Israel Claims to Have Dealt a Serious Blow to Hezbollah

Politics, Geopolitics & Conflict

The UN envoy for Libya, Abdoulaye Bathily, has resigned from his post, slamming the country's rival parties and external meddlers for making it impossible to work toward elections and political stability. Bathily sees further instability on the horizon in Libya. He also struck out against dangerous external actors who are meddling in other countries from Libya. While Bathily's resignation is not hugely significant, the reasons for it are, and his absence is likely to lead to an uptick in destabilizing political rivalry between Tripoli and Benghazi. Evidence is mounting of Russian weapons deliveries to Libya, which have recently coincided with visits to eastern Libyan strongman General Khalifa Haftar.

Sanctions against Venezuela have been reimposed after the temporary relief expired on April 15, with Washington giving companies until the end of May to settle any outstanding transactions after Nicolas Maduro refused to back down on targeting opposition candidates for this year's elections. This week, the opposition finally fielded a candidate for the July 28 elections. Diplomat Edmundo Gonzalez Urrutia, a largely unknown figure, will challenge Maduro with the backing of opposition leader Maria Corina Machado, who has been banned from running on trumped-up criminal charges.

Israel claims to have dealt a serious blow to Hezbollah forces in southern Lebanon after deploying some 100,000 troops to Israel's northern border area. Israeli attacks have displaced an estimated 90,000 Lebanese, while Hezbollah has displaced a similar number of Israelis with constant missile fire across the border. This week, Israeli authorities claimed to have killed half of Hezbollah's commanders in southern Lebanon. The last time fighting between Israel and Hezbollah hit this level was during the 2006 Lebanon War. Markets are largely convinced that the Iran-Israel standoff will not (for now) result in a regional war and instead will proceed as another phase of a nuclear cold war with high-level rhetoric, much along the lines of the current Russia-Ukraine/NATO standoff. 

Discovery & Development

Portuguese oil company Galp Energia is reportedly looking to sell half of its stake in an exploration block off the coast of Namibia following a significant oil discovery. The discovery at the Mopane field, estimated to contain at least 10 billion barrels of oil and gas equivalent, could potentially kickstart Namibia's oil industry. Galp Energia holds an 80% stake in the PEL 83 block, with Namibia's national oil company NAMCOR and Custos each holding a 10% stake. Investors should monitor developments in Galp Energia's divestment strategy and potential capital-raising efforts. This discovery presents an attractive investment opportunity in an emerging market.

Deals, Mergers & Acquisitions

LNG Energy Group, founded by Texas billionaire oilman Rod Lewis, has struck a deal with PDVSA to rehabilitate five aging oil fields. The agreement comes amidst concerns about the fairness of Venezuela's upcoming presidential election, leading the Biden administration to reevaluate sanctions relief. LNG Energy Group will take over the production and development of two oil fields in eastern Venezuela, with contracts awarded by PDVSA. This development will serve as a test of U.S. sanctions policy, have broader market implications, and highlight the lucrative energy opportunities that exist in emerging markets despite geopolitical challenges. 

Denmark has initiated its largest offshore wind tender, offering no subsidies for companies competing to develop six sites with a combined capacity of up to 10 gigawatts (GW). The wind farms are vital for Denmark to achieve its target of reducing CO2 emissions by 70% from 1990 levels by 2030. Companies must bid on the price they're willing to pay to the state over 30 years, with the state retaining a 20% stake in each project. The winning projects could potentially exceed 10 GW and enable Denmark to export green power or produce hydrogen. The tender shines a light on Denmark's commitment to renewable energy. The tender could set a precedent for future renewable energy projects globally by demonstrating the feasibility of large-scale offshore wind development sans subsidies. 

Oman LNG has entered into a sale and purchase agreement with TotalEnergies to supply 800,000 metric tons per year of LNG for a duration of 10 years starting from 2025. TotalEnergies, holding a 5.54% stake in Oman LNG, is among the company's shareholders. TotalEnergies has made FID for Oman's Marsa LNG project, which involves the construction of an LNG liquefaction plant at Sohar port with a capacity of 1 million mtpa. The deal provides stability for Oman LNG and TotalEnergies over the next decade. 

Oman's Minister of Energy and Minerals, Salim al-Aufi, announced plans to auction offshore oil and gas blocks by the end of the year, with intentions for new auctions annually. Oman aims to boost its oil and gas production as it opened an exploration licensing round in March 2023 for three gas blocks. Its exploration efforts demonstrate Oman's focus on maximizing its hydrocarbon resources. 

Baker Hughes has been awarded a contract to provide equipment for the third phase of Saudi Aramco's gas network expansion project in Saudi Arabia. The order includes 17 pipeline centrifugal compressors aimed at enhancing gas distribution across the country. This order follows previous deliveries for phases 1 and 2 of the project. Baker Hughes is also investing in expanding its manufacturing site in Modon, Saudi Arabia, to support the project. The expansion of the gas network aligns with Saudi Arabia's efforts to diversify its economy and meet domestic energy demand.

Ithaca Energy has reached an agreement to purchase nearly all of Eni's UK oil and gas-producing assets for approximately $938 million in stock. This acquisition aims to position Ithaca Energy as one of the largest independent energy companies in the North Sea region. The combined entity is expected to produce over 100,000 boepd until at least 2028 and plans to distribute dividends of up to $500 million each in 2024 and 2025. This deal signifies a significant consolidation in the UK North Sea oil and gas sector.

Energy Earnings

OFS company Halliburton saw its Q1 revenue from the international segment surge by 12%, primarily driven by a 21% increase in Latin America. North American revenue declined by 8% y/y, totaling $2.5 billion. The company expects its North American business to deliver flat revenues and margins for the full year 2024 despite lower activity levels. Adjusted profit came in a 76 cents per share in Q1, surpassing analyst estimates. Total quarterly revenue was $5.8 billion. 

Hess Corporation (NYSE: HES) has announced significantly higher-than-expected net income for the first quarter of 2024, attributing the surge in profits to soaring oil and gas production volumes. The company posted a net income of $972 million, or $3.16 per share, compared to $346 million, or $1.13 per share, in the first quarter of 2023. The substantial rise in profits is primarily due to increased production volumes, with oil and gas net production reaching 476,000 boepd, marking a 27% increase from the same period last year. Net production in the Bakken rose by 17% to 190,000 boepd, while production in Guyana surged by 70% to 190,000 bopd.