The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
Interesting read today’s Telegraph!
No ‘net zero’ pledge, no right to drill for N Sea explorers
Rachel Millard
OIL and gas producers who refuse to commit to reducing their carbon emissions to “net zero” will be excluded from North Sea drilling licences, the new Business Secretary has signalled.
Kwasi Kwarteng said a quid pro quo with the sector meant it would only get government support if it took “decarbonisation very seriously indeed”.
Oil and gas producers in the UK have been under growing pressure to cut their methane and carbon dioxide emissions, which accounted for 4pc of the UK’s greenhouse gas emissions in 2018.
The Government wants to slash emissions to net zero by 2050 and said in last month’s energy White Paper that North Sea licensing needed to be “compatible with our climate change ambitions”.
Mr Kwarteng’s comments, made during a government review into North Sea licensing, are the starkest indication yet of action likely to be taken against the sector towards that goal.
Speaking to the Westminster Energy Forum before his promotion this month from energy minister, Mr Kwarteng was asked whether he saw “licensing for new exploration and production to be contingent upon [net] zero commitments by operators”.
He replied: “Absolutely. All the conversations I’ve had with Energy UK and the Oil and Gas Authority, I talk about quid pro quo; something for something. That quid pro quo means that government support is only going to be there if they take decarbonisation very seriously indeed.”
The sector generally recognises it needs to reduce emissions. Oil and Gas UK, the trade body, has agreed a goal for the basin to reach net zero by 2050.
But running oil and gas rigs on renewable energy can be complex, while flaring is still regularly used. Producers are also reeling from the impact of the pandemic, which has slashed oil demand, as well as grappling with wider questions over their future as the UK and other countries try to cut their reliance on fossil fuels.
The Government is working with the sector on a “transition deal” to help it develop hydrogen, carbon capture and cut its greenhouse gases. A Business Department spokesman said: “The Business Secretary rightly set out how our review into the future of the oil and gas licensing regime seeks to ensure it remains compatible with our target to reach net zero emissions by 2050.
“We will agree a transformational North Sea transition deal with industry to create jobs, retain skills and deliver new business and trade opportunities to support the sector’s transition to a lower carbon future.”
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The sectors to invest in for the best returns next year
Utilities and technology firms may struggle, but profits could rocket at companies poised to recover as the economy does
Sam Benstead
Oil firms are primed for a blowout 2021 as profits are forecast to rise sevenfold. UBS, the bank, calculated which investment sectors would grow their earnings the most next year, according to the views of hundreds of stock analysts.
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The research focused on American shares, but sectors behave in similar ways across the world. Surging profits at American oil companies would be driven by higher oil prices and rising international demand, which would have the same impact on British firms such as BP.
Financial forecasting is a useful indicator of consensus and can be used by DIY investors to tag along with the professionals – or take a contrarian view.
UBS said the energy sector, which is dominated by oil companies, was predicted to grow its earnings per share by 625pc in 2021. London-listed Shell and BP are among the world’s biggest players. Next was the industrials sector, home to engineering and machinery companies such as BAE Systems and Rolls-Royce, where earnings are expected to grow by 79pc next year.
The consumer discretionary sector, which includes high street retailers and fashion companies, followed with a 50pc increase. A strong British pick here would be Burberry.
These sectors are all considered to be “cyclical”, meaning that profits rise and fall with the health of the economy.
UBS’s earnings forecasts imply that stock market analysts expect a strong economic recovery next year, which would boost the shares that suffered most in 2020.
By contrast, “defensive” stocks, such as household goods maker Unilever and drinks giant Diageo, and technology firms will be the slowest-growing sectors next year, according to UBS. Technology businesses will grow earnings by 14pc, consumer staples by 6pc and utilities, such as National Grid, by just 5pc, it found.
Mark Haefele of UBS said: “We expect the more economically sensitive markets and sectors, many of which performed poorly in 2020, to lead the charts in 2021. After a rally of over 50pc in 2020, the top five American technology firms alone now represent around one eighth of the global stock market. We think other business areas will see stronger earnings growth in 2021.”
British alternatives to the Silicon Valley tech favourites include food delivery services Ocado and Just Eat.
‘An economic recovery will boost the shares that suffered most in 2020’
Does this mean DIY investors should ditch technology for energy? Mr Haefele said a mixed approach was best as the pandemic had made the world more digital and not all companies would be able to adapt. This means sticking with some technology firms while also backing companies due a recovery.
“While we think that in the short term investors can profit by investing in companies exposed to a ‘cyclical’ recovery, thi
https://oilprice.com/Energy/Oil-Prices/Goldman-Turns-Bullish-On-Oil-Sees-65-Brent-In-2021.html
Exxon Mobil lines up bids for £1.2bn North Sea oil and gas fields
More oil and gas fields in the North Sea are set to change hands with bids for a $1bn-$1.5bn (£1.2bn) portfolio of Exxon Mobil’s assets due on Oct 28, sources told Reuters. The portfolio produces around 35,000 barrels of oil equivalent per day, expected to rise to around 60,000 per day by 2023. Smaller players have been snapping up fields.
Ggg/madam - chaps relax. We’re better than this constant knocking. Your both clearly intelligent chaps. Can’t we try to put views out without knocking each other. Bounce ideas off each other and be positive please. Whether you ramp or de-ramp it won’t matter a jot to the share price!
Jersey Oil and Gas*
P2170 stake acquisition completion
JOG has announced completion of the acquisition of a 70% stake in its P2170 licence from partner Equinor, taking JOG up to 88% alongside partner CIECO. The deal was announced back in January 2020, and includes two future milestone payments and a royalty agreement on production from the licence, but no upfront cash. P2170 contains the 25mmboe (gross) Verbier discovery, alongside the Cortina prospect and Mirabel lead.
It is helpful to see this acquisition now completed. P2170 lies adjacent to the rest of JOG’s portfolio, which includes the Buchan field and J2 and Glenn oil discoveries, overall known as the Greater Buchan Area. JOG is progressing development here based on a new hub which could develop 134mmbbl of gross 2C resources (or potentially over 200mmbbl if other assets that JOG does not hold are included). JOG is currently progressing concept selection work for GBA development, and this is expected to be completed in Q3 2020. P2170 and the Verbier discovery is included in this development planning work, and today’s acquisition completion gives JOG greater control here, alongside capacity for bringing in a new partner going forward (a partial sales process of JOG’s overall GBA position to provide forward funding is planned post the concept selection work).
No change to forecasts or valuation – we had already updated our numbers for this Verbier stake acquisition.
Continued on net page/
Financial Forecasts
20 May 2020 UK Equities / FTSE AIM All-Share
Sector: Oil & Gas Producers
Buy Target Price: 600p Current Price: 66.5p
JOG.L
KeyData
Market Capitalisation Shares in Issue
Free Float
Average Daily Volume (k) 12 Month Trading Range
Price Performance (p/share)
£14.5m 21.8m 77.1%
106 48p - 244p
300 250 200 150 100
50
0
May-18 Nov-18 May-19
Nov-19 May-2
0
Source: Bloomberg
Analyst Details
Daniel Slater, CFA
daniel.slater@arden-partners.com +44(0)20 7614 5947
Year To: December
Net Production (mboe/d)
Oil Price (US$/bbl)
Sales (£m)
EBITDA (£m)
Free Cash Flow (£m)
Net Cash/(Debt) (£m)
DPS (p)
Valuation
Core NAV (p/share) (2) Total Risked NAV (p/share) 748 Total Unrisked NAV (p/share) 1,498
* Arden Partners acts as corporate broker to this company.
2018A 2019A 2020E 2021E
0.0 0.0 0.0 0.0 71 64 40 50 0.0 0.0 0.0 0.0 (2.1) (2.9) (2.6) (2.7) (5.7) (7.5) (8.0) (3.2) 19.8 12.3 4.3 1.1 0.0 0.0 0.0 0.0
2019A
See page 4 for regulatory disclosure
Arden Partners plc is authorised and regulated by the Financial Conduct Authority and is a member of the London Stock Exchange. www.arden-partners.com
1
Conclusion: JOG’s GBA project (based on the Buchan oil field, J2, Glenn and Verbier oil discoveries and a number of additional exploration prospects), awarded in 2019, have transformed the company’s asset position. They put JOG in charge of gross 134mmbbl of 2C resources, which the company plans to use as the base for a new hub development in t
viewJersey Oil and Gas PLCJersey Oil and Gas bolsters expertise as it eyes progress for GBA projectsDr Chris Haynes has 39 years’ experience in the industry, much of which was gained at Shell, where he was responsible for the delivery of the blue-chip's major upstream projects worldwideJersey Oil and Gas PLC - Jersey Oil and Gas bolsters expertise as it eyes progress for GBA projectsJersey Oil and Gas PLC (LON:JOG) has hired project delivery specialist Dr Chris Haynes as an advisor to the board, as it seeks to advance the Greater Buchan Area (GBA) hub oilfield development project in the North Sea.Haynes has 39 years’ experience in the industry, much of which was gained at Royal Dutch Shell PLC (LON:RDSA), where he was responsible for the delivery of Shell's major upstream projects worldwide.READ: Jersey is “fully funded” to advance Greater Buchan"We are very pleased to welcome Chris to the company as a board adviser,” said Andrew Benitz, Jersey chief executive in a statement. “His wealth of project development experience, forged over a diverse 39-year career with Shell, will be of great benefit to JOG as we progress through the next stage gates of our highly exciting Greater Buchan Area development project. We look forward to working closely with Chris and benefitting from his oversight and advice."Jersey last month said it will lead a technical and commercial evaluation of the GBA projects, to assess whether a collaboration between the companies holding licences in the vicinity would result in a decrease in cost and an increase in value.Situated 120 miles north-east of Aberdeen, the GBA is host to discovered resources “in excess” of 200mln barrels of oil equivalent.Included in the agreement are Buchan, J2 and Glenn (owned and operated by Jersey Oil & Gas), Verbier (operated by Equinor UK), Avalon (operated by Ping Petroleum UK) and Leverett (owned and operated by Zennor Resources).Jersey had £12.3mln cash at the end of December. In March, the company highlighted that it has no debt and, on current plans, it has sufficient working capital through to the end of 2021.