IOC that handled most of India’s gasoline imports in the surge of shipments that started in April of last year – has kept taking gasoline to fill the domestic supply gap.
After oil producers including ONGC and private sector Cairn India pleaded for reduction in cess, oil ministry had written to Finance Ministry.
India shipped in 461,000 barrels per day (bpd) of Iranian oil in July, nearly a 21 per cent increase from June.
Cobalt International Energy’s plans to offload an African oil discovery at the centre of a US corruption investigation have suffered a blow, after Angola’s state energy group backed away from a $1.8bn deal to buy it.
Cobalt, the New York-listed Texan oil explorer, reached a with state-owned Sonangol a year ago. But , the billionaire daughter of Angola’s authoritarian president and newly appointed Sonangol boss, has now written to Cobalt to recommend that it sell its interest elsewhere, the US group said on Tuesday.
Ms dos Santos’s decision delays what Cobalt had hoped would be the final act of its eventful foray in Africa’s second-biggest oil producing country.
In 2012, seven years after it was founded with $500m from Goldman Sachs and US private equity groups, Cobalt’s share price jumped 38 per cent in a day, giving it a market value of $11bn, after it struck oil under Angola’s seabed.
Weeks later, the Financial Times reported that three top Angolan officials had held previously in a local company, Nazaki Oil and Gaz, which the government had assigned to be Cobalt’s partner when granting exploration rights. One of those officials, Manuel Vicente, was head of Sonangol at the time that the rights were granted. He is now the country’s vice-president.
All three officials deny wrongdoing, as does Cobalt, which maintains it did not know about the officials’ hidden stakes.
US authorities had opened a corruption investigation in 2011 following allegations about the hidden stakes made by a local activist, Rafael Marques de Morais. In 2014, Cobalt with Nazaki and another local partner, which transferred their interests in the project to Sonangol.
Last year, the US Securities and Exchange Commission, which handles potential civil violations of anti-corruption law, . A parallel investigation by the Department of Justice, which handles criminal cases, was still ongoing as of May, according to a Cobalt filing.
Angola’s vast natural wealth, chiefly oil but also diamonds, was the subject of three decades of on-off civil war, which finally ended in 2002.
But it continues to fuel instances of bribery and embezzlement that have left the country five places off the bottom of Transparency International’s rankings of perceived corruption last year.
Timothy Cutt, a former head of petroleum at BHP Billiton who took over as Cobalt chief executive in July, blamed the lack of recovery in the crude oil price for Sonangol’s decision to pull back from the purchase of Cobalt’s assets.
Mr Cutt, who has held talks with Ms dos Santos in Luanda, said that he would invite other potential buyers to a data room this week. Cobalt, which slipped to a net loss of $252m for the first half of the year compared with a $148m loss for the same period last year, needed a deal by the end of the year, he added.
Selling the Angolan assets would determine whether Cobalt needed to seek investors for its Gulf of Mexico interests, Mr Cutt explained.
Chevron, BP, Total and other big western groups pump Angolan crude, alongside Sinopec of China and several smaller companies. Mr Cutt said that 18 groups had examined Cobalt’s assets during a previous effort to sell them, though none was prepared to go as far as Sonangol.
Cobalt’s shares, which hit $35 when it announced its initial discovery in 2012, were down 25 per cent at $1.02 in early New York trading on Tuesday.
Top eight listed state-owned oil and gas companies have a combined market capitilization of about $80 billion, making it ninth largest globally.
The Comptroller and Auditor General of India in a report tabled in Parliament, said 831.88 sq km of KG-D6 area needs to be taken away from RIL as per the contract.
Oil rose in New York amid speculation the oversupply still weighing on global markets will diminish, even after prices fell into a bear market on Monday.
Futures gained 1.2 per cent after dropping below US$40 on Monday for the first time since April. While crude and gasoline inventories are forecast to have declined, they will remain at the highest seasonal level in at least two decades. Still, the retreat is driven by a seasonal slowdown in U.S. fuel demand and prices will rebound above US$50 a barrel by year-end as American shale production retreats, according to Bank of America Merrill Lynch.
Oil has tumbled more than 20 percent from its peak in June — meeting the common definition of a bear market — halting a recovery that saw prices almost double from a 12-year low in February. The supply glut is upsetting industry expectations, with BP Plc, Royal Dutch Shell Plc and Exxon Mobil Corp. reporting second-quarter earnings last week that were worse than estimated.
“What’s going on right now is actually quite seasonal, we’re still looking for oil to be back in the $50-plus range heading into year-end,” Francisco Blanch, head of commodities research at Bank of America Merrill Lynch, said in a Bloomberg television interview. “Supply’s already contracting and demand’s still okay.”
West Texas Intermediate for September delivery was at US$40.55 a barrel on the New York Mercantile Exchange, 49 cents higher, at 11:42 a.m. London time. The contract slid US$1.54, or 3.7 per cent, to US$40.06 on Monday, the lowest close since April 18. Total volume traded was about 16 perc ent below the 100-day average.
Brent for October settlement rose 62 cents to US$42.76 a barrel on the London-based ICE Futures Europe exchange. The contract dropped US$1.39 to US$42.14 a barrel on Monday. The global benchmark traded at a premium of US$1.41 to WTI for October.
U.S. crude stockpiles probably dropped by 1.75 million barrels last week, according to a Bloomberg survey before a report from the Energy Information Administration on Wednesday. Supplies rose to 521.1 million barrels through July 22, keeping them more than 100 million barrels above the five-year average. Gasoline inventories probably fell by one million barrels last week.
“The period for the market to balance out is taking longer than expected,” Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt, said by e-mail. “The market faces continuing oversupplies of crude and products as well as an increase in U.S. oil production.”
Supplies could swell further as OPEC nations work to restore halted output, with factions in Libya reaching a deal to re-open oil terminals and Nigeria resuming payments to militants in the oil-rich Delta region.
The crude glut will take a long time to dissipate, meaning only gradual price gains, said Michael Hsueh, a strategist at Deutsche Bank AG. West Texas Intermediate, the U.S. benchmark, will average US$49.50 in the fourth quarter before breaking decisively above US$50 next year, the analysts say.
“We’re looking at a market that’s still in a very slow process of rebalancing and we don’t think that you’ll get a sustainable deficit until the second quarter of 2017,” said Hsueh, who sees oil at US$53 next year.
“Those deficits are necessary to draw down global inventories, but that will still take until the end of 2018, it appears.”
WTI fell 22 per cent from early June to Monday’s close, taking it past the 20 per cent drop that characterizes a bear market. So ends a recovery that saw prices almost double from a 12-year low in February. Supply disruptions from Nigeria to Canada that cut into the global surplus have abated.
While U.S. stockpiles are down from an April peak, they remain far above anything the market has witnessed at this time of year for at least three decades. Worse, gasoline inventories are at unprecedented levels, too, crushing processing profits from a fuel that a few months ago was seen as an industry bright spot.
“The price move down does make sense, given that we still have a huge overhang of oil inventories,” said Gareth Lewis Davies, an energy strategist at BNP Paribas. “There’s a sense that looking at the balances going forward, supply and demand are in parity. That means we’re still left with this overhang.”
Yet, with oil companies’ capital expenditure reductions set to reach US$1 trillion by 2020, Simon Flowers, the Edinburgh-based chief analyst at Wood Mackenzie Ltd., said there’s a “ticking time bomb” that will eventually push prices higher. Such reductions may even push demand above supply as early as the end of this year, said Hans Van Cleef, an ABN Amro energy economist.
The lack of investment “will have a big impact on global supply,” said Van Cleef, who forecast Brent will reach US$70 next year. As soon as the market realizes there isn’t an oversupply and that a shortage is imminent, “that should give a huge boost to oil prices,” he said.
As prices begin to rise, the first producers to benefit will be U.S. shale drillers, Flowers said. He expects shale output to bottom early next year before returning to the record level set in 2015 of about 4.5 million barrels a day within two years. Shale production will nearly double to as much as 8.5 million by the middle of the next decade, spurred by cost savings of as much as 40 percent, according to Flowers.
Already, U.S. oil explorers have boosted the number of active rigs by 58 since the start of June to 374, with 3 added last week, Baker Hughes Inc. said July 29. American producers have expanded drilling in recent weeks after idling more than 1,000 oil rigs since the start of last year.
Globally the number of new oil rigs that hit their break even costs at US$57 a barrel is “a much more patchy story,” Flowers said, with regions such as West Africa lagging behind the U.S. in adapting to a lower price environment.
“The U.S. Energy Department is saying that this productivity gain is continuing,” said Bjarne Schieldrop chief commodities analyst at SEB AB. Those gains could put the price of oil needed for U.S. shale production below US$40 this time next year, he said.
With files from Alex Longley and Laura Wright
When KazMunaiGas Exploration Production listed in London in 2006, Kazakhstan was so keen to make it attractive to international investors that it rewrote some laws.
A decade later, the shine has worn off for investors in KMG EP, who are locked in an increasingly , the Kazakh state oil company NC KMG, which owns a controlling stake.
This week, minority shareholders will vote on a plan by NC KMG to tighten its control over the KMG EP by rewriting the “relationship agreement” between it and its subsidiary that, if approved, could lead to a buyout worth up to $1.3bn. Independent directors have decried the proposals as an attempt to , and a growing number of investors look likely to vote against them.
However, the story of how KMG EP went from a flagship for Kazakhstan’s state oil company to a thorn in its side shines a light on the inefficiencies that plague the Kazakh company and the challenges of reforming the oil industry in the former Soviet Union.
It is also a tale of a power struggle between two warring units of the same company — and, in particular, between two sets of independent directors, the westerners hired to burnish corporate governance credentials who are sometimes .
“It’s a very promising asset. To say that it has been underutilised is a gross understatement,” says Ivan Mazalov, director at Prosperity Capital.
When KMG EP listed in 2006, the Kazakh government’s intention was “to create a blue-chip oil company,” says a long-time adviser to the company who worked on the initial public offering. “The level of transparency and corporate governance is .”
The oil boom lifted the global depositary receipts from an IPO price of $14.64 to a high of more than $34. But as prices fell, the inefficiency of KMG EP’s Soviet-era fields became more apparent. In 2015, the company reported a $288m operating loss.
“At the moment there is no value in the assets: it’s going to be a major struggle to get our auditors not to write off all our assets,” says Chris Hopkinson, a former Royal Dutch Shell executive hired by NC KMG to lead a turnround of its and KMG EP’s assets.
KMG EP says it is returning to profitability. But efficiency remains poor. For example, KMG EP employs 2.5 people in its production division per well, more than twice the level of comparable Russian companies, according to an analysis last year by Sberbank CIB.
Mr Hopkinson and people close to KMG EP say that resistance from local contractors and politically connected businesspeople in the regions of western Kazakhstan where the company operates has made it hard to push through change. The company has exclusive relationships with some contractors, whose share of KMG EP’s operating costs has risen from 12 per cent in 2014 to 23 per cent this year, according to a company circular.
Replacing KMG EP’s old-fashioned “nodding donkey” wells with electrical submersible pumps could improve efficiency and lift production by as much as 60 per cent, Mr Hopkinson says.
“EP is very close to the communities, who naturally have a huge apprehension with regards to changing away from a system which their whole societies and towns are based on supporting, to something which is unknown,” he says.
Mr Hopkinson casts the drive for efficiency as the main reason NC KMG is proposing to rewrite the relationship agreement with KMG EP. The changes would give KMG EP’s board, of which he is the NC KMG-appointed chairman, greater power, he says.
But many shareholders and people close to KMG EP question whether these changes are necessary or sufficient to push through the efficiency plan. “It will only be implemented if the Kazakhs want it to be implemented. Unless you bring vested interests on side, you won’t succeed,” says one person close to the company.
What’s more, the proposals are the latest in between the parent company and its subsidiary. They also come as NC KMG prepares for its own listing — something that bankers and investors say would be difficult to achieve while KMG EP is still listed.
It did not take long following KMG EP’s 2006 IPO for the new company’s independence to chafe with its parent. The tensions were exacerbated by the companies’ differing financial positions. KMG EP built up several billion dollars its balance sheet while NC KMG has been weighed down by hefty debts and the need to finance its stakes in Kazakhstan’s major projects.
In 2010, NC KMG went to its subsidiary to borrow $1.5bn, a humiliation that “enraged” the parent company, according to a person who advised on the deal.
In 2014, NC KMG attempted to end its troubled relationship with its subsidiary, offering to buy out minorities at a price of $18.50 per global depository receipt. But after six months of discussions between the independent directors of the parent company and its subsidiary, the offer was withdrawn amid tumbling global oil prices.
Since then, NC KMG has placed growing financial and operational pressure on its subsidiary, shareholders and people close to KMG EP say. For much of 2015, NC KMG’s trading unit, the sole buyer of KMG EP’s oil on the Kazakh market, refused to pay the rates set out in the relationship agreement between the two companies — only agreeing to a settlement after protracted negotiations. Then this year, when that provision of the agreement expired, NC KMG unilaterally slashed the price it paid KMG EP to just $7 a barrel.
The deterioration in relations between the two companies has been exacerbated by personal animosity between the three western independent directors of NC KMG and their three counterparts at EP KMG, say people close to both companies.
NC KMG has overruled the independent directors of KMG EP for two years now over the company’s dividend payments, which were slashed to zero this year.
Ivan Mazalov, director of Prosperity Capital, one of the largest minority shareholders in KMG EP, says the proposal from NC KMG “looks to me like constructive dismissal” of the subsidiary’s independent directors. “There’s a civilised way to end it: make a competitive offer and people will sell. Don’t fumble it like this,” he says.
Diesel consumption grew 1.5%, the slowest month-on-month pace since July 2015, mainly because people anticipated favourable prices in May and July.
Subsidised cooking gas prices have crawled up at a time when price of commercial LPG has fallen, reducing the gap between the two to about Rs 64 per cylinder.
If you give a driller a dollar, he is going to drill a hole. It is a cliché much repeated by oil price bears over the past two years, warning that US oilmen would be itching to drill for, and pump more, crude, the minute the oil price looked like stabilising.
These bears were gleefully quoting the adage again in July, as slipped 14 per cent over the course of the month. The number of US rigs has started to creep back up, even though there seemed precious little evidence of end demand for new production. Refiners appear to have miscalculated their needs, leading to a glut of gasoline, which bodes ill for crude demand down the line.
The renewed does not seem to have much troubled demand for oil and gas company bonds. The leg down in interest rate expectations after the UK’s Brexit vote, and the swelling pools of sovereign debt trading at , mean that income-starved investors are once again ignoring real dangers in their hunt for yield.
The dropped precipitously after the price began its steep decline in 2014, but domestic crude production itself did not top out until April 2015, and only fell 8 per cent from that peak, according to the US Energy Information Administration.
One explanation lies in the incentive structure for oil and gas company executives. Compensation still tends to reward executives for exceeding annual production and reserve growth targets, rather than preserving capital value and reducing debt, according to a timely analysis by Moody’s, the credit rating agency. Metrics tied to improving a company’s creditworthiness comprise by far the smallest portion of executives’ bonuses.
The report makes for grim reading for bondholders.
In most cases, there has been no sign of significant changes to either short-term or long-term incentive plans, despite the new era of lower oil prices. Expense control metrics, which reward executives for keeping costs down, have increased modestly, Moody’s found, but if anything, matters have become more concerning. With share prices in the tank, the value of long-term incentive plans are shot, so the terms of annual bonus schemes are even more important as a proportion of executives’ take-home pay right now.
“This system of compensation is negative for credit investors, given our pessimistic industry outlook based on the global oversupply of oil and slow decline in production,” Moody’s analyst Christian Plath wrote. “It also suggests many exploration and production company boards and managements are finding it difficult to shed their high-growth strategies.”
As well as the reach for yield, bond prices have also been buoyed by the scarcity of supply. Only a handful of energy companies have this year tapped the market to refinance existing junk bonds, and the tepid response to those issues that have come to market recently suggests companies will continue to hold off.
Matters are not yet as perilous as they were back in January. Then, energy sector junk bond yields spiked as high as 21 per cent, when it looked like a wave of bankruptcies might become a tsunami. US junk bonds are currently experiencing their highest default rate in six years, almost all as a result of the energy and natural resources sectors, where defaults outpace the rest of the market by a ratio of seven to one.
The yield is typically negatively correlated and . As oil rebounded from the January nadir, the yield on the Bank of America Merrill Lynch US high yield energy index was down to 9.4 per cent at the end of June. However, it ended July almost exactly where it had begun, despite that 14 per cent decline in the oil price having eroded credit quality, and that flashed a warning.
It was only in the final days of July that the energy bond market appeared to wake up to the increased danger and it seems likely that the correction will continue, absent a sudden spike in the oil price.
The truth is that US oil production is highly elastic, meaning drillers can quickly ramp up when the oil price rebounds. Outside of distressed situations, where companies are already close to default, bondholders get short shrift — and investors ought to drill down into the bonus plans set out in annual reports if they want to identify which companies, and which executives, are going to give them the shortest shrift of all.
July 29 (Reuters) – U.S. drillers this week added oil rigs for a fifth consecutive week, Baker Hughes Inc said on Friday, but the oilfield services provider and some analysts cast doubts on a substantial recovery in drilling this year with crude prices heading for their biggest monthly loss in a year.
Drillers added three oil rigs in the week to July 29, bringing the total rig count up to 374, compared with 664 a year ago, according to the closely followed Baker Hughes weekly report.
U.S. crude futures have slipped below $41 a barrel for the first time since April, pressured by persistently high inventories.
The market was on track for a monthly loss of about 15 percent, and is down about 20 percent from highs over $50 in early June when drillers started returning to the well pad.
“I believe oil prices in the upper $50s at a minimum are required for a sustainable recovery in North America,” Baker Hughes Chief Executive Martin Craighead said on a conference call on Thursday.
Bigger rivals Schlumberger Ltd and Halliburton Co last week both said they expected a modest recovery in North American activity.
“I don’t subscribe to the hopeful commentary,” Craighead said.
Analysts and producers said $50 a barrel was the key level that would prompt a return to the well pad after the biggest price rout in a generation prompted a slump in the oil rig count since it peaked at 1,609 in October 2014.
Since early June when U.S. crude prices tipped above $50, drillers have added 55 oil rigs before this week.
A similar price rally last year to over $60 in May-June spurred drillers to add 47 rigs in July to August.
But that return to the well pad was shortlived as prices fell to 12-year lows near $26 by February, resulting in the rig count tumbling by 359 between September 2015 and May 2016.
“If oil prices continue to fall, rigs will turn down with the price,” James Williams, President of WTRG Economics in Arkansas said in a report written this week when crude was trading at $43.
He said $43 was “close to the point” the rig count could turn down, but noted there would likely be a one- to two- month lag before the count actually declines because it takes time to acquire needed permits, rigs and crews.
“We anticipate slow rig growth. However, that is with all of the caveats about oil prices, which must stay at or above the current level,” Williams said.
Copyright 2016 Thomson Reuters. Click for Restrictions.
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LONDON, July 28 (Reuters) – Royal Dutch Shell missed quarterly profit expectations by more than $1 billion on Thursday after reporting a 72 percent plunge in earnings due to weak oil prices and high costs following its $54 billion takeover of BG Group.
Shell’s second-quarter current cost of supplies – its definition of net income – was $1 billion, much lower than the $2.1 billion expected by analysts. They had expected a better performance at the upstream division, which lost $1.3 billion, compared with a $469 million deficit last year.
“Lower oil prices continue to be a significant challenge across the business, particularly in the upstream (sector),” said Chief Executive Ben van Beurden, who said last month he wanted Shellto be the best oil company for investor returns.
Oil averaged $39.59 a barrel in the second quarter, down from $55.84 a year earlier. Shell said it loses or gains around $5 billion with every $10 move in Brent crude prices.
Shell also spent more than expected on corporate expenses, with some $250 million going on redundancy and restructuring charges following the BG deal.
The oil major is laying off some 12,500 workers over 2015-16.
Shell’s London-listed “A” shares had their worst day in two months and were down 3.4 percent by 1304 GMT, compared with a 0.6 percent fall in the oil and gas companies index.
Shell rivals BP and Statoil also reported worse-than-expected second-quarter results this week mainly because analysts’ expectations on cost reductions had been too optimistic.
Despite its poor performance, Shell left unchanged its main capital investment and disposal targets as well as its prized dividend.
Cash flow from operating activities for the second quarter of 2016 was $2.3 billion compared with $6.1 billion for the same quarter last year, meaning it was not enough to cover the quarterly dividend of $3.7 billion.
“We do expect the release to have negative implications for the stock short-term, but ultimately a rebalancing of the cash equation is happening and despite the seasonality in earnings Shell is, in our view, heading in the right direction,” analysts at Barclays wrote.
RELYING ON ASSET SALES
Shell’s debt-to-equity ratio, or gearing, rose to 28.1 percent versus 12.7 percent a year earlier, meaning its debt pile is mounting rapidly. Shell’s self-imposed gearing ceiling is 30 percent.
Chief Financial Officer Simon Henry said at current oil prices of $43-43.50 a barrel, the company would not make enough money unless it raised cash from asset disposals.
Copyright 2016 Thomson Reuters. Click for Restrictions.
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MOSCOW, July 29 (Reuters) – Russia’s largest oil producer Rosneft and Venezuela’s state oil company PDVSA have signed deals, including on offshore gas development and oil products trading, Rosneft said on Friday.
Rosneft has been active in Venezuela, which is seen as Moscow’s political ally. It is working on five upstream projects jointly with PDVSA.
Analysts have worried that Rosneft’s large-scale projects, including heavy oil development in Venezuela, will challenge Rosneft’s finances.
The company said on Friday its head Igor Sechin, a long-standing ally of Russian president Vladimir Putin, had signed deals with PDVSA on a feasibility study of three natural gas offshore blocks in Venezuela. Production of gas there could total 9 billion cubic metres per year.
Venezuela is chasing investment to meet its ambitious oil production goals and to try to counter a biting economic crisis.
The companies have also signed trading deals, which foresee swaps of crude oil and oil product supplies between Rosneft and PDVSA. Supplies are expected to start this year.
(Reporting by Vladimir Soldatkin; Editing by Dmitry Solovyov)
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(Bloomberg) – Petroleo Brasileiro SA made its biggest oil field sale ever to Statoil ASA in a major step to meeting a $15.1 billion divestment target as it works to cut leverage and reduce expenditures.
Statoil will pay $2.5 billion for Petrobras’s 66 percent operating interest in the BM-S-8 offshore license in the Santos basin, which holds the giant Carcara discovery. Petrobras’s shares rose 2.5 percent to 11.73 reais at 11:51 a.m. in Sao Paulo. Shares of QGEP Participacoes SA, a minority partner at the project, jumped as much as 40 percent.
“This is an emblematic transaction,” Chief Financial Officer Ivan Monteiro told reporters in Sao Paulo on Friday. “It completes one year of talks, one year of negotiations.”
The state-controlled company has agreed to sell $4.6 billion in oil fields and energy infrastructure since it announced the two-year divestment plan in 2015. Recent sales include oil fields in Argentina and gas stations in Chile, as the company looks to focus its capital and human resources on a group of massive offshore discoveries in Brazil. The deal gives Statoil a longer future in Brazil now that its major project, Peregrino, has fallen from peak production levels.
Petrobras is also looking to sell a group of onshore oil fields, fuel unit BR Distribuidora, and natural gas and petrochemical infrastructure, Monteiro said.
The Carcara deal will help Petrobras reduce leverage and relieve it from heavy investments expected to start in 2018 when development work at Carcara begins, Exploration and Production head Solange Guedes told reporters at the same press conference. Carcara is still under exploration and will require expensive production equipment in two years, she said. Petrobras currently pumps about 90 percent of the oil and gas produced in Brazil.
To contact the reporters on this story: Sabrina Valle in Rio de Janeiro at svalle@bloomberg.net ;Fabiana Batista in Sao Paulo at fbatista6@bloomberg.net To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net Peter Millard, Walter Brandimarte
Copyright 2016 Bloomberg News.
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Independent Oil and Gas plc announced Friday the appointment of David Peattie as chairman and Andrew Hay as senior independent non-executive director, with immediate effect.
Peattie has over 35 years of industry experience and previously held the role of CEO of Fairfield Energy, an oil and gas company owned by a syndicate of North American and European private equity investors, led by Riverstone and Warburg Pincus. Peattie began his career at BP in 1979 as a petroleum engineer and during his 33 year tenure at the company held a number of technical, commercial and senior management positions including Head of BP Russia responsible for BP’s interests in TNK-BP as well as its businesses in the Russian Arctic and Sakhalin.
“We look forward to welcoming David and Andrew to the board of Independent Oil and Gas. David brings a deep sector knowledge and strong track record to IOG and his significant oil and gas expertise will be of considerable value to the company at this important stage in our journey, and in particular with our development and M&A plans,” said Mark Routh, CEO of IOG, in a company statement.
The drilling of the appraisal well on the Skipper license, of which IOG is 100 percent owner and operator, successfully spudded on July 23 and is continuing on schedule. The company does not expect to issue any further announcements until the initial well results become available by approximately mid-August.
LONDON, July 29 (Reuters) – OPEC’s oil output is likely in July to reach its highest in recent history, a Reuters survey found on Friday, as Iraq pumps more and Nigeria manages to export additional crude despite militant attacks on oil installations.
Top OPEC exporter Saudi Arabia has kept output close to a record high, the survey found, as it meets seasonally higher domestic demand and focuses on maintaining market share rather than trimming supply to boost prices.
Supply from the Organization of the Petroleum Exporting Countries has risen to 33.41 million barrels per day (bpd) in July from a revised 33.31 million bpd in June, according to the survey based on shipping data and information from industry sources.
The increase in OPEC production has added to downward pressure on prices. Oil has fallen from a 2016 high near $53 a barrel in June to $42 as of Friday, pressured also by concern about weaker demand.
OPEC’s production could rise even further should talks to reopen some of Libya’s oil facilities succeed. Conflict has been keeping Libyan output at a fraction of the pre-war rate.
“This could shortly release more oil into an already abundantly supplied market,” Carsten Fritsch of Commerzbank said, although earlier hopes of a restart have not been realised.
“It therefore remains to be seen whether this time will be different.”
OPEC’s output has climbed due to the return of former member Indonesia in 2015 and another, Gabon, this month, skewing historical comparisons. July’s supply from the remaining members, at 32.46 million bpd, is the highest in Reuters survey records, starting in 1997.
Supply has also risen since OPEC abandoned in 2014 its historic role of cutting supply to prop up prices as major producers Saudi Arabia, Iraq and Iran pump more.
In July, the biggest increase of 90,000 bpd has come from Iraq, which has exported more barrels from its southern and northern ports despite a pipeline leak that restrained southern exports.
Nigeria, where output has been hit by militant attacks on oil facilities, has nonetheless exported slightly more in July than June, the survey found, although crude exports remain significantly below the 2 million bpd seen in early 2016.
Output in two major producers is largely stable. Iran, OPEC’s fastest-growing source of supply expansion this year after the lifting of Western sanctions, has pumped only 20,000 bpd more as the growth rate tops out for now, the survey found.
Saudi output in July was assessed at 10.50 million bpd, close to June’s revised rate and the record 10.56 million bpd reached in June last year.
“Exports are down a bit, offset by higher direct burn and slightly higher refinery runs,” said an industry source who monitors Saudi output. “For the time being, I’m sticking to my numbers, which suggest supply is flat.”
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Libya’s UN-backed government signs a deal with an armed brigade controlling the major Ras Lanuf and Es Sider oil ports to end a blockade and restart exports.
BENGHAZI, Libya, July 29 (Reuters) – Libya’s U.N.-backed government signed a deal with an armed brigade controlling the major Ras Lanuf and Es Sider oil ports to end a blockade and restart exports from the major terminals shut down since December 2014.
Reopening the ports would be a major step for the North African state, which since the 2011 fall of Muammar Gaddafi has slipped into chaos that has cut its oil output to less than a quarter of pre-2011 levels of 1.6 million barrels per day.
No specific date was set for restarting exports, but swift resumption will be hampered by technical damage from militant attacks and by opposition from the state-run National Oil Corporation, which objected to paying cash to reopen the ports.
Libyan Presidential Council deputy Mousa Alkouni signed the agreement late on Thursday with Ibrahim al-Jathran, commander of the Petroleum Facilities Guards, one Libya’s many armed brigades that has controlled the terminals.
“I think the resumption depends now on technical part… and I think also it will happen from within a week to two weeks, but not more,” Alkouni told Reuters by telephone.
He said the agreement included paying an unspecified amount in salaries to Jathran’s forces. He said they had not been paid wages for 26 months. Their role is protecting the oil ports, though critics say they used it to extort money from Tripoli.
Rival governments and a complex network of armed groups who once fought against Gaddafi and have quasi official status are vying for power and for control of the country’s oil wealth, closing down pipelines and battling over export terminals.
Ali Hassi, a spokesman for Jathran’s PFG brigade, said no date had been decided for reopening the ports because that would depend on the National Oil Corporation. But he confirmed an agreement had been signed between the council and Jathran.
Jathran’s brigades led blockades of the ports starting in 2013 saying he was trying to prevent corruption in oil sales, though others disputed his motives. He has also called for more autonomy for his eastern region.
Opening Ras Lanuf and Es Sider would add a potential 600,000 barrels per day of capacity to Libya’s crude exports, though experts estimate damage from fighting and the long stoppage must be repaired before shipments are at full capacity again.
The NOC has said damage from recent attacks by Islamic State, which expanded in the country’s chaos, meant the ports would struggle to get beyond 100,000 bpd in the near term.
Beyond technical problems, NOC chairman Mustafa Sanalla has also objected to any deal with Jathran saying it was a mistake to reward the brigade commander by paying to end his blockade of the oil ports.
Sanalla said a deal including payments would encourage other groups to disrupt oil operations in the hope of a similar payout. The NOC has also threatened to withdraw its recognition of the Presidential Council.
Eurasia Group analyst Riccardo Fabiani said the agreement was likely to stick unlike previous attempts to reopen the ports, because both sides had an interest in making it work.
Copyright 2016 Thomson Reuters. Click for Restrictions.
Galp Energia has reached an agreement with a consortium led by Marubeni to sell a 22.5 percent stake in the share capital of Galp Gás Natural Distribuição, S.A. (GGND), for $153 million (EUR 138 million).
Prior to the completion of the transaction, GGND will raise stand-alone funding to reimburse existing shareholder loans of $631 million (EUR 568 million), leading to total cash proceeds to Galp of around $777 million (EUR 700 million).
The group’s Ebitda was down 25 percent year-on-year in the second quarter of 2016, on a replacement cost adjusted (RCA) basis, to $368 million (EUR 337 million). This was mainly due to a “lower contribution” from the Refining & Marketing (R&M) and Exploration & Production (E&P) business segments, according to a company statement, which were impacted, respectively, by the “decrease of the refining margins” and “the lower prices of oil and natural gas on the international markets”.
During the first half of 2016 working interest production increased 30 percent YoY to 55,500 barrels of oil equivalent per day, which was primarily due to the start-up of units #4 and #5 and increased production at FPSO #3 in Brazil. Net entitlement production increased 33 percent YoY to 53,000 boepd.
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Canada’s gross domestic product contracted at the fastest pace in more than seven years in May as wildfires curbed Alberta oil production.
Canada’s gross domestic product contracted at the fastest pace in more than seven years in May as wildfires curbed Alberta oil production.
The economy shrank 0.6 percent after an April expansion of 0.1 percent, Statistics Canada said Friday in Ottawa. The median forecast in a Bloomberg survey was for a 0.5 percent contraction. The drop was “primarily due” to the record 22 percent plunge in non-conventional oil production, the agency’s report said.
Excluding non-conventional oil, output shrank by 0.1 percent in May. Manufacturing fell by 2.4 percent, also the fastest since 2009, on disruption to transportation equipment makers and a 15 percent drop at oil refineries.
The wildfires are another chapter in a long-delayed economic recovery following years of weak global demand and a more recent plunge in energy investment. Whether or not oil production and the wider economy bounce back is critical for Bank of Canada Governor Stephen Poloz, who is standing by a prediction for an export recovery in the second half.
Poloz kept his key lending rate at 0.5 percent on July 13, pointing to signs oil production was resuming after fires knocked about 1 million barrels a day offline and forced the evacuation of 80,000 people from Fort McMurray. Poloz also projected the economy would rebound with annualized growth of
3.5 percent in the third quarter after shrinking 1 percent in the second.
Conventional oil production rose 0.6 percent in May, as most refineries for that industry were outside the fire zone, Statistics Canada said.
Friday’s report was marked by other one-off factors. The output of utilities fell 1.8 percent in May after a jump in April when there were colder-than-average temperatures. The public sector expanded by 0.3 percent, led by gains tied to the collection of the 2016 census. Finance and insurance climbed 0.6 percent on increased claims linked to the Alberta fires.
Finally, arts and entertainment rose 4.3 percent, as the sting of Canadian teams failing to make the National Hockey League playoffs was eased by basketball and the return of Toronto Blue Jays baseball.
To contact the reporter on this story: Greg Quinn in Ottawa at gquinn1@bloomberg.net To contact the editor responsible for this story: Theophilos Argitis in Ottawa at targitis@bloomberg.net Stephen Wicary
Copyright 2016 Bloomberg News.
NEW YORK, July 29 (Reuters) – Oil prices steadied on Friday after touching three-month lows amid a week-long selloff but still finished the month nearly 15 percent lower, with U.S. crude declining the most in a year because of a persistent glut.
Slower economic growth and high inventories of crude and refined oil products have driven Brent and U.S. West Texas Intermediate (WTI) crude futures 20 percent below from their 2016 highs, technically placing them in bear market territory.
The two benchmarks matched April lows on Friday before their most actively traded contracts settled up on what traders said was short-covering by investors taking profit on bearish bets.
Hedge funds, some of the biggest bulls in oil, slashed their positive bets on WTI to a five-month low in the week to July 26, U.S. Commodity Futures Trading Commission data showed, amid growing worry about oil’s fundamentals.
The dollar’s drop to a three-week low also made greenback-denominated oil more affordable to holders of the euro and other currencies.
The September Brent contract, which expired as the front-month, settled at $42.46 a barrel, down 0.6 percent on the day and 14.5 percent on the month. That was the biggest monthly drop for Brent since December.
Brent’s more actively traded October contract rose 30 cents to settle at $43.53, after hitting $42.52, its lowest since April 19.
WTI’s front-month contract, September, rose 46 cents, or 1 percent, to settle at $41.60 a barrel, after slipping earlier to below $41 for the first time since April 20. For the month, the contract finished down 14 percent, the biggest decline for a WTI front-month since July 2015.
Crude prices are still up more than 55 percent from 12-year lows of $26 to $27 in the first quarter. The recovery faded after prices above $45 enticed U.S. oil drillers to return to the well pad. Drillers added 44 rigs in July, the most in a month since April 2014.
Cheap crude has led refiners to produce more fuel worldwide, adding to the oversupplied market. Oil majors Exxon Mobil Corp , BP Plc, Royal Dutch Shell Plc and Chevron Corp each had a poor second quarter because of weak refining margins.
“Doubts are rife as to whether the oil supply imbalance is indeed slowly drawing to an end,” said Stephen Brennock, of London-based oil brokers PVM.
Some traders said oil could see technical support in the near-term after Brent and WTI fell below their 200-day moving averages on Friday.
Analysts in a Reuters survey said they expected higher oil prices this year based growth in demand.
“We are maintaining a bearish posture while at the same time suggesting that additional crude price declines of around $4 a barrel from current levels could require a few more weeks,” said Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Associates.
Copyright 2016 Thomson Reuters. Click for Restrictions.
MILAN, July 29 (Reuters) – Italian oil group Eni swung to a net loss in the second quarter on lower oil prices and a production shutdown at a key field in southern Italy, missing expectations.
The company said its adjusted net loss in the quarter was 290 million euros ($322 million) compared to a net profit of 505 million euros the previous year. That was below a Thomson Reuters estimate for a profit of 59.6 million euros.
Low oil prices have taken their toll on earnings at most of the major oil companies. Royal Dutch Shell, BP and Statoil reported worse-than-expected second-quarter results this week.
“The miss is big and provides reason for uncertainty rather than commitment,” Santander oil analyst Jason Kenney said.
By 0738 GMT, Eni shares were down 1.5 percent while the European oil and gas index was down 0.2 percent.
“The results are not good news, but longer term I think the market can take heart from the group’s production outlook,” Mediobanca analyst Alessandro Pozzi said.
Eni, which reported a 2.2 percent fall in output in the second quarter, said it expected production for the year to be in line with last year, boosted by ramp-ups and start-ups in Norway, Egypt, Angola, Venezuela and Congo.
“Our main developments are proceeding on time and on budget, allowing us to confirm our expected production growth of more than 5 percent in 2017,” CEO Claudio Descalzi said.
Since 2008, Eni has discovered around 2.4 times what it actually produces, compared with a rate of just 0.3 times for its rivals.
It has made major gas discoveries in Mozambique and Egypt that have increased its reserves and has discovered more than 12 billion barrels in the last 7 years, mostly in Africa.
The company is looking to sell down its stakes in its Area 4 field in Mozambique and its giant Zohr acreage in Egypt to help to fund development.
The group, which said it would pay an interim dividend of 0.4 euros per share in line with expectations, said cash flow in the first six months fell 51 percent to 3.1 billion euros.
(Reporting by Stephen Jewkes. Editing by Jane Merriman)
Copyright 2016 Thomson Reuters. Click for Restrictions.
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Exxon Mobil and Chevron miss profit and production estimates as wildfires, write-downs and weak refining margins battered oil explorers already reeling under a glut-driven price collapse.
(Bloomberg) – Exxon Mobil Corp. and Chevron Corp. missed profit and production estimates as wildfires, writedowns and weak refining margins battered oil explorers already reeling under a glut-driven price collapse.
Exxon reported a $1.7 billion second-quarter profit that was its lowest since the first quarter of 1999, before the Mobil Corp. acquisition that shaped the company into its current form. The 41-cent-per-share result was 23 cents lower than the average of 20 estimates from analysts in a Bloomberg survey, the biggest miss in at least a decade.
Chevron extended its longest losing streak in more than a quarter century after booking a $2.8 billion writedown on assets that can’t generate profits at current prices. The company posted a surprise loss of $1.47 billion, or 78 cents a share, compared with profit of $571 million, or 30 cents, a year earlier, San Ramon, California-based Chevron said in a statement. Analysts had expected the world’s third-largest oil explorer by market value to earn anywhere from 19 to 41 cents a share.
Given the plunge in crude and natural gas markets, “you cannot recover no matter how efficient you are,” Fadel Gheit, an analyst at Oppenheimer & Co., said during an interview with Bloomberg Television. “The industry cannot survive on current oil prices.”
Exxon followed Royal Dutch Shell Plc and BP Plc in posting lower profits as crude’s collapse continued to batter the industry. Shell reported its weakest quarterly result in 11 years and missed analysts’ estimates by more than $1 billion. BP said earnings tumbled 45 percent as poor refining margins exacerbated the impact of falling oil prices.
Exxon and Chevron also underperformed in the oil patch. Exxon’s wells pumped the equivalent of 3.957 million barrels a day during the quarter, according to a statement on Friday, almost 3 percent below the 4.069-million average of four analyst estimates. Chevron’s 2.528 million barrels of daily output was 3.4 percent below estimates.
Exxon, the world’s biggest oil explorer by market value, said wildfires that ravaged the oil-sands region of western Canada as well as aging wells reduced output. Exxon’s U.S. oil and natural gas wells lost an average of $5.6 million a day during the quarter.
“While our financial results reflect a volatile industry environment, Exxon Mobil remains focused on business fundamentals, cost discipline and advancing selective new investments across the value chain to extend our competitive advantage,” Rex W. Tillerson, chairman and chief executive officer, said in the statement.
Chevron Chairman and CEO John Watson said the company continues to adjust to the lower-price environment. “In our upstream business, we recorded impairment and other charges on certain assets where revenue from expected oil and gas production is expected to be insufficient to recover costs,” he said in the statement.
It was Chevron’s third straight quarterly loss, the longest slump for the company since at least 1989, according to data compiled by Bloomberg.
Crude and natural gas prices dropped during the quarter compared with the same period a year ago in markets overburdened with supplies. With diesel and gasoline prices also slumping, Exxon and other major oil companies were deprived of the tempering effect oil refining typically provides during times of low crude prices. Margins from refining oil into fuels at U.S. refineries, based on futures prices, plunged 30 percent to a second-quarter average of $17.12 a barrel from $24.42 a year earlier.
Exxon shares slumped 2.2 percent to $88.18 as of 10 a.m. in New York. Chevron fell 1 percent to $100.76.
Imperial Oil Ltd., Exxon’s Canadian affiliate, reported a loss of C$181 million ($138 million) in the second quarter from a profit a year earlier. The wildfires forced Imperial to shut in production, resulting in 60,000 barrels per day of lost output, the company said Friday.
Tillerson has been looking beyond the current downturn in energy markets to augment the company’s gas and oil portfolios from the South Pacific to Africa. The company also is plowing money into expanding refining and chemical complexes from Singapore to The Netherlands, betting that regional demand for products used in automobile tires, engine oil and plastics will grow over the long term.
Copyright 2016 Bloomberg News.
MOSCOW, July 29 (Reuters) – Iran needs two to three months to achieve its pre-sanctions level of oil production, Iranian Communications Minister Mahmoud Vaezi said during a visit to Moscow on Friday.
Iran has to date reached 80 percent of its pre-sanctions oil output, Vaezi told reporters.
(Reporting by Olesya Astakhova; Writing by Denis Pinchuk and Dmitry Solovyov; Editing by Vladimir Soldatkin)
Copyright 2016 Thomson Reuters. Click for Restrictions.
Analyst tells Bloomberg Television, “The industry cannot survive on current oil prices.”
Some oil and gas companies might be proclaiming the industry has finally seen the bottom on oil prices, but second quarter earnings reports make quite clear that there is a steep climb back to the top.
Deon Daugherty
Senior Editor, Rigzone
Exxon Mobil Corp. showed a $1.7 billion profit loss in the second quarter – the lowest since the 1Q 1999. Chevron Corp. booked a 2Q 2016 write-down on assets of $2.8 billion, stretching into its lengthiest losing streak in 25 years, according to a Bloomberg report. And Royal Dutch Shell reported earnings in 2Q fell 72 percent.
The collapse in oil prices from more than $125 per barrel to less than $30 per barrel within 18 months is the key factor behind the earnings trouble. By mid-day July 29, Brent was selling for $43.18 per barrel. Rigzone analysis shows that more than 90 companies in North America alone have gone bankrupt.
An Oppenheimer & Co. analyst, Fadel Gheit, summed up the situation on Bloomberg Television recently: “The industry cannot survive on current oil prices.”
So, where does the industry – its companies, its employees, its investors – go from here?
Analysts have told me since the beginning of the drop that the largest companies have the bandwidth to sustain them through a long, deep decline. The smaller shops would close, they said. And it would appear they were correct.
But, they also say the story isn’t over. To repeat a popular refrain of the last year-and-a-half, the industry is cyclical and what goes down must come back up.
At Tudor, Pickering, Holt & Co., the optimism necessary for the risky work of making money in oil and gas was clear in a note to investors about Shell’s recent performance.
“We fundamentally believe in the Shell story long-term, but we think Shell may struggle in the short-term,” they wrote.
In short, it’s taken almost two years to reach the bottom, and it’s a long way back to the top.
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KIRKUK, Iraq, July 31 (Reuters) – Militants stormed two energy facilities in northern Iraq on Sunday, shooting at least four workers and detonating explosives that sent flames into the sky, security sources said.
The first attack, on the AB2 gas compressor station, about 15 km (10 miles) northwest of Kirkuk, started around 0300 (0000 GMT) when four gunmen with hand grenades broke through the external door, leaving two guards in critical condition.
They then shot dead four employees in a control room inside and planted explosives charges, around five of which went off, the sources said.
Forces from the elite counter-terrorism service stormed the facility, regained control and freed 15 other employees who had hidden in a separate room.
The attackers could not be found and may have escaped to launch a second attack on the Bai Hassan oil station, 25 km further northwest, the sources said.
The militants there used the same approach to enter the facility before blowing up an oil storage tank inside, the sources said. They were still clashing with security forces there, and casualty figures were not immediately clear.
There have been no claims of responsibility for either attack, but Islamic State has previously targeted oil facilities in the area with explosives, targeting oil wells at Khabbaz oilfield southwest of Kirkuk.
Islamic State militants, who seized a third of the OPEC producer’s territory in 2014, have since been pushed back in many areas by an array of Iraqi forces backed by U.S.-led coalition air strikes.
Kurdish peshmerga forces, which have pushed back Islamic State in northern Iraq and thus expanded the territory of their autonomous region, have controlled Kirkuk and surrounding areas for two years.
(Writing by Stephen Kalin; Editing by Himani Sarkar and Andrew Heavens)
Copyright 2016 Thomson Reuters. Click for Restrictions.
Searcher Seismic reported Friday that it has commenced the Pre-Stack Depth Migration (PSDM) reprocessing of 4,350 miles (7,000 kilometers) of 2D seismic data in the Browse Basin, Western Australia.
The project comprises broadband PSDM reprocessing of Searcher’s existing Vampire 2D Seismic Survey, acquired in 2010 with a 5 mile (8 kilometer) streamer that ties key exploration wells in the Browse Basin, and includes coverage to the 2016 Australian Acreage Release.
“Applying broadband deghosting not only improves the end result, but allows greater resolution for the PSDM velocity model building at all levels,” Joshua Thorp, Geoscience Manager for Searcher Seismic, said in the press release.
The PSDM reprocessing, being undertaken by WesternGeco, provides a high value solution for understanding the Browse Basin in a regional context. The final PSDM data will be available in last quarter of 2016.
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DOF Subsea, a subsidiary of Norway’s DOF ASA, reported Friday that Shell Australia has awarded the firm a 5-year inspection, maintenance and repair (IRM) contract with 2 options for 2-years extensions to provide fulltime underwater services and multi-purpose supply vessel (MPSV) to the Prelude FLNG (floating liquefied natural gas) facility that will be deployed offshore Western Australia.
The workscope requires DOF Subsea to provide project management, engineering and integrated services for IMR programs as well as the dedicated vessel and options for other vessels. Prelude FLNG, the largest floating facility ever built, will produce, liquefy, store and transfer LNG at sea.
“This is a very important contract award for DOF Subsea, and the award further strengthens DOF Subsea’s position in the global subsea IMR market. We look forward to working with Shell Australia on the world leading Prelude FLNG facility,” CEO Mons Aase said in the press release.
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(Bloomberg) — The plunge in oil prices is catching up with Singapore’s three largest banks.
Last week, Swiber Holdings Ltd., a small Singapore company that provides construction services for international oil and gas projects, filed a petition to liquidate its operations, after facing payment demands from creditors at a time when its business was under pressure. DBS Group Holdings Ltd., one of Swiber’s largest lenders, said it only expects to recover about half of the S$700 million ($522 million) it loaned to the firm and its units. Swiber subsequently said it’s dropping the liquidation in favor of a restructure plan.
DBS and Singapore’s two other large banks, Oversea-Chinese Banking Corp. and United Overseas Bank Ltd., are exposed to the downturn in the energy sector as a result of their lending to local companies which provide construction, shipping and maintenance services to the oil and gas industry. Many of those companies are suffering as the plunge in crude prices since 2014 curtailed exploration and other activity by oil and gas producers.
The financial health of the energy-services companies is the “key concern” for UOB over the next one or two years, Chief Executive Officer Wee Ee Cheong said at a media briefing Thursday on the bank’s second-quarter results. The bank’s exposure to Swiber is “manageable,” Wee said, though he noted that the wider difficulties in the oil and gas services industry were a factor behind the 17 percent climb in UOB’s nonperforming assets for the second quarter.
Swiber said it will drop its liquidation application in a statement on Friday. Instead, the company plans to operate under a judicial management, which would allow it to continue operating under court supervision while it attempts to turn its business around. Some of its lenders had sought judicial management to recover more of their loans, according to people familiar with the talks who asked not to be identified because the discussions were private.
“I presume it helps them buy time but it’s uncertain how viable these oil-services companies are if oil prices remain low for an extended period of time,” said Alan Richardson, a Hong Kong-based fund manager at Samsung Asset Management, which owns DBS shares. “The indirect victims of these bankruptcies are the banks who are lending money to them.”
Shares of DBS were little changed at S$15.40 as of 11:02 a.m. local time on Monday, paring this year’s loss to 7.7 percent. OCBC gained 0.8 percent and UOB rose 0.6 percent.
Oil has slipped about 19 percent from its recent peak in early June, ending a recovery that saw prices almost double from a 12-year low in February. Prices are falling again as U.S. producers increased drilling amid a glut of crude and fuel supplies that are at the highest seasonal level in at least two decades.
The recent recovery in oil prices from their lows has provided only modest relief, OCBC Chief Executive Officer Samuel Tsien indicated Thursday in a media briefing on the bank’s second-quarter results, which included a 61 percent jump in nonperforming assets.
“We cannot say it’s going to be the bottom yet. We may have two more quarters to go,” Tsien said in response to a question on the rise in delinquent energy sector loans.
Oil and gas-related loans made up 5.3 percent of gross lending by Singapore banks as of December, a higher proportion than at banks in Korea, Thailand and the European Union, according to Moody’s Investors Service. The deteriorating quality of the Singapore banks’ loans to energy firms, as well as weaker regional economies, prompted Moody’s to downgrade its outlook for the three largest lenders on June 30.
UOB and OCBC’s exposures to offshore marine services companies amounted to 13 percent to 18 percent of their common equity Tier 1 capital and loan-loss reserves at the end of June, Moody’s said in a statement Monday.
DBS is due to report its second-quarter results on Aug. 8.
In a sign of how fast the bad-loan problems are worsening, OCBC said new nonperforming assets jumped 91 percent to S$924 million in the second quarter, mainly because of companies linked to the oil and gas support services sector. Newly soured assets at UOB more than doubled to S$802 million, from S$372 million a year ago.
Copyright 2016 Bloomberg News.
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Malaysia’s Perisai Petroleum Teknologi Bhd disclosed Friday that its 51 percent subsidiary, Perisai Offshore Sdn Bhd, PETRONAS Carigali Sdn Bhd (PCSB) and HESS Exploration and Production BV have agreed to an extension of the farm-out of jackup Perisai Pacific 101 (400′ ILC) .
According to Perisai’s company filing with local exchage Bursa Malaysia, the farm-out extension to HESS is valued at approximately $5.3 million.
The company said Thursday that the farm-out extension would commence June 23 for a duration of up to 54 days until Aug. 15. Perisai Pacific 101 will then be reassigned to PCSB, the upstream arm of Malaysia’s national oil company Petroliam Nasional Berhad, to support its drilling operations.
In April 2014, Perisai Offshore clinched a three year $158 million contract from PCSB to supply Perisai Pacific 101, which was built by PPL Shipyard Ltd. in Singapore.
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Swiber Holdings Limited announced Friday that the financially troubled Singapore-based offshore construction and support services provider to the upstream oil and gas industry would file applications to be placed under judicial management instead of liquidation, a move that would reverse the company’s July 27 appointment of KordaMentha Pte Ltd as Provisional Liquadators.
“On July 28, the Board of Directors and the Provisional Liquidators have had discussions with the Company’s major financial creditor who indicated that they are supportive of an application for the Company to place itself into judicial management instead of liquidation,” Cameron Lindsay Duncan of KordaMentha said in the statement.
“Today, the Company and its subsidiary, Swiber Offshore Construction Pte Ltd. (SOC), have taken out applications to place the Company and SOC under judicial management and interim judicial management. As a consequence, the Company has applied to discharge the provisional liquidation order and to withdraw the winding up application made on July 27,” the statement added.
Industry sources told Rigzone that judicial management appears to be better solution for Swiber’s current woes as it gives the firm more options in reorganizing its problems under court supervision and may provide better results for creditors and shareholders than liquidation.
Last Wednesday, Swiber announced plans to wind up the company and appointed Cameron Lindsay Duncan and Muk Siew Peng of KordaMentha Pte Ltd. as the “joint and several Provisional Liquators of the company.”
Meantime, Swiber said the trio of directors — Francis Wong, Leonard Tay and Nitish Gupta — who resigned as directors of the company would continue to be directors of certain subsidiaries of the firm. Swiber also said Tay remains its chief financial officer (CFO), retracting an earlier statement that he had resigned from the post.
In a related development, Vallianz Holdings Ltd., an offshore support vessels and integrated marine solutions provide to the oil and gas industry, provided a company update Friday on the impact of its business relations with Swiber, who owns just over 25 percent interest in the company.
According to Vallianz, the firm had trade receivables and other receivables owing from Swiber entities amounting to approximately $61.9 million, while it had trade payables and other payables owing to Swiber entities of approximately $58.7 million as of March 31.
“While the recent developments at Swiber will have an impact to the Group’s business, the Board is of the view that the situation is manageable and its operations are continuing as usual. The Company continues to work in close consultation with its legal advisors to evaluate the impact of the developments at Swiber,” Vallianz said in the press release.
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It was as if the potash industry breathed a collective sigh of relief. BPC, the trading arm of Belaruskali, earlier this month its long-awaited annual potash contract with a consortium of Chinese buyers.
“Better late than never,” was the verdict of analysts at Scotiabank.
After BPC’s $219 a tonne agreement — a 30 per cent fall from 2015 — Israel Chemicals (ICL) on Tuesday said that it had signed a contract with its Chinese customers, and other large potash producers in Russia and North America are understood to be negotiating their own contracts.
The with China, the world’s biggest potash user, provides a benchmark for the whole world. Until the accord, industry executives and analysts had blamed this year’s sluggish shipments on the lack of a contract.
Potash, which regulates a plant’s water content and improves root strength, is mined from deposits in countries including Canada, Russia and Belarus. It is one of the key crop nutrients alongside nitrogen, made from natural gas or coal, and phosphates, which is also mined.
Companies such as Canada’s PotashCorp, Russia’s Uralkali as well as Belaruskali are among the world’s leading suppliers. BHP Billiton, the world’s largest miner by market value, is also developing Jansen, a potash mine in Saskatchewan, Canada.
Thanks to the settlement, shares in the leading potash producers bounced. PotashCorp is up 6 per cent since the start of the month, Mosaic up 9 per cent and Germany’s K+S adding 4 per cent.
However, the outlook for the potash market and its producers remains uncertain. Here are five factors that will shape the outlook:
1. Increasing competition
The leading producers have all blamed rising competition in recent years for sluggish prices. In the past, the large suppliers have not pursued market share by offering lower prices. But a fight to sell increased volumes has broken out amid oversupply of potash as well as tumbling crop prices.
Macquarie points to Chinese customs data which show that Uralkali has gained share this year at the expense of ICL and Canpotex, the legal North American export cartel comprising of PotashCorp, Mosaic and Agrium. The bank expects the fight for market share to continue. “We see no alternative but for a growing market share battle between major potash producers,” it says.
2. Shipments in 2016 and 2017
A late Chinese contract settlement historically has led to lower international shipments for the year, but the pent-up demand usually means higher shipments the following year.
“We expect the situation will be no different with a delayed contract impacting shipments in the first half of 2016, setting up the potential for a strong demand recovery in the coming year,” .
3. Bottoming demand
On top of the delayed demand over the Chinese contract, industry executives and analysts have noted a recovery in key markets including Brazil and the US.
Much will depend on currency movements. Uralkali says demand in the Brazilian and Indian market “is getting better,” while analysts also expect US farmers to increase fertiliser applications.
Crop prices also have a big impact. Grain and oilseed prices have fallen back after a rally in the first part of the year, but the fertiliser price declines relative to crop prices provides farmers with an incentive to apply more crop nutrients, according to analysis from PotashCorp. “We believe this increased affordability will support strong fertiliser demand and provide the opportunity for a fertiliser price recovery,” the company argues.
4. Mixed supply outlook
While the China contract provides a floor for the market, questions about supply remain. “Any price increase depends on further discipline by the producers,” says Oliver Hatfield at consultants Integer.
This seems to be happening. Mosaic, for example, recently announced it would idle a mine with capacity of about 2.6m tonnes until the end of the year. Nearly 7m tonnes of production capacity could be closed between 2016 and 2020, says PotashCorp.
In the medium term, however, the market is braced for new production. K+S’s in Saskatchewan, is due to be commissioned this year, reaching 2m tonne capacity in 2017. EuroChem is planning to commission two projects in Russia with targeted capacity of over 8m tonnes, with production aimed at 2017-18.
5. Possible Belaruskali and Uralkali reunion
One leading factor behind tougher competition in the potash sector has been the of the original BPC, formed between Uralkali and Belaruskali. Uralkali quit the trading arm after it accused Belaruskali of going behind its back in trading with China.
Over the past year, Uralkali’s large shareholders have reportedly approached Belaruskali about reviving their export distribution operations. If it happens, it could be bullish for potash prices. But Ben Isaacson, head of commodity research at Scotiabank, says there is little upside for Belaruskali, which has now built up relationships in key potash markets. The only real benefit “could be psychological tactics against buyers such as China and India,” he says.
Oil prices were volatile on Tuesday, falling to their lowest level since April before recovering with concerns about rising gasoline stocks .
Since hitting $52 a barrel in early June, oil prices on both sides of the Atlantic have dropped by more than 15 per cent.
One factor driving prices lower has been rising product stocks and fears that it could delay the long-awaited rebalancing of the oil market.
“There is a growing concern that a falling surplus in the crude oil market is being replaced by a glut of products,” said Julian Jessop of Capital Economics. “Indeed, stocks of gasoline are higher than usual.”
Brent, the international crude market, fell as much as 67 cents to $44.14 a barrel before recovering and flipping briefly into positive territory. West Texas Intermediate, the US oil benchmark, also recovered after trading down 71 cents to $42.36.
Gasoline stocks usually fall in the summer as demand peaks in the northern hemisphere but this year the decline has been relatively muted.
In fact in the US — the world’s most important gasoline market — inventories have continued to rise, hitting 241m barrels last week.
This in turn is pressuring gasoline prices and raising fears that refiners will decide to buy less crude to turn into fuel.
BP said on Tuesday that its refining margins has slumped to six-year low and would remain under “significant pressure” in the coming months.
At the same time, between January and May have started to ease.
Most of the Canadian production that was forced to close because of wildfires has returned, although there is still a question mark over supplies from Libya following a deal between two rival governments.
US explorers have also increased the number of rigs drilling for oil, which have risen for four consecutive weeks.
This is important because declining US production is one of the key factors that analysts say will drive the rebalancing of the oil market.
“Although declines from existing wells are expected to result in a net decrease in production, increased drilling and higher well productivity are expected to partially offset the decline,” the US Energy Information Administration said on Tuesday.
Against this backdrop, hedge funds and speculators have turned increasingly bearish on oil.
The combined net long position in Brent and WTI — the difference between bets on rising and falling prices — has fallen to 453m barrels of oil, down more than 200 barrels from its peak at the end of April.
“This has been largely driven by a fairly rapid take-up of short positions by the money managers group, which looks reflective of a broader change in sentiment as regards price direction,” said analysts at JBC Energy, a Vienna-based consultancy.
Short positions in WTI have increased to 141m barrels, up from just over 50m at the start of June as concerns about the gasoline surplus have mounted.
said it had finally drawn a line under the Deepwater Horizon disaster as chief executive Bob Dudley set out a “much stronger outlook” after six years of asset sales, cost cuts and crippling legal settlements.
He said the UK energy group was “well down the path” towards fresh growth and renewed his commitment to defend its hefty dividend despite continued weakness in the price of oil.
Mr Dudley’s bullish comments came as BP reported a 45 per cent year-on-year drop in second-quarter profits two weeks after the group declared that the for the 2010 Deepwater Horizon oil spill would be $61.6bn.
Underlying replacement cost profits — analysts’ preferred measure — were $720m in the three months to June 30, compared with $1.31bn in the same period last year. This was below analysts’ consensus expectation for $840m but an improvement on the $532m recorded in the first quarter.
Oil prices have staged a from the $34 a barrel average in the first quarter — when they hit their lowest level for 13 years — to an average $46 in the second quarter. However, the recovery has stalled in recent weeks with Brent crude trading on Tuesday below $45 a barrel, its lowest since May.
Mr Dudley admitted he had expected higher prices of “around $50 at this point in the year” but told the Financial Times that the market was being held back by high inventories and a strong dollar, which increases the cost of oil to non-US buyers.
He said BP was on course to lower its break-even point to within the $50-55 a barrel range by next year and insisted the group would cut costs further to defend its dividend if prices remained below that level.
“The industry made money at $20 a barrel,” he said. “There is no doubt there is room for more reductions. We’re working really hard to make sure we can preserve the dividend.”
BP said capital expenditure this year would be lower than its previous guidance for $17bn and cited this as evidence of successful belt-tightening. Mr Dudley insisted BP could still develop fresh resources while restraining costs, reiterating his promise to deliver 800,000 barrels a day of new production by 2020.
“It’s the most exciting time in the past six years,” he said. “Instead of lawsuits, we’ve got new [oil] projects coming.”
The quarterly results included a further $5.2bn charge related to settlements with US authorities, investors and tens of thousands of individuals and businesses affected by the 2010 Deepwater Horizon blowout, which killed 11 workers and released more than 3m barrels of oil into the Gulf of Mexico.
Mr Dudley said that, while BP would continue to make staggered payments resulting from the settlements for years to come, the full extent of the financial burden was now clear. “We are very pleased to have finally drawn a line under the material liabilities for Deepwater Horizon. We will always be mindful of what we have learnt from that tragic accident.”
Analysts said disappointment over the modestly lower than expected profits was partially offset by strong underlying cash flow and good control of costs and spending. Shares in BP were down 2.44 per cent at 429.6p on Tuesday afternoon.
Underlying profits from BP’s refining and marketing operations, known as the downstream business, were in line with expectations at $1.5bn, compared with $1.9bn a year ago. The upstream business — responsible for exploration and production — inched back into the black with profits of $29m, compared with a loss of $747m in the first quarter but down from $494m a year ago.
BP was the first of the global oil majors to report second-quarter results, with others such as and , due to publish theirs later in the week. Investors are looking for signs that the heavy cost cuts and asset disposals made since the oil price crash of 2014 are beginning to pay off.
Tom Ellacott, head of corporate research at Wood Mackenzie, the energy consultancy, said many oil and gas companies could now break even at about $50 a barrel, compared with the $90 that most needed in 2014. This would help restore confidence to the sector, he added, although investment was likely to remain subdued.
“Balance sheet management is front of mind across the industry — cost containment and capital discipline are still the strident messages emanating from all companies,” said Mr Ellacott. “But strategies will need to shift away from survival mode and look to the future.”
