Will This Be The World’s Last Surviving Fossil Fuel
FN Media Group Presents Oilprice.com Market Commentary
London – October 22, 2020 – Natural gas could be the single most important energy source of the next decade. For investors who want both profitability and longevity, the natural gas sector is the very first place to look. The math is simple: Big banks are fleeing oil. The coal industry is in terminal decline. And renewable energy is years or even decades away from meeting global demand. Mentioned in today’s commentary includes: BP p.l.c. (NYSE: BP), Exxon Mobil Corporation (NYSE: XOM), TOTAL SE (NYSE: TOT), TC Energy Corporation (NYSE: TRP), Canadian Natural Resources Limited (NYSE: CNQ).
So while the multi-trillion-dollar ESG trend is cutting off financing for oil and coal, the global energy transition to renewables is helpless without a bridge fuel. A fuel that is abundant, cleaner than oil or coal, and cheap to produce. That fuel is natural gas.
Big money is banking on this bridge. And the trend has already begun, with some players racing to one of the most profitable natural gas frontiers in the world… Colombia.
A combination of skyrocketing demand and falling supply have left the Latin American nation desperate for the world’s most sought after transition fuel, making it a great case study for the coming global natural gas resurgence. In fact, while prices for natural gas in the U.S. have spent most of the year below $2 per thousand cubic feet, prices in Colombia have climbed as high as $7/mcf.
That’s a 250% premium on a resource that costs roughly $0.60 to produce and transport to the market. [seems low as the proposed pipeline tariff is $.70. Colombia truly is a producer’s paradise. And right now, a top exploration and production team in this most profitable venue is NGX Energy International (GASX; PENYF).
Colombia: The Big Margin Bonanza
Colombia’s natural gas prices are some of the highest in the world. Imagine gas contracts at $5/mcf and above, or spot prices that reach to $7/mcf. And then imagine near-zero volatility. Colombia’s natural gas supply is about to be cut in half at a time when demand is set to rise over 50%. Existing producers can’t keep up.
Now, consider that amid the skyrocketing demand, declining supply and high natural gas prices, Colombia’s proven reserves are dwindling … Proved gas reserves are almost half what they were in 2009. That means it desperately needs another major discovery.
It’s the perfect setup for NGX Energy (GASX; PENYF) … which is parked right next to one of Colombia’s biggest producing natural gas plays … giant Ecopetrol’s Chuchupa. And that play is in major decline.
3 Blocks–All of Them Potential Kingmakers for Colombia
NGX Energy owns 3 key natural gas assets that could end up generating many times in cumulative cash flows compared to its current market valuation…
#1 Maria Conchita
Maria Conchita is a 32,518-acre block located in the Guajira Basin in Colombia’s Caribbean coast. This is the block right next to giant Chuchupa to the north.
NGX has completed 3-D seismic testing on Maria Conchita and successfully re-entered its first well hitting substantial gas projected to yield 14 – 20 MMcf/d with 2 additional re-entry wells and 3 new wells planned in the near-future.
The SN-9 block is NGX’s flagship exploratory 311,353-acre block, in which NGX has a 72% interest. And again, it’s the closelogy. This block is adjacent and upstructure to Canacol Energy, Colombia’s largest independent gas producer, which has booked natural gas reserves of 624 Bcf and production of 200 MMcf/d.
The news flow on this one should also be fast-paced, with NGX about to start drilling and seismic already indicating gas. It will be drilling up to four conventional exploration wells here in the initial phase to depths of 4,500 – 6,000 feet and at a budgeted cost of $4.5-6 million per well for completion.
NGX (GASX; PENYF) is anticipating potential production from this block at 180 MMscfd based on management estimates. That means it’s another potential Canacol–but with a tiny market cap company, so the upside potential is huge if it reaches its target.
Tiburon is NGX’s blue sky exploratory project with huge potential capacity of up to 2Tcf of natural gas (based on management estimates) thanks to its location sitting in the same basin as Chuchupa and surrounded by massive offshore discoveries Orca and Perla.
NGX is estimating Tiburón’s peak production potential at 400 MMscfd–for 10 years. That’s twice the production of Canacol, Colombia’s largest independent gas producer. It’s a huge undertaking, which means NGX will be looking for a multinational partner to help develop this one after shooting 2D seismic.
Getting It Across the Finish Line
When you’re sitting on a huge natural gas play in a country that desperately needs new reserves, with soaring demand, declining supply and solid prices, one thing that can trip you up as a junior E&P company is management.
In this case, we’re looking at a management team that’s made shareholders a ton of money before. Even better: They’ve done it before in Colombia. NGX’s board has some serious pedigree. They come as former executives of the region’s largest oil and gas company, PDVSA (Petróleos de Venezuela). NGX executive chairman Ronald Pantin held various senior executive positions at PDVSA and was CEO and Executive Director of Pacific Rubiales from 2007 until 2016.
Federico Restrepo-Solano is the Director & President of NGX, and partner and corporate director at Qvartz Capital Partners private equity fund. He’s got more than 25 years of experience mining, oil and infrastructure, including as Senior VP of Corporate Affairs at Frontera Energy, President of Colombia’s national federation of coal producers, Fenalcarbón. Importantly, he’s also served as a representative for Colombia before the Inter-American Committee on Ports, in Washington DC.
Serafino Iacono, NGX CEO, has over three decades of experience in capital markets and public companies and has raised more than $4 billion for numerous natural resource projects internationally. He serves as an Executive Chairman at Gran Colombia Gold Corp and former Co-Chairman and Executive Director of Pacific Rubiales, among a long line of other high-profile executive roles.
The Clock Is Ticking in Natural Gas Ground Zero
This is an exploration story. That means it’s higher risk and higher reward. But it’s hard to find a story with higher potential reward than this, and management with a track record that strikes confidence. And any good exploration story has to have news flow. This one does. The NGX announcement calendar is expected to be packed …
NGX stock has already climbed over 300%… but could go much higher if there is good news once the drill bit starts hitting the ground. Colombia is desperate for new natural gas, and it’s great to work with a government faced with soaring demand and declining supply.
NGX (GASX; PENYF) is on the ground floor of this potential, sitting on three highly prospective blocks, where even a single discovery will likely provide this tiny market-cap company with major cash flow. And where a single discovery has the potential to establish NGX as one of the most important companies on the Colombian oil and gas scene.
Big Oil Is Betting Big On The Energy Transition, As well
Exxon (XOM) is an oil giant looking to keep its commitment to reduce its emissions. It claims to have about one-fifth of the world’s total carbon capture capacity. The company captures about 7 million tons per year of carbon.
In addition to its carbon capture ambitions, Exxon is also betting big on natural gas. In fact, it’s a pioneer in the liquefied natural gas industry. Using technology and expertise, Exxon has become one of the most important players in the business. With ventures in Qatar, the world’s largest natural gas producer, and emerging hotspots such as Papua New Guinea, Exxon is making all the right moves to stay ahead of the coming natural gas boom.
Total (TOT) is one of the few oil majors truly diving head first into the new energy reality It is not only aware of the needs that are not being met by a significant portion of the world’s growing population, it is also hyper-aware of the looming climate crisis if changes are not made. In its push to create a better world for all, it has committed to contributing to each of the United Nations’ Sustainable Development Goals.
While Total’s share price slipped in March along with the wider market, Total’s pivot towards greener pastures has helped it outperform some of its peers. Though it still maintains a major presence in the global oil and gas industry, it has made significant strides in the renewable realm, as well.
BP (BP) is another European energy giant slowly pivoting towards greener energy alternatives. BP, which has been criticized in the past as being slow and late to the environmental cause, could now leapfrog its peers. We are still a long way from Beyond Petroleum. But chief executive Bernard Looney believes that we are only 30 years from a net zero BP.
“Renewables and natural gas together account for the great majority of the growth in primary energy. In our evolving transition scenario, 85% of new energy is lower carbon,” Spencer Dale, BP group chief economist, said, commenting on the outlook to 2040.
TC Energy Corporation (TRP) is a major oil and energy company based in Calgary, Canada. The company owns and operates energy infrastructure throughout North America. TC Energy is one of the continent’s largest providers of gas storage and owns and has interests in approximately 11,800 megawatts of power generations. It’s also one of the continent’s most important pipeline operators.
With TC Energy’s massive influence throughout North America, it is no wonder that the company is among one of Canada’s highest valued energy companies. Investors can feel comfortable with the company due to its huge and diverse portfolio, and continuing eye for success.
Though Canadian oil has had a particularly rough go at it this year, Canadian Natural Resources (CNQ), kept its dividend intact after swinging to a loss for the first half of the year, while Canada’s producers are scaling back production by around 1 million bpd amid low oil prices and demand. Though Canadian Natural Resources kept its dividend, it withdrew its production guidance for 2020, however. It also said it would curtail some production at high-cost conventional projects in North America and oil sands operations and carry out planned turnaround activities at oil sands projects in the second half of 2020.
By. Nikki Taylor
**IMPORTANT! BY READING OUR CONTENT YOU EXPLICITLY AGREE TO THE FOLLOWING. PLEASE READ CAREFULLY**
Forward-Looking Statements. Statements contained in this document that are not historical facts are forward-looking statements that involve various risks and uncertainty affecting the business of NGX. All estimates and statements with respect to NGX’s operations, its plans and projections, size of potential gas reserves, comparisons to other gas producing fields, oil prices, recoverable gas, production targets, production and other operating costs and likelihood of gas recoverability are forward-looking statements under applicable securities laws and necessarily involve risks and uncertainties including, without limitation: risks associated with oil and gas exploration, timing of reports, development, exploitation and production, geological risks, marketing and transportation, availability of adequate funding, volatility of commodity prices, imprecision of reserve and resource estimates, environmental risks, competition from other producers, government regulation, dates of commencement of production and changes in the regulatory and taxation environment. Actual results may vary materially from the information provided in this document, and there is no representation that the actual results realized in the future will be the same in whole or in part as those presented herein. Other factors that could cause actual results to differ from those contained in the forward-looking statements are also set forth in filings that NGX and its technical analysts have made, We undertake no obligation, except as otherwise required by law, to update these forward-looking statements except as required by law.
Exploration for hydrocarbons is a speculative venture necessarily involving substantial risk. NGX’s future success will depend on its ability to develop its current properties and on its ability to discover resources that are capable of commercial production. However, there is no assurance that NGX’s future exploration and development efforts will result in the discovery or development of commercial accumulations of natural gas. In addition, even if hydrocarbons are discovered, the costs of extracting and delivering the hydrocarbons to market and variations in the market price may render uneconomic any discovered deposit. Geological conditions are variable and unpredictable. Even if production is commenced from a well, the quantity of hydrocarbons produced inevitably will decline over time, and production may be adversely affected or may have to be terminated altogether if NGX encounters unforeseen geological conditions. Adverse climatic conditions at such properties may also hinder NGX’s ability to carry on exploration or production activities continuously throughout any given year.
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