Namibia racks up another major offshore oil discovery
Shares of Portuguese integrated energy operator Galp Energia (OTCPK:GLPEF) (OTCPK:GLPEY) have popped more than 20% in Monday’s early trading session after the company announced that the first phase of its exploration in the Mopane field in offshore Namibia could contain at least 10B barrels of oil.
Galp says it conducted testing operations at the Mopane-1X well in January and the Mopane-2X well in March, with, “significant light oil columns discovered in high-quality reservoir sands.” The Mopane field is located in the Orange Basin, where Shell Plc (NYSE:SHEL) and TotalEnergies SE (NYSE:TTE) have made several oil and gas discoveries. Galp produced an average of just over 122,000 barrels of oil-equivalent per day in 2023.
According to Galp, flows achieved during the tests reached the maximum allowed limit of 14K bbl/day, “potentially positioning Mopane as an important commercial discovery.” Citi is bullish on Galp’s discovery, saying the test results are close to a best-case scenario, and has labeled the discovery as “totally transformational” to the company.
From some perspective, Galp’s discovery is comparable to the more than 11 billion barrels of recoverable oil and gas contained in Guyana’s Stabroek block, an 6.6 million acre (26,800 square kilometers) area owned by U.S. oil majors Exxon Mobil Corp.(NYSE:XOM) and Hess Corp. (NYSE:HES), as well as China’s CNOOC Ltd (OTCPK:CEOHF). However, Chevron Corp.(NYSE:CVX) could end up partaking in Guyana’s prized asset if it succeeds in its planned $53 billion merger with Hess. Exxon is the main operator of the block with a 45% stake while Hess and CNOOC own 30% and 25%, respectively.
Galp has launched the sale of half of its 80% stake in Petroleum Exploration Licence 83 (PEL 83), which covers almost 10,000 square kilometers in the Orange Basin. Namibia’s national oil company NAMCOR and independent exploration group Custos each holding a 10% stake apiece.
Galp plans to cede control of the development of the project to the potential buyer, likely to be a major international energy company with a strong track record in project management. Galp has hired Bank of America to run the sale process, with proceeds likely to be in the billions of dollars.
The Mopane discovery–one the largest made in the nascent basin following successful exploration campaigns by rivals TotalEnergies and Shell–could help kickstart the southern African country’s oil industry. In recent years, Namibia has attracted huge interest from international oil companies seeking to grow their production as demand.
Despite the ongoing clean energy transition, most energy analysts have predicted that oil demand will continue growing for years, if not decades. The U.S. Energy Information Administration (EIA) is the most bullish on long-term oil demand, and has predicted a demand peak will not come before 2050, while the OPEC Secretariat sees it coming in 2045.
Meanwhile, Standard Chartered has predicted global oil demand will hit 110.2 mb/d in 2030 and increase further to 113.5 mb/d in 2035.
According to StanChart, a structural long-term peak is very unlikely within 10 years despite a high probability of cyclical downturns over the period. StanChart has argued that the current gulf between demand views creates significant investment uncertainty which that’s likely to force longer-term prices higher.
The oil price rally has continued losing momentum, with crude oil futures posting a second straight weekly loss, marked by big swings with geopolitical risk perception rising and falling in the Middle East. Tradition Energy’s Gary Cunningham has told MarketWatch that the oil rally has stalled because there “hasn’t been any increased risk to high production countries in the region” with Saudi Arabia, United Arab Emirates and Iraq staying out of the conflict. “Really, only Iran’s barrels are at risk, and that would only be if wider hostilities broke out,” he added.
Bank of America has tapped Targa Resources Corp. (NYSE:TRGP) and Marathon Oil Corp. (NYSE:MRO) as some of the stocks most sensitive to oil price swings. Meanwhile, Goldman Sachs has picked Targa Resources and Chevron as attractive dividend-paying energy stocks with good prospects for dividend growth.
With a current dividend yield of 7% and a 51% payout ratio, GS has predicted that Targa will grow its dividend by 30% CAGR through 2025. On the other hand, the analysts have forecast that Chevron, with a current yield 4.0% and 49% payout ratio, will grow its dividend by 6% CAGR through 2025.
