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Charbone Hydrogen
Overview
Charbone Hydrogen (TSXV:CH,OTCQB:CHHYF,FWB:K47) is the only publicly listed green hydrogen firm in Canada looking to expand across North America (US and Canada) with a pipeline of new projects. This is an opportune time for Charbone as the world races to find effective solutions to meet its net-zero ambitions by 2050. Green hydrogen could be a perfect fit as a potentially low-emitting fuel source. There is an increasing realization of the potential of hydrogen in serving as a low-emissions substitute for fossil fuels in residential as well as industrial use cases.
The Government of Canada has laid out its hydrogen policy, aiming to meet nearly 30 percent of its energy requirement in 2050 by hydrogen, as well as become one of the top three clean hydrogen producers globally. The presence of abundant hydroelectric power, favorable government policies, and a progressive tax regime should boost hydrogen production in the country. The 2023 federal budget includes more than $17 billion in tax credits over the next five years to help fund clean energy projects, including hydrogen.
Source: IRENA - Geopolitics of energy transformation: the hydrogen factor
The US Department of Energy expects to produce 10 million metric tons (MMT) of hydrogen annually by 2030 and eventually reach 50 MMT by 2050. According to US Deputy Secretary of Energy David Turk, 50 MMT of hydrogen could power every bus, train, plane and ship in the US. This is the scale of hydrogen production the government is aiming to achieve. This would imply massive investments in creating the infrastructure to support production. The US government’s Bipartisan Infrastructure Law sets aside $9.5 billion in total funding, including $8 billion for creating 10 regional hydrogen hubs and $1.5 billion in additional funding for other support.
Charbone stands to benefit from rapid adoption of hydrogen as an alternative to fossil fuels. Moreover, Charbone’s focus solely on “green hydrogen” should further its position among investors looking for opportunities to invest in sustainable energy solutions. Green hydrogen is produced when the energy used to power electrolysis comes from renewable sources like wind, water, solar or nuclear. Charbone has clearly stated its intentions to leverage hydropower and nuclear energy to produce hydrogen.
Company Highlights
- Charbone Hydrogen is a Canada-based producer of green hydrogen, and is the only publicly listed green hydrogen producer in Canada.
- The company aims to develop a pipeline of 16 green hydrogen projects across the US and Canada. Of which, the first facility at Sorel-Tracy (Quebec, Canada) is under construction and is expected to be production-ready in mid-2024.
- The company will leverage hydropower and nuclear energy to produce green hydrogen which will allow it to control production costs while lowering emissions. Energy costs remain a significant portion of hydrogen production and the ability to lower these costs will make Charbone’s offering more competitive.
- Charbone has developed several strategic partnerships aimed at strengthening its position in the hydrogen market. This includes a construction agreement with EBC, a supply agreement with NEK Community Broadband, and an MOU with Oakland County for the development of the first green hydrogen plant in the US.
- In December 2023, the company announced the closing of the second tranche of private placement. When combined with the previous closing, the company has raised an aggregate of $499,877, which will be used to fund the construction of the Sorel-Tracy Project.
- Charbone is well positioned to participate in the rise of green hydrogen as a potential low-emitting alternative to fossil fuels.
Project Pipeline and Key Partnerships
The company plans to construct 16 hydrogen projects across North America (six in Canada and 10 in the US) over the next four years. The first of which is under construction at Sorel-Tracy in Quebec, which is expected to be production-ready by mid-2024. The Sorel-Tracy facility is located on a 40,000-square-meter land parcel along Quebec Highway 30. The highway is known as the “Steel Highway” because of the numerous steel mills and process plants operating along the highway.
The construction of Phase 1 of its Sorel-Tracy facility is being done in partnership with EBC, one of the largest construction companies in Quebec. EBC has a proven track record of designing and building facilities in Canada and the US. The partnership agreement gives EBC the right of first refusal to construct additional Sorel-Tracy phases, as well as one or all of Charbone’s facilities within the North American market.
In addition, Charbone has entered into several other strategic partnerships all aimed to expand its footprint in North America.
Superior Plus
This partnership allows Charbone to sell hydrogen produced at the Sorel-Tracy facility to Superior Propane, a subsidiary of Superior Plus. Such supply agreements ensure that Charbone can generate cash flow immediately following the commencement of production.
NEK Community Broadband
Another such supply agreement was signed in November 2023 with NEK Community Broadband, which ensures the supply of green hydrogen in the Northeast Kingdom of the state of Vermont (USA). NEK Broadband is building a high-speed broadband infrastructure and plans to install a hydrogen fuel cell backup system for a reliable power supply.
Oakland County Economic Development Department, Michigan
Further advancing its goal of US expansion, Charbone signed a memorandum of understanding in December 2023 with Michigan’s Oakland County Economic Development Department to set up Charbone’s first green hydrogen facility in the United States. Oakland County is home to major automakers, and a green hydrogen facility in their proximity will support the effort of producing environmentally friendly mobility options.
Being the only publicly listed green hydrogen player in Canada, Charbone offers investors a unique opportunity to participate in the rise of green hydrogen as a potential low-emitting alternative to fossil fuels.
Management Team
Dave Gagnon – Chairman and CEO
Dave Gagnon has been chairman and chief executive officer of Charbone Hydrogen Corporation since April 21, 2022. He has been a climate tech entrepreneur for the last 25 years, and was the first entrepreneur in Canada to start a wind turbine company and offer a new alternative energy solution in North America. Gagnon also worked with an institutional investor that manages several public pension plans, Caisse de depot et placement du Quebec, where he gained deep knowledge of the financial markets.
Benoit Veilleux – Chief Financial Officer
Benoit Veilleux was appointed as the CFO of Charbone on August 15, 2022. Veilleux has over 15 years of experience in corporate accounting and finance. He began his professional career at KPMG in 2003, where he managed and coordinated audit teams for public companies until 2010. Since then, he has worked with a number of companies including Air Liquide Canada and the Hypertec Group.
Daniell Charette – Chief Operating Officer
Daniell Charette has been the chief operating officer of Charbone since February 2019. He brings over 25 years of experience in running and managing renewable energy companies. He has worked in senior leadership roles with several renewable companies including NEG Micon A/S, Vestas and Brookfield Power. He has served on various association boards and councils, including the Canadian Wind Energy Association, Association Québécoise des Producteurs d’Énergie Renouvelable, and Latin Wind Energy Association.
Francois Vitez – Director
Francois Vitez is a hydropower and energy storage expert with more than 24 years of experience in the development, engineering and construction management as well as operations and maintenance of hydropower and energy storage projects in North America and internationally. He is a board member and chair of the Value of Hydropower committee at Waterpower Canada, vice-chair of the Energy Storage Association of Canada, board member of the California Energy Storage Association, and member of the International Hydropower Association.
This article was written in collaboration with Couloir Capital.
Elixir Energy
Overview
Elixir Energy (ASX:EXR) is a gas exploration and development company currently focused on its portfolio of natural gas assets in Queensland, Australia and Mongolia. As an early mover in both areas, Elixir Energy has been the first company ever to free-flow gas from the deep Taroom Trough in Queensland and flow gas of any description in Mongolia.
Elixir Energy’s Grandis Gas project in Queensland is located in the Taroom Trough in the Southern Bowen Basin, where Australia’s premier physical and commercial gas hub – Wallumbilla – is immediately adjacent. Market factors are now driving new rounds of drilling in the Taroom Trough contributing to its reputation as an emerging energy super basin with major electricity as well as gas infrastructure.
A successful free-flowing test was conducted on the Lorelle Sandstone and has indicated it could produce a commercial flow rate of gas, with the breakeven commercial initial flow rate estimated at 2.5 million cubic feet per day.
Gas flow from Stage 1 Lorelle Sandstone post stimulation
Elixir Energy’s Nomgon coal-bed methane (CBM) project is located in Mongolia.
The Nomgon CBM project is in the South Gobi region of Mongolia and on the Chinese/Mongolian border. The ideal location of the asset provides access to excellent infrastructure, including planned pipelines and local mines as customers. The Nomgon project includes a CBM pilot production plant, which flowed gas in its early stages and is now moving to progressively de-water with a view to building up a sustained gas flow rate.
The company is led by a highly experienced team with direct histories in Queensland, Australia and Mongolia and expertise in the natural resources industry, community engagement and working with government stakeholders.
Company Highlights
- Elixir Energy (ASX:EXR) is an exploration and development company with energy assets in Australia and Mongolia, targeting natural gas and renewable energy/hydrogen.
- The company’s Grandis Gas project in Queensland is located in an established gas and oil region, with exceptional access to existing infrastructure and high gas prices.
- The region is currently hosting multi-operator activity, including by Shell.
- Elixir has discovered a deep free-flowing gas zone in Grandis – the first of its kind.
- The company was also the first to flow natural gas in Mongolia, pioneering production in the country.
- A management team with a wide range of expertise in the natural resources sector provides leadership for maximising the value of Elixir Energy’s assets.
Key Projects
Grandis Gas Project
The company’s asset in Queensland, Australia, covers approximately 1,000 square kilometers in an established oil and gas province. The project is well-suited for cost-effective transportation to domestic and international gas markets.
Project Highlights:
- Strong Local Infrastructure: The region's long history of oil and gas production has resulted in a robust infrastructure, including gas transportation and electricity transmission access – and community support for the industry.
- Adjacent to Current and Proposed Pipelines: The asset is located close to existing – and proposed gas pipelines to assist in efficient and low-cost transportation as production commences.
- Impressive Initial Flow Test Results: After a successful suite of DFITs, free-flowing test on the Lorelle Sandstone has been successfully stimulated. Elixir’s technical and economic modeling indicates the Lorelle Sandstone alone could produce a commercial flow rate of gas, with the breakeven commercial initial flow rate estimated at 2.5 million cubic feet per day.
Daydream-2 Lorelle Sandstone Flow Testing*
Nomgon CBM Project
Elixir Energy’s 100-percent-owned coal-bed methane (CBM) project is ideally located in the South Gobi region of Mongolia. This location gives the asset access to robust local infrastructure and close access to Chinese energy markets – the world’s largest.
Project Highlights:
- CBM Pilot Project In Production: The pilot plant passed a key production milestone of 200,000 square cubic feet per day in its early stages. Water production has progressed since these early flows with a view to de-pressuring the CBM reservoir, leading to sustained gas flows.
- District-scale Asset: The Nomgon project covers a significant 30,000 square kilometers in Mongolia. Initial exploration campaigns have been promising and indicate the potential for the asset to become a significant producer of regional energy markets.
Management Team
Richard Cottee - Non-executive Chairman
Richard Cottee was appointed as the non-executive chairman of the company on April 29, 2019. Cottee was the managing director of coal-seam-gas(CSG)-focused Queensland Gas Company (QGC) during its growth from a $20-million market capitalization junior explorer through to its acquisition by BG Group for $5.7 billion. QGC’s CSG assets are now operated by Shell and produce gas that is sold to China and other LNG markets.
Originally a lawyer, Cottee has spent the vast majority of his career in senior executive roles in the energy industry, including as CEO at CS Energy, NRG Europe, Central Petroleum and Nexus Energy. A 32-year veteran of the industry, Cottee is a strong business development professional and a graduate of The University of Queensland.
Neil Young - Managing Director and Chief Executive Officer
Neil Young was appointed to the board of Elixir on December 14, 2018, as its chief executive officer. Young has more than 20 years of experience in senior management positions in the upstream and downstream parts of the energy sector, focusing on business development, new ventures, gas marketing and general commercial functions. He has worked for a range of companies in the UK and Australia, including EY, Tarong Energy and Santos. Young founded Golden Horde Ltd in 2011 to explore gas on the Chinese border in Mongolia. He has also developed various new ventures in other countries including Kazakhstan, Japan and the USA. Young has an M.A. (Hons) joint degree in economics/politics from the University of Edinburgh.
Stephen Kelemen - Non-executive Director
Stephen Kelemen was appointed as the non-executive director of the company on May 6, 2019. Kelemen led Santos’ coal seam gas (CSG) team from its inception in 2004 and drove the growth in this area that allowed Santos to become one of Australia’s leading CSG companies.
An engineering graduate from Adelaide University, Kelemen served Santos for 38 years in multiple technical and leadership roles.
Kelemen is currently an adjunct professor at the University of Queensland’s Centre for Coal Seam Gas and also acts as a non-executive director on the boards of Galilee Energy (ASX:GLL) and Advent Energy.
Anna Sloboda - Non-executive Director
Anna Sloboda was appointed as the non-executive director of the company on October 1, 2020. Sloboda is a joint Belarusian/Australian citizen and has more than 20 years of experience in corporate finance, and in developing junior resource companies operating around the world.
Sloboda is currently an executive director of Red Citadel Resources Pty Ltd, a privately owned mineral resources exploration company with a range of projects in Africa and South America.
She also serves as an advisory committee member, maritime archaeology, at the Western Australian Museum.
Previously she was a co-founder of Trans-Tasman Resources and in that capacity had substantial experience in dealing with Chinese off-takers and partners. Other prior employers include Lehman Brothers, Clough and Curtin University.
Sloboda has a Master of Economics from Belarusian University and an executive MBA from Melbourne Business School.
Victoria Allinson - Company Secretary and Chief Financial Officer
Victoria Allinson is a fellow of The Association of Certified Chartered Accountants, a fellow of the Governance Institute of Australia and an NSX-nominated advisor. She has more than 30 years of accounting and auditing experience, including senior accounting positions in a number of listed companies and was an audit manager for Deloitte Touche Tohmatsu. Allinson has gained professional experience while living and working in both Australia and the United Kingdom.
Her previous experience has included being company secretary and CFO for a number of listed companies, including ASX-listed: Kiland, Safety Medical Products, Marmota Limited, Centrex Metals, Adelaide Energy, Enterprise Energy NL, and Island Sky Australia as well as several unlisted companies.
Quarterly Activities Report for the Period Ended 31 March 2024
HIGHLIGHTS
- Daydream-2 successfully flowed from the Lorelle Sandstone without stimulation
- Very material increase in prospective resources in deep coals
- Analysis undertaken post end of quarter indicates the Lorelle alone could produce a commercial flow rate
- Daydream-2 program remains fully funded with current cash equivalent held of $11.9M
MANGAGING DIRECTOR’S REPORT TO SHAREHOLDERS FOR THE QUARTER
Following the drilling of the Daydream-2 well at the end of the December quarter, the March quarter has been one of intense analysis and preparation for the next phase of the Grandis appraisal program.
Just after the end of the quarter, that phase kicked off with the successful flowing of gas from the Lorelle Sandstone at ~4,200 metres – critically, without stimulation, which is a first for the Taroom Trough.1
This activity is occurring at a time of now widespread recognition that the East Coast Australian gas market faces imminent supply shortfalls, prices are high and expected to stay high, and growing international geo-political tensions put a premium on LNG supplies from stable countries like Australia.
Daydream-2 Lease during 2nd flow period of Lorelle Sandstone
The drilling of the Daydream-2 well late in 2023 finished up with a unexpected but very pleasant surprise – gas free flowing from a formation at a depth of 4,200 metres (called the Lorelle sandstone) – something not encountered in the Taroom Trough before.
The primary targets of Daydream-2 are tight gas and coal formations that require stimulation to flow – a free-flowing zone adds a lot to these in terms of economics (lower costs, possibly lower decline rates, energy in the well-bore, etc).
In January we undertook laboratory analysis of samples obtained from the sands captured at the wellsite from the Lorelle sandstone. This work identified clay rims on the sands that preserved porosity in this highly pressured deep zone. These results are analogous with the high productivity deep Permian section of the Perth Basin which has been a source of enormous success in recent years.2
Click here for the full ASX Release
This article includes content from Elixir Energy, licensed for the purpose of publishing on Investing News Australia. This article does not constitute financial product advice. It is your responsibility to perform proper due diligence before acting upon any information provided here. Please refer to our full disclaimer here.
Oil and Gas Price Update: Q1 2024 in Review
Additionally, Russia also committed to a voluntary production cut of 471 thousand barrels per day for the second quarter of 2024, alongside reductions in exports.
OPEC’s decision to curb output in the name of stability was a factor Eric Nuttall partner and senior portfolio manager at Ninepoint Partners pointed to as a Q1 catalyst.
“Oil volatility has actually fallen,” said Nuttall during an April 5 interview. “You wouldn't know it necessarily when looking at the oil price, but volatility is low. I think you can attribute that to the OPEC cut, that was one of the biggest goals of OPEC’s intervention into the market was to reduce volatility.”
As Nuttall explained, the effort to minimize volatility was successful and helped keep the benchmarks between US$70 – US$87 per barrel throughout the 90-day session.
Oil market update: Rebounding prices
Chart via TradingEconomics
After reaching a 2023 high of US$93.10 (Brent) on September 11, prices spent the remainder of the year sliding until bottoming at US$75.80 on December 4.
WTI followed a similar trajectory displaying slightly more volatility, reaching a yearly high of US$91.43 in late September, then slipping to US$68.71 in early December.
Chart via TradingEconomics
The subsequent upswing in prices can be attributed to several factors, according to Nuttall, Firstly, values are rebounding from a period of low activity, driven by unfounded concerns about weak demand and exaggerated fears of increased US shale production.
Secondly, OPEC's production cuts which played a significant role in reducing oil inventories.
He explained that typically, demand is weakest at the beginning of the year, but this time, inventories have only seen a minimal increase compared to the substantial buildup last year. This underscores the effectiveness of OPEC's cuts in counteracting the impact of strategic petroleum reserve releases and stabilizing oil prices.
“Lastly, we do have a geopolitical risk premium and the oil price now, I'm guessing US$5 a barrel,” said Nuttall.
He continued: “We haven't had a risk premium in quite a while. But what we're seeing in the Middle East, what we're seeing [with] Russia, Ukraine, it just fast forwarded where I thought we were going to be, I thought we'd be at US$90bbl in the summertime, we’re there a few months earlier than I thought.”
Oil market update: Strategic reserves
At the end of January oil prices dipped below US$77bbl (Brent) following a rally that took futures into overbought territory. Despite military tensions escalating in the Middle East, abundant supplies contributed to the decline, with OPEC+ exports exerting additional pressure on prices.
Prices began to recover in early February, breaking through the US$80bbl level on February 5, and remaining above the threshold for the remainder of the quarter.
On February 26, The US Department of Energy released a solicitationto purchase up to 30 million barrels of crude oil for the Strategic Petroleum Reserve (SPR), aimed at enhancing the nation's energy security.
In 2022 the Biden administration withdrew 32.3 million barrels from the SPR for domestic consumption.
“Analysis from the Department of the Treasury indicates that SPR releases in 2022, along with coordinated releases from international partners, reduced gasoline prices by as much as 40 cents per gallon,” the government announcementnoted.
Less than a week later the administration scrapped a purchase that would have added 3 million barrels back to the SPR, citing high prices.
While Ninepoint’s Nuttall doesn’t think SPR restocking will impact broader oil prices, he was surprised by the government’s decision to restock.
“The biggest threat to his re-election is inflation. And the biggest input to inflation is energy pricing, specifically oil and gasoline,” said Nuttall. “So, it was counterintuitive to me, and I think it was purely for political theater, that he started to refill it.”
By the end of March prices had breached US$85bbl and closed the three-month period above US90bbl.
Oil market update: Long term bullishness
In a special report from FocusEconomics, panelists are forecasting a 10 percent decline in spot prices for Brent and WTI crude oil over the next decade compared to 2023 levels.
However, prices are anticipated to remain historically high in the near term due to increased demand from China and India.
The consensusamong the FocusEconomics panelist is for Brent crude oil prices to
average around US$85 per barrel for the remainder of the year.
Nuttall is taking a more bullish stance, supported by an increase in demand while global inventories are already at multi-year lows.
Using the Days of Supply metric, a calculation that estimates how many days current inventory levels will last, based on the current consumption rate, Nuttall expects inventories to reach the “lowest level in history later this year.”
“That's very supportive of a high price,” he said.
Similar to FocusEconomics’ analysis, Nuttall sees oil prices remaining in the US$90bbl range.
He noted that geopolitical events have accelerated the approach to this price target, and the subsequent trajectory of prices will depend on when Saudi Arabia decides to return barrels, the pace of that return, and developments in the Middle East and Russia.
While there are uncertainties, such as potential infrastructure damage and the impact on oil flow, factors like stronger US demand, better-than-expected European performance, and solid demand from India contribute to his bullish outlook.
“But we're not calling for US$150 oil, we just don't think that's reasonable right now.”
Gas market update: Q1 2024 in review
While oil prices remained relatively stable throughout Q1 2024, gas prices sank to multi decade lows, hitting US$1.55 per Metric Million British Thermal Unit (MMBtu).
The decline was attributed to a warmer than expected winter in the Northern Hemisphere and ample supply.
Chart via TradingEconomics
“Higher LNG production (up by 3 percent y-o-y), together with stronger piped gas deliveries to Europe and China, further eased supply fundamentals and supported demand growth,” the International Energy Agency’s (IEA) latest gas report stated.
The market overview also noted that global demand was up 2 percent for the quarter but was more than offset by the production uptick.
Gas market forecast: Geopolitical fragility
Looking forward prices are expected to remain well below the highs set in 2022 when values neared US$10MMBtu, propelled by market uncertainty brought on by Russia’s invasion of Ukraine and fears around supply security.
After a steep decline in late 2022, prices have remained below US$5MMBtu throughout 2023. Although concerns about the Panama Canal and Red Sea disruptions led to speculation about a geopolitical premium, the uptick has yet to materialize in the gas market.
For the remainder of the year, FocusEconomics panelists expect natural gas prices to decrease in Asia and Europe compared to 2023 averages, while remaining steady in the US, staying below the pre-pandemic 10-year average.
Prices could see declines brought on by an abundance in gas inventories in all regions, attributed to mild weather conditions from the El Niño pattern and subdued industrial activity.
Europe will continue to be the region to watch as ongoing sanctions on Russian gas, conflict in Ukraine and supply security trends could add tailwinds to prices.
“The structural deficit in European natural gas has yet to be fully resolved with increased LNG supply not yet fully making up for lost Russian imports. Thus, European gas prices remain vulnerable to supply interruptions or increases in demand,” a Goldman Sachs (NYSE:GS) analyst said. “This is especially the case during winter, when weather-dependent heating comprises the bulk of demand and bouts of cold weather can lead to rapidly falling stocks and higher prices.”
Moving into 2025, increased US LNG export capacity could facilitate a price convergence among regions by the end of the year.
“In 2025, US natural gas prices are expected to surpass the pre-pandemic average, with Europe seeing a slight increase and Asia maintaining stability,” FocusEconomics Natural Gas Market Outlook read.” The absence of El Niño is predicted to boost heating demand, while industrial output growth will drive up consumption.”
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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
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