plant could be shut for longer than originally anticipated, exacerbating a global shortage of natural gas.
Shell and its partners are now considering canceling the scheduled LNG cargo loading due to the ongoing power issue, one of the people said.
Mon, 6th Dec 2021 07:06
Royal Dutch Shell Plc Third Quarter 2021 Euro and GBP Equivalent Dividend Payments
The Hague, December 6, 2021 - The Board of Royal Dutch Shell plc (“RDS”) today announced the pounds sterling and euro equivalent dividend payments in respect of the third quarter 2021 interim dividend, which was announced on October 28, 2021 at US$0.24 per A ordinary share (“A Share”) and B ordinary share (“B Share”).
Dividends on A Shares will be paid, by default, in euros at the rate of €0.2121per A Share. Holders of A Shares who have validly submitted US dollars or pounds sterling currency elections by November 26, 2021 will be entitled to a dividend of US$0.24 or 18.06p per A Share, respectively.
Dividends on B Shares will be paid, by default, in pounds sterling at the rate of 18.06p per B Share. Holders of B Shares who have validly submitted US dollars or euros currency elections by November 26, 2021 will be entitled to a dividend of US$0.24 or €0.2121per B Share, respectively.
Euro and pounds sterling dividends payable in cash have been converted from US dollars based on an average of market exchange rates over the three dealing days from 1 December to 3 December 2021.
This dividend will be payable on December 20, 2021 to those members whose names were on the Register of Members on November 12, 2021.
Taxation - cash dividend
Cash dividends on A Shares will be subject to the deduction of Dutch dividend withholding tax at the rate of 15%, which may be reduced in certain circumstances. Non-Dutch resident shareholders, depending on their particular circumstances, may be entitled to a full or partial refund of Dutch dividend withholding tax.
If you are uncertain as to the tax treatment of any dividends you should consult your tax advisor.
Note A different currency election date may apply to shareholders holding shares in a securities account with a bank or financial institution ultimately holding through Euroclear Nederland. This may also apply to other shareholders who do not hold their shares either directly on the Register of Members or in the corporate sponsored nominee arrangement. Shareholders can contact their broker, financial intermediary, bank or financial institution for the election deadline that applies.
Bald_eagle totally agree but religious leaders care more about their dogma than the environment. God will take care.
Christmas rally ,nice
The downtrend in sp since October 20th (red) is over, so the question turns to the current uptrend (green) and how far that will take the sp: https://invst.ly/wtacl
With Brent proving more resilient than some pundits supposed, the obvious target for RDSb (according to that particular chart) of 1715 might turn out to be short of the mark.
The Chinese solution was a disaster and there is a major gender imbalance. So i don't really think it worked at all. Most of Europe's replenishment rate is less than needed for a capitalist system to function. That's why a move away from a capitalist's system is needed.
"What we really need is a smaller global population then there will be a reduction in goods and energy required."
==============================================================
Orac, I haven't really heard 'environmentalists' calling for a reduction in world population. I don't expect that would be popular....even more of a hard sell than reducing our reliance on fossil fuels.
How would we do it?! The Chinese 'solution' sort of worked but not a vote winner I suspect!!
Slightly ironically the birth rate in UK by 'indigenous' population is too low to support a vibrant economy, if you believe the economists. Perhaps the answer will be AI, where less people will be required & we will all have more 'quality' time. But I suspect it will just mean the super rich getting even richer.