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ENERGY VOICE 07/03/2024

‘Not windfall conditions’: Serica boss hits out at EPL tax extension

Serica Energy CEO Mitch Flegg has criticised the Chancellor’s decision to extend the windfall tax on North Sea producers.

In a trading update, he said current oil and gas prices “do not represent windfall conditions” and the effect will be greater imports, leaving the UK less resilient.

Chancellor Jeremy Hunt unveiled a year-long extension to the windfall tax, known as the Energy Profits Levy (EPL), during Wednesday’s Spring Budget, bringing the “sunset” to 2029.

Investment incentives remain, meaning it “could have been worse” as one source told EV, however the fourth tax change in two years now makes it “impossible” to plan investment according to trade body OEUK.

Mr Flegg of Serica Energy said: “It would be remiss not to express considerable disappointment with the extension of the EPL announced in the Budget yesterday.

“Current oil and gas prices do not represent windfall conditions for UK producers and increasing the tax burden on domestic oil and gas production again will be damaging for UK jobs and the economy.

“The achievements delivered by Serica have added to domestic sources of energy. The kind of approach exhibited in the Budget will lead to more imports and reduce the ability of our industry to enhance the UK’s resilience to potential energy shocks in the future.”

Boost to reserves

Serica Energy’s (LON: SQZ) trading update highlighted a 10 million boost annual to reserves as of 31 December to 140m barrels of oil equivalent.

That follows Serica’s recent acquisition of Tailwind Energy.

Mr Flegg said nearly all of the reserves additions are from fields which are already producing, limiting its incremental emissions.

“Production in the early part of 2024 has been encouraging and we look forward to the future impact of executing our investment programme this year. We are on track to commence the planned well intervention and drilling activities on the Bruce and Triton assets during the coming month,” he added.

https://www.energyvoice.com/oilandgas/north-sea/549550/serica-energy-windfall-tax/

Proactive Investors:

Harbour Energy reports results ‘in line’ as it works to close Wintershall deal

Harbour Energy PLC (LSE:HBR) reported production in line with expectations, whilst its financial results statement reflected a business in steady state ahead of its next phase of consolidation.

Harbour, which was formed in 2021 through the combination of London-listed Premier Oil and private equity North Sea firm Chrysaor, is now working to close its deal to acquire $11.2 billion of upstream assets from Germany’s Wintershall.

Adding substantial operations in Norway, Germany, Argentina and Mexico to its existing portfolio of assets in the North Sea, Asia and Africa, the deal promises to create “one of the world's largest and most geographically diverse independent oil and gas companies”

The company, today, noted “significant progress” toward closing the transaction.

It expects to publish a prospectus and hold necessary shareholder meetings in the second quarter, and it is progressing through its checklist of regulatory and legal approval processes.

It has, so far, successfully received approval from certain bondholders, as needed, and has successfully agreed syndication for financing facilities.

Harbour said it continues to expect the deal’s completion by the end of 2024.

In regards to its current business, the company reported average production of 186,000 barrels of oil equivalent per day, noting an average operating cost of $16 per barrel – with both metrics described as within guidance and forecast.

Revenue was reported at $3.7 billion, down from $5.4 billion, with the company citing the reduction from exceptionally prior high gas prices for the decline.

Profit before tax reduced to $600 million, from $2.5 billion, and after-tax adjustments the company reported a $32 million profit.

Chief executive Linda Cook, in her accompanying comments, highlighted Harbour’s cash flow generation, as well as its growth opportunities and carbon capture and storage (CCS) projects.

"Harbour materially advanced its strategy during 2023,” she said in the statement.

“We improved our safety performance, generated material free cash flow, and progressed our international growth opportunities and CCS projects, while maintaining our capital discipline.

“This enabled continued shareholder returns over and above our base dividend while retaining the flexibility that allowed us to announce a transformational acquisition in December.”

Cook added: "We remain focused on the successful completion of the Wintershall Dea acquisition and the ongoing safe and efficient management of our existing portfolio.

“We are excited about our future as we look to continue to build a geographically diverse, large scale, independent oil and gas company focused on safe and responsible operations, value creation and shareholder returns."

https://www.proactiveinvestors.co.uk/companies/news/1042633/harbour-energy-rep

"We remain focused on the successful completion of the Wintershall Dea acquisition and the ongoing safe and efficient management of our existing portfolio. We are excited about our future as we look to continue to build a geographically diverse, large scale, independent oil and gas company focused on safe and responsible operations, value creation and shareholder returns."

Fully agree with Linda C. here with focus on “successful completion of the Wintershall Dea acquisition and the ongoing safe and efficient management of our existing portfolio.” and in the meanwhile, I enjoy the higher dividends.

Good to note:

§ Total 2P reserves and 2C resources increased to 880 mmboe (2022: 865 mmboe) reflecting reserve additions at our operated UK hubs and international exploration success, partially offset by production

§ Continued momentum on Harbour's UK CCS projects, Viking and Acorn, with both projects awarded Track 2 status; estimated independently verified net CO2 storage capacity in excess of 200 million tonnes

And nice to see a 1c higher dividend per share a resulting from less shares in circulation:

§ Proposed final dividend of $100 million, in line with $200 million annual dividend policy and equating to 13 cents per share (2022: 12 cents), reflecting dividend per share growth for the full year 2023 of c.9%

"We remain focused on the successful completion of the Wintershall Dea acquisition and the ongoing safe and efficient management of our existing portfolio. We are excited about our future as we look to continue to build a geographically diverse, large scale, independent oil and gas company focused on safe and responsible operations, value creation and shareholder returns."

Brent prices rising sharply at the moment:

https://tradingeconomics.com/commodity/brent-crude-oil

Orkney ocean energy project wraps initial phase

An innovative project, combining wave power with subsea energy storage, has concluded a successful 12-month test programme aimed at providing low carbon power and communications to subsea equipment

A groundbreaking ocean energy project, integrating wave power with subsea energy storage, has completed a 12-month test programme.

The £2 million Renewables for Subsea Power (RSP) project, situated five kilometres east of Orkney Mainland, demonstrated the potential of green technologies to deliver continuous low carbon power and communications to subsea equipment.

Linking Mocean Energy’s Blue X wave energy converter with Verlume’s Halo underwater battery storage system, the project offered an alternative to carbon-intensive umbilical cables.

Industry leaders including TotalEnergies, Shell Technology, PTTEP, Serica Energy, Harbour Energy, Baker Hughes, Transmark Subsea and the Net Zero Technology Centre have supported this successful test programme.

https://www.energylivenews.com/2024/03/06/orkney-ocean-energy-project-wraps-initial-phase/

Should Value Investors Buy Harbour Energy Stock?

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.One stock to keep an eye on is Harbour Energy (HBRIY - Free Report) . HBRIY is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock is trading with a P/E ratio of 5.40, which compares to its industry's average of 5.94. Over the past 52 weeks, HBRIY's Forward P/E has been as high as 78.92 and as low as 4.10, with a median of 6.59.We should also highlight that HBRIY has a P/B ratio of 1.78. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. This stock's P/B looks solid versus its industry's average P/B of 1.83. HBRIY's P/B has been as high as 3.05 and as low as 1.48, with a median of 1.81, over the past year.These are only a few of the key metrics included in Harbour Energy's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, HBRIY looks like an impressive value stock at the moment.

https://www.zacks.com/amp/stock/news/2236022/should-value-investors-buy-harbour-energy-hbriy-stock

Good to once again note that Brent, UK, European (and Natural Gas) prices are all nicely up once again and with gas prices looking particularly bullish at the moment while we await HBR updates this week:

https://tradingeconomics.com/commodities

Forbes:

The Biden Administration’s Ongoing Strategic Petroleum Reserve Gamble

The United States established its Strategic Petroleum Reserve (SPR) in the wake of the 1973–1974 oil embargo that disrupted oil imports and drove oil prices much higher.

The SPR has the capacity to hold enough crude oil to help mitigate the impact of severe supply interruptions.

The President of the United States has the authority to order the release of SPR oil in response to energy supply emergencies or to meet obligations under the International Energy Program. However, these emergencies have often been broadly interpreted to mean rising gasoline prices, especially in election years.

President Biden inherited an SPR that contained 638 million barrels. However, first in response to rising gasoline prices, and then as a result of Russia’s invasion of Ukraine, President Biden announced the most aggressive SPR drawdown in history. During his first two and a half years in office, the SPR was drawn down by 291 million barrels, to the lowest level since 1983.

Critics charge that this puts U.S. energy security at risk. Others counter that because the U.S. is now the world’s top oil producer, we are less dependent on oil imports. There is an element of truth to this argument, in that net U.S. imports have fallen.

However, that argument requires context. The U.S. exports a lot of oil, because the oil we produce isn’t a great economic fit for U.S. refiners. Therefore, we export a lot of the oil we produce domestically, and we import a lot of cheaper foreign oil. Thus, the loss of oil imports would cause some disruptions, even though our net petroleum imports have fallen sharply in recent years.

The Biden Administration has replaced some of the oil that was removed from the SPR and has announced that it would repurchase more “as market conditions allow.” However, this is an election year. One thing an incumbent president abhors is rising gasoline prices during election years. Therefore, I don’t believe we will see anything more than token purchases for the rest of the year.

One of my 2024 energy predictions was that the Biden Administration wouldn’t replace more than 10% of the oil that was removed from the SPR. So far, the administration has only replaced 4% of what was removed.

It won’t be long before refiners start to transition to summer gasoline blends. That will cause gasoline prices to rise, as it does every spring. Even if token SPR purchases are still going on at that time, they will probably be suspended then so they won’t contribute any additional upward pressure on gasoline prices.

There is certainly risk to this strategy. If geopolitical events disrupt the oil markets, it will look foolhardy in hindsight, and there will likely be repercussions. However, if the oil markets have an uneventful year, there may be no political consequences.

https://www.forbes.com/sites/rrapier/2024/02/26/the-biden-administrations-o

Good to note that Brent, UK and European Gas prices are all nicely up once again here and looking pretty bullish at the moment while we await HBR updates next week:

https://tradingeconomics.com/commodities

Wintershall Dea and partners complete appraisal of Adriana gas discovery

The appraisal well encountered high-quality reservoirs in the primary target within the Cretaceous Lysing Formation.

Wintershall Dea, together with its partners Petoro, Aker BP and PGNIG, has completed an appraisal well in the Adriana gas and condensate discovery.

The well has resulted into an upward revision in the estimated recoverable volumes from the discovery in the Norwegian Sea.

Drilled using the Transocean Norge rig, the appraisal well encountered high-quality reservoirs in the primary target within the Cretaceous Lysing Formation.

The consortium is now evaluating potential development options for the Adriana discovery, which was made in 2021.

As per the initial estimates, recoverable volumes at Adriana were 19–31 million barrels of oil equivalent (boe).

The new appraisal results have led to a revised estimate of 28–43 million barrels.

The Adriana discovery is part of a multi-level discovery that includes the Dvalin North gas field.

Dvalin North is currently being developed as a subsea tie-back to the Heidrun platform via the Wintershall Dea-operated Dvalin field.

Located approximately 270km north of Kristiansund, the Adriana discovery is positioned in the Haltenbanken area of the Norwegian Sea, in proximity to other fields such as Dvalin, Aerfugl and Skarv.

Following the appraisal activities at Adriana, the Transocean Norge rig has been relocated to the Maria field, operated by Wintershall Dea, to commence drilling operations related to the Maria Phase 2 development.

Wintershall Dea Norway VP of exploration & subsurface Roy Davies said: “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.”

In December 2023, Wintershall Dea’s owners, BASF and LetterOne, reached an agreement to sell the company’s upstream oil and gas assets to Harbour Energy for $11.2bn (€10.36bn).

The assets included in the deal are located in Algeria, Argentina, Denmark, Egypt, Germany, Libya, Mexico and Norway.

https://www.offshore-technology.com/news/wintershall-dea-adriana-gas-discovery/?cf-view

Drax to explore Viking carbon transport options with Harbour, BP

Drax is to explore a tie-up with the developers of the Viking carbon capture and storage (CCS) project which could see an additional route for sequestering biomass emissions.

In its annual results update on Thursday the energy firm (LON:DRX) said it had recently signed a memorandum of understanding (MoU) with Harbour Energy and BP to “assess options for transportation and storage of CO2”.

It’s understood the agreement covers early feasibility studies on how the nearby Drax Power Station could connect into Viking pipeline infrastructure around the Humber.

Led by operator Harbour, Viking aims to capture emissions from across the south Humber region, the UK’s most industrialised area. Emissions from the cluster’s industrial partners would then be transported by pipeline and stored in the depleted Viking gas fields in the southern North Sea, via the Theddlethorpe terminal.

Once operational, Viking is expected to be one of the largest CCS projects in the world, aiming to capture and store up to 10m tonnes of CO2 a year by 2030.

Drax is already a partner in the East Coast Cluster scheme – set to tie into the BP-led Northern Endurance storage reservoir to the northeast – but a potential link to Viking would open up additional options to offload CO2.

Meanwhile the energy group is pushing ahead plans for bioenergy with carbon capture and storage (BECCS) at its power station site at nearby Selby, by installing post-combustion capture technology on two power generating assets.

It intends to complete its first unit – capable of capturing 4 million tonnes pf CO2 per year – by 2030 followed by an equal-sized second unit by 2035.

Planning consent for the scheme has been granted, but government is still consulting on a possible extension of bridging subsidies for the plant to enable operations between 2027-2030.

Richard Gwilliam, Drax Group’s UK BECCS Programme Director, said: “Viking CCS has a compelling vision for delivering the decarbonisation of the Humber. Their plans could facilitate significant investment into the region, create thousands of new highly skilled green jobs and ensure that the Humber continues to play an important long-term role in supporting the UK’s energy security.

“We are excited about working with Viking CCS through this new MoU which will explore how BECCS at Drax Power Station could connect to their pipeline.

“BECCS is currently the only credible large-scale technology that can generate renewable power and deliver carbon removals.”

Viking’s developers last month awarded a front end engineering and design (FEED) for the project contract to Technip Energies.

https://www.energyvoice.com/renewables-energy-transition/ccs/uk-ccs/549086/drax-carbon-transport-options-with-bp-harbour/

Conservatives are not going to be in power from next year anyhow, hence more meaningless BS by Hunt!

Article in full via Yahoo here incase of interest:

Bloomberg

Hunt Considers Extending UK Windfall Tax on Oil and Gas at Budget

Maintaining the energy levy for an extra year would increase the tax take in 2028-2029, the crucial fifth year of the OBR’s forecast horizon during which Hunt’s own fiscal rules state that the national debt must be falling. That would give him a bit of extra breathing space to ease other taxes. None of the people disclosed an estimate of how much revenue extending the tax would generate, but the OBR predicts it will raise £1.9 billion ($2.4 billion) in 2027-2028.

One of the people said that extending the energy profits levy is low down the list of potential measures under consideration, suggesting it may not end up being deployed in the budget.

“We keep all taxes under review and do not comment on future tax policy outside of fiscal events,” the Treasury said in a statement.

The tax has ended up raising less than initially forecast, with the government’s monthly receipts data suggesting about £6 billion has been collected to date. The OBR’s forecasts indicate another £3.6 billion is expected over the 2024-25 tax year, with takings tapering to £1.9 billion in 2027-2028.

https://news.yahoo.com/hunt-considers-extending-uk-windfall-130625331.html?guccounter=1&guce_referrer=aHR0cHM6Ly9kdWNrZHVja2dvLmNvbS8&guce_referrer_sig=AQAAAFqcjNZDtf0vH7V0KXUXMGEEyd4qnZ58wjJgx4cbzAHGWKHjCZ4_MdkfcQ4Xl6ITlIG-NjlcIOmpFKSt2o5urz_2UKNM6NNwTFSRuOcsJnpK__YDE5mVexBhBRr_lXgYmjm1qCr5_Fu9IaGlf0fG7KL4QyHIQU9h_DlyvU3dFgiw

Bloomberg

Oil Fluctuates With US Stockpiles, OPEC+ Supply Policy in Focus

Crude inventories fell 4.2 million barrels last week, EIA says

OPEC, allies expected to extend production cuts beyond March

Oil fluctuated in a narrow range as traders weighed rising US crude inventories against expectations that OPEC+ will extend supply cuts.

West Texas Intermediate edged lower to trade near $78 a barrel, pulling back from intraday highs amid broader risk-off sentiment. US crude inventories rose 4.2 million barrels last week, the Energy Information Administration said, a smaller buildup than the 8.4 million barrel gain projected in an industry report.

https://www.bloomberg.com/news/articles/2024-02-27/latest-oil-market-news-and-analysis-for-feb-28?leadSource=uverify%20wall

Higher for longer O&G prices within a tight physical market, prolific assets, and having investors like Carlos Slim onboard here all bodes well for the longer term outlook while daily SP fluctuations are meaningless unless you’re a trader which has it’s own frustrations, hopefully big gains to be had here by year end if you have sufficient patience!

Noteworthy that Brent has now sustainably remained above the USD $80 resistance mark here and continues trading at $80+ levels while UK, European and Natural Gas prices are all also once again nicely up/rallying at the moment:

https://tradingeconomics.com/commodities

Similar article (in full) also available in The Press and Journal incase of reader interest:

“Aberdeen firms tell Jeremy Hunt to scrap windfall ‘supertax’”

“The UK Chancellor is facing calls to remove the controversial tax on oil and gas giants ahead of his spring budget next week.”

https://www.pressandjournal.co.uk/fp/politics/scottish-politics/6386391/aberdeen-windfall-tax-jeremy-hunt/

ENERGY VOICE, 28/02/2024

Aberdeen firms tell Jeremy Hunt to scrap windfall ‘supertax’

The UK Chancellor is facing calls to remove the controversial tax on oil and gas giants ahead of his spring budget next week.

North-east businesses are piling pressure on Chancellor Jeremy Hunt to ditch the controversial windfall tax in his spring budget next week.

Russell Borthwick, chief executive of Aberdeen and Grampian Chamber of Commerce, wrote to the senior Tory minister to make the case for it to be urgently scrapped.

In his letter, he said the tax has “knocked investor confidence” and is “already costing jobs with tens of thousands more at risk”.

His appeal comes after a furious backlash from business leaders in the region to Labour’s plans to increase the levy from 75% to 78% and extend it to 2029.

The energy profits levy was introduced as a response to soaring profits in May 2022. Supporters say it is vital to help increase spending on public services and take pressure off struggling households.

The chamber is Scotland’s largest and represents more than 1,200 businesses in the north-east, collectively employing more than 100,000 people.

Mr Borthwick added: “A windfall tax may have had justification while windfall profits were being made by energy companies in the wake of Russia’s invasion of Ukraine.

“Profits have since returned to normal levels and this supertax on just one specific sector should be lifted as a matter of urgency.”

As well as risking jobs, the chamber boss claims the tax is likely to result in carbon capture and offshore projects being shelved.

Windfall tax row

More than 700 concerned voices, including Aberdeen oil tycoon Sir Ian Wood, recently wrote to Sir Keir Starmer demanding a U-turn on his windfall tax plans.

Analysts warned it could cost the UK £20 billion by deterring investment and put jobs at risk.

The policy follows Labour abandoning a pledge to spend £28 billion a year on green energy jobs.

But Sir Keir attempted to calm fears from the oil and gas sector at the party’s conference in Glasgow earlier this month.

He told party members that North Sea oil would “continue for decades”.

David Duguid, Tory MP for Banff and Buchan, supports moves announced by the UK Government to remove the tax when prices drop to a pre-determined price.

He said: “The Conservative approach to this has been far more sensible than Labour who want to make the windfall tax higher and longer.

The first minister last week visited Aberdeen to set out his opposition to Labour’s plans to increase the windfall tax and instead maintain it at current levels.

SNP MP Kirsty Blackman accused the Tories of using the north-east as a “cash cow”.

She added: “Today, both Labour and the Tories are looking to squander the north-east’s massive green energy potential by using North Sea revenues to prop up the failing Brexit Britain economy and fund pet projects sou

february 26, 2024

british & uae oil companies join forces for exploration in andaman sea

a collaborative effort between british and united arab emirates (uae) oil companies, harbour energy & mubadala energy, continues to intensify as they progress with advanced drilling operations to ascertain gas reserves in the andaman sea.

following the successful drilling of the timpan-1 exploration well, the duo proceeded with drilling operations at the ***o-1 well. “the drilling of the ***o-1 exploration well in wk andaman 2 is still in progress,” deputy head of upstream oil and gas regulatory task force (skk migas), nanang abdul manaf, said as quoted by bisnis.com on thursday, february 22, 2024.

nanang said they aim to conduct layer content tests soon to validate the reservoir content of the second exploration well in the andaman ii block.

the ***o-1 well, situated in the andaman sea, aceh province, is undergoing vertical drilling using rig west capella (drillship), with a planned final depth reaching 11,733 ft tvd rt. this drilling activity aims to evaluate hydrocarbon content in the bampo sandstones reservoir.

the focus lies on acquiring reservoir and fluid data through lwd, wireline logging, coring, and downhole sampling in open-hole conditions, with estimated resources reaching gip 1.205 tcf and recoverable 723 bcf & 33.5 mmstb.

furthermore, advanced exploration drilling is planned for the layaran-2 prospect, part of the south andaman concession. “for the south andaman wk, we await the rig’s turn from andaman ii,” nanang said.

skk migas estimates that the investment for four exploration wells in the andaman sea, conducted by harbour energy in partnership with mubadala energy, will reach us$360 million, or equivalent to rp5.5 trillion.

the expansion of exploration wells targets the layaran prospect in the south andaman block, operated by mubadala energy. subsequent exploration drilling will focus on the halwa and ***o prospects in the andaman ii block. the fourth drilling operation will return to south andaman after the results of the layaran drilling are determined.

this exploration momentum gained traction after the successful drilling of the first well, timpan-1, in the andaman ii block last year, which resulted in the flow of additional contingent resources (2c) of 80 mmboe and significant gas potential (multi-tcf play).

https://indonesiabusinesspost.com/risks-opportunities/british-uae-oil-companies-join-forces-for-exploration-in-andaman-sea/

Brent has once again crossed and now sustainably remained above the USD $80 resistance mark and currently nicely trading at $80+ levels here while UK, European and Natural Gas prices are all also up/rallying at the moment:

https://tradingeconomics.com/commodities