Today - Tuesday, March 31, 2015
- Will it be a yes or a no? Oil is again heading lower as Iran and six world powers try to break an impasse in negotiations aimed at stopping Iran from having the capacity to develop a nuclear bomb, in exchange for an easing of international sanctions.
- Iran could increase oil production by some 500K bpd in three to six months if sanctions are removed, and by an additional 700K bpd within another year, according to estimates by Facts Global Energy.
- The deadline to find a preliminary agreement is set to expire tonight.
- Crude futures -2.3% to $47.55/bbl.
- ETFs: USO, OIL, UCO, SCO, BNO, DTO, DBO, UWTI, USL, DWTI, DNO, SZO, OLO, TWTI, OLEM
Monday, March 30, 2015
- Royal Dutch Shell (RDS.A, RDS.B) plans to delay drilling a $100M-plus exploration well off Australia's northwest coast, in the latest example of reduced activity in the area due to the plunge in crude oil prices.
- Shell had expected to start drilling its Cronus-1 well this quarter in the Browse Basin, targeting a large gas discovery that has been called a "multi-trillion cubic feet" gas prospect, which lies north of BHP's Argus field and north-east of ConocoPhillips' Poseidon discovery.
- Wells by Japan's Inpex and South Africa’s Santos planned off Western Australia's coast also have been deferred recently.
- Shell is still drilling development wells as planned at its $12B Prelude floating LNG project in the Browse Basin, and is a 25% partner in Chevron's $54B Gorgon LNG venture.
- BNSF Railway says it is cutting the speed of crude oil trains in some urban areas to as slow as 35 miles/hour, a 30% reduction, to improve safety following recent high-profile derailments in the U.S. and Canada.
- BNSF, owned by Berkshire Hathaway (BRK.A, BRK.B), says it also is stepping up efforts to find and repair defective wheels before they can cause derailments.
- The company says it already has doubled the frequency of track inspections near waterways, and now will inspect the track 2.5x more often than regulations require.
- BNSF hauls much of the oil produced in the Bakken region.
- A lawsuit in Oklahoma highlights a new worry for energy companies: the possibility of being forced to pay for damages from earthquakes if the tremors can be linked to oil and gas activity.
- Oklahoma has experienced 585 quakes of 3.0 or greater magnitude last year, more than the state had in the previous 30 years combined and the most of any state in the contiguous U.S. - even California.
- The tremors under investigation in Oklahoma and other oil-producing states have been too small to cause major damage, but the prospect of facing juries over quake-related claims is reverberating throughout the energy industry, which fears lawsuits and tighter regulations could increase costs and stall drilling.
- In financial statements, major area operators such as Continental Resources (NYSE:CLR) have flagged potential financial risks if earthquakes lead to stricter regulations; in Arkansas, BHP and Chesapeake Energy settled a case by five homeowners in 2013 for an undisclosed sum, and in Texas, a lawsuit against EOG Resources (NYSE:EOG) for quake-related damages is pending.
- Separately, a Bloomberg article today says CLR and its CEO, Harold Hamm, have tried to put pressure on scientific inquiries that linked Oklahoma earthquakes to fracking wastewater.
- Hercules Offshore (NASDAQ:HERO) discloses it was hit by a delisting notice from Nasdaq, which warns that the Company has 180 days, or until Sept. 21, to regain compliance with the minimum bid price requirement.
- To regain compliance, the minimum bid price of HERO's common stock must meet or exceed $1/share for a minimum of 10 consecutive business days during the 180-day grace period.
- Ensco (NYSE:ESV) -2.7% AH after disclosing it received a notice of early termination for its DS-4 drilling rig operating in the Gulf of Mexico, in the latest example of the severe downturn in the contract drilling market.
- BP is employing the drillship at a $560K dayrate with a contract set to expire in July 2016, and is utilizing ESV's DS-3 drilling rig in the Gulf at a $480K dayrate with a June 2016 expiration.
- ESV says it is marketing DS-4 to potential customers for new contracts beginning after the estimated termination date.
- Vaalco Energy (NYSE:EGY) -15% AH after saying its first exploration well on Block 5 offshore Angola was found to be water-bearing, and the well will be plugged and abandoned.
- The well was drilled to a total vertical depth of 1,829 meters; given the disappointing results, EGY says it will not go forward with earlier plans to drill to 2,250 meters for geologic and geophysical correlation.
- EGY says it completed the seismic processing of 2,025 sq. km of 3D data in the outboard portion of Block 5,and has identified several new pre-salt and post-salt leads as future exploration targets to be evaluated.
- Tetra Tech (NASDAQ:TTEK) says it was awarded a $1B contract for the U.S. Agency of International Development to support the implementation of USAID's Water and Development Strategy.
- Under the five-year indefinite delivery indefinite quantity contract, TTEK says it will provide engineering and consulting services to improve access to clean water and sanitation, and strengthen global food security through the sustainable management of water in agriculture.
- TTEK has a substantial history of supporting USAID in providing solutions to address critical water issues around the world.
- Gazprom (OTCPK:OGZPY) says its 2014 earnings used to calculate dividends fell 70% Y/Y because of a foreign currency loss.
- Gazprom says its net income according to Russian accounting standards sank to 189B rubles from 628B rubles a year ago, which may translate into a payout of ~2 rubles/share vs. 7.2 rubles a year earlier as the company usually pays out 25% of domestic profit.
- Additionally, CEO Alexei Miller says the company is asking for government approval to provide Ukraine a discount on natural gas prices for three months beginning April 1 after Ukraine's state-owned oil and gas company sent a letter seeking to extend the current discount winter package to the end of winter of next year.
- As Iran nears a potential nuclear deal with U.S. that eases Western sanctions, the country is emerging again as a potential prize for Western oil companies such as BP, Royal Dutch Shell (RDS.A, RDS.B), Eni (NYSE:E) and Total (NYSE:TOT); the Chinese also are likely to enter the race, while U.S. companies are expected to be further down the pack.
- Iran is a big prize for oil companies, as it holds 10% of the world’s oil reserves - no. 4 globally after Venezuela, Saudi Arabia and Canada and ahead of Iraq - and almost a fifth of global gas reserves - second only to Russia.
- Raymond James says Iran could add 500K bbl/day to world oil supply by year-end 2016 if an agreement is reached.
- However, experts believe Iran is in a much weaker position since it last negotiated with Western oil majors in the late 1990s, as Iraq is now open to outside investors, Mexico is allowing foreign investment in oil for the first time since 1938, and $50 oil has forced companies to focus on investments that deliver stronger returns and less risk.
- Enterprise Products Partners (NYSE:EPD) says CEO Michael Creel plans to retire as of Dec. 31, 2015; COO Jim Teague is selected to succeed Creel as CEO upon Creel's retirement at the end of the year.
- Teague has served as a director of EPD's general partner since 2008 and as COO since 2010; he joined EPD in 1999 after 23 years at Dow Chemical.
- EPD also names Randall Fowler as chief administrative officer effective April 1, and says the position will be added to the CEO and non-executive chairman to comprise the office of chairman.
- Exxon Mobil (XOM +2.4%) says it began production at its Hadrian South gas development in the deepwater Gulf of Mexico with facilities tied back to the nearby Lucius project, reducing additional infrastructure requirements.
- XOM expects daily gross production from Hadrian South, its deepest subsea tie-back in nearly a mile and a half of water, to reach ~300M cf of gas and 3K barrels of liquids from two wells.
- Hadrian South is a subsea production system with flowlines connected to the Anadarko-operated Lucius truss spar, which started production in January.
- With the startup of Hadrian South and Lucius, XOM's total Gulf of Mexico net production capacity has increased by more than 45K boe/day.
- XOM holds a 46.7% interest in Hadrian South, with partners Petrobras (NYSE:PBR) at 23.3% and Eni (NYSE:E) holding a 30% stake; XOM owns a 23.3% interest in Lucius.
- BP (BP +0.3%) believes fines above $2.3B for the 2010 Gulf of Mexico oil spill would threaten the solvency of its U.S. oil business and drain the unit’s cash this year, even if U.S. crude returned to $100/bbl, according to court papers from Friday.
- BP argued for much lower fines, reiterating that its multibillion-dollar response to stem the environmental impact of the spill and “herculean” efforts by its workers merit a smaller penalty.
- BP said a high penalty could force the BPXP unit to cut from its 2,300 jobs, $5B in annual spending and future oil production in the Gulf region, and that it would damage the business if forced to sell off $1B-$3B in assets to pay off spill liabilities.
- In rebuttal, the U.S. government said one of its experts showed at trial that BPXP could pay the highest potential fines by borrowing money from its internal credit line or from external sources, by using future cash flows tied to oil reserves or by selling assets.
- U.S. District Judge Barbier in New Orleans could level fines as high as $13.7B against BP after the company files final reply briefs in late April.
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