Politics, Geopolitics, & Conflict
For several weeks, we have heard that South Sudan is gearing up to restart oil exports through civil-war-torn Sudan proper, after pipelines were ruptured during fighting between the Sudanese army and paramilitary forces in a war that has been ongoing for some 18 months. This week, South Sudanese officials said oil would start flowing in a matter of days, with Reuters reporting that Sudanese engineers will be arriving in South Sudan this weekend to formalize a restart plan that could see up to 150,000 barrels of South Sudan’s oil hit the market via Sudan. Sudan is the only available export route for landlocked South Sudan’s oil.
Leaked documents dated October 16 allegedly from the US Geospatial-Intelligence Agency and National Security Agency appear to map out Israeli plans for an attack on Iran. The authenticity of two leaked documents has not been verified. The documents detail Israeli air force plans to strike Iran and covert UAV activity said to be in preparation for a strike on Iran.
Another leaked document reported by WSJ this week alleges that Russia has been using the Houthis for proxy warfare against the U.S., providing strategic satellite data used to strike vessels in the Red Sea. Again, the source of the documents is unverified and sourcing is attributed to one “a person familiar with the matter” and “two European defense officials”. The suggestion is that Russia is passing intelligence to the Houthis via Iran’s…
Politics, Geopolitics, & Conflict
For several weeks, we have heard that South Sudan is gearing up to restart oil exports through civil-war-torn Sudan proper, after pipelines were ruptured during fighting between the Sudanese army and paramilitary forces in a war that has been ongoing for some 18 months. This week, South Sudanese officials said oil would start flowing in a matter of days, with Reuters reporting that Sudanese engineers will be arriving in South Sudan this weekend to formalize a restart plan that could see up to 150,000 barrels of South Sudan’s oil hit the market via Sudan. Sudan is the only available export route for landlocked South Sudan’s oil.
Leaked documents dated October 16 allegedly from the US Geospatial-Intelligence Agency and National Security Agency appear to map out Israeli plans for an attack on Iran. The authenticity of two leaked documents has not been verified. The documents detail Israeli air force plans to strike Iran and covert UAV activity said to be in preparation for a strike on Iran.
Another leaked document reported by WSJ this week alleges that Russia has been using the Houthis for proxy warfare against the U.S., providing strategic satellite data used to strike vessels in the Red Sea. Again, the source of the documents is unverified and sourcing is attributed to one “a person familiar with the matter” and “two European defense officials”. The suggestion is that Russia is passing intelligence to the Houthis via Iran’s IRGC.
Discovery & Development
Namibia’s offshore oil drilling is ramping up with Galp Energia’s (GALP.LS) Mopane discovery, where Saipem’s Santorini drillship recently arrived. Four major drilling campaigns, including by TotalEnergies (TTE) and Chevron (CVX), are expected to launch before year-end, following significant finds in the region. Galp is preparing for four new wells in Namibia by Q4, while Rhino Resources begins its two-well campaign in November. Despite tighter budgets amid the global energy transition, Namibia’s promising finds are attracting increased exploration.
BW Energy (BWE) has brought another well online in the Dussafu license off Gabon, while preparing workover operations on three wells using Borr Drilling’s rig. The firm discovered significant oil at the Hibiscus field in May and started production on the DHIBM-7H well in early October, targeting 40,000 bopd by year-end. With eight new wells delivered, production is now nearing the target, and the final test well, Bourdon (DBM-1), is scheduled for early 2025. Panoro Energy (PEN) holds a 17.5% stake in the project, which saw record production in Q3 2024.
CNOOC has commenced production from its Xijiang 30-2 oilfield in the South China Sea ahead of schedule. This project includes 23 planned development wells and is expected to reach peak production of 26,000 boepd by 2027. CNOOC has been active in 2024, launching multiple oil and gas projects, including an oilfield in Bohai Bay and a natural gas project with over 1 trillion cubic meters of proved reserves.
Deals, Mergers & Acquisitions
Harbour Energy (HBR.L) is looking to sell stakes in several North Sea oilfields and is reviving plans for a U.S. listing as tax hikes loom under the Labour government. With a windfall tax increase to 78% starting Nov. 1 and removal of investment allowances, companies like Harbour and TotalEnergies (TTE) are scaling back UK activities. Harbour recently completed its $11 billion Wintershall Dea acquisition, doubling its output and diversifying outside the North Sea. Many producers are pausing investments due to the unstable fiscal environment in the UK.
Transocean Ltd. (RIG) is in talks to merge with rival Seadrill Ltd. (SDRL), as offshore oil exploration rises. Both companies have faced challenges in recent years, with Transocean down 35% and Seadrill down 26% this year. Offshore drilling is now booming due to steady oil prices and slower U.S. shale production growth. If the merger happens, it would follow Noble Corp.’s recent acquisitions of Diamond Offshore and Maersk Drilling, further consolidating the offshore drilling sector. The final decision on the merger has not yet been made.
Earnings Beat
Tesla’s Q3 earnings exceeded expectations with $0.72 per share and a net income of $2.51 billion, higher than analysts’ predictions of $0.59 per share. Revenue came in slightly below forecasts at $25.18 billion, but the company’s net income and sales both rose 8% year-over-year, marking a return to profit growth. Tesla also surprised the market by projecting a small increase in vehicle deliveries for 2024, countering previous forecasts of a slight decline. Following the earnings release, Tesla’s stock surged 12%, adding $81 billion to its market value.
Equinor (NYSE: EQNR) reported lower-than-expected Q3 earnings, with adjusted operating income at $6.89 billion, down 13% from last year and below the forecast of $7.01 billion. The decline was driven by lower oil prices and production volumes, though rising natural gas prices and output provided some support. Equinor’s total production averaged 1.984 million boepd, with a 2% increase in Norwegian output offset by international setbacks. While the renewables sector showed an 82% increase in power generation, delays at Dogger Bank A reduced growth projections, and the segment continues to post losses.
Valero Energy (NYSE: VLO) posted Q3 earnings per share of $1.14, a steep 86% drop from last year’s $7.49 but still above Wall Street’s expectation of $0.98. The refining giant’s operating income fell sharply to $565 million, down from $3.4 billion a year ago, due to slumping refining margins amid weak fuel demand and increased global supply. Refining throughput averaged 2.9 million bpd, with margins plunging to $9.09 per barrel from $19.47 in 2023. Despite the profit slump, Valero remains committed to maintaining a 40-50% annual shareholder payout ratio.
Vista Oil & Gas (VIST) reported Q3 earnings of $0.55 per share, falling significantly short of the Zacks Consensus Estimate of $1.36 and representing a 59.56% earnings surprise. Revenues, however, reached $462.38 million, surpassing expectations by 4.49% and showing a strong year-over-year increase from $289.69 million. This marks the second consecutive quarter of earnings misses, and the company’s stock, while up 61.5% year-to-date, faces uncertainty. Analysts are revising future earnings estimates downward.
SLB (NYSE: SLB), the world’s largest oilfield services provider, beat third-quarter earnings expectations with EPS of $0.89, slightly above the analyst consensus of $0.88. Revenue came in at $9.16 billion, up 10% year-over-year but flat quarter-on-quarter. North American revenue grew by 3%, driven by higher demand in the U.S. Gulf of Mexico and increased Canadian drilling, offsetting weaker U.S. shale drilling. Despite softened short-cycle activity and cautious international spending, SLB returned nearly $900 million to shareholders during Q3. CEO Olivier Le Peuch expects to surpass the company’s $3 billion shareholder return commitment for the year, emphasizing that long-term upstream investments will remain high.
NextEra Energy Inc. (NYSE: NEE) reported Q3 2024 GAAP net income of $1.852 billion, or $0.90 per share, an increase from $1.219 billion, or $0.60 per share, a year ago. Non-GAAP EPS of $1.03 exceeded Wall Street expectations by $0.06, while revenue of $7.57 billion grew by 5.6% year-over-year but fell short of estimates by $440 million. The company restored power to 95% of customers affected by Hurricanes Helene and Milton in Florida, and its subsidiary, Florida Power & Light, reported net income of $1.293 billion, driven by ongoing investments. NextEra reaffirmed its adjusted EPS guidance for 2024 at $3.23 to $3.43, with projections for future years also provided.
Baker Hughes (NASDAQ: BKR) reported stronger-than-expected Q3 profits, driven by robust international operations, with earnings before interest, tax, depreciation, and amortization (EBITDA) rising 23% year-on-year to $1.2 billion and operating profits increasing 30% to $930 million. Net earnings per share reached $0.67, surpassing analyst expectations of $0.61, on the back of solid order levels, particularly in Industrial & Energy Technology, and a rising EBITDA margin of 17.5%. The company experienced 34% growth in its oilfield services and equipment business in Europe and sub-Saharan Africa, while facing declines in the Middle East, Asia, and North America.
