Embed Size (px)
Citation preview
woodmac.com Trusted Intelligence
Obo Idornigie
Corporate trends and the North Sea
2
woodmac.com
Agenda • Corporate trends
• Global investment and project execution
• Energy transition and how companies are positioned
• North Sea in focus
3
woodmac.com
Free cash flow generation: 2015 - 2020
Industry is now in thrive mode
Companies generating free cash flow
-20
0
20
40
60
80
100
120
2015 2016 2017 2018 2019 2020
(US
$bn)
Source: Wood Mackenzie
2019 budgets guidance
broadly flat
Average of US$55/bbl needed
to balance the books
4
woodmac.com
Production outlook: Indexed to 2018
Production outlook is robust across most peer groups
New projects delivering attractive returns
0.0
0.5
1.0
1.5
2.0
20
18
20
19
20
20
20
21
20
22
20
23
20
24
20
25
20
26
20
27
20
28
20
29
20
30
Ind
exe
d to
20
18
Other Independents US Independents
Majors Asian NOCs
Source: Wood Mackenzie
0
10
20
30
40
50
60
0 50 100 150 200
Post-
tax I
RR
(%
)
Capital spend US$ billion (2019 - 2030)
Source: Wood Mackenzie
Pre-FID projects – spend vs. IRR
5
woodmac.com
Shareholder distributions are central to Big Oil’s message
Dividends are creeping up; buybacks are back
Source: Wood Mackenzie Corporate Service. Combined yield is based on currently guided dividend and share repurchase
programmes / market capitalization. Assumed buybacks in 2019: Apache – US$1bn Shell - US$9bn, Devon – US$1bn, Marathon –
US$1bn, Anadarko – US$1bn, Pioneer US$2bn, Total US$2bn, Oxy – US$1bn, Noble US$500m COP – US$3bn, Chevron US$3 billion.
2019 forecasted combined shareholder return yield
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
De
vo
n
Apache
Shell
CN
RL
Pio
neer
Anad
ark
o
Ma
rath
on O
il
Oxy
Tota
l
BP
No
ble
Re
psol
Suncor
Eni
CO
P
Ch
evro
n
Exxon
Mob
il
Equin
or
Mu
rphy O
il
Hu
sky
He
ss
Ce
novus
EO
G
Com
bin
ed d
ivid
end &
buyback y
ield
Diversified dividend yield Diversified buyback Majors dividend yield
Majors buyback Tight Oil dividend yield Tight Oil buyback
Focused Canadian dividend yield Focused Canadian buyback
Source: Wood Mackenzie
6
woodmac.com
-70%
-50%
-30%
-10%
10%
Exx
on
Mo
bil
Su
nc
or
San
tos
CN
OO
C L
td
Wo
od
sid
e
Occ
ide
nta
l
CN
RL
Co
nti
nen
tal
Co
no
co
Ph
illip
s
Tu
llo
w O
il
Ch
ev
ron
Sh
ell
EO
G
Ko
sm
os
Ap
ac
he
Co
nc
ho
Hes
s
Eq
uin
or
ON
GC
To
tal
Mara
tho
n
En
i
No
ble
Petr
oC
hin
a
Rep
so
l
Ran
ge
BP
Sin
op
ec C
orp
Ch
es
ap
ea
ke
Dev
on
An
ad
ark
o
Cen
ovu
s
So
uth
wes
tern
LU
KO
IL
Pre
mie
r O
il
Hu
sk
y
Cair
n E
nerg
y
Pio
nee
r
New
fie
ld
INP
EX
Fro
nte
ra
Dia
mo
nd
ba
ck
En
can
a
Mark
et
Pre
miu
m/
Dis
co
un
t to
Wo
od
Mac N
PV
Major Focused US Diversified Independent Focused Canadian
Focused International Latin American Weighted Average
… but investors aren’t buying it: the sector is under-priced
Current valuations raise prospect of corporate consolidation
Source: Wood Mackenzie Corporate Benchmarking Tool Q4 2018. Market cap at 13 February 2019. NPV discounted to 1 January 2019.
Market premium / discount to WM base case NPV10 (%)
8
woodmac.com
Capital spend has stabilised
But there is no stampede to re-invest in growth
Global upstream development capex – Wood Mackenzie risked base-case
0
100
200
300
400
500
600
700
800
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
US
$ b
illio
n
On Production Approved For Development Pre-FID US L48
Source: Wood Mackenzie
40%
9
woodmac.com
-40
-20
0
20
40
60
80
100
% d
evia
tion
fro
m F
ID
2006 - 2009
FIDs
2010 - 2013
FIDs
Post - 2014
FIDs
Schedule
Execution performance by FID era
Upstream’s execution problem: something needed to change
Over-ambitious projects and supply chain constraints eroded returns
Source Wood Mackenzie:
Cost
Average
Higher proportion of subsea
tie-backs
Evolving contracting
strategies
Weaker supply chain backlog
10
woodmac.com
New contracting models are starting to provide successful outcomes
Adoption needs to broaden though.
Source: Wood Mackenzie Upstream Supply Chain Research
Integrated subsea contracts gaining momentum
0
1
2
3
4
5
6
7
8
9
0
1
2
3
4
2016 2017 2018
No. o
f in
tegra
ted
co
ntr
acts
aw
ard
ed
To
tal e
st.
va
lue
of in
tegra
ted
co
ntr
acts
(U
S$
Bn
)
Estimated value (US$Bn)
No. of awards (rhs) Increased contractor
scope and risk
Cost and execution
efficiencies
Early engagement
11
woodmac.com
Investment hotspots in 2019: 20 FIDs to watch
Source: Wood Mackenzie Q4 Pre-FID upstream project tracker
3
3
1
3
Which Mozambique LNG
project to make FID: Area
1 or Area 4? (7 bn boe)
New W. Africa oil:
Woodside’s SNE & Aker
Aker’s DW Tano (0.7 bn
boe)
Colour key: Onshore project Shallow-water Deepwater
BP’s goes big on brownfield in
GoM: Atlantis Ph 3 (110
mmboe)
Big ‘surplus’ FIDs loom at
Petrobras’ Buzios, Iara
Entorno and Sepia (9.1 bn
boe)
E.African oil in the running:
Blocks 1, 2 & Kingfisher in
Uganda & Kenya’s Block 10BB
(1.7 bn boe)
Total to fast-track
Glendronach (0.2 bn
boe)
Upstream revival in Angola
with BP’s Block 31 SE and
Eni’s Block 15/06 SE? (0.3
bn boe)
Will COP FID high
CO2 Barossa gas for
Darwin LNG? (0.6 bn
boe)
US GoM’s first 20k project at
Chevron’s Anchor? (0.5 bn
boe)
Novatek want to FID
Arctic LNG-2 by YE (5.5
bnboe)
Will ExxonMobil take the
plunge in Romania at
Neptun Deep? (0.6 bn
boe)
The pendulum switches back to deepwater
13
woodmac.com
Solar PV
Onshore
wind
Offshore
wind
CCS / Methane
capture
Biofuels
Power /
Battery storage /
EV charging
Majors are leveraging synergies and hedging their bets
Source: Wood Mackenzie
The Majors currently invest less than 3% of their upstream capex in renewables. Equinor could see this increase dramatically by 2030
Investments in renewables and emerging technologies Benchmarking: total M&A spend post-2015
4
2
0
0%
5%
10%
15%
20%
25%
30%
35%
Sola
r P
V
Onsh
ore
win
d
Offsh
ore
win
d
Do
wn
str
ea
m r
efin
ing
Explo
ratio
n
M&
A
Dow
nstr
ea
mch
em
icals
Pre
-FID
con
ve
ntio
nal
N A
me
rica
on
sho
re o
il
Renewables Oil and gas
Compared to oil and gas, renewables offer low returns
But the risks are lower
Typical energy project IRRs
Note: For renewable energy projects we show equity IRRs; for oil
and gas projects, we show project IRRs, assuming they are 100%
equity financed.
16
woodmac.com
North Sea capital expenditure 2014-2020
0
5
10
15
20
25
30
35
40
45
50
2014
2015
2016
2017
2018
2019
2020
Ca
pit
al e
xp
en
dit
ure
(U
S$
bil
lio
n)
Norway UK Netherlands Denmark
-26%
-22%
-21% +7%
+7%
North Sea investment stabilised after three years of decline
Norway is at the heart of recovery and will keep investment stable until the early 2020s
Source: Wood Mackenzie, Upstream Data Tool (UDT)
North Sea FIDs (2014 – 2020)
-
20
40
60
80
100
120
140
160
0
5
10
15
20
25
2014
2015
2016
2017
2018
2019
2020
mm
bo
e
FID
s
Nor UK Neth Den Avg reserves size*
17
woodmac.com
Gjoa P1
Balder X Project
Ringhorn phase IV
Valhall Lower Hod
Tor IOR
Hod Redevelopment
Heidrun Future
Ormen Lange Late-Life Recovery
Frosk
Haltenbanken East Lavrans
Duva
Brasse Luno II Area Garantiana
NOAKA Fogelberg
Hanz
Cape Vulture
Asterix
King Lear Area
Alta
Linnorm
Peon
Tommelitan Alpha
Wisting
Grevling
GRAND
Rosebank
Glendronach
Clair South
Glengorm
0
10
20
30
40
50
60
70
80
2019 2020 2021 2022
US
$/b
bl B
rea
ke
ve
n, N
PV
10
Expected FID Date
Norway UK
Source: Wood Mackenzie
200
mmboe
A healthy pipeline in the near-term, but larger projects down the line are still struggling to bring down costs Pre-FID projects by breakeven and expected FID date
Bubble size is indicative of reserves
18
woodmac.com
0
2
4
6
8
10
12
14
16
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
Cu
mu
lati
ve
M&
A (
US
$ b
n)
Dela
s &
fu
nd
s (
US
$ b
n)
Cumulative M&A (RHS) Funds (LHS) M&A deals (LHS)
PE funds have committed US$10 billion to the North Sea
There is generally a 12-18 month lead time from company start-up to first major deal
Source: Wood Mackenzie, M&A Tool
History of private equity in UK and Norway over the last 5 years
*
Funds being set up M&A catches fire M&A slows
19
woodmac.com
The deal pipeline remains fairly full – but sellers are in a strong place financially
The UK dominates when it comes to upcoming packages
Source: Wood Mackenzie, M&A Tool
North Sea deal pipeline – what could sell in 2019
0
20
40
60
80
100
120
0
500
1,000
1,500
2,000
2,500
3,000
Ap
ac
he
Eq
uin
or
Co
no
co
Ph
illip
s
JX
Nip
po
n
To
tal
Ex
xo
nM
ob
il
Ex
xo
nM
ob
il
Ch
ev
ron
En
i
Va
r E
ne
rgi
To
tal
Co
no
co
Ph
illip
s
MO
L
Re
ps
ol
Ak
er
BP
Da
na
Petr
ole
um
En
Qu
es
t
BP
Win
ters
ha
ll D
EA
Ed
iso
n
Ze
nn
or
Ma
rath
on
Re
ps
ol S
ino
pe
c
TA
QA
kb
oe
d
NP
V1
0 U
S$
mil
lio
n Norway UK 2019 production
20
woodmac.com
Key takeaways • The industry has reset and is now in thrive mode
• Global investment has stabilised and project execution is improving
• The Euro Majors leading the charge on energy transition but momentum still needed
• Further M&A expected in the North Sea and the UK expected to dominate
Our solutions give you an integrated view
of the market with transparent data, analysis and models that link equipment, services, costs and supply chain risk to
asset and corporate valuations.
The result is a comprehensive outlook
that helps you understand supply and demand, benchmark against peers, assess costs and confidently guide
strategy.
Delivering the industry’s most complete set of solutions for drilling/ rigs, subsea, SURF, marine construction, facilities and fabrication.
woodmac.com
21
22
woodmac.com
Project data-led services, tools and models
Drilling
Subsea
Facilities &
Fabrication
SURF & Marine
Construction
Offshore insights
• Global offshore well demand • Global rig supply profile (floating &
jack-up)
• Global hardware awards (subsea trees, controls, manifolds, umbilicals)
• Global subsea tree installations
• Global floating production award demand
• Leased FPS trends • New construction outlook
• Global installation demand (flowlines, umbilicals, risers)
• High-profile vessel schedule • EPIC contract summary
• Supply and demand outlook • Forecast fleet utilization • Forecast day rate trends
• Global subsea spend • Global subsea hardware
market share • Global capacity and cost trends
• Global shipyard tonnage backlog
• Fabricator market share
• Vessel capability profile • Vessel Cost Model: day rate build-up
22
woodmac.com
23
woodmac.com
Drilling / Rigs Subsea SURF Marine Facilities
Construction
Shipyards /
Fabrication
Offshore Drilling and
Rigs Service
• Market overview
• Supporting data
Offshore Rig
Tracking Tool
• Dynamic Rig Tool
in Spotfire
Subsea Market Service
• Market overview
• Backup data
Subsea Market Tool
• Dynamic Rig Tool
in Spotfire
SURF Service
• Market overview
• Backup data
Marine Construction Service
• Market overview
• Backup data
Vessel Function
Database
Vessel Schedule Vessel
Cost Model
Offshore Production Systems
Service
• Market overview
• Backup data
Offshore Shipyard Service
• Market overview
• Shipyard backlog
data
Upstream Supply Chain Solutions Get a complete picture of today’s market and plan for future offshore opportunities
Global Project Tracker View which Pre-FID projects become viable at different commodity prices - and estimated Capex for each piece
of the project!
23
woodmac.com
24
woodmac.com
Disclaimer
Strictly Private & Confidential
These materials, including any updates to them, are published by and remain subject to the copyright of the Wood Mackenzie group ("Wood
Mackenzie"), and are made available to clients of Wood Mackenzie under terms agreed between Wood Mackenzie and those clients. The use of
these materials is governed by the terms and conditions of the agreement under which they were provided. The content and conclusions
contained are confidential and may not be disclosed to any other person without Wood Mackenzie's prior written permission. Wood Mackenzie
makes no warranty or representation about the accuracy or completeness of the information and data contained in these materials, which are
provided 'as is'. The opinions expressed in these materials are those of Wood Mackenzie, and nothing contained in them constitutes an offer to
buy or to sell securities, or investment advice. Wood Mackenzie's products do not provide a comprehensive analysis of the financial position or
prospects of any company or entity and nothing in any such product should be taken as comment regarding the value of the securities of any
entity. If, notwithstanding the foregoing, you or any other person relies upon these materials in any way, Wood Mackenzie does not accept, and
hereby disclaims to the extent permitted by law, all liability for any loss and damage suffered arising in connection with such reliance.
Copyright © 2018, Wood Mackenzie Limited. All rights reserved. Wood Mackenzie is a Verisk business.
Wood Mackenzie™, a Verisk business, is a trusted intelligence provider, empowering decision-makers with unique insight
on the world’s natural resources. We are a leading research and consultancy business for the global energy, power and
renewables, subsurface, chemicals, and metals and mining industries. For more information visit: woodmac.com
WOOD MACKENZIE is a trademark of Wood Mackenzie Limited and is the subject of trademark registrations and/or
applications in the European Community, the USA and other countries around the world.
Europe
Americas
Asia Pacific
Website
+44 131 243 4400
+1 713 470 1600
+65 6518 0800
www.woodmac.com
