It was mostly a quiet week for oil prices,
Friday, July 27, 2018
It was mostly a quiet week for oil prices, rising on the back of geopolitical tensions at the start of the week before losing those gains on Friday as the oil rig count increased. Earnings reports started trickling in this week, with strong performances across the board. The recovery of oil markets in the last year is starting to be reflected in earnings, although some share prices were battered as Wall Street had expected more.
Shell posts strong earnings, initiates $25 billion share buyback. Royal Dutch Shell (NYSE: RDS.A) nearly tripled its profits in the second quarter, year-on-year, and announced the beginning of a $25 billion share buyback program. Investors weren’t convinced, and Shell’s stock sunk nearly 4 percent on the news. The skepticism may have been the result of the 1.5 percent decline in production, which stemmed from field declines and asset sales. Also, Shell’s earnings came in a little under expectations. Shell’s gearing, or debt ratio to capitalization, declined from 24.7 percent in the first quarter to 23.6 percent in the second, another sign of progress.
BP to pay $10.5 billion for BHP shale assets. BP (NYSE: BP) agreed to purchase BHP’s (NYSE: BBL) shale assets for $10.5 billion. BHP has been trying to unload its shale assets for a while, after losing some $19 billion on shale, so the sale is welcome. For BP, the acquisition is an enormous splash, making it a major player in U.S. shale. The assets are located in the Eagle Ford, Permian and Haynesville shales. “This is a transformational acquisition for our (onshore U.S.) business, a major step in delivering our upstream strategy and a world-class addition to BP’s distinctive portfolio,” BP Chief Executive Bob Dudley said in a statement. BP also hiked its dividend for the first time in almost four years and also announced a $6 billion share buyback.
Chevron doubles earnings, Exxon’s up 18 percent. Chevron (NYSE: CVX) reported earnings of $3.8 billion for the second quarter, more than twice as much as a year earlier. Like some of the others, earnings still came in a bit under expectations – shares were down 2 percent on the news. Meanwhile, ExxonMobil (NYSE: XOM) fell 4 percent in early trading on Friday after undershooting expectations. The oil major said that production fell 7 percent in the second quarter, year-on-year, even as Permian and Bakken production jumped. Exxon earned just under $4 billion for the quarter, up 18 percent from a year earlier.
Saudi Arabia halted shipments through Bab el-Mandeb. Saudi Arabia halted shipments through the crucial chokepoint of Bab el-Mandeb this week after Houthi rebels attacked two Aramco tankers. Nearly 5 million barrels per day of oil volumes pass through the narrow strait between the horn of Africa and Yemen.
Airlines cutting capacity because of fuel costs. Many of the largest U.S. airline companies are trimming flights and raising fares in reaction to rising fuel prices.
Trump calls off trade war with Europe…maybe. President Trump boasted about a breakthrough in trade relations with Europe this week, seeming to support a free trade proposal that resembles the one that the Obama administration and Europe had been considering. He said the two sides would have talks on “zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods.” Trump also suggested that Europe would buy up American soybeans – hit hard in the current trade fight with China – and American LNG. Light on details, the market did not know what to make of the announcement, but welcomed the easing of relations. But already, the vague breakthrough is running into trouble, with both sides far apart on whether or not agriculture should even be considered as part of the negotiations.
Saudi Arabia pressures Aramco to take on debt. With the IPO of Saudi Aramco on ice, the Saudi government is pressing Aramco to raise tens of billions of dollars in debt to fund the country’s economic transformation, according to the WSJ. Saudi officials want Aramco to raise debt to buy a controlling stake in SABIC, a Saudi petrochemical company, currently owned by the sovereign wealth fund. The move would effectively transfer $50 to $70 billion to the Saudi sovereign wealth fund, handing a mountain of cash to the government.
CNPC to spend $22 billion through 2020 to boost production. China’s state-owned CNPC announced plans to spend $22 billion by 2020 to boost oil and gas production in its western region of Xinjiang, according to Reuters. The move would help offset declining production from mature fields in China’s northeast.
Occidental Petroleum considers sale of pipeline assets. Occidental Petroleum (NYSE: OXY) is exploring the sale of its pipeline assets, which could be worth as much as $5 billion. The move would give the company resources to boost exploration and production. The sale of pipeline assets is timely given the high valuation for midstream assets.
Indian refiner cancels purchase of Iranian oil. India’s Hindustan Petroleum Corp. cancelled the purchase of an Iranian oil cargo because it couldn’t obtain insurance for the shipment, due to U.S. sanctions. The cancellation suggests U.S. sanctions will be more effective than once thought.
Deepwater drilling picks up. “The broad-based recovery is now also reaching the offshore market,” Patrick Schorn, executive vice-president of wells at Schlumberger (NYSE: SLB), told analysts last week. “We are preparing ourselves further for deepwater.” Schlumberger, along with Halliburton (NYSE: HAL), warned investors that the Permian could see a slowdown. But Schlumberger, more internationally-focused than Halliburton, struck a more optimistic tone regarding offshore drilling, noting that drilling could rise by 10 percent this year. According to analysts at Bernstein, there could be 40 final investment decisions on offshore projects this year, up from just 29 in 2017 and 14 in 2016.
Chesapeake Energy to sell $2 billion Utica assets. Chesapeake Energy (NYSE: CHK) is selling its remaining assets in the Utica shale for $2 billion in order to slash the company’s debt.
It was mostly a quiet week for oil prices, rising on the back of geopolitical tensions at the start of the week before losing those gains on Friday as the oil rig count increased. Earnings reports started trickling in this week, with strong performances across the board. The recovery of oil markets in the last year is starting to be reflected in earnings, although some share prices were battered as Wall Street had expected more.
Shell posts strong earnings, initiates $25 billion share buyback. Royal Dutch Shell (NYSE: RDS.A) nearly tripled its profits in the second quarter, year-on-year, and announced the beginning of a $25 billion share buyback program. Investors weren’t convinced, and Shell’s stock sunk nearly 4 percent on the news. The skepticism may have been the result of the 1.5 percent decline in production, which stemmed from field declines and asset sales. Also, Shell’s earnings came in a little under expectations. Shell’s gearing, or debt ratio to capitalization, declined from 24.7 percent in the first quarter to 23.6 percent in the second, another sign of progress.
BP to pay $10.5 billion for BHP shale assets. BP (NYSE: BP) agreed to purchase BHP’s (NYSE: BBL) shale assets for $10.5 billion. BHP has been trying to unload its shale assets for a while, after losing some $19 billion on shale, so the sale is welcome. For BP, the acquisition is an enormous splash, making it a major player in U.S. shale. The assets are located in the Eagle Ford, Permian and Haynesville shales. “This is a transformational acquisition for our (onshore U.S.) business, a major step in delivering our upstream strategy and a world-class addition to BP’s distinctive portfolio,” BP Chief Executive Bob Dudley said in a statement. BP also hiked its dividend for the first time in almost four years and also announced a $6 billion share buyback.
Chevron doubles earnings, Exxon’s up 18 percent. Chevron (NYSE: CVX) reported earnings of $3.8 billion for the second quarter, more than twice as much as a year earlier. Like some of the others, earnings still came in a bit under expectations – shares were down 2 percent on the news. Meanwhile, ExxonMobil (NYSE: XOM) fell 4 percent in early trading on Friday after undershooting expectations. The oil major said that production fell 7 percent in the second quarter, year-on-year, even as Permian and Bakken production jumped. Exxon earned just under $4 billion for the quarter, up 18 percent from a year earlier.
Saudi Arabia halted shipments through Bab el-Mandeb. Saudi Arabia halted shipments through the crucial chokepoint of Bab el-Mandeb this week after Houthi rebels attacked two Aramco tankers. Nearly 5 million barrels per day of oil volumes pass through the narrow strait between the horn of Africa and Yemen.
Airlines cutting capacity because of fuel costs. Many of the largest U.S. airline companies are trimming flights and raising fares in reaction to rising fuel prices.
Trump calls off trade war with Europe…maybe. President Trump boasted about a breakthrough in trade relations with Europe this week, seeming to support a free trade proposal that resembles the one that the Obama administration and Europe had been considering. He said the two sides would have talks on “zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods.” Trump also suggested that Europe would buy up American soybeans – hit hard in the current trade fight with China – and American LNG. Light on details, the market did not know what to make of the announcement, but welcomed the easing of relations. But already, the vague breakthrough is running into trouble, with both sides far apart on whether or not agriculture should even be considered as part of the negotiations.
Saudi Arabia pressures Aramco to take on debt. With the IPO of Saudi Aramco on ice, the Saudi government is pressing Aramco to raise tens of billions of dollars in debt to fund the country’s economic transformation, according to the WSJ. Saudi officials want Aramco to raise debt to buy a controlling stake in SABIC, a Saudi petrochemical company, currently owned by the sovereign wealth fund. The move would effectively transfer $50 to $70 billion to the Saudi sovereign wealth fund, handing a mountain of cash to the government.
CNPC to spend $22 billion through 2020 to boost production. China’s state-owned CNPC announced plans to spend $22 billion by 2020 to boost oil and gas production in its western region of Xinjiang, according to Reuters. The move would help offset declining production from mature fields in China’s northeast.
Occidental Petroleum considers sale of pipeline assets. Occidental Petroleum (NYSE: OXY) is exploring the sale of its pipeline assets, which could be worth as much as $5 billion. The move would give the company resources to boost exploration and production. The sale of pipeline assets is timely given the high valuation for midstream assets.
Indian refiner cancels purchase of Iranian oil. India’s Hindustan Petroleum Corp. cancelled the purchase of an Iranian oil cargo because it couldn’t obtain insurance for the shipment, due to U.S. sanctions. The cancellation suggests U.S. sanctions will be more effective than once thought.
Deepwater drilling picks up. “The broad-based recovery is now also reaching the offshore market,” Patrick Schorn, executive vice-president of wells at Schlumberger (NYSE: SLB), told analysts last week. “We are preparing ourselves further for deepwater.” Schlumberger, along with Halliburton (NYSE: HAL), warned investors that the Permian could see a slowdown. But Schlumberger, more internationally-focused than Halliburton, struck a more optimistic tone regarding offshore drilling, noting that drilling could rise by 10 percent this year. According to analysts at Bernstein, there could be 40 final investment decisions on offshore projects this year, up from just 29 in 2017 and 14 in 2016.
Chesapeake Energy to sell $2 billion Utica assets. Chesapeake Energy (NYSE: CHK) is selling its remaining assets in the Utica shale for $2 billion in order to slash the company’s debt.
Redigert 20.01.2021 kl 00:01
Du må logge inn for å svare
Volf
28.07.2018 kl 09:30
1456
Global Energy Advisory - 27th July 2018
Exxon has revised upwards its reserve estimate for a major oil discovery off the coast of Guyana. The Stabroek block is now seen to hold 25% more crude, at more than 4 billion barrels. What’s more, the actual size of the discovery could turn out to be even larger, according to Wood Mackenzie analysts: It could be up to 1,000 times larger than the average bloc in the Gulf of Mexico.
If Exxon turns out to be right and there are indeed many more billions of barrels in the waters of Guyana, the tiny South American country could become a pretty solid oil producer in the not too distant future, with a potential daily rate of 750,000 barrels by 2025.
It’s good timing for Exxon, as well. Big Oil has faced challenges in growing their reserve base in the last few years as investments in new exploration have stalled in the face of lower oil prices. Now, investments are on the rise but mostly in ongoing production rather than in exploration. Yet Exxon is so upbeat about Stabroek that it has commissioned two drill ships for simultaneous exploratory drilling off the Guyanese coast.
The world’s largest listed oil company reported today disappointing second-quarter results. Earnings per share fell short of analyst expectations, coming in at $0.92 per share, versus forecasts of $1.27, although revenues beat forecasts, at $73.5 billion, versus an expected $72.58 billion.
Deals, Mergers & Acquisitions
• BHP Billiton has agreed the sale of its U.S. shale operations to BP and a U.S. independent, Merit Energy. The combined value of the deal is $1.8 billion, of which BP will pay around $1.5 billion for the Australian miner’s Permian, Eagle Ford, and Haynesville assets. BHP was forced to sell the assets by activist investor Elliott Management after years of losses after the 2014 downturn.
• Wren House will buy North Sea Midstream Partners, a pipeline infrastructure operator, from private equity firm ArcLight Capital for about $1.7 billion. Wren House is the infrastructure investment unit of the Kuwait Investment Authority. NSMP’s assets include majority stakes in two gas pipelines and a gas terminal as well as a gas processing plant in the UK.
• Saudi Aramco plans to buy a majority stake in petrochemicals producer Sabic from the country’s sovereign wealth fund as part of a strategy to supply funds for the megaprojects that Riyadh is bent on pursuing in an attempt to diversify its economy away from oil. Aramco could buy as much as 70% in Sabic, which is the sovereign wealth fund’s entire stake in the company. The deal could transfer tens of billions of dollars from the state oil company into the sovereign wealth fund. It will also give a reason to Aramco to delay its IPO by maybe another year.
• Halliburton has expanded into water and process treatment chemicals with the acquisition of Athlon Solutions. The size of the deal was not disclosed and analysts judged it as small but Halliburton now plans to grow the Athlon business organically as part of its plan to expand into production chemicals.
• Occidental Petroleum is considering the sale of its pipeline network eyes proceeds of up to $5 billion that the company will use to boost exploration and production activities, emboldened by the improvement in oil prices in recent months. The time is right for pipeline sales as producers need more capacity to match growing production. Some pipeline operators, however, are not thrilled about the capex needed to maintain and expand this capacity, so an asset sale is the logical choice.
Tenders, Auctions & Contracts
• Italy’s oilfield services provider Saipem announced almost $800 million in new contracts across the world including in Saudi Arabia, Iraq, Mexico, Nigeria, and Serbia. The contracts include work on a gas compression plant for Saudi Aramco, debottlenecking the West Qurna field that Exxon operates in Iraq, and works on a Pemex refinery in Mexico.
Discovery & Development
• Rosneft plans to start pumping oil in Kurdistan by the end of the year. The Russian state company signed a number of contracts with the Erbil government late last year, amid a heat-up between the Kurdish authorities and the central Iraqi government. This week, Rosneft’s Igor Sechin is visiting Baghdad to discuss the Kurdistan contracts, which also include the construction of oil and gas pipelines in the semi-autonomous region.
• BP has been greenlit to start drilling again off the coast of Nova Scotia, after last month it accidentally spilled several thousand liters of drilling mud into the ocean. The spill was caused by a loose connection on the drilling rig deployed to the site, some 330 km off the Halifax coast.
• China’s CNPC plans to invest some $22 billion in boosting oil production in the western province of Xinjiang until 2020. Last year, the province yielded 11.45 million tons of crude oil and 23.5 billion cu m of natural gas. With the additional investment, the region will produce some 50 million tons of crude between 2018 and 2020, CNPC says.
Company News
• Halliburton reported a net profit of $511 million for the second quarter of the year, from $28 million a year earlier.
• Schlumberger also reported improved earnings, at $430 million, up from a loss of $75 million a year ago, and an 11% increase in revenues to $8.3 billion.
• Baker Hughes booked an adjusted net profit of $289 million for Q2 2018 on revenues of $5.55 billion, up 2% on the year.
• Shell reported a 30% increase in profits for the second quarter and said it will star buying back shares aiming for a total $25 billion in repurchases.
• French Total exceeded profit expectations, reporting a 44% increase in net profit to $4.6 billion on record-high quarterly oil production of 2.717 million bpd.
• Norway’s Equinor (formerly Statoil) missed profit expectations for the second quarter on higher maintenance costs for its North Sea fields, reporting EBITDA of $4.3 billion, compared with expectations of $4.6 billion.
• ConocoPhillips booked a net profit of $1.6 billion for the second quarter, up from a loss of $3.4 billion a year earlier, thanks to higher prices and the absence of asset write-downs.
Regulatory Updates
• A U.S. District Court in New York has dismissed a case brought by the New York authorities against Chevron as part of a wider attack against Big Oil on the grounds of its contribution to climate change. The lawsuits also include Shell, Exxon, BP, and ConocoPhillips. This is the second climate change lawsuit against Big Oil that a judge dismisses in as many months. In both cases the ruling said that climate change action is an issue that falls within the powers of legislative authorities, not the courts.
Politics, Geopolitics & Conflict
• The U.S. has arrested two individuals as part of an investigation into a money laundering ring involving former Venezuelan state oil company officials and businessmen. Those arrested are alleged to have laundered $1.2 billion in PDVSA funds.
• Saudi Arabia suspended shipments of oil via the strait of Bab el Mandeb after a Houthi attack on two VLCCs carrying Saudi crude. The strait sees almost 5 million barrels of crude oil and products shipped daily.
• Donald Trump has agreed with European Commission President Jean-Claude Juncker on concessions seeking to avoid a trade war between the U.S. and the European Union. While details are sparse still, Trump claims that Europe will buy “massive amounts” of U.S. LNG as one of the ‘concessions’.
Exxon has revised upwards its reserve estimate for a major oil discovery off the coast of Guyana. The Stabroek block is now seen to hold 25% more crude, at more than 4 billion barrels. What’s more, the actual size of the discovery could turn out to be even larger, according to Wood Mackenzie analysts: It could be up to 1,000 times larger than the average bloc in the Gulf of Mexico.
If Exxon turns out to be right and there are indeed many more billions of barrels in the waters of Guyana, the tiny South American country could become a pretty solid oil producer in the not too distant future, with a potential daily rate of 750,000 barrels by 2025.
It’s good timing for Exxon, as well. Big Oil has faced challenges in growing their reserve base in the last few years as investments in new exploration have stalled in the face of lower oil prices. Now, investments are on the rise but mostly in ongoing production rather than in exploration. Yet Exxon is so upbeat about Stabroek that it has commissioned two drill ships for simultaneous exploratory drilling off the Guyanese coast.
The world’s largest listed oil company reported today disappointing second-quarter results. Earnings per share fell short of analyst expectations, coming in at $0.92 per share, versus forecasts of $1.27, although revenues beat forecasts, at $73.5 billion, versus an expected $72.58 billion.
Deals, Mergers & Acquisitions
• BHP Billiton has agreed the sale of its U.S. shale operations to BP and a U.S. independent, Merit Energy. The combined value of the deal is $1.8 billion, of which BP will pay around $1.5 billion for the Australian miner’s Permian, Eagle Ford, and Haynesville assets. BHP was forced to sell the assets by activist investor Elliott Management after years of losses after the 2014 downturn.
• Wren House will buy North Sea Midstream Partners, a pipeline infrastructure operator, from private equity firm ArcLight Capital for about $1.7 billion. Wren House is the infrastructure investment unit of the Kuwait Investment Authority. NSMP’s assets include majority stakes in two gas pipelines and a gas terminal as well as a gas processing plant in the UK.
• Saudi Aramco plans to buy a majority stake in petrochemicals producer Sabic from the country’s sovereign wealth fund as part of a strategy to supply funds for the megaprojects that Riyadh is bent on pursuing in an attempt to diversify its economy away from oil. Aramco could buy as much as 70% in Sabic, which is the sovereign wealth fund’s entire stake in the company. The deal could transfer tens of billions of dollars from the state oil company into the sovereign wealth fund. It will also give a reason to Aramco to delay its IPO by maybe another year.
• Halliburton has expanded into water and process treatment chemicals with the acquisition of Athlon Solutions. The size of the deal was not disclosed and analysts judged it as small but Halliburton now plans to grow the Athlon business organically as part of its plan to expand into production chemicals.
• Occidental Petroleum is considering the sale of its pipeline network eyes proceeds of up to $5 billion that the company will use to boost exploration and production activities, emboldened by the improvement in oil prices in recent months. The time is right for pipeline sales as producers need more capacity to match growing production. Some pipeline operators, however, are not thrilled about the capex needed to maintain and expand this capacity, so an asset sale is the logical choice.
Tenders, Auctions & Contracts
• Italy’s oilfield services provider Saipem announced almost $800 million in new contracts across the world including in Saudi Arabia, Iraq, Mexico, Nigeria, and Serbia. The contracts include work on a gas compression plant for Saudi Aramco, debottlenecking the West Qurna field that Exxon operates in Iraq, and works on a Pemex refinery in Mexico.
Discovery & Development
• Rosneft plans to start pumping oil in Kurdistan by the end of the year. The Russian state company signed a number of contracts with the Erbil government late last year, amid a heat-up between the Kurdish authorities and the central Iraqi government. This week, Rosneft’s Igor Sechin is visiting Baghdad to discuss the Kurdistan contracts, which also include the construction of oil and gas pipelines in the semi-autonomous region.
• BP has been greenlit to start drilling again off the coast of Nova Scotia, after last month it accidentally spilled several thousand liters of drilling mud into the ocean. The spill was caused by a loose connection on the drilling rig deployed to the site, some 330 km off the Halifax coast.
• China’s CNPC plans to invest some $22 billion in boosting oil production in the western province of Xinjiang until 2020. Last year, the province yielded 11.45 million tons of crude oil and 23.5 billion cu m of natural gas. With the additional investment, the region will produce some 50 million tons of crude between 2018 and 2020, CNPC says.
Company News
• Halliburton reported a net profit of $511 million for the second quarter of the year, from $28 million a year earlier.
• Schlumberger also reported improved earnings, at $430 million, up from a loss of $75 million a year ago, and an 11% increase in revenues to $8.3 billion.
• Baker Hughes booked an adjusted net profit of $289 million for Q2 2018 on revenues of $5.55 billion, up 2% on the year.
• Shell reported a 30% increase in profits for the second quarter and said it will star buying back shares aiming for a total $25 billion in repurchases.
• French Total exceeded profit expectations, reporting a 44% increase in net profit to $4.6 billion on record-high quarterly oil production of 2.717 million bpd.
• Norway’s Equinor (formerly Statoil) missed profit expectations for the second quarter on higher maintenance costs for its North Sea fields, reporting EBITDA of $4.3 billion, compared with expectations of $4.6 billion.
• ConocoPhillips booked a net profit of $1.6 billion for the second quarter, up from a loss of $3.4 billion a year earlier, thanks to higher prices and the absence of asset write-downs.
Regulatory Updates
• A U.S. District Court in New York has dismissed a case brought by the New York authorities against Chevron as part of a wider attack against Big Oil on the grounds of its contribution to climate change. The lawsuits also include Shell, Exxon, BP, and ConocoPhillips. This is the second climate change lawsuit against Big Oil that a judge dismisses in as many months. In both cases the ruling said that climate change action is an issue that falls within the powers of legislative authorities, not the courts.
Politics, Geopolitics & Conflict
• The U.S. has arrested two individuals as part of an investigation into a money laundering ring involving former Venezuelan state oil company officials and businessmen. Those arrested are alleged to have laundered $1.2 billion in PDVSA funds.
• Saudi Arabia suspended shipments of oil via the strait of Bab el Mandeb after a Houthi attack on two VLCCs carrying Saudi crude. The strait sees almost 5 million barrels of crude oil and products shipped daily.
• Donald Trump has agreed with European Commission President Jean-Claude Juncker on concessions seeking to avoid a trade war between the U.S. and the European Union. While details are sparse still, Trump claims that Europe will buy “massive amounts” of U.S. LNG as one of the ‘concessions’.