Yahoo Finance 2 Ways to Play Europe’s $800 Billion Energy Crisis
The energy crisis that engulfed Europe after Western sanctions punished Russia’s invasion of Ukraine cost the continent hundreds of billions of dollars. Now, the Middle East crisis and the Houthi war on the Red Sea could threaten future energy supplies.
While climate change remains at the top of the agenda, the immediate name of the game is “energy security”, and that has opened up enormous opportunities for investors on both sides of the divide. At the height of the Russia-Ukraine conflict, European countries were even forced to return to coal burning. While that has since declined, with climate change returning to the top of the agenda, natural gas has regained status as the only viable bridge to a green energy transition.
In early February, Germany earmarked $16 billion for the construction of four natural gas power plants to complement a renewable energy expansion push. And Austria has recently made its largest natural gas discovery in four decades—enough to increase its domestic production by 50%.
In the meantime, Germany—the EU’s largest economy—has been creating a new dependency on American LNG. In fact, according to McKinsey, “Europe has come to shape global gas markets, with European hub prices setting global LNG spot prices.”
That false sense of security is also being threatened by the Biden administration’s recent pause on new LNG projects.
But one thing is clear: Natural gas is back in fashion in Europe, and domestic sources in combination with renewable energy are the only true answer to energy security.
Last summer, EU lawmakers voted to include natural gas and nuclear energy on the list of sustainable activities in line with its fight against climate change and its goal of reaching climate neutrality by 2050.
All of this renders Europe one of the best and most exciting places to be for new energy opportunities, and that means huge opportunities for companies to come in and develop gas fields that were overlooked by the supermajors, who have taken to chasing bigger things in offshore frontiers.
Below are two companies well-positioned to take advantage of the new energy security atmosphere in Europe:
#1 TotalEnergies (NYSE:TTE)
French TotalEnergies (TTE) is shaping up to be a big winner on the Europe-LNG playing field. In a joint venture, TTE partners with QatarEnergy in Qatar’s giant North Field East and North Field South projects. Last Fall, the JV secured two long-term deals—27 years--to deliver LNG to France, beginning in 2026. TTE has a 6.25% share in the North Field East LNG expansion project and a 9.375% share in the North Field South project.
Deals of this magnitude are usually reserved for Asian buyers, so a 27-year deal for Europe is a milestone for TTE in Europe, where the company can now brandish its status as a major contributor to France’s energy security. With piped Russian gas previously accounting for nearly 40% of Europe’s gas market share before the war, alternative LNG imports have been rapidly ramping up to fill in the gaps. Competition is growing, and once a Chinese recovery picks up more steam, that competition will grow further, potentially pricing Europe out of the market.
From exciting new offshore plays from Namibia to Suriname, TTE is forging new pathways to upstream growth, posting a record net profit of $36.2 billion in 2022. That was a doubling of profits over the previous year, partly due to higher oil and gas prices following Russia’s invasion of Ukraine.
That record profit has continued.
Earlier this month, TTE reported its highest profit in history for 2023, underpinned by LNG performance and its electricity divisions, which helped push net profit to $21.4 billion, or 4% higher than 2022. All of that puts TTE ahead of its giant peers, including Exxon, BP and Shell.
The French giant is pursuing a more unique strategy in terms of reaching net-zero emissions by 2050. Instead of simply divesting fossil fuels assets (though it is offloading its Canadian oil sands), it’s “expanding ownership of renewable power and low-carbon assets” and “expects to more than double its gross renewable generation capacity by 2025”. It’s covering demand from all angles, Aristotle Capital Global Equity Strategy noted in a recent investment letter.
Going forward, the upstream growth focus is to be driven by TTE's bet on oil and gas to boost profits, in addition to exploration success, new oil projects, and an expansion of its LNG portfolio. Suriname offshore exploration could see $9 billion invested, and observers are closely watching its new Venus oil discovery offshore Namibia.
#2 MCF Energy (TSXV:MCF; OTC:MCFNF)
Small-cap MCF Energy, backed by veteran explorer and producer, Ford Nicholson, is convinced that this is the right atmosphere in which to foster European energy security through domestic natural gas production.
Germany and Austria are key venues for this, and MCF is tapping into five key prospects several of which have had wells that have produced or are capable of producing gas from, three previous discoveries.
MCF Energy is the first new public company consolidating major exploration projects in Europe, and it’s the first since Russia invaded Ukraine to offer investors an opportunity to help build domestic natural gas resources in Germany and Austria.
The company is targeting large-scale natural gas exploration and production here, with two drills in the next several months, the first of which has already begun in Austria, in the Welchau prospect near the Austrian Alps. Strategically located only 18 kilometers from a pipeline, Welchau is adjacent to an up-dip from a discovery that intersected at least a 400-meter gas column previously. According to MCF, all elements are in place here for a significant discovery.
MCF management has indicated an intent to move its drill bit after the well at Welchau within a matter of weeks from Austria into Germany, in the Lech prospect, where it will re-enter a well previously drilled by Mobil (now Exxon) in the ‘80s, with proven gas and oil.
Thanks to its 100% acquisition of German Genexco last year, MCF Energy is now ready to drill down for some much-needed domestic energy resources for Germany.
MCF’s second drill, planned for March, is in Bavaria, which is home to the company’s Lech and East Lech concessions, which cover 10 sq km and 100 sq km, respectively. Lech has three previously drilled wells and two discoveries. Adjacent to this, Lech East, in southwest Bavaria, is a large-scale concession covering ~100 square kilometers, with significant 3D seismic and AI showing more potential ahead of MCF Energy’s planned 4.6-million-euro exploration program.
At Lech, MCF will re-enter Mobil’s former Kinsau #1 well, adapting new drilling technology and eventually horizontal wells to stimulate the hydrocarbons that are already known to exist. Mobil established production rates of over 24 MMCF per day of natural gas with associated condensate from the Kinsau #1 in the ‘80s. Mobil was exploring for oil so never developed the gas discovery. The second well drilled by Mobil found oil in a deeper zone which produced at about 180 BOPD with associated gas but with low oil prices was also never developed.
This well, being a re-entry of a proven, previously drilled hole could translate into quick cash flow for MCF Energy, and one hit could flare out into multiple development zones for each well.
About a week into a 40-day drill in Austria and only several months away from its first drill into Germany’s proven resources, MCF Energy is convinced it’s on track for a hit that could give Germany a partial domestic solution to its ongoing energy security problems.
Bonus: 10 More Companies Looking To Capitalize on the Energy Bull Market
Halliburton Company (NYSE:HAL), one of the largest oilfield service companies globally, offers a comprehensive range of services and products to the upstream oil and gas industry. Halliburton's presence in Europe, through its operations and technological solutions, supports the region's oil and gas exploration and production activities, emphasizing efficiency, innovation, and lower carbon emissions.
The company's focus on developing sustainable technology solutions, such as hydraulic fracturing and shale gas production technologies, aligns with Europe's increasing emphasis on environmental responsibility and energy security, making Halliburton a key contributor to the continent's energy sector and an attractive proposition for investors focused on technological advancement in energy services.
Halliburton continues to expand its digital and technological footprint, leveraging big data, AI, and machine learning to optimize drilling and production processes. This digital transformation enables Halliburton to offer more precise and efficient services, reducing the environmental impact of drilling activities.
Schlumberger Limited (NYSE:SLB), the world's leading provider of technology and services to the oil and gas industry, plays a pivotal role in Europe's energy sector through its extensive portfolio of innovative oil and gas technologies for reservoir characterization, drilling, production, and processing. Schlumberger's commitment to innovation and efficiency drives its operations across Europe, where the company assists in maximizing recovery, reducing costs, and improving the environmental performance of oil and gas operations.
With a strong emphasis on research and development, Schlumberger is at the forefront of the energy transition, offering solutions that enhance the sustainability and productivity of the European oil and gas industry, presenting investors with opportunities in a company that is shaping the future of energy through technology.
Enbridge Inc. (NYSE:ENB) stands as a titan in the North American energy sector, notably extending its operations into Europe through investments in offshore wind energy projects and energy transportation infrastructure. Renowned for operating the world's longest crude oil and liquids transportation system, Enbridge's commitment to innovation and sustainability is reflected in its significant foray into renewable energy, particularly in Northern Europe's burgeoning offshore wind market.
The company's strategic diversification into renewables, alongside its traditional oil and gas operations, demonstrates a balanced approach to energy production, emphasizing efficiency, safety, and environmental stewardship. Enbridge's operational excellence and forward-thinking investment strategy underscore its position as a leader in the global energy transition, making it a compelling choice for investors looking at resilient and sustainable energy portfolios with a footprint in Europe.
Enbridge is also pioneering efforts in the carbon capture, utilization, and storage (CCUS) domain, aiming to further mitigate the environmental impact of energy systems worldwide, including Europe. This initiative is part of Enbridge's broader strategy to lead in sustainable energy by decreasing greenhouse gas emissions and enhancing the green energy transition.
Golar LNG Limited (NASDAQ:GLNG) is a trailblazer in the liquefied natural gas (LNG) industry, with a diversified business model encompassing LNG shipping, floating LNG liquefaction, and floating storage regasification units. Golar's innovative approach to LNG solutions, particularly its pioneering floating LNG technology, positions it strategically within Europe's evolving energy landscape, where LNG plays a pivotal role in diversifying energy sources and enhancing energy security.
The company's commitment to unlocking new markets for natural gas worldwide aligns with Europe's energy transition goals, offering investors a unique vantage point into the dynamic LNG sector that bridges traditional energy supply with future energy demand.
Golar's engagement in projects aimed at reducing the carbon footprint of LNG shipping showcases its commitment to environmental sustainability. This focus on cleaner shipping practices is particularly relevant in Europe, where stringent environmental regulations are setting new standards for maritime operations, positioning Golar as a forward-thinking investment in the transition to cleaner energy logistics.
Transocean Ltd (NYSE:RIG) is a global leader in offshore drilling, offering services crucial for the exploration and extraction of oil and natural gas beneath the ocean's surface. With a fleet specialized in deepwater and harsh environment drilling, Transocean's technological prowess and operational expertise enable access to some of the most challenging and resource-rich areas worldwide, including Europe's North Sea region, a critical area for oil and gas production with stringent environmental and safety standards.
Transocean is enhancing its technological capabilities to address the emerging needs of the offshore drilling industry, with investments in next-generation drillships that offer higher efficiency and lower environmental impact. These advancements are crucial for maintaining competitiveness in Europe's offshore drilling sector, characterized by aging infrastructure and increasing regulatory pressures.
Transocean's emphasis on state-of-the-art technology and sustainable operations reflects its adaptability and commitment to leading the offshore drilling industry into a more sustainable era.
Imperial Oil Limited (TSX: IMO) is a Canadian petroleum company that operates across the entire oil and gas value chain. As one of Canada's largest integrated oil companies, it operates a large number of assets including oil sands projects in Alberta, conventional oil and gas operations, and a network of retail fuel stations. For Q4 2023, the company announced a decrease in earnings due to lower crude prices, yet exceeded analyst forecasts with record-high production levels at its Kearl oil sands mine.
The Calgary-based firm also raised its quarterly dividend by 20%, emphasizing its commitment to shareholder returns. Despite lower returns for Q4, earnings and cash flow were above many analysts' forecasts. Looking forward, Imperial Oil initiated solvent-assisted steam injection at its Grand Rapids oil sands thermal project, anticipating a bump in production. Grand Rapids marks the industry's inaugural solvent-assisted thermal project, reducing carbon emissions by up to 40% compared to standard steam methods.
With the M&A action going from upstream into the mid-and-downstream sectors, Pembina Pipeline Corp. (TSX:PPL) has caught the attention of smart money. Pembina manages conventional and oil-sands pipelines, oil storage, and natural gas gathering and processing. Offers infrastructure for natural gas, condensate, and natural gas liquids (NGLs), including cavern storage, alongside pipeline and rail terminaling facilities. Pembina's share price has been trailing the market at the end of 2023, but earnings were good nonetheless.
With C$1.21, up from the prior-year quarter's level of 39 Canadian cents, the company showed resilience in the last quarter of 2023. The outperformance was strong throughout the different business units of the company. Last week, Pembina said it would delay the decision for the Cedar LNG project until mid-2024. The facility, intended to ship LNG to Asian markets, would be under the ownership of the Haisla Nation, marking it as the most extensive Indigenous-owned infrastructure venture in the nation.
Arc Resources Ltd. (TSX:ARX) is a leading player in the Canadian energy sector, prominently known for its extensive operations in some of the country's most prolific natural gas and oil plays. Arc Resources has demonstrated a strong commitment to environmental stewardship, aiming to reduce its carbon footprint through innovative practices and technologies. This approach aligns with global energy trends towards sustainability, making Arc an attractive proposition for investors interested in companies leading the charge in responsible energy production.
Furthermore, Arc Resources is actively involved in community engagement and development initiatives, emphasizing the importance of building strong, sustainable communities around its operations. This holistic approach to business underscores Arc's role not only as an energy producer but also as a responsible corporate citizen.
Tourmaline Oil Corp. (TSX:TOU), Canada's largest natural gas producer, has consistently expanded its operations through strategic acquisitions and exploration, emphasizing efficiency and cost-effectiveness. Tourmaline's commitment to sustainability is evident in its efforts to minimize environmental impact and invest in water conservation technologies, aligning with the broader industry shift towards more sustainable energy production practices.
Tourmaline's strategic acquisitions have not only expanded its operational footprint but also enhanced its resilience and operational efficiency, setting a benchmark in the sector for sustainable growth. The company's focus on low-cost operations and environmental stewardship positions it favorably in the eyes of investors seeking sustainable investment opportunities in the energy sector.
Precision Drilling Corporation (TSX:PD) stands out as a leading provider of drilling and completion services, with a notable emphasis on high-performance, high-value services that cater to the evolving needs of the global oil and natural gas industry. Precision's investment in state-of-the-art drilling technology demonstrates its commitment to operational efficiency and safety, aligning with the industry's focus on reducing environmental impact and enhancing worker safety.
Precision Drilling's initiatives towards sustainability include reducing emissions from its operations and implementing advanced systems for energy efficiency. These efforts reflect the company's acknowledgment of the critical role environmental stewardship plays in securing long-term success and acceptance in an increasingly eco-conscious market.
By. Josh Owens
**IMPORTANT! BY READING OUR CONTENT YOU EXPLICITLY AGREE TO THE FOLLOWING. PLEASE READ CAREFULLY**
Forward-Looking Statements
This publication contains forward-looking information which is subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ from those projected in the forward-looking statements. Forward looking statements in this publication include that large oil and gas companies will continue to focus on offshore natural gas resources; that domestic onshore natural gas assets in Europe will provide a more affordable energy source than offshore resources; that demand for natural gas will continue to increase in Europe and Germany; that Russia will not supply the majority of natural gas in Germany and Europe; that natural gas will continue to be utilized as a main energy source in Germany and other European countries and demand for natural gas, and in particular domestic natural gas, will continue and increase in the future; that MCF Energy Ltd. (the “Company”) can replicate the previous success of its key investors and management in developing and selling valuable energy assets; that the natural gas projects of the Company will be successfully tested and developed; that the Company can develop and supply a safe, domestic source of energy to European countries; that natural gas will be reclassified as sustainable energy which will support the development of the Company’s assets; that imports of liquified natural gas will not be sustainable for Europe and that European countries will need to rely on domestic sources of natural gas; that the Company expects to obtain significant attention due to its upcoming drilling plans combined with Europe desperate for domestic natural gas supply; that the upcoming drilling on the Company’s projects will be successful; that the Company’s projects will contain commercial amounts of natural gas; that the Company can finance ongoing operations and development; that the Company can achieve its business plans and objectives as anticipated. These forward-looking statements are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information. Risks that could change or prevent these statements from coming to fruition include that large oil and gas companies will start focusing on the development of domestic natural gas resources; that the natural gas resources of competitors will be more successful or obtain a greater share of market supply; that offshore liquified natural gas assets will be favored over domestic resources for various reasons; that alternative technologies will replace natural gas as a mainstream energy source in Europe and elsewhere; that demand for natural gas will not continue to increase as expected for various reasons, including climate change and emerging technologies; that political changes will result in Russia or other countries providing natural gas supplies in future; that the Company may fail to replicate the previous success of its key investors and management in developing and selling valuable energy assets; that the natural gas projects of the Company may fail to be successfully tested and developed; that the Company’s projects may not contain commercial amounts of natural gas; that the Company may be unable to develop and supply a safe, domestic source of energy to European countries; that natural gas may not be reclassified as sustainable energy or may be replaced by other energy sources; that the upcoming drilling on the Company’s projects may be unsuccessful or may be less positive than expected; that the Company’s projects may not contain commercial amounts of natural gas; that the Company may be unable to finance its ongoing operations and development; that the Company can achieve its business plans and objectives as anticipated; that the Company may be unable to finance its ongoing operations and development; that the business of the Company may be unsuccessful for various reasons. The forward-looking information contained herein is given as of the date hereof and we assume no responsibility to update or revise such information to reflect new events or circumstances, except as required by law.
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