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The Offshore Decade

www.reservereport.com

The Offshore Decade

Matt Sterett
Dec 31, 2019
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The Offshore Decade

www.reservereport.com

“The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails” - William Arthur Ward


A ROLLER-COASTER DECADE.

10x yrs ago, half of our friends couldn’t find a job, and the other half were being fired.

All-in-all (for the US at least), the decade turned out fine.

2019 was a sharp representation of the 2010s:

  • The S&P 500 killed it

  • Crude was volatile, Gas prices declined

  • Rates dropped

E&Ps had a pointed year, too.

The dispersion, this year, of stock prices has been dramatic - and representative of the chaos that shale experienced throughout the 2010s:

Wildcatting - that’s expected to be erratic.

But Shale…

There’s supposed to be a level of sameness.

Like project finance.

And that has definitely not been the case.

When we see volatility & dispersion like in 2019, we see momentum opportunities.

[Momentum, in investing, is a proxy for idiosyncratic risk - specifically the underreaction to firm specific events]

We expect firm specific events to continue, if not increase, in in the Oil Patch.

And momentum aside - in the case of Shale - we might be able to see a couple of those events coming -


APACHE.

Speaking of firm specific events…

Since we last published, Apache announced a JV with Total for their Block 58, offshore Suriname.

We’ll start by making it clear:

WE WERE WRONG.

We were stunned upon reading the headline.

Wow.

  • The Steve Keenan drama.

  • The ambiguous Maka well update.

  • And it ends with Total as a partner?

We’ll venture to guess that over the life of this project, Apache has brought numerous parties into a data room to evaluate buying-in to Suriname.

And Total… they would’ve been one of the sharpest in that room…

Oh, yeah - the deal comes with a $100Mm bonus.

Congrats Apache -


FIRST OIL (& GAS).

Continuing the positive news from South America’s North Atlantic coast…

3x days after Exxon & Hess announced First Oil from their Liza field, ANOTHER discovery was announced:

“Mako-1 is the 15th discovery on the prolific Stabroek Block and further underpins a growing resource base for future developments” - CEO John Hess

It’s not often that an IR team has to work this much, on account of good news.

Oh - on the topic of First Oil…

Noble’s Leviathan gas field began production this morning.

Offshore is 2019’s winner -


SHALE.

Bloomberg & the WSJ recently ran pieces highlighting issues including production forecasting.

One graphic stood out:

While we’ll give credit to the WSJ & Rystad for taking these public positions, we’d like to call attention to Whiting (again).

Three months ago, a much more comprehensive analysis of Whiting’s production was conducted:

Twitter avatar for @EnergyCredit1
O&G OG @EnergyCredit1
Very proud to attach an Energy FinTwit research collaboration on Whiting Petroleum, $WLL @WillRayValentin @oil_gonif drive.google.com/open?id=1AUO68… 1/
drive.google.comWLL_EFT_10.31.19.pdf
3:00 PM ∙ Oct 31, 2019
256Likes44Retweets

There’s 2000+ wells in that analysis.

And the conclusion is ugly.

That’s it for today - Happy New Year’s Eve.

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The Offshore Decade

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