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    SembMarine’s 1Q Profit Down 14 Percent (Monday, 27 April 2015)

    1 Jan 1970, 12:00 am
    Singapore’s Sembcorp Marine, a company building offshore drilling rigs, has achieved a net profit of $106 million for the three months ended March 31, 2015, which represented a 14% decline compared with $122 million in 1Q 2014.Group turnover for three months ended March 31, 2015 declined 2% year-on-year to $1.30 billion, which compares with $1.34 billion for the corresponding period in 2014. According to the company, the decline in revenue was due mainly to decline in rig building and repair revenue recognised during the first quarter compared with last year.In 1Q2015, Group EBITDA declined 4% year-on-year to $169 million, while operating profit fell 7% to $138 million, from $149 million in the previous corresponding period.At the pre-tax level, Group profit of $135 million was 13% lower than the $155 million achieved in the previous year. Associate and joint venture income declined 32% year on year to $3.9 million.Turnover for the Rig building sector declined 5% year on year from $796 million to $753 million. The Group delivered the Prosafe accommodation semi-submersible as well as one Hakuryu jack-up rig during the quarter, with another nine rigs in the work-in-progress stage and scheduled for delivery this year.Offshore and conversion revenue increased 19% from $362 million in 1Q2014 to $431 million in 1Q2015.Ship repair revenue was 37% lower at $100 million in 1Q 2015 compared with $158 million in the corresponding period in 2014 as average revenue per vessel remained low although the number of ships repaired increased.OutlookThe ongoing cutback in global exploration and production expenditure has resulted in a scarcity of new orders for the industry this year, SembMarine explains. The company further notes that customers strive to conserve cash and consolidate their offshore fleet operations as charters are not renewed or are renewed at significantly lower rates.Furthermore, new rigs face the prospect of not securing charters despite their higher technical specifications and superior capabilities. As a result, the Group faces a challenging year ahead, the company concludes.Source: www.offshoreenergytoday.comPlease leave comments and feedback below

    Traders Alarmed Oil Glut is a Strain on West Texas Storage Tanks (Sunday, 26 April 2015)

    1 Jan 1970, 12:00 am
    Four-hundred miles from the near overflowing tanks at the U.S. oil hub in Cushing, Oklahoma, a second glut in the Permian Basin of West Texas is pressuring oil prices once again as pipeline disruptions strand millions of barrels in the region.The Permian, the fastest-growing shale play, accounts for about a fifth of the country's total oil production, and is expected to produce about 2 million barrels of crude a day in May. The region houses over 20 million barrels of crude storage.Stockpiles in the Permian have hit several records in the last four weeks, according to data from industry information provider Genscape.Investors have zeroed in on storage, waiting for declines in weekly inventory data to signal demand is rising or production is beginning to taper off. Stockpiles in Cushing, the delivery point for the U.S. futures contract, hit a record in the week to March 13, and Gulf Coast supply has been robust.Now a Permian backlog shows signs of an even bigger supply glut. Pipeline interruptions next month will compound already high inventories in the region that have grown because production has outpaced takeaway capacity.Crude from the Permian that gets stored in Midland, Texas, awaiting transport to the Gulf Coast, will be diverted to Cushing, where it will add to burgeoning supplies, possibly putting even more downward pressure on crude prices, traders said.West Texas Intermediate oil delivered into Midland has slumped recently on news of planned work in May on two major pipelines in the region - Sunoco Logistics Partners LP's 300,000 barrel-per-day West Texas Gulf and the 280,000 bpd Mid Valley pipeline. These lines are primarily responsible for bringing Permian crude closer to refiners on the Gulf Coast.Pipeline outages in May will result in extra barrels moved into Cushing, as physical oil traders will be "less likely to buy May WTI at Cushing for need of storage space for incremental May deliveries," said Dominic Haywood, an oil analyst at Energy Aspects in London."Prompt futures should reflect fundamentals and if cash is weaker, then that implies a softer May balance and thus weaker fundamentals."On Thursday, the discount for WTI into Midland for May delivery traded as low as $2.50 a barrel below U.S. crude futures, the widest differential since early January, as traders looked to offload crude.JUST TOO FULLSince February, storage volumes and utilization rates have remained high in the Permian Basin, according to Genscape, which monitors four locations totaling about 18.5 million barrels in the region. Utilization rates are just under 70 percent and there are some 12 million to 13 million barrels of oil stored in tanks there.There is a limited amount of space to hold crude in the Permian, Genscape said.In Colorado City, Texas - the starting location of both Magellan Midstream Partners' 300,000 bpd BridgeTex and Sunoco's West Texas Gulf lines - set a record in stocks last week, although it was shy of a record utilization rate."You need to move it up to Cushing or move it to the Gulf Coast," said Hillary Stevenson, manager of supply chain network at Genscape. "If you have a lot of pipelines backed up, that's not good."EARLY SIGNSThe first signs that storage was swelling appeared in the "roll" period for over-the-counter physical crude in Cushing, the three days following a future contract's expiration when refiners and traders square up final positions.Fearing extra supply would eventually move to Cushing, traders dumped May barrels in the cash roll for as little as minus $1.60 on Friday, the lowest in four years.Traders said the problem could be resolved in a month. WTI at Midland barrels for June are more than $1.50 a barrel stronger than May bids.Still, crude inventories look to remain high, particularly as demand levels and production cuts might not be enough to start major drawdowns just yet, said Michael Cohen, head of energy commodities research at Barclays."We probably won't see the low levels initially anticipated, but we're not out of the woods yet in terms of clearing this crude," he added.Source: www.reuters.comPlease leave comments and feedback below

    Premier Suspends Isobel Deep due to BOP Problem (Sunday, 26 April 2015)

    1 Jan 1970, 12:00 am
    Falkland Oil and Gas Limited (FOGL) has informed that the 4/20-1 “Isobel Deep” well, offshore the Falkland Islands, has been temporarily suspended due to problems detected on the blowout preventer (BOP).According to FOGL, following the setting of the 13 3/8? casing at a depth of 1273.9m metres, a problem was detected with the BOP. The well has been suspended and the BOP has been brought to surface for inspection and repairs, the company said.The company further informs that it is anticipated that the repairs to the BOP will take in the order of 10-14 days. Whilst these repairs are being undertaken the rig will be utilised to drill the top-hole sections and set the conductor(s) on the Chatham and/or Jayne East Locations.The rig will return to the Isobel Deep location to continue drilling once the BOP repairs have been completed.The well was spudded by the operator Premier Oil on April 8, 2015. The well is located on licence PL004a, in which FOGL has a 40% working interest.These operational changes have no financial impact on FOGL. The company is fully carried through the Isobel Deep and Jayne East wells by Premier Oil and Rockhopper Exploration.Source: www.offshoreenergytoday.comPlease leave comments and feedback below

    Half of U.S. Fracking Companies Will Be Dead or Sold This Year (Sunday, 26 April 2015)

    1 Jan 1970, 12:00 am
    Half of the 41 fracking companies operating in the U.S. will be dead or sold by year-end because of slashed spending by oil companies, an executive with Weatherford International Plc said.There could be about 20 companies left that provide hydraulic fracturing services, Rob Fulks, pressure pumping marketing director at Weatherford, said in an interview Wednesday at the IHS CERAWeek conference in Houston. Demand for fracking, a production method that along with horizontal drilling spurred a boom in U.S. oil and natural gas output, has declined as customers leave wells uncompleted because of low prices.There were 61 fracking service providers in the U.S., the world’s largest market, at the start of last year. Consolidation among bigger players began with Halliburton Co. announcing plans to buy Baker Hughes Inc. in November for $34.6 billion and C&J Energy Services Ltd. buying the pressure-pumping business of Nabors Industries Ltd.Weatherford, which operates the fifth-largest fracking operation in the U.S., has been forced to cut costs “dramatically” in response to customer demand, Fulks said. The company has been able to negotiate price cuts from the mines that supply sand, which is used to prop open cracks in the rocks that allow hydrocarbons to flow.Oil companies are cutting more than $100 billion in spending globally after prices fell. Frack pricing is expected to fall as much as 35 percent this year, according to PacWest, a unit of IHS Inc.While many large private-equity firms are looking at fracking companies to buy, the spread between buyer and seller pricing is still too wide for now, Alex Robart, a principal at PacWest, said in an interview at CERAWeek.Fulks declined to say whether Weatherford is seeking to acquire other fracking companies or their unused equipment.“We go by and we see yards are locked up and the doors are closed,” he said. “It’s not good for equipment to park anything, whether it’s an airplane, a frack pump or a car.”Source: www.bloomberg.comPlease leave comments and feedback below

    Petrobras Erases Corruption Probe Losses After Audited Results (Sunday, 26 April 2015)

    1 Jan 1970, 12:00 am
    Petroleo Brasileiro SA wiped out the stock plunge sparked by Brazil’s largest kickback investigation after releasing long-delayed earnings.The state-controlled oil driller rose as much as 6.7 percent to 13.78 reais on Friday, erasing losses accumulated since Nov. 13, the day before police arrested more than 20 people during an investigation into whether company executives demanded bribes in exchange for contracts. The stock has surged 67 percent from an 11-year low in January, leading gains on the Ibovespa equity gauge, which has rallied 21 percent during the span, approaching a bull market.Investors have piled into Petrobras shares after Chief Executive Officer Aldemir Bendine, who took over in February, announced plans to sell $13.7 billion in assets this year and next to cut debt. The oil producer also reported its 2014 results on Wednesday, ending a five-month debate on writedowns related to the corruption scandal.The company disclosed an impairment of 44.6 billion reais ($15 billion), mainly from overpriced and unfinished refinery projects, and a corruption-linked writedown of 6.2 billion reais. The charges drove a 2014 net loss of 21.6 billion reais that wiped out dividend payments. Petrobras had postponed the release of third-quarter results since November because of a lack of consensus over the size of graft-related writedowns.The rebound in crude prices has also lifted Petrobras shares as it boosted the outlook for the company’s offshore investments. Oil, while still down 47 percent from its high last year, has jumped 17 percent since Petrobras bottomed out on Jan. 30.The Rio de Janeiro-based company wants to sell a stake in petrochemicals maker Braskem SA, Agencia Estado said April 13. Earlier this month, six people with knowledge of the matter said Petrobras is considering selling fields in its fastest-growing deepwater oil region.The shares are still trading 45 percent below last year’s high of 24.56 reais reached in September before the presidential elections in Brazil.Source: www.bloomberg.comPlease leave comments and feedback below

    Canada Pipelines Still Need Better Spill Response, Clark Says (Saturday, 25 April 2015)

    1 Jan 1970, 12:00 am
    A fuel spill this month off the beaches of Vancouver proves more needs to be done before British Columbia will allow construction of new heavy oil pipelines, the west coast province’s premier said.An estimated 2,700 liters of bunker fuel leaked from the Marathassa, a grain ship in Vancouver’s English Bay, sparking political wrangling, with the mayor and province accusing the federal government of a slow response and cleanup.The emergency heightened concern that a bigger spill would have a devastating impact on the coastal province situated between landlocked Alberta oil sands and global markets.The Marathassa showed B.C. is not ready to contain a marine oil spill, Premier Christy Clark said.“What we did learn is we aren’t sufficiently coordinated in the harbor between levels of government,” Clark said in a telephone interview with Bloomberg News on Friday. “We have got our work cut out for us to make sure that we raise our game on this.”Clark laid out five conditions three years ago for major pipeline projects to be approved in her province, one of which is “world-class” marine spill response.“None of those projects can go ahead until” the conditions are met, she said.Enbridge Inc.’s Northern Gateway project and Kinder Morgan Inc.’s Trans Mountain expansion both have routes that would run through British Columbia.Spill FundingMarine-spill response is the responsibility of the federal government, which has been criticized for closing a marine base in Vancouver. Commissioner of the Canadian Coast Guard Jody Thomas said in an April 12 statement, however, that the closing “would not have changed how we responded to this incident,” since the facility was not involved in spill response.Department of Fisheries and Oceans funding for Environmental Response Services, which handles oil spill cleanup, will be C$17 million ($13.9 million) this year, up from C$12.9 million in 2014-2015 and C$10.3 million the year before, government figures show. The number of staff has also increased.Nonetheless, the federal New Democratic Party said it would make a motion in Parliament on Monday to reverse the closing of Vancouver’s Kitsilano coast guard facility. “This spill needs to be a wake-up call,” NDP Leader Thomas Mulcair said in a written statement. “Conservative cuts are threatening the B.C. coast.”Containing SpillIn a written statement, a Coast Guard spokesman defended the agency’s response, saying vessels were dispatched to the spill site within 25 minutes of the first complaint and skimmers were on the water within four hours to contain the spill.While the urgent response has been completed, the Coast Guard “will continue to clean the trace pollution that washed up on the shores of Burrard Inlet, and to monitor and plan for the potential long-term effects of the spill,” spokesman Frank Stanek said in an e-mail Monday.Clark’s government sparred with the federal Conservatives in the days after the spill, which was reported April 8, though she struck a conciliatory tone in the interview Friday.“This isn’t a product of one federal government not providing adequate spill response,” Clark said. “It’s a product of 50 years of federal government ignoring the West Coast’s needs in this regard. And this federal government has begun to really think about it. But we’ve to go from thinking about it, to making it happen.”Source: www.bloomberg.comPlease leave comments and feedback below

    Cheaper Oil Encourages Top Traders to Drive Up Volumes (Saturday, 25 April 2015)

    1 Jan 1970, 12:00 am
    Some of the world's biggest oil trading houses say they expect increased volumes this year as a fall in oil prices ties up much less capital for trading than a year ago.Trading oil is expensive and requires big players to have billions of dollars of credit lines with dozens of banks, but a steep drop in oil prices means the value of a mid-sized cargo of crude oil has fallen from $115 million to $60 million and has therefore become cheaper to finance.The development has a slight downside, as traders are under-utilising banking lines and banks generally don't like maintaining unused credit lines.Traders therefore need to come up with some solutions, including increasing volumes they trade, to help keep credit lines open for when they could badly need them in full again, if and when oil prices recover."The relation with banks is always important for us especially at the time when utilisation of credit lines has dropped due to the drop in prices," Jacques Erni, chief financial officer of Gunvor, one of five top global trading houses, told the FT Commodities Summit on Wednesday."I think (to keep) the good relations we have to make sure that we do utilise (the lines) that we have, we have to make sure that we have the volume," Erni added.The top five traders, Vitol, Glencore, Trafigura [TRAFGF.UL] and Mercuria as well as Gunvor, already trade more than a tenth of global oil and products, with their total annual turnover in oil and commodities well in excess of $0.5 trillion.Jeff Dellapina, chief financial officer of Vitol, the world's biggest trader, said the issue of unused lines would not necessarily have an impact on his firm, as banks are used to market fluctuations and are not in a rush to pull liquidity back as they know oil prices will ultimately rise.However Guillaume Vermersch, chief financial officer of Mercuria, said the issue of unused banking lines was encouraging a growth in trading activity. "It means more trades and more volumes," he said.Source: www.reuters.comPlease leave comments and feedback below

    Oil Firms Face Further Cuts as Low Prices Linger (Saturday, 25 April 2015)

    1 Jan 1970, 12:00 am
    Oil majors may need deeper cuts to oil and gas exploration and production spending as they grapple with an extended period of low crude prices.The industry is expected to reveal another set of grim earnings for the first quarter when benchmark Brent prices averaged $55 a barrel, almost half the level of a year ago.Exxon Mobil Corp., Royal Dutch Shell, BP and France's Total have already responded by cutting 2015 capital spending by 10 to 15 percent, delaying and scrapping projects and cutting operating costs.And despite a sense among some industry executives that oil prices may have hit their 2015 lows following a decline in U.S. shale production, more cuts may be needed.Exxon, the world's biggest listed oil company, has reduced 2015 capital spending by 12 percent to $34 billion."We'll see throughout the year whether we stay there (capex) or not, we're seeing a lot of cost efficiencies," chief executive Rex Tillerson said at the IHS CERAWeek conference.Analysts at HSBC singled out BP, Chevron, Statoil and Total for having "management aggressively looking to exploit this period to improve long-term returns.""Some of the companies now view the current environment not as a threat, but as the best opportunity for a re-set of project economics in well over 10 years," HSBC said in a note."As a result, we think the capex reductions we are seeing this year are likely to be only the start."The savings announced in recent months are already improving balance sheets.According to analysts at Jefferies, oil majors today require an average oil price of $78 a barrel in order to cover investments and dividends from organic cash flows, down from $90 a barrel in early 2015.Oil companies are not expected to cover dividends through organic cashflow (excluding acquisitions) until 2017, according to Jefferies.DIVIDENDS SAFEThe seven oil global majors are forecast to report a year-on-year decline in income of around 57 percent, while earnings per share are set to decline by about 27 percent, according to JefferiesDespite the expected drop in revenues, analysts expect most oil majors are likely to maintain dividend payouts to investors after increasing borrowing to a record $31 billion of debt in early 2015.Eni is the only oil major to have cut dividends. BP, Total and Shell have vowed to maintain their annual payouts, while BP and Total are also offering scrip dividends, which allow investors to buy shares at a reduced price instead of receiving the dividend.The lower average oil price during the quarter looks set to be offset, like in the previous two quarters, by a stellar rise in profits from refining as global demand for oil products such as gasoline and diesel surged as a result of lower prices.Morgan Stanley's top picks in the sector are Total and Statoil due to big pipeline of project startups and their ability to implement further spending cuts.Several analysts downgraded Shell's valuation following the Anglo-Dutch firm's move to buy smaller rival BG Group for around $70 billion.Source: www.reuters.comPlease leave comments and feedback below

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