Carbon Credentials drive Capital Costs?

Lower carbon oil and gas may be increasingly valued by investors, earning higher multiples and lower costs of capital. This is the conclusion from our recent investor survey, linked here.

c80% now find it harder to invest in oil and gas, because of the need to decarbonise energy. However, 90% see lower carbon barrels as part of the solution. Hence 80% stated that lower capital costs could be warranted for these lower carbon producers.

Higher carbon barrels are currently being punished with c6% higher costs of capital, on average, compared with more typical projects. However, lower carbon barrels are not yet being rewarded, ascribed just 2% lower costs of capital, according to the survey data.

We will be happy to send a free copy of the data-file to all those that complete the survey, otherwise, it can be purchased below.

Northern Lights CCS: the economics?

We have modeled out simple economics for Northern Lights, the most elaborate carbon capture and storage (CCS) scheme ever proposed by the energy industry (Equinor, Shell, TOTAL).

The project involves capturing industrial CO2, liquefying it, transporting it in ships, receiving it onshore in Norway, piping it 110km offshore, then injecting it 3,000m below the seabed. Phase 1 will likely sequester 1.3-1.5MTpa, with potential expansion to 5MTpa.

Our conclusion is that Phase 1 will be expensive. However, much of the infrastructure “scales”. So phase 2 could cost 35% less, bringing the “carbon storage” component to below Europe’s carbon price. This could be promising if combined with next-generation carbon separation or decarbonised gas technologies, to lower the “carbon capture” component.

Our economic estimates can be flexed in the ‘simple model’ tab. Underlying cost calculations are substantiated in the ‘Notes’ tab.

CO2-EOR in Shale: the economics

We have modelled the economics of CO2-EOR in shale, after interest in this topic spiked 2.3x YoY in the 2019 technical literature. Our deep-dive research into the topic is linked here.

The economics appear very positive, with a 15% IRR under our base case assumptions, and very plausible upside to 25-30%.

The model also allows you to stress-test your own assumptions such as: oil prices, gas prices, CO2 prices, CO2 tax-credits, compressor costs and productivity uplift. The impacts on IRR, NPV and FCF are visible.

The Ascent of Shale

This model contains our live, basin-by-basin shale forecasts. We model each of the Permian, Bakken and Eagle Ford, as a function of the rig count, drilling productivity, completion rate, well productivity and type curves. Thus, we derive production and financial expectations.

Our numbers hinge on the productivity gains described in our thematic research. Shale productivity trebled from 2012-2018. We think it can effectively double again by 2025. This would unleash 21Mbpd of US liquids production by 2025, within cash flow at a flat $50/bbl Brent input.

Mero: Economic Model

We have modeled the economics of the Mero oilfield (formerly known as Libra), using public disclosures and our own estimates.

Our model spans >250 lines of inputs and outputs, so you can flex key assumptions, such as oil prices, gas prices, production profiles and costs.

In particular, we have tested the impact of different gas bottleneck scenarios on the field’s ultimate value.

Johan Sverdrup: Don’t Decline

Equinor is deploying three world-class technologies to mitigate Johan Sverdrup’s decline rates, based on reviewing c115 of the company’s patents and dozens of technical papers. This 15-page note outlines how its efforts may unlock an incremental $3-5bn of value from the field, as production surprises to the upside.

Johan Sverdrup: Economic Model

We have modelled the economics of Equinor’s Johan Sverdrup oilfield, using public disclosures and own estimates. Our model spans >250 lines of inputs and outputs, so you can flex key assumptions, such as oil prices, gas prices, production profiles and costs. In particular, we have tested the impact of different decline rates and recovery factors on the field’s ultimate value.

Offshore Economics: the Impact of Technology

This data-file quantifies the impact that technology can have on offshore economics. We start with a 250-line field model, for a typical offshore oil and gas project. We then list our “top twenty” offshore technologies, which can improve the economics. In a third tab, we update our base case model, line-by-line, to reflect these twenty technologies. Finally, the “before” and the “after” are compared and contrasted.

Why the Thunder Said?

This 8-page report outlines the ‘four goals’ of Thunder Said Energy; and how we hope we can help your process…

Oil Major Cash Flow and Operating Leverage

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.