Ben Richardson, CEO at SulNOx, confident they can cost-effectively decarbonise commercial shipping. Watch the video here.
FINAL SECTION
2021 could be a watershed year for oil markets, in which falling investments and bankruptcies will create a supply crunch the likes of which we have never seen before. With an ever-growing list of delayed upstream projects and FIDs, the threat is growing. In a report by the International Energy Forum (IEF) and consultancy BCG in December 2020, warnings were given that lower CAPEX levels and low investment appetite will be a real threat to markets. OPEC, IEA, and others, have already made it clear that cumulative hydrocarbon related investments are dwindling. As OPEC has indicated before, investment volumes of around $12.6 trillion are needed to keep the oil supply for the coming decades at the current level. Norwegian oil consultancy Rystad Energy said that even though demand has declined in 2020, 2019 levels could return before 2024/25, necessitating future upstream spending of an average of $380 billion p.a. over the long-term. The need for large scale new investments is clear, as the upstream sector has already been fighting an uphill battle to get access to the necessary investment volumes in recent years. Larger investments are necessary to avoid a future of higher prices and increased market volatility. Inadequate investments will set off another wave of unwanted boom-and-bust pricing. With oil majors indicating that CAPEX reductions will be in place throughout 2021, and some even seeing 2022 as a difficult year, production is undoubtedly being threatened.
Technology alone cannot be the savior. IEF research indicated that every dollar of CAPEX that is cut today will have twice as powerful an effect in terms of reducing activity as the cuts made following the 2014 fall in prices had. As demand for oil and gas is expected to increase after COVID, low CAPEX supply will become a major constraint. At the moment, no real new immense oil and gas resource is available to counter demand growth without trillions of investment dollars being poured in.
A peak oil investment crisis is in the making. The current financials of most IOCs and leading NOCs are not accounting for peak investment requirements. As the IEF report clearly states, industry investment will have to rise over the next three years by at least 25% yearly from 2020 levels to stave off a crisis. Peak oil prices also could be a reality if the market doesn’t react.
By Cyril Widdershoven for Oilprice.com
More Top Reads From Oilprice.com:
CONTINUATION - GRAPHS NOT INCLUDED
During COVID, international oil companies have seen a steep decline in their revenues, market value, and interest from institutional investors. The ongoing financial plunge has had an enormous effect on their total market capitalization, which plunged to unforeseen levels. In October 2020 reports showed that the combined market cap of the top-5 oil companies in the U.S. fell by 45% to $367 billion, in comparison to $690 billion in December 2019 or $674 billion in October 2019. It wasn’t only COVID that was responsible for this drop, but also global macro-economic drivers, such as the U.S.-China trade war and continuing oil overproduction. In the last year, instability in the market has increased due to lower revenues, increased market cooperation, and a tsunami of bankruptcies, divestments, and consolidation. A significant indicator of just how much the industry was suffering was the removal of ExxonMobil, once the world’s largest publicly traded company, from the Dow Jones Industrial Average in August 2020. Exxon suffered a huge market cap drop in 2020, falling from $300 billion in September 2019 to $144 billion in October 2020.
European oil and gas companies also suffered in 2020. Almost all 25 NA-European oil and gas companies have seen a market capitalization crash in 2020.
European supermajors Royal Dutch Shell and BP, which are in the midst of diversifying their businesses, declined in value by 33.5% and 34.5%, respectively. At the end of 2020, overall energy indexes were still around 20% lower than at the start of 2020.
Major investment institutions are currently turning their backs on hydrocarbon investments. A growing political emphasis on renewables, low-carbon or even Net-Zero production, and other energy transition policies are massively hurting oil and gas investment. The IMF, WB, EBRD, EIB, and others have also stated that they are ending hydrocarbon project financing. The well-recorded oil demand destruction during 2020 has pushed oil supply risks out of the mind of analysts is seems. Most E&P companies have curtailed their spending on upstream operations dramatically. These lower 2020 investment levels, combined with several low investment years before, are now a serious threat to the future of the oil market. Market volatility is expected to increase in the coming years, mainly due to the lower investment levels reducing supply.
Article posted on Oil Price. com on the 12th.
As I did not see this article referred to in earlier posts I thought I would post here.
https://oilprice.com/Energy/Oil-Prices/The-Oil-Industry-Is-In-Dire-Need-Of-Investment.html?utm_source=browser&utm_medium=push_notification&utm_campaign=vwo_notification_1610168088&_p_c=1
Please go to web link to read article in full plus graphs etc
The Oil Industry Is In Dire Need Of Investment
By Cyril Widdershoven - Jan 12, 2021, 7:00 PM CST
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The global oil market is in flux once again. The bulls are fighting it out with the bears as COVID lockdowns come into force around the world. Oil prices may have hit 10-month highs on the back of extended production cuts from OPEC+ but black clouds have re-emerged on the horizon as the majority of OECD markets appear to be struggling with a new strain of COVID. The new strain was first identified in the UK but has now been reported in China, Japan, and other major Asian markets. Optimism about short-term oil prices should be subdued as demand for fuels will undoubtedly take a hit as lockdowns continue. A potential new oil glut could be in the making for H1 2021 if exporters fail to keep their promises.
Still, there will be a post-COVID era at some point, hopefully shortly after summer. Optimism remains tempered, but global vaccination programs are in place, which could lead to a reopening in the near future. The real market threats in the years to come, however, are currently being ignored. After several years of being bombarded by peak oil demand or oil glut scenarios, the market is without any doubt heading towards a major supply crisis. The COVID-era has not only removed short-term demand and increased interest in a global energy transition, it has also brought down global upstream investments. Analysts have already indicated a possible peak oil investment scenario, but that has been countered by many claiming that renewables will make up for losses. The reality, however, is very worrying. Demand for crude oil, natural gas, and petroleum products is going to hit a plateau in the coming decades, but it will still likely reach a level of more than 108-110 million bpd for a long period of time. Demand is likely to grow by at least 10 million bpd from current levels. So where are these additional volumes going to come from? With upstream investment faltering and majors turning their back on oil, it remains unclear how this demand will be met.
https://www.reuters.com/article/global-oil-supply-idUSKBN28P1BT?taid=5fd8ad85fa24020001ede6bc&utm_campaign=trueAnthem:+Trending+Content&utm_medium=trueAnthem&utm_source=twitter
World faces long-term oil supply gap despite COVID demand destruction
By Noah Browning
3 MIN READ
LONDON (Reuters) - Inadequate investment in exploration and new drilling may leave the world without enough oil in 20 to 30 years despite a shift towards renewable power sources, top energy analysts say.
FILE PHOTO: Oil pours out of a spout from Edwin Drake's original 1859 well that launched the modern petroleum industry at the Drake Well Museum and Park in Titusville, Pennsylvania U.S., October 5, 2017. REUTERS/Brendan McDermid
The long-term outlook contrasts with today’s situation where plunging oil demand due to the coronavirus crisis has left the market oversupplied, prompting the Organization of the Petroleum Exporting Countries, Russia and their allies, a group known as OPEC+, to curb output.
(For graphic of Oil supply and demand scenarios: )
Reuters Graphic
Weak demand has piled pressure on producers and energy majors as they seek to pivot to low-carbon energy. It has sapped them of funds to invest in new oil assets so they can meet an expected rise in crude demand as the global economy recovers.
(For graphic of Crude futures front month close: )
Reuters Graphic
The Paris-based International Energy Agency said it was not clear if adequate investment in oil supplies “will come in time and, if it does come, where it will come from.”
Sufficient long-term oil supplies “should not be taken for granted,” it wrote in its annual outlook.
(For graphic of Global oil supply: )
Reuters Graphic
(For graphic of Total new liquids supply: )
Reuters Graphic
Norwegian consultancy Rystad Energy said in a report this month that the world would run out of the oil supplies it needed by 2050 unless there was sharp rise in exploration.
It said was $3 trillion in capital spending was needed to tap 313 billion new barrels of oil from existing underdeveloped fields or from new undiscovered fields.
“The scope of exploration will have to expand significantly unless we see a momentous transition in the global energy mix sooner than currently expected,” said Palzor Shenga, Rystad’s senior upstream analyst.
Energy consultancy Wood Mackenzie said existing discoveries needed investment to meet future oil needs but said current low-level demand, high costs of developing new resources and the associated risks had deterred oil companies from acting.
“Only about half the supply needed to 2040 is guaranteed from fields already onstream. The rest requires new capital investment and is up for grabs,” the consultancy said.
(For graphic of Global fuel supply: )
Reuters Graphic
Reporting by Noah Browning; Editing by Edmund Blair
Life is easy if you have hindsight.
Where a company considers the market does not reflect the "true" value in the current share price, then many companies have adopted the practice of spending "surplus" cash on buying shares in the open market. It is considered to be good for remaining shareholders as it is hoped the share price will increase.
I have no idea why the GKP BoD did not immediately cancel the shares, nor why they have not RNSd that they have now cancelled all but 1m - so we have the likes of ADVFN showing the shares in issue as 224m!
I am no apologist for Jon Ferrier, but the buy back decision was taken by the whole BoD and was completed prior to many (our own government included) realised the economic world wide impact from covid with its resultant negative effect of the price of oil.
There are a number of posters who regularly state the company will be sold in the very near future.
If that were to be the case, then all existing shareholders will benefit from buy back if the take over price is north of £2.
Highlander1970
While I too would like the idea of GKP being debt free, the buy back was not necessarily a bad move.
The company purchased 19,059,064 shares at a cost of $50m - so an average cost of $2.62 or a little less than £2 each - so purchased at twice today’s price.
If / when the company is sold - let's say for $5b including existing debt and cash - that would equate to $23.57 per share ( $5b less $50m of extra debt based on 210m shares) whereas without the buy back, each share would be worth $21.83 ($5 billion divided by 229m shares).
So shareholders receive an extra $1.74c per share held.
Multiply up by your own shareholding.
Of course, some think the company could be sold for $10b (or more) - that would deliver an extra $3.72c (or more) for every share held.
Overall, I do not view the company decision to buy back 19m shares at an average of, let's say £2 each, a poor decision.
Attyg - hoping for a sale, but still not expecting one.
Apologies for the earlier incorrect posting – I thought the 13 March RNS was the last one summarising the transactions in own shares.
highlander1970,
While I too would like the idea of GKP being debt free, the buy back was not necessarily a bad move.
The company purchased 19,059,064 shares at a cost of $25m - so an average cost of $1.312 or less than £1 each - so not purchased at multiples of today's price. (See RNS dated 13 March 2020)
If / when the company is sold - let's say for $5b including existing debt and cash - that would equate to $23.69 per share ( $5b less $25m of extra debt based on 210m shares) whereas without the buy back, each share would be worth $21.83 ($5 billion divided by 229m shares).
So shareholders receive an extra $1.86c per share held.
Multiply up by your own shareholding.
Of course, some think the company could be sold for $10b (or more) - that would deliver an extra $3.83c (or more) for every share held.
Overall, I do not view the company decision to buy back 19m shares at an average of, let's say £1 each, a poor decision.
Attyg - hoping for a sale, but still not expecting one.
Shadypants
Noticed that 70% of output has been hedged at $35 in H2 - so with Brent at c$45 now, does that mean we get the current price but if it slips below $35 we still get $35?
Presentation:
70% of H2 2020 net production net production hedged at a floor price of US$35bbl
Full upside to price increases
That suggests your interpretation is correct.
JF may well have had his strings pulled, but Lansdowne appear to have had enough and want GKP to change.
They are bringing about a change in CEO and they have appointed their rep onto the Board.
Looks to me that they want matters brought to some sort of conclusion - either sell the business or develop and gain proper commercial compensation.
It also looks like Erbil require financial assistance from Baghdad, so while it may sound crazy, we may get some change there, possibly approving an Oil & Gas law.
It is increasingly looking like both parties require to move forward.
For my part, I would expect Soden would not have been in possession of, or had read, price sensitive information by 8 am on the day of his official appointment. I saw his purchase as a signal. Why did he buy them on the day of his appointment other than to have the transaction show as a Director purchase. Others clearly take a different view.
Not odd.
A buyer has replaced a seller.
Artemis is out, so no well of cheap and available shares for the MMs to go to.
There now appears to be a buyer(s) who considers the shares undervalued and has decided to take advantage of market conditions.
None of us who believe in even one quarter of Eden's potential being realised view a sp of 8p as toppy.
Indeed, the reverse is my view.
Apologies if the link does not work - I just typed in Iraqi tax into Google and looked down the list and opened the PKF one. In any case it was only a brief summary of the rules - but 15% tax is the max. It gets further complicated if for example the person is American, then they have to declare such gains and suffer US tax. USA tax Americans on their worldwide income.
I would love it if GKP was sold, even at £10 per share, but while always hopeful I am not expecting it any time soon. However, regardless of any possible takeover, I am firmly of the view that we could/should be at £4+ this time next year - so much value being created. Sadly, I doubt the political situation will get properly resolved anytime soon and so I think it unlikely we will see the Chinese etc conclude a purchase till the politics is more stable.
I have no Iraqi tax knowledge and my UK tax knowledge is poor.
Go to the link below and download the PKF guide to tax in Iraq.
https://www.pkf.com/publications/tax-guides/iraq-tax-guide/
It is pretty scant but it suggests non-residents suffer tax at a maximum of 15%
The PKF summary does not detail tax issues surrounding share awards.
However, it makes sense that under Iraqi tax rules any exercised awards will be subject to 15% tax.
Any subsequent gain from exercising at £2 and selling at say £10 would also be subject to 15% tax - I think.
It makes sense for an employee not to exercise the option today as the gain would be subject to 15% tax, the person would have to make that payment - from spare cash, or from selling some shares.
Someone who exercised the option would then run the risk of having paid tax on shares that might go down in value.
The person also has the disadvantage of perhaps having 15% less shares (sold to pay the 15% tax) if the company is then sold for say £10 per share.
Thus it tends to make sense to exercise options as late as possible to when the person wants to "cash in".
All of the above does not mean that GKP is about to be sold.