Banyan Gold Corp. Aug. 5 announced the appointment of Tara Christie as its new president and CEO. An accomplished mining executive with more than 20 years of operational experience, Christie has managed a number of mineral resource companies and served as a member of the Yukon Environmental and Soci…
Brixton Metals Corp. Aug. 5 posted results from an initial phase of 2016 exploration at its Thorn gold-silver project in Northwest British Columbia. A total of 891 soils and 159 rock samples were collected during this program. Most of these were collected within a previously unexplored area of the p…
Silver Range Resources Ltd. Aug. 4 said it has staked and completed an initial examination of the Itchen gold property about 78 kilometers (48 miles) west of the Lupin Mine in Nunavut. Exploration in the Itchen Lake area dates to the early 1960s, when gold was discovered at Contwoyto Lake. The devel…
Copper North Mining Corp. Aug. 4 reported the start of 2016 exploration at Thor, a northern British Columbia project that provides the company with an opportunity to explore for porphyry copper-gold mineralization in the slopes and valleys adjacent to the shutdown Kemess South mine. Initial explorat…
Stakeholder Gold Corp. Aug. 3 reported encouraging results from an initial phase of exploration at it Ballarat gold property in the Yukon Territory. Planned and executed by GroundTruth Exploration Inc., an innovative exploration company founded by Shawn Ryan, the program included soil sampling; GT P…
Golden Predator Mining Corp. Aug. 3 said it has begun the second phase of 2016 exploration at its 3 Aces project in southeastern Yukon Territory. With a budget of C$4 million, this program includes detailed soil sampling, structural mapping, geophysical work, road construction, trenching, drilling a…
Kennady Diamonds Inc. Aug. 2 said summer drilling program at its Kennady North project adjacent to the Gahcho Kué diamond mine in Northwest Territories is underway with two rigs conducting exploration and delineation drilling at the Faraday kimberlite bodies. Kimberlite has been intersected in the f…
, the Russian state-run gas group, reported a dip in quarterly profit of more than 5 per cent due to lower gas prices and higher capital expenditure.
Net income fell to Rbs362bn in the first quarter, down from Rbs382bn a year earlier, the company said on Wednesday. Total sales increased by 5.4 per cent to Rbs1.74tn.
The global oil slump has created uncertainty for Gazprom, which sells much of its at rates linked to the price of oil. Prices on the spot market in Europe, Gazprom’s key source of revenues, have more than halved in the past two years. Many analysts predict that slumping demand in Russia, Ukraine, and China, as well as a potential rise in exports of liquefied natural gas from the US, will push prices down further.
The company said on Wednesday that it did not intend to cut its capital expenditure or turn to debt markets to head off the problem. Gazprom’s budget for 2016 is based on an average price of $199 per thousand cubic meters — which would already be the lowest in a decade — when expected prices are even lower at $167-$171 per thousand cubic meters.
“We can see that the prices on the market today are lower than those we set out in our budget,” Alexander Ivannikov, Gazprom’s finance director, said on a conference call with investors. “But we have half the year still to come and the weather factor is more important.”
Total sales of gas by volume to European countries increased by 49 per cent. But with prices at $187.5 per thousand cubic meters nearly $100 less than a year earlier, the rise only translated into a 22 per cent increase in sales revenues. Sales by volume went down by 16 per cent in the former Soviet Union, mostly driven by Ukraine’s attempt to wean itself off Russian gas since the in 2014, and 6 per cent in Russia.
Operating expenses rose 24 per cent, which the company mostly attributed to an asset swap agreed last October with German firm Wintershall.
Gazprom’s falling revenues may impact its plans for several major new investment projects. The company said it still intended to finance Turkish Stream, a new gas pipeline that was put on hold last year after Turkey shot down a Russian Su-24 fighter plane. Turkish president , in St Petersburg to meet his Russian counterpart Vladimir Putin on Tuesday, said that Ankara intended to finish the project, which entails a pipeline supplying gas to Europe through Greece that remains subject to EU approval.
“Terms of References (TORs) to the committee includes looking into the issue of gas migration and give its recommendations in this regard,” he said.
Saudi Arabia’s oil production rose to a record level in July as it moved to meet domestic demand and maintain pressure on regional rivals, with Opec countries still locked in a battle for customers.
Data submitted by the kingdom to the Opec showed output jumped to 10.67m barrels a day last month, up 123,000 b/d on June and surpassing the previous record of 10.56m b/d from June last year.
Saudi Arabia usually pumps more crude oil during the summer months to meet a seasonal increase from domestic power companies trying to satisfy air-conditioning demand. In July parts of Saudi Arabia endured record-breaking temperatures above 50 degrees centigrade.
But the kingdom’s oil production is under intense scrutiny after it promised its Opec peers in June that it would not with its oil. Rival Opec countries will be watching closely to see if it pulls back production once temperatures cool as it did last year, lowering output to around 10.2m b/d between September and May.
Saudi Arabia’s state oil company last week for Asian customers by the most in a year, signalling a more aggressive push for customers as it competes with big producers like Russia and Iraq and its regional rival Iran, where exports are rising after the end of years of sanctions.
Demand is also expected to weaken in Asia in October as the refinery maintenance season gets under way.
Oil prices are back under pressure since June amid oversupplied crude and refined product markets after a recovery for much of the first half of the year.
“Lower-than-predicted demand, high refined product stocks during the peak summer driving season and rising crude supply . . . have all significantly exerted pressure over the month,” Opec said.
Brent crude, the global benchmark, has slid towards $40 a barrel, prompting oil producers such as Venezuela, to rally support for another meeting of Opec and non-Opec countries to agree to measures to prop up oil prices.
An April failed to reach any agreement to freeze production and no production cap was implemented at Opec’s June meeting in Vienna.
Opec members are scheduled to meet informally in September on the sidelines of an industry conference in , the group’s president said earlier this week.
The group’s output is still well above the estimated level of demand for its crude. In July total Opec production stood at 33.1m b/d according to estimates by secondary sources such as oil analysts. Opec forecasts demand for its crude to stand at 31.9m b/d in 2016 and 33m b/d next year.
Two years of low prices are starting to reduce supplies outside the cartel with non-Opec production expected to contract by 800,000 b/d in 2016 and a further 150,000 b/d next year.
World oil demand growth in 2016 is expected to average at just over 1.2m b/d, which is 30,000 b/d more than forecast in last month’s report. Next year’s growth of 1.15m b/d stands unchanged.
Although the oil market surplus will ease by more than 1m b/d year-over-year the report suggests the oil market will remain oversupplied by 100,000 b/d on average in 2017. Last month Opec forecast a small deficit for next year.
“We want to link the price to market dynamics. Government will move towards market dynamic pricing system,” Oil Minister Dharmendra Pradhan said.
“They are a potential for us,” a senior executive at Reliance Industries said, referring to customers who don’t want subsidy but could be lured away with better service.
, the UK energy group, is planning to sell one of its biggest Chinese investments, by disposing of its 50 per cent stake in the near Shanghai.
BP is the latest western oil company to curtail activity in China, as energy groups reel from . China’s slow liberalisation of its energy sector has disappointed investors.
Analysts said that the group’s move to exit the Secco plant made sense at a time when Asia was “awash” with petrochemical supplies.
It also comes amid the UK company’s plans to sell between $3bn and $5bn worth of assets this year. BP has made more than $50bn of divestments since 2011 to help pay legal and clean-up bills following the 2010 Gulf of Mexico oil spill.
State-controlled , which also has a 50 per cent stake in the Secco joint venture, said it was “researching” BP’s planned sale.
“We haven’t made any decision to buy or not,” said Sinopec. BP declined to comment.
One analyst, who declined to be named, valued BP’s chemicals business, which is largely Asia focused, at $3bn. This would imply that BP could secure $1bn-$2bn for its Secco stake, the analyst added.
The Secco plant started operations about 10 years ago after $2.7bn of investment by BP and Sinopec. It makes products including ethylene, which is a building block for plastics.
While BP appears keen to scale back its activity in China, it has no plans to exit the country.
The UK company has stakes in several big Chinese petrochemical sites as well as a liquefied natural gas terminal. It does not have any oil or gas production in the country.
Other western oil companies aiming to reduce their presence in China include , which is seeking to sell its stake in the in the north-east of the country. has shelved a shale gas joint venture in the south-west.
The petrochemical industry is now struggling with . “Asia is awash with petrochemicals supplies and in China, even though there is ample demand, the oversupply is translating into lower domestic prices,” said Michal Meidan, analyst at Energy Aspects.
“For BP, that must focus on costs in the current oil price cycle, this probably makes sense.”
While western energy companies have been retreating from Chinese oil investments, Middle Eastern and Russian groups are keen on projects in the country.
Saudi Aramco, Saudi Arabia’s state-controlled oil company, has held on-off talks with China National Petroleum Corporation, parent of PetroChina, about buying a stake in its new refinery in Kunming. No deal has been finalised. Saudi Aramco already holds a stake in a Quanzhou refinery.
Kuwait Petroleum Corp and National Iranian Oil Company have been in talks about investing in Chinese refineries.
, Russia’s state-controlled oil company, agreed in 2013 to establish a refining joint venture in Tianjin, the port city near Beijing.
Last year ChemChina, the state-controlled chemicals and refining conglomerate, offered a stake in some of its refineries to Rosneft.
When the price of oil rose above $50 a barrel in June, it looked like the worst was over for international oil companies. Few people expected a return to the industry’s $100 a barrel heyday, but steady recovery seemed under way.
Two months later, with prices back down to about $45 a barrel, that optimism has been extinguished.
The oil majors’ in recent weeks were mostly worse than expected, with sharp drops in profits, rising debts and gloomy outlooks.
As well as weak prices of crude oil and natural gas, margins for refined products are also being squeezed, as ripple down the supply chain. said its refining margins in the second quarter were the lowest since 2010.
“The glut of crude oil has translated into a glut of refined product,” says Michele Della Vigna, co-head of European equity research at Goldman Sachs. “So the integrated oil majors are getting hit at both ends.”
In response, companies are once again reducing spending. , fresh from its £35bn takeover of BG Group, said capital expenditure this year would be 38 per cent less than the pair jointly invested as standalone companies in 2014.
Yet, cost cuts alone are not enough to defend shareholder returns. With the exception of of Italy, all the oil majors have so far maintained their prized dividends — but they have had to increase borrowing to do so.
Shell’s net debt increased $5bn in the second quarter to a record $75bn. Simon Henry, chief financial officer, admitted the group’s debt to equity ratio was in danger of breaching its self-declared upper limit of 30 per cent.
“The fact that debts are creeping up shows that the majors are not able to fund their dividends organically at these prices,” says Tom Ellacott, head of corporate research at Wood Mackenzie, the energy consultancy.
A year ago, oil groups were talking about the need for a long-term break-even point of $60 a barrel. That was painful enough for an industry that had grown fat on prices twice that level. But companies are now acknowledging that even tougher action is required. BP, for example, is aiming to cover all its cash needs — including its dividend — at an oil price of $50-$55 a barrel by next year.
Analysts and industry executives say the squeeze is leading to a leaner, . Tens of thousands of jobs have been cut, contracts have been renegotiated with service providers and engineering processes simplified. “We’re starting to see the benefits of projects being reworked with much improved economics,” says Mr Ellacott.
These efficiency gains are lowering the potential cost of new oil and gasfields. Of the 13m barrels a day of proven but untapped resources available for development, the average break-even point has fallen $19 a barrel since the 2014 peak to $51, .
There have been tentative signs of lower costs giving companies confidence to resume the hunt for future growth.
“There’s a tricky balancing act between cutting costs to achieve cash flow neutrality while at the same time looking to the long term,” says Mr Ellacott. “We are seeing the majors trying to reposition their portfolios to the most attractive and lowest cost growth opportunities.”
In the past two months, BP has approved projects in Indonesia and Egypt, while gave the green light to a of the Tengiz oilfield in Kazakhstan.
There has also been a burst of acquisitions, with and each striking $2.5bn deals in recent weeks to , an exploration company focused on Papua New Guinea, and a controlling stake in a from , respectively.
However, these acquisitions are dwarfed by the under way to raise cash. Shell alone is looking to raise $30bn by 2018 from sales of non-core assets. Investment activity also remains . From 2007-2013, there were on average 40 large projects — defined as having reserves of 50m barrels of oil equivalent or more — approved each year. In 2015, there were just eight and so far this year there have been six.
Oil bulls believe these cuts will eventually lead to tighter supplies and drive recovery in prices and investment. Wood Mackenzie calculates that more than 20m barrels a day of new capacity needs to be developed by 2025 to offset production declines from existing fields and to meet future demand growth.
Some analysts doubt the arguments for cyclical recovery, pointing out that output from the Opec nations remains close to record highs while US shale production could be quickly intensified if the market tightens. Mr Della Vigna at Goldman Sachs believes oil is facing a “deflationary spiral” with plentiful supplies forcing the industry to become more efficient, which in turn leads to further increases in production at lower costs.
This analysis leads Mr Della Vigna to argue that the sacrifices being made by oil majors to defend dividends may be in vain. “They inflated their dividends in a high oil price environment and now cheap debt and disposals are propping them up. They’ve done enough to keep it going for a couple more years but, longer-term, they are going to have to review their payouts.”
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A 30 per cent drop in profit may not sound like something to be proud of but, for Total, its second-quarter earnings were a sign of resilience. While most of its rivals reported worse than expected results, the French group beat analysts’ forecasts and earned plaudits for the way it is weathering the downturn in oil and gas prices. Total’s earnings drop was half the average 60 per cent fall suffered by Royal Dutch Shell, BP, ExxonMobil and Chevron. “Total is emerging as a relatively safe haven, and with oil prices weakening again it looks the most attractive investment among the . . . global majors for what might be a very difficult few quarters,” said Iain Reid, analyst at Macquarie. He said Total’s management had a “firm grip on costs” leading to “more predictable and positive” results than rivals’. The group said last month that it was on course to exceed a target for $2.4bn in savings this year. Operating costs per barrel, already among the lowest in the industry, have fallen 12 per cent in the past year to $6.50. Mike Borrell, Total’s head of exploration and production in Europe and central Asia, said the group was quicker than most to tackle the unrestrained spending that built across the industry in the era of $100 per barrel of oil. “Even before the crash we saw that the industry was on an unsustainable footing. Costs were eating away at profit margins and we could see that unless we did something about it we were not going to be able to deliver shareholder value.” |
Weakness in the oil and gas sector forced to write down £440m with the Anglo-American engineering group still loss-making despite a rise in revenue.
Revenues in the first half increased 7 per cent to £2.8bn compared with the same period last year due to strong growth in its clean energy and environment and infrastructure businesses.
However, revenues in its US and gas business fell 55 per cent with delays and cancellations of key contracts also leading to lower margins.
The company reported a pre-tax loss of £446m for the half compared with a profit of £73m a year earlier.
It maintained its guidance for the full year but predicted like-for-like revenues will be down “double-digit” compared with last year.
Shares rose 3 per cent to £480.70 on Tuesday morning as the results beat analyst expectations both for revenues and profits. Analysts at Liberum noted that revenues from solar and the UK North Sea were at record levels but were offset by weak performance from Americas oil and gas.
“Our industry continues to face very challenging conditions, with capital projects across natural resources markets being delayed and cancelled in many parts of the world,” said , chief executive.
reflect the toxic overspill of the oil sector’s pain. Companies that provide services and equipment for the offshore and shale industries, such as Wood Group or Weir, have been hammered as energy majors slash investment spending in response to the oil price fall.
Amec designs, builds and maintains engineering equipment, and relies on the oil and gas industry for much of its business.
The Anglo-American group parted ways with chief executive Samir Brikho in January, just over a year after he created it through a $3bn merger. It has pledged to cut costs and deleverage its balance sheet, with sales of non-core assets planned to help cut debt.
Amec recognised £440m of impairments during the first half. The company aims to complete £500m of disposals by next June to help halve its net debt.
However, it admitted that, excluding any benefit from disposals, net debt will be higher than previously forecast at the end of this year at about £1.1bn.
Mr Lewis said: “We continue to benefit from the diversity of our platform and we remain on track to deliver the operational guidance we gave at the beginning of the year.
“I have initiated a wide-ranging review of the strategy, our organisation structure and cost base — which we are now part-way through. I expect to update investors on these issues in the autumn.”
Over 95% of Indian hydrocarbon industry leaders consider the recent policy changes in the sector to be pro-business and transparent.
The Indian subsidiary of Swiber Holding Ltd had furnished the bank guarantee last year after bagging a construction, maintenance and service contract from ONGC.
Opec has said it will meet informally in September as the oil exporters’ group grapples with a renewed dip in crude prices since its last meeting in June.
Officials from countries will gather on the sidelines of an International Energy Forum biennial conference for ministers in Algeria in late September, the body said in a statement on Monday.
“Opec continues to monitor developments closely, and is in constant deliberations with all member states on ways and means to help restore stability and order to the oil market,” Opec said.
At Opec’s , officials agreed to maintain their strategy of not cutting oil production to support prices. The oil market rebalancing was under way, they said, but they would continue to watch market movements carefully.
Prices had been on the rise, after falling below $30 a barrel at the start of the year. By mid-June Brent crude rose above $50 a barrel as global production outages from Canada to Libya and Nigeria took hold.
But renewed weakness, partly from some of this lost production coming back on to the market, has prompted some Opec members to push again for a production freeze agreement.
A Doha meeting of Opec and non-Opec countries in April, to rein in output that consistently outpaced demand, failed to reach in any agreement.
“The last try a few months ago failed spectacularly,” said analysts at JBC Energy. The latest attempt, they said, “is indicative of the significant pressure some of these producers are under in terms of their economies.”
a barrel last week, far below the prices in excess of $100 a barrel that oil exporting countries came to rely upon to fill their government coffers.
The global benchmark edged higher by 77 cents on Monday to $45.05 a barrel.
Hedge funds and other money managers have cut their overall bets on rising crude oil prices to the lowest level since the start of the year, data from Intercontinental Exchange showed.
Speculators reduced their net long positions for an eighth consecutive week. They were down 28,148 contracts to 260,388 in the week to August 2. The fall was also propelled by a rise in short positions, as bets against a sustained price increase grow.
Higher production from Iran, Iraq, Nigeria and could see Opec production breaking above 34m barrels a day next year, said David Hufton at broker PVM.
“These are not scenarios that add up to higher oil prices,” he said. “Price recovery in 2017 is not a shoo-in.”
Mohammed Bin Saleh Al-Sada, Qatar’s energy minister and current Opec President, however remained positive about the oil market’s direction.
“Higher oil demand is expected in the third and fourth quarters,” Mr Al-Sada said according to the statement.
The recent decline in oil prices are temporary, Opec said. “These are more of an outcome resulting from weaker refinery margins, inventory overhang — particularly of product stocks, timing of Brexit and its impact on the financial futures markets, including that of crude oil.”
ONGC has also reported ‘condensate’ production inappropriately as crude oil production, though both products were identified distinct.
Strikes and blockages by some students’ unions, among others, that crippled oil and gas output of Oil India Ltd (OIL) and ONGC were organised in Assam last month.
ONGC has also reported ‘condensate’ production inappropriately as crude oil production, though both products were identified distinct.
If merged, the PSUs will form a monopoly that owns 85% of the market. Whether the CCI will allow it and the government will like it remain to be seen, said Lalit.
Robert Mabro, who has died aged 81, was an oil academic who became a trusted adviser to some of the most powerful figures in the energy industry.
Founder of the , he helped shape the for half a century, and acted as a broker between Opec and rivals to cut production and stabilise oil prices after the Asian financial crisis.
“Clever, trusted, witty and light-hearted, Mabro was a brilliant diplomat who used the authority of his intellectual independence to bring conflicted parties together,” said Paul Newman, a friend who chairs Icap Energy, an offshoot of the UK broker.
After oil prices slid below $10 a barrel in 1997, Mabro was called on to draw together big producers, who were reluctant to cede market share and co-operate with nations they viewed as rivals.
After a year of back channel talks, a deal was hammered out between Opec kingpins Saudi Arabia and Venezuela and rival producers led by Mexico. This helped underpin a recovery in prices.
“It was Robert who brought us together during these secretive talks,” said Abdulaziz bin Salman, who was part of the negotiations as Saudi deputy oil minister. “As our proxy he gave us the confidence. He was a realist, a deep thinker and focused minds on the art of the possible,” the prince added.
But for Mabro the rapprochement was unremarkable. “At various levels he was effectively doing that sort of thing all the time,” said Paul Horsnell, a former colleague and now head of commodities research at Standard Chartered. “If anybody wanted an honest broker, or wanted to broach an idea to other parts of the industry, Robert would be a natural port of call.”
Information and opinions would move around the oil world via Mabro, Mr Horsnell said, because of his integrity, discretion, lack of a personal agenda and modesty.
His ability to distil issues to their essence was noted by friends and colleagues, bringing together politics, economics and other subjects to analyse energy markets.
With his moustache and wide smile, he would peer over his glasses as he spoke about topics ranging from oil market dynamics and geopolitics to Viennese cakes and his love for the US television drama The West Wing. Mabro passed away on holiday in Crete with his wife Judy, daughters and grandchildren.
Born in Alexandria in 1934 to Lebanese parents, he earned an Egyptian degree in civil engineering, then studied philosophy in France before receiving a masters degree in economics in London.
He began his academic career at the School of Oriental and African Studies, then moved to Oxford university in 1969 to research the economics of the Middle East, after which his interest in oil developed.
In the 1970s he founded several energy outfits including the OIES, which focuses on the economics, politics and international relations of energy.
Mabro once “because it only works when it is in hot water”.
When John Kerry, then a US presidential candidate, said in a television interview in 2004 that he wanted US security “to be in the hands of Americans [. . .] not the Saudi royal family or others around the world,” Mabro responded: “That is a nice line but it is meaningless. You [will] have to continue to import [oil] for many years to come.”
“He always questioned the motivations behind a person’s comments,” said Bassam Fattouh, director of the OIES. “He was critical of everyone and this enabled him to be impartial.”
When talking about oil market commentators on television, Mabro once said to the Financial Times: “Everyone seems to be an expert. Who are these people? They never seem to ask me.” The comment was delivered a chuckle.
Three of Europe’s biggest energy groups are looking to make progress with multibillion-dollar asset disposal programmes before the end of this year, despite pressure on valuations from low prices.
Total of France is aiming to sell its Atotech chemicals subsidiary this autumn in a deal expected by analysts to raise about $3bn, and Eni of Italy says talks to offload part of a big Mozambique gasfield are at an “advanced stage”.
Royal Dutch Shell, meanwhile, says it is working on 17 potential disposals as it seeks to reassure investors that its target for by 2018 is achievable.
In common with other oil companies, the European trio are looking to divest non-core assets to help shore up their balance sheets and defend dividends at a time of mounting pressure from the prolonged weakness in oil prices.
However, they face a challenge to achieve acceptable valuations as the deflationary impact of the oil price crash ripples through the industry.
This balancing act is especially tricky for Shell as disposals are crucial to reduce debts after its , completed in February.
“Shell is going to have to be flexible on price if it is to move forward with some of these deals,” said one energy banker. “They cannot just sit back and wait for oil prices to come back.”
About $3bn of disposals have been completed or announced by Shell so far this year, including the sale of its stake in the Japanese refiner Showa Shell.
Simon Henry, Shell’s chief financial officer, said last month that the group wanted to make “significant progress” on deals worth $6bn-$8bn by the end of the year.
Assets in Thailand, New Zealand and the North Sea are among those up for grabs, as well as Shell’s planned exit from its with Saudi Aramco in the US.
Patrick de la Chevardière, chief financial officer of Total, said he was confident of hitting his target for $10bn of disposals by the end of next year despite weak valuations for upstream exploration and production assets.
“It is true that the oil price environment is not favourable to sell upstream assets, and we are not desperate to sell at any price,” he told investors last month. “We have a few projects under negotiation to sell midstream assets, mostly pipeline infrastructure … and the market is there for those assets.”
Much of this year’s deal activity has involved downstream refining and chemicals businesses, such as Total’s Berlin-based Atotech unit, which makes chemicals for circuit boards and semiconductors used in electronics. Mr de la Chevardière said Total was in the process of selecting a short list of bidders, with an aim to sign a deal in the fourth quarter.
Reuters last week that Sinochem of China and private equity groups Cinven and BC Partners had made it into a second round of bidding. Total and the three reported bidders declined to comment.
ExxonMobil has been strongly linked with Eni’s Mozambique asset. Both companies declined to comment. Eni is also planning to offload part of a big next year in pursuit of its target for €7bn of disposals by 2019.
“Our 20 MMTPA Vadinar refinery is looking at earning an additional $1.50 on its Gross Refining Margin (GRM) on the back of Rs 1,600 crore of investments.
Rising fuel demand, driven by India’s thirst for gasoline, is expected to help push the growth rate in the country’s fuel consumption ahead of China’s.
Singapore Inc is facing mounting concerns as the city-state’s long-successful oil and gas sector turns sour with the oil price slump.
Oil and gas services have been a lucrative niche for the country. It is the world’s biggest maker of jack-up rigs, which are used to drill for oil in shallow ocean waters.
But the plunging price of , currently hovering around $40 a barrel, has turned this strength into a source of as rig builders have been forced to slash jobs while smaller oil services providers face bankruptcy.
The latest company to get into difficulty is Swiber, a Singapore-listed marine engineering company that has been placed under a court-supervised rescue plan.
Analysts say Swiber’s troubles underline the particular risks faced by the country’s three big banks — , and which are the main lenders to the country’s offshore oil and gas services sector.
Swiber, valued at just over S$50m (US$37m) before trading was suspended, defaulted on a coupon payment last week, hit by a slowdown in its business including the delay of a $710m oilfield project in west Africa.
A total of S$1.2bn in bonds issued by Singapore is set to mature by the end of 2017, according to data compiled by OCBC Bank, and there are now worries there could be more defaults.
“I would expect sporadic default cases going forward. I would expect widespread default in the event that oil prices remain depressed on a sustained basis,” said Wee Siang Ng, a Singapore-based analyst at Fitch Ratings.
Big players such as rig builder are also struggling. Keppel cut 16 per cent of its staff in the first half of the year as net profit fell 45 per cent. Rival reported a 70 per cent drop in first-half profit.
However, Keppel is cushioned by the strong performance of its property development and property fund management arm. Both rig builders also are backed by Temasek, Singapore’s state investment company.
But a handful of smaller oil and gas companies have attracted warnings from auditors about their ability to continue as going concerns, financial filings show.
“Several offshore and marine companies were making investments for future growth during 2014 and were caught when energy prices took a steep dive in [the fourth quarter of] 2014,” said Nick Wong, credit analyst at OCBC Bank, said.
The oil price slide has also deterred upstream activity by oil majors, denting the profitability of services providers, Mr Wong added.
To cope, Singapore oil services groups have sought to raise money through rights issues, divesting assets, and by restructuring bank loans.
Concerns have spread to the banks after DBS said it only expected to recover about half of the S$700m it has lent to Swiber. Only about S$300m of DBS’s lending to Swiber is secured against collateral such as vessels.
However, DBS said Swiber “had an order book of more than S$1bn” as of the end of June and noted that the company had no overdue payments with the bank.
At UOB’s results briefing it cited difficulties in the oil and gas services sector for a rise in non-performing assets and identified the sector as a “key concern”. But it said its exposure to Swiber was manageable. UOB’s outstanding loans to the oil and gas industry stood at S$9.3bn at the end of June, or 4 per cent of the total outstanding loan book.
DBS, which is due to report second-quarter results on August 8, had loans of S$17bn to the oil and gas sector in the first quarter, equivalent to 6 per cent of its loan book.
Warren Buffett’s Berkshire Hathaway beat profit forecasts for the second quarter, in part thanks to hiking car insurance premiums at its Geico division.
The 7 per cent year-over-year increase in average premiums helped Geico dig itself out from the effects of the increase in accident payouts, which has plagued the auto insurance industry.
Geico’s improved performance was part of a wider bounceback in Berkshire’s sprawling insurance empire, which helped offset continuing weakness in the company’s railroad arm.
Mr Buffett’s conglomerate reported net income for the three months to June 30 of $5bn, up from $4bn in the same period last year. The company’s operations span insurance underwriting, railroads, utilities, manufacturing and retail, and it also holds a .
Underwriting profits at the insurance division were $337m in the quarter, compared to a forecast from Barclays of $253m and up from $38m last year. Berkshire Hathaway Reinsurance returned to profit in the quarter, and Geico’s underwriting profit rose to $150m from $53m last time.
“It is pretty competitive out there,” said Jim Shanahan, analyst at Edward Jones, “so it is positive they have been able to push through premium increases and still maintain market share.”
Mr Buffett told attendees at Berkshire’s that he suspected an increase in “distracted driving” was behind last year’s surge in accidents, along with the increased numbers of miles driven that come with an improved economy. Geico was improving its “basic underwriting”, he said.
Revenues across Berkshire rose 6 per cent to $54.5bn, partly thanks to the , an aerospace industry supplier, and Duracell batteries, two recent acquisitions. Book value, the measure on which Mr Buffett urges shareholders to judge his performance, is up 6.9 per cent on a year ago, to $160,009 per share.
A weak spot in the second-quarter earnings, released after the closing bell on Friday, was Berkshire’s railroad business BNSF. Its revenues declined 15 per cent and pre-tax profits were down 19 per cent to $1.2bn. BNSF operates approximately 32,500 route miles of track in 28 US states and three Canadian provinces.
The division has been hit by falling freight volumes, and it warned that it saw no likelihood of much improvement later this year. Revenues from transporting coal were down 41 per cent in the second quarter, and from transporting industrial products were down 5 per cent.
US oil producers are increasingly transporting oil by pipeline rather than rail, Berkshire said. “With oil at low production levels, along with pipeline displacement, we expect comparative volume declines in petroleum-related categories for the remainder of 2016.”
A special resolution was passed by company shareholders to enhance the limit for purchase of equity shares by FIIs/RFPIs, RBI said.
After reporting a small loss during the first quarter, ConocoPhillips reported adjusted earnings of $54 million from its Alaska operations in the second quarter of the year.
Taking into account a one-time $93 million tax adjustment, the largest independent exploration and production company in the w…
The Alaska Department of Revenue is soliciting comments on possible changes to state tax regulations. Advice is being asked on two sets of potential new regulations, one on a change in the state oil and gas property tax statute made in 2014 in Senate Bill 138 and a second on the changes in state oil…
Addressing a recent debate over the necessity or otherwise of the Southcentral electric utilities to build much new power generation capacity in recent years, Mark Johnston, general manager of Municipal Light and Power, told the Anchorage Chamber of Commerce on Aug. 1 that aging power plants tend to s…
Furie Operating Alaska is continuing to drill its KLU A-2 development well in the Kitchen Light gas field in Cook Inlet using the Randolf Yost jack-up rig, Bruce Webb, Furie senior vice president, told Petroleum News Aug. 2. Having paused the drilling while the company brings in some well completion…
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Cook Inlet Pipeline Co. is dealing with two spills at the Drift River Terminal Facility on the west side of Cook Inlet.
In an Aug. 2 situation report the Alaska Department of Environmental Conservation, Division of Spill Prevention and Response, said the spills were discovered associated with over…
