Wednesday, 17 July, 2024 / Edition 16

Hi everyone,

A special welcome to the new subscribers joining us after yesterday’s webinar entitled Behind the Boom: 2024 Upstream Deal Flow. I really enjoyed sharing with all of you! If you missed the webinar, we will be sending out a recording in next week’s edition of Well Read, so stay tuned!

Now, let’s get to the energy news of the week.

Shangyou Nie

Editor, Well Read

BP Forecasts Peak Oil Demand in 2025

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Global demand for oil and coal will peak in 2025, according to BP’s Energy Outlook 2024 issued last week. Gas demand will continue to grow and peak in 2045 under the Current Trajectory scenario.

Key points from the Outlook:

• BP analyzes global energy outlook under two different scenarios: Current Trajectory and Net Zero.

• Even under the Current Trajectory scenario, oil demand will peak next year and decline from 102 million b/d in 2025 to 77 million b/d in 2050.

• The main reason for oil demand peaking so soon is due to reduced oil use in road transportation with the uptick in electric vehicle purchases.

• Coal demand will peak in 2025, as China reduces its dependence.

• “Solar did not grow as fast as expected,” said Dale Spencer, BP’s chief economist, during the release webcast.

Gas outlook findings:

• Gas demand projections were very different depending on the scenario.

• Under the Current Trajectory scenario, gas demand will peak in 2045.

• Under the Net Zero scenario, gas demand will peak in 2025.

• LNG trading shows a similar trend, continuing to grow until 2050 to reach 1,000 bcm per year under the Current Trajectory scenario, but it peaks in 2030 under the Net Zero scenario.

• LNG demand growth after 2030 is highly dependent on the pace of energy transition, especially in Europe and Asia.

• Carbon emissions from energy use will peak in 2025 to 41 Gt of CO2 equivalent under both scenarios.

Implications:

• Oil demand peaking as early as next year might lead to fiercer competition for market share and oil price volatility.

• Eighty percent of global gas production growth will come from the USA and the Middle East. This indicates a major growth direction for the US oil/gas industry in the mid to long term.

Be aware of the precise timing of these projections: Since these projections are shown in five-year increments, oil peak could happen between 2025 and 2030. The actual numbers from 2026 through 2029 are not shown.

Go deeper: For more details, you can access the data from BP.

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Devon to Acquire Williston Basin Assets from Grayson Mill Energy

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Last week, Oklahoma City-based Devon Energy announced plans to acquire the Williston Basin business of Grayson Mill Energy for $5 billon in a cash and stock deal. This deal will expand Devon’s existing position in the basin.

Deal details:

• Devon will pay $3.25 billion cash and $1.75 billion in stock to Encap Investments, a Houston-based Private Equity firm, for Grayson Mill’s assets.

• Devon expects the deal to close in Q3, 2024, with an effective date of 1 June 2024.

Devon will get:

• 307,000 net acres (70 percent working interest) in the Williston Basin

• 500 gross drilling locations, 300 re-frac candidates, and 10 years of inventory life in the basin

• 100,000 boed (55 percent oil) of new production in 2025, bringing total production in the Williston Basin to 150,000 boed

• Infrastructure ownership in 950 miles of gathering system in the basin

After the deal:

• Devon will have a total production of 765,000 boed production, with 55 percent oil.

• Devon’s portfolio will include assets in the Permian and Eagle Ford, Anadarko Basin, Power River, and Williston basins.

• Devon will become the fourth-largest producer in the Williston Basin after Chord, Continental Resources, and ConocoPhillips-Marathon, according to Andrew Dittmar, a director at Enverus.

• Devon will increase its stock buy-back program to $5 billion through mid-2026.

About Devon:

• Devon has a market cap of $30 billion.

• Devon has been actively hunting for an M&A target. It was earlier reported in discussions to acquire Marathon prior to Conoco’s acquisition of Marathon.

What to watch:

• The deal represents the latest example in the ongoing M&A wave, as well as the active exit of private equity firms from the oil and gas industry.

• PE firm Encap sold a total of $4.5 billion assets throughout the last month, including assets in Uinta and Permian Basins.

• Expect continued M&A activity as companies consolidate their oil/gas positions and build up inventory life.

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✉️ To get in touch with Shangyou, send an email to editorial@aapg.org.