$SQZ is rock solid: 58mboe 2P Res from 5 fields with soild maturity mix (Columbus); comes off milestone payments for BKR acqu.; N&S Egg growth pipe; UK lowest E&P tax rate ex US; access to services; conventional fields; top mgmt; zero EV in 2022?
GB 500p intrinsic value.
1/3
Check out its potential cash flow profile (without growth capex for North & Egg) or potential well interventions for BKR in 2022 for, perhaps, $80m. FCF would be $537m. Deduct $50-80m and it may still be zero EV by year-end due to gas price futures curve. Insane!
2/3
Here is the NBP gas price Future curve as of today. We modelled Serica below that to leave room for their 20% hedging which could be below that.
$SQZ is also a hedge against potential Ukraine disruption. Better than $IOG as proven fields;
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Finally, North Egg may add up to 100% intrinsic value. 2P (p50) resource = 60mboe. Exploration well going to spud in July (plus 70days campaign; floater contracted). If successful, would become an inexpensive tie-back with Rhum (existing field of Serica). Watch out for this.
$SQZ has an exceptionally low Beta of 1.0 for an E&P in case factor style (high beta) in a risk off macro environment (sell high beta) is a worry.
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India likes a "GOOD" deal - also in crude oil - and is about to teach Russia a lesson what that means.
Spoiler 1: it's not a pretty one!
Spoiler 2: China & Turkey will learn quickly..!
Let's look at the Indian-Russo crude oil bromance.
1/x Thread
Before the invasion in Feb 2022, Russia exported some 2.8mbpd (55%) of its 5.5mbpd crude to Europe by way of pipeline (Druzhba) & sea transportation (seaborne).
But not just crude oil...
2/x
Russia also sold products such as diesel or jet to Europe for a total of 1.4mbpd in petroleum product exports.
In other worlds, G7 sanctioned as introduced in Dec 2022 required 4.2+mbpd of crude & products to be re-shuffeled in globally. Big numbers!
For now, Red Sea disruptions due to Houthi attacking commercial vessels randomly remains a ton-mile story, not a crude oil story.
Within different shipping segments the picture of diverting cargo around the Suez Canal remains a Container Vessel story, to a less extent also a Product Tanker & Crude Oil tanker story.
Container Vessels owners have been the most consequent in diverting cargo.
Since Nov, the number of container vessels crossing the Suez Canal has collapsed by 80% in both directions.
2/n
Crude Oil tankers from the Middle East (Saudi Arabia; UAE; Iraq; Kuwait; Qatar or Oman) to Europe are also lower but our high frequency data does not yet show a similar collapse.
It also nicely illustrates how changing Russian crude flows (Urals diverted to India & China and away from Europe) have increased traffic through the Suez Canal - good for Egypt as Russian dark fleet vessels will or cannot seek an alternative route to ship oil from the Baltics to India.
Brazil is is an interesting microcosm to study in the oil industry.
It's a large, growing consumer of petroleum products. It's the 8th largest producer of crude oil in Dec 2023 as well as a large producer & consumer of biofuels.
Most importantly, it's energy agency reports the data in detail & timely (unlike most countries globally).
1/n
Brazil's resource wealth (mainly offshore) is well documented but it struggled for years to follow through.
Finally, it does with an exit rate of 3.9mbpd of oil production in 2023. Only the US, SA, RUS, CAD, IRQ, CN & IRN (incl condi; in this order) produced more that month. That's 50% growth since Jan 2018!
2/n
Better still, most such production growth reaches the international market. In Dec 2023, Brazil exported 1.7mbpd of crude oil - an ATH.
Remember, in oil net exports is the key number to measure.
Shall we look at the European NatGas market together?
Will Europe have to freeze this winter, after much mild weather luck last winter?
Will TTF drag coal prices up as last winter?
Thread 1/n
Our rolling forecast upfront for those of you with a little ADD:
Best-estimate today, Europe will exit the winter 23/24 in March at or around 40% storage levels (red line) which suggests TTF doesn't have to spike, ceteris paribus. Is it a bear? Neither.
Let me explain.
2/n
Natgas has unique characteristics for a commodity:
Supply is inelastic while demand is highly ELASTIC: Colder temps >> demand goes up exponentially & vice versa.
Not all demand is equal but heating buildings (HH & retail demand) is 65-70% of winter demand (Oct-Mar).
In 2023, BYD will sell some 3 million passanger cars, of which 1.5m will likely be Battery Electric Vehicles (BEV) & the rest Plug-in Hybrids (PHEV). At least that is what we see coming from tracking monthly figures.
2/n Note: table incomplete due to poor company breakouts
BYD's Chairman shared somewhat bigger sales targets recently. He hopes to "double last year's sales to 3.6 million units".