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September 2023 Quarter (“Quarter”) Operations Report
Clean Hydrogen Technologies
On 2 August 2022 BPH announced that, following its shareholders’ meeting on 21 June 2022 at which shareholders voted unanimously to approve an investment in hydrogen technology company Clean Hydrogen Technologies Corporation (“Clean Hydrogen” or “Vendor” or “Borrower”), BPH and its investee Advent Energy Ltd (“Advent” or “Lender”), together the “Purchasers”, settled for the acquisition of a 10% interest in Clean Hydrogen for US$1,000,000 (“Cash Consideration”) (8% BPH and 2 % Advent.
The Purchasers had a first right of refusal to invest further in Clean Hydrogen to a maximum of a further US$1,000,000 for an additional 10% interest. The Purchasers loaned a further US$950,000 (“Additional Cash Consideration”) under this agreement and the Purchasers and Clean Hydrogen have now executed a Loan Conversion Agreement which enabled the conversion of the US$950,000 loan into the relevant Subscription Shares Tranche 2, representing the Purchasers further 9.5% interest in Clean Hydrogen.
BPH now has an interest of 15.6% and Advent has an interest of 3.9% interest in Clean Hydrogen. Clean Hydrogen has also issued 760 share options to BPH and 190 share options to Advent, with an exercise price of USD$3,000 each, exercisable immediately, with the option to convert into shares in Clean Hydrogen expiring ten years from the date of issue.
The parties acknowledge and agree that the Cash Consideration and Additional Cash Consideration shall be used by Clean Hydrogen to design, build, produce and test a reactor that can produce a minimum of 3.2kgs and as high as 15kgs of hydrogen per hour and to submit at least 2 new patents in an agreed geography, relevant to the production of hydrogen from proprietary technology.
Capital
On 11 September 2023 the Company announced that it had received binding commitments to raise $1.9 million (before costs) (“Placement”) comprising the issue of 95,000,000 new fully paid ordinary shares (“Placement Shares”) in the Company at an issue price of $0.02 per share. The Placement was well supported by new and existing investors and upsized to accommodate strong demand.
Placement participants will receive one (1) free Attaching Option for every two (2) Placement Shares, exercisable at $0.03 each with an expiry date of 30 September 2024 (“Attaching Options”). The Attaching Options, the issue of which are subject to shareholder approval at the Company’s November 2023 Annual General Meeting, will be quoted on the ASX.
Click here for the full ASX Release
This article includes content from BPH 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.
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Overview
Australia is on the verge of an energy crisis. Inaction by the Australian government on gas and energy security has resulted in a gas market that is very nearly running on empty, with extreme price hikes and the possibility of significant losses in employment and capital. Against the backdrop of a global clean energy transition, natural gas represents a critical fuel for this transition. The switch to renewable energy cannot occur overnight, and natural gas offers an avenue for a gradual transition.
Natural gas represents a low-carbon, low-emission alternative to traditional energy sources, and could even be leveraged for sustainable energy.
BPH Energy (ASX:BPH) intends to do precisely that. An investment company headquartered in Western Australia, BPH has already invested in two highly promising businesses in the energy sector. The first, Advent Energy, is an unlisted oil and gas exploration and production company.The second, Clean Hydrogen Technologies, has developed a CO2-free method of processing gas into hydrogen and conductive carbon.
BPH has a diversified portfolio with an investment in medical technology company Cortical Dynamics, providing yet another avenue for potential growth.
In February 2024, BPH Energy raised a further AU$2.25 million to execute its next phase of hydrocarbon and Cortical Dynamics funding.
Company Highlights
- BPH Energy is an ASX-listed investment company based in Western Australia.
- The company recently completed a $1.9 million placement to fund further investment in Hydrogen, PEP11 and its carbon gas storage strategy.
- BPH holds a 36.1 percent interest in Advent Energy Limited, and with Advent a 19.5 percent interest in Clean Hydrogen Technologies, and a 17 percent interest in Cortical Dynamics.
- Clean Hydrogen Technology is in the process of upscaling into a much larger commercial operation.
- Cortical Dynamics has the potential to expand its technology not just into the EU marketplace, but globally thanks to a licence and cooperation agreement with Philips.
- The global hydrogen market is projected to grow from less than US$100 billion in 2021 to over US$200 billion by 2030. Demand is projected to reach up to 73 million metric tons by 2050.
- The Australian Corporation and Consumer Commission has warned that developed gas reserves in eastern and southeastern Australia may be unable to meet demand by the end of 2025.
- Due to the predicted gas supply shortfall, Advent Energy's PEP11 asset has generated significant interest among investors and displays the potential for a significant uplift in value.
- PEP11 also has the potential to fill the gap represented by the impending gas shortage.
- BPH Energy's investee company Cortical Dynamics has secured FDA 510(k) clearance in the USA for its flagship technology, the Brain Anaesthesia Response Monitor or BARM™ system version 1.
Key Investments
Advent Energy
An unlisted oil and gas exploration company based in Western Australia, Advent maintains two major assets. The offshore Petroleum Export Permit 11 (PEP11) represents its most compelling asset. Jointly owned by Advent subsidiary Asset Energy (85 percent) and Bounty Oil & Gas NL,(15 percent) the exploration area covers 4,649 square kilometers.
PEP11's estimated prospective recoverable gas resources is 5.7 trillion cubic feet. With this resource alone, BPH and Advent could potentially fulfill the energy needs of most of Victoria and New South Wales for the next several decades. Advent is in the process of applying to the National Offshore Petroleum Titles Administrator (NOPTA) to enable drilling, and recently succeeded in a Federal Court Appeal.
Advent also holds Retention Lease 1, an onshore permit in the Bonaparte Basin.
Highlights:
- Well-positioned Assets: PEP11 is situated less than 50 kilometers from the Sydney-Newcastle greater metropolitan area. In addition to this:
- The Sydney Basin is a proven hydrocarbon basin with excellent potential for further discovery of natural gas.
- It represents the closest potential carbon storage (geosequestration) area to NSW carbon sources which collectively represent 30 percent of Australia's total CO2 output.
- PEP11 may also have potential as a CCS (geosequestration) project in the Sydney Basin.
- Majority Ownership: Asset Energy holds an 85 percent stake in PEP11.
- A Proven Petroleum Basin: Ongoing hydrocarbon seeps have been confirmed in PEP11 along with geophysical indications of escaping gas. The asset's prospectivity is supported by the seismically-indicated gas features historically observed by Advent and a 2011 geochemical report.
Clean Hydrogen Technologies
Based in the United States, Clean Hydrogen Technologies (CHT) leverages its unique catalysts alongside a bespoke engineering process to generate clean hydrogen and conductive carbon from natural gas. The technology uses a process called thermo-catalytic pyrolysis, which combines heat, and a catalyst and has no oxygen. Importantly the process produces no CO2 emission. CHT is currently in the process of commercialization, announcing in February 2024 that it has moved from proof-of-concept to production.
Highlights:
- Patents: Clean Hydrogen has filed two comprehensive patents in the United States with plans to file additional patents in the coming months.
- US-focused and Funding Potential: Clean Hydrogen plans to operate primarily in the United States, allowing it to leverage the federal government's $9.5-billion hydrogen industry investment and $1.2-trillion infrastructure investment and Jobs Act.
- High Investment Potential: BPH Energy with Advent has a 19.5-percent stake in Clean Hydrogen.These investments have the capacity to substantially increase in value with the burgeoning hydrogen market.
Medical Technology Investment
Cortical Dynamics
Cortical Dynamics is an Australian neurotechnology developer and medical device manufacturer focused on developing the next generation brain function monitors by employing the latest theories and technologies in the field.
Headquartered in Perth, Western Australia, Cortical Dynamics is focused on commercializing its core product, the Brain Anaesthesia Response Monitor System (BARM), which was developed with the objective of better detecting the effect of anesthetic and analgesic agents on human brain activity. BARM aids anesthetists in keeping patients optimally anesthetized and pain-free during operations using general anesthesia.
BARM was specifically developed to solve several problems associated with anesthetic and analgesic delivery in the operating theater and negative post-operative consequences. Its proprietary algorithms are based on innovative developments in understanding how the brain's rhythmic electrical activity or EEG is produced.
Highlights:
- Physiology-based algorithm: Unlike other monitors, BARM’s algorithms are based on the individual patient’s physiological processes that produce electrical activity in the brain, providing more interpretable and personalized monitoring of their response to anesthetic agents.
- Global patents: Cortical has an extensive and growing global patent portfolio, and has secured FDA 510(k) clearance in the USA for its flagship technology, the Brain Anaesthesia Response Monitor or BARM™ system version 1.
- Regulatory Approvals: BARM version 1 is approved by regulatory bodies in Australia, the European Union and Korea. However, Cortical will be commercializing version 2, which is an enhancement of version 1 made possible through a technical partnership with the Austrian Institute of Technology in Vienna.
- Business Model: Cortical intends to sell BARM V2 devices with associated recurring sales of the disposable single-use head sensors to hospitals or day surgeries, internationally.
BARM Sensors
- World-class Team: A team of experienced researchers, biomedical engineers and corporate financiers make up Cortical Dynamics, with a global network of key opinion leaders and clinicians advising the company on the development of the BARM technology based on real challenges they face in the operating room.
- Philips Partnership: Cortical Dynamics has a non-exclusive license and cooperation partnership with global medical industry player Philips Electronics North America to interface the BARM system with Philips’ operating theater monitors.
- Artificial Intelligence App: Partially funded through a grant, the Cordyan is an AI-based app that has been developed to help clinicians, researchers and hospitals better understand the implications of using anesthetic agents on humans.
Management Team
David Breeze — Managing Director and Executive Chairman
David Breeze is a corporate finance specialist with extensive experience in the stock broking industry and capital markets. He has been a corporate consultant to Daiwa Securities, manager of corporate services for Eyres Reed McIntosh, and state manager and associate director for the stock broking firm BNZ Norths. Breeze is a fellow of the Institute of Company Directors of Australia. He has published in the Journal of Securities Institute of Australia and has also acted as independent expert under the Corporations Act. He has worked on the structuring, capital raising and public listing of more than 70 companies involving more than $300 million, covering a range of areas including oil and gas, gold, food, manufacturing and technology. Breeze is chairman of Grandbridge Limited, a public investment and advisory company and MEC Resources, a public company investing in exploration companies that target potentially large energy and mineral resources. He is also chairman of Advent Energy.
Tony Huston
Tony Huston has been involved for over 35 years in engineering and hydrocarbon industries for both on and offshore exploration/development. His early career experience commenced with Fitzroy Engineering, primarily working on the development of onshore oil fields. In 1996, Huston formed his own E&P company on re-entry of onshore wells primarily targeting shallow pay that had been passed or ignored from previous operations. This was successful and the two plays opened up 15 years ago and are still in operation. His focus over the last 10 years has been to utilize new technology for enhanced resource recovery, which has been demonstrated in various fields, including US, Mexico, Oman, Italy and Turkmenistan.
Charles Maling
Charles Maling was formerly the communications officer for the Office of the Western Australian State Government Environmental Protection Authority, advising the chairman of the EPA on media issues. Maling has worked with the Western Australian State Government Department of the Environment for 14 years and a further eight years for the EPA. His administrative roles included environmental research (including a major study on Perth Metropolitan coastal waters and Western Australian estuaries) environmental regulation and enforcement, and media management.
Dr Sunil Nagaraj - Chief Scientist (Cortical Dynamics)
Dr. Sunil Belur Nagaraj obtained his master’s degree from the University of Victoria in Canada in 2010; and doctoral degree from University College Cork, Ireland in 2015. His doctoral research centered around the development of AI-based real-time brain monitoring, utilising EEG recordings to monitor brain activity. After a role as a postdoctoral fellow at the Harvard Medical School/Massachusetts General Hospital in the USA. Nagaraj assumed the position of an assistant professor of medicine at the University Medical Centre Groningen in The Netherlands for two years. Concurrently, he dedicated three years to working as a scientist at Royal Philips, where he specialised in sleep disorders at the Innovation Forum, highlighting its potential to provide future insights into heart-brain connectivity.
Throughout his career, Nagaraj has demonstrated exceptional research acumen, with a patent and 21 high-impact journal articles to his name, amassing over 650 pioneering research papers and has been recognised through several national and international grants, enabling him to conduct cutting-edge studies that contribute significantly to the advancement of medical technology.
Top 5 Oil and Gas Stocks on the TSX and TSXV in 2024
The first quarter of 2024 saw increasing trends in Brent Crude and West Texas Intermediate prices, attributed to ongoing tensions from the Russia-Ukraine conflict and global economic conditions. OPEC countries' production cuts and Russia's commitment to reduce exports also supported prices.
Despite volatility, prices remained stable between US$70– US$87 per barrel. Natural gas prices, however, sank to multi decade lows due to warmer-than-expected weather and ample supply.
Looking ahead, FocusEconomics panelists forecast a 10 percent decline in spot prices for oil over the next decade, while gas prices are expected to remain below highs set in 2022, with potential declines in Asia and Europe and steady prices in the US. Increased US LNG export capacity could lead to price convergence among regions by 2025.
The price stability in the oil market also helped some oil and gas stocks register gains for the quarter. The five top oil and gas stocks on the TSX and TSXV listed below saw significant share price growth over the first three months of 2024. All year-to-date performance and share price data was obtained on April 25, 2024, using TradingView’s stock screener, and the top oil and gas stocks listed had market caps above C$10 million at that time.
1. Sintana Energy (TSXV:SEI)
Year-to-date gain: 222.7 percent; market cap: C$396.4 million; share price: C$1.07
Sintana Energy, an oil and gas exploration and development company, operates across five highly prospective onshore and offshore petroleum exploration licenses in Namibia and Colombia.
Share prices saw early year tailwinds after the company released two updates on exploration activity in Namibia’s Orange Basin. During the exploration campaign of Petroleum Exploration License 83 (PEL 83) two significant light oil discoveries were made in January.
February saw more share price growth when Sintana was listed on the TSX Venture 50 ranking as the top energy performer.
In mid-March Sintana announced the results of its warrant exercise activity, revealing an approximate 99 percent exercise rate, which generated an additional C$22.5 million in cash resources for the company. A few days later the company reported a third light oil discovery for the quarter in the Orange Basin.
Shares rose to a quarterly high of C$0.58 at the end of March.
2. MEG Energy (TSX:MEG)
Year-to-date gain: 31.8 percent; market cap: C$8.6 billion; current share price: C$31.57
MEG is an energy company with a focus on in situ thermal oil production in Alberta's southern Athabasca oil region. Utilizing innovative enhanced oil recovery projects, including steam-assisted gravity drainage extraction methods, the company aims to increase oil recovery responsibly while reducing carbon emissions.
Shares of MEG spent the three-month session trending higher reaching a Q1 high of C$31.48 at the end of March.
In late February MEG reported its fourth-quarter and full-year 2023 financial and operating results. Included in the results was record annual bitumen production and increased funds flow from operations.
MEG's production outlook for 2024 remains positive, with plans to optimize operations and enhance capital efficiency. Additionally, the company announced a capital allocation strategy focused on debt reduction and returning capital to shareholders.
On March 6, the energy company launched a share buyback program, aiming to repurchase up to 24,007,526 common shares between March 11, 2024, to March 10, 2025. This initiative is part of the company's strategy to enhance shareholder returns and reduce debt.
3. Obsidian Energy (TSX:OBE)
Year-to-date gain: 29.4 percent; market cap: C$912.9 million; current share price: C$11.79
Obsidian Energy is an intermediate-sized oil and gas producer, with a portfolio of assets that yield approximately 32,000 barrels of oil equivalent per day. The company's primary operations are in the Peace River, Cardium, and Viking regions of Alberta, Canada.
In early January, Obsidian released its full year 2023 results which included a 6 percent year-over-year increase. Later in the month the Calgary-based company provided the results of a 2023 independent reserves evaluation.
“We replaced 124 percent of 2023 production on a proved developed producing (PDP) basis, 157 percent on a total proved (1P) basis and 217 percent on a total proved plus probable (2P) basis,” the statement read.
In February Obsidian announced the completion of the first half 2024 capital program, highlighting ongoing development in the Willesden Green/Pembina assets in Cardium and exploration and appraisal activity in the Clearwater and Bluesky formations in Peace River.
Additionally, Optimization of Viking wells drilled in late 2023 yielded strong production results.
“Current production has surpassed 36,500 barrels of oil equivalent per day (boe/d) based on field estimates. Despite production impacts from January's cold weather, operations have resumed normalcy, with production slightly exceeding planned targets year-to-date, aided by strong initial rates from wells brought online in February,” the company said.
In March, Obsidian successfully completed a previously announced offer to purchase 2 million of its outstanding senior unsecured notes.
Share reached a quarterly high on March 31 and were trading for C$11.26.
4. Imperial Oil (TSX:IMO)
Year-to-date gain: 27.25 percent; market cap: C$51.92 billion; current share price: C$96.91
Calgary-based Imperial Oil is a prominent Canadian energy company involved in exploration, production, refining, and marketing of petroleum products. With a history spanning over 140 years, Imperial operates diverse assets across Canada, including oil sands, conventional crude oil, and natural gas assets.
On February 2, Imperial released its Q4 2023 results which highlighted upstream production of 452,000 gross oil-equivalent barrels per day, “marking its highest level in over three decades.”
Additionally, Imperial initiated steam injection at Cold Lake Grand Rapids, pioneering the industry's first deployment of a solvent assisted SAGD technology. Downstream operations performed strongly, with refinery capacity utilization reaching 94 percent, following the successful completion of the largest planned turnaround at the Sarnia site.
The company returned more than C$2.7 billion to shareholders, including the completion of a substantial issuer bid. Additionally, Imperial increased its quarterly dividend by 20 percent, from C$0.50 to C$0.60 cents per share. Lastly, the company released its annual corporate Sustainability report, highlighting its sustainability focus areas and achievements.
In March Imperial implemented temporary measures to ensure fuel supplies to Winnipeg during unplanned pipeline maintenance. The Winnipeg Products Pipeline, which transports gasoline, diesel, and jet fuel to the area, required preventative maintenance, including the replacement of a section under the Red River.
The work that began in mid-March is expected to take three months.
Shares marked a Q1 high of C$94.69 on March 31.
5. Condor Energies (TSX:CDR)
Year-to-date gain: 23.94 percent; market cap: C$99.4 million; current share price: C$1.76
Condor Energies concentrates on the exploration, development, and production of natural gas resources across Turkey, Kazakhstan, and Uzbekistan. Notably, the company is currently building Central Asia's inaugural liquefied natural gas facility.
Furthermore, in mid-2023, it disclosed the procurement of a lithium brine mining license in Kazakhstan.
In late January Condor secured a natural gas allocation from the Government of Kazakhstan for its maiden modular liquefied natural gas (LNG) production facility. The gas allocation will be instrumental in liquefying feed gas to produce up to 350 tonnes per day of LNG, equivalent to about 210,000 gallons per day, the company said.
Condor shares rose to a quarterly high of C$2.76 on February 20.
In March, the energy company began a production enhancement operation for eight natural gas-condensate fields in Uzbekistan. Gas output will be directed to the domestic market through state entity agreements. Condor has agreed to cover project costs and receive a share of the generated revenues. The production increase plans will be facilitated through several measures including artificial lift and drilling programs, exploring deeper horizons, and conducting seismic reprocessing.
Don’t forget to follow us @INN_Resource for real-time news updates!
Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.
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.
March 2024 Quarter (“Quarter”) Operations Report
Clean Hydrogen Technologies
On 2 August 2022 BPH announced that, following its shareholders’ meeting on 21 June 2022 at which shareholders voted unanimously to approve an investment in hydrogen technology company Clean Hydrogen Technologies Corporation (“Clean Hydrogen” or “Vendor” or “Borrower”), BPH and its investee Advent Energy Ltd (“Advent” or “Lender”), together the “Purchasers”, settled for the acquisition of a 10% interest in Clean Hydrogen for US$1,000,000 (“Cash Consideration”) (8% BPH and 2 % Advent).
The Purchasers had a first right of refusal to invest further in Clean Hydrogen to a maximum of a further US$1,000,000 for an additional 10% interest. The Purchasers loaned a further US$950,000 (“Additional Cash Consideration”) under this agreement and the Purchasers and Clean Hydrogen will execute a Loan Conversion Agreement which will enable the conversion of the US$950,000 loan into the relevant Subscription Shares Tranche 2, representing the Purchasers further 9.5% interest in Clean Hydrogen. BPH now has an interest of 15.6% and Advent has an interest of 3.9% interest in Clean Hydrogen. Clean Hydrogen have issued 760 share options to BPH and 190 share options to Advent, with an exercise price of USD$3,000 each, exercisable immediately, with the option to convert into shares in Clean Hydrogen expiring ten years from the date of issue. During the Quarter BPH exercised 42 of these options by paying Clean Hydrogen a total exercise price of US$126,000.
The parties acknowledge and agree that the Cash Consideration and Additional Cash Consideration shall be used by Clean Hydrogen to design, build, produce and test a reactor that can produce a minimum of 3.2kgs and as high as 15kgs of hydrogen per hour and to submit at least 2 new patents in an agreed geography, relevant to the production of hydrogen from proprietary technology.
On 22 February 2024 BPH announced that Clean Hydrogen had moved from proof of concept to production.
Clean Hydrogen cracks hydrocarbons from natural gas using a process called thermo-catalytic pyrolysis which combines heat, a catalyst and has no oxygen. Clean Hydrogen’s feedstock is natural gases hydro-carbons. Importantly there are no CO2 emissions from the core process since the carbon becomes a solid carbon composite product, thus rendering natural gas a clean (no CO2 emissions) source of two products, turquoise hydrogen and solid carbon composite.
Turquoise Hydrogen is the industry term used for hydrogen sourced from natural gases hydrocarbons using thermo-catalytic pyrolysis. Since there are no CO2 emissions the carbon becomes solid in the form of a fine black dust type material which in Clean Hydrogen’s case is a carbon composite made from CNTs (Carbon Nanotubes) and Alumina (ceramics). Carbon Nanotubes have unusual mechanical properties to reinforce their Alumina composite, acting as a toughening agent. CNTs have a tensile strength greater than steel, conductivity greater than copper and thermal dissipation greater than diamonds. They also resist corrosion and fatigue (ref: https://www.assemblymag.com/articles/93180-can-carbon-nanotubes-replace-copper).
Click here for the full ASX Release
This article includes content from BPH 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
Prices for Brent Crude and West Texas Intermediate trended higher during the first quarter of 2024, following a volatile 2023 which saw prices make broad fluctuations but end the year range bound at their start levels.
Ongoing tensions stemming from the Russia-Ukraine conflict led to concerns about potential disruptions to global oil supplies, contributing price support. Global economic conditions, such as inflation concerns, monetary policy decisions, and geopolitical tensions in oil-producing regions, played a significant role in shaping oil price movements during the quarter with both benchmarks registering a 14 percent and 18 percent (WTI) increase over the 90-day session.
Prices were also supported by several OPEC countries, including Saudi Arabia, Iraq, United Arab Emirates, Kuwait, Kazakhstan, Algeria, and Oman, extending voluntary production cuts totaling 2.2 million barrels per day to support oil market stability.
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.
Elixir Energy Limited (ASX: EXR) – Reinstatement to Quotation
Description
The suspension of trading in the securities of Elixir Energy Limited (‘EXR’) will be lifted immediately following the release by EXR of an announcement with respect to the design, timing and intended outcomes of the stimulation program at Daydream-2 that commenced on 19 April 2024.
Issued by
ASX Compliance
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.
Daydream-2 Operations Update
Elixir Energy Limited (“Elixir” or the “Company”) is pleased to provide an operations update on its 100% owned Grandis project located adjacent to the Wallumbilla gas hub in Queensland.
HIGHLIGHTS
- Lorelle Sandstone successfully stimulated and cleaned up
- Computer models based on the data acquired during testing indicates the Lorelle Sandstone alone could produce a commercial flow rate1
- Contractor scheduling and other operational issues have led to a small delay in the rest of the program
Following the recent successful free-flowing test on the Lorelle Sandstone, Elixir advises that this key formation has now been successfully stimulated. The zone was flowed back overnight to clean out the stage, and again flowed gas to surface with slugs of proppant debris and stimulation fluid as expected.
Gas flow from Stage 1 Lorelle Sandstone post stimulation
Data acquired during the Lorelle Sandstone flow periods has been used to predict the initial gas flow rate and ultimate recovery for each well from this lowermost zone. Elixir’s technical and economic modelling1 indicates the Lorelle Sandstone alone could produce a commercial flow rate of gas, with the breakeven commercial initial flowrate being estimated at 2.5 million cubic feet per day1.
This commerciality threshold is strongly underpinned by the location of the Grandis Project only a few tens of kilometres from: gas pipeline infrastructure connecting to domestic and international gas markets; existing and proposed local gas-fired power stations; a commercial gas hub into which spot sales can be made at high gas prices; etc. Accordingly, plans for a staged development are already underway, including engaging with gas offtakers with interests in the region.
Since the stimulation and flow-back of the Lorelle Sandstone, Elixir has sustained a number of logistical and other operational delays. After successfully isolating the Lorelle Sandstone with a bridge plug to proceed with the next stimulation stage, the setting mechanism became lodged in the hole requiring remedial activity. This delay has resulted in the full stimulation program not being able to be completed before the hard deadline for certain equipment to leave the site to meet commitments with another operator.
Stimulation equipment on location at Daydream-2
Accordingly, Elixir has demobilized at Daydream-2 and will re-commence the stimulation program in a month or so. This will ensure that the program can be executed as planned and there are no negatives for the ultimate program except for this time delay. Negotiations with the relevant sub- contractors are in hand and a more precise timetable is expected to be finalized shortly.
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.
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