8 June 2021
Analysts
Stuart Howe 613 9235 1856 Joseph House 613 9235 1624 Energy weekly
Authorisation Hamish Murray 613 9235 1813 Oil prices rally on robust demand outlook
Energy Producers and Developers Brent hits multi-year high on improved demand outlook Weekly Mkt Cap Ticker Price change (A$m) (%) Oil price benchmarks have risen to 2 year highs, with Brent clearing US$70/bbl last
WPL $24.01/sh 23,136 10% week for a weekly gain of 3% to now US$71/bbl. Saudi Arabia’s Energy Minister STO $7.70/sh 16,040 14% provided upbeat comments, stating that the demand outlook for oil “has shown clear OSH $4.13/sh 8,582 13% signs of improvement.” An International Energy Agency (IEA) report warned of a ORG $4.77/sh 8,401 20% supply gap in the second half of 2021 as stagnant supply falls short of rising global BPT $1.38/sh 3,148 9% demand, which it expects will support oil prices. The IEA anticipates global oil demand KAR $1.39/sh 767 13% STX $0.36/sh 716 15% to be 5.4 million barrels per day higher in 2021 compared with the previous year. For SXY $3.48/sh 639 10% context, the US Energy Information Administration puts global 2020 oil consumption at COE $0.27/sh 440 -2% around 92 million barrels per day. Reopening of economies following COVID related CVN $0.26/sh 399 6% lockdowns support the IEA’s demand outlook. GLL $0.66/sh 193 -13% BYE $0.12/sh 120 15% In the US, gasoline demand hit its highest level since the beginning of the pandemic FAR $0.01/sh 110 0% according to Descartes Labs, a geospatial intelligence company. The Memorial Day BLU $0.08/sh 100 1% (31 May 2021) long weekend traditionally marks the start of the US driving season and CTP $0.13/sh 94 8% higher fuel demand. Elsewhere, the CEO of Lukoil PJSC stated that demand for ATS $0.05/sh 59 7% “gasoline has already reached the level of 2019 both in Europe and Russia. Domestic COI $0.06/sh 44 -15% flights in the U.S. have increased to almost the pre-pandemic level.” Bell Potter Securities energy sector coverage Global media see OPEC’s next meeting on 1 July 2021 as a likely opportunity to Target/ Ticker Rating Valuation* announce further unwinding of its curtailed supply position. OPEC+ is restoring two BLU* $0.16/sh Buy (Spec) million barrels per day of idled capacity in monthly instalments over May-July 2021. BPT $1.73/sh Buy Saudi Arabia, as OPEC+’s largest member, maintains a more conservative approach BYE $0.42/sh Buy to restoring capacity and would like to “see demand before you see supply,” while COE $0.45/sh Buy Russia has consistently advocated production increases. CEOs of Russian oil COI* $0.13/sh Buy (Spec) CTP $0.23/sh Buy companies voiced the need for ramping up supply from July 2021, as global oil FAR* $0.03/sh Buy (Spec) demand recovers. SXY $3.75/sh Buy Source: IRESS & BELL POTTER SECURITIES Separately, the media reported that Exxon Mobil’s minority activist investor, Engine * valuation for Speculative rated stocks No.1, has expanded its Board presence with a third Director voted in. Investors of the Speculative rated securities: - See risks on Page 25 company also approved a proposal requiring the company to disclose political and - May not be suitable for Retail clients. climate-lobbying activities, a level of disclosure which was strongly opposed by S&P/ASX Energy (index) incumbent directors. 140 120 100 Table 1 - Oil & gas prices & energy indices 80 Commodity/Index Last close price Weekly change (%) Monthly change (%) Yearly change (%) 60 Brent Crude - $US/bbl 71 3% 4% 78% 40 US Crude WTI - $US/bbl 70 5% 8% 82% 20 Asia Tapis Crude - $US/bbl 72 4% 4% 98% 0 Henry Hub Gas - US$/MMbtu 2.97 5% 2% 77% Jun 19 Dec 19 Jun 20 Dec 20 Jun 21 JKM LNG - US$/MMbtu 10.61 2% 17% 412%
XEJ S&P 300 Rebased ASX 200 Energy Index 8,536 10% 7% 6% S&P 500 Energy Index 416 7% 5% 18% MSCI World Energy Index 172 6% 4% 17%
SOURCE: BLOOMBERG - EUCRBRDT INDEX (BRENT), USCRWTIC COMDTY (WTI), APCRTAPI INDEX (TAPIS), NGUSHHUB INDEX (HENRY SOURCE: IRESS GAS), JKL1 COMDTY (JKM), AS51ENGY INDEX (ASX 200 ENERGY), S5ENRS INDEX (S&P 500 ENERGY) & MXWO0EN INDEX (MSCI WORLD ENERGY)
BELL POTTER SECURITIES LIMITED DISCLAIMER: THIS REPORT MUST BE READ WITH THE DISCLAIMER ON PAGE 26 THAT FORMS Page 1 ABN 25 006 390 772 PART OF IT. AFSL 243480
Energy weekly 8 June 2021
Commodity and index performance
Figure 1 - Energy commodity complex (index) Figure 2 - Crude oil: Brent, WTI & Tapis
Index US$/bbl 450 100
400 80 350 60 300 40 250
200 20
150 0 100 -20 50 -40 0 2016 2017 2018 2019 2020 2021 Jun-19 Dec-19 Jun-20 Dec-20 Jun-21 Brent crude Henry Hub gas Brent Crude US Crude WTI Asia Tapis Crude Newcastle thermal coal LNG Japan/Korea Market
SOURCE: BLOOMBERG - COASNE60 INDEX (THERMAL), JKL1 COMDTY (JKM), EUCRBRDT INDEX (BRENT) SOURCE: BLOOMBERG - EUCRBRDT INDEX (BRENT), USCRWTIC COMDTY (WTI) & APCRTAPI INDEX & NGUSHHUB INDEX (HENRY GAS) (TAPIS)
Figure 3 - Thermal coal (FOB Newcastle) Figure 4 - JKM (Japan Korea Marker) LNG futures price
US$/t US$/MMbtu 140 20 18 120 16 100 14
80 12 10 60 8 40 6 4 20 2 0 0 2016 2017 2018 2019 2020 2021 2016 2017 2018 2019 2020 2021
SOURCE: BLOOMBERG - COASNE60 INDEX SOURCE: BLOOMBERG - JKL1 COMDTY
Figure 5 - Equity indices: ASX Energy, US Energy & MSCI World Figure 6 - ACCC netback, JKM & US gas
Index $ 26 160 24 22 140 20 18 120 16 100 14 12 80 10 8 60 6 4 40 2 0 20 2016 2017 2018 2019 2020 2021 2022 2023 Jun-19 Dec-19 Jun-20 Dec-20 Jun-21 ASX 200 Energy Index S&P 500 Energy Index Henry Hub - US$/MMbtu Henry Hub - A$/GJ ACCC net back price - A$/GJ LNG Japan/Korea Marker - A$/GJ MSCI World Index
Forward net back price - A$/GJ
SOURCE: BLOOMBERG - AS51ENGY INDEX (ASX 200 ENERGY), S5ENRS INDEX (S&P 500 ENERGY) & SOURCE: ACCC, BLOOMBERG - JKL1 COMDTY (JKM) & NGUSHHUB INDEX (HENRY GAS) MXWO0EN INDEX (MSCI WORLD ENERGY)
Page 2
Energy weekly 8 June 2021
Table 2 - Price Performance - Oil & gas, indices and currency
Prices Price Performance T - 3 T - 6 Weekly Monthly Quarterly 6 month Yearly 2 Year 5 Year Commodity Units Last Close T- 1 Week T - 1 Month Months Months T - 1 Year T - 2 Years T- 5 Years change change change change change change change Oil Brent Crude US$/bbl 71 69 68 68 48 40 63 49 3% 4% 5% 47% 78% 12% 45% US Crude WTI US$/bbl 70 66 65 65 46 38 53 50 5% 8% 7% 53% 82% 32% 40% Asia Tapis Crude US$/bbl 72 70 70 71 48 36 67 51 4% 4% 2% 52% 98% 9% 42% Mars US US$/bbl 69 66 65 65 47 39 58 46 5% 7% 6% 49% 76% 20% 50% OPEC Crude Oil Basket US$/bbl 70 69 67 68 48 39 61 46 2% 4% 3% 47% 81% 15% 52% Gas Henry Hub Natural Gas US$/MMbtu 2.97 2.84 2.90 2.54 2.36 1.68 2.40 2.32 5% 2% 17% 26% 77% 24% 28% JKM LNG Price US$/MMbtu 10.61 10.40 9.06 6.00 7.70 2.07 4.48 4.77 2% 17% 77% 38% 412% 137% 122% Indices ASX 200 Energy Index 8,536 7,742 7,964 8,632 8,323 8,054 10,487 8,204 10% 7% -1% 3% 6% -19% 4% S&P 500 Energy Index 416 390 397 397 300 351 448 504 7% 5% 5% 39% 18% -7% -18% MSCI World Energy Index 172 163 165 165 135 148 194 199 6% 4% 5% 28% 17% -11% -14% ASX 200 Index 7,282 7,162 7,062 6,740 6,688 5,999 6,383 5,360 2% 3% 8% 9% 21% 14% 36% S&P 500 Index 4,230 4,204 4,202 3,821 3,702 3,232 2,843 2,109 1% 1% 11% 14% 31% 49% 101% MSCI World Index 2,997 2,976 2,952 2,723 2,642 2,288 2,104 1,686 1% 2% 10% 13% 31% 42% 78% Currency Spot USD/AUD 0.77 0.77 0.78 0.77 0.74 0.70 0.70 0.74 0% 0% 1% 5% 10% 11% 5%
SOURCE: BLOOMBERG
Page 3
Energy weekly 8 June 2021
Energy comps tables
Table 3 - Balance sheet structures
Market cap Cash Debt Net debt EV Company name (ticker) AUD$m AUD$m AUD$m AUD$m AUD$m Woodside Petroleum (WPL.AU) 23,136 4,653 8,023 3,370 26,505 Santos (STO.AU) 16,040 1,703 5,864 4,161 20,201 Origin Energy (ORG.AU) 8,401 474 4,757 4,283 12,684 Oil Search (OSH.AU) 8,582 698 3,766 3,068 11,649 Beach Energy (BPT.AU) 3,148 114 158 44 3,192 Senex Energy (SXY.AU) 639 58 103 45 684 Cooper Energy (COE.AU) 440 115 229 114 555
SOURCE: BLOOMBERG & BELL POTTER SECURITIES ESTIMATES
Table 4 - Balance sheet gearing
Equity Net debt Company name (ticker) ND/ND+E AUD$m AUD$m Woodside Petroleum (WPL.AU) 16,624 3,370 17% Santos (STO.AU) 9,331 4,161 31% Origin Energy (ORG.AU) 11,830 4,283 27% Oil Search (OSH.AU) 7,192 3,068 30% Beach Energy (BPT.AU) 2,923 44 1% Senex Energy (SXY.AU) 309 45 13% Cooper Energy (COE.AU) 331 114 26%
SOURCE: BLOOMBERG & BELL POTTER SECURITIES ESTIMATES
Table 5 - Net debt & interest coverage ratios
EBITDA Net debt Net debt/ Net interest EBITDA/Net
AUD$m (1) AUD$m EBITDA x AUD$m interest x Company name (ticker) 2021 2022 Dec-20 2021 2022 (2) 2021 2022 Woodside Petroleum (WPL.AU) 4,895 4,954 3,370 0.7x 0.7x 311 15.7x 15.9x Santos (STO.AU) 3,274 3,523 4,161 1.3x 1.2x 300 10.9x 11.8x Origin Energy (ORG.AU) 2,161 2,353 4,283 2.0x 1.8x 238 9.1x 9.9x Oil Search (OSH.AU) 1,291 1,514 3,068 2.4x 2.0x 216 6.0x 7.0x Beach Energy (BPT.AU) 996 1,117 44 0.0x 0.0x 8 124.5x 139.6x Senex Energy (SXY.AU) 79 113 45 0.6x 0.4x 17 4.7x 6.8x Cooper Energy (COE.AU) 85 139 114 1.3x 0.8x 13 6.4x 10.4x
SOURCE: BLOOMBERG EARNINGS ESTIMATES ADJUSTED BY BELL POTTER SECURITIES NOTES: (1) ADJUSTED FOR CALENDAR YEAR; (2) FY20 OR JUN 20 HY ANNUALISED
Table 6 - Profitability ratios
EBITDA margin % NPAT margin % Company name (ticker) 2021 2022 2021 2022 Woodside Petroleum (WPL.AU) 85% 85% 26% 28% Santos (STO.AU) 59% 62% 19% 20% Origin Energy (ORG.AU) 18% 20% 4% 5% Oil Search (OSH.AU) 70% 76% 21% 28% Beach Energy (BPT.AU) 65% 67% 24% 26% Senex Energy (SXY.AU) 55% 59% 22% 32% Cooper Energy (COE.AU) 48% 57% 3% 12%
SOURCE: BLOOMBERG & BELL POTTER SECURITIES ESTIMATES
NOTE: ADJUSTED FOR CALENDAR YEAR
Page 4
Energy weekly 8 June 2021
Domestic peer comparison
Table 7 - Peer comparison - EV/2P Reserves, EV/2P Reserves + 2C Contingent Resources, EV/Production
Production Multiple Company Name EV Reserve & Resource (Mmboe) Multiples (A$/boe) rate* (A$/boe) A$m 2P 2C 2P + 2C EV/2P EV/2P+2C mmboe/p.a. EV/prod. Woodside Petroleum Ltd (WPL) 26,563 1,041 5,925 6,966 25.5 3.8 92.50 287 Santos Limited (STO) 20,729 933 2,282 3,215 22.2 6.4 87.50 237 Oil Search Limited (OSH) 11,475 388 1,208 1,596 29.5 7.2 28.50 403 Beach Energy Limited (BPT) 3,134 352 180 532 8.9 5.9 25.45 123 Strike Energy Limited (STX) 681 0 183 183 na 3.7 0.00 na Karoon Energy Ltd (KAR) 594 36 101 137 16.3 4.3 3.20 186 Senex Energy Limited (SXY) 589 134 0 134 4.4 4.4 3.00 196 Cooper Energy Limited (COE) 414 50 35 85 8.3 4.9 2.80 148 Carnarvon Petroleum Limited (CVN) 286 0 116 116 na 2.5 0.00 na Galilee Energy Limited (GLL) 182 0 518 518 na 0.4 0.00 na Byron Energy Limited (BYE) 147 34 0 34 4.4 4.4 1.20 122 Central Petroleum Limited (CTP) 125 28 41 69 4.5 1.8 2.00 63 FAR Limited (FAR) 99 28 65 93 3.6 1.1 0.00 na Blue Energy Limited (BLU) 92 12 192 204 7.5 0.5 0.00 na Armour Energy Limited (AJQ) 79 25 12 37 3.2 2.1 0.44 181 Australis Oil & Gas Limited (ATS) 69 21 149 170 3.3 0.4 0.47 145 Comet Ridge Limited (COI) 42 30 96 126 1.4 0.3 0.00 na Vintage Energy Ltd (VEN) 29 0 3 3 na 8.8 0.00 na Fremont Petroleum Corporation Limited (FPL) 14 10 241 250 1.5 0.1 0.04 358
Mean 10.2 3.5 190.1 Trimmed mean (25% excluded) 9.3 3.3 180.6 Median 6.0 3.8 180.9
SOURCE: COMPANY DATA, IRESS AND BELL POTTER SECURITIES ESTIMATES * PRODUCTION GUIDANCE USED AS FORWARD PRODUCTION RATE, OTHERWISE CURRENT ANNUALISED PRODUCTION RATE
Page 5
Energy weekly 8 June 2021
Proposed Australian energy projects
Proposed Australian LNG import facilities
Table 8 - Proposed LNG import facilities
Project Proponent Location Project status Estimated capital cost Import capacity First gas
Australia Industrial Port Kembla, New Construction to begin in The Port Kembla Gas Terminal Energy (Andrew Forrest A$250m 115PJpa (19.8MMboe) By late 2022 South Wales Q1 CY21 backed) Energy Projects & Port of Newcastle, New Environmental Impact Newcastle GasDock A$589m 110PJpa (18.9MMboe) By 2022-23 Infrastructure Korea South Wales Statement preparation Responding to Outer Harbor, South Development Outer Harbor LNG Project Venice Energy A$200m 160PJpa (25.8MMboe) By Q3 2022 Australia Application (2020) submissions Preparing Evironmental Geelong Energy Hub Viva Energy Australia Geelong, Victoria Not disclosed 140PJpa (24.1MMboe) By 2024 Effects Statement Vopak LNG Import Gas Royal Vopak North Avalon, Victoria Feasibility study ~A$250m Not disclosed Not disclosed Terminal underway
SOURCE: COMPANY WEBSITES AND VARIOUS PRESS REPORTS
Proposed Australian hydrogen projects
Table 9 - Proposed hydrogen projects
Project Proponent Location Project status Proposed commissioning
Origin Energy & Kawasaki Heavy Feasibility study completed / Green liquid hydrogen for export Townsville, Queensland Not disclosed Industries commencing FEED works Environmental Impact Statement Power to Gas Demonstration Jemena & Origin Energy Sydney, New South Wales Early 2021 under review Green ammonia plant Fortescue Metals Group Bell Bay, Tasmania Feasibility study underway Not disclosed Export scale green hydrogen project Origin Energy Bell Bay, Tasmania Feasibility study underway Mid-2020s Hydrogen and methanol plant ABEL Energy Bell Bay, Tasmania Feasibility study underway 2023 Renewable hydrogen project Grange Resources Port Latta, Tasmania Feasibility study underway Not disclosed
SOURCE: COMPANY WEBSITES AND VARIOUS PRESS REPORTS
Page 6
Energy weekly 8 June 2021
Australian battery storage projects
Proposed Australian battery storage projects
Table 10 - Proposed battery storage projects
Project & proponent Stage Expected commissioning Capital cost A$m Capacity MW/MWh
Broken Hill Battery Energy Storage System Project (Broken Hill, New South Wales) - AGL Energy Scoping report lodged 2022 Not disclosed 50 / 100 Eraring Battery (Eraring, New South Wales) - Origin Energy Concept report underway Late 2022 (Phase 1) Not disclosed 700 / 2800 Liddell Battery (Muswellbrook, New South Wales) - AGL Energy Construction April 2022 (Phase 1) Not disclosed 500 / not disclosed Great Western Battery (Wallerawang, New South Wales) - Neoen Concept report complete 2023 300-400 500 / 1000 Wallgrove Grid Battery (Wallgrove, New South Wales) - Transgrid / Tesla / Infigen Energy Detailed design work Q4 2021 61.9 50 / 75
Maoneng batteries (Across New South Wales, including Balranald) - Maoneng Group / AGL Energy Not disclosed 2023 Not disclosed 4 x 50 / 4 x 100 Bouldercombe Battery Project (Bouldercombe, Queensland) - Genex Power Development Q4 2021 50 50 / 75 The Wandoan Battery (Woleebee, Queensland) - Vena Construction commenced Energy Australia / AGL Energy in October 2020 2021 120 100 / 150 Goyder South Wind, Solar and Storage Project (Burra, Development application 3,000 (includes solar and South Australia) - Neoen submitted 2023 (Stage 1) wind farm infrastructure) 900 / 1800 Torrens Island Battery (Torrens Island, South Australia) - AGL Energy Not disclosed 2024 Not disclosed 250 / 62.5
Victorian Big Battery (Geelong, Victoria) - Neoen / Tesla Construction 2021-2022 summer Not disclosed 300 / 450 Development activities Loy Yang A Battery (Traralgon, Victoria) - AGL Energy underway 2024 Not disclosed 200 / 800
SOURCE: COMPANY WEBSITES AND VARIOUS PRESS REPORTS
Commissioned Australian battery storage projects
Table 11 - Commissioned battery storage projects
Project & proponent Stage Expected commissioning Capital cost A$m Capacity MW/MWh
Hornsdale Power Reserve (Hornsdale, South Australia) - 150 / 193.5 (100 / 129 + 50 / 64.5 Neoen / Tesla Commissioned Dec-17 161 (90 + 71 expansion) expansion)
Darlymple Battery Project (York Peninsula, South Australia) - ElectraNet / AGL Energy Commissioned Dec-18 30 30 / 8 Ballarat Battery Storage (Ballarat, Victoria) - Energy Australia / AusNet Services Commissioned Dec-18 42.66 30 / 30 Gannawarra Battery Storage (Gannawarra, Victoria) - Energy Australia / Edify Energy Commissioned Mar-19 41.19 25 / 50
SOURCE: COMPANY WEBSITES AND VARIOUS PRESS REPORTS
Page 7
Energy weekly 8 June 2021
News headlines
Disclaimer: Articles have been shortened for this report. Please follow the respective article reference for the full news report. News segment headers on this page are hyperlinked to their respective news segments found in the subsequent article pages.
Australian energy market news - US emerges as Australia’s new rival for LNG exports - The Australian (3/06/2021)
ASX-listed energy company news
- Woodside attacked over ‘worse than Adani’ LNG project - The Australian Financial Review (4/06/2021) - Former WA treasurer Ben Wyatt joins Woodside board - The Australian Financial Review (2/06/2021)
Global energy market news
- Oil and gas set to deliver profitable last gasp - The Australian Financial Review (4/04/2021) - Russia Oil CEOs See OPEC+ Hiking Output Again as Market Heats Up - Bloomberg (4/06/2021) - Pressure on for Paris alignment but oil investments continue - The Australian Financial Review (3/06/2021) - Oil Slips as Broader Sell-Off Compounds U.S. Fuel Supply Rise - Bloomberg (3/06/2021) - Exxon Activist Expands Boardroom Presence With Third Seat - Bloomberg (3/06/2021) - Oil Advances With Optimism Growing Around Summer Demand Pick-Up - Bloomberg (3/06/2021) - Oil price hits two-year high as OPEC sees more demand - The Australian (2/06/2021) - Saudis Dismiss Call to End Oil Spending as ‘La La Land’ Fantasy - Bloomberg (2/06/2021) - OPEC+ Gives Little Away as It Sees Oil Market Tightening - Bloomberg (2/06/2021) - Asia Refiners Face a Double Blow to Profits from Iran and Covid - Bloomberg (1/06/2021) - Net-zero future confronts oil-rich nations - The Australian Financial Review (31/05/2021) - Oil Gains as OPEC+ Forecasts Crude Stockpiles Will Drop Sharply - Bloomberg (31/05/2021) - OPEC+ Sees Tight Oil Market as Ministers Set for Supply Talks - Bloomberg (31/05/2021)
Page 8
Energy weekly 8 June 2021
Other energy news
- Taxpayers prop up Genex Power’s pumped hydro project - The Australian Financial Review (6/06/2021) - Banpu nabs NEW solar farms - The Australian Financial Review (6/06/2021) - Solar replaces wind as Australia’s biggest source of renewable energy - The Australian (4/06/2021) - Steering FMG’s hydrogen-powered green energy dream - The Australian (4/06/2021) - Uranium stocks are stirring as climate policies reset - The Australian (4/06/2021)
- The ‘mean greens’ taking on Exxon - The Australian Financial Review (3/06/2021) - China’s Solar Giants Say Industry Needs to Fight Cost Inflation - Bloomberg (2/06/2021) - Clean energy boost still misses climate goals: International Energy Agency - The Australian (2/06/2021) - BP Bolsters Clean Energy Push With U.S. Solar Deal - Bloomberg (1/06/2021)
Page 9
Energy weekly 8 June 2021
Australian energy market news
US emerges as Australia’s new rival for LNG exports
The Australian (3/06/2021)
The US has exported more LNG than Australia for the first time on record, marking a major new commodities rival and underscoring heightened competition among producers to win market share with Asian gas buyers. LNG output from the US jumped to 6.75 million tonnes in May spread across 95 cargoes, making it the second-largest global exporter behind Qatar and dumping Australia into third spot for the month, Bloomberg data shows. With access to cheap gas supplies, the US is starting to deliver on its vast resources. It was responsible for all of the world’s new LNG production in 2020 – delivering 20 million tonnes of new output – with the nation now on track to overtake Australia on an annual basis and compete with Qatar as the biggest natural gas exporter in the world. “Supported by abundant supplies of shale gas and growing liquefaction capacity, the US’s LNG exports experienced a meteoric rise,” the International Gas Union’s World LNG report said on Thursday. “Numerous additional projects are looking to ride the second wave of US gas exports in another round of development.” Six LNG export facilities have started operating on the Gulf coast with three more to start in the next few years, threatening Australia’s current pole position just ahead of Qatar. Australia’s $200 billion LNG spending spree in the past decade catapulted the country to the top as the world’s largest gas exporter. However, little appetite exists to bankroll new LNG projects. A lack of gas to fill plants such as the North West Shelf is one issue along with growing climate concerns and existing projects suffering cost blowouts and delays, trimming returns for investors. Australia’s trade tensions with China are also weighing on sentiment, potentially hobbling new deals. Instead, Australia will rely on the expansion of existing projects such as Woodside Petroleum’s Pluto plant and Santos’s Darwin LNG facility to keep it ¬competitive with the US and Qatar. “With the great LNG build-out concluded in 2019, Australia now looks to projects to support current infrastructure, namely backfill projects to maintain feed gas supply to existing export projects,” the IGU report said.
Page 10
Energy weekly 8 June 2021
ASX-listed energy company news
Woodside attacked over ‘worse than Adani’ LNG project
The Australian Financial Review (4/06/2021)
Conservation groups have issued an investor-beware warning over Woodside Petroleum as a call on whether to proceed with its $US11 billion ($14.2 billion) Scarborough LNG project goes down to the wire. The Conservation Council of Western Australia (CCWA) and the Australia Institute have renewed the attack on Woodside and partner BHP over Scarborough, with the release of research showing it would release more greenhouse gases than the Adani coal mine in Queensland. The research found Scarborough would release 1.6 billion tonnes of greenhouse gas over the life of the project, including customer, or so-called scope 3, emissions. Woodside, which added former WA treasurer Ben Wyatt to its board on Wednesday, is preparing to make a final investment decision on the project and the state government is weighing up final approvals. WA Environment Minister Amber- Jade Sanderson is due to release a decision on a Woodside greenhouse gas abatement plan for Scarborough, which is likely to include a raft of offsets and other measures. There is also a decision pending on the conditions around Woodside building part of a Scarborough pipeline on the sea floor in an area now known to contain long submerged Indigenous rock art. The CCWA claims government authorities have not properly assessed the impact of the development on the climate and Aboriginal heritage. It has launched action in the WA Supreme Court in a bid to overturn approvals already issued to Woodside by the WA Environmental Protection Authority.
Former WA treasurer Ben Wyatt joins Woodside board The Australian Financial Review (2/06/2021)
Former West Australian treasurer Ben Wyatt says he’s keen to help Woodside Petroleum navigate its way through the transition to a lower-carbon economy and Indigenous heritage issues after joining the board of the LNG producer. In a resources industry coup, Woodside has named Mr Wyatt as a director as it grapples with how best to lower carbon emissions and protect an important rock art site on the doorstep of its WA operations. Mr Wyatt was hot property after quitting politics at the WA election in March and was courted by big iron ore miners for executive positions. He was seen by many as a natural successor to WA Premier Mark McGowan, before leaving politics after a successful stint as the first Indigenous treasurer of any Australian parliament. It is understood Mr Wyatt may have made history by becoming the first Aboriginal director of an ASX top-100 company. “My Aboriginality is something I’m very proud of,” he said. “My late father was always keen to ensure my Aboriginality was part of my story but it was always about ‘you have to work hard to get where you want to be’.”
Page 11
Energy weekly 8 June 2021
Global energy market news
Oil and gas set to deliver profitable last gasp
The Australian Financial Review (4/04/2021)
The oil industry looks set for a hugely profitable but accelerated decline towards extinction, as mounting climate pressures constrain the supply of capital needed for investment, driving up prices and cash flows for producers. That’s the theory gaining traction in the market after a landmark few months that have ramped up the forces behind the transition to low-carbon energy beyond anyone’s expectations. Earlier this week, Saudi Arabian Energy Minister Prince Abdulaziz bin Salman al Saud mocked the International Energy Agency’s landmark report pointing to the need to halt spending on new oil and gas developments to reach climate goals as “a sequel of [the] La La Land movie”. But for publicly listed companies, the escalation of investor, regulatory and stakeholder pressures to cut investment in new oil and gas development can not be ignored – even as Brent crude oil prices climbed to a two-year high this week, back over $US70 a barrel. JPMorgan puts the estimated shortfall in global spending on oil development out to 2030 to meet demand about $US600 billion ($783 billion), even assuming the return of Iranian barrels and the further winding-down of voluntary production cutbacks by OPEC and its allies. MST Marquee energy analyst Mark Samter says the perversity for oil markets is that the forces of the energy transition will have a far more profound impact on the supply side than on demand for a number of years. Respected consultancy FACTS Global Energy estimates global oil demand will still increase by 9 million to 10 million barrels per day from 2019 levels by the time it peaks in the mid-2030s, then declining by just 7 million barrels a day by 2050. “While net zero 2050 is an admirable aspiration, oil is not going anywhere,” FGE’s Fereidun Fesharaki and Jeff Brown wrote in a note to clients. The speed of change will vary between products and countries, but “in aggregate, it is more like turning a big ship than turning a speedboat - it takes time,” they said. That means production looks set to fall behind demand, as increasing ESG pressures in both debt and equity markets add to the mounting caution on spending on oil investment that has been evident since last year’s COVID-19-induced price slump to withhold capital from the sector. “This, to my mind, means that oil is likely to have a wildly profitable, if far quicker, death than common perception has it,” Mr Samter said.
Russia Oil CEOs See OPEC+ Hiking Output Again as Market Heats Up Bloomberg (4/06/2021)
The bosses of two of Russia’s main oil companies expect OPEC+ to raise output further this year as the market heats up, perhaps as soon as its July meeting. The group, of which Russia is joint leader with Saudi Arabia, is currently restoring about 2 million barrels a day of idle production in monthly instalments that end in July. The alliance may need to keep ramping up in August or September to feed the demand recovery, said Gazprom Neft PJSCChief Executive Officer Alexander Dyukov. “It’s important not to allow the market to overheat,” Dyukov said at the St. Petersburg International Economic Forum on Thursday. “An oil price in a range of $65 to $70 a barrel isn’t stable in the long term.” The Organization of Petroleum Exporting Countries and its allies gave few hints about output policy beyond July when they met earlier this week. While Russian Deputy Prime Minister Alexander Novak has been a consistent advocate for production increases, his Saudi counterpart has preferred to keep a tighter rein on output. “We’ll have to see demand before you see supply,” Saudi Energy Minister Prince Abdulaziz bin Salman said in St. Petersburg. With Brent crude already above $70 a barrel, it’s necessary to raise output as
Page 12
Energy weekly 8 June 2021
consumption grows, said Vagit Alekperov, CEO of Lukoil PJSC, Russia’s second-largest oil producer. “Many countries are exiting from those restrictions introduced during the pandemic,” he said. Consumption of “gasoline has already reached the level of 2019 both in Europe and Russia. Domestic flights in the U.S. have increased to almost the pre- pandemic level. Thus additional fuel will be required.” Russia’s Novak said he sees global oil consumption recovering to pre-pandemic levels next year. Alekperov would like to see OPEC+ raise output by at least 500,000 barrels a day each quarter to satisfy the additional demand. “We shouldn’t allow a sharp hike in the price,” Alekperov said.
Pressure on for Paris alignment but oil investments continue
The Australian Financial Review (3/06/2021)
Last week’s “watershed” moment on climate for the oil and gas sector has underscored the importance for Australia’s producers to align their investments with the decarbonisation trend, says UBS energy analyst Tom Allen, who rates all three of the country’s biggest listed producers a “buy”. Mr Allen says Santos, Oil Search and Woodside Petroleum are all trading at a discount to underlying oil and gas prices and are all set to benefit from robust crude oil prices in the December half. Brent crude hit a two-year high of $US71.99 a barrel on Thursday as the market took confidence from the decision by OPEC and its allies to stick to their plan to gradually relax output curbs. But Santos is the bank’s preferred pick because of its project pipeline in development, led by the carbon capture and storage project at its Moomba gas operation, which he expects to reach a final investment decision in late September. “We want to see businesses make investment decisions on the next wave of growth projects that are aligned with the energy transition,” Mr Allen said on Thursday. “So there needs to be a clear path of decarbonisation attached to those projects. It can’t be just more of the same.” Still, the comments came as Karoon Energy on Thursday gave the green light for the development of a new 10,000 barrels a day oil project off Brazil, backed by lenders including Macquarie and with no climate strings attached. The $US160 million ($207 million) syndicated loan for the Patola project, which will cost $US175 million-$US195 million in total, also involves European banks Deutsche Bank and ING, and energy giant Shell, which markets crude oil for Karoon from the Bauna offshore project into which it will be connected. “The world will continue to need oil for decades into the future,” Karoon chief executive Julian Fowles told The Australian Financial Review. The lenders “were comfortable to fund this project on the understanding I think that we are progressing our own understanding of where we sit with respect to climate change and our carbon footprint and that's something that we will be addressing”, he said. Karoon, which has no emissions reduction targets, is due to update its climate reporting this year. “I’d anticipate that future funding rounds, if we do them, would certainly bring in a lot more attention in that regard,” Dr Fowles said. The development of the 13.2 million barrel Patola project sets up Karoon to reach its target for production of 30,000 barrels a day within 18-24 months, making the company the third or fourth biggest oil producer on the ASX. The project, due online in the March quarter of 2023, will reduce Karoon’s carbon intensity because the oil will be produced through existing infrastructure.
Page 13
Energy weekly 8 June 2021
Oil Slips as Broader Sell-Off Compounds U.S. Fuel Supply Rise
Bloomberg (3/06/2021)
Oil was virtually unchanged as a stronger dollar weighed broadly across commodities, while traders assessed rising fuel stockpiles in the U.S. Futures in New York lost two cents on Thursday, but still remain on track for a second straight weekly gain. U.S. government data showed domestic gasoline supplies rising by the most since early April, while distillate inventories climbed by nearly 4 million barrels. That’s offsetting back-to-back weekly declines in crude inventories. The pause follows a fierce run-up at the start of the week, which has seen both crude benchmarks set fresh multi-year highs. The dollar surged by the most in three weeks on Thursday, making commodities priced in the currency less attractive. A spate of strong U.S. economic data has ratcheted up wagers the Federal Reserve may need to move faster on tapering its stimulus operations. “To have a draw that big on the crude oil side is really constructive for overall crude markets,” said Brian Kessens, a portfolio manager at Tortoise, a firm that manages roughly $8 billion in energy- related assets. However, the refined products build was disappointing and may be due to an increase in refinery utilization ahead of the summer driving season, he said. Still, optimism is growing around the demand rebound from the U.S. to the U.K. and parts of Asia. As forecasts of a tighter market abound, Saudi Arabia hiked its official selling prices to Asia by more than expected. Even so, the nation’s energy minister reiterated that evidence of higher demand will have to come before supply increases. For demand, “there’s been a quick response to people getting vaccinated and lockdown restrictions coming off,” said Peter McNally, global head for industrials, materials and energy at Third Bridge. “There’s plenty of upside in gasoline consumption, and jet fuel demand is coming back. Even if international travel is slower to return, that’s not going to derail” the recovery. West Texas Intermediate for July delivery edged down 2 cents to settle at $68.81 a barrel. Brent for August settlement lost 4 cents to end the session at $71.31 a barrel.
Exxon Activist Expands Boardroom Presence With Third Seat Bloomberg (3/06/2021)
Exxon Mobil Corp. activist investor Engine No. 1 expanded its presence on the oil giant’s board to three seats, according to preliminary vote tallies. The initial counts show the newest nominee from Engine No. 1’s slate elected to Exxon’s 12-member board is private- equity investor Alexander Karsner, Exxon said Wednesday in a statement. The results, which still need to be certified, confirmed an earlier report by Bloomberg News. Karsner joins Gregory Goff, former chief executive officer of refiner Andeavor, and environmental scientist Kaisa Hietala, whose victories were announced last week shortly after Exxon’s May 26 annual general meeting. The Western world’s biggest oil company managed to place nine of its nominees onto the board. Exxon investors also for the first time approved proposals requiring the company to disclose political- and climate-lobbying activities, according to a filing, despite staunch opposition from incumbent directors. Chairman and Chief Executive Officer Darren Woods captured about 2.67 million votes, placing him in the bottom half of the field. Lead Director Ken Frazierfared only marginally better with a seventh-place showing. A third seat for Engine No. 1 caps a months-long proxy fight and provides a coda to last week’s dramatic meeting, which at one point was halted so that the company could have more time to count the votes. The shift in Exxon’s boardroom may present a crippling blow to the future leadership of Woods, according to Ceres, a coalition of environmentally active investors managing $37 trillion. Woods told shareholders earlier last month that voting for the dissident directors would “derail our progress and jeopardize your dividend.”
Page 14
Energy weekly 8 June 2021
Oil Advances With Optimism Growing Around Summer Demand Pick-Up Bloomberg (3/06/2021)
Oil extended gains as signs of a demand recovery from the U.S. to Europe stoke optimism among producers and analysts in the crude market. Futures in New York surged 1.6% on Wednesday. Global benchmark Brent crude closed above the psychological $70-a-barrel mark for two consecutive days for the first time in more than two years. Oil is in “strong demand right now,” with economies around the world opening up, Daniel Yergin, the oil historian and vice chairman at consultant IHS Markit Ltd., said in a Bloomberg Television interview. This week, Saudi Arabia’s energy minister also said the demand picture has shown signs of improvement and the International Energy Agency’s Fatih Birol said he sees a robust consumption recovery in the next six months. “There’s plenty of room for upside here,” said Bob Yawger, head of the futures division at Mizuho Securities. “Summer and the reopening of the economy is bullish for demand,” while “it looks much less likely we’ll have Iranian barrels any time soon than it did last week.” U.S. benchmark futures are at the highest since October 2018 and traders see prices grinding even higher with a revival of the 2015 Iran nuclear deal still likely months away and real-time data confirming a summer demand rebound underway in some countries. U.S. gasoline demand hit the highest since the pandemic began last week, according to Descartes Labs, while traffic on U.K. roads was higher than pre-pandemic levels for the first time. Still, a solid consumption recovery in parts of Asia remains elusive. Gasoline sales in India, the world’s biggest market for motorcycles and scooters, collapsed to the lowest level in a year as a devastating second wave of Covid-19 infections savaged consumption. Meanwhile, the American Petroleum Institute was said to report 5.36-million-barrel decline in U.S. oil inventories, which would be the second straight weekly drawdown if confirmed by U.S. government data on Thursday. The API report also showed gasoline stockpiles rising by over 2.5 million barrels and an increase in distillate supplies. West Texas Intermediate for July delivery traded at $68.76 a barrel as of 4:45 p.m. in New York after settling at $68.83 a barrel. Brent for August settlement climbed $1.10 to end the session at $71.35 a barrel, the highest since May 2019.
Oil price hits two-year high as OPEC sees more demand The Australian (2/06/2021)
The global oil-price benchmark closed above $US70 a barrel for the first time in two years on investors’ optimism that improving demand and a dwindling supply glut may mean the market can absorb any additional production from OPEC and its allies. Brent crude rose 93 cents, or 1.3 per cent, to $US70.25 a barrel, the highest close since May 2019. West Texas Intermediate futures gained $US1.40, or 2.1 per cent, to $US67.72 a barrel. The US gauge settled at its highest level since October 2018. Members of the Organisation of the Petroleum Exporting Countries and their allies, a group known as OPEC+, on Tuesday agreed to continue relaxing curbs on oil production, signalling their confidence in improving oil demand and a drop in the global supply glut. Prices began rallying after a technical committee within the cartel on Monday confirmed forecasts for a rebound of six million barrels a day in world oil demand this year, according to people familiar with OPEC and its allies. Vaccination programs are enabling governments across North America and Europe to reduce coronavirus restrictions and resume more normal economic activity. That will help pare global oil stocks—which at one point last year threatened to overwhelm the world’s ability to store them—to below their five-year average by the end of July for the 2015-19 period, the OPEC committee projected. In the US, oil and oil-product inventories have fallen more than expected in recent weeks, thanks in part to a pick-up in demand for transportation fuels. “The bull recipe for the oil market is still intact: reviving demand, muted US shale oil response together with controlled and restrictive supply from OPEC+, resulting
Page 15
Energy weekly 8 June 2021
in further declines in inventories and yet higher oil prices,” said Bjarne Schieldrop, chief commodities analyst at Swedish bank SEB.
Saudis Dismiss Call to End Oil Spending as ‘La La Land’ Fantasy Bloomberg (2/06/2021)
At first glance, a 200-page treatise on energy efficiency might not resemble a glitzy Hollywood musical fantasy. But it depends on the audience. The International Energy Agency stirred some passionate debate last month when it urged an end to new oil and gas investments to avert disastrous climate change. The adviser to major economies detailed the step and many others in its “road map” for reaching net-zero carbon emissions by 2050. A less reverential verdict arrived on Tuesday from the world’s biggest oil exporter, Saudi Arabia. The IEA’s energy blueprint, the kingdom said, is a sequel to “La La Land” -- the whimsical 2016 romantic comedy movie whose lead characters break out into song- and-dance numbers. “Why should I take it seriously?” Saudi Energy Minister Prince Abdulaziz bin Salman said when asked about the report at an OPEC press conference. IEA Executive Director Fatih Birol, speaking earlier on Bloomberg Television, gave a more down-to-earth description of his agency’s work. The 2050 outlook merely “translates” the policy aspirations of many governments to limit greenhouse gases into practical measures, he said. Climate activist Greta Thunberg said on Twitter that the dismissive response from the oil-exporting titan was actually a sign of alarm. “Wow. We’re clearly witnessing the beginning of the end of the fossil fuel era,” Thunberg said. “They’re starting to panic. Let’s speed up the process.”
OPEC+ Gives Little Away as It Sees Oil Market Tightening Bloomberg (2/06/2021)
OPEC+ left oil consumers in limbo, sticking to its plan of monthly production increases until July but refusing to give any hints about further moves until there’s clear evidence more crude is needed. “The demand picture has shown clear signs of improvement,” Saudi Energy Minister Prince Abdulaziz bin Salman said, in some of his most upbeat comments since the price crash last year. But pressed on whether more supply increases will be needed, he said: “I will believe it when I see it.” The wait-and-see approach indicates that OPEC+ is likely to err on the side of caution, potentially responding too late if the energy market tightens rapidly, as OPEC itself is forecasting. The risk for the broader economy is faster inflation just as it’s recovering from the pandemic. Hours before oil producers gathered virtually, the International Energy Agency warned of a looming gap between rising demand and stagnant supply in the second half of the year, putting upward pressure on prices. “Demand growth is outpacing supply gains even with the agreed month-by- month OPEC+ production increases taken into account,” said Ann-Louise Hittle, oil analyst at consultant Wood Mackenzie Ltd. The IEA, which advises Western countries on energy policy, forecast that global oil demand will jump roughly 5 million barrels a day -- the equivalent of the production of Kuwait and the United Arab Emirates -- between now and the end of the year. With Brent crude rising above $70 a barrel on Tuesday, OPEC+ is now at the center of one of the most pressing debates in global markets: the threat of inflation. From the U.S. Federal Reserve to the People’s Bank of China, central bankers are starting to sweat about rising prices, particularly for commodities such as steel and lumber that later filter into the cost of everyday goods. Prince Abdulaziz said that Saudi Arabia, Russia and other oil producers weren’t to blame, with oil having a “minuscule” impact. And yet, Western consumers are feeling the pinch. In America, average retail gasoline prices rose to a six-year high above $3 per gallon over the Memorial Day weekend, which traditionally marks the start of the summer driving season. “This inflation issue is not going away,” said
Page 16
Energy weekly 8 June 2021
Bill Farren-Price, a director at research firm Enverus and veteran observer of the cartel. “If OPEC+ are smart they will start to worry about the risk of demand being eroded as oil gets into the $70s.”
Asia Refiners Face a Double Blow to Profits from Iran and Covid Bloomberg (1/06/2021)
Asian refineries are grappling with what’s expected to be a brief period of weak profits as a demand-sapping Covid-19 comeback across the region coincides with a likely surge in oil- product exports from Iran. The virus resurgence in India and other nations apart from China is reducing consumption of products such as gasoline and jet fuel, squeezing the profit margins of refiners. The market is also bracing for the possibility of a boost to Iranian fuel oil supplies into Asia should a nuclear deal be revived. That’s led to complex refining margins in Singapore, a proxy for Asia, falling from $1.65 a barrel at the end of April to as low as 3 cents in mid-May. While it’s a setback for processors recovering from the pandemic, margins have rebounded slightly and are expected to resume an upward trajectory as soon as the third quarter with accelerating vaccination rates aiding demand. The average profit from converting crude into gasoline in Asia -- the so-called crack spread -- fell in May from April, snapping a three-month gain. Across the region, restrictions in place from Malaysia, Vietnam to Japan sapped demand for transportation fuel, with oil consultancy FGE seeing India’s gasoline consumption as the “biggest stumbling block to Asia’s demand recovery” with an estimated 20% fall in April through June versus the previous quarter. “Export is not a very attractive option,” said N. Vijayagopal, the finance director at Bharat Petroleum Corp., India’s second biggest fuel retailer. Refiners across the country are facing a double whammy caused by weaker regional markets and lower domestic consumption that’s prompting them to set aside earlier plans to maintain run rates and reduce operations instead. Complex refining margins in Singapore were at 80 cents a barrel on Friday and have averaged 71 cents in May. That compares with $2.41 in the same period in 2019, prior to the pandemic. The profit from converting crude to gasoline in Asia was at $7.89 on Monday and have averaged $8.47 in May.
Net-zero future confronts oil-rich nations The Australian Financial Review (31/05/2021)
For oil producing nations, a global shift towards cleaner fuels will pose questions about whether they can come out of the energy transition well. Ali Allawi, Iraq’s Finance Minister, found himself in a quandary last year as the spread of coronavirus cut demand for oil and prices tumbled. Allawi’s treasury, which receives more than 90 per cent of its revenues from crude sales and spends 45 per cent of its total budget on salaries and pensions, suddenly didn’t have enough money to pay millions of public employees and retirees. OPEC’s second-largest producer borrowed billions of dollars, mostly from local banks, to bridge the shortfall. But public anger boiled over. The fallout of the virus then battered businesses as their most important customers – public employees – cut their spending. Iraq’s economic fragility was laid bare: the hit to both public and private sectors caused the country’s gross domestic product to shrink 11 per cent in 2020, according to the IMF, and poverty rose amid worsening unemployment. Yet this scenario – a huge fall in revenues as demand for Iraq’s oil drops – is not just a pandemic phenomenon, it is the future for oil- producing countries. Last year’s oil crash coincided with an unprecedented focus by global governments, corporations and the public on committing to net-zero emissions targets by 2050. For producers, a global shift towards cleaner fuels will amplify the challenges of the past year, prompting questions about which resource-rich countries can come out of the energy transition in the best shape. The International Energy Agency has warned of the
Page 17
Energy weekly 8 June 2021
drastic impact that pursuing a net-zero emissions target by 2050 could have. The Organisation of Petroleum Exporting Countries’ share of world production would rise to more than half of the total, as oil and gas supplies become concentrated among a smaller number of countries, but annual per capita income from these commodities could fall by as much as 75 per cent by the 2030s. “We’re facing a potential declining market in terms of size,” says Allawi, “a potential decline in price [and] demands by our trading partners and allies, mainly in the industrial world, that we should abide by the Paris climate agreement terms.” If Iraq, which has 145 billion barrels of proven crude reserves, stays dependent on oil, Allawi says, “it could be catastrophic”. Sweeping state and economic reforms could avert this scenario, but the minister has struggled to push through change. For decades, oil price booms and busts have provided shocks to producer states, underscoring economic frailties and the urgent need to develop new business sectors to reduce fossil fuel dependence.
Oil Gains as OPEC+ Forecasts Crude Stockpiles Will Drop Sharply Bloomberg (31/05/2021)
Oil climbed for a second month as OPEC and its allies forecast that inventories will fall sharply this year if the group sticks to its plan. Futures rose 0.9% on Monday in New York, bringing their monthly gain to more than 5%, as the cartel said that a supply surplus will mostly be gone by the end of next month. Stockpiles are forecast to decline by at least 2 million barrels a day from September through December, the group said. “Demand is strong, it’s going to grow, and inventories aren’t going to go up,” Bart Melek, head of commodity strategy at TD Securities, said by phone. Oil has climbed more than 35% this year as the OPEC+ alliance, led by Saudi Arabia and Russia, cautiously restores supplies cut when the pandemic slashed demand for fuel. In a meeting of its ministers on Tuesday, the 23-nation group is expected to approve a production increase scheduled for July, completing the return of just over 2 million barrels a day of halted supply since April of last year. The U.S., China and parts of Europe are driving robust demand recovery from the Covid-19 pandemic, despite a virus comeback across Asia. American gasoline stockpiles have declined and consumption gained in the lead up to the Memorial Day weekend, which heralds the start of the summer driving season and peak fuel demand. Average retail prices for regular gasoline in the U.S. rose to $3.046 per gallon on Sunday, the highest since October 2014, according to auto club AAA. West Texas Intermediate for July delivery gained 59 cents to $66.91 a barrel on the New York Mercantile Exchange, with no settlement because of the Memorial Day holiday in the U.S. Brent for August fell 31 cents to $69.32 on the ICE Futures Europe exchange in London. It was also a holiday in the U.K.
OPEC+ Sees Tight Oil Market as Ministers Set for Supply Talks Bloomberg (31/05/2021)
A year after shuttering unprecedented volumes of crude, the OPEC+ alliance is expecting world oil markets to get acutely tight. The coalition led by Saudi Arabia and Russia believes that the glut created during the pandemic has nearly gone, and that oil stockpiles will diminish rapidly in the second half of the year as lockdowns ease and travel gathers pace. That leaves the Organization of Petroleum Exporting Countries and its partners with a decision they will start pondering as soon as Tuesday: whether to pour more oil into the market in the second half when the outlook is still so mired in uncertainty. Holding output steady would support the market against the twin risks of renewed virus outbreaks and a potential export flood from fellow OPEC member Iran. But with Brent futures near $70 a barrel, it could also jeopardize the global economy and feed into the inflationary pressures fixating Wall Street. “There are many moving parts when it comes to factors affecting the
Page 18
Energy weekly 8 June 2021
global oil market, such as the pace of change during the pandemic,” OPEC Secretary- General Mohammad Barkindo said after preliminary consultations on Monday. At their meeting on Tuesday, ministers are expected to press ahead with a gradual increase already pencilled in for July, completing the return of 2 million barrels since May. In theory, according to a historic deal struck in the depths of the oil crisis last year, the group has committed to hold at that level until early 2022. But a tight market may call for the agreement to be revised. Delegates said initial discussions would begin on Tuesday about the alliance’s moves after July. No decision will be made, they said. But any hints the ministers give will be closely scrutinized -- by inflation forecasters as much as oil traders.
Page 19
Energy weekly 8 June 2021
Other energy related news
Taxpayers prop up Genex Power’s pumped hydro project
The Australian Financial Review (6/06/2021)
Genex Power’s $777 million Kidston pumped hydro project in north Queensland has received more public funding than its total capital cost, casting doubt on the value of using taxpayers’ money for a technology that has been around for more than 100 years. The high-profile project, using an abandoned gold mine, west of Townsville, for a 250 megawatt storage and generation facility, has long been the darling of renewable energy advocates. The Kidston pumped hydro project has received a $610 million loan from the Northern Australian Infrastructure Facility as well as $47 million from the Australian Renewable Energy Agency. ARENA also agreed to convert an earlier $9 million loan into a full grant that doesn’t need to be paid back, which effectively increases the grant funding from ARENA to $56 million. There was also $54 million in debt finance from the Clean Energy Finance Corporation for the neighbouring 50 megawatt solar farm, which is attached to the pumped hydro project. The Queensland government – which is trying to reach a 50 per cent renewable energy target by 2030 – is also funding and building the $147 million, 186- kilometre transmission line linking the Kidston project to the energy grid. It has also received an off-take agreement of up to 30 years from EnergyAustralia. Grattan Institute energy program director Tony Wood said it was clear Genex’s Kidston project needed taxpayer money to get it across the line. “I think there is a lot of question marks about why this project received so much public funding,” Mr Wood told AFR Weekend. “I think everyone’s a bit desperate for a pumped hydro project, but they are unusual animals. The problem with pumped hydro is every project is dependent on very local situations. What you learn from this project you won’t necessarily be able to apply to another project.”
Banpu nabs NEW solar farms The Australian Financial Review (6/06/2021)
Thailand’s Banpu has agreed a deal to acquire New Energy Solar’s Australian solar farms. Street Talk can reveal Banpu and New Energy’s board signed a deal at the weekend which is understood to value the assets at more than $300 million. The deal is expected to be announced on Monday. The agreement will see Banpu take control of New Energy’s Manildra and Beryl solar plants in NSW’s central west, which are both 100 per cent owned and provide power under long term contracts to users including Sydney Metro and Kelloggs. The assets are expected to join Banpu Energy Australia, which was set up to invest in renewable energy assets. Banpu’s best known in Australia for acquiring coal miner Centennial Coal in 2010, paying about $2 billion for the company. The agreement comes after New Energy Solar had RBC Capital Markets run an auction for the assets, in an effort to close a large discount between the group’s share price and its net tangible asset backing. The auction saw early interest from a handful of potential acquirers, however Banpu emerged in the latter stages as the most interested. RBC Capital Markets’ bankers collected bids mid last month. It is understood Banpu was advised by Azure Capital/Natixis. The two solar farms were on New Energy Solar’s books for $342.3 million at June 30, including debt.
Page 20
Energy weekly 8 June 2021
Solar replaces wind as Australia’s biggest source of renewable energy The Australian (4/06/2021)
Solar power has outstripped wind generation in Australia’s electricity market to become the biggest source of renewables supply in 2020, while coal continued to lose market share even as it remains the dominant fuel source for the grid. The combination of rooftop solar on 2.7 million Australian homes and new large-scale solar projects saw the clean energy source account for 9 per cent of the nation’s electricity generation for the year to December 31, up from a 6.8 per cent in 2019. Wind power rose to 8.5 per cent in 2020 from 7.4 per cent a year earlier, while hydro was steady at 5.5 per cent, figures released by the Department of Industry, Science, Energy and Resources show. Renewables overall contributed nearly a quarter of system supplies at 24 per cent, up from 21 per cent in 2019. “Solar is now the largest source of renewable energy at 9 per cent of total generation, up from 7 per cent in 2019, with one in four Australian homes having solar – the highest uptake in the world,” Energy Minister Angus Taylor said. “The large uptake of solar helped contribute to the record 7 gigawatts of new renewable capacity installed last year, confirming Australia as a renewable energy world leader.” Fossil fuels continued to do the bulk of the heavy lifting with coal and gas generating 73 per cent of grid needs. While coal supplied 54 per cent of generation, it represented a continued decline from the 56 per cent share in 2019, reflecting the emergence of solar as a cheaper rival during daylight hours.
Steering FMG’s hydrogen-powered green energy dream
The Australian (4/06/2021)
When Western Australian-born metallurgist Julie Shuttleworth was working at Sino Gold’s operations in a remote area of central China in the late 1990s, she was faced with a unique challenge. When she arrived with a load of 15kg gold bars from the mine to sell to the bank, a two and a half hour drive from the mine, she found its weighing machines could only handle 5kg bars, the usual size from the much smaller mines in the area. Determined to get the cash she needed for the mine, which she had just commissioned, she dispatched a worker to get a saw and cut the gold bars up into three on a desk in the bank, with customers coming in and out. “It’s one of my favourite stories,” says Shuttleworth from her Perth office where she now holds the dual roles of deputy chief executive of Andrew Forrest’s Fortescue Metals Group (FMG) and chief executive of new subsidiary Fortescue Future Industries (FFI). “We were the first Western-owned gold mine in China, and we made bigger bars than anyone else.” “We went to put them on the scales, but our bars weighed 15kg each. I couldn’t go back the mine without the money because we needed it. “I sent the driver to the hardware store to get a hacksaw. “I chopped the gold bars into thirds, we swept up the gold filings and did the transaction. “People were coming in and out of the bank as if it were normal. They ignored us, although we were at a table in the bank cutting up gold bars.” These days Shuttleworth is facing much larger challenges as Andrew Forrest’s right hand executive in charge of his ambitious strategy to turn iron ore giant Fortescue into a green hydrogen powerhouse. While Forrest’s trips to almost 50 countries to sign hydrogen deals hit the headlines last year, an exercise which saw him medivacked to a hospital in Switzerland when he got Covid from an interpreter, Shuttleworth has been the executive quietly running the business in the background.
Page 21
Energy weekly 8 June 2021
Uranium stocks are stirring as climate policies reset The Australian (4/06/2021)
It’s unusual to see a stock climb 10 per cent in one day in the absence of a material announcement. On Thursday, shares in the Australian uranium developer Paladin Energy climbed 19 per cent and a couple of weeks ago they rose 10 per cent on a day. The stock is up threefold in the past six months, and has a market capitalisation tracking towards $2 billion. Yet it doesn’t produce anything! What’s going on with uranium – and more importantly – have you missed the boat? If big money is anything to go by, specialist funds are jumping in. Canadian-based commodity fund manager Sprott has created a fund that owns physical uranium on the outlook for uranium demand due to it being a clean energy source that isn’t intermittent (like wind and solar). Investors are salivating at the role nuclear will play in the shift away from fossil fuels to attain mid-century zero emission targets. For now, the spot price for uranium remains reasonably flat. Uranium stocks are taking off on the back of the possibility of an inflection point in 2024-25, where demand is likely to exceed supply. Why? Older reactors in the US that were previously scheduled for closure are likely to have life extensions. China is significantly increasing its nuclear capacity, projected to rise from 50GWe (gigawatts electric power) to 70GWe by the end of 2025. New nuclear technology is enabling countries and industries that have never before made use of it, due to much smaller plants. In common with Paladin, Boss Energy is getting prepared so that when this inflection point occurs it can fast-track the restart of production. Elsewhere, Bannerman Resources is starting from scratch, but has heavy hitters at management and board level that have been involved in other projects like Rio Tinto’s Rössing uranium mine in Namibia. Then there is Canadian giant Cameco, which is actually operating. It’s the world’s best known uranium company and has mothballed some of its production. The miner is known to be highly disciplined. In its latest presentation, Cameco talks about not reopening more production until prices rise further.
The ‘mean greens’ taking on Exxon The Australian Financial Review (3/06/2021)
Since the 1990s, the wisest oil-producing countries and companies have regularly reminded themselves of the oil patch adage that the Stone Age did not end because we ran out of stones; it ended because we invented bronze tools. When we did, stone tools became worthless – even though there were still plenty on the ground. And so it will be with oil: The petroleum age will end because we invent superior technology that coexists harmoniously with nature. When we do, there will be plenty of oil left in the ground. So be careful, wise producers tell themselves, don’t bet the vitality of your company, community or country on the assumption that oil will be like Maxwell House Coffee – “Good to the last drop” – and pumped from every last well. Remember Kodak? It underestimated the speed at which digital photography would make film obsolete. It didn’t go well for Kodak or Kodachrome. Alas, though, not every oil company got the memo. One that most glaringly did not is the one that in 2013 was the biggest public company in the world! It’s ExxonMobil. Today, it is no longer the biggest. As a result of its head-in-the-oil-sands-drill- baby-drill-we-are-still-not-at-peak-oil business model, Exxon lost more than $US20 billion ($26 billion) last year, suffered a credit rating downgrade, might have to borrow billions just to pay its dividend, has seen its share price over the last decade produce a minus-30 per cent return and was booted from the Dow Jones Industrial Average. But last week – finally – Exxon got the memo, in the form of a shareholder revolt in what was one of the most consequential weeks in the history of the oil and gas industry and shareholder capitalism. I’ve long argued that if environmentalists want to have an impact on the climate, they can’t be “nice greens”. They have to be “mean greens”. They have to be as mean and tough, as diligent and vigilant, as the industry they’re trying to change. Well, last week a little hedge
Page 22
Energy weekly 8 June 2021
fund called Engine No. 1 delivered an unprecedented master class in mean green using the tools of democratic capitalism. A plucky, purpose-driven investment fund, Engine No. 1 set out to force Exxon to improve its financial returns by getting much more serious about gradually transitioning – through innovation and acquisitions – into being an energy company, not just an oil and gas company. At Exxon’s annual meeting, Engine No. 1 offered up a slate of four new members for Exxon’s 12-member board. The four represent deep energy expertise and climate solutions. The slate committed to push the oil giant to a net zero emissions strategy by 2050, more investments in clean energy systems and more transparency about Exxon’s energy transition, with metrics and milestones, as well as disclosure of its lobbying payments and partners, suspected of undermining the science around climate change. And darn if half the slate – Gregory Goff and Kaisa Hietala – wasn’t immediately elected by wide margins, and at least one other member might be as well when ExxonMobil finishes counting the votes from its very, very bad day. Engine No. 1 was successful because it got three of the four biggest pension funds in America – fed up with Exxon’s relentless value destruction – to vote for its nominees. We’re talking about the California Public Employees’ Retirement System, the California State Teachers’ Retirement System and the New York State Common Retirement Fund. Also, three of the world’s biggest fund managers, Vanguard, State Street and Black Rock, which together own more than one-fifth of all Exxon stock, each voted for part of the dissident slate. And if you are keeping score at home – on your Stone-Age-ending-before-we-run-out-of-stones score card – on the same day that Engine No. 1 landed at least two energy/climate experts on the Exxon board, Barron’s reported: “A Dutch court ordered European energy giant Royal Dutch Shell to slash its carbon emissions by a net 45 per cent by 2030. And, at Chevron’s annual meeting, shareholders supported a nonbinding proposal to ask the company to cut carbon emissions generated by the use of its products.”
China’s Solar Giants Say Industry Needs to Fight Cost Inflation Bloomberg (2/06/2021)
The heads of some of China’s largest solar makers pressed the industry to reduce costs as raw material inflation boosts panel prices for the first time in eight years. Manufacturers like Trina Solar Co. and Longi Green Energy Technology Co. said rising prices are creating problems for their customers, solar’s end-users, and that companies in the supply chain need to improve cooperation to better balance supply and demand for materials. The executives spoke at the SNEC International Photovoltaic Power Generation and Smart Energy conference in Shanghai on Wednesday, in the midst of solar power’s worst bout of inflation in more than a decade. Solar module costs have risen 21% since the start of the year, potentially causing developers to delay projects. “The continuous surge in raw material costs this year has created a very big hassle for our end-customers,” said Gao Jifan, chairman of panel-maker Trina. “We need to break the trend as soon as possible.” The key culprit behind rising prices is polysilicon, the ultra-conductive material that’s the main component in photovoltaic panels. Prices have more than quadrupled in the past year as surging demand for new solar power has outpaced production capacity. The material’s meteoric price rise is causing concerns over supply security, Longi Chairman Zhong Baoshen said during a panel discussion at the conference. The fix, according to Zhong, is for polysilicon makers to invest in more capacity, while the companies that buy polysilicon need to slow their spending to improve the supply-demand balance. Prices may stay high through the rest of the year, but the supply shortage should ease in 2022 and 2023 as new factories come online, BloombergNEF analyst Yali Jiang said in a note Wednesday.
Page 23
Energy weekly 8 June 2021
Clean energy boost still misses climate goals: International Energy Agency The Australian (2/06/2021)
Global energy investment is tipped to rebound in 2021 from pandemic lows but not enough spending will be devoted to clean energy with the world falling well short of net zero emissions goals, the International Energy Agency has warned. Spending will increase nearly 10 per cent to $US1.9 trillion in 2021, reversing most of last year’s drop after Covid- 19 decimated demand, but investment in renewables still needs to be fast-tracked to cut pollution levels. The oil and gas industry will devote 4 per cent of their capital budgets to green investments in 2021, the IEA estimates, up from 1 per cent last year but still not enough to beat climate goals. “The rebound in energy investment is a welcome sign, and I’m encouraged to see more of it flowing towards renewables,” IEA executive director Fatih Birol said. “But much greater resources have to be mobilised and directed to clean energy technologies to put the world on track to reach net-zero emissions by 2050. Based on our new Net Zero Roadmap, clean energy investment will need to triple by 2030.” The IEA caused shock in the industry two weeks ago after declaring no new coalmines, oil or gas fields should be opened up if the world is to reach net-zero emissions by 2050. The road map for the global energy sector to reach carbon neutrality by the middle of the century also says there should be no more coal-fired power stations and calls for an end to new petrol cars by 2035.
BP Bolsters Clean Energy Push With U.S. Solar Deal
Bloomberg (1/06/2021)
BP Plc made a big stride in reaching its low-carbon generation target with a brace of solar power deals unveiled Tuesday. The oil and gas giant agreed to buy 9 gigawatts of solar projects in the U.S. from 7X Energy, London-based BP said in a statement. It’s joint venture Lightsource BP is also entering the Greek market with a 640-megawatt solar development it won at auction in partnership with local company Kiefer TEK. “When you consider the 20-gigawatt target we’ve laid out until 2025, it’s a significant move forward,” Dev Sanyal, BP’s head of gas and low-carbon energy, said in an interview. BP’s solar expansion is part of a strategy to produce more power from the wind and sun and to extract fewer hydrocarbons as it seeks to slash its greenhouse-gas emissions by the middle of the century. It expects to have 20 gigawatts of low-carbon energy under final investment decision by 2025, reaching 50 gigawatts by the end of the decade. BP will pay $220 million for the U.S. projects and 1 gigawatt of “safe harbor” equipment eligible for tax credits, with the deal expected to complete in 30 days. The assets, which are not currently generating solar power, boost BP’s total pipeline of renewables projects to 23 gigawatts. The transaction “represents a major statement for the company’s accelerating energy- transition strategy, in our view, alongside a 40% decline in oil and gas volume by 2030,” according to Will Hares, a Bloomberg Intelligence analyst. BP expects to generate at least 8% to 10% returns from the projects, although “the market is definitely becoming more competitive, the market is also growing” Sanyal said. But as an integrated energy company, BP can still meet its return threshold thanks to its extensive customer base, it’s operating experience and trading capabilities, he said. The U.S. assets are BP’s first wholly-owned projects since the company re-entered the solar market in 2017, a company spokesman said. While the major’s venture Lightsource BP also announced its entry into the Greek solar market on Tuesday, BP is “not looking to place a flag on every mountain,” Sanyal says. The U.S. is an important, growing market for BP, but it will continue to look at other parts of the world for potential assets. The U.S. assets are whole owned by BP, but will be run by Lightsource BP, in which the major has a 50% stake.
Page 24
Energy weekly 8 June 2021
Energy sector risks
Risk to energy sector equities include, but are not limited to: - Commodity price and exchange rate fluctuations. The future earnings and valuations of exploration, development and operating energy assets and companies are subject to fluctuations in underlying commodity energy prices and foreign currency exchange rates. - Infrastructure access. Energy projects are reliant upon access to treatment and pipeline infrastructure. Access to infrastructure is often subject to contractual agreements, permits and capacity allocations. Agreements are typically long-term in nature. Infrastructure can be subject to outages as a result of weather events or the actions of third party providers. - Operating and capital cost fluctuations. Markets for exploration, development and costs of goods sold can fluctuate and cause significant differences between planned and actual operating and capital costs. Key operating costs are linked to energy and labour markets. Energy companies are also exposed to costs associated with future land rehabilitation. - Reserve and Resource risks. Future earnings forecasts and valuations rely on accuracy of Reserve estimation, the ability to extract the underlying Reserve and the potential for Reserve life extensions. - Sovereign risks. Energy companies’ assets are subject to the sovereign risk of the country of location and may be exposed to the sovereign risks of major offtake customers. - Regulatory changes. Changes to the regulation of infrastructure and taxation (among other things) can impact the earnings and valuations of energy companies. - Environmental risks. Energy companies are exposed to risks associated with environmental degradation as a result of their exploration and production processes. Fossil fuel producers may be partially exposed to the environmental risks of end markets including the electricity generation sector. - Operating and development risks. Energy companies’ assets are subject to risks associated with their operation and development. Development assets can be subject to approvals timelines or weather events, causing delays to commissioning and commercial production. - Occupational health and safety (OH&S) risks. Energy companies are exposed to OH&S risks. - Funding and capital management risks. Funding and capital management risks can include access to debt and equity finance, maintaining covenants on debt finance, managing dividend payments and managing debt repayments. - Merger/acquisition risks. Risks associated with value transferred during merger and acquisition activity. - Impact of pandemic infection such as Coronavirus disease (COVID-19): This may have an adverse impact on the macro economic factors such as energy demand and oil/gas pricing.
Page 25
Energy weekly 8 June 2021
Research Team Recommendation structure Staff Member Title/Sector Phone @bellpotter.com.au
Buy: Expect >15% total return on a TS Lim Joint Head of Research/Financials 612 8224 2810 tslim 12 month view. For stocks regarded Chris Savage Joint Head of Research/Industrials 612 8224 2835 csavage as ‘Speculative’ a return of >30% is Industrials expected. Steven Anastasiou Industrials 613 9235 1952 sanastasiou Hold: Expect total return between -5% James Filius Industrials 613 9235 1612 jfilius and 15% on a 12 month view Sam Haddad Industrials 612 8224 2819 shaddad Alex McLean Industrials 612 8224 2886 amclean Sell: Expect <-5% total return on a Hamish Murray Industrials 613 9235 1813 hmurray 12 month view Jonathan Snape Industrials 613 9235 1601 jsnape
Speculative Investments are either start-up Damien Williamson Industrials 613 9235 1958 dwilliamson Healthcare/Biotech enterprises with nil or only prospective operations or recently commenced John Hester Healthcare 612 8224 2871 jhester operations with only forecast cash flows, or Tanushree Jain Healthcare 612 8224 2849 tnjain companies that have commenced Elyse Shapiro Healthcare 613 9235 1877 eshapiro operations or have been in operation for Resources some time but have only forecast cash David Coates Resources 612 8224 2887 dcoates flows and/or a stressed balance sheet. Stuart Howe Resources 613 9235 1856 showe Brad Watson Resources 618 9326 7672 bwatson Such investments may carry an Joseph House Resources 613 9235 1624 jhouse exceptionally high level of capital risk and Associate volatility of returns. Sam Brandwood Associate Analyst 612 8224 2850 sbrandwood
Olivia Hagglund Associate Analyst 612 8224 2813 ohagglund Michael Ardrey Associate Analyst 613 9235 8782 mardrey Bell Potter Securities Limited Bell Potter Securities (HK) Limited Bell Potter Securities (US) LLC Bell Potter Securities (UK) Limited ABN 25 006 390 772 Room 1701, 17/F Floor 39 16 Berkeley Street Level 29, 101 Collins Street Posperity Tower, 39 Queens Road 444 Madison Avenue, New York London, England Melbourne, Victoria, 3000 Central, Hong Kong, 0000 NY 10022, U.S.A W1J 8DZ, United Kingdom Telephone +61 3 9256 8700 Telephone +852 3750 8400 Telephone +1 917 819 1410 Telephone +44 7734 2929 www.bellpotter.com.au
The following may affect your legal rights. IMPORTANT DISCLAIMER This document is a private communication to clients and is not intended for public circulation or for the use of any third party, without the prior approval of Bell Potter Securities Limited. In the USA and the UK this research is only for institutional investors. It is not for release, publication or distribution in whole or in part to any persons in the two specified countries. In Hong Kong, this research is being distributed by Bell Potter Securities (HK) Limited which is licensed and regulated by the Securities and Futures Commission, Hong Kong. In the United States, this research is issued and distributed by Bell Potter Securities (US) LLC which is a registered broker-dealer and member of FINRA. Any person receiving this report from Bell Potter Securities (US) LLC and wishing to transact in any security described herein should do so with Bell Potter Securities (US) LLC. This is general investment advice only and does not constitute personal advice to any person. Because this document has been prepared without consideration of any specific client’s financial situation, particular needs and investment objectives (‘relevant personal circumstances’), a Bell Potter Securities Limited investment adviser (or the financial services licensee, or the representative of such licensee, who has provided you with this report by arrangement with Bell Potter Securities Limited) should be made aware of your relevant personal circumstances and consulted before any investment decision is made on the basis of this document. While this document is based on information from sources which are considered reliable, Bell Potter Securities Limited has not verified independently the information contained in the document and Bell Potter Securities Limited and its directors, employees and consultants do not represent, warrant or guarantee, expressly or impliedly, that the information contained in this document is complete or accurate. Nor does Bell Potter Securities Limited accept any responsibility for updating any advice, views opinions, or recommendations contained in this document or for correcting any error or omission which may become apparent after the document has been issued. Except insofar as liability under any statute cannot be excluded. Bell Potter Securities Limited and its directors, employees and consultants do not accept any liability (whether arising in contract, in tort or negligence or otherwise) for any error or omission in this document or for any resulting loss or damage (whether direct, indirect, consequential or otherwise) suffered by the recipient of this document or any other person. RESEARCH POLICIES For Bell Potter’s Research Coverage Decision Making Process and Research Independence Policy, please refer to our company website: https://www.bellpotter.com.au/topnavigation/private-clients/stockbroking/research DISCLOSURE OF INTEREST Bell Potter Securities Limited, its employees, consultants and its associates within the meaning of Chapter 7 of the Corporations Law may receive commissions, underwriting and management fees from transactions involving securities referred to in this document (which its representatives may directly share) and may from time to time hold interests in the securities referred to in this document. Disclosure: Bell Potter Securities acted as Lead Manager for Byron Energy Limited (BYE) for the $13.8m placement in May 2020 and received fees for those services. Analyst, Joseph House, has a long position in BPT and COI. ANALYST CERTIFICATION Each research analyst primarily responsible for the content of this research report, in whole or in part, certifies that with respect to each security or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about those securities or issuers and were prepared in an independent manner, and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by that research analyst in the research report.
Page 26