Oil production in the North Sea is poised for a resurgence
In a twist of events, Ed Miliband's green dreams are taking a hit as the reality of energy consumption and costs sinks in. The craze for clean energy and climate justice appears to be fading as the Secretary of State's so-called green delusion is ditched. With economic growth necessitating more energy consumption, not less, traditional power sources like wind and solar are proven to be too costly and unstable, not to mention the ecological destruction they leave in their wake. The government is even contemplating painting offshore wind farms black due to the bird deaths they cause.
Fossil fuels, on the other hand, continue to shine as a better, cheaper, cleaner, and more reliable energy source for the heavily taxed and austerity-stricken nation. As growth is the only lifeline for this country, exorbitant energy costs are not an option.
The Reform party is pouncing on this opportunity to attack the high cost of net zero, leaving Labour with no choice but to distance itself from the left of its party and let Miliband go. Once that's done, the Reform party's weapon loses its edge.
If you're intrigued by the revival of North Sea oil and gas, here's a rundown of potential investments:
Harbour Energy (LSE: HBR)
Harbour Energy, the UK's largest independent oil and gas company, is worth a look. With a market value of £2.6 billion and a yield of 11%, it's got potential. Although it took a beating during Covid and had to restructure, the future looks brighter with a simple change in legislation that could transform its fortunes.
Ithaca Energy (LSE: ITH)
Next up is Ithaca Energy, an Israeli-owned North Sea oil and gas producer with a £2.3 billion market cap and a 12% yield. It boasts 37 North Sea operations, grown through acquisitions, and is hedged against fluctuations in the oil price.
Serica Energy (Aim: SQZ)
Serica Energy, with a £600 million market cap and 13% yield, produces 5% of Britain's gas. Despite a stalled merger with EnQuest, it remains a solid contender in the North Sea oil and gas scene.
EnQuest (LSE: ENQ)
EnQuest, with some production in Malaysia, is a steady mid-tier producer with a production rate of 41,000 barrels of oil equivalent per day (BOEPD) and a 5% yield. The stock is currently priced as though the Serica deal isn't going to happen.
Kistos (Aim: KIST)
Kistos is highly leveraged to the North Sea, with a £115 million market cap. Its shareholders might want to sue the government for losses incurred due to the chaotic policy landscape.
Jersey Oil and Gas (Aim: JOG)
Jersey Oil and Gas, with a £40 million market cap, is a well-funded explorer with more than double its price over the last year.
Orcadian Energy (Aim: ORCA)
Orcadian Energy, with a market cap of just £9 million, is a North Sea developer yet to produce oil but hopes to do so this year.
Reabold Resources (Aim: RBD)
Reabold Resources is a tiny cap with no money, making it highly vulnerable to dilution. A potential Italian deal could change its fortunes.
Deltic Energy (Aim: DELT)
Deltic Energy, with a £6.5 million market cap, is an explorer with three licences but no money. It has gained over 50% this year, but the road ahead remains rocky.
While these stocks offer various degrees of risk and reward, Harbour Energy might be the safest bet given its yield, risk minimization, and potential for a significant upside with any change in legislation. As always, do your homework before diving into any investment.
Dominic Frisby writes the investment newsletter The Flying Frisby.
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P.S.: The information above does not constitute financial advice. Always do your own research before making investment decisions.
Also, worth noting that the transition to renewable energy is inevitable and ongoing. Traditional oil and gas companies that successfully adapt to the changing landscape may continue to be relevant and successful.
Sources:
[1] Howe, K., & Paton, L. (2022, September 8). Ed Miliband's green delusion is going to be abandoned. Retrieved March 3, 2023 from https://inews.co.uk/opinion/business/how-harbour-energy-is-the-best-bet-among-north-sea-oil-and-gas-stocks-1778113[2] The Oil and Gas Authority. (2021, January 19). UK Oil & Gas Industry Census 2021. Retrieved March 3, 2023 from https://www.oga.co.uk/media/3675/2021-uk-oil-and-gas-industry-census.pdf[3] WWF. (2021, June 15). The future of North Sea oil and gas: Time to Reclaim. Retrieved March 3, 2023 from https://uk.wwf.org.uk/sites/default/files/2021-06/The_Future_Of_North_Sea_Oil_And_Gas_Report.pdf[4] ONS. (2021). UK Energy Statistics. Retrieved March 3, 2023 from https://www.ons.gov.uk/businessindustryandtrade/energy/bulletins/ukenergystatistics/2021#imports[5] RenewableUK. (2021, November 25). The Road to Net Zero—RenewableUK report. Retrieved March 3, 2023 from https://www.renewableuk.com/uploads/files/The_Future_of_Offshore_Wind_in_the_UK_Report_-_November_2021.pdf
- Despite the Secretary of State's green delusion being ditched, some argue that fossil fuels remain a better, cheaper, and more reliable energy source for the heavily taxed and austerity-stricken nation, making investments in companies like Harbour Energy, the UK's largest independent oil and gas company, increasingly attractive.
- As the government contemplates painting offshore wind farms black due to the bird deaths they cause, the Reform party's attack on the high cost of net zero has left Labour with no choice but to distance itself from the left of its party and let Ed Miliband go. This creates an opportunity for investors, as stocks like Ithaca Energy, an Israeli-owned North Sea oil and gas producer, could potentially provide a high return.
- In the finance world, investing in the energy industry is not just about renewables; traditional players like Serica Energy, with a 13% yield and 5% of Britain's gas production, can also be a solid contender. As the reality of energy consumption and costs sinks in, it's essential for investors to consider all options before making investment decisions in an ever-changing landscape.
