Is the US Accelerating toward Becoming the World’s Energy Capital?

Is the US Accelerating toward Becoming the World’s Energy Capital?

(Note: companies that could be impacted by the content of this article are listed at the base of the story (desktop version). This article uses third-party references to provide a bullish, bearish and balanced point of view; sources listed in the “Balanced” section)

Production of oil and natural gas in the United States is growing at a rapid pace due to technological advances. As a result, the US is approaching a position of becoming a net exporter of energy for the first time since the Fifties. Most energy exports out of the US will originate in the Gulf of Mexico as new pipelines move oil and gas from the Permian Basin (West Texas and New Mexico) to refineries in the Gulf. This new supply has the potential to make the Gulf of Mexico the largest exporting hub in the world within the next few years. Could this mean that the United States is becoming the new energy capital of the world?

Offshore Wind Power Blows into the Energy Market

Offshore Wind Power Blows into the Energy Market

Offshore wind power is one of the most exciting and fastest-growing industries in renewable energy. Without any landmasses in the way, wind offshore blows strongly and consistently without interruption. Furthermore, offshore provides ample space and fewer restrictions for installing massive turbines, making offshore wind an attractive energy alternative to support the electric power needs of our populous coastal communities. Offshore wind turbines may achieve a higher output, but their remote ocean locations present costly challenges to installation. Additionally, a salty and humid environment at sea means much more maintenance than their land counterparts. However, improved efficiencies from advances in technology as well as government support have encouraged rapid growth of offshore wind energy installations in the past few years.

During 2018, the global capacity of offshore wind energy grew by 24% for a total of 23 gigawatts (GW) of annual energy production capacity, according to the Global Wind Energy Council (GWEC), an international trade association for the wind power industry. This explosive growth was partially fueled by the opening of the world’s biggest offshore wind farm off the coast of the United Kingdom. This wind farm can produce 659 megawatts (MW) annually, which is enough to power 590,000 homes. With this substantial addition, offshore wind power now provides nearly a tenth of the UK’s electricity. Indeed, the rapid acceleration of offshore wind energy installations inspires an optimistic outlook for this abundant renewable energy source.

Will the Oil Slowdown Provoke a Renewable Energy Takeover?

Will the Oil Slowdown Provoke a Renewable Energy Takeover?

The Organization of the Petroleum Exporting Countries cut its demand forecast for the second consecutive month on Wednesday. The OPEC reduced the expected use for the remainder of the year to 1.02 million barrels per day, which is down 80,000 b/d from the August estimate. This decrease is attributed to the weaker-than-expected economic data in the first half of the year.

Will Renewable Energy be the Downfall of Fossil Fuels?

Will Renewable Energy be the Downfall of Fossil Fuels?

Fossil fuel has been the main energy source since the mid-1700s during the Industrial Revolution. It has provided the majority of our power since then, but research shows that when burned, it has negative impacts on the environment. For this reason, many countries have been searching for an alternative, preferably a renewable one. Solar and wind power have been the most prominent choices and have seen a jump in popularity in recent years.

Research – Genie Energy (GNE) – Earnings Miss Causes Decline in Stock

Tuesday, August 6, 2019

Genie Energy (GNE)

Earnings Miss Causes 30% Decline In Stock

Genie Energy Ltd through its subsidiaries operates as a retail energy provider; and an oil and gas exploration company. It operates through three segments: Genie Retail Energy; Afek Oil and Gas, Ltd.; and Genie Oil and Gas. The company resells electricity and natural gas to residential and small business customers primarily in the Eastern and Midwestern United States and offers energy brokerage and advisory services.

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

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

  • What went wrong? Genie reported $(0.29) vs $(0.09) and our $0.09 est. Adjusted EBITDA was $(9.1) million vs $(1.6) million. Shortfall can be attributed to Retail Energy top line which reported Gross Profit of $8.2 million vs $15.8 million.
  • Why were Energy Service results down? Mild weather meant lower usage and a charge for hedging more supply than needed. Customers switching to….



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Is Solar Energy the Way of the Future?

Is Solar Energy the Way of the Future?

(Note: companies that could be impacted by the content of this article are listed at the base of the story (desktop version). This article uses third-party references to provide a bullish, bearish and balanced point of view; sources listed in the “Balanced” section)

The race to find an alternative renewable energy source has been ongoing for decades. The most popular and sustainable option available at the moment is solar power. Solar energy comes from each particle of sunlight called a photon. Every single one that reaches the Earth contains energy inside that fuels our planet. Solar power is responsible for all of our weather systems and theoretically, enough solar radiation hits the surface of the planet each hour to fill our needs for nearly an entire year. It could be converted to useable energy using photovoltaics and could play an important role in global energy in the future. We will have access to solar energy as long as the sun is alive, which according to NASA is about 6.5 billion years.

Research – Orion Group (ORN) – Poised for a Strong Rebound

Tuesday, July 2, 2019

Orion Group Holdings (ORN)

Poised for a Strong Rebound

Orion Group Holdings Inc is a US-based company which provides solutions in marine construction, design and specialty services both on and off the water in the continental US, Alaska, Canada, and the Caribbean Basin.

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

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

  • Another large Marine award.Dredging work of $52 million on a crude oil export terminal should begin in 4Q2019 and run into 3Q2020. Dredging will allow Very Large Crude Carriers (VLCCs) to load at South Texas Gateway Terminal project. Design and demo work could expand the scope of the project for ORN and validate the emerging industrial strategy.
  • Award should push 2Q2019 backlog into $650 million range, another record. Combined with the large Terminal 5 project in Seattle that should begin this quarter, …  

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Research – Orion Group Holdings (ORN) – Another Project Award Boosts Record Backlog and Reinforces Positive Outlook

Thursday, July 18, 2019

Orion Group Holdings (ORN)

Another Project Award Boosts Record Backlog and Reinforces Positive Outlook.

Orion Group Holdings Inc is a US-based company which provides solutions in marine construction, design and specialty services both on and off the water in the continental US, Alaska, Canada, and the Caribbean Basin.

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

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

  • Another large Marine award. Dredging work of $52 million on a crude oil export terminal should begin in 4Q2019 and run into 3Q2020. Dredging will allow Very Large Crude Carriers (VLCCs) to load at South Texas Gateway Terminal project. Design and demo work could expand the scope of the project for ORN and validate the emerging industrial strategy.
  • Award should push 2Q2019 backlog into $650 million range, another record. Combined with the large Terminal 5 project in Seattle that should….



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*Analyst
certification and important disclosures included in 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.
 

Energy Quarterly Review Q2 2019

Q2 2019 Energy Quarterly Review

Noble Capital Markets

It was a difficult quarter for energy stocks as prices fell in response to falling energy prices. Energy stocks, as measured by the XLE Energy Select Sector SPDR Fund, fell 5.1% over the three months ended June 30, 2019. The decline stands in contrast to a 2.6% increase in the S&P 500 Composite Index over the same time period. Both oil and natural gas prices declined during the most recent quarter. Oil prices, as measured by the WTI August 2019 future price, declined 5.4% from $61.81 per barrel to $58.47 per barrel. Natural gas prices, as measured by Henry Hub August 2019 futures, declined even more significantly, falling 14.0% from $2.68 per thousand cubic feet to $2.308.

The decline in oil prices corresponds to rising inventories with the EIA reporting consolidated oil stocks of approximately 2 million BBLS (as of 6/21), up 4.6% from a year ago. Oil imports continue to decline even as the export of petroleum products grows. Domestic production of oil continues to grow. The spread between North Sea Brent oil prices and WTI oil price has…

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Industry Report – Energy – The storage numbers tell it all

Tuesday, July 2, 2019

Energy Industry Report

The Storage Numbers Tell it All

Mark Heim, CFA, Senior Research Analyst, Noble Capital Markets, Inc.

Refer to end of report for Analyst Certification & Disclosures

  • Energy stocks had a rough quarter in response to falling energy prices. The XLE Energy Select SPDR Index fell 5.1% during the quarter in response to a 5.4% decline in oil prices and a 14.0% decline in natural gas prices.
  • The decline in oil prices reflect rising inventories. Oil inventories are up 4.6% year over year. Oil prices seem to have shrugged off Middle East tension. The spread between Brent (global) prices and WTI (domestic) widened in response to increased domestic production.
  • Natural gas prices also reflect rising inventories. Gas in storage rose after a mild April and May causing a drop in prices in June. Storage has returned to historical levels after being below average. As we enter the quiet summer period, we would not expect to see a significant natural gas price appreciation until the fall at the earliest.
  • Energy future prices do not offer much hope. Future oil prices are below current oil prices making it difficult for companies to lock in prices in order to support future drilling. Without a significant rise in prices later in the year, realized prices will most likely drop in 2020 for most energy companies. We believe investors should be cautious regarding energy stocks until signs of a turnaround.

Energy Commentary – Second Quarter 2019

It was a difficult quarter for energy stocks as prices fell in response to falling energy prices.  Energy stocks, as measured by the XLE Energy Select Sector SPDR Fund, fell 5.1% over the three months ended June 30, 2019.  The decline stands in contrast to a 2.6% increase in the S&P 500 Composite Index over the same time period.  Both oil and natural gas prices declined during the most recent quarter. Oil prices, as measured by the WTI August 2019 future price, declined 5.4% from $61.81 per barrel to $58.47 per barrel.  Natural gas prices, as measured by Henry Hub August 2019 futures, declined even more significantly, falling 14.0% from $2.68 per thousand cubic feet to $2.308.

The decline in oil prices corresponds to rising inventories with the EIA reporting consolidated oil stocks of approximately 2 million BBLS (as of 6/21), up 4.6% from a year ago.  Oil imports continue to decline even as the export of petroleum products grows.  Domestic production of oil continues to grow.  The spread between North Sea Brent oil prices and WTI oil price has widened from $5.23 per barrel to $8.04 per barrel in response to increased domestic production.  The oil futures curve is relatively flat with prices rising towards $60 over the next few months but then falling to $57 next summer and $55 the year thereafter.  We believe the decline reflects a belief that near-term prices are artificially inflated by political tension in the Mideast and perhaps a feeling that long-term global expansion may be getting old in the tooth.

The decline in natural gas prices, on the other hand, is due to domestic issues.  The EIA reports natural gas storage of 2.3 trillion cubic feet (as of June 21, 2019), up 11.4% from the same time last year.  After several months of being near five-year lows, storage levels have returned to historical averages.  The rise in storage has been most pronounced in the Midwest where weather was abnormally mild in April and May.  At the same time, domestic gas production has continued to grow, at least until reported for April.  It should be noted that natural gas prices began their sharp decline in May and June.  We suspect domestic production in May and June will show a decline when reported in response to lower prices.

The current outlook for the energy sector is somewhat negative.  The euphoria of merger activity in previous quarters has dissipated.  We have noticed an increase of bankruptcy filings among marginal energy companies this quarter.  The rise in international oil prices due to political unrest seems destined to be short-lived.  Other energy future prices are low.  Storage levels are high.  Undoubtedly, companies will respond to low prices by cutting back drilling, which will reduce production and the storage glut.  Until companies begin reporting such cutbacks, we would encourage investors to be cautious regarding the energy sector. 

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Senior Equity Analyst focusing on energy and utility stocks. 24 years of experience as an analyst. Chartered Financial Analyst©. MBA from Washington University in St. Louis and BA in Economics from Carleton College in Minnesota. Professor at St. Louis University’s MBA program. Named WSJ ‘Best on the Street’ Analyst four times. Named Forbes/StarMine’s “Best Brokerage Analyst” three times. FINRA licenses 7, 63, 86, 87.

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News – Will electric cars stall the demand for oil?

Does a green light for electric cars mean a red light for oil?

(Note: companies that could be impacted by the content of this article are listed at the base of the story (desktop version). This article uses third-party references to provide a bullish, bearish and balanced point of view; sources listed in the “Balanced” section)

Electric cars are no longer a novelty.  There were more than 5.4 million electric vehicles (EVs) as of January 1, 2019, including hybrids.  China represents more than half of the market followed by the US, Norway, Germany and the UK.  The number of electric vehicles grows by more than 50% each year and the growth rate has shown no signs of slowing down.  Every electric vehicle purchased means less demand for gasoline and thus oil.  While it is true that oil is used to generate electricity, oil’s market share of generation is small and decreasing.  It is reasonable to ask then, “will electric vehicle growth dampen the demand for oil and cause downward pressure on oil prices?”

News – Will Green Dreams Turn Into Coal’s Nightmare?

Will the Era of the New Green Deal Spell Doom for the Coal Industry? 

(Note: companies that could be impacted by the content of this article are listed at the base of the story (desktop version). This article uses third-party references to provide a bullish, bearish and balanced point of view; sources listed in the “Balanced” section)  

In the run-up to the 2020 Presidential election, ample discussion has centered on efforts to combat climate change.  Democratic candidate Jay Inslee proposed phasing coal out completely over the next 11 years. Another Democratic candidate, Beto O’Rourke, proposed a $5.1 trillion plan to achieve net-zero greenhouse gas emissions by 2050 by investing in infrastructure, clean power and energy efficiency to combat climate change.  While the coal industry’s share of supplying fuel to electric power plants has fallen due to the increased use of natural gas, the emphasis on green energy has increasingly put coal in the crosshairs of new environmental policy proposals.

Research – Genie Energy (GNE) – Increasing estimates; strong results

Tuesday, May 7, 2019

Genie Energy Ltd. (GNE)

Acquisitions boost results. Can this be duplicated?

Genie Energy Ltd through its subsidiaries operates as a retail energy provider; and an oil and gas exploration company. It operates through three segments: Genie Retail Energy; Afek Oil and Gas, Ltd.; and Genie Oil and Gas. The company resells electricity and natural gas to residential and small business customers primarily in the Eastern and Midwestern United States and offers energy brokerage and advisory services.

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

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

  • Genie Energy reports higher
    adjusted EBITDA fueled by acquisitions.  
     Genie energy reported 2019 first-quarter adjusted EBITDA of $10.4 million versus $8.6 million for the same period last year.  Improved results reflect the positive contribution of new operations in Finland, the acquisition of Prism Solar, and a new municipal aggregation agreement.  Higher results came despite weather headwinds that decreased natural gas sales. 
  • Customer growth was impressive. Customer growth was strong with meters rising 6.9% year over year and 23.5% quarter over quarter.  The company’s churn rate dropped to 5.3% versus 7.6% in the first quarter last year and 7.1% in the mos…



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