This model assesses the production-upliftsand well-level economicsof re-fracturing shale wells in the Permian and the Eagle Ford, to improve recovery of previously missed pay. The opportunity is interesting but not quite game-changing.
Economic breakevens are seen at c$45/bbl under our base-case assumptions. The most likely NPV uplift is c$0.5M/well. However higher prices and process-enhancements can unlock $2-3M of NPV10 per well.
Input assumptionsare informed by disclosures from Occidental and Devon Energy, the two E&Ps that dominate the technical literature. They are summarised in the ‘notes’ tab. Please download the file to stress-test the assumptions…
>30% IRRs should be attainable converting waste-plastic back into oil, based on disclosures from technology-leaders in the sector. This economic model allows for stress-testing of product prices, input costs, gate fees, capex, opex, utilisation and fiscal regimes.
“If you invest with the same technology as everyone else, you may get the same returns as everyone else”. This adage matters for renewables, where we gather single digit IRRs have become customary in solar tenders. Hence, we reviewed 37 distinct solar patents filed across the Oil Majors in 2018. Three ‘leaders’ stood out, each pursuing a different technology strategy in solar. The data-file includes brief summaries of the patents, who each Major partnered with, and our own assessment of each patent’s materiality.
Shale comprises c5% of global supply and c20% of global R&D; while offshore comprises c30% of global supply, but <10% of global R&D, according to our estimates. This simple file aims to break down the oil and gas industry’s R&D activities, by category and sub-category, based on the >1,000 patents and >300 SPE papers we have categorized so far.
This data-file tabulates the approximate cash flow, capex and ‘pre-tax costs’ of Oil Majors, in order to illustrate the operational leverage within the group. Every $1 of free cash flow comes after $3 of cost. Hence small reductions in the cost base, through technology, deliver 3x larger uplifts to free cash flow. This is why we are screening Oil companies’ technology-capabilities.
Our LNG supply model looks project-by-project, across 120 LNG facilites: including c40 mature plants, c10 under development, c20 in design and c30 under discussion.
Our base case supply estimatescome from “risking” the supply associated with each of these projects (chart below). Use of LNG should rise at over 8% per year to drive the energy transition and displace coal, but there are only enough developments underway for a 4% CAGR out to 2025, as COVID has deferred 50MTpa of start-ups.
The outlook depends on the path. The 2030 supply outlook can vary by 325MTpa, when comparing all reasonably possible supply (top chart) against the firm supply-growth that looks all but locked (bottom chart). Qatar and select US projects are the most exciting new supply sources.
The greatest opportunities in LNGare therefore to create new demand and to advance competitive projects when others are cannot. To see which projects we think will progress, please download the data-file.
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