Energy Prospectus

Opening Prices:
> WTI is up $0.16 to $69.32/bbl, and Brent is up $0.32 to $74.17/bbl.
> Natural gas is up 3.4c to $2.763/MMBtu.

AEGIS Notes
Oil

Oil trades slightly higher as the market shrugs off Russia's Wagner revolt
August ’23 WTI gained 16c this morning to trade around $69.32/Bbl

A potential conflict involving Moscow and Wagner mercenaries was averted Saturday after a deal led to their withdrawal, halting their swift advance on Moscow < Nataly (our Russia expert) told me that the situation is under control.
> Deputy PM Novak confirmed normal operations in Russia's energy sector over the weekend (BBG)
> Robust Russian crude exports, in addition to monetary tightening by Western nations and a lackluster recovery in China, continue to weigh on prices

Emerging Markets Drive Oil Market Optimism, Says Aramco CEO (Bloomberg)
> Saudi Aramco CEO Amin Nasser expressed confidence in the 'generally sound' oil market for the rest of 2023, fueled by robust demand growth from China and India
> Nasser added that despite the risk of recession in several OECD nations, developing countries are driving growth in demand exceeding 2 MMBbl/d in 2023 < IEA forecasts 2.4 million bpd year-over-year increase in demand for oil in 2024 and global demand will be 104 million bpd by end of Q3. Per IEA, demand will exceed supply even if Saudi Arabia does not cut another million bpd starting in July. Barring a global recession, IEA forecasts oil demand to keep increasing in 2024.
> Despite China's economic challenges, the transportation and petrochemical sectors continue to show growth in demand. He reiterated that an expected global economic recovery could further tighten supply-demand balances.

Natural Gas

Natural gas prices are trading higher, around $2.76, extending gains from last week
> The Winter ‘23/’24 strip is up 4.3c to $3.62, and the Summer ’24 strip is higher by 1.7c to $3.35 < At these ngas prices ALL OF OUR GASSERS will be extremely profitable in 2H 2023 and 2024.

Weather forecasts shifted warmer, with the Lower 48 forecast warming by 5.1 °F over the two-week period
> Regionally, the largest changes were in the Northeast, Midwest, and Southeast regions

Texas power demand forecast to break record again this week (Reuters)
> ERCOT is currently projecting electricity demand on Wednesday to peak at 85.4-GW, compared to last year’s peak of 80.1-GW
> This is the third time in the past two weeks that ERCOT has forecast record-breaking demand due to the heatwave currently impacting the South Central region

Power use failed to set a record last week, as storms knocked out power to more than 600k customers, mostly along the Gulf Coast
> Gas demand in the South Central region is forecast to rise to 26-Bcf/d on Wednesday from its current level of 23-Bcf/d

China’s ENN and Cheniere sign LNG supply deal (Reuters)
> LNG exporter Cheniere Energy announced that they will supply 87-Bcf per year to China’s ENN for 20 years
> This is the first major binding agreement for natural gas trade between the US and China in several years

Here are the Q1 actual revenues net of cash settlement on their hedges and all-in cash expenses (including G&A, interest expense and current income taxes) per Mcfe for the four large-cap gassers in the Sweet 16:

Net Revenues / Net cash expenses

$4.077 / $2.694 for Antero Resources (AR)

$3.068 / $1.134 for Comstock Resources (CRK) < CRK is the closes to a "Pure Gasser", so operating expenses are the lowest.

$4.125 / $1.410 for EQT Corp. (EQT) < EQT has some very good hedges in place for 2023.

$3.997 / $2.001 for Range Resources (RRC)

All four will report lower Adjusted Net Income in Q2 (low point of the year), but they should all be profitable. AR is the only one that might report a small loss for the quarter.

They all continue to generate solid operating cash flow. They should all be free cash flow positive in 2H 2023. None of them have any near-term debt issues.

Note from RBC Capital Markets Team

Helima Croft (Analyst) < Super Smart Global Oil Market Expert

Russia Quick Take: Lord of War Published June 25 2023 15:12:32 EDT

Initial Analysis on the Russian Insurrection and White House Energy Response
The immediate challenge to the Putin regime appears to have receded with Yevgeny
Prigozhin’s decision to end the apparent rebellion and seek sanctuary in Belarus.
However, the risk of further civil unrest in Russia now must be factored into our
oil analysis for the back half of the year. It is our understanding that the White
House was actively engaged yesterday in reaching out to key domestic and foreign
producers about contingency planning to keep the market well supplied if the crisis
impacted Russian output. A significant concern was that President Putin would
declare martial law, preventing workers from showing up to major loading ports
and energy facilities, potentially halting millions of barrels of exports. There appears
to be great uncertainty about what comes next, and the next few weeks will likely
be crucial for determining if Putin has staved off the most serious challenge to his
control of the country during his over two decades in power. Finally, several market
commentators on Saturday were speculating that the end of the Putin regime could
mean the roll back of Russian energy sanctions and a return of Russian exports to
Europe.

Citi maintained its third-quarter Brent price forecast of $83/bbl, a
number $8.60-$8.75 above the respective August and September Brent contracts
on Monday morning of $74.25/bbl and $74.40/bbl.