Iran Claims to Have Expanded Its Axis of Resistance

Politics, Geopolitics & Conflict

Danish shipping giant Maersk has raised the lower end of its full-year guidance thanks to Houthi attacks that have disrupted Red Sea shipping. Maersk is now expecting Q1 profits of $208 million on $12.4 billion in revenue. That compares to last year’s $2.3 billion in profit on $14.2 billion in revenue.

And in the meantime, Iran is claiming that a new front has been established in the Axis of Resistance, with a militia group based in Bahrain claiming to have been behind an attack on Israel that happened last weekend allegedly targeting an Israeli transportation company called Trucknet Enterprises in the southern Israeli port city of Eilat. While rather insignificant in terms of the scale of the drone attack, which failed to cause any real damage, if a Bahrain-based group was indeed behind the attack, this will inevitably cause some complications for Tehran in terms of relations with Saudi Arabia, the ultimate power within Bahrain. The group, the Al-Ashtar Brigades (AAB), is an Iran-aligned Shia militia that has in the past launched terrorist attacks against the government of Bahrain. The credibility of the claims of the Bahrain-based group has not been independently verified and reports could be an exaggerated attempt by Iran to create the impression that its axis of resistance is expanding in a significant manner. The other four fronts are Iraq, Lebanon, Syria, and the West Bank, with pro-Iran militias in Iraq also claiming on Thursday that it targeted Israel’s Tel Aviv and Beersheba with cruise missiles. Again, there is a high probability that there was no cruise missile launch directed at these Israeli cities, but there is immense pressure by Iran right now for its axis proxies to appear to be bombarding Israel. 

Discovery & Development

Venture Global LNG Inc. is poised to commence production at its second LNG export facility in Louisiana by mid-2024. The Plaquemines LNG facility, currently under construction, received initial gas supply last week, marking progress towards its 20 mtpa capacity goal. Despite delays in its first facility, Calcasieu Pass, Venture Global aims to resolve operational issues and expects to commission it fully by the year's end. The company's recent acquisition of a fleet of LNG transport vessels underscores its commitment to expanding its global market presence.

Equinor has received approval from the Norwegian Offshore Directorate to drill two wildcat wells in the North Sea under production license 1185, until February 2029. Equinor, holding a 40% working interest, will operate the wells alongside Vår Energi, Sval Energi, and Aker BP, each with a 20% stake. The drilling operations will utilize Odfjell Drilling's Deepsea Stavanger semi-submersible rig.

Namibia's national oil company, NAMCOR, has entered a development agreement with Chevron, granting the U.S. oil major an 80% operating working interest in an offshore block in the Walvis Basin as a reflection of the growing interest in Namibia's potential as a frontier basin, with recent large offshore discoveries. Under the deal, NAMCOR and local company Custos Energy will retain 10% each in petroleum exploration license 82. Chevron, alongside its involvement in PEL 90, plans to drill an exploration well in the newly acquired block by the fourth quarter of this year.

In other Namibia news, Baker Hughes is set to construct a new liquid mud plant and a maintenance base in Namibia's Walvis Bay to support the country's burgeoning offshore exploration activities. This initiative aims to address congestion and inadequate facilities at Namibia's commercial ports, driven by an influx of drill rigs and support vessels. The liquid mud plant, expected to open by September, will produce drilling fluids locally, enhancing operational efficiency and reducing costs for oil companies operating in the region. Namport, the national ports authority, is seeking funding to extend Luderitz port's quay wall to accommodate more vessels, with the aim of doubling or even tripling berth availability. 

Gas production will commence in Iraq’s West Qurna field within the next six months. ExxonMobil's recent exit from West Qurna 1, subsequently taken over by PetroChina, has reshaped ownership dynamics in the field, with PetroChina now holding the largest stake. The sale of ExxonMobil's shares to Iraq's Basra Oil Company and Indonesia's Pertamina signifies a shifting landscape in one of Iraq's most significant oil fields.

Energy Earnings

JinkoSolar's Q1 performance saw a slight revenue dip to $3.19 billion, missing estimates. This was in part offset by a robust outlook and a significant surge in shipments, which soared by 51.2% year-over-year to 21,907 MW. Despite a decrease in gross margin to 11.9%, attributed to lower average selling prices, the company maintained strong order book visibility for 2024, exceeding 70%. Leveraging N-type technology, JinkoSolar anticipates further growth, with plans to focus on advanced capacity expansion, aiming for N-type cell efficiency of 26.5% by year-end. The company projects Q2 module shipments between 24.0 GW and 26.0 GW, with full-year estimates ranging from 100 GW to 110 GW, signaling confidence in its production capabilities and market demand. 

Phillips 66 reported earnings of $748 million in Q1, down from $1.3B in the previous quarter and $1.96B in the same quarter last year. Adjusted earnings, excluding special items, were $822 million, with adjusted EPS at $1.90, missing estimates. President and CEO Mark Lashier cited strong crude utilization rates but noted impacts from maintenance and renewable fuels conversion. Midstream pre-tax income was $554 million while refining pre-tax income was $131 million, both affected by asset impairments and legal settlements. The company will focus on divesting non-core assets and selling its retail marketing business in Germany and Austria, while emphasizing investments in renewable fuels, exemplified by the startup of the Rodeo Renewable Energy Complex. Phillips 66 hopes to achieve its mid-cycle adjusted EBITDA target of $14B by 2025 and return over 50% of operating cash flows to shareholders.

Marathon Oil (MRO.N) narrowly surpassed Q1 profit expectations, buoyed by elevated oil and LNG prices. Despite a 2.7% decrease in quarterly oil production to 181,000 bpd, higher crude and LNG pricing supported financial performance. The impact of January winter storms, particularly in the Bakken, dampened production by 4,000 bpd. Marathon Oil reported an adjusted profit of 55 cents per share, slightly exceeding analysts' expectations of 54 cents per share.

Leading wind turbine manufacturer Vestas unexpectedly reported an adjusted operating loss for Q1, attributing it to lower project deliveries. Despite a 5% decrease in sales, the company maintained its earnings guidance for the year. Analysts noted the disappointment in the fewer-than-expected wind turbine deliveries, leading to a 3% decline in Vestas' shares. Despite challenges from higher raw material costs and supply chain issues, Vestas reiterated its full-year guidance, expecting an operating margin before special items of 4-6% on sales of 16-18 billion euros.

PBF Energy exceeded Wall Street's expectations for Q1 profit, reporting an adjusted profit of 85 cents per share, higher than analysts' average estimate of 66 cents, largely on the back of increasing consumer demand, despite a decline in consolidated gross margin per barrel of throughput. While PBF's refineries underwent significant planned maintenance during the quarter, they are expected to operate smoothly for the remainder of the year. With a total throughput of 900,000 bpd in Q2, representing around 90% of combined capacity, PBF remains optimistic about its operational outlook. Analysts view PBF's performance positively, especially amidst challenges faced by other industry players.