Indonesia Energy Mobilizes Drilling Rig to Commence Drilling

 

Plan to drill 3 Back-to-Back Production Wells at Kruh Block

JAKARTA, INDONESIA and DANVILLE, CA / ACCESSWIRE / March 9, 2021 / Indonesia Energy Corporation Limited (NYSE American:INDO) (IEC), an oil and gas exploration and production company focused on Indonesia, today announced that the company has mobilized the drilling rig to drill 3 back-to-back producing wells at its 63,000 acre Kruh Block.

Each of the 3 wells are expected to average production of 173 barrels of oil per day over the first year of production. IEC anticipates that each well will cost approximately $1.5 million to drill and complete. Based on the terms of IEC’s contract with the Indonesian government and an assumed oil price of $63.50/barrel, each well is expected to generate $3.33 million in net revenue in its first year, which is more than double the cost to drill each well.

As previously announced, IEC plans to drill a total of 5 wells in 2021, 6 wells in 2022 and 7 wells in 2023, for a total of 18 new wells on Kruh Block.

Mr. Frank Ingriselli, IEC’s President commented “We are excited to commence our production plans on the Kruh Block. These 3 new wells, which we have the cash to drill, have the potential to grow production and cash flow for our company by nearly 300%. At today’s oil price, the net cash flow we expect to receive from each of these wells, in just the first year, will be more than double the total cost to drill the wells. This is a great asset that should significantly grow our cash flow as we continue to seek to maximize returns on our investments and grow shareholder value.”

About Indonesia Energy Corporation Limited

Indonesia Energy Corporation Limited (NYSE American:INDO) is a publicly traded energy company engaged in the acquisition and development of strategic, high growth energy projects in Indonesia. IEC’s principal assets are its Kruh Block (63,000 acres) located onshore on the Island of Sumatra in Indonesia and its Citarum Block (1,000,000 acres) located onshore on the Island of Java in Indonesia. IEC is headquartered in Jakarta, Indonesia and has a representative office in Danville, California. For more information on IEC, please visit www.indo-energy.com.

Cautionary Statement Regarding Forward-Looking Statements

All statements in this press release of Indonesia Energy Corporation Limited (“IEC”) and its representatives and partners that are not based on historical fact are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Acts”). In particular, when used in the preceding discussion, the words “estimates,” “believes,” “hopes,” “expects,” “intends,” “on-track”, “plans,” “anticipates,” or “may,” and similar conditional expressions are intended to identify forward-looking statements within the meaning of the Acts, and are subject to the safe harbor created by the Acts. Any statements made in this news release other than those of historical fact, about an action, event or development, are forward-looking statements. While management has based any forward-looking statements contained herein on its current expectations, the information on which such expectations were based may change. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of risks, uncertainties, and other factors, many of which are outside of the IEC’s control, that could cause actual results (including, without limitation, the anticipated results of IEC’s 2021 exploration and production activities and the impact of global oil prices as described herein) to materially and adversely differ from such statements. Such risks, uncertainties, and other factors include, but are not necessarily limited to, those set forth in the Risk Factors section of the Company’s annual report on Form 20-F for the fiscal year ended December 31, 2019 filed on June 16, 2020 with the Securities and Exchange Commission (SEC). Copies are of such documents are available on the SEC’s website, www.sec.gov. IEC undertakes no obligation to update these statements for revisions or changes after the date of this release, except as required by law.

Company Contact:

Frank C. Ingriselli
President, Indonesia Energy Corporation Limited
Frank.Ingriselli@Indo-Energy.com

Source: Indonesia Energy Corporation Limited

 

Private Energy Companies’ Role in the Energy Cycle

 

The energy industry is a cyclical business. Energy prices rise, causing drilling activity to increase, creating excess supply that causes energy prices to fall. When energy prices fall, companies reduce drilling, which lowers supply and causes energy prices to rise. One never knows exactly which part of the cycle we may be experiencing or when the peaks and troughs will form, only that the cycle exists. But, a closer look at the active players within each cycle component can provide insight as to the length and magnitude of the cycle.

During the down periods of an energy cycle, cash flow is low. Smaller companies with weaker balance sheets are pressured. Some go bankrupt or are forced to sell off property at low prices. Most will be forced to sharply cut back drilling to operate within their expected cash flow. Larger, less leveraged companies are in a better position to take a longer-term perspective and continue drilling under the belief that energy prices will eventually rise.

The Role of Private Companies

During the boom periods of an energy cycle, the reverse is true. Large companies flush with cash will increase drilling. But, they will focus on their most profitable projects, leaving many good projects on the planning board. This is when smaller, sometimes private companies step in. Many successful companies have been formed by mid-level managers of large companies who form new companies that buy underutilized assets of their former employers.

 

 

Energy Today

So, what part of the energy cycle are we in currently? Is the recent rise in oil (and natural gas) prices a sign that we have reached an inflection point in the cycle? Or is it merely a head fake temporarily offsetting a longer trend. Bloomberg reports that there is a resurgence of private energy operators drilling in the Permian Basin. It points out that companies like DoublePoint Energy and Mewbourne Oil Co. are operating as many rigs in the basin as larger companies such as Chevron Corp. and Exxon Mobil Corp. While such a shift toward increased drilling by private companies is normal, it is usually seen in conjunction with increased drilling by established energy companies.

The fact of the matter is that large energy companies are not responding to higher oil prices in a manner similar to past cycles. Drilling has started to rise in response to the rise in oil prices that began last November. However, the number of active rigs in the United States (402 as of 2/19/21) is only half that of a year ago (790) despite higher energy prices.

 

 

The shift towards smaller and private energy investing has created unexpected delays in the supply response to higher prices. Large, well-funded energy companies can expand the drilling of known projects quickly. Drilling by small, underfunded companies takes more time. Assets must be acquired and analyzed. Funding must be secured. The shift towards private investors is perhaps one explanation as to why the rig count has been slow to respond.

Wrap-Up

Of course, there may be other reasons. COVID has thrown a wrench in the ability of companies to find and relocate employees to drilling sites. Large energy companies are also rethinking their commitment to fossil fuels. Companies like BP Amoco and Total SE are emphasizing investments in renewable energy over fossil fuels. A study by Deloitte shows that almost all companies setting emission targets have been companies with market caps above $10 billion. Time will tell whether new investors fill the investment gap being left by the majors. The pace and size of private energy investing could go a long way towards determining the length and magnitude of the current energy price cycle.

Suggested Reading:

Energy Outlook 2021

Can Oil Prices Keep Climbing?

Will the U.S. Continue to Subsidize Renewable Energy?

Will Renewable Energy be the Downfall of Fossil Fuels?

Sources

https://finance.yahoo.com/news/shale-private-army-ramping-means-090003295.html, David Wethe, Kevin Crowley and Sheela Tobben, Bloomberg, March 1, 2021

https://www.forbes.com/sites/deborahbyers/2020/06/16/the-last-cycle-lessons-from-the-past-to-build-oil-and-gass-future/?sh=1cc3d1972cac, Deborah Byers, Forbes, June 16, 2020

https://www2.deloitte.com/us/en/insights/industry/oil-and-gas/oil-gas-energy-sector-disruption.html, Stanley Porter, Duane Dickson, Kate Hardin, Thomas Shattuck, Deloitte, August 13, 2020

 

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Gevo to Report Fourth Quarter 2020 Financial Results Earlier

 

ENGLEWOOD, Colo., March 8, 2021 (GLOBE NEWSWIRE) — Gevo, Inc. (NASDAQ: GEVO) announced today that it has rescheduled the release of its fourth quarter 2020 financial results ended December 31, 2020 from March 18, 2021 to March 17, 2021 at 4:30 p.m. EST (2:30 p.m. MST).

To participate in the conference call on March 17, 2021, please dial (833) 729-4776 (inside the U.S.) or (830) 213-7701 and reference the access code 3178466#.

A replay of the call will be available two hours after the conference call ends on March 17, 2021. To access the replay, please visit https://edge.media-server.com/mmc/p/xhvdnuqd. The archived webcast will be available in the Investor Relations section of Gevo’s website at www.gevo.com.

About Gevo

Gevo’s mission is to transform renewable energy and carbon into energy-dense liquid hydrocarbons. These liquid hydrocarbons can be used for drop-in transportation fuels such as gasoline, jet fuel, and diesel fuel, that have the potential to yield net-zero greenhouse gas emissions when measured across the full lifecycle of the products. Gevo uses low-carbon renewable resource-based carbohydrates as raw materials from residues and slurries, and is in an advanced state of developing renewable electricity and renewable natural gas for use in production processes, resulting in low-carbon fuels with substantially reduced carbon intensity (the level of greenhouse gas emissions compared to standard petroleum fossil-based fuels across their lifecycle) and GHG scores. Gevo’s products perform as well or better than traditional fossil-based fuels in infrastructure and engines, but with substantially reduced greenhouse gas emissions. In addition to addressing the problems of fuels, Gevo’s technology also enables certain plastics, such as polyester, to be made with more sustainable ingredients. Gevo’s ability to penetrate the growing low-carbon fuels market depends on the price of oil and the value of abating carbon emissions that would otherwise increase greenhouse gas emissions. Gevo believes that its proven and patented technology, which enables the use of a variety of low-carbon sustainable feedstocks to produce price-competitive low carbon products such as gasoline components, jet fuel, and diesel fuel, yields the potential to generate project and corporate returns that justify the build-out of a multi-billion-dollar business.

Learn more at Gevo’s website: www.gevo.com

About HCS Group and Haltermann Carless

HCS Group is one of the leading manufacturers of high-quality hydrocarbons and specialty chemicals. The company employs about 500 people worldwide. The products are sold worldwide through the traditional brands Haltermann Carless, ETS Racing and EOS. HCS Group belongs to H.I.G. Europe, a subsidiary of the US private equity investment company, H.I.G. Capital.

The brand Haltermann Carless, one of the oldest chemical companies in the world, provides innovative hydrocarbon-based specialty products and solvents and associated services to best serve its customers. The company operates a network of state-of-the-art facilities for refining, processing and blending to produce a wide variety of specialty products in key business areas: Automotive, Middle Distillates, Oil & Gas, Pentanes, Performance Fuels, Performance Solvents and Aromatics.

The chemical company is a pioneer in developing and marketing a sustainable technologies portfolio based on renewable feedstock since more than a decade. With access to a variety of bio-based feedstock sources the company is able to supply into different high-end applications ranging from high purity solvents for personal care and cosmetics to specialty renewable fuels for motorsport races, outdoor power equipment and aviation contributing to significantly reduced greenhouse gas emissions.

For more information visit: http://www.h-c-s-group.com; www.haltermann-carless.com

Forward-Looking Statements

Certain statements in this press release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to a variety of matters, including, without limitation, statements related to the MOU to develop and build a renewable hydrocarbon facility at HCS Group’s site located in Speyer, Germany, Gevo’s technology, whether the project contemplated by the MOU will be constructed resulting in revenue to Gevo, and other statements that are not purely statements of historical fact. These forward-looking statements are made on the basis of the current beliefs, expectations and assumptions of the management of Gevo and are subject to significant risks and uncertainty. Investors are cautioned not to place undue reliance on any such forward-looking statements. All such forward-looking statements speak only as of the date they are made, and Gevo undertakes no obligation to update or revise these statements, whether as a result of new information, future events or otherwise. Although Gevo believes that the expectations reflected in these forward-looking statements are reasonable, these statements involve many risks and uncertainties that may cause actual results to differ materially from what may be expressed or implied in these forward-looking statements. For a further discussion of risks and uncertainties that could cause actual results to differ from those expressed in these forward-looking statements, as well as risks relating to the business of Gevo in general, see the risk disclosures in the Annual Report on Form 10-K of Gevo for the year ended December 31, 2019, and in subsequent reports on Forms 10-Q and 8-K and other filings made with the U.S. Securities and Exchange Commission by Gevo.

Investor and Media Contact
IR@gevo.com

+1 720-647-9605

SOURCE: Gevo

Indonesia Energy Obtains Key Permits to Commence its 2021 Drilling Campaign

 

• Paves way for commencement of new production well drilling operations at Kruh Block in the next 30 days
• Appraisal activities at Citarum Block also continuing

JAKARTA, INDONESIA and DANVILLE, CA / ACCESSWIRE / March 4, 2021 / Indonesia Energy Corporation Limited (NYSE American:INDO) (IEC), an oil and gas exploration and production company focused on Indonesia, today announced that the company has received necessary permits that will allow it to move forward expeditiously to commence its previously announced drilling plans in 2021 for its 63,000 acre Kruh Block.

Drill site preparations are completed and supporting services are in progress. The mobilization of the drilling rig is expected within the next 5 days and the first well is expected to commence drilling within 30 days. IEC’s plan is to drill 3 back-to-back wells as part of the commencement of its new drilling on Kruh Block, which is part of an overall previously announced plan to drill a total of 5 wells in 2021, 6 wells in 2022 and 7 wells in 2023, for a total of 18 new wells on Kruh Block.

In addition, IEC has also completed and provided to the Government of Indonesia two (2) Geological & Geophysical studies each covering both the Kruh Block and the Citarum Block. Additional prospects have been identified from the new study in the 1,000,000-acre Citarum Block which is located on the island of Java only 16 miles from the capital city of Jakarta where natural gas prices are at a 300% premium to the prices in the United States.

Mr. Frank Ingriselli, IEC’s President, commented “These final permits couldn’t have come at a better time, given the recent recovery in oil prices which are at a level not seen since 2019. Accordingly, we should be on-track to significantly increase production and cash flow this year. Also, our drilling operations are expected to decrease production costs to below $20.00 per barrel. All these factors should contribute to our near and long-term goal of maximizing production from the Kruh Block and augmenting shareholder value.”

About Indonesia Energy Corporation Limited

Indonesia Energy Corporation Limited (NYSE American:INDO) is a publicly traded energy company engaged in the acquisition and development of strategic, high growth energy projects in Indonesia. IEC’s principal assets are its Kruh Block (63,000 acres) located onshore on the Island of Sumatra in Indonesia and its Citarum Block (1,000,000 acres) located onshore on the Island of Java in Indonesia. IEC is headquartered in Jakarta, Indonesia and has a representative office in Danville, California. For more information on IEC, please visit www.indo-energy.com.

Cautionary Statement Regarding Forward-Looking Statements

All statements in this press release of Indonesia Energy Corporation Limited (“IEC”) and its representatives and partners that are not based on historical fact are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Acts”). In particular, when used in the preceding discussion, the words “estimates,” “believes,” “hopes,” “expects,” “intends,” “on-track”, “plans,” “anticipates,” or “may,” and similar conditional expressions are intended to identify forward-looking statements within the meaning of the Acts, and are subject to the safe harbor created by the Acts. Any statements made in this news release other than those of historical fact, about an action, event or development, are forward-looking statements. While management has based any forward-looking statements contained herein on its current expectations, the information on which such expectations were based may change. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of risks, uncertainties, and other factors, many of which are outside of the IEC’s control, that could cause actual results (including, without limitation, the anticipated results of IEC’s 2021 exploration and production activities and the impact of global oil prices as described herein) to materially and adversely differ from such statements. Such risks, uncertainties, and other factors include, but are not necessarily limited to, those set forth in the Risk Factors section of the Company’s annual report on Form 20-F for the fiscal year ended December 31, 2019 filed on June 16, 2020 with the Securities and Exchange Commission (SEC). Copies are of such documents are available on the SEC’s website, www.sec.gov. IEC undertakes no obligation to update these statements for revisions or changes after the date of this release, except as required by law.

Company Contact:

Frank C. Ingriselli
President, Indonesia Energy Corporation Limited
Frank.Ingriselli@Indo-Energy.com

Source: Indonesia Energy Corporation Limited

Wednesday, March 03, 2021

Indonesia Energy Corp (INDO)
Rating downgraded with shares above our price target

Indonesia Energy Corp Ltd is an oil and gas exploration and production company focused on Indonesia. It holds two oil and gas assets through its subsidiaries in Indonesia: one producing block (the Kruh Block) and one exploration block (the Citarum Block). The Kruh Block is located to the northwest of Pendopo, Pali, South Sumatra. The Citarum Block is located to the south of Jakarta.

Michael Heim, Senior Research Analyst, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

We are lowering our rating on the shares of INDO as the shares have crossed and remain above our previous price target of $8.00. The shares of INDO have been strong as of late in response to rising oil prices. The shares have traded above our previous price objective for several weeks.


We have adjusted our earnings and cash flow estimates to reflect our higher oil price assumptions.  We have raised our 2021 WTI oil price estimate to $60 from $45 and our 2022 estimate to $60 from $50 to reflect recent strength. We are maintaining our long-term oil price estimate of $50 at this time as we monitor the industries drilling response to higher prices. We now project a 2020 EPS loss of …

This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary.  Proper due diligence is required before making any investment decision. 

Wednesday, March 03, 2021

Energy Fuels (UUUU)(EFR:CA)
Rare Earth Element Outtake Agreement Signed. Is This Just The Beginning?

As of April 24, 2020, Noble Capital Markets research on Energy Fuels is published under ticker symbols (UUUU and EFR:CA). The price target is in USD and based on ticker symbol UUUU. Research reports dated prior to April 24, 2020 may not follow these guidelines and could account for a variance in the price target.

Energy Fuels is the largest uranium producer in the U.S. and holds more production capacity and uranium resources than any other U.S. producer. The Company also produces vanadium. Headquartered in Colorado, Energy Fuels holds three of America’s key uranium production centers: the White Mesa Mill in Utah, the Nichols Ranch ISR Facility in Wyoming, and the Alta Mesa ISR Facility in Texas. The producing White Mesa Mill is the only conventional uranium mill in the U.S. and has a licensed capacity of 8 million pounds of U3O8 per year. Nichols Ranch is in production and has a licensed capacity of 2 million pounds of U3O8 per year. Alta Mesa is currently on standby. Energy Fuels also owns several licensed and developed uranium and vanadium mines on standby and other projects in development.

Michael Heim, Senior Research Analyst, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

Energy Fuels signs Rare Earth Element (REE) Outtake Agreement with Neo Performance Materials. Neo will take 80% of the rare earth products processed from monazite sand by UUUU’s White Mills plant. (See December 15, 2020 announcement regarding 3-year agreement with Chemours Co to supply monazite sands.) The agreement with NEO includes a put option for UUUU to sell the remaining 20% as well as a right of first refusal option for Neo for additional monazite purchases. The agreement will only use only 2% of White Mill capacity, leaving room to expand either monazite/rare earth operations or start up uranium operations.


What are Rare Earth Elements and Monazite Sand? Rare earth elements are 17 elements that are becoming increasingly valuable for high-tech consumer products such as cellular telephones, computer hard drives, electric and hybrid vehicles and flat-screen monitors.  Demand for Thulium is especially high. Monazite sand, abundant around the world, is a reddish brown phosphate material that contains …

This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary.  Proper due diligence is required before making any investment decision. 

Tuesday, February 23, 2021

Gevo, Inc. (GEVO)
Today’s Update Should Highlight Upcoming Milestones

Gevo Inc is a renewable chemicals and biofuels company engaged in the development and commercialization of alternatives to petroleum-based products based on isobutanol produced from renewable feedstocks. Its operating segments are the Gevo segment and the Gevo Development/Agri-Energy segment. By its segments, it is involved in research and development activities related to the future production of isobutanol, including the development of its biocatalysts, the production and sale of biojet fuel, its Retrofit process and the next generation of chemicals and biofuels that will be based on its isobutanol technology. Gevo Development/Agri-Energy is the key revenue generating segment which involves the operation of the Luverne Facility and production of ethanol, isobutanol and related products.

Poe Fratt, Senior Research Analyst, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

Tune in for today’s fireside chat. Water Tower Research will host another fireside chat with Gevo management today at 2:30pm EST. CEO Dr. Patrick Gruber and Chief Commercial Officer Timothy Cesarek will discuss Gevo’s Business Pipeline, Contracts and Beyond Net-Zero 1. Details on the fireside chat are posted at www.gevo.com.


Supply agreement amended to boost volume to 5 MGPY.  Scandinavian Airlines System (SAS) agreed to boost the minimum volume on the October 2019 fuel sales agreement to 5.0 million gallons per year (MGPY). Sales are expected to begin 2024 with product from the Net-Zero 2 plant. The estimated value of the contract exceeds $100 million, including SAF and environmental credits …

This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary.  Proper due diligence is required before making any investment decision. 

Thursday, February 18, 2021

enCore Energy Corp. (ENCUF)(EU:CA)
Price Objective Raised With Plans Progressing. Are Uranium Prices Strengthening?

enCore Energy Corp together with its subsidiary, is engaged in the acquisition and exploration of resource properties. The company holds the Marquez project in New Mexico as well as the dominant land position in Arizona with additional other properties in Utah and Wyoming. The firm also owns or has access to North American and global uranium data including the Union Carbide, US Smelting and Refining, UV Industries, and Rancher’s Exploration databases in addition to a collection of geophysical data for the high-grade Northern Arizona Breccia Pipe District.

Michael Heim, Senior Research Analyst, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

We are raising our price objective to $1.00 from $0.85. The increase comes after the announcement of a $15 million (upsized) common stock/warrant private placement offering of the EU.v shares on February 16th. New ENCUF shares are not being offered. Shares include a half share warrant to purchase EU.v shares at $1.30 for 36 months. Proceeds will be used to start refurbishment of the Rosita Plant, execute a drilling program to update reserves, complete minor reformation work at Rosita and Vasquez, and support M&A activity. The announcement is a clear indication that the plans laid out by management last year are moving forward.


There are initial signs that future uranium prices are starting to rise even as spot prices stagnate.  FactSet reported that September contract uranium prices rose 9.4% to a level of $32.65 per pound on Monday. The strength follows electric generation issues plaguing Texas and the Midwest due to cold weather. Many electric utilities have been holding off on uranium purchases for 2022 and 2023 due to …

This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary.  Proper due diligence is required before making any investment decision. 

 

Houston Outages and the New Challenges for Texas Utilities

 

Winter storms and wind chills in the negative double digits across the Dallas-Fort Worth area are wreaking havoc on the ERCOT electric grid system, taking 45,000 megawatts of power offline and leaving millions without power and has caused at least ten deaths. Half the blades on wind generation units froze up and became inoperable. Solar power output is low due to storm conditions. Thermal power has been hampered by cold temperatures. Natural gas pipelines are freezing. Transformers are breaking. And the weather is about to get worse. ERCOT management cannot estimate when power will be restored but tells customers it may be days. The cold and loss of electric have already had a significant impact on the energy industry, with drilling slowing and refineries closing. Water systems and waste treatment plants have been shut-down in several parts of Texas, resulting in water-boil orders. The wide-spread disruption in electric service has the potential to disrupt the food supply chain as cold weather impacts livestock, feed, and agriculture.

What’s an ERCOT?

The Electric Reliability Council of Texas (ERCOT) manages the flow of electricity to more than 26 million customers or 90% of the residents in Texas. It schedules power on an electric grid that connects over 46,500 miles of transmission lines and 680 generation units. ERCOT is an Independent System Operator (ISO) as defined by the Federal Energy Regulatory Commission (FERC) Order 888 and operates separately from market participants. ERCOT oversees five major utility systems (AEP Texas Central, AEP Texas North, CenterPoint, Oncor, and Texas-New Mexico Power) but is composed of 160 members, including power generators, municipal utilities, and electric retailers. It is responsible for tariff administration and design, congestion management, market monitoring, and other functions. The Texas electric market deregulated in 1999, allowing customers the option to choose their energy supplier. Approximately 90% of customers have chosen to buy electricity from marketers that are not their local utility. This means that the bulk of power purchased from the grid is being done by marketers on behalf of customers. Suppliers bid to sell energy into the grid. Approximately half of the power sold in the grid comes from natural gas generation, with coal (28%), nuclear (11%), and wind (11%) proving the bulk of the remaining load.

 

 

What will be the reaction to the power outages?

Texas House Speaker Dade Phelan has called for a joint hearing to review the power outages. Undoubtedly, some will question the reliance on natural gas and wind for generation considering frozen blades and pipes. However, shifting back towards coal hardly seems an appropriate response in a more energy-conscience environment. Besides, coal and nuclear are baseload fuels that cannot be easily ramped up to meet periods of peak demand, as witnessed during extreme temperatures. Some may push for system upgrades that coordinate the transmission of power between ISOs. ERCOT is somewhat unique in being an ISO that operates solely within one state. Better connectivity with neighboring ISOs might increase the system’s flexibility to manage power.

 

Wholesale electric transmission/distribution hubs

 

Will energy users turn to distributed power?

Another answer to power outages may come in the form of distributed power. Onsite generators can serve as a backup to electric utility service during outages or as a supplement during peak demand. Generators can run on gasoline or diesel. Larger turbine generators can provide large loads between 10 kilowatts to 30 megawatts and run on a variety of fuels such as natural gas, diesel, biofuel, and even hydrogen. They are ideal products for hotels, apartments, nursing homes, and health clubs. Capstone Turbines (CPST) makes a series of products that provide both electricity and thermal heat. The movement towards distributed power has been growing in recent years with the rolling blackouts seen in California the last two years and will likely continue to grow considering the issues at ERCOT.

Summary: Is a death spiral coming?

Angry customers and voters will prompt action. Will it cause reregulation of the Texas market or an upgrade in the system’s transmission? Or will they walk with their feet and leave the system and move towards self-generation? The answer will most likely be a little bit of both. Some customers will add on-site generation as a backup or supplement to utility service. Other customers will remain utility customers but demand better service. Better service, of course, means new transmission and distribution lines, which mean higher rates. Higher rates lead to customers trying to leave the system and self-generate. As fewer customers remain to pay for the system upgrades, their rates go up even more. The onus is on electric utilities and ISOs to improve service or face a death spiral leading to the loss of its customer base.

 

Suggested Reading:

Energy Outlook 2021

Gevo, Inc. (GEVO) Fire Side Chat

Is the Price of Uranium Rising?

 

 

Sources:

https://www.wfaa.com/article/weather/live-updates-winter-weather-storms-north-texas-dallas-fort-worth-power-outages-boil-order-warning-wind-chill-closures/287-76d22978-f0a5-4257-8c30-30a6124f4b11?ref=exit-recirc

https://en.wikipedia.org/wiki/Regional_transmission_organization_(North_America)

http://www.ercot.com/mktrules

https://www.electricchoice.com/blog/texas-energy-power-grid-101/#:~:text=There%20is%20one%20major%20thing,own%20power%20to%20its%20consumers.

https://quickelectricity.com/what-is-ercot/

 

Stay up to date. Follow us:

 

Why Oil is Moving and Why It Could Go Higher

 

Brent Oil prices crossed $60 per barrel for the first time since January 2020. The surge began in early November when positive vaccine test results gave the market hope that oil demand would soon return to pre-pandemic levels. But instead of returning to last March’s oil price level in the mid-fifties, a funny thing happened. Oil prices shot through pre-pandemic levels and all the way to $60. What’s more, oil prices seem poised to rise above $60 and reach levels not seen since 2018.

Why are they Increasing?

So why do energy prices continue to rise? In a nutshell … there is a lack of supply response to higher prices. Producers across the world are not increasing drilling yet. Worldwide, active rigs have fallen to a level half that of a year ago. The chart below shows the correlation between rig count and oil prices. Note that oil price rose in the last two months of last year, rig count did not. This trend has continued in 2021 with oil prices rising to $60 per barrel, but the world rig count stuck at 1183 as of the end of January. The last time Brent oil prices were at $60 in January of 2020, there were 2265 active rigs.

 

 

In total, world active rigs are 43% below January 2020 levels. The declines have been the sharpest in the United States (down 53%) and Africa (down 55%). Other regions such as Asia (down 27%), Europe (down 29%), and Canada (down 33%) have seen smaller declines. The Middle East, once again establishing its position as a price setter, reports a 42% year-over-year decline in active rigs, very much in line with the world’s average.

 

 

OPEC’s Hand in the Situation

An analysis of rig declines by region seems to suggest that OPEC’s overall strategy is working. Recall that OPEC, led by Saudi Arabia, flooded the market with oil in the spring allowing oil prices to fall sharply. West Texas Intermediate oil prices even dropped below zero temporarily as traders were caught with excess oil and no room to put the oil in storage. OPEC’s intent was manyfold. First, it wanted to punish Russia for not going along with production cuts and remind them of the potential impact on nonconformance. Second, it wanted to counter the rise in U.S. production coming from increased shale production. Technological advances have made U.S. shale production profitable at prices in the forties leading to the U.S. becoming a net exporter of oil. When oil prices fell last year, U.S. producers responded by cutting back drilling, as evidenced by the chart above.

Will Trend Continue

So why aren’t U.S. oil producers responding to higher oil prices by increasing drilling? Most likely, producers have been snake bitten by last year and wary of raising production only to be forced to halt production or shut-in production if oil prices fall. A second explanation may be that producers are first focusing on well completions from last year before ramping up drilling. If that is the case, we would expect to see drilling begin to rise as the inventory of well completions dries up.

 

 

Take-Away

Whatever the reason for the current low rig count, the implication for oil prices is positive. There has not been a supply response to higher prices, and oil inventories are falling. The chart above shows that crude oil inventories rose sharply last March but have been falling in recent months. Inventories are now approaching pre-pandemic levels. Unless producers accelerate drilling, inventories may continue to fall as the global economy expands. The result could be that oil prices continue to rise even as we have crossed $60 per barrel.

 

 

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Sources:

U.S. Energy Information Administration

Baker Hughes Energy

 

How Oil is Expected to Remain an Important Part of the Energy Mix

 

EIA Releases its Annual Energy Outlook

The U.S. Energy Information Administration (EIA) released its Annual Energy Outlook for 2021.  The Annual Outlook provides modeled projections of domestic energy markets through 2050, including scenario analysis using various assumptions. The EIA, is part of the U.S. Department of Energy, and is the nation’s most authoritative source of data, forecasts, and analysis of the U.S. energy market. The report outlines energy production expectations over the next thirty years.

Noble Capital markets recently held a panel titled Managing the Transition to a Greener Energy Environment which brought together executives representing different energy sources to discuss the future of their respective fuelsand will present a livestream of its presentation on February 3^rd at 2:00 pm ET (register at https://bipartisanpolicy.org/event/eias-annual-energy-outlook-2021-release).

 

Renewable and Natural Gas are projected Winners but Other Fuels Should see Declines Level Off

As one might expect, the EIA projects that natural gas and renewable fuels will grow in importance as the United States works to reduce carbon emissions. Coal production, which has fallen sharply in recent years, begins to level off by 2025 in response to falling prices. Oil production, which has expanded over the last decade due to production improvements and a growing economy, begins to stagnate and eventually decline with the proliferation of electric vehicles.

 

Source: United States Energy Information Administration (EIA): Annual Energy Outlook 2020

 

Generation to Grow in Importance with a Move to Electric Vehicles

Looking at consumption by sector; electric power remains the largest source of energy demand representing about one-third of consumption. The EIA sees generation demand reversing recent declines associated with efficiency gains and picking up demand from transportation starting around 2030. Industrial demand grows with an expanding economy and low energy prices.

 

Source: United States Energy Information Administration (EIA): Annual Energy Outlook 2020

 

Oil Prices Projected to Rise

EIA projections call for oil prices to rise steadily over the next thirty years as lost transportation and generation demand is replaced by increased industrial demand. The EIA’s base case has Brent oil prices rising above $100 in the next 25-30 years.

 

Source: United States Energy Information Administration (EIA): Annual Energy Outlook 2020

 

With Growing Tight Sand Production, the U.S. Will Remain A Net Exporter

Production from tight oil formations, led by production in the Permian Basin, has become the dominate source of U.S. production and the EIA believes that will continue. The United States will remain a net exporter of oil and energy for the foreseeable future.

 

Source: United States Energy Information Administration (EIA): Annual Energy Outlook 2020

 

Take-Away: Renewables Are Growing But Don’t Rule Fossil Fuels Out

The EIA’s conclusions match up with that of the NobleCon17 Energy Panel. Specifically:

• Renewables will continue to take market share as costs continue to decline.
• A portfolio of energy sources is needed to provide backup and react to changing prices.
• Fossil fuels may lose market share but will see overall demand and pricing increase.
• Efficiency gains will continue in all fuels.

 

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