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EnergyComment2019-05-07T21:49:12+01:00
11November 2019

Global Energy Briefing No 182: International Energy Markets & Big Oil´s Low Carbon Strategies

By |Monday, 11 November 2019|Categories: #BigEnergy100, coal markets, coal price, electric vehicle sales, international coal markets, international gas markets, international oil markets, oil price|Tags: , , , , , , , , |

All you need to know about global energy: Global Energy Briefing No 182 (45pp) covers:

  • the latest trends in international oil, gas and coal markets
  • the latest international numbers of electric car markets
  • a feature on the low-carbon activities of big oil companies and how stock markets can value them
  • plus an in-depth look at BP ´s latest numbers (3Q19)

Please find more on our newsletter subscription options here, or follow us on Twitter here. The newsletter is available in ENGLISH and in GERMAN. Email to staff@energycomment.de to receive a free test copy in English or German (content is identical).

29October 2019

BP in 3Q19: The American Heritage & Beyond

By |Tuesday, 29 October 2019|Categories: #BigEnergy100, company strategies|Tags: |

1. The Third Quarter 2019

The British-American supermajor delivered as expected, after a string of advance warnings one month ago. Most attention was directed at the profit numbers. Can Big Oil maintain its reputation as ultra-solid cash machine? The first share price reaction on Tuesday was negative. BP shares lost 3.8%.

Net profit in Q3 (underlying replacement cost profit) tumbled ~40% from $3.8bn a year ago to $2.3bn. The profit slump would be even higher if the large in-house trading division had not placed a number of successful bets in the oil and gas sector, as the CFO stated. The company does not provide exact numbers but this division is larger than Vitol or Trafigura.

 A large impairment charge of $2.6bn, after lower-than-expected revenues from the sale of US gas assets and some other items, meant that BP even had to report an overall net loss of $0.7bn.  

A closer look shows that the problem was in the upstream sector. Here RCPBIT (a kind of replacement cost ebitda) halved from $4.0bn a year ago to $2.1bn. This was mainly due to lower oil and gas prices, a major hurricane shutdown and extensive maintenance outages.  

Downstream and the contribution from Rosneft (where BP holds a 20% share) remained more or less stable.

2. Not enough earnings: Divestment continues

The BP path to financial stability is still slippery. So far in 2019, the firm produced an impressive cash flow of $20.6bn ($6.5bn hereof in Q3). Another $1.4bn was generated by divestments. 

So far so good. But the company spends about $2bn more than it earns, namely $23.9bn in the first 9 months of this year.

Hereof organic capex ($11.3bn) is the largest element, plus dividends ($4.0bn), oil spill payments ($2.5bn), inorganic capex ($4.0bn, mostly for BHP assets) and lease liability payments ($1.8bn). And, not to forget, share buybacks for $0.3bn.

So the shale adventure, lots of money to keep shareholders happy, and past sins continue to weigh heavily on BP´s balance sheet.

The strategic conclusion is shrinking, i.e. a large divestment programme. Transactions announced so far this year total $7.2bn. Nevertheless, the financial range for new strategies appears limited. 

Net debt stands at $46.5bn, compared with $38.5 billion a year ago. Gearing is 31.7%, compared with 27.1% a year ago. These are pretty high numbers, at least for supermajors.

3. Production in Q3

Upstream production, excluding the Rosneft stake, came in at 2.57 mboe/d oil and gas in Q3. Including Rosneft´s share it was 3.7 mboe/d oil and gas. BP had sold TNK-BP to Rosneft a few years ago, in exchange for a 20% share in Russia´s largest oil producer Rosneft. 

BP managed a 4.4% growth in oil and gas production in the third quarter compared to last year. Hurricanes and maintenance could not offset additional volumes from the $10.5bn akquisition of BHP´s shale assets.

Excluding portfolio changes, however, BP’s underlying upstream production, excluding Rosneft, was down 2.5% year-on-year.

4. Low-carbon transition: You need a microscope

BP is lagging behind its more transition-oriented European peers Total, Shell or Equinor. It is more “American”, both in terms of strategy, production focus and culture.

Unsurprisingly, third-quarter numbers, documentation and the conference call did not provide much in terms of transition.

Ethanol-equivalent production was stable against last year at 624 million litres in the first nine months of 2019. BP prefers to present this in litre terms, as the translated 14.500 b/d (or 10.000 b/d in gasoline-equivalent energy terms) do not sound that impressive. The volume equals ~0.6% of BP´s total energy production.

BP´s net wind generation capacity currently stands at 926 MW, lower than the 1431 MW one year ago due to divestments.

Wind power generation fell accordingly to 506 GWh in the third quarter. By the way, this translates into a meagre 3500 b/d oil if we assume that, just for rough comparison purposes, 1 litre oil equals 10 kWh power. Wind represents just ~0.1% of BP´s total energy production.

The solar developer Lightsource BP, in which BP holds 43%, currently manages a portfolio of 2 GW solar facilities. It is one of the largest companies in this sector worldwide and certainly a strong point in BP´s transition portfolio.

Overall, BP did not provide much in terms of strategy. This may be left to the new CEO in February 2020.

5. The other transition: from Dudley to Looney. Leaving the American heritage behind? 

CEO Bob Dudley is to retire early next year. He will be replaced by the firm’s upstream boss Bernard Looney (49). 

Dudley led the company in a very turbulent period, after he took over from Tony Hayward in the aftermath of the 2010 Deepwater Horizon disaster in the Gulf of Mexico.

The feared financial collapse of BP did not come, but BP faced clean-up costs and lawsuits that will eventually amount to $75 billion. BP paid $18bn in the last four years alone, and around $65bn so far by 2019. Dudley needed to sell oil and gas assets to pay the bills. 

He shrank BP and, in an unexpected turn of events, this was a good starting point after the 2015 collapse of oil prices. Dudley then took BP through a fast growth period. The acquisition of BHP’s US shale oil assets in 2018 for $10.5bn was BP’s biggest deal in the Dudley era.

But he leaves the company without a clear culture or strategy for the transition to low carbon. Critics say that, under Dudley, BP has done too little to reduce carbon emissions and increase investment in renewable energy. 

Under his watch, BP has become the “most American” European oil major: Fossil growth plus lip service to climate change.  

The new incoming CEO Bernard Looney spearheaded BP’s efforts in Brazil and West Africa. He also supported the conpany´s digital drive, squeezed costs and delivered projects on time. His upstream division has raised profits from $0.6bn to $14.3bn in just three years, as the FT reported.

BP has made some small-scale investments (and divestments) in wind farms, solar power, biofuels and low-carbon start-ups, but much less so than its peers Shell or Total. As mentioned above, biofuels and wind contribute just a (translated) 0.7% to BP´s total energy production. 

The societal pressure for more is mounting though, from the Royal Shakespeare Company and major art institutions cancelling BP’s sponsorships, to activists scaling North Sea oil rigs and shutting down its London headquarters. 

Oil may become the new coal sooner than expected, at least in some parts of the world. Investors demand a long-term strategy from the management. 

BP’s assets may become “stranded assets” if climate policies gather pace. As FT Lex pointedly wrote, the new CEO may have to write off the oil reserves he himself discovered.

 

15October 2019

Global Energy Briefing No.181: International Energy Markets and Company Strategies (English/Deutsch)

By |Tuesday, 15 October 2019|Categories: #BigEnergy100, company strategies, electric vehicle sales, international coal markets, international gas markets, international oil markets|Tags: , , , , , , , , , , |

All you need to know: Global Energy Briefing No 181 (46pp) covers the latest trends in international oil, gas and coal markets, and highlights major energy company news and strategy updates.

Major topics of this edition:
(1) A new CEO for BP (Bernard Looney): Which strategic changes can be expected? We look back at the Dudley era and the challenges ahead for the most “American” supermajor in Europe.

(2) Big Oil or Big Energy? We compare the latest low-carbon investments of oil companies and identify leaders and laggards.

(3) ENI and Equinor: Major strategic steps and missteps

(4) North Sea: Trends in oil/gas ownership

(5) Wind turbine industry: Further steps towards a global oligopoly

(6) Season 4, Episode 11: EDF and Hinkley Point C – The race is on – who can build the most expensive nuclear plant in the world ?

(7) Global oil markets: The latest data, price and market trends. Shale oil trends, OPEC strategy and price outlook.

(8) Global natural gas markets: The latest price and market trends for the European, US gas markets and global LNG.

(9) Global coal markets: Latest trends in global coal prices and market trends.

(10) Electric car markets: The latest numbers for the major EV markets.


Please find more on our newsletter subscription options here, or follow us on Twitter here. The newsletter is available in ENGLISH and in GERMAN. Email to staff@energycomment.de to receive a free test copy in English or German (content is identical).

30September 2019

Italian oil&gas major ENI in turbulent times (#BigEnergy100)

By |Monday, 30 September 2019|Categories: #BigEnergy100|Tags: , , , |

Busy days for Italian oil and gas giant Eni ranging from good to not so good news.

Eni is a second-tier supermajor with 1.9 boe/d oil and gas production and assets worldwide. Three parallel developments have characterized the last few days: new fossil investment, renewable plans and fossil heritage.

1.
Billions for Norway and the Barent Sea: Vår Energi (68.6% ENI-owned) acquires ExxonMobil´s upstream assets in Norway for $4.5 billion. The deal comprises 150.000 boe/d production effectively doubling Eni´s equity production. Eni is now the second-largest oil and gas producer in Norway after state-owned Equinor (Statoil).

ExxonMobil, like other supermajors such as Chevron and ConocoPhillips, is disposing of non-core assets to raise cash and reduce risk. US supermajors are moving capital closer to home to invest in US shale basins, or in global LNG assets.

2.
Eni has entered a far-reaching agreement with global renewables developer MainstreamRP to develop large-scale RE projects in the UK (offshore wind), Asia and Africa. The move mimics similar investments by oil majors.

Eni targets a 1.6GW renewable generation capacity by 2022 and 5 GW by 2025. In the same line: Eni´s JV with General Electric (ArmWind) recently won a 48MW wind auction in Kasachstan.

3.
On a less positive note, Eni´s CEO Descalzi has come under investigation in the Congo and in Italy. Allegedly he did not close that an Eni business partner (Petroservice) is run by his wife. In addition, there are broader allegations of corruption in the Congo. Also, Eni is a defendant in a multi-billion corruption trial in Nigeria. Eni denies any wrongdoing.

4.
High risk has been a familiar and, given the competition with much larger US and British/Dutch peers, almost inevitable concept for Eni (ex Agip) throughout its history: Starting from early groundbreaking arrangements with OPEC countries and Moscow in the 1960s, to high-risk field developments in Kasachstan (Kashagan) and very close links to Libya. Eni has been a dominant player in war-torn Libya since the 1960s producing almost half of its oil and gas. Libya today accounts for 15% of Eni´s total oil/gas production.

Today´s investment in Norway and in low-risk renewable alliances may be seen as a move to counter-balance other high-risk involvements across the globe.

This would be in line with strategies of many of Eni´s peers. Facing a low-price environment in oil and gas markets and fossil divestment demands in Italy, further steps may follow.

30September 2019

#BigEnergy100: Our regular reporting on 100 big energy companies across industries

By |Monday, 30 September 2019|Categories: #BigEnergy100, company strategies, Global Energy Briefing|

Starting today we will regularly report on 100 big energy companies across industries,  from oil to gas, wind, solar and batteries: #BigEnergy100 . We will focus on four aspects:

  • Company strategies
  • Energy transition towards low-carbon solutions
  • Shifting value chains across energy industries and beyond
  • Capital market indicators (stock performance, investors, benchmarking)

Read short news for free on our twitter account (@energycomment) or here on our website.

Or read systematic news and background analysis, embedded into market and industry developments, in our very affordable, bi-weekly newsletter Global Energy Briefing (English and German version available – subscription details here: newsletter).

16September 2019

Global Energy Briefing No 180: International Energy Markets in August/September (Deutsch/English)

By |Monday, 16 September 2019|Categories: coal markets, international coal markets, international gas markets, international oil markets, oil industry, oil markets, oil price, Saudi Arabia|

All you need to know: Our first newsletter after the summer break, Global Energy Briefing No 180 (32pp) covers the latest trends in international oil, gas and coal markets, including the attack on the oil infrastructure in Saudi Arabia.

We provide a first assessment of the Abqaiq assault and look at the overall oil supply and demand picture. Our second focus is the stubborn weakness of European gas markets and the (related) trends in global LNG markets. Finally, we examine the events in global hard coal markets, China in particular. We conclude with a brief look at the latest surge in European power prices and the downturn in carbon prices.


Please find more on our newsletter subscription options here, or follow us on Twitter here. The newsletter is available in ENGLISH and in GERMAN.

19July 2019

Global Energy Briefing No 179: International Energy Markets in July (Deutsch/English)

By |Friday, 19 July 2019|Categories: coal markets, international gas markets, Newsletter, oil markets|

All you need to know: Our second July newsletter Global Energy Briefing No 179 (32pp) covers the latest trends in international oil, gas and coal markets. We focus on recent oil price movements, OPEC and US shale oil outlook; the second focus is on European gas and global LNG markets as well as the recent coal revival in Asia. We conclude with a look at the latest surge in European carbon prices.


Please find more on our newsletter subscription options here, or follow us on Twitter here. The newsletter is available in ENGLISH and in GERMAN.

11July 2019

Global Energy Briefing No 178: World Energy Statistics – The Race between Renewable and Fossil Energy

By |Thursday, 11 July 2019|Categories: Newsletter, Statistics|

Our early July newsletter Global Energy Briefing (No.178, 14pp) is based on the results of BP´s recent “Statistical Review of World Energy 2019”. The short newsletter presents the most interesting numbers and findings in a limited number of easily comprehensible charts – ideal for presentation or illustration.


Please find more on our newsletter subscription options here, or follow us on Twitter here. The newsletter is available in ENGLISH and GERMAN.

25June 2019

Global Energy Briefing No 177: Big Energy Companies – Strategies, Benchmarks, News (deutsch/english)

By |Tuesday, 25 June 2019|Categories: Allgemein, company strategies, Newsletter, Unternehmensstrategien|Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , |

German + English Edition Available!

Our June newsletter Global Energy Briefing (No.177, 32pp) focuses on our sample of 100 global big energy companies.

Topics are among others:

  • Downstream strategies of Western oil majors and NOCs;
  • LNG investment news;
  • the consolidation of the global wind industry;
  • expansion and re-positioning strategies of leading PV cell/module manufacturers;
  • transition steps of European utilities;
  • latest numbers and trends in global electric car sales;
  • the expansion and globalization of large battery makers.

Companies featured in this newsletter:

  • Saudi Aramco, OMV, Adnoc, Chevron, Phillips 66, Petrobras, Devon, CNRL, Wintershall DEA, Anadarko, Adani,
  • Gazprom, Novatek,
  • Xinjiang Goldwind, Siemens Gamesa, Vestas, Suzlon, Ming Yang, SEwind (Shanghai Electric), Brookfield,
  • LONGi Solar, URE, GCL Poly,
  • Enel, Engie, EDF, Statkraft, Eletrobras, EDP, Iberdrola,
  • CATL, SK Innovation, Northvolt

 


Please find more on our newsletter subscription options here, or follow us on Twitter here. The newsletter is available in ENGLISH and GERMAN.

13June 2019

Saudi Aramco: Net profits of $111 billion

By |Thursday, 13 June 2019|Categories: oil industry, Saudi Arabia|Tags: |

Saudi Aramco is the national oil company of Saudi Arabia and the largest oil producer and oil resource owner of the world. The latest BP Statistical Review of World Energy estimates that the country´s oil resources (2P/50%) are in the region of 290 billion barrels.

Aramco recently published its financial numbers for 2018. They dwarf even the largest Western and Chinese oil majors in some respects:

  • Net income 2018: $111.1bn (+46% year on year)
  • Revenues 2018: $355.9bn (+35% year on year)

Aramco is clearly an extremely profitable company, thanks to a successful oil cartel (OPEC+) and low costs. Aramco more or less sponsors the entire country single-handedly. 

For comparison: ExxonMobil has comparable revenues ($279bn in 2018) but its net income is “just” $31bn before and $21bn after taxes in 2018.

Riyadh was pursuing plans to float a small part of the company in New York or London to raise money. But after lengthy debates about the long-term value of the company and oil resources in general, Riyadh preferred a less complicated way to raise cash through company bonds instead of selling shares.

The capital is needed to diversify and secure future revenues. This happens mainly through downstream integration in petrochemicals and refining in key markets (India, China), and through expanding its natural gas business worldwide.

Sources and more details:

https://www.reuters.com/article/us-saudi-oil-aramco/saudi-aramco-reports-2018-net-income-of-1111-billion-idUSKCN1TD12O

Image: Courtesy Saudi Aramco (Berri Gas Plant)

Read more on this and on related issues in the next edition of our bi-weekly newsletter Global Energy Briefing (more)

12June 2019

Wind industry: Suzlon declines Vestas takeover offer despite heavy debt burden

By |Wednesday, 12 June 2019|Categories: India, wind turbines|Tags: , , |

An offer by Vestas for a majority stake in leading Indian wind turbine maker Suzlon ended without agreement, media reported. Apparently, the takeover price was the major problem.

Vestas´ package was worth close to $1.1bn for a majority stake in Suzlon. Suzlon´s  market cap is just $360m (25bn rupees) today after Suzlon shares falling in Mumbai in the wake of the news.

Suzlon suffers from a heavy debt burden and is working with lenders to find a solution. Over the past years, the largest Indian wind turbine maker had to stop its high-flying global ambitions due to falling turbine prizes and the abrupt collapse of the Indian market. In 2015 it had to sell its German subsidiary (now: Senvion) and left the US market for some time. Suzlon´s market cap sank from 130bn rupees ($1.9bn) in 2015 to just 25bn rupees.

Suzlon´s debt stood at 111bn rupees ($1.6bn) in May 2019. It has defaulted on bond payments as early as 2012 and remained in a debt-restructuring program since. It defaulted again in April on a long-term bank facility repayment obligation. Another foreign-currency, convertible bond ($172m) is due in July this year.

It still has, however, a very strong position in its Indian home market including a strong order book and a 16 GW installed turbine base. This makes the company attractive for Danish turbine giant Vestas who makes another attempt to enter the promising Indian market and to catch up with its global rival Siemens Gamesa.

Vestas is the leading global onshore wind turbine maker with 10.1 GW of new installations and a global market share of 22% in 2018. The Danish giant is followed by China´s Goldwind (6.7 GW), GE (5.0 GW) and Siemens Gamesa (4.1 GW). The quadriga accounted for 57% of all wind turbines deployed last year.

Second and third tier manufacturers have difficulties to stem the investment for new turbine generations for onshore and offshore, strong price competition and global marketing and O&M. They also suffer from stop-and-go policies in their home markets, such as Germany and India.

Further consolidation can be expected. Enercon (Germany), Suzlon (India) and, to some degree, GE (US) and Goldwind (China), mainly rely on their respective home markets but this strategy is under pressure as truly global suppliers like Vestas and Siemens Gamesa are growing faster, have a more diversified portfolio and scale advantages in production.

Sources and more details:

https://www.rechargenews.com/wind/1803437/vestas-euro-1bn-suzlon-offer-deadline-passes-with-no-deal-report ($$)

https://www.bloomberg.com/news/articles/2019-05-08/billionaire-shanghvi-to-keep-suzlon-stake-despite-falling-value

Image: Courtesy Suzlon India

Read more on this and on related issues in the next edition of our bi-weekly newsletter Global Energy Briefing (more)

7June 2019

Utilities: Power giant Enel exits Russian coal

By |Friday, 7 June 2019|Categories: company strategies, utilities|Tags: , , |

Italian power giant Enel has announced the sale of Russia´s largest coal plant Reftinskaya (3.8 GW) to leading Siberian power and heat utility Kuzbassenergo, owned by SGC (SUEK), for “at least” RUB21bn (approx. $320m).

Enel is the 2nd largest global utility. It is regarded as the forerunner in the utility world thanks to its fast and successful switch to renewable power in Europe and the Americas, to smart grids and EV infrastructure.

In May 2019, Enel reached its highest market capitalization ever at €58.7bn. It is the largest utility in Europe, ahead of Iberdrola and EDF. Worldwide, the company ranks second only to US-based NextEra (excluding Chinese state-owned conglomerates).

Enel´s CEO Starace recently warned that the EU power sector has reached a “watershed” as cheap renewables will destroy the economic viability of coal production within a decade.

As the outgoing president of Eurelectric, the Europan power industry body, he praised the new-found alliance between the European Commission and the European power sector with both promoting a swift transition to decarbonized power solutions.

In stark contrast to the gloomy appearance of the UK or German power industries, he sees good prospects for the sector in a more and more electrified world.

The IEA concluded in its latest “World Energy Investment 2019” report that utilities focussing on renewables on average show a better financial performance in terms of capital cost (WACC) and returns (ROIC).

Links and Sources:

https://www.ft.com/content/444c9980-83b4-11e9-b592-5fe435b57a3b

https://www.enelrussia.ru/en/media/press/d201906-enel-russia-board-of-directors-called-extraordinary-general-shareholders-meeting-to-approve-reftinskaya-gres-sale.html

Picture: Enel power plant in Russia, courtesy Enel.

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