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Why the Majors need to consider margins in weighing up offshore wind

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19 July 2022

Why the Majors need to consider margins in weighing up offshore wind

Report summary

As electrons are set to replace hydrocarbon molecules in Big Energy portfolios, which will offer the higher unit cash margin? Offshore wind’s stronger performance than the Majors’ new field upstream development portfolios shows that the financial prize in renewable power is more than simply long-term and steady cash flows. We introduce our new proprietary operating cash flow per GJe metric to analyse relative performance across new developments in E&P and offshore wind. With the Majors flush with deep pockets of cash at a time when huge offshore wind tender volumes will be awarded, we also discuss the strategic implications.

Table of contents

  • Executive summary
  • A new cash margin metric: operating cash flow per GJe
  • Offshore wind delivers by some margin
  • The traditional comparison: risk and reward
  • Balancing the value equation: higher risk, returns and high cash margins
  • Final word
    • Notes on methodology
    • Breakdown of average unit operating cash margins

Tables and charts

This report includes 11 images and tables including:

  • Weighted average operating cash margin (real), pre-production assets, 2025-2040:
  • Annual weighted average operating cash margin (real), pre-production assets:
  • Weighted average upstream operating cash margin (real), pre-production assets, 2025-2040:
  • New project nominal returns - Majors’ upstream* vs unlevered offshore wind projects**
  • Offshore wind unlevered IRRs (nominal) by development status:
  • Capital intensity* in offshore wind versus upstream, pre-production assets:
  • Annual cash margin movement since 2010 in offshore wind and upstream, onstream assets:
  • Weighted average operating cash margin, 2025-2040, and IRRs, for pre-production assets:
  • Understand and benchmark the companies leading the energy transition:
  • Offshore wind operating cash margin - using average and annual efficiency factor:
  • Breakdown of weighted average operating cash margin (real), pre-production assets, 2025-2040:

What's included

This report contains:

  • Document

    Why the Majors need to consider margins in weighing up offshore wind

    PDF 1.27 MB