Edison Investment Research

Ludicrous growth of the EV

Hit the ‘ludicrous mode’ setting on the Tesla model S P100D and you feel yourself being propelled from standstill to 60mph in a paltry 2.5 seconds – over 30% slower than Musk’s latest revelation, the Tesla Roadster. The Tesla Roadster boasts a range of over 600miles on a single charge, a top speed of 250mph in addition to neck straining acceleration.

Tullow’s Araku result completes our 2017 wells to watch list

At the start of this year, we highlighted seven exploration wells due to be drilled in 2017, all involving independent companies and targeting resources over 100mmboe. The results from the last of these wells, Tullow’s Araku, were announced last week, with the offshore Suriname well proving the presence of gas condensate but with no significant reservoir quality rocks.

Fancy a Ferrari or an EV?

EV adoption impact on oil demand

Electric vehicles are a fascinating subject and not a day goes by without Tesla or a major OEM touting their latest designs and the virtues of electrification of their light vehicle fleet. That excludes Marchionne, Ferrari’s CEO, who famously retorted that ‘you’ll have to shoot me first’ before the supercar brand develops a vehicle without the roaring sound of an internal combustion engine.

Verbier delivers after sidetrack

Statoil’s sidetracked Verbier well has discovered oil after the main wellbore found water filled sand. The company was targeting oil in an updip location on the structure together with joint venture partner Jersey Oil & Gas (JOG). Statoil believes that the 20/05b-13z well has proven a minimum recoverable resource of 25mmbbls, and that the upside could be as much as 130mmbbls. The JV has not at this stage provided details of the discovery such as sand quality and thickness, or of the location of the sidetrack. Appraisal wells will now be planned to assess the commerciality of Verbier, and to mature further prospectivity in the P2170 licence including the Cortina prospect and Meribel lead.

Revealing Big Oil hurdle rates

Pemex farm-outs indicate lower end of returns appetite

Our analysis on cost of capital tends to focus on small/mid cap E&Ps as these are companies we traditionally model and where the deals are material enough to investors that get good visibility on deal metrics. The analysis indicates that costs of capital (as implied by buyers’ IRRs) are perhaps higher than many would expect - in the range of 15-20%.

These deals are often characterised by a capital-constrained seller and therefore often a buyer’ market. How the deals stack up when deals are made with other large companies or NOCs are probably different and should illustrate the lower end of returns that the buyers are willing to accept.

Fatala well latest disappointment offshore West Africa

Results from Hyperdynamics’ Fatala-1 are the latest in a number of disappointing wells drilled offshore West Africa. It joins Ophir’s Ayame-1X well in Cote d’Ivoire and ExxonMobil’s Liberian well Mesurado-1 as highly anticipated exploration wells that have failed to deliver over the last year in an effort to extend the successes seen in Mauritania, Senegal and Ghana.