Crude oil returns to $50 per barrel as decline in U.S. supplies extends recovery

Crude oil rose to $50 per barrel for the first time in six months amid an accelerated fall in U.S. crude supplies and curtailed  supplies have also been curtailed in Nigeria, Venezuela and Canada.

Futures climbed as much as 1.3 percent in New York to $50.21, the highest price since 9 October 2015. Brent crude topped $50 for the first time since November earlier on Thursday.

According to U.S.-based energy agency EIA, U.S. crude production dropped for an 11th week to 8.77m barrels a day.

Crude inventories slid by 4.23 million barrels last week, exceeding an expected drop of 2 million. Stockpiles at Cushing, Oklahoma, the delivery point for WTI and the nation’s biggest oil-storage hub, fell by 649,000 barrels.

Further, The Organization of Petroleum Exporting Countries (OPEC) is unlikely to set an output target when it meets June 2 as it sticks with Saudi Arabia’s strategy of squeezing out rivals, according to all but one of 27 analysts surveyed by Bloomberg.

Source: Bloomberg



Chevron-led consortium to invest up to $37bn in Kazakh oil field

According Kazakhstan’s energy minister Kanat Bozumbayev, a consortium led by Chevron Corp. plans on investing up to $37bn in the country’s oil fields with Chevron’s CEO John Watson having previously discussed the project with the country’s political leaders.

Investment in the project is expected to commence during 2017 and the project would add up to 24,000 jobs in the country.

Chevron is the biggest partner in the field’s operator, Tengizchevroil, with a 50% stake. Other shareholders in the operator include Exxon Mobil Corp. with a 25% stake, Kazakhstan’s state-controlled oil company Kazmunaigas owns 20% and Lukarco, a company controlled by Russia’s Lukoil, owns the remaining 5% in the operating company.

Chevron would separately announce the consortium’s final investment decision on the project in consultation with its partners.

Output at the Tengiz oil field is currently about 500,000 barrels a day. Chevron plans to increase annual production to about 760,000 barrels a day by 2021, but the company had previously delayed investments amid the crude oil price slump.

Chevron has estimated that it would spend between $17 – 22bn annually over the next two years on capital projects; down from this year’s $25 – $28bn budget for such developments.

Source: Nasdaq



Shell announces job cuts in 2016

Royal Dutch Shell Plc plans to cut 2,200 more jobs to take its tally of job cuts to 12,500 in 2016.

According to Paul Goodfellow, Shell’s vice president for the U.K. and Ireland, at least 5,000 jobs would be cut in 2016 to tackle lower crude oil prices and as a result of its acquisition of BG Group Plc earlier this year.

Shell’s adjusted net income for 1Q 2016 declined 58% to $1.6bn following the collapse in oil prices. The company acquired BG Group for $54bn in 2016 to get access to oil and natural gas reserves from Australia to Brazil. The acquisition increased Shell’s debt to $70bn as on 31 March 2016.

Source: Bloomberg

Pemex in talks with major players for drilling prospects in Gulf of Mexico

Mexico’s PEMEX wants to develop its offshore deep water capabilities in the Gulf of Mexico and was in discussions with Chevron, Total and ExxonMobil. The company also plans to engage with Statoil ASA to look at mutual areas of interest for jointly developing offshore capabilities.

Mexico is scheduled to auction offshore assets in the Gulf of Mexico on 5 December 2016, hoping to raise $44bn to support its economy.

Source: Rigzone



Iran has no plans to freeze oil exports, official says ahead of OPEC meeting

According to Iran’s Deputy Oil Minister Rokneddin Javadi, the country had no plans to freeze its output as the country tried to raise its crude exports to pre-sanctions levels.

According to Mr. Javadi, Iran’s current crude oil exports, excluding gas condensates touched 2m barrels per day (bpd) and that its crude oil export capacity would reach 2.2m barrels by the middle of summer.

Separately, a meeting between OPEC and non-OPEC producers would take place on 2 June 2016 to plan on freezing output to shore up crude oil prices.

Source: Reuters

Saudi Arabia in talks with banks over bond sale

The Kingdom of Saudi Arabia plans on issuing debt in the international markets later in 2016 to stem the sharp decline in foreign exchange reserves, following a depressed crude oil market.

A number of banks have been asked to indicate their terms on raising the sovereign debt issuance.

The size and maturity of Saudi Arabia’s first international bond has not been disclosed publicly, but according to credit analysts at two European banks, the kingdom may borrow at rates about 200 basis points above equivalent US Treasury bonds.

Previously, in April 2016, the kingdom raised a $10bn, 5-year loan from banks including JPMorgan, HSBC and Bank of Tokyo-Mitsubishi in a deal that was several times subscribed and allowed the government to increase the sum borrowed.

The loan is seen as a first step towards sovereign bond issuance and Saudi officials have said that the kingdom could increase debt levels from less than 7% of gross domestic product in 2015 to 50% of GDP by 2020.

Saudi Arabia’s debt plans come as falling oil prices encourage other Gulf countries, including Abu Dhabi and Oman, to turn to capital markets for funding.

Separetely, Saudi Arabia’s credit rating has been downgraded by all three big global rating agencies this year.

Source: FT

Penn West warns it may default on debt; stock tumbles

Canada-based oil and gas producer Penn West Petroleum Ltd. warned it could be in violation of its lending agreements by the end of June 2016, leading to its shares losing a quarter of its value in Monday’s trade.

The company said that it had hired investment banking firm Rothschild of New York and accounting firm PWC of Calgary as advisers as it negotiated with its lending syndicate to ease conditions that could result in default if not met by 30 June 2016.

A default would allow the lenders to demand immediate repayment.

Penn West stock fell as low as $0.78 per share on Monday morning, down 26 per cent from its close of $1.05 on Friday. A year ago, Penn West stock was trading over $3 a share.

With debt of $1.87bn as of 31 March 2016, the company is required to maintain covenants on its senior debt and total debt to adjusted earnings. But depressed oil prices have led to a steep fall in earnings as compared to its debt.

Source:  The Star


Kuwait to increase oil production by 44% by 2020

According to a senior official from state-owned Kuwait Petroleum Corp, the company plans to ramp up its production by c.44% to 4bn barrels a day by 2020.

The company has also planned to tender certain new E&P projects in the Persian Gulf and ramp up local production capacities.

According to OPEC, Kuwait exported most of its oil: an average of 2m barrels per day in 2015. During April 2016, a quarter of its oil was exported to China. Further, Kuwait was keen on expanding its exports to South Korea as it sought contracts on the country’s energy projects.

Source: OilPrice

Calumet reports 1Q’16 loss of $67.7m; looks at asset divestments

U.S-based Calumet Specialty Products posted a 1Q’16 loss of $67.7m or 87 cents per share, as compared to a profit of $23.8m, or 27 cents per share, a year ago. The news comes on the company’s earlier announcement that it expected a net loss between $59 – 83m for the same period.

Revenues for the 1Q’16 period declined 29% yoy to $713m (1Q’15: $1bn).

The company, which owns 10 refineries across the U.S., attributed the dismal performance to the effect of collapsing oil prices as its fuel products business suffered due to weaker refining margins.

In light of the weak results, the company’s CEO Tim Go stated that the company would look to divest some of its assets, including the $430m refinery that opened a year ago in western North Dakota.

The refinery, with an operating capacity of 20,000 bpd, currently processed output worth 15,000 bpd. Calumet plans to operate the refinery at 75% of capacity due to the weakening commodity prices.

Source: IBJ

Pacific Exploration receives $830m bid from EIG

Pacific Exploration received a $830m bid from private equity firm EIG Global Energy Partners, which argues that its bid was superior to the one selected last month by the company’s board.

The bid comes ahead of its restructuring-related court hearing on Tuesday in Canada.

Previously, the company’s board selected a bid submitted by Catalyst Capital Group, which had support from debt holders holding more than 75% of the company’s debt.

EIG’s new bid was considered to be superior to Catalyst’s offer, according to the company’s CEO R. Blair Thomas.

Washington-based EIG argued in its letter that the total creditor recovery of $830m in its new bid was 67% higher than the Catalyst offer and the implied enterprise value of $1.53bn was 39% higher too.

The $300m in sponsor equity contributed to the company was 20% higher in the new bid than what Catalyst proposed, the letter said. The $550m in total cash contributed to the company was also 10% higher than Catalyst’s. EIG said the binding offer will expire May 31.

Source:  Globe and Mail

%d bloggers like this: