“Shell” Games with Carbon Credits

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Shell sold millions of ‘phantom’ carbon credits

U.S. Dept. of Energy To Purchase Crude for Strategic Petroleum Reserve

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Video Transcription edited for grammar. We disavow any errors unless they make us look better or smarter.

Michael Tanner: [00:00:14] What’s going on, everybody? Welcome into the Wednesday, May 8th, 2024 edition of the Daily Energy News Beat stand up. Here are today’s top headlines. First up, shell sold millions of carbon credits for carbon that was never captured. Report finds interesting. Next up US Department of Energy to purchase crude oil for the Strategic Petroleum Reserve. Stu is falling out of his seat somewhere. I will then quickly jump over and talk about what happened in the oil and gas finance markets today. API did come out with their crude oil inventory estimate and then we did see couple earnings. I want to highlight specifically Cord and Sandridge. And then we’ll let you guys get out of here. Stu is on assignment today. So I am holding down a solo show. But it’s not going to stop us from having a great show. [00:01:06][51.5]

Michael Tanner: [00:01:06] Let’s go ahead and move right in to the first story. Shell sold millions of carbon credits for carbon that was never captured, according to report. Now is what you’ll discover. Greenpeace wrote the report. So we’ll see here. I’m going to read straight from the article here. Shell showed millions of carbon credits for reductions in greenhouse gas emissions that never happened, allowing the company to turn a profit on its fledgling carbon capture and storage project, according to a new report by Greenpeace Canada. Yeah, I’m sure they’re not biased at all. Under an agreement with the Alberta government. Shell was awarded two tons worth of emission reduction credits for each tonne of carbon that it actually captured and stored at its underground facility at its quest plant near Edmonton. This took place between 2015 and 2021 through a subsidy program for carbon capture and utilization storage projects, which are championed by the oil and gas sector as a way to cut its greenhouse emissions. During this period, shell was able to sell 5.7 million tons of what Greenpeace described as phantom credits, making more than 200 million for the company. These credits were sold to other oilsands companies in the Alberta carbon market. I love the next quote, though such sales would not have been illegal, but amounted to a hidden subsidy within the program, which undercut the effective effectiveness of industrial carbon pricing, according to Keith Stewart, a senior energy strategist at Greenpeace. Wow, what a title over at Greenpeace senior energy strategist it should be. It should probably be Lights Out senior energy strategist, because Greenpeace really just wants your lights to. Hey, do go out. Shell has received over 777 million from the federal government and provincial governments at about 406, in revenue from carbon offsets, according to the company records cited by our friends over at Greenpeace. All in all, this is what’s crazy. Taxpayer funding is covered about 93% of the cost of Shell’s Quest project to date. So this is what’s funny. Okay, so we’ve talked a lot about carbon credits, maybe the Fugazi that they are. Are you really offsetting? Are you really not? The problem is carbon credits have been championed exactly by people like Greenpeace. Greenpeace has been at the forefront of trying to push carbon credits on. We need to do this. We need to have a carbon price. We need to do that. They’re all for this. And then when shell actually enters into not a legal agreement, remember what the article said. Such sales would not have been illegal, but amounted to a, quote, hidden subsidy. Wasn’t that what you want, a subsidy? That’s exactly what the whole carbon credit thing is. It’s a subsidy. So why are you for carbon credits? If now when a company takes advantage of given carbon credits, you can go out and say hidden subsidy. Absolutely unbelievable. And rightfully so. The Alberta government, Ryan Fournier, he’s a spokesperson of the Alberta. Alberta’s Environment Minister, Rebecca Schultz said that this is a, quote, smear job by Greenpeace. He and the environmental people are now saying Greenpeace is doing a smear job. Unbelievable. That quest facility is operated by Shell Canada and owned by Canadian Natural Resources, Chevron and Shell Canada. It’s unbelievable. You’ve now got interesting. You’ve got environmentalists fighting with each other when they should be on the same side, specifically Canadian. I could see how maybe the environmentalists, you know, in the United States, have a bunch of different stuff. Pretty unbelievable. It’s it’s I find it hilarious with Greenpeace will go to any lengths to make the oil and gas industry look better, even if they’re the ones pushing for this. In response to this report, Shell Canada spokesperson Stephanie Dolan said carbon capture technology is critical to achieving international climate targets. His actual code is, quote, a result of its innovative fiscal and regulatory framework. 9 million tonnes of CO2 has been captured at the Shell Quest facility that otherwise would have been released into the atmosphere. Neither Province or shell denied the sale of extra credits. I love how they say the innovative fiscal and regulatory frameworks, so they’re telling you it’s a little bit of a Fugazi without even telling you I’m on either side here. I think carbon credits are a little bit. The pie in the sky. I’ve been. I keep saying the word fugazi. Do I do I believe that in some respects. You know, if they’re doubling down on credits for no reason to receive subsidies in order to make their project work, that really is an innovative fiscal framework because you’re going to need it. So carbon credits, I think, are going to become a big deal. And I also think what you’re going to see is you’re going to see a lot of people who were for carbon credits, aka a lot of these Greenpeace folks all of a sudden when they see the impact and say, oh, well, now Shell’s making a bunch of money on it. Oh, now shell selling them to other companies. It’s going to be interesting. So Greenpeace not happy with carbon credits even though they were all for it. Gotta love it. [00:05:49][283.6]

Michael Tanner: [00:05:50] Let’s move on here. U.S. Department of Energy to purchase crude for the Strategic Petroleum Reserve. The publisher note there from stu I love it. I bet they don’t ever fill it. It’s too close to the November elections. He’s probably right. But the doe, the Department of Energy, the D.o.e., announced a new solicitation to purchase to replenish the petroleum reserve. They announced that they seek up to 3.3 million barrels of crude oil for delivery in October, which is like a quarter of the absolute, amount of oil we use on a daily basis. So they’re basically not doing anything today. Department of energy is, procured about a total of 30, 2 million barrels of oil at an average price of about 76,000. The the bids for this are due by May 14th. This will go to Big Hill storage facility. The d.o.e. also canceled. And you gotta love this. This is my favorite. Like the D.o.e. canceled 140 million of barrels that congressionally mandated sales for the fiscal years, 24 to 27, in a move that counts as replenishing. Right. So if you aren’t going to spend the money. But now we’re not going to spend the money, you count, that is a cash increase. I wish my bank account work like that. I wish I could tell Bank of America that because then I could maybe see, I could keep that rolling and just see my account up, up, up and up. I’m reading now again from the article. Just a week ago, President Biden’s energy advisor, Amos Hochstein, said there was enough oil in the reserve and in the administration. We use the crude oil from the SEC here should the need arise. Yeah, as we get closer to the election and you want to attempt to lower oil prices. But I thought we couldn’t lower oil prices. According to, Karine Jean-Pierre, and the FTC. Linda con I apparently only Scott Sheffield can do that. So. Unbelievable. Dogs buying, like, five barrels. I mean, that’s really what the three, the five barrels or 3 million. But it doesn’t really matter in the context of what the of what the Spro are really hold. I mean, they’re, they cancel 140 million barrels. So they count that that’s what we call that. That’s what we call non-GAAP accounting. Folks. If you want to know what non-GAAP accounting looks like for the SPR, it’s absolutely there. So, spro, I guess is getting replenished. But we will, we will see that there. [00:08:05][134.6]

Michael Tanner: [00:08:06] Let’s go ahead and jump over to finance here, guys. But before we do that, let’s pay the bills. As always, thank you for checking us out. www.energynewsbeat.com the best place for all your energy and oil and gas news. Doing the team do a tremendous job making sure that website stays up to speed. Everything you need to know to be the tip of the spear when it comes to the energy and the oil and gas business. Hit the description below all links to the timestamp, links to the articles. A lot of good stuff there guys. Check us out again. www.energynewsbeat.com. [00:08:34][28.2]

Michael Tanner: [00:08:37] I mean overall market fairly flat to the S&P 500. Only traded up about a 10th of a percentage point. Nasdaq basically flat only down one tenth of a percentage point. We also saw ten year yield. two year yields drop about 0.04 percentage points. Ten year yields actually up 0.04 percentage points. Dollar index rose about quarter of a percentage point. And we saw bitcoin stay fairly flat $63,000 crude oil dropped a little bit mainly off the back of stuff will cover. It’s currently trading 7838. That was actually down about a 10th of a percentage point. Brant oil absolutely flat 8340. Natural gas actually saw a little bit of a pop up, about a half a percentage point $2.20, you know, mainly oil settling lower, mainly on signs of some easing supply tightness. That’s according if you read routers. You know, we’ll also you know,. [00:09:30][52.9]

Michael Tanner: [00:09:31] The API also came out and we saw a slight build industry in in what the API is guesstimating for the Strategic Petroleum Reserve, crude oil inventory numbers, which you will hear it at 930, central time, here on Wednesday. It came in and they did about a half a million barrel build, which was, you know, we are expecting about a 1.4 million barrel draw. We did see the EIA also raise its forecast for world oil and liquids fuel output and lowered its demand expectations, basically pointing to a well-supplied market as opposed to prior forecasts which have been showing, mainly an undersupplied market. So I think the EIA is is is is. Along with the IAEA. And the real question is who’s right, IEA, EIA or OPEC? We know OPEC is a lot more bullish on where demand is going to come from. It looks like the IEA and the IEA are trending the other way. But it’ll be interesting to see there. You know, I think you know the quote here from Stone x analyst Alex Hodges. Global inventories remain in a building phase and has accelerated recently. They wrote that to clients on last Tuesday. So you know again the things are getting pulled one way or the other. It’ll be very interesting. Again we saw the API with that 500 million barrel draw. [00:10:46][75.8]

Michael Tanner: [00:10:47] Let’s move over quickly. Caught. We saw two earnings today. We’ll start with cord energy here. They actually post an earnings beat street estimate of $4.80 earnings per share. They actually posted about $5 and a $0.10. So beat that by about beat it by about $0.30 there. Top line quarter one operational financial highlights oil volumes up at the higher end of their guidance, about, 99,000 barrels of oil per day was about $10 per boe, which was apparently the lower end of the guidance. Total volumes. We’re about 168 million barrels of oil equivalent today. So you can see the split there spent about 250 million on CapEx. Net cash provided by operating activities, about $406 million. Net income of about 199 adjusted EBITDA. Remember that’s, you know, the RR favorite SPR number is about 464 million in adjusted free cash flow is about 199 million. They also did come out and say that they are getting close to finalizing their enter plus, merger. You know, shout out to, John Farrell and our friends over well, database. Me and him did a great deal spotlight specifically talking about Ford and that acquisition of plus and and really drilling down to in what is going to be key for cord, which is those three mile laterals, you know, quote from Danny Brown. He’s the CEO and president over there. Core deliver exceptional operational performance. In the first quarter. The team rebounded quickly from a difficult weather conditions, a well improving cycle times, our development program and exhibiting the strongest quarterly safety performance in company history. The improved operational performance, coupled with strong well performance, drove first quarter oil production and free cash flow above expectations. We also went ahead and basically, where is it here? They declared a very a base plus variable cash dividend of about $2.94 a share. So all those new enter plus shareholders, they’re going to make sure they’re going to get a little bit of their they they’re definitely going to make sure that they get their, stock there. [00:12:54][126.5]

Michael Tanner: [00:12:54] The other one I want to cover quickly is Sandridge. They actually just dropped, not good. They went ahead and, posted, earnings per share of about $0.23 on revenues of about, 30 million, which is compared to about 110 million, the quarter before that. So you can see that the weather really impacted then cash provided by operating to about $15 million. You know, adjusted EBITDA was about $14.7 million. First quarter realized natural gas prices. We’re about $75. You know, sandwich gets its gets beaten up a lot. They actually do have fairly low lows in about $7.09 a BOE. But they do spend a lot of that. They do spend a decent amount of that in mid con which really has lower operating costs. So pretty I mean it’s Sandridge is always going to struggle. There there are small cap. they have about 208 million of cash equivalent. But you’re only you know, you’re only making about, you know, 11 million a quarter. And it’s, you know, relative to kind of the outstanding, outstanding, you know, well, performance that they have, you know, didn’t quite meet Street’s expectations. We expect you know, their market is close since they, since they announced. So we’re not necessarily we’ll see the stock movement tomorrow, but, you know, pretty you know a lot more earnings guys that go to energy news Broadcom search earnings or go to our earnings category. You’re going to be able to see all of the different categories there. I did record today before I let you go a great great interview with Bennett Williams. He’s an offshore M&A expert. Having been in that business for 20 years. This will be available on our deal spotlight. We covered Exxon Chevron versus S and what’s going on. There was an excellent we spent about an hour breaking it all down. So hope you guys check that out next week. But with that guys I’m gonna let you get out of here. [00:14:40][105.3]

Michael Tanner: [00:14:41] Quick one for us. Stu and I will be back in the chair tomorrow to finish out the week. Until then, we’ll see you next time. [00:14:41][0.0][858.4]

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