Exploration and Production Review and Outlook - Noble Capital Markets Energy Sector Review - Q4 2021
Energy: Fourth Quarter 2021 Review and Outlook
Noble Capital Markets Energy Sector Newsletter
Source: Capital IQ as of 12/31/2021
Energy Fundamental Data
Source: Energy Information Administration as of 12/31/2021
ENERGY INDUSTRY OUTLOOK
Exploration and Production: 2021-4Q Review and Outlook
Energy Stocks Performance
Energy stocks, as measured by the XLE Energy Index, began the quarter on a high note outperforming the overall market. As we entered the second half of the quarter, however, energy stocks leveled off while the overall market continued to rise. For the quarter ended December 31, 2021, the XLE rose almost 6% while the S&P 500 Index rose some 10%.
Oil Prices
As is usually the case, the XLE tracked the movement in oil prices. WTI oil prices have been on a tear this year including a sharp increase in October reaching a peak price of $84.65/bbl on October 21. Prices cooled off a bit since then, but remain above $75/bbl., which is near a five-year high (excluding the October run up). Brent oil prices continue to track a few dollars above WTI prices and ended the quarter at $78/bbl. Futures prices are flat holding in the mid seventies for several months implying that the market believes supply and demand have reached a point of equilibrium. More surprisingly, domestic production has also been slow to respond to higher prices. Active rigs have doubled since bottoming out in the spring of 2020 but remain at levels only half that of 2018, the last time oil prices were at this level.
Natural Gas Prices
Natural gas prices have also been exceptionally strong early in the quarter climbing above $6/mcf. entering the heating season. Mild weather in November and December have tempered the sharp rise but prices remain above $3.50/mcf, a very profitable level for natural gas producers. Storage levels, which were running high most of 2020, have returned to historical levels. Drilling activity remains steady. As is the case with oil, we believe the lack of a supply response could mean that natural gas prices remain at elevated levels for several quarters.
Outlook
Energy industry fundamentals remain strong. Energy prices are high and show no sign of decreasing. Past concerns of industry-wide reductions in lifting costs or a fundamental shift away from carbon-based fuels have gone to the wayside due to a lack of supply response to higher prices. Managements seem cautious due to concerns that demand could collapse with another COVID outburst or perhaps that OPEC would punish any expansion by flooding the market. The drilling that is being done is very profitable and that should lead to higher company profits and improved company financials. We believe small energy companies that can expand without drawing attention may be at an advantage.
Source: Michael Heim 01/04/2022; Energy Information Agency (EIA)
Source: Capital IQ as of 12/31/2021
Oil & Gas - Comparable Tables
Source: Capital IQ as of 12/31/2021
Oil & Gas - LTM Equity Performance
Source: Capital IQ as of 12/31/2021
Oil & Gas - 2021-4Q Global M&A Activity
Source: Capital IQ as of 12/31/2021
Power Generation - Comparable Tables
Source: Capital IQ as of 12/31/2021
Power Generation - LTM Equity Performance
Source: Capital IQ as of 12/31/2021
Power Generation - 2021-4Q Global M&A Activity
Source: Capital IQ as of 12/31/2021
Energy Services - Comparable Tables
Source: Capital IQ as of 12/31/2021
Energy Services - LTM Equity Performance
Source: Capital IQ as of 12/31/2021
Energy Services - 2021-4Q M&A Activity
Source: Capital IQ as of 12/31/2021
Mineral Energy - Comparable Tables
Source: Capital IQ as of 12/31/2021
Mineral Energy - LTM Equity Performance
Source: Capital IQ as of 12/31/2021
Mineral Energy - 2021 Global M&A Activity
Source: Capital IQ as of 12/31/2021
LTM Energy - Energy Industry M&A Summary
Source: Capital IQ as of 12/31/2021
NOBLE QUARTERLY HIGHLIGHTS
Standard Uranium Ltd. (TSXV:STND)
Industry: Energy – Mineral Energy
Standard Uranium is a mineral resource exploration company based in Vancouver, British Columbia. Since its establishment, Standard Uranium has focused on the identification and development of prospective exploration stage uranium projects in the Athabasca Basin in Saskatchewan, Canada. Standard Uranium’s Davidson River Project, in the southwest part of the Athabasca Basin, Saskatchewan, is comprised of 21 mineral claims over 25,886 hectares. The Davidson River Project is highly prospective for basement hosted uranium deposits yet remains relatively untested by drilling despite its location along trend from recent high-grade uranium discoveries.
4th Quarter News Highlights:
November 9, 2021: The Company announced the completion of the Phase II summer 2021 diamond drilling program at the Company’s flagship 25,886-hectare Davidson River Project, located in the Southwest Athabasca Uranium District of Saskatchewan, approximately 25 km to 30 km, respectively, to the west of Fission Uranium’s Triple R and NexGen’s Arrow deposits.
Laramide Resources Ltd. (TSX:LAM)
Industry:Mineral Energy; Exploration and production
Laramide is a Canadian-based company with diversified uranium assets strategically positioned in the United States and Australia that have been chosen for their low-cost production potential. Laramide’s Churchrock and Crownpoint properties form a leading In-Situ Recovery (ISR) division that benefits from significant mineral resources and near-term development potential. Additional U.S. assets include La Jara Mesa in Grants, New Mexico, and La Sal in the Lisbon Valley district of Utah. The Company’s Australian advanced stage Westmoreland is one of the largest uranium projects currently held by a junior mining company.
4th Quarter News Highlights:
November 15, 2021: Laramide Resources announced the commencement of an exploration program at Murphy Uranium Project in Northern Territory, Australia. The Company launched a helicopter supported reconnaissance stream and soil sampling program designed to test for uranium, gold and a suite of other precious and base metals, hosted within favorable geological units on ELs 9319 and 9414 in the Northern Territory.
Industry: Energy – Oil & Gas; Exploration and production
Journey is a Canadian exploration and production company focused on conventional, oil-weighted operations in western Canada. Journey's strategy is to grow its production base by drilling on its existing core lands, implementing water flood projects, executing on accretive acquisitions. Journey seeks to optimize its legacy oil pools on existing lands through the application of best practices in horizontal drilling and, where feasible, with water floods.
4th Quarter News Highlights:
November 9, 2021: The company announced that the Duvernay drilling program has advanced to the point where Journey has significant production history for the three wells drilled by its joint venture partner, Kiwetinohk Resources Corp. ("KRC"). These wells rank in the top tier of all wells drilled to date in the East Shale Duvernay basin. The success to date in this play highlights the significant development potential of the Duvernay land block. The joint venture currently controls approximately 116 gross sections where Journey has an average working interest of 37.5% (43.5 net sections).
Source: Company Press Releases
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Noble Capital Markets Energy Newsletter Q4 2021
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