Archive for Energy

Energy Company Boosts Thailand Oil Production, Offers ‘Low Risk Production Growth’

Source: Streetwise Reports   11/19/2020

The highlights of Pan Orient Energy’s third quarter are presented in a Mackie Research Capital Corp. report.

In a Nov. 13 research note, Mackie Research Capital Corp. analyst Bill Newman reported that Pan Orient Energy Corp.’s (POE:TSX.V) Q3/20 financial and operational results were in line with expectations and noted that the company offers “low risk production growth in Thailand.”

Newman summarized the Canadian energy company’s achievements and reviewed the numbers, from Q3/20.

Operationally, oil production from Pan Orient’s Thailand Joint Venture was up, noting that in September 2020, the company placed the L53-DD7 and L53-DD8 development wells and the L53-AA2 exploration well in production. September 2020 net production surged to an average of about 1,575 barrels of oil per day (1,575 boe/d) from an average of roughly 881 boe/d in August. Net production in October came in at an average of 1,417 boe/d.

Overall Q3/20 net production for Alberta-headquartered Pan Orient averaged 1,114 barrels of oil per day (boe/d), slightly higher than its Q2/20 average of 1,060 boe/d.

During the quarter, the oil and gas company’s total funds flow doubled, to $2.4 million from $1.2 million in Q2/20, driven by a higher realized oil price.

During Q3/20, the L53-DD9 appraisal well in Thailand was successfully drilled, hitting 29 meters of net oil pay in the four main producing sands, AA, BB, CC and DD. Testing of this well is scheduled to start in about 10 days, Newman noted. Two other wells were drilled during the quarter but failed to encounter oil.

As for Pan Orient’s balance sheet at Sept. 30, 2020, it showed $26.4 million in working capital and non-current deposits and no debt. The energy company also holds $3.5 million of working capital and long-term deposits for its 50.01% equity interest in the Thailand Joint Venture. This additional amount takes Pan Orient’s total net working capital to $29.9 million.

Looking forward, Pan Orient intends to “focus on low-risk development operations in Thailand” for the rest of the year, indicated Newman, and restart appraisal drilling there in 2/21.

Mackie has a Buy rating and a CA$1.35 per share target price on Pan Orient “based on the company’s strong financial position and expected production growth in Thailand,” Newman noted. Pan Orient’s current share price is about CA$0.60.

 

Disclosure:
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Pan Orient Energy. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Pan Orient Energy, a company mentioned in this article.

 

Disclosures from Mackie Research, Pan Orient Energy Corp., Update, November 13, 2020

RELEVANT DISCLOSURES APPLICABLE TO COMPANIES UNDER COVERAGE
1. The analyst holds shares in Pan Orient Energy Corp.

ANALYST CERTIFICATION
Each analyst of Mackie Research Capital Corporation whose name appears in this report hereby certifies that (i) the recommendations and opinions expressed in this research report accurately reflect the analyst’s personal views and (ii) no part of the research analyst’s compensation was or will be directly or indirectly related to the specific conclusions or recommendations expressed in this research report.

Mackie Research Capital Corporation, its directors, officers and other employees may, from time to time, have positions in the securities mentioned herein.

Oil Higher Despite Inventories Increase

By Orbex

Crude prices have been higher again this week with the market bolstered by the broad pickup in risk appetite.

Risk assets, including oil and other commodities, have been higher in response to further vaccine news.

Inventories Rise

Indeed, crude prices have been higher this week despite the latest report from the Energy Information Administration.

The EIA reported that in the week ending November 13th, US crude inventories rose by 0.8 million barrels. However, this was far less than the 1.7 million-barrel increase the market was looking for.

The result only takes inventory levels back up to 489.5 million barrels. At this level, inventories are just 6% above their five-year seasonal average.

Gasoline Stocks Rise, Distillate Stocks Fall

Gasoline inventories were also higher over the week, rising by 2.6 million barrels. This takes the total stockpile amount to 4% above their five-year seasonal average.

Meanwhile, distillate stockpiles were fell over the week by 5.2 million barrels. They are now just 11% above their five-year seasonal average.

Imports Lower

Elsewhere, the report noted that US crude oil imports averaged 5.3 million barrels per day over the last week. This marked a reduction of 245k barrels on the prior week.

Looking back over the last four weeks, crude oil imports have averaged 5.4 million barrels per day, around 12% less on the same four-week period last year.

Gasoline Production Drops

Refinery runs were rose by 395k barrels per day on the prior week to average 13.8 million barrels per day.

Refineries were back up to 77.4% of their total operating capacity whole gasoline production was lower, averaging 9.1 million barrels per day.

Demand Recovering

In terms of measuring demand, the total products supplied number averaged 19.4 million barrels per day over the last four weeks, down around 9.1% on the same four-week period a year prior.

Gasoline products supplied averaged 8.5 million barrels, down 9.5% on the same period a year prior.

Distillate products supplied were seen averaging 4.1 million barrels per day over the last four weeks, down 6.5% on the same period a year prior.

Crude Holding Above Key Resistance Level

Following the rally off the 33.17 level support at the start of the month, oil prices have now broken back above the 40.97 level.

While above here, the focus is on further upside with the 43.88 level the next upside zone to note. To the downside, any correction below the 40.97 level will turn the focus back to the 36.23 level support and the retest of the broken channel.

By Orbex

Crude Rally Capped By EIA Inventories Rise

By Orbex

Crude prices have been higher this week. This comes in response to the better risk environment which has developed around the COVID vaccine news this week.

Oil has been higher despite the latest report from the Energy Information Administration which showed an increase in US crude inventories.

Headline Inventories Rise

The EIA reported that in the week ending November 6th, US crude stores rose by 4.3 million barrels on the prior week.

The increase took the total position to 488.7 million contracts. At this level, US crude stores are around 6% higher than their five-year seasonal average.

Gasoline Inventories Fall

Despite the increase in headline crude oil inventories, gasoline stockpiles were lower over the week.

Stockpiles fell by 2.3 million barrels, taking the total position to around 3% above their five-year seasonal average.

Distillate stockpiles were also lower, falling by 5.4 million barrels over the week. They now sit around 15% above their five-year seasonal average.

Crude Imports Fall

Elsewhere, the report showed that US crude oil imports averaged 5.5 million barrels per day last week. This was an increase of 470k barrels on the previous week.

Looking back across the last four weeks, US crude imports averaged around 5.3 million barrels per day, marking a 12.6% decrease on the same period a year prior.

In terms of gauging demand, the total products supplied number averaged 19.1 million barrels per day over the last four weeks. This was down 10.7% on the same period a year prior.

Total gasoline products supplied over the period averaged 8.5 million barrels per day, down 10.3% on the same period a year prior.

Meanwhile, distillate products supplied averaged 3.9 million barrels per day, down by 8.9% on the same period a year prior.

Demand has been steadily recovering for oil over recent months despite concerns around rising COVID cases globally. And with the news this week of a vaccine, the outlook has improved drastically.

Pending successful rolling out of the jab, sentiment should continue to improve.

Crude Breaks Above 41.35

Crude oil prices broke back above the 41.35 level and the 50% retracement of the decline from 2020 highs this week. However, prices stalled just ahead of testing the 43.88 level.

While above 41.35, the focus remains on the continued upside and a break of the 43.88 level, putting the focus on a move up to the 49.30 level next.

By Orbex

Western Midstream Posts 99% YoY increase in Q3 Earnings, Announces $250 Million Buyback Program

Source: Streetwise Reports   11/10/2020

Shares of Western Midstream Partners traded 23% higher after the company reported Q3/20 financial results that included a nearly 100% growth in net income. The firm also provided FY/21 guidance and announced a $250 million buyback program.

Western Midstream Partners LP (WES:NYSE) yesterday announced third-quarter 2020 operating and financial results for the period ended September 30, 2020.

The company reported that in Q3/20 net income available to limited partners totaled $241.5 million, or $0.55 per common unit (diluted), compared to $121.2 million, or $0.27 per common unit (diluted) in Q3/19.

The firm indicated that in Q3/20 adjusted EBITDA was $518.4 million, Cash flows from operating activities totaled $392.9 million, and free cash flow amounted to $339.2 million. These results compared favorably with $410.2 million, $340.2 million, and $70.7 million reported, respectively, in Q3/19.

Western Midstream’s President, CEO and CFO Michael Ure commented, “As evidenced by our outstanding third-quarter and year-to-date financial and operational results, the WES team continues to surpass expectations as we adapt and respond to market challenges…Producer outperformance, the pursuit of operational efficiencies and sustainable cost savings, and continued commercial achievements contributed to the highest quarterly Adjusted EBITDA in WES’s history. As a result of the incredible outperformance achieved thus far and anticipated continued success, we expect full-year Adjusted EBITDA above the high-end of our originally issued guidance range of $1.875 billion to $1.975 billion and capital expenditures meaningfully below the low-end of our previously updated 2020 guidance range of $400 million to $450 million.”

“Notwithstanding the significant challenges faced this year, we expect to realize approximately $175 million in sustainable annual operating cost and G&A savings compared to our originally issued guidance,” Ure added.

The company provided some preliminary full-year 2021 guidance. Western Midstream advised that for FY/21 it expects adjusted EBITDA will be between $1.825 billion and 1.925 billion. The firm estimates total capital expenditures of $275-375 million, which is $100 million less than the midpoint of the firm’s previously reported guidance.

Western Midstream stated that it estimates that FY/21 distributions will be at least $1.24 per unit and that it will be in a position to repay 2021 debt maturity by utilizing free cash flow.

The company additionally announced that “the board of directors of the Partnership’s general partner has authorized the Partnership to commence a buyback program of up to $250 million of the Partnership’s common units through December 31, 2021.”

Western Midstream Partners is a master limited partnership (MLP) that was established to acquire, own, develop and operate midstream assets. The firm stated that its assets are located in New Mexico, North-central Pennsylvania, Texas and the Rocky Mountains. The company’s business operations entail “the gathering, compressing, treating, processing, and transporting natural gas; gathering, stabilizing, and transporting condensate, natural-gas liquids, and crude oil; and gathering and disposing of produced water for its customers.” The firm is also engaged on its own account and serves as an agent for its customers in buying and selling of natural gas, natural-gas liquids and condensate.

Western Midstream started the day with a market cap of around $4.0 billion with approximately 444 million shares outstanding. WES shares opened almost 9% higher today at $9.90 (+$0.81, +8.92%) over yesterday’s $9.09 closing price. The stock has traded today between $9.85 and $11.18 per share and is currently trading at $11.22 (+$2.13, +23.43%).

Disclosure:
1) Stephen Hytha compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. He or members of his household own securities of the following companies mentioned in the article: None. He or members of his household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.

WTI Crude Oil Speculators pared their bullish bets for 1st time in 4 weeks

By CountingPips.comReceive our weekly COT Reports by Email

 

WTI Crude Oil Non-Commercial Speculator Positions:

Large energy speculators lowered their bullish net positions in the WTI Crude Oil futures markets this week, according to the latest Commitment of Traders (COT) data released by the Commodity Futures Trading Commission (CFTC) on Friday.

The non-commercial futures contracts of WTI Crude Oil futures, traded by large speculators and hedge funds, totaled a net position of 472,090 contracts in the data reported through Tuesday October 27th. This was a weekly drop of -18,258 net contracts from the previous week which had a total of 490,348 net contracts.

The week’s net position was the result of the gross bullish position (longs) sliding by -4,919 contracts (to a weekly total of 659,778 contracts) while the gross bearish position (shorts) advanced by 13,339 contracts for the week (to a total of 187,688 contracts).

The crude oil speculative positions fell on Tuesday following three straight weeks of rises. The pull-back in bullish positions keeps the current speculator sentiment in the tight range that has prevailed over the past six weeks from approximately +460,000 contracts to approximately +490,000 contracts. The overall standing has now been under +500,000 net contracts for nine straight weeks following a streak of twenty straight weeks above that threshold previously.

WTI Crude Oil Commercial Positions:

The commercial traders position, hedgers or traders engaged in buying and selling for business purposes, totaled a net position of -498,804 contracts on the week. This was a weekly increase of 12,313 contracts from the total net of -511,117 contracts reported the previous week.

 

WTI Crude Oil Futures:

Over the same weekly reporting time-frame, from Tuesday to Tuesday, the WTI Crude Oil Futures (Front Month) closed at approximately $39.57 which was a fall of $-1.89 from the previous close of $41.46, according to unofficial market data.

*COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) as well as the commercial traders (hedgers & traders for business purposes) were positioned in the futures markets.

The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators).

Find CFTC criteria here: (http://www.cftc.gov/MarketReports/CommitmentsofTraders/ExplanatoryNotes/index.htm).

Article By CountingPips.comReceive our weekly COT Reports by Email

First Solar Shares Heat Up on Q3 Earnings and Reinstated FY Guidance

Source: Streetwise Reports   10/28/2020

First Solar shares traded 11% higher and established a new 52-week high after the company reported Q3/20 financial results that included a nearly 70% increase in year-over-year revenue.

Solar energy

After U.S. markets closed for trading yesterday, photovoltaic solar energy manufacturer First Solar Inc. (FSLR:NYSE) announced financial results for the third quarter ended September 30, 2020.

The company’s CEO Mark Widmar commented, “We delivered strong financial results for the third quarter…The dedication we continue to witness from our associates enabled us to expand module segment gross margin, close the sales of our Ishikawa, Miyagi and Anamizu projects in Japan and increase earnings per share quarter-over-quarter. This result reflects the strengths of our competitively advantaged CdTe modules and vertically integrated manufacturing process.”

The company reported that net sales in Q3/20 were $928 million, compared to $642 million in Q2/20 and $547 million in Q3/19. The firm indicated that the 44% sequential increase of $285 million versus Q2/20 was mostly attributable to international project sales and an increase in third party volume of modules sold.

First Solar also advised that net income per share for Q3/20 was $1.45, compared to $0.35 in Q2/20 and $0.29 in Q3/19.

The firm noted that it had previously withdrawn its full-year 2020 guidance due to the many uncertainties surrounding the coronavirus pandemic, but the company now reports that “its financial results have not been materially impacted by COVID-19.” Therefore, First Solar advised that it is reinstating financial guidance for Q4/20 and FY/20 based upon results achieved through the first nine months of this fiscal year.

The company advised that it now estimates that Q4/20 net revenue will be in the range of $540-790 million and FY/20 net revenue will be between $2.6 and $2.9 billion. The firm also stated that it expects Q4/20 net income per share of $1.00-1.50 and FY/20 net income per share of $3.65-4.15.

First Solar is based in Tempe, Ariz., and is a global provider of photovoltaic (PV) solar energy products and solutions. The firm creates, manufactures and markets both PV solar modules and PV power systems. The company is focused on delivering integrated power plant solutions that offer economical alternatives to fossil-fuel generated electricity.

First Solar began the day with a market capitalization of around $8.7 billion with approximately 106.0 million shares outstanding. FSLR shares opened 12% higher today at $92.33 (+$9.94, +12.06%) over yesterday’s $82.39 closing price and reached a new 52-week high this morning of $97.93. The stock has traded today between $90.21 and $97.93 per share and is currently trading at $92.24 (+$9.85, +11.96%).

Disclosure:
1) Stephen Hytha compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. He or members of his household own securities of the following companies mentioned in the article: None. He or members of his household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.

Natural Gas Is on the Rise – And Huge Gains Could Be Lurking in This Dead Sector

Independent financial analyst Matt Badiali explains why he expects natural gas to rebound and discusses six potential investments.

Source: Matt Badiali for Streetwise Reports   10/28/2020

The oil price gets all the press. The price of a barrel collapsed during the Covid-19 lock down. Companies went bankrupt in droves. Now, the industry turned to mergers to survive.

Investors fled. The sentiment turned awful. No one cares about oil anymore. The future is electric cars…peak demand is right around the corner.

Right or wrong, the oil industry is deep in a bear market. And that brings opportunity.

For example, one unintended consequence to this collapse is a major decline in natural gas production. According to the Energy Information Administration (EIA) data, we haven’t seen this big a drop in natural gas production since 2008.

From February 2020 to May 2020, U.S. natural gas production fell 8%. That’s the largest three-month decline since 2008.

That’s important, because consumption isn’t falling.

Natural gas is important because it heats nearly half the homes in the U.S. The bulk of U.S. natural gas, about 60%, goes to electric power and homes. The rest goes to industry and commercial users.

If we look at July 2020 consumption data (the latest available) it’s up 4% from July 2019. In general, consumption in 2020 is down just 1% over the same period in 2019, even with the pandemic. That’s a huge contrast to oil demand. U.S. liquid fuel demand fell 23% in the first half of 2020.

And the EIA expects demand to continue to rise into 2021.

That’s driving a rise in natural gas prices, as you can see here:

Natural gas prices

The question is, how do you play it, as an investor?

After a little research, I came up with six potential investments. Natural gas make up at least 40% of their production mix. And they are all profitable over the past 12 months. But there’s a definite division in price to earnings:

Company % Natural Gas Market Cap Free Cash Flow EV to FCF*
Black Stone Minerals (BSM) 73% $1.3 billion $347 million 5.5 times
W&T Offshore (WTI) 46% $230 million $139 million 6.0 times
Dorchester Minerals (DMLP) 47% $361 million $57 million 6.2 times
Par Pacific Holdings (PARR) 83% $395 million $42 million 31 times
EQT Corp (EQT) 95% $4.0 billion $215 million 40 times
Cimarex Energy (XEC) 41% $2.7 billion $105 million 47 times
Data from Bloomberg; *Enterprise Value to Free Cash Flow as a proxy for Price to Earnings Ratio

I sorted the companies based on their enterprise value divided by trailing 12-month free cash flow. That gives us a realistic price to earnings snapshot. The key is that this measure includes debt. That’s important because most of the exploration and production companies carry debt.

For example, Par Pacific Holdings has a $395 million market cap, but holds $1.1 billion in debt. That’s why its enterprise value (EV) is 31 times its free cash flow (FCF). EQT carries $4.7 billion in debt and Cimarex carries $2.2 billion in debt. That’s why their ratios balloon so much higher.

In contrast, Blackstone Minerals has just $323 million in debt. W&T Offshore has $636 million and Dorchester has just $2.3 million.

That’s why those companies are so much cheaper by that price to earnings metric. And here’s the critical part…those companies usually trade at a much higher EV to FCF ratio.

For example, since 2016, Blackstone Minerals’ average EV to FCF ratio was 27. At 27 times free cash flow, its market cap should be over $9 billion right now. That’s 592% above its current price.

Since 2016, W&T Offshore traded for an average 28.5 times free cash flow. That means its market cap should be around $3.3 billion. That’s an incredible 1,335% above its current price.

And based on Dorchester’s average ratio of 11.7, its market cap should be around $664 million. That’s an easy 84% from today.

That’s the kind of set up I like best in natural resources. We have a hated or ignored sector. In this case, natural gas is the baby thrown out with the oily bathwater. And we have a group of companies that are still profitable.

In this case, they are trading well below their average, because of market sentiment.

Sentiment can change quickly. A cold winter, like we are expecting, will continue to drive the natural gas price higher. And the rising price could be the ticket to send these stocks soaring.

–Matt Badiali

Matt Badiali is a geologist and independent financial analyst. He spent fifteen years researching and writing about great investments inside the natural resources sectors. He can be reached at www.mattbadiali.net.

Streetwise Reports Disclosure:
1) Matt Badiali: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: None. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this article: None. I determined which companies would be included in this article based on my research and understanding of the sector.
2) The following companies mentioned in the article are sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.

4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.

China Sets Its Sights On Global EV Dominance

By OilPrice.com

– The world’s largest automotive market, China, is looking to become a dominant player in the rising global electric vehicle market. Chinese EV manufacturers are expected to start expanding overseas, while Beijing already controls a large part of the global EV supply chain, beginning with critical minerals processing.

The United States has started to realize that China could dominate the future of transportation—electric transportation—if it does not counter the current Chinese influence over critical parts of the EV supply chain, from battery metals sourcing and processing to battery manufacturing.

China is the world’s top EV market, and the government is looking to have new energy vehicle (NEV) sales at up to 25 percent of all sales by 2025, although it is not looking to ban sales of new gasoline-powered vehicles anytime soon.

Having supported EV manufacturers and sales over the past few years, Beijing now looks to expand its presence outside China.

“Over the next five years we anticipate Chinese players across the EV supply chain to aggressively enter the overseas market,” UBS said in a note last week, as carried by CNBC. “We believe China materials costs are lower than the overseas market. If this advantage can sustain, China could realize a cost advantage over ex-China players,” according to UBS analysts.

Chinese EV brands are set to challenge Tesla and the western automakers outside China, while Beijing’s dominance in the supply chain is of great concern for U.S. energy security policy experts, as well as to the White House.

U.S. President Donald Trump declared last month a national emergency to deal with the threat that America’s dependence on critical minerals, especially on China, poses to national security and the U.S. economy.

“Our dependence on one country, the People’s Republic of China (China), for multiple critical minerals is particularly concerning. The United States now imports 80 percent of its rare earth elements directly from China, with portions of the remainder indirectly sourced from China through other countries,” President Trump’s executive order said.

China controls a large part of the EV supply chain, analysts say. It is a common misconception that China holds most of the natural resources—in fact, 23 percent of global supply of all battery raw materials comes from China, according to Benchmark Mineral Intelligence. However, China dominates chemical production of battery-grade raw materials with a whopping 80 percent of total global production. China will host a total of 101 lithium-ion battery plants currently planned or under construction to 2029 out of all 136 plants planned globally by that date, Benchmark Mineral Intelligence said.

China controls 80 percent of the world’s raw material refining in the lithium-ion battery supply chain, 77 percent of the world’s cell capacity, and 60 percent of the world’s component manufacturing, BNEF said in a report last month.

“The next decade will be particularly interesting as Europe and the U.S. try to create their own battery champions to challenge Asian incumbents who are already building capacity in both places. While Europe is launching initiatives to capture more of the raw material value chain, the U.S. is slower to react on this,” said James Frith, BNEF’s head of energy storage.

China’s push to adopt EVs and support its electric car manufacturing and supply chain industries is not only the result of clean air policies.

“By committing to adopt EVs that reduce its dependence on oil, Beijing would make itself less vulnerable if tensions between the United States and China were to increase. In addition, EVs create opportunities for Chinese companies to benefit from a growing EV industry, and gain global recognition and credibility by developing sophisticated technology at a low cost,” U.S. advocacy group Securing America’s Future Energy (SAFE) said in a report in September.

The U.S. and its partners need to develop a supply chain of critical minerals less dependent on China to counter Beijing’s dominance, General James Conway and Peter Ackerman, members of SAFE’s Energy Security Leadership Council, wrote in an op-ed in the Financial Times last week.

“We risk a scenario in which we swap our dependence on a chaotic oil market dominated by Opec countries that do not share our strategic goals, for a reliance on China for our future transportation needs,” the authors wrote.

Link to original article: https://oilprice.com/Energy/Energy-General/China-Sets-Its-Sights-On-Global-EV-Dominance.html

By Tsvetana Paraskova for Oilprice.com

 

Is the LONG Wait Soon to Be Over for Azarga Uranium?

Source: Peter Epstein for Streetwise Reports   10/22/2020

Peter Epstein of Epstein Research wonders if investors’ patience with U.S.-focused Azarga Uranium will finally be rewarded.

Azarga Uranium Corp. (AZZ:TSX; AZZUF:OTCQB) has been battling to obtain the permits, licenses and approvals to construct a world-class in-situ recovery (ISR) uranium operation in South Dakota for over a decade. I’ve been both supportive and optimistic on uranium fundamentals and on Azarga for four years.

Local opposition has slowed the process down, but in December 2019, the company eliminated the last remaining contention on its U.S. Nuclear Regulatory Commission (NRC) license at the 100%-owned Dewey Burdock (DB) project. Now, the company remains focused on obtaining final U.S. Environmental Protection Agency (EPA) permits.

In August 2020, management arranged funding for the financial assurance bonds required by the EPA. This is a critical step in advance of the final EPA permits being issued. With the NRC license in place and EPA permits thought to be imminent, a number of institutional investors, as well as strategic and financial partners, could drive the valuation higher.

Today’s share price of CA$0.18 is 28% below its April 2020 high of CA$0.25. To be fair, the entire sector has sold off as the underlying uranium price declined from $34.25/lb to ~$30/lb, despite industry fundamentals that, arguably, have never been better.

Peers Energy Fuels Inc. (EFR:TSX; UUUU:NYSE.American), Ur-Energy Inc. (URG:NYSE.MKT; URE:TSX), Denison Mines Corp. (DML:TSX; DNN:NYSE.MKT), Fission Uranium Corp. (FCU:TSX; FCUUF:OTCQX; 2FU:FSE), Global Atomic Corp. (GLATF:OTCMKTS) and GoviEx Uranium (GXU: CSE) are down between 25%–40% from 52-week highs.

However, very few (if any) uranium juniors have as impactful a news release hanging over them as Azarga does. It seems reasonable to wonder if the share price could surpass its 52-week high upon finally reaching this long-awaited stage of being granted final EPA permits for DB.

Of course, we’ve seen this movie before, right? I’ve been expecting this development to unfold for a long time. Importantly though, I don’t believe that management has ever deceived me. CEO Blake Steele has always been open with me about the challenges and timing uncertainties.

The company has had advisors, consultants and lawyers working with it on DB virtually every step of the way. CEO Steele and his board have listened to the experts, and their efforts could pay off fairly soon.

Here I am again, suggesting that the long wait could soon be over. The market cap has languished in the CA$30 million (CA$30M) range, currently at CA$34M. If Azarga can show line of sight toward getting DB into production in the next three years, what might the company potentially be worth?

The after-tax, preliminary economic assessment (PEA)-derived, net present value (NPV)(8%) of Dewey is $147M = CA$195M. Azarga is trading at 17.5% of its NPV. That’s pretty cheap, again assuming that DB could be up and running within three years.

Three U.S.-focused peers, UR-Energy, Uranium Energy Corp. (UEC:NYSE.MKT) and Energy Fuels trade at enterprise values of CA$111 to CA$271M (average = CA$206M). All should be interested in partnering with Azarga on DB, or acquiring Azarga outright for its larger portfolio of Western U.S. uranium assets in South Dakota, Wyoming and Colorado.

Cameco Corp. (CCO:TSX; CCJ:NYSE) has three uranium operations in the area. To the extent these companies have deposits or projects near DB, there might be meaningful synergies to gain with Azarga.

In the chart below, notice that at Dewey’s base-case, long-term uranium price assumption of $55/lb, its internal rate of return (IRR) is 55%. Compare that to the average of eight similar-stage peers; $58/lb and an IRR of 31.8%. The current long-term contract price is $35/lb.

This means Azarga might possibly be able to sign a five-year contract for a portion of its nameplate capacity at a price that most global peers would not, or could not, accept.

Readers are reminded that of the $31.7M of upfront capital needed, $20–$25M could probably be raised in debt. Of the remainder, some might potentially be satisfied with an upfront payment on an off-take agreement with a utility.

Even more impressive is that Dewey’s NPV divided by its upfront capex is 5.4x. This is very strong for any mining project, not just in the uranium sector. The average NPV/capex ratio of peers is 1.2x. This is perhaps the biggest differentiating factor between Azarga and other juniors, including dozens not in the chart.

Even at a long-term uranium price assumption of $45/lb, which I believe we could see within 12–24 months, DB’s IRR is 37% (still above the average of peers). However, at $45/lb, the average IRR among peers falls to 20%–25%. Several names in the chart might not be financeable at $40¬–$45/lb uranium.

It’s worth noting that of the many dozens of preconstruction uranium projects across the globe, the vast majority cannot possibly deliver commercial quantities within three years. Time to market matters, and DB is looking at fairly near-term production.

Another observation is that DB is in the U.S., a place I believe will be better to operate a mine in than countries like Argentina, Zambia or Niger.

But wait, the story gets even more interesting. In addition to a robust PEA, there are up to three potential satellite deposits that could feed the DB project: Dewey Terrace, Gas Hills and Aladdin. Once Azarga gets over the permitting hurdle, these satellite deposits will instantly become more valuable.

Having millions of additional pounds of uranium available to enhance the DB project might make a meaningful difference to the economics depicted in the PEA. Instead of 14 years of operation at 1.0M lbs/year, perhaps 15–20 years at 1.5 to 2.0M lbs/year will be contemplated.

Uranium Market

Once Azarga Uranium clears the final hurdle, a number of investment catalysts will present themselves. Preliminary discussions on off-take agreements with utilities would be launched. Lining up debt funding for construction would be aggressively pursued. More earnest talks with prospective strategic/financial partners would take place.

Importantly, management could probably sell off a modest interest (15%–20%?) of the DB project to cover 100% of its funding needs through cash flow positive operations.

All eyes are on Azarga Uranium, and the uranium price in coming months. Will investors’ patience finally be rewarded?

Peter Epstein is the founder of Epstein Research. His background is in company and financial analysis. He holds an MBA degree in financial analysis from New York University’s Stern School of Business.

 

Disclosures: The content of this article is for information only. Readers fully understand and agree that nothing contained herein, written by Peter Epstein of Epstein Research [ER], (together, [ER]) about Azarga Uranium, including but not limited to, commentary, opinions, views, assumptions, reported facts, calculations, etc. is not to be considered implicit or explicit investment advice. Nothing contained herein is a recommendation or solicitation to buy or sell any security. [ER] is not responsible under any circumstances for investment actions taken by the reader. [ER] has never been, and is not currently, a registered or licensed financial advisor or broker/dealer, investment advisor, stockbroker, trader, money manager, compliance or legal officer, and does not perform market making activities. [ER] is not directly employed by any company, group, organization, party or person. The shares of Azarga Uranium are highly speculative, not suitable for all investors. Readers understand and agree that investments in small cap stocks can result in a 100% loss of invested funds. It is assumed and agreed upon by readers that they will consult with their own licensed or registered financial advisors before making any investment decisions.

At the time this article/interview was originally posted, Peter Epstein owned stock options in Azarga Uranium and the company was an advertiser on [ER].

Readers should consider me biased in my view of the Company. Readers understand and agree that they must conduct their own due diligence above and beyond reading this interview. While the author believes he’s diligent in screening out companies that, for any reasons whatsoever, are unattractive investment opportunities, he cannot guarantee that his efforts will (or have been) successful. [ER] is not responsible for any perceived, or actual, errors including, but not limited to, commentary, opinions, views, assumptions, reported facts and financial calculations, or for the completeness of this interview or future content. [ER] is not expected or required to subsequently follow or cover events and news, or write about any particular company or topic. [ER] is not an expert in any company, industry sector or investment topic.

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Oil is Weak Early in the Week

Author: Dmitriy Gurkovskiy, Chief Analyst at RoboForex

Oil is starting the final October week in the “red”. On Monday, October 26th, Brent is looking rather weak while trading at $41.

Probably, the situation is influenced by another wave of market concerns and fears relating to a stable demand for energies in the future. While many countries around the world are introducing more and more restrictions to slow down the second wave of COVID-19, global economies are “shrinking” again. Under such circumstances, even considering the start of the heating season in the USA and Europe, the demand for energy commodities remains quite limited.

From the fundamental point of view, there are two factors that put pressure on the oil market. The first one lies in the growth of the rig numbers in the USA – the report from Baker Hughes showed 6 additional units over the week. The second factor is connected with the oil production increase in Libya.

It became known earlier that NOC, the Libyan National Oil Corporation, would remove the force majeure status for two seaport terminals and increase the oil production. At a time of quite low demand for oil, delivery expansion from Libya may put additional pressure on the oil price.

In the H4 chart, after reaching the predicted correctional target at 41.50, Brent is moving to break this level to the downside. Possibly, the asset may form a narrow consolidation range around this level. If later the price breaks this range to the downside, the market may extend this correction down to 39.50; if to the upside – grow to reach 42.50 and then return to 41.50. From the technical point of view, this scenario is confirmed by MACD Oscillator: its signal line is moving below 0. After the line enters the histogram area, the downtrend on the price chart will continue.

As we can see in the H1 chart, after completing the descending wave at 41.30, Brent is consolidating around this level. If later the price breaks this range to the upside, the market may resume growing towards 42.20; if to the downside – continue moving within the downtrend to reach 40.54. From the technical point of view, this idea is confirmed by Stochastic Oscillator: its signal line is moving below 50 within the “oversold area”. It has already reached 20 and may break the area to the upside towards 50, which suggests a new correction on the price chart.

Disclaimer

Any forecasts contained herein are based on the author’s particular opinion. This analysis may not be treated as trading advice. RoboForex bears no responsibility for trading results based on trading recommendations and reviews contained herein.