Alvopetro Energy Ltd.’s vision is to become a leading independent upstream and midstream operator in Brazil. Our strategy is to unlock the on-shore natural gas potential in the state of Bahia in Brazil, building off the development of our Caburé natural gas field and our strategic midstream infrastructure.
Michael Heim, Senior Vice President, Equity Research Analyst, Energy & Transportation, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
Gas sales declined due to a temporary reduction in demand. Gas sales to Bahiagas in September averaged 6.8 MMcf/d down 35% from August sales and well below peak sales of 15.8 MMcf/d in the March quarter. Gas sales were below take or pay agreements by 1.2 MMcf/d, which will be treated as deferred revenue. Gas sales had been declining in recent months because Alvopetro’s joint venture partner in its primary field had increased its nominations for gas sales following the start-up of its plant. The decline in September is related to lower demand and comes in addition to nomination issues.
Management views the decline as temporary and is working to increase production in 100% owned fields. As we have indicated before, increased partner nominations will result in lower partner nominations in the latter years of well lives. In addition, Alvopetro is making progress drilling new wells that do not have nomination issues. Regarding the drop in demand, we would remind investors that the city of Bahia is a vibrant growing city that has limited gas supply options beyond Alvopetro. We are not concerned with a one-month decline in demand but recommend investors monitor demand issues going forward.
Equity Research is available at no cost to Registered users of Channelchek. Not a Member? Click ‘Join’ to join the Channelchek Community. There is no cost to register, and we never collect credit card information.
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.
Oil giant Exxon Mobil is making a huge bet on shale with its just-announced $59 billion all-stock acquisition of Pioneer Natural Resources, one of the largest producers in the Permian Basin of West Texas and New Mexico. Shale oil is a type of unconventional oil found in shale rock formations that must be hydraulically fractured to extract the oil.
The deal, which is Exxon’s biggest since its merger with Mobil in 1999, will give it access to Pioneer’s large acreage position in the Permian, allowing Exxon to more than double its current production in the region to over 1 million barrels per day once the deal closes in 2024.
This massive expansion of Exxon’s shale oil production comes even as much of the industry has pulled back investments in new drilling due to investor pressure to improve returns and limit growth. While Exxon is already one of the most active drillers in the Permian, the addition of Pioneer’s operations will make it the largest shale oil producer in the basin by far.
The shale boom propelled U.S. oil production to record highs in recent years, though growth has slowed more recently. The Biden administration has also paused new leases for drilling on federal lands, creating uncertainty around future shale production. However, the industry is still projected to provide most new sources of oil supply worldwide in the coming years.
Exxon’s bet is that shale, especially the Permian where production costs are lowest, will continue to drive future growth. Pioneer outlined an ambitious plan last year to raise Permian production as high as 2 million barrels per day by 2030. Together, the companies expect to capture major cost savings by combining operations.
But analysts say the deal is not without risk for Exxon. While shale helped supercharge U.S. production, the industry has had a mixed track record of profitability. Investors have lost patience with shale companies struggling to deliver consistent returns, pushing firms like Pioneer to focus more on cost discipline and shareholder payouts rather than maximum production growth.
Outside shale, Exxon is also working to develop large, costly conventional oil projects offshore Guyana and in other regions to replenish reserves. Some analysts question whether Exxon might be spreading itself thin trying to balance massive shale drilling with high-stakes conventional projects.
More broadly for the oil industry, concerns around climate change have made the long-term outlook uncertain. With electric vehicles going mainstream and many governments setting net-zero emissions targets, peak oil demand may already be behind us according to some forecasts.
While Exxon says shale oil will be needed to meet global energy demand for decades to come, increasing pressure on the industry to reduce emissions led Pioneer to accelerate its own net zero target from 2050 to 2035 after the acquisition was announced. With shale methane emissions a major focus for policymakers, combining operations could allow for more investment in leak detection and reductions.
For now, Exxon seems confident in the value of shale, and particularly the Permian’s vast oil riches. The Pioneer deal positions it to be the dominant driller in the West Texas region as others pull back. But only time will tell whether the big bet on shale pays off or leaves Exxon overextended. The deal reflects one of the oil majors’ biggest signals of confidence yet that shale will continue driving growth well into the future.
CALGARY, AB, Oct. 5, 2023 /CNW/ – Alvopetro Energy Ltd. (TSXV: ALV) (OTCQX: ALVOF) announces September 2023 sales volumes and an operational update.
September 2023 Sales Volumes
September sales volumes averaged 1,203 boepd, including natural gas sales of 6.8 MMcfpd and associated natural gas liquids sales (“NGLs”) from condensate of 69 bopd, bringing our average sales volumes to 1,696 boepd in the third quarter of 2023.
Natural gas, NGLs and crude oil sales:
September 2023
August 2023
Q3 2023
Q2 2023
Natural gas (Mcfpd), by field:
Caburé
6,165
9,894
8,949
9,891
Murucututu
642
662
726
665
Total Company natural gas (Mcfpd)
6,807
10,556
9,675
10,556
NGLs (bopd)
69
84
81
84
Oil (bopd)
–
8
3
8
Total Company (boepd)
1,203
1,852
1,696
1,852
Our offtaker, Bahiagás reduced offtake in September due to a temporary reduction in end user consumption. As a result, natural gas nominations and production were below Bahiagás’ take or pay limits within our contract. Our contract requires that Bahiagás pay Alvopetro for the greater of actual gas delivered in the month or 80% of the Firm contracted volumes for the period. Our Firm contracted volume is currently 300,000 m3/d1 or 10.6 MMcfpd1, before adjusting for heat content of our delivered natural gas. As such, Bahiagas is required to pay Alvopetro for gas not taken up to 8.5 MMcfpd1. On a heat adjusted basis this amounted to 1.2 MMcfpd (35 MMcf) in September which is in addition to the September sales volume noted above of 6.8 MMcfpd. This volume paid but not taken by Bahiagas is to be compensated by Alvopetro in the future through natural gas deliveries in excess of 9.5 MMcfpd1. Natural gas deliveries during October have been approximately 8.7 MMcfpd to-date.
1 Volume represents contract volume based on contract referenced natural gas heating value. Note that Alvopetro’s delivered natural gas sales volumes, as reflected in the table above, are prior to any adjustments for heating value of Alvopetro natural gas. Alvopetro’s natural gas is approximately 7.5% hotter than the contract reference heating value.
Operational Update
In July, we spud our 183-A3 well on our Murucututu natural gas field. We are currently drilling at 3,383 metres and our plan is to drill the well to 3,480 metres total depth.
On our Bom Lugar field, we drilled the BL-6 well to a total depth of 3,244 metres. The well was completed in two intervals. The first Caruaçu interval from 2,591 to 2,598 metres was perforated and 28 barrels of fluid was swabbed over a 12-hour period with 17 barrels of 29 degree API oil and 39% water cut. The second Caruaçu interval from 2,486 to 2,598 metres swabbed 101 barrels of fluid over 24 hours with 89 barrels of 33 degree API oil and 12% water cut. We completed an organic acid stimulation and are equipping the well with an artificial lift system and expect to have the well on production next week.
Upcoming Investor Conference
Corey C. Ruttan, President and Chief Executive Officer, will present at the ‘Schachter Catch the Energy’ Conference on Saturday October 14, 2023, at 11:30 am (Mountain time).
Date:
October 14, 2023
Time:
11:30 am to 12:05 pm (Mountain time)
Location:
Mount Royal University (4825 Mt Royal Gate SW, Calgary, Alberta) Bella Concert Hall & Ross Glen Hall (Presentation Room 1)
The Conference is hosted by Josef Schachter, CFA and author of the Schachter Energy Report. Alvopetro’s presentation will include a moderated Q&A session. In addition, company personnel will be available throughout the day at Alvopetro’s booth to answer investor questions.
Alvopetro Energy Ltd.’svision is to become a leading independent upstream and midstream operator in Brazil. Our strategy is to unlock the on-shore natural gas potential in the state of Bahia in Brazil, building off the development of our Caburé and Murucututu natural gas fields and our strategic midstream infrastructure.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.
All amounts contained in this new release are in United States dollars, unless otherwise stated and all tabular amounts are in thousands of United States dollars, except as otherwise noted.
Abbreviations:
bbls
=
barrels
boepd
=
barrels of oil equivalent (“boe”) per day
bopd
=
barrels of oil and/or natural gas liquids (condensate) per day
BRL
=
Brazilian real
m3
=
cubic metre
m3/d
=
cubic metre per day
MMBtu
=
million British thermal units
Mcf
=
thousand cubic feet
Mcfpd
=
thousand cubic feet per day
MMcf
=
million cubic feet
MMcfpd
=
million cubic feet per day
Q2 2023
=
three months ended June 30, 2023
Q3 2023
=
three months ended September 30, 2023
BOE Disclosure. The term barrels of oil equivalent (“boe”) may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet per barrel (6Mcf/bbl) of natural gas to barrels of oil equivalence is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. All boe conversions in this news release are derived from converting gas to oil in the ratio mix of six thousand cubic feet of gas to one barrel of oil.
Testing and Well Results. Data obtained from the BL-06 well identified in this press release, including initial testing data and associated production, should be considered to be preliminary. Production during testing is useful in confirming the presence of hydrocarbons, however, such production and production rates are not determinative of the rates at which such well will continue production and decline thereafter. Test results are not necessarily indicative of long-term performance of the relevant well or fields or of ultimate recovery of hydrocarbons and there is no representation by Alvopetro that the data relating to the BL-06 well contained in this press release is necessarily indicative of long-term performance or ultimate recovery. The reader is cautioned not to unduly rely on such data as such data may not be indicative of future performance of the well or of expected production or operational results for Alvopetro in the future.
Forward-Looking Statements and Cautionary Language. This news release contains “forward-looking information” within the meaning of applicable securities laws. The use of any of the words “will”, “expect”, “intend” and other similar words or expressions are intended to identify forward-looking information. Forward‐looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such results will be achieved. A number of factors could cause actual results to vary significantly from the expectations discussed in the forward-looking statements. These forward-looking statements reflect current assumptions and expectations regarding future events. Accordingly, when relying on forward-looking statements to make decisions, Alvopetro cautions readers not to place undue reliance on these statements, as forward-looking statements involve significant risks and uncertainties. More particularly and without limitation, this news release contains forward-looking information concerning the expected timing of certain of Alvopetro’s testing and operational activities including the expected timing of drilling the 183-A3 well, expected timing of production commencement from the BL-06 well, exploration and development prospects of Alvopetro, and expected natural gas sales and gas deliveries under the Company’s long-term gas sales agreement. The forward‐looking statements are based on certain key expectations and assumptions made by Alvopetro, including but not limited to expectations and assumptions concerning testing results of the BL-06 well, equipment availability, the timing of regulatory licenses and approvals, the success of future drilling, completion, testing, recompletion and development activities, the outlook for commodity markets and ability to access capital markets, the impact of global pandemics and other significant worldwide events, the performance of producing wells and reservoirs, well development and operating performance, foreign exchange rates, general economic and business conditions, weather and access to drilling locations, the availability and cost of labour and services, environmental regulation, including regulation relating to hydraulic fracturing and stimulation, the ability to monetize hydrocarbons discovered, expectations regarding Alvopetro’s working interest and the outcome of any redeterminations, the regulatory and legal environment and other risks associated with oil and gas operations. The reader is cautioned that assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be incorrect. Actual results achieved during the forecast period will vary from the information provided herein as a result of numerous known and unknown risks and uncertainties and other factors. Although Alvopetro believes that the expectations and assumptions on which such forward-looking information is based are reasonable, undue reliance should not be placed on the forward-looking information because Alvopetro can give no assurance that it will prove to be correct. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on factors that could affect the operations or financial results of Alvopetro are included in our annual information form which may be accessed on Alvopetro’s SEDAR+ profile at www.sedarplus.ca. The forward-looking information contained in this news release is made as of the date hereof and Alvopetro undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.
CALGARY, AB, Oct. 2, 2023 /CNW/ – InPlay Oil Corp. (TSX: IPO) (OTCQX: IPOOF) (“InPlay” or the “Company”) is pleased to confirm that its Board of Directors has declared a monthly cash dividend of $0.015 per common share payable on October 31, 2023, to shareholders of record at the close of business on October 16, 2023. The monthly cash dividend is expected to be designated as an “eligible dividend” for Canadian federal and provincial income tax purposes.
About InPlay Oil Corp.
InPlay is a junior oil and gas exploration and production company with operations in Alberta focused on light oil production. The company operates long-lived, low-decline properties with drilling development and enhanced oil recovery potential as well as undeveloped lands with exploration possibilities. The common shares of InPlay trade on the Toronto Stock Exchange under the symbol IPO and the OTCQX Exchange under the symbol IPOOF.
Michael Heim, CFA, Senior Research Analyst, Noble Capital Markets, Inc.
Refer to the bottom of the report for important disclosures
Oil price rose 30% in the third quarter helping propel the XLE Energy Index up 11.4%. Natural gas prices also rose after twelve months of decline. Higher oil prices reflect declining inventories due to rising demand that is not being met by rising supply.
Domestic oil demand is rising. Oil demand largely tracks the economy. And, while monetary tightening has slowed growth, demand is still growing. Recently, domestic demand has increased due to warm summer weather and increased propane exports to Europe.
Oil supply is not keeping pace. OPEC+ extended its production cuts. In previous decades, domestic producers would respond to production cuts by accelerating drilling. In recent years, producers have not increased drilling as noted by a sharp decline in domestic oil rig activity. Oil drilling rigs even declined this quarter despite the rise in oil prices. Limited drilling, combined with sharper well decline curves, has meant supply is not keeping up with demand.
Small cap producers are uniquely positioned to take advantage of higher prices. The production gains that came from horizontal drilling and fracking in the Permian Basin appear to be waning. That means well profitability has declined as producers move on to secondary and tertiary targets. This is especially an issue for larger production companies that need a large number of wells drilled to provide growth. In addition, large companies face regulatory and investor pressures regarding fossil fuel production that the smaller companies may avoid.
Energy Stocks
Energy stocks, as measured by the XLE Energy Index, rose 11.4% in the 2023 third quarter as compared to a 3.6% decline in the S&P 500 Index. The outperformance was largely due to rising oil prices. The November 2023 futures contract rose 30% during the quarter. Natural gas prices rose 4.9% during the quarter largely reflecting normal seasonal trends.
Oil Prices
The rise in oil prices corresponds to a drop in inventories. After a covid-induced spike in early 2020, domestic inventories have fallen steadily. During this period of monetary tightening, demand growth has slowed but remained positive. Supply, on the other hand, has stagnated. OPEC+ has extended cutbacks and domestic drilling activity has declined.
Figure #1
Source: EIA
The decline in drilling activity can best be seen by looking at domestic oil rig activity. Where once there were more than 1600 active wells, now there are one-third that number. What’s more, oil drilling activity has continued to decline in the third quarter even as oil prices have risen.
Figure #2
Source: Baker Hughes
Weather has also played a part as warm temperatures have meant increased use of oil for electric generations. Although oil represents a small portion of the generation load, it is an important component in the summer months when generation demand is greatest. Temperatures in the United States have been warmer than average each month this summer and 17 of the 24 months over the last four years.
Figure #3
Finally, it is worth noting that petroleum exports have been growing. Exports jumped after the Ukraine invasion as the United States rushed to ship petroleum to Europe to offset Russian supply disruptions. Note the large jump in propane exports since 2021 in the chart below. Propane, a component of the crude oil barrel, is one of the easier fuels to export until additional liquified natural gas export terminals are completed.
Figure #4
The combination of limited drilling, growing demand for electric generation and exports, and OPEC production cuts bodes well for oil prices.
Natural Gas Prices
The story for natural gas is less positive but improving. Sharp declines last winter bottomed out in April and have slowly begun to creep back upward. Natural gas production profitability is not great at prices near $3.00 per thousand cubic feet (mcf) but still profitable.
Figure #5
Source: Nymex, EIA
Outlook
We believe the outlook for energy companies remains favorable. Oil prices are high and do not show signs of falling due to OPEC cuts, reduced domestic drilling and rising demand for power generation and exports. We believe the case for smaller cap energy stocks is especially strong because they are less liquid and slower to react to rising energy prices. Smaller energy companies also face less political and investor pressure to shift away from carbon-based production.
GENERAL DISCLAIMERS
All statements or opinions contained herein that include the words “we”, “us”, or “our” are solely the responsibility of Noble Capital Markets, Inc.(“Noble”) and do not necessarily reflect statements or opinions expressed by any person or party affiliated with the company mentioned in this report. Any opinions expressed herein are subject to change without notice. All information provided herein is based on public and non-public information believed to be accurate and reliable, but is not necessarily complete and cannot be guaranteed. No judgment is hereby expressed or should be implied as to the suitability of any security described herein for any specific investor or any specific investment portfolio. The decision to undertake any investment regarding the security mentioned herein should be made by each reader of this publication based on its own appraisal of the implications and risks of such decision.
This publication is intended for information purposes only and shall not constitute an offer to buy/sell or the solicitation of an offer to buy/sell any security mentioned in this report, nor shall there be any sale of the security herein in any state or domicile in which said offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or domicile. This publication and all information, comments, statements or opinions contained or expressed herein are applicable only as of the date of this publication and subject to change without prior notice. Past performance is not indicative of future results. Noble accepts no liability for loss arising from the use of the material in this report, except that this exclusion of liability does not apply to the extent that such liability arises under specific statutes or regulations applicable to Noble. This report is not to be relied upon as a substitute for the exercising of independent judgement. Noble may have published, and may in the future publish, other research reports that are inconsistent with, and reach different conclusions from, the information provided in this report. Noble is under no obligation to bring to the attention of any recipient of this report, any past or future reports. Investors should only consider this report as single factor in making an investment decision.
IMPORTANT DISCLOSURES
This publication is confidential for the information of the addressee only and may not be reproduced in whole or in part, copies circulated, or discussed to another party, without the written consent of Noble Capital Markets, Inc. (“Noble”). Noble seeks to update its research as appropriate, but may be unable to do so based upon various regulatory constraints. Research reports are not published at regular intervals; publication times and dates are based upon the analyst’s judgement. Noble professionals including traders, salespeople and investment bankers may provide written or oral market commentary, or discuss trading strategies to Noble clients and the Noble proprietary trading desk that reflect opinions that are contrary to the opinions expressed in this research report. The majority of companies that Noble follows are emerging growth companies. Securities in these companies involve a higher degree of risk and more volatility than the securities of more established companies. The securities discussed in Noble research reports may not be suitable for some investors and as such, investors must take extra care and make their own determination of the appropriateness of an investment based upon risk tolerance, investment objectives and financial status.
Company Specific Disclosures
The following disclosures relate to relationships between Noble and the company (the “Company”) covered by the Noble Research Division and referred to in this research report. Noble is not a market maker in any of the companies mentioned in this report. Noble intends to seek compensation for investment banking services and non-investment banking services (securities and non-securities related) with any or all of the companies mentioned in this report within the next 3 months
ANALYST CREDENTIALS, PROFESSIONAL DESIGNATIONS, AND EXPERIENCE
Senior Equity Analyst focusing on Basic Materials & Mining. 20 years of experience in equity research. BA in Business Administration from Westminster College. MBA with a Finance concentration from the University of Missouri. MA in International Affairs from Washington University in St. Louis. Named WSJ ‘Best on the Street’ Analyst and Forbes/StarMine’s “Best Brokerage Analyst.” FINRA licenses 7, 24, 63, 87
WARNING
This report is intended to provide general securities advice, and does not purport to make any recommendation that any securities transaction is appropriate for any recipient particular investment objectives, financial situation or particular needs. Prior to making any investment decision, recipients should assess, or seek advice from their advisors, on whether any relevant part of this report is appropriate to their individual circumstances. If a recipient was referred to Noble Capital Markets, Inc. by an investment advisor, that advisor may receive a benefit in respect of transactions effected on the recipients behalf, details of which will be available on request in regard to a transaction that involves a personalized securities recommendation. Additional risks associated with the security mentioned in this report that might impede achievement of the target can be found in its initial report issued by Noble Capital Markets, Inc.. This report may not be reproduced, distributed or published for any purpose unless authorized by Noble Capital Markets, Inc..
RESEARCH ANALYST CERTIFICATION
Independence Of View All views expressed in this report accurately reflect my personal views about the subject securities or issuers.
Receipt of Compensation No part of my compensation was, is, or will be directly or indirectly related to any specific recommendations or views expressed in the public appearance and/or research report.
Ownership and Material Conflicts of Interest Neither I nor anybody in my household has a financial interest in the securities of the subject company or any other company mentioned in this report.
Michael Heim, Senior Vice President, Equity Research Analyst, Energy & Transportation, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
2023 summer drilling program completed. Hemisphere drilled eight wells (6 for production) during the summer, as planned. Four had been completed by August 24th, as reported during second quarter results, so the completions were expected and in line with our model’s assumptions. Management indicated that capital expenditures for the rest of the year should be minimal and we do not expect additional wells to be drilled.
Production is rising. Management reports that production has reached 3,200 boe/d, up from August production of 3,000 boe/d. Recall that production for the second quarter was slightly below our expectations, but we expected rates to rise as wells came on line. With production finishing the quarter strong, we believe third quarter production should meet our projections for 3,050 boe/d and fourth quarter production of 3,200 boe/d which assumes some improvement from well optimization.
Equity Research is available at no cost to Registered users of Channelchek. Not a Member? Click ‘Join’ to join the Channelchek Community. There is no cost to register, and we never collect credit card information.
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.
Chesapeake Utilities Corporation announced Monday that it has entered into an agreement to acquire Florida City Gas (FCG) from NextEra Energy for $923 million in cash. The acquisition will significantly expand Chesapeake’s presence in the growing Florida energy market.
FCG is the eighth largest natural gas local distribution company in Florida, serving around 120,000 residential and commercial customers across eight counties. Its infrastructure includes approximately 3,800 miles of distribution pipelines and 80 miles of transmission pipelines.
According to Jeff Householder, President and CEO of Chesapeake Utilities, natural gas demand in Florida continues to rise as consumers and businesses seek reliable, domestic, and affordable energy. With this acquisition, Chesapeake aims to capitalize on the robust growth opportunities across the state.
“This acquisition will more than double our natural gas business in Florida, one of the fastest growing states in the nation,” said Householder. “We see significant potential to continue pursuing long-term earnings growth.”
The deal is expected to close by the end of the fourth quarter of 2023, subject to regulatory approvals. Once completed, FCG will become a wholly owned subsidiary of Chesapeake Utilities.
Chesapeake has a strong track record of successfully integrating acquisitions to drive growth, as seen in its purchase of Florida Public Utilities in 2009. The company believes it can optimize FCG’s operations and execute on additional investments in gas distribution, transmission, and other energy platforms.
To finance the deal, Chesapeake plans to utilize a mix of equity and long-term debt to maintain balance sheet strength. The company has also obtained committed financing from Barclays.
Chesapeake has extended its earnings guidance through 2028 based on the increased scale and opportunities from FCG. It expects earnings per share growth of approximately 8% through 2028. The company also increased its 5-year capital expenditure guidance to $1.5-$1.8 billion.
The FCG acquisition demonstrates Chesapeake’s strategy of consolidating natural gas assets and positioning itself for growth in key geographies. As energy markets evolve, strategic deals allow companies like Chesapeake to enhance their competitive position.
Uranium prices have hit their highest level in 12 years, reaching around $70 per pound in recent trading. This marks a major rally for the nuclear fuel, as prices were languishing below $30 per pound just a couple years ago. The uranium market has seen renewed interest from investors and utilities lately, driving the huge spike in prices.
Uranium is a key material used in nuclear power generation. It is the fuel inside nuclear reactors that undergoes fission to release massive amounts of energy. Uranium is mined from the ground, then processed and enriched before being fabricated into fuel rods for insertion into reactors. Nuclear power plants require a steady supply of uranium fuel to continue operating.
There are several factors behind the big jump in uranium prices recently. A major one is increased demand, as more nuclear reactors are being built around the world. China in particular has been rapidly expanding its nuclear energy capabilities. More reactors coming online globally means more demand for uranium fuel. Supply has also been constrained lately, with pandemic-related disruptions slowing some uranium mining operations. This demand/supply imbalance has helped drive uranium prices markedly higher.
The surge in uranium prices is great news for uranium mining companies and producers. Major players in the global uranium market like Cameco, Kazatomprom, and Energy Fuels stand to benefit greatly from elevated prices. Their profitability increases significantly when uranium prices rise. These companies have seen their stock prices jump this year in tandem with the uranium price rally. Many uranium stocks are up 50% or more year-to-date.
According to Noble Capital Markets Senior Research Analyst Michael Heim, “There has been an imbalance between domestic uranium supply and demand over the last 15 years as consumers (electric utilities) purchased cheap uranium from foreign nations such as Kazakhstan under short-term contracts. Domestic producers curtailed production with spot prices below production costs. With prices now near $70 per pound and electric utilities increasingly willing to sign longer-term contracts, domestic uranium companies like Energy Fuels are able to restart operations.”
The hot uranium market also has implications for the broader stock market. The S&P 500 energy sector has been one of the top performing segments this year. Rising uranium prices provide an added catalyst, as nuclear energy becomes relatively more cost competitive. Utility companies running nuclear power plants also benefit from lower relative fuel costs. This can enhance their profitability and lead to upside in the utilities sector.
Overall, the big rebound in uranium prices reflects growing global demand for nuclear power. New reactor projects and increased focus on energy security are driving uranium back to multi-year highs. This should provide a boost to uranium producers and related stocks going forward. Nuclear power appears poised for increased utilization in the years ahead, which points to a strong fundamental outlook for uranium prices. As long as demand keeps rising faster than supply, uranium seems likely to maintain its bull run.
Oil prices climbed over 1% Friday after Russia banned diesel and gasoil exports. The move aims to increase Russia’s domestic supply but reduces the global oil market.
West Texas Intermediate crude climbed back above $90 per barrel following the news. Brent futures also gained, topping $94. Energy analysts say the Russian ban will likely sustain upward pressure on oil prices near-term.
Russia is a leading diesel producer globally. How much the export halt affects US fuel prices depends on how long it remains in place, says Angie Gildea, KPMG’s head of energy. But any drop in total global oil supply without lower demand will lift prices.
The ban comes as US gas prices retreat from 2022 highs, now averaging $3.86 nationally. Diesel is around $4.58 per gallon. Diesel powers key transport like trucks and ships. The loss of Russian exports could spur further diesel spikes.
However, gas prices may keep easing for most of the US, says Tom Kloza of OPIS. Western states could see increases.
Kloza believes crude may rise $2 to $3 per barrel in the near-term. But gasoline margins are poised to shrink even if oil nears $100 again. The US transition to cheaper winter fuel could also limit price hikes.
Goldman Sachs sees Brent potentially hitting $100 per barrel in the next 12 months. Sharper inventory declines are likely as OPEC supply falls but demand rises, says Goldman’s head of oil research.
The White House has criticized OPEC+ for the production cuts. US gasoline demand recently hit a seasonal record high over 9.5 million barrels per day. Jet fuel use is also rebounding towards pre-pandemic levels.
Strong demand, paired with reduced Russian oil exports, leaves the market more exposed to supply disruptions. Hurricane Ian showed how quickly price spikes can occur.
The Biden Administration plans to keep tapping the Strategic Petroleum Reserve into 2023 to restrain cost increases. But further export bans or output reductions could overwhelm these efforts.
While tighter global fuel supplies might not directly translate to the US, Russia’s latest move signals volatility will persist. Energy prices remain sensitive to supply and demand shifts.
More export cuts could accelerate oil’s return to triple-digits. But for US drivers, the road ahead on gas costs seems mixed. Falling margins and seasonal shifts could limit prices, but risks linger.
Oil markets and energy stocks often get painted with a broad brush. But within the sector, offshore drilling stocks offer upside that many investors are overlooking. Despite cries of peak oil demand, fundamentals for rig owners point to gains ahead.
The oil services sector has rocketed over 50% higher in the last year, soundly beating the S&P 500. Yet offshore drilling stocks remain unloved. This creates an opportunity for investors willing to take a contrarian bet.
The bull case lies in constrained supply and rapidly rising prices. ESG considerations have limited capital investment in new oil production. But robust demand has returned as pandemic impacts recede. This supply/demand imbalance has sent oil above $80 per barrel.
Day rates for offshore rigs are soaring as utilization rates stick near 90%. However, shipyards are focused on liquefied natural gas, not building fresh drilling ships. That means supply can’t catch up to growing demand in a hurry.
This grants pricing power to rig owners. Valaris, Noble, and Weatherford have emerged from bankruptcy with pristine balance sheets. Meanwhile Transocean boasts the most high-specification rigs, positioning it to profit from climbing day rates.
Yet valuations look disconnected from fundamentals. Offshore drillers trade at up to an 80% discount to replacement value, signaling the market doubts their potential. But conditions point to further gains.
Why Energy Could Shine for Investors
Beyond compelling fundamentals, two key reasons make energy stocks stand out right now:
Inflation hedge – Energy equities have historically held up well during inflationary periods. With prices still running hot, oil stocks may offer protection if high inflation persists.
Contrarian bet – Energy is the most hated sector this year, with heavy net outflows from funds. That sets up a chance to buy low while others are selling.
To be clear, the long-term peak oil argument holds merits. The global energy transition will likely constrain fossil fuel demand over time. But that shift will take decades to play out.
In the meantime, diminished investment and stiff demand creates room for shares like offshore drillers to run higher. For investors willing to make a contrarian bet, the neglected energy space offers rare value.
ESG Sours Sentiment But Oil Remains Key
What about the ESG push away from fossil fuels? Shift is clearly underway. But hydrocarbons still supply 80% of global energy needs. Realistically, oil and gas will remain vital to powering the world for years to come.
Market sentiment has soured on all things oil. But investors should remember that supply/demand, not narrative, ultimately drives commodity prices. Offshore drillers look primed to benefit from that dynamic.
While oil markets face uncertainty beyond the next decade, conditions now point to upside in left-behind niches like offshore drilling stocks. For investors who see value where others only see headwinds, forgotten energy corners may hold diamonds in the rough.
CALGARY, AB, Sept. 14, 2023 /CNW/ – Alvopetro Energy Ltd. (TSXV: ALV) (OTCQX: ALVOF) announces that our Board of Directors has declared a quarterly dividend of US$0.14 per common share, payable in cash on October 13, 2023, to shareholders of record at the close of business on September 29, 2023. This dividend is designated as an “eligible dividend” for Canadian income tax purposes.
Dividend payments to non-residents of Canada will be subject to withholding taxes at the Canadian statutory rate of 25%. Shareholders may be entitled to a reduced withholding tax rate under a tax treaty between their country of residence and Canada. For further information, see Alvopetro’s website at https://alvopetro.com/Dividends-Non-resident-Shareholders.
Alvopetro Energy Ltd.’svision is to become a leading independent upstream and midstream operator in Brazil. Our strategy is to unlock the on-shore natural gas potential in the state of Bahia in Brazil, building off the development of our Caburé and Murucututu natural gas fields and our strategic midstream infrastructure.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.
All amounts contained in this new release are in United States dollars, unless otherwise stated and all tabular amounts are in thousands of United States dollars, except as otherwise noted.
Forward-Looking Statements and Cautionary Language.This news release contains “forward-looking information” within the meaning of applicable securities laws. The use of any of the words “will”, “expect”, “intend” and other similar words or expressions are intended to identify forward-looking information. Forward‐looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such results will be achieved. A number of factors could cause actual results to vary significantly from the expectations discussed in the forward-looking statements. These forward-looking statements reflect current assumptions and expectations regarding future events. Accordingly, when relying on forward-looking statements to make decisions, Alvopetro cautions readers not to place undue reliance on these statements, as forward-looking statements involve significant risks and uncertainties. More particularly and without limitation, this news release contains forward-looking information concerning the Company’s dividends, plans for dividends in the future, the timing and amount of such dividends and the expected tax treatment thereof. The forward‐looking statements are based on certain key expectations and assumptions made by Alvopetro, including but not limited to equipment availability, the timing of regulatory licenses and approvals, the success of future drilling, completion, testing, recompletion and development activities, the outlook for commodity markets and ability to access capital markets, the impact of global pandemics and other significant worldwide events, the performance of producing wells and reservoirs, well development and operating performance, foreign exchange rates, general economic and business conditions, weather and access to drilling locations, the availability and cost of labour and services, environmental regulation, including regulation relating to hydraulic fracturing and stimulation, the ability to monetize hydrocarbons discovered, expectations regarding Alvopetro’s working interest in properties and the outcome of any redeterminations, the regulatory and legal environment and other risks associated with oil and gas operations. The reader is cautioned that assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be incorrect. Actual results achieved during the forecast period will vary from the information provided herein as a result of numerous known and unknown risks and uncertainties and other factors. In addition, the declaration, timing, amount and payment of future dividends remain at the discretion of the Board of Directors. Although Alvopetro believes that the expectations and assumptions on which such forward-looking information is based are reasonable, undue reliance should not be placed on the forward-looking information because Alvopetro can give no assurance that it will prove to be correct. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on factors that could affect the operations or financial results of Alvopetro are included in our annual information form which may be accessed on Alvopetro’s SEDAR+ profile at www.sedar.com. The forward-looking information contained in this news release is made as of the date hereof and Alvopetro undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.
DevvStream Holdings, a leading developer of carbon offset projects and associated credit streams, has signed a definitive agreement to go public through a merger with special purpose acquisition company (SPAC) Focus Impact Acquisition Corp.
The combined company will be named DevvStream Corp. and is expected to list on the Nasdaq under ticker “DEVS”. The deal values DevvStream at an implied $212.8 million enterprise value.
Founded in 2021, Vancouver-based DevvStream partners with corporations and governments on sustainability initiatives. It brings projects generating carbon credits to market by co-investing or providing technical services in exchange for a share of long-term credit streams.
This capital-light model requires little upfront investment for participation in the fast-growing carbon markets. DevvStream estimates its current portfolio will generate $13 million in net revenue in 2024 and $55 million in 2025 as projects are expanded.
DevvStream participates in both regulated compliance markets and the rapidly expanding voluntary carbon credit market. The voluntary market hit $2 billion in 2022 but could reach up to $250 billion by 2030 according to estimates.
The merger will provide further expansion capital to DevvStream as it scales its portfolio of emissions-reducing projects. Focus Impact raised $172.5 million in its May 2021 IPO into a trust that will go to the combined company after redemptions.
According to DevvStream CEO Sunny Trinh, “Entering into a definitive agreement to merge with Focus Impact is a significant step towards accelerating the growth of our differentiated technology-based approach to carbon markets.”
He added that enhancing transparency and reliability in voluntary markets in particular can help drive participation and meaningful emissions reductions.
Focus Impact CEO Carl Stanton said the proposed merger “presents a significant opportunity to create substantial value for our shareholders.” He cited DevvStream’s systematic approach to carbon project development and blockchain-enabled tracking.
The transaction is expected to close in the first half of 2023, subject to shareholder approvals and other customary closing conditions. Upon completion, DevvStream will be listed on the Nasdaq under ticker “DEVS”.
With global momentum building around carbon markets and climate action, the merger comes at an opportune time. DevvStream is now poised to capitalize on surging demand as both corporations and governments seek to curb emissions.
Uranium prices have entered a new bull market in 2023, surging 20% so far this year. The nuclear fuel recently hit $60 per pound for the first time in over a decade. This milestone comes on the back of rosier demand forecasts from the World Nuclear Association (WNA) and vastly outperforms other metals markets.
The WNA recently released its biennial report at the World Nuclear Symposium in London. The report provides insights into future uranium demand, underscoring the role nuclear power will play in the global energy transition. It predicts world reactor requirements for uranium will reach almost 130,000 tonnes by 2040, up from 65,650 tonnes in 2023.
Even the WNA’s most conservative projection of 87,000 tonnes in 2040 represents robust demand growth. This is driven by an expected expansion of nuclear capacity from 391 gigawatts currently to 686 gigawatts by 2040 under its base case scenario. The bulk of new reactors will be located in China, which is aggressively decarbonizing by replacing coal plants with nuclear.
China has 23 reactors under construction, 23 more planned, and 168 proposed to add to its existing fleet of 53 reactors. The WNA report increased its overall uranium demand growth projections to 4.1% annually through 2040, up from 3.1% in its 2021 forecast.
This surging demand presents a huge opportunity for growth in the uranium mining sector. As the market transitions from oversupply to undersupply, uranium companies are poised to benefit tremendously. Their revenues, earnings, and valuations could rapidly improve as prices rise. Many junior miners could become acquisition targets for larger producers looking to add resources.
A key driver of demand is the accelerated adoption of small modular reactors (SMRs). These compact, modular designs allow nuclear plants to be constructed faster and cheaper. The WNA sees SMRs reaching 31 gigawatts of installed capacity by 2040, significantly boosting uranium demand. However, forecasts remain relatively conservative given SMRs’ potential applications in shipping, data centers, and other sectors.
According to BMO Capital Markets, SMRs could play a pivotal role in powering remote mines looking to replace diesel generators with cleaner energy solutions. With ample space and ideal climates, mines are adding solar and wind power. But in colder regions like Canada, SMRs may be the only viable zero-carbon option.
In much the same way platinum miners are testing hydrogen trucks onsite, uranium producers could pioneer SMR installations at operations. This would create new demand from uranium miners themselves. BMO estimates SMR capacity could reach 58 gigawatts by 2030, or around 10% of total nuclear generation.
While secondary supplies like reprocessed fuel and stockpiles have bridged the supply-demand gap for decades, the WNA report acknowledges these inventories are diminishing. With roughly 3.7 years of reactor requirements in current stockpiles, the WNA projects secondary supplies will fall from 11-14% of demand now to just 4-11% by 2050.
This decline underscores the need for new mine supply to meet growing reactor demand in the long run. With secondary sources drying up, uranium prices must rise to incentivize investment in expansion and new projects. The uranium bull run still appears to be in its early innings, as rosier demand forecasts confront constrained mine supply. Nuclear energy’s role in global decarbonization efforts continues to expand, brightening the outlook for uranium markets and uranium mining companies.
