focusIR May 2024 Investor Webinar: Blue Whale, Kavango, Taseko Mines & CQS Natural Resources. Catch up with the webinar here.
Top UK operator eyes up new international offshore projects
Harbour Energy makes plans for Mexico and Indonesia, and looks forward to absorbing Wintershall Dea.
UK-based Harbour Energy is looking increasingly to its international portfolio for growth starting in Mexico and Indonesia, and will get a further turbo-charge after its $11.2 billion acquisition of Wintershall Dea is completed.
Harbour currently generates only 11% of its production internationally, or 11,000 barrels of oil equivalent per day, with the remainder coming from the UK North Sea, or 175,000 boepd.
That will change substantially through the Wintershall Dea assets in Norway, Argentina, Mexico, Egypt, Libya, Algeria, Germany and Denmark.
https://www.upstreamonline.com/field-development/top-uk-operator-eyes-up-new-international-offshore-projects/2-1-1609861
Strangely trading on low volumes.
As highlighted by others, divided is just up 9% with notably great progress on a transformational M&A deal, also, guidance nicely held all over, so what’s not to like, markets are hard to call and hence often provide unique opportunities for longer term investors, GLA.
An excellent update/RNS, lot better than anticipated, now let’s see how the markets react, should be a very good day here, fingers crossed.
And on the Wintershall Dea M&A:
“Since the announcement, significant progress has been made on the various approvals and workstreams required for completion”
Today’s budget announcement was a non-event as Conservatives are almost certain to loose power by next year and as such a 2029 one year EPL extension by them becomes irrelevant as it’s all down to Labour whose policies remain purposely ambiguous! However, one thing is certain here and that are the clear benefits of geographical diversification which Harbour Energy management team have very successfully initiated via the Wintershall Dea M&A agreement now in progress (along with increasing focus on PMO inherited global assets and utilizing all tax incentives that still remain in the North Sea/UK.
Wintershall Dea, Aker BP increase recoverable volume estimate from Adriana oil and gas discovery in Norwegian Sea
Wintershall Dea and its partners, Petoro, Aker BP, and PGNIG, have successfully completed drilling for an appraisal well on the Adriana gas and condensate discovery in the Norwegian Sea. They are now evaluating potential development options.
The appraisal well, drilled with the Transocean Norge rig, encountered high-quality reservoirs in the primary target within the Cretaceous Lysing Formation. Following the completion of the well, the estimated recoverable volumes for the Adriana discovery have been revised upwards, from an initial 19-31 MMboe to a new estimate of 28-43 MMboe.
“Our exploration strategy, as a subsea specialist, focuses on investing in areas close to existing infrastructure, where we already have a sound understanding of the geology and potential development options. This improves the possibility of fast-tracking discoveries into new subsea developments. The promising results from the Adriana appraisal well put us in a strong position to consider potential development strategies for this discovery”, said Roy Davies, VP Exploration & Subsurface for Wintershall Dea Norway.
Key area Haltenbanken. The Adriana discovery was made in 2021, as part of a multi-level discovery including the Dvalin North gas field, which is already being developed as a subsea tie-back to the Heidrun platform via the Wintershall Dea operated Dvalin field. The discovery lies 270 km north of Kristiansund on the west coast of Norway, in the Haltenbanken area of the Norwegian Sea close to the Dvalin, Aerfugl and Skarv fields.
“This region is pivotal to our exploration and production strategy in Norway. We are currently developing the Dvalin North discovery and hold shares in several other partner-operated discoveries and development projects in the area. This includes the ongoing Idun North and Alve North developments, which are operated by Aker BP”, said Michael Zechner, Managing Director of Wintershall Dea Norway.
A planned sidetrack to appraise the deeper Sabina discovery had to be abandoned for technical reasons. The partnership will consider re-entry during 2024 or 2025. The Transocean Norge rig has now moved to the Wintershall Dea operated Maria field to commence drilling operations in relation to the Maria Phase 2 development.
OGV Energy magazine
Published: 05-03-2024
Https://www.pressandjournal.co.uk/fp/politics/6389177/rishi-sunak-oil-aberdeen/
RISHI SUNAK: ‘I want more oil and gas’
Exclusive: The prime minister writes in the P&J about his government's plans for the vital energy industry as the Scottish Conservative conference begins in Aberdeen.
“For me, this FTSE 250 stock is a no-brainer buy!”
Harbour Energy (LSE:HBR) is the FTSE 250’s biggest oil and gas producer. And following an announcement on 21 December 2023, that it plans to acquire the worldwide assets of Wintershall Dea, I think the stock is something of a bargain.
But the shares are now changing hands for around 250p. That’s only marginally higher than before the announcement. And less than half what they were in April 2022.
Improving profitability
The declining stock price doesn’t reflect Harbour’s pre-tax earnings.
As the chart below shows, EBITDA (earnings before interest, tax, depreciation, and amortisation) was $3.9bn, in 2022.
For the six months ended 30 June 2023, EBITDA was approximately $1.4bn. This is more than the company earned for the whole of 2019, when it was valued more highly.
So what’s going on?
A massive tax bill
In May 2022, the government introduced the Energy Profits Levy (EPL) on earnings generated from the North Sea. From 1 January 2023, this was increased to 35%.
With corporation tax at 40%, this means the company is subject to a tax rate of 75% on its profits.
The EPL will apply until 31 March 2028, although if oil and gas prices fall to their 20-year average — for two consecutive quarters — it will be scrapped.
However, Brent crude is currently around 13% higher than this floor price.
Falling valuation
A common method of valuing an energy company is to compare its enterprise value (EV) — an estimate of how much someone would have to pay to buy it — with EBITDA.
EV is calculated by adding together market cap and debt, and then deducting cash.
The chart below shows that Harbour’s EBITDA/EV has been falling recently — it’s now less than one.
What does this all mean?
Wintershall has an EV of $11.2bn and during the first half of 2023, recorded an EBITDA of approximately $2.2bn. Doubling this to reflect 12 months of trading, gives a figure of $4.4bn. This implies an EV/EBITDA of around 2.5.
Based on its balance sheet at 30 June 2023, Harbour currently has an EV of $2.4bn. Multiplying its EBITDA for the first six months of 2023 by two, gives an expected result of $2.8bn for the full year.
Therefore, post-merger the group’s EV will be approximately $13.6bn. And it will have an EV/EBITDA of 1.9.
Even if investors remain sceptical and drop the group’s valuation to one, its stock market valuation should be $7.2bn. Based on the number of shares that will be in issue, this implies a share price of 335p. That’s a premium of around 34% to today’s value.
That’s why — despite the penal tax rate, its carbon-intensive footprint and its exposure to volatile commodity prices — the company’s shares appear to be a ‘no-brainer’ buy to me.
The post For me, this FTSE 250 stock is a no-brainer buy!
https://uk.finance.yahoo.com/news/ftse-250-stock-no-brainer-075900549.html
And let’s not forget potential progress on HBR drilling in Norway.
On separate note, some interesting reading here:
Wintershall achieves “significant” exploration, production milestones in 2023
In Norway, the company recommenced full production at the Dvalin field at the end of 2023 providing significant new gas volumes for Europe. It also secured approval for the further development of the Dvalin North and Maria Phase 2 fields, and 13 new exploration licences in the latest licensing round.
In Mexico, Wintershall Dea closed its acquisition of a 37% interest in the producing Hokchi field, and made a major oil discovery at the Kan exploration prospect with preliminary volume estimates of 200 to 300 MMboe. Together with its partners, the company received approval for the development concept for the Zama field, one of the largest shallow water oil discoveries of the past 20 years.
In Argentina, the development of the Fénix project has continued apace. The production platform for the project has been successfully installed in February 2024. The project will produce up to 10 MMcmgd for Argentina once operational, with first gas anticipated in Q4 2024.
In the MENA region, Wintershall Dea produced first gas at its operated East Damanhour project in Egypt, and took the final investment decision for the Raven west development (West Nile Delta), with start of production expected in Q2 2025. In Algeria, the company closed its acquisition of an increased share at Reggane Nord.
One of the strongest CCS portfolios in Europe. The company also made strong progress in its carbon, capture and storage (CCS) activities.
https://worldoil.com/news/2024/2/25/wintershall-achieves-significant-exploration-production-milestones-in-2023/
Key here will be any updates on progress in the Wintershall Dea deal, Mexico, and/or Indonesia assets, however on the M&A front, I believe that we can expect a comprehensive progress report by the time of the company AGM in May.
Stupmy, we’re also getting a fair few large one off trades here almost daily nowadays which is pretty irregular in HBR but not unexpected while awaiting for a merger of this size to close, and personally, I don’t expect to see any shorts here by Q3 as we close in on the M&A finalization.
Stumpy, Just looking at the daily trading volumes here these days as compared to last year, as for CONTROL EMPRESARIAL DE CAPITALES, S.A. DE C.V. ( Carlos Slim & Team/Family), they’ve gone from 0% to over +7% here in no time, my guess is that they’ll eventually move up to a +10% holding.
I have no crystal ball but I’m very optimistic (particularly post the merger) and invested here for the long run and while SP remain at these levels, I plan to reinvest my dividends, GLA.
Norwegian tax system is very fair, consistent and hence unlike the UK, extremely stable, newly formed HBR will benefit enormously post the Wintershall M&A finalization. I hope the UK will heed a lesson or two!
Short Sellers in Trouble As Physical Oil Market Defies Data
While official data indicates an oil glut, the physical oil market is experiencing significant tightness, as evidenced by soaring spreads, contrary to market expectations.
Factors contributing to the physical market's tightness include supply issues in various regions, including vessel diversions, freeze-offs in the US, worker protests in Libya, and logistical constraints in the North Sea.
Despite the physical market's tightening, financial players continue to aggressively sell and short the sector, translating into high short interest in energy stocks and challenging the physical oil market's resilience.
Something odd is taking place in the oil market. While on one hand "data" dissembled by Biden's Dept of Energy and specifically its statistical arm, the Energy Information Administration, has done everything it could to indicate there is a glut of oil, which is understandable - there is nothing Biden's handlers fear more than an inflationary surge in oil and gasoline prices ahead of the November elections and will do everything in their power to mandate a dataset that has the most adverse impact on oil prices, the physical market is sending just the opposite signal, with spreads showing screaming physical tightness.
Consider the Brent prompt spread which after tumbling to a multi-year low in late December, has exploded higher to a backwardation around 90 cents...
... entrenching its strongest position since late October, while several other timespreads also the firmest since last September. The comparable WTI April-May spread was trading around 50 cents after hitting 75 cents last week.
Commenting on the surge in time-spreads, Citi strategist Max Leyton - who is far less bearish than oil permabear Ed Morse who recently left the bank - says they strengthened on the “perfect storm” of Atlantic Basin supply issues, and notes that supply issues include “ongoing Red Sea vessel diversions, US freeze-offs hitting oil output, worker protests disrupting Libyan supply, UK oil terminal logistics limiting North Sea Forties supply, and buying up of crude cargoes at the Nigerian Dangote refinery."
https://oilprice.com/Energy/Crude-Oil/Short-Sellers-in-Trouble-As-Physical-Oil-Market-Defies-Data.html
Looks like someone(s) loading up extremely carefully/slowly here on the very cheap at the moment, possibly CONTROL EMPRESARIAL DE CAPITALES, S.A. DE C.V. ( Carlos Slim & Team/Family) who likely plan to go to 10%+ holding before the deal is closed and the SP rockets along with also the PoO.
Interesting development here indeed which bodes very well for post M&A closure in Q4 (or earlier) with BASF now planning to hold on to their Russian O&G assets/business.
“BASF and LetterOne Extend Ownership of Russian Oil and Gas Company Wintershall”
“BASF, the German chemical giant, and LetterOne, an investment group led by Mikhail Fridman, have decided to maintain their ownership stakes in the Russian business of the oil and gas company Wintershall Dea. This decision comes despite the ongoing sale of foreign assets to Harbour Energy, a transaction that involves the transfer of Wintershall Dea's oil and gas business to Harbour Energy. However, the deal excludes Russia-related businesses and the gas transmission business in Germany. The legal separation of these Russia-related businesses is part of an ongoing process.”
Wintershall achieves “significant” exploration, production milestones in 2023
https://worldoil.com/news/2024/2/25/wintershall-achieves-significant-exploration-production-milestones-in-2023/
“great posts will read thru a few times, same there is so many wolves in sheep's clothing on this BB, you would have thought after the BOD playing an absolute blinder - and still the dark side stick like shxx on your shoe. Hope they get hurt. HNY GLA for the true HBR LTH'ers”
BaysilHope, spot on mate, and this may continue until the deal is finalized and then they will all rapidly disappear as this time, we’ll enter the FTSE 100 permanently.
Hopefully the HBR - Wintershall deal will close somewhat sooner than the anticipated Q4 and the resulting HBR (being the size of Aker BP) will easily be back in the FTSE 100.
Great Divi, huge Capital gains potential, solid proactive management, fantastic PMO and now richly diversified/outstanding Wintershall Dea assets all in the works, what’s not to like here, sometimes markets offer exceptionally unique opportunities and HBR today is now one such case I believe.
Firstly, any M&A deal of this magnitude (or any deal for that matter) is never completed until it’s fully closed/done (estimated closure Q4 this very year), and secondly, when have markets ever been rational? But markets do often provide unique entry opportunities and I believe HBR today is one such opportunity.
And as for Shorts (which BTW have significantly reduced from their highs of last year), I’ve seen them on the wrong side of a trade often and forced to rush for rapid closure (which can actually end up as a positive for the SP), some Shorters are smart and/or lucky and some for sure are just a bunch of gambling young kids playing with other people’s money, and this is all in my humble opinion, I’m sure everyone here will continuously do their own research, GLA.
BASF CFO Dirk Elvermann sees no obstacles to the planned sale of the oil and gas subsidiary Wintershall Dea to the British oil company Harbour Energy. Elvermann told the news agencies dpa-AFX and dpa that the review was a matter of course in the Foreign Trade and Payments Act and in a corresponding ordinance. BASF announced the sale in December.
The German government intends to subject the deal, which is due to be completed in the fourth quarter, to an investment review. The agreement includes the transfer of the production and development business and exploration rights in several countries, as well as licenses for the capture and storage of carbon dioxide.
"The Wintershall Dea assets to be divested do not represent critical infrastructure," said Elvermann. Only a minority stake in the transmission system operator Nowega could be considered part of the critical infrastructure. Wintershall Dea is only indirectly involved in this via a minority shareholding in Erdgas Münster. This was the trigger for the Federal Government's audit.
In addition, Wintershall Dea is continuing preparations for the separate sale of its stake in Wiga. This company is active in the gas transportation business - the operationally independent Wiga subsidiaries operate high-pressure pipeline systems, including the transportation network of Gascade as well as Opal and NEL.
The pipelines were originally used to distribute Russian gas in Germany, said Elvermann. Now they are being used to land liquefied natural gas from other countries, such as the USA.
- possibly also for hydrogen in the future. "This critical
infrastructure is not part of the deal with Harbour Energy," Elvermann emphasized. Wintershall Dea wants to sell its share of these pipelines separately. The German government is the first point of contact here.
In contrast to earlier German-British deals, the UK is no longer part of the EU, said the CFO. However, a British buyer had never been refused a purchase in an investment protection review. "We are very confident about the review."/wo/DP/he