Mark Latham Commodity Equity Intelligence Service

Friday 23rd October 2015
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    Coldest before the dawn

    Frankfurt-based sentix, a leader in the emerging field of behavioural finance, has been compiling a commodity sentiment index for more than a decade by surveying more than 4,500 institutional and private investors.

    The sentix Asset Class Sentiment for Commodities index dropped precipitously in mid-July to lows not seen even at the height of the global financial crisis or during the stomach-churning fall in the price of crude in the second half of 2014.

    The researcher warned with admirable Germanic directness that "when such a strong fall of the indicator occurs it is not wise to buy the market anti-cyclically," but as was the case in late 2009 "the time for contrarians will come when confidence returns" which could take "several months".

    From the record low of –20.75 seen on this graph dated July 20, the sentix index has now shot back up to above 0.

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    China 2015 power consumption growth may shrink to 1pct: CEC

    China’s power consumption growth would shrink from the previous 2% to 1% in 2015, the China Electricity Council (CEC) said.

    China consumed a total 456.3 TWh of electricity in September this year, declining 0.2% year on year, the fourth yearly decline this year, following the drop of 6.3%, 2.2% and 1.3% in February, March and July respectively, showed data from the National Bureau of Statistics (NBS).

    Power consumption by the primary industries, tertiary industries and residential segment all posted year-on-year increase of 2.7%, 7.3% and 4.6%, separately, while that by the secondary industries stood at 312.8 TWh, falling 2.9% on year and down 11.7% from August.

    The decreased power use was greatly impacted by slack demand and overall supply glut in the secondary industries, with power consumption at building and metallurgical industries down 6.4% and 7.8% over January-September, compared with the growth of 7.3% and 1.8% from a year ago.

    The decline in these two industries’ power use contributed 1.2 percentage points in the total power use growth across the country.

    Additionally, the EI Nino-impacted cooler weather also resulted in the consumption slid this year, analysts said.

    Meanwhile, the average utilization of power generating units across the country dropped 7.24% on year to 2,972 hours over January-September this year. Of this, hydropower plants and thermal power plants contributed 2,639 and 3,247hours, down 3.08% and 7.55% on year, respectively.

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    Anglo American output challenged cuts diamond production

    Anglo American PLC reported Thursday broadly mixed output across most of the commodities it produces in the third quarter, with lowered diamond production in response to weaker prices for the gemstones.

    The world's fifth-largest diversified miner by market capitalization said diamond output, its largest earnings driver last year, fell 27% to 6 million carats in the three months ended Sept. 30 compared with the year-earlier period.

    Iron ore output, its second-largest earnings contributor last year, rose 10% on year to 14.3 million metric tons as the ramp up of its Minas Rio iron ore project in Brazil more than offset lower output from its majority owned South African unit, Kumba Iron Ore Ltd (KIO.JO).

    Copper output fell 3% on year to 171,100 tons in the quarter as a result of the sale of the Anglo Norte assets in Chile. Otherwise copper output from its retained operations increased 1% on year.

    Platinum concentrate output rose 14% to 614,000 troy ounces compared with the year-earlier quarter when output was hit by a five month-strike. Export thermal coal and nickel output both fell during the period, while export metallurgical coal output rose.

    Anglo American's shares have halved since the beginning of the year as a result of the continued commodities price rout stemming from weaker-than-expected Chinese economic growth and a supply glut in many of the commodities it produces.

    The company has slashed costs, boosted mining performance and sought to sell unwanted assets, but tumbling commodity prices, particularly in iron ore, copper, coal, and diamonds-four key earnings drivers for the company-has eclipsed those efforts.

    Mining group Anglo American said on Thursday it was postponing major project investment decisions at its platinum unit until at least 2017 and had cut diamond production in the face of soft demand.

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    Teck Resources swings to loss after $1.7 billion charge

    Teck, the largest producer of steel-making coal in North America, said the write-downs reflect lower expectations for commodity prices.

    Canadian mining giant Teck Resources swung to a loss in the third quarter of the year due to a $1.7 billion (Cdn$2.2 billion) asset impairment charge in its steel-making coal and other businesses.

    The Vancouver-based company, the largest producer of steel-making coal in North America, said the write-downs reflect lower expectations for commodity prices.

    “We are taking significant steps to meet the challenge of low commodity prices,” Tech chief executive Don Lindsay said in a statement.

    The company’s adjusted earnings and revenue, excluding the charges, did better than analyst estimates.

    And it seems to be working, as the company’s adjusted earnings and revenue, excluding the charges, did better than analyst estimates.Third-quarter earnings, totalled Cdn$29 million ($22 million), or 5 cents a share, from Cdn$159 million, or 28 cents, a year earlier.

    Teck also noted it has reduced costs throughout the company and raised nearly $1 billion in two streaming transactions.

    In April, the miner decided to cut its dividend to shareholders from $0.45 per share to $0.15 to weather weak prices that the company attributes to global oversupply.

    A month later, it cut production and inventories of steel-making coal by suspending operations for three weeks in the third quarter. It said production in the fourth quarter, which began Oct. 1, would be aligned with sales volumes.
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    Freeport-McMoRan Swings to Loss, Takes Big Oil-and-Gas Write-Down

    Freeport-McMoRan Inc. swung to a third-quarter loss on another big write-down tied to the company’s struggling oil-and-gas operations. The loss, excluding one-time items, was sharply wider than analysts had feared and revenue missed expectations.

    The U.S.’s biggest miner and a major copper producer, also announced plans to further curtail copper and molybdenum production, including a possible shutdown of its Sierrita mine in Arizona.

    Freeport-McMoRan recently said it would explore options for its troubled oil and gas business and cut the size of its board as it contends with tumbling commodity prices and a move on the company by activist investor Carl Icahn. Possible moves include a spinoff, joint-venture arrangements or further cost cuts.

    Mr. Icahn first disclosed an 8.5% stake in Freeport in August, when the company announced it would slash 2016 capital spending by 29%, cut expected copper production by 150 million pounds, and eliminate about 10% of its U.S. workforce of roughly 15,600.

    Overall, Freeport-McMoRan reported a loss of $3.8 billion, or $3.58 cents a share, compared with a year-earlier profit of $552 million, or 53 cents a share. Excluding net charges of $3.7 billion, the per-share loss was 15 cents.

    Revenue decreased 35% to $3.68 billion.

    Analysts polled by Thomson Reuters expected per-share loss of eight cents and revenue of $3.96 billion.

    U.S. miner and oil producer Freeport-McMoRan, under pressure from activist investor Carl Icahn and falling prices, said on Thursday it will further cut copper and molybdenum output as it posted a bigger-than-expected quarterly loss.

    The Phoenix-based company said it remains confident in the longer-term outlook for copper prices, but will halve operating rates at its Sierrita mine in Arizona as price continue to fall.

    The move will cut output by 100 million pounds of copper and 10 million pounds of molybdenum annually, said Freeport, which is also considering a full shutdown of the mine.

    Combined with cuts announced in August, annual production has been reduced by 250 million pounds of copper and 20 million pounds of molybdenum.

    The biggest U.S.-listed copper miner, Freeport said a primary strategic objective is the "significant" reduction of its $20.7 billion debt load.

    The company also said it continues to mull options for its oil and gas business. They include spinning off the unit to shareholders, joint ventures, an initial public offering of a minority stake of the unit and further spending cuts.

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    Oil and Gas

    Takeover target Santos pares capital spending, trims output forecast

    Australian oil and gas producer Santos Ltd, looking to beef up its balance sheet after knocking back a $5 billion takeover offer this week, flagged on Friday it would cut capital spending by a further 10 percent this year.

    Santos also lowered the top end of its 2015 oil and gas production forecast by 5 million barrels to 57 million to 59 million barrels of oil equivalent (mmboe), blaming the change on unscheduled outages and lower than expected demand for its gas in Queensland.

    It said capital spending would drop to A$1.8 billion ($1.3 billion), as it deferred some development activity amid a wider strategic review and auction of assets as it races to cut its A$8.8 billion net debt pile.

    Santos on Thursday rejected a A$7.1 billion bid from Scepter, a firm backed by the royal families of Brunei and the United Arab Emirates, calling the offer opportunistic and saying the conditions would have hurt consideration of other alternatives.

    Its third-quarter sales revenue fell 24 percent to A$808 million, hit by weaker oil prices. This was partly offset by a 4 percent rise in gas production to 14.5 mmboe, due mostly to its prized stake in the Papua New Guinea liquefied natural gas (LNG) project.

    "We said that we would produce more for less and this quarter's figures are a strong reflection of that. Year to date production is up 10 percent while capex is down 55 percent and unit production costs are down 15 percent," Santos CEO David Knox said in a statement.

    Santos has just started exporting from its $18.5 billion Gladstone LNG project, the biggest project it has ever built and operated, boosting its credentials as a gas supplier to Asia.
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    Marubeni Corp moves in on Santos PNG LNG stake

    Japanese trading and investment house Marubeni Corporation is believed to be seeking a stake in the Santos and Oil Search-backed PNG LNG gas project.

    As Santos and its advisers at Deutsche Bank and Lazard juggle a fistful of proposals stemming from the wide-ranging strategic review, Street Talk understands one option under serious consideration for Santos is to sell a 3.6 per cent stake in PNG LNG to Marubeni in a deal that could be worth as much as $2 billion.

    Santos has a 13.5 per cent stake in the PNG LNG project, which it owns alongside ExxonMobil (33.2 per cent and operator), Oil Search (29 per cent), National Petroleum Company of PNG (16.8 per cent), JX Nippon Oil and Gas Exploration Company (4.7%) and Mineral Resources Development Company (2.8 per cent).

    The asset's strategic value was underscored by Woodside Petroleum's bid for Oil Search in September and Santos executive chairman Peter Coates has already called PNG LNG his company's "jewel in the crown". But Santos' stake would be worth less than Oil Search's because it does not own as much of the gas that would be used for an expansion.

    That said, everything is on the table at Santos and there are plenty of balls in the air.

    Other sources reckon Santos' preferred deal is the sale of assets in Western Australia and Victoria, along with an equity raising. [Bids for assets were due on October 20, however it's understood they were pushed back by one week.] However, hiving off a 3.6 per cent stake could allow Santos to achieve twin goals of paying down debt and maintaining a material interest in the project.

    It comes as Santos rejected a $6.88 a share cash proposal from Middle East-backed Scepter Partners, saying it was an "opportunistic" approach. Scepter's team, headed by former Blackstone Advisory Partners banker Anthony Steains, is understood to have sought meetings with Santos, along with no-talk no-shop conditions and four-to-six weeks due diligence. Highbury Partnership and Gilbert + Tobin are advising the bidder.

    Fund managers and analysts were also left wondering on Thursday night how Santos could price an equity raising given the 16 per cent share price jump on Thursday and the $6.88 a share line in the sand.

    They were also left guessing at the strength of Scepter's bid. It's a new entity and listed equities investors are yet to see exactly how the bidder funds its deals.

    There is a theory that Steains and co made the bid without pitching the deal to the underlying equity sponsors [i.e. sovereign wealth funds and Brunei royalty]. It's also understood Scepter needed due diligence to line up debt funding.

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    Weatherford announces third quarter 2015 results

    Weatherford International plc reported a net loss before charges of $42 million ($0.05 net loss per share non-GAAP) on revenues of $2.24 billion for the third quarter of 2015. GAAP net loss for the third quarter of 2015 was $170 million, or a net loss of $0.22 per share.

    Third Quarter 2015 Highlights

    Net debt decreased by $28 million and positive free cash flow from operations was $123 million;
    Operating income increased 3% and by 47 basis points sequentially, driven mostly by improvements in North America where revenue increased by 2% and operating margins increased 493 basis points with the modest recovery from spring break up in Canada and continued cost reduction measures;
    Best-in-class sequential incrementals of 2% and year-on-year decrementals of 29%;
    Completed the previous reduction in force target of 11,000 employees by September 30, 2015, with realized annualized savings of $803 million; and
    Repurchased $236 million of long-term debt through open market transactions generating a gain of $35 million.

    Bernard J. Duroc-Danner, Chairman of the Board, President and Chief Executive Officer, stated:

    'We continue to make rapid and deep cost progress and drive structural change, while effectively redirecting our culture and strengthening our talent bench. Our actions remain centered around perennially improving our cost structure through cycles and intensifying capital allocation and cash generation as a company-wide discipline. Our direction is steadfast.

    Our free cash flow from operations in the third quarter increased to $123 million. We are confident in our ability to generate positive free cash flow every quarter going forward and on a full year basis this year and beyond. Our path further takes us towards operating excellence and a strict focus on our industrial core.'

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    Statoil: New Compressors Boost Gas Recovery at Troll A

    Two giant compressors that started up on the Troll A platform offshore Norway earlier this month will ensure a daily export capacity of 4.23 billion cubic feet of gas from the Troll field, according to Statoil.

    The compressors will help the Troll field meet its long-term production profile, currently extending to 2063. They are operated by land-based power from Kollsnes west of Bergen, ensuring zero emissions of carbon dioxide and nitrogen oxides from the platform. During the past 18 months Statoil has started up low-pressure compressors on Troll A, Kvitebjørn, Heidrun, Kristin, Åsgard and Gullfaks, which has increased the recovery rate of the installations by more than 1.2 billion barrels and has extended their lives.

    Gunnar Nakken, a senior vice president at Statoil, commented in a company statement:

    “This is a new strategic milestone for the Troll field. The compressors are an important investment to ensure sustainable, long-term production and activity on the Norwegian continental shelf.”

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    Top oil traders wary of tapping their war chests

    The world's biggest oil traders are sitting on a war chest worth billions of dollars, but are reluctant to embark on a spending spree, because the pool of available assets is either too pricey or simply not for sale.

    Vitol, Mercuria, Trafigura and Gunvor, the four privately-owned houses that traded nearly a billion tonnes of raw materials last year, have all said they are open to opportunities, but not at any price.

    "The assets are (either) problematic, so it's not clear you want to own them, or they are reasonable assets, but their price hasn't come down low enough to create an opportunity," Mercuria chief executive Marco Dunand told the Reuters Commodities Summit.

    The trading companies, which profit from volatility in the price of commodities, rather than falls or rises, have used this downturn in raw metals to rid themselves of assets they no longer want and prepare the ground for juicier targets.

    Mercuria sold a 51 percent stake in Henry Bath, one of the world's oldest metals storage firms that it acquired through its purchase of JPMorgan Chase's physical commoditiesbusiness, in September, for $60 million.

    Rival Trafigura netted nearly $900 million last year from the sale of an 80-percent stake in the Corpus Christi complex, its oil asset in the Texas shale hub, to U.S. firm Buckeye.

    Chief financial officer Christophe Salmon said Trafigura was open to opportunities, but only those that would not compromise the company's balance sheet.

    "Obviously, if you divest from existing assets, this leaves you more ability to reinvest, to recycle this capital into future acquisitions, so it's a moving piece," he said.

    "Now that valuations are coming to a more reasonable level, we could be looking at opportunities again on a very selective basis," Salmon said.

    With that in mind, Trafigura is drawn more by infrastructure than in upstream producing assets, he said.

    Gunvor, one of the world's top four oil trading houses, has raised some $2 billion from selling its Russian assets, since former co-owner, Russian billionaire Gennady Timchenko, was hit with U.S. sanctions last year.

    Gunvor chief executive Torbjorn Tornqvist told the summit he definitely saw his company growing in the coming years.

    The company's series of divestments has left it with a healthy cash pile that it could invest in new business in places like Europe, the United States and China.

    Vitol on the other hand has snapped up a number of assets in the last year, from taking control over a series of European oil refineries through its Varo Energy joint venture, to buying a stake in the Nigerian downstream assets of Oando, to taking over oil storage firm VTTI
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    Australia oil, gas deals heat up with Beach Energy and Drillsearch Energy merger

    Australian oil and gas producers Beach Energy and Drillsearch Energy Ltd agreed to a billion dollar merger on Friday, the day after Santos rejected a $5 billion offer, signalling the industry's fortunes may be bottoming.

    The pace of deals in the sector has picked up as a slump in oil prices since June last year has battered share prices to such weak levels that companies and assets are proving irresistible to buyers with sufficient funds.

    "Here it's been a particularly painful year for (energy) equities, which has generated once-in-a-cycle type opportunites for people with a more bullish long-term view on oil prices," said Adrian Prendergast an analyst with Morgans in Melbourne.

    Analysts said the string of bids over the past month, including Suncor's C$4.3 billion bid for Canadian Oil Sands, suggested acquirors see oil prices bottoming as supply comes out of the market, especially in the United States.

    "It does provide some indication the industry thinks it may miss the opportunity to transact in this recent oil price rout as people in the market have become more positive about oil prices next year," said Scott Simpson, an analyst at GMP Securities in Perth.

    The Drillsearch-Beach merger followed a A$7.1 billion ($5.2 billion) bid for Santos from a firm backed by the royal families of Brunei and the United Arab Emirates and an A$11.7 billion bid by Woodside Petroleum for Oil Search Ltd.

    "We are starting to see M&A as a real theme as cashed-up groups seek assets with exposure to oil price upside," UBS analyst Nik Burns said in a note on the Scepter bid for Santos.

    Drillsearch agreed to a takeover offer valuing it at A$384 million, a 27 percent premium to its close on Thursday, to create a combined company worth about A$1.2 billion. The enlarged group would be Australia's biggest onshore oil and gas producer.

    The two companies, both with good cashflows and little debt, said they would be well-positioned to snap up distressed assets, possibly from Santos or Origin Energy, which is also beefing up its balance sheet, to expand beyond their core in the Cooper Basin.

    "This is not about squeezing the lemon, this is about finding growth opportunities," Drillsearch Chairman Jim McKerlie told analysts.

    The merger of Beach and Drillsearch had long been expected as they are already partners in Cooper Basin oil and gas acreage, Beach owns a 4 percent stake in Drillsearch and they are both 19.9 percent owned by Seven Group Holdings.

    Combined, they expect to produce 10.6 million to 11.8 million barrels of oil equivalent in the year to June 2016.
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    Australia flags concerns on $35 bln Halliburton bid for Baker Hughes

    Australia's antitrust regulator raised concerns on Friday about Halliburton Co's proposed $35 billion buyout of rival Baker Hughes Inc , in another setback for a deal that has already hit competition snarls in the United States.

    Delaying its final ruling for a third time, the Australian Competition and Consumer Commision (ACCC) said joining the world's No. 2 and No. 3 oilfield services firms to eclipse the current No. 1, Schlumberger NV, "may create conditions that would facilitate coordinated behaviour in the market".

    "The ACCC is concerned that the acquisition would result in the merged entity being one of only a small number of suppliers that could service the relevant markets," ACCC Chairman Rod Sims said in a statement, which described the companies as "close competitors across a broad range of oilfield goods and services in Australia".

    "The ACCC is particularly concerned in relation to the supply of complex or high-risk projects, such as off-shore drilling projects," Sims added.

    The regulator will give a final ruling on Dec. 17, but the remarks signal the hurdles the companies face as they try to push through a deal first announced 11 months ago as a way to cut costs amid an oil price downturn.

    The two firms have already committed to selling businesses to appease U.S. authorities, but the ACCC's Sims noted that authorities in Europe, India and China are also looking at the deal.

    The deal originally had a deadline of Dec. 16, but the two companies, which both provide services, technology and systems to the oil and gas industry globally, have more recently said it may not close until 2016.

    The ACCC initially said it expected to give a decision by July 9 but postponed that twice to collect extra information from both companies. The regulator said it has requested more information by a deadline of Nov. 12.

    The ACCC on Thursday also postponed a final decision on Royal Dutch Shell's $70 billion takeover of BG Group by a week, its second delay for a ruling on that deal, amid a flurry of M&A activity in the global energy sector that ias increased its workload.

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    Cameron’s profits slip 10.5 percent as cost cutting offsets weaker demand

    Cameron International’s profits slipped 10.5 percent as the Houston-based oil tool maker offset weaker demand for its onshore products by cutting costs and nearly tripling its subsea operating income.

    CEO Scott Rowe said in a statement said the company’s third quarter earnings were nearly identical to those a year ago, before the dramatic collapse in oil prices and the deep plunge in the U.S. rig count.

    “These results validate the journey we began in 2014 to reduce the company’s fundamental cost structure and improve execution across our four segments,” he said.

    Cameron posted earnings of $213 million, or 98 cents per share, in the three-month period ending Sept. 30. That’s down from $238 million, or $1.12 per share, during the same time a year ago.

    Revenues fell from $2.7 billion to $2.2 billion amid weaker demand for all of its products and services, the company said.

    Cameron’s subsea and drilling segments boosted its operating income despite the brutal downturn, in part due to project cost reductions, the company said.

    Its surface divisions and valves and measurements segments continued to struggle with waning demand and pressure from producers for deeper discounts.

    Although Cameron has been able to protect its balance sheet by improving operations and cutting costs, Rowe said the tough times show no signs of abating, which means the company will likely see operating income margins decline in all business segments in the fourth quarter.

    “In the face of market headwinds, we will maintain our relentless focus on the things we can control: execution, customer relationships, cost reduction and technology,” he said.

    The company has cancelled its conference calls with investors as it continues to work on a merger with Schlumberger. Cameron said it expects the $12.8 billion deal to close in the first quarter of 2016.

    Cameron has warned of further weakening in the fourth quarter after the company posted a reduced profit in the latest period.
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    Sanchez Energy Announces Third Quarter 2015 Operating Results

    Production of 4,862 thousand barrels of oil equivalent ("MBOE") during the third quarter 2015 for average production of 52,844 barrels of oil equivalent per day ("BOE/D") driven by continued outperformance of Catarina wells

    The Company received approximately $345 million in cash with the close of the Western Catarina Midstream Divestiture, with annual lease operating costs expected to rise approximately $0.75 per barrel of oil equivalent over previous guidance as a result of the transaction

    The Company's joint venture ("JV") with Targa Resources Partners LP (NGLS)("Targa") to construct a cryogenic processing plant expected to have initial capacity of 200 million cubic feet per day ("MMcfd") and associated high pressure gathering pipelines near Sanchez Energy's Catarina asset in the Eagle Ford Shale is expected to provide a path to improved yields, lower processing fees, and significant marketing benefits


    "During the third quarter 2015, we continued to realize operational success driven by strong production and declining well costs," said Tony Sanchez, III, Chief Executive Officer of Sanchez Energy.

    "Production for the third quarter 2015 averaged approximately 52,844 BOE/D, exceeding the high end of our guidance range of 46,000 to 50,000 BOE/D. A comprehensive optimization of our drilling and completion practices, along with direct sourcing strategy has resulted in cost savings of approximately 50% of our total well cost relative to third quarter 2014.

    Extensive changes have been made to our processes and systems with essentially no change to our well design. As a result, our production remains strong and we have developed the financial flexibility needed to successfully manage a two-rig program in today's more challenging commodity price environment."
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    Patterson-UTI Energy Reports Financial Results for Q3

    Including the non-cash charges discussed below, the Company reported a net loss of $226 million, or $1.54 per share, for the third quarter of 2015, compared to net income of $16.0 million, or $0.11 per share, for the quarter ended September 30, 2014.  Revenues for the third quarter of 2015 were $422 million, compared to $846 million for the third quarter of 2014.

    The financial results for the three months ended September 30, 2015 include pretax non-cash charges totaling $280 million ($187 million after-tax, or $1.28 per share).  These charges include $125 million from the impairment of all goodwill associated with the Company's pressure pumping business, $131 million from the write-down of drilling equipment primarily related to mechanical rigs and spare rig components, $22.0 million from the write-down of pressure pumping equipment and closed facilities and $1.9 million related to the impairment of certain oil and natural gas properties.  For the nine months ended September 30, 2015, the financial results also include pretax charges of $19.8 million related to a legal settlement and the impairment of certain oil and natural gas properties during the first six months of 2015.

    Andy Hendricks, Patterson-UTI's Chief Executive Officer, stated, "During the third quarter, our rig count averaged 105 rigs in the United States and four rigs in Canada, compared to the second quarter average of 122 rigs in the United States and two in Canada.  Current commodity prices are, of course, negatively impacting drilling activity.  For the month of October, we expect our average rig count will be 92 in the United States and four in Canada."

    Mr. Hendricks added, "We recognized $28.9 million of revenues related to early contract terminations in contract drilling during the third quarter.  These early termination revenues positively impacted our total average rig revenue per day of $26,010 by $2,870.  Excluding early termination revenue, total average rig revenue per day during the third quarter would have been $23,140, compared to $24,330 per day in the second quarter.

    "Total average rig operating costs per day during the third quarter decreased $140 to $13,580 from $13,720 in the second quarter.  Excluding the positive impact from early termination revenues in both the second and third quarters, total average rig margin per day was $9,560 during the third quarter, compared to $10,600 during the second quarter.

    "At the end of the third quarter our rig fleet included 160 APEX® rigs.  During the fourth quarter we expect to add one additional new APEX® rig under contract to our fleet.  We currently have no plans for additional newbuild rigs in 2016.

    "As of September 30, 2015, we had term contracts for drilling rigs providing for more than $800 million of future dayrate drilling revenue.  Based on contracts currently in place, we expect an average of 71 rigs operating under term contracts during the fourth quarter, and an average of 45 rigs operating under term contracts during 2016.

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    Northern Oil and Gas, Inc. Announces Reaffirmation of its Borrowing Base at $550 million

     Northern Oil and Gas, Inc. today announced that, during the semi-annual redetermination period under Northern's revolving credit facility, its bank syndicate group reaffirmed and maintained the existing $550 million borrowing base.

    "Capital discipline, combined with our exposure to the core of the Williston Basin, supported the reaffirmation of our borrowing base," commented Northern's Chairman and Chief Executive Officer, Michael Reger.  "The financial flexibility of our business model and the discipline we are showing through our capital allocation process gave our lenders the confidence they needed to maintain our borrowing base.  We appreciate the continued support provided by the entire syndicate of banks in our facility."
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    Alternative Energy

    Lithium Cartel raises prices 17%

    Demand volume inventory reduction lithium price is now the biggest weekly gain in four years

    Source: Original 2015/10/23 8:59:39 Six types of institutional holdings in the same industry
    Last week, the Chinese battery grade lithium carbonate prices rose 8 percent, the biggest weekly gain in four years. And since last year's third quarter, lithium carbonate prices have risen 39%. At present, the domestic lithium carbonate little inventory, and the release of new capacity is less, so the lithium carbonate prices or continuity.   According to sources, since the first quarter of last year, China continued to increase efforts to support new energy vehicles, China's automobile market downturn in the overall environment, the sudden emergence of new energy vehicles, sales booming. According to the China Automotive Industry Association data show that in January 2015 to August, China's new energy automobile production 118,000, sales of 108,700, an increase of 2.6 times, respectively, and 2.7-fold.   New energy vehicles is growing rapidly, driven by demand for lithium battery cathode material increase. The number of lithium battery company余家飞speed increase from 10 in 2008 to the current more than 100, and the heat also launched a new round of expansion. It is reported that this year at least 18 listed companies to invest in lithium battery project, the amount of investment over 50 billion yuan.   Demand good, but the arrival of winter cause the Lithium production plummeted, and then pushed up prices. At present, the global lithium resource exploitation lies in the Chemetall (Germany), FMC (USA), SQM (Chile) hands of three companies, accounting for about 70% of the market. Although China is rich lithium resources, subject to technical limitations Tempered lithium-based compounds, therefore exploitation in the past for a long period of time is very limited.   Lithium resource mining methods there are also two types: ore extraction of lithium and Lithium. Currently, the global lithium resources mainly from Salt Lake Lithium route. The Salt Lake Lithium and entered production season, resulting in the upstream supply is tight, reducing raw material supply. To this end, in September, the first price increase leading enterprise FMC. The company since October 1, 2015, on a global scale to enhance the lithium product prices across the board, including lithium carbonate prices by 15%.   International mining industry lead prices pulled up the price. It is understood that domestic manufacturers of lithium raw material inventory is very small.   Brokerage research reports, ore prices rising in recent years, coupled with FMC price, per tonne of lithium carbonate price broke through 60,000. Taking into account the domestic no new lithium carbonate production capacity release, Qinghai major capacity shut down by the end of November, is expected to support prices until next year.A shares in Accor Group, Gan Feng Li industry and other listed companies involved in the production and sales of lithium carbonate related businesses.

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    Terra Firma's Monterey to take Infinis Energy private

    Monterey Group, owned by private equity firm Terra Firma, agreed on Thursday to buy back the rest of renewable power generating firm Infinis Energy it did not own, following regulatory changes that have hit the sector.

    Britain this year announced a swathe of cuts in renewable energy subsidies, including changing the way renewable projects qualify for payments and scrapping subsidies for onshore wind farms.

    Infinis Energy's share price has halved since it listed in November 2013 and the rare move of taking it private was the best option for the business, according to a source familiar with the deal.

    "We have considered gradual sell-downs of our interest in the company since its IPO ... and more recently we have also explored other strategic options, but the change in the regulatory environment for Infinis has prompted us to rethink our strategy," Guy Hands, chairman and chief investment officer of Terra Firma, said in a statement.

    The agreed cash offer values Infinis at 555 million pounds ($856 million).

    The deal is likely to result in a break-up of the firm, which generates power from landfill gas and from wind, the source added.

    Monterey, which already owned 68.5 percent of Infinis, will pay 185 pence per share for the remaining shares, a 40.4 percent premium to the closing price of 131.75 pence on Oct. 21.

    Infinis' shares were trading at 183.5 pence at 0845 GMT, up 39.3 percent.

    Goldman Sachs advised Terra Firma and Monterey. Barclays and RBC advised Infinis.
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    Foxconn to partner Apple plans to add 2 GW green energy projects

    US tech giant Apple is embarking on two new clean energy programs in China aimed at reducing the greenhouse gas emissions by its manufacturing partners by over 20 million metric tons between now and 2020, equivalent to taking nearly 4 million passenger vehicles off the road for one year.

    For achieving this objective, Apple will partner with suppliers in China to install more than 2 gigawatts of clean energy projects over next five years.

    The new initiatives in China will see Apple significantly expanding its clean-energy investments to build more than 200 MW of solar projects in the northern, eastern and southern grid regions of China. These projects will produce energy equivalent to the quantum used by more than 265,000 Chinese homes in a year and will begin to offset the energy used in Apple's supply chain.

    The second Apple initiative is to push its manufacturing partners to become more energy efficient and to use clean energy for their manufacturing operations.

    In addition, Apple Thursday announced that the construction of its 40 megawatts solar projects in the Sichuan Province is now complete. These solar installations produce more electricity than what is used by Apple's 19 corporate offices and 24 retail stores in China.

    "Climate change is one of the great challenges of our time, and the time for action is now," said Tim Cook, Apple's CEO, in a statement.

    - See more at:
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    Swiss CO2 capture plant to help grow vegetables

    A commercial-scale plant which captures CO2 will be built in Switzerland, with the greenhouse gas to be used to improve vegetable growth.

    It will be operated by Zurich-based Climeworks, a spin-off company from the Swiss Federal Institute of Technology in Zurich (ETH Zurich).

    It will use a so-called Direct Air Capture (DAC) technology, which relies on a novel filter to extract carbon dioxide from the atmosphere and is a claimed to be a world first.

    The plant works using gas which binds to the surface of the reusable filter. When the filter is filled to its capacity, it is heated to 100°C to release the CO2.

    Image: Climeworks

    It is expected to be operational by mid-2016 and capture 900 tons of CO2 from the atmosphere a year. The firm aims to enhance the growth of vegetables by up to 20% in a nearby greenhouse.

    The plant is part of a three-year pilot and demonstration project and is expected to cost up to €4 million (£2.94m).

    It will be built in the village of Hinwil, at the site of a recycling facility, which will supply it with heat and power.

    Climeworks said the project is a “crucial milestone” towards closing the carbon cycle, where CO2 emitted from any source can be captured and re-used to produce carbon-neutral fuels.

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    Dow Chemical reviewing options for agri unit

    Dow Chemical Co said it would "review all options" for its agrosciences business, after the unit reported its third straight quarter of sales decline on Thursday.

    The No.1 U.S. chemical company said it would sell its stake in a joint venture with Petrochemical Industries Co of Kuwait for pretax proceeds of $1.5 billion.

    Dow is also looking to cut its stake in another joint venture in Kuwait that makes petrochemical products.

    Shares of the company, which reported a higher-than-expected quarterly profit, rose about 7 percent to $50.70 in premarket trading.

    Dow's joint venture with Petrochemical Industries, MEGlobal, produces ethylene glycol, a raw material used to make polyester fibers. The U.S. company's partners in the petrochemical products joint venture, Greater EQUATE, include Petrochemical Industries and Boubyan Petrochemical Co.

    Dow's net income attributable to shareholders surged more than 50 percent to $1.29 billion, or $1.09 per share, in the third quarter ended Sept. 30, partly due to a $621 million gain related to the sale of its AgroFresh specialty chemical business.

    Operating profit rose about 14 percent to 82 cents per share as a fall in raw material prices boosted margins.

    Revenue fell 16 percent to $12.04 billion.

    Analysts on average had expected an operating profit of 69 cents per share and revenue of $12.38 billion, according to Thomson Reuters I/B/E/S.

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    Base Metals

    China refined copper demand to rise 4-4.5 pct in 2016 -Antaike

    China's demand for copper is expected to rise 4-4.5 percent in 2016, with the exact level depending on economic growth, investment in powerprojects and bank credit to small- and medium-scaled factories, said a senior analyst at state-backed research firm Antaike.

    Those variables have also prompted Antaike to trim its 2015 forecast for growth in copper demand to 5.3 percent from the 6.2 percent touted at the start of the year, He Xiaohui told Reuters on the sidelines of an industry conference in Nanning in southwest China. He put demand at 9.18 million tonnes in 2015.

    But He said the 2015 forecast could be cut further to below 5 percent in December if appetite for the metal did not show signs of improving.

    "Few people expect demand (growth) to be better next year than this year," He said.

    "Optimists say the winter is not over yet. Pessimists say it is just the beginning."

    He said bank credit to the metals sector, in particular small- and medium-sized firms, had been tight.

    Some smaller factories that use refined copper for manufacturing of copper rods and power cables had contracted out their orders to bigger ones or declined to take orders because they did not have cash to buy metal, he said.

    State investment in the power sector is expected to rise next year after slowing in 2015. Still, copper is used only when grids fund projects and place orders for power cables and wires, He said.

    China will spend at least 2 trillion yuan ($315 billion) to improve its power grid infrastructure over the 2015-2020 period, which an executive at a state-owned copper producer told Reuters could consume some 1.3 million tonnes of refined copper.

    Antaike's He said copper demand could boom if funding for power projects surged next year.
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    CEO Of Europe's Largest Zinc Producer Hints At Default

    Complacency seemed ready to set back in, with Glencore stock recently rising as high as its recent equity offering price of 125p. And then today we noticed that not only is Glencore's CDS back above 700 bps, the widest it has been in three weeks, but that another mining company has fallen into the market's crosshairs, this time Belgium-based (with Zurich HQ) Nyrstar NV, Europe's largest refined-zinc producer, whose stock crashed the most since its initial public offering in 2007, while it bonds tumbled to a yield of 19%, suggesting a default may be imminent.

    The official version is that this plunge happened after the company said "its mining business is being challenged by the rout in metals."

    According to Bloomberg, "Investment in the company’s Port Pirie smelting operations in Australia will cost A$563 million ($405 million), about 10 percent more than previously forecast, it said in a statement Thursday. Nyrstar shares slumped as much as 27 percent, the most since at least October 2007, to the lowest in six years."

    "Clearly, the business has underperformed for some time," Nyrstar CEO Bill Scotting said, referring to mining. "At these zinc prices we are not cash generating so we have to look at that portfolio. If zinc prices don’t recover we will potentially have to idle more mines."

    However, none of this is news, or should be news.

    What was news was the CEO's admission in Belgium's Tijd that the company "can't guarantee the full repayment of the company's notes due in May 2016. In other words, a default, by any other name.

    So while other commodity traders such as Glencore and Trafigura are desperate to preserve the image that they have no liquidity problems, Nyrstar is the first to hint the D-word.

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    Steel, Iron Ore and Coal

    CIL stake sale misses another date - Report

    Financial Express reported that the department of disinvestment (DoD) has extended the deadline to appoint financial advisors for Coal India (CIL) disinvestment to November 10, as it has failed to receive adequate response from merchant bankers. The first deadline was set on September 2, 2015, which was later extended to October 14.

    People familiar with the development said global investment banks flagged concerns over a shortfall in Coal India’s environment sustainability commitments.

    In addition, there was lack of clarity regarding the group or basket under which CIL would feature. Bankers have sought more clarity on the matter, as it would have a bearing on the costs involved in conducting a government deal.

    The DoD aims at appointing five merchant bankers, and has now facilitated meetings between merchant bankers and representatives of the company.

    CIL had in 2013 committed to a sustainable development policy under which the Maharatna PSU has to pursue mining, integrating environmental, sociocultural and economic factors.

    A senior government official said that “CIL has some sustainability plans that CIL committed in 2013. They have not been able to implement it. The foreign bankers have expressed concerns on that.”
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    Lu’an Group takes tough move to cope with sluggish market

    Lu'an Group, one of the five top coal producers in Shanxi, planned to suspend salary but retain the job for employees, in order to cut labor cost amid worsening coal market.

    All management staff who worked no less than five years for the company could apply for leave without pay, which in principle, shall not be less than five years, the company said in a recent statement.

    Shanxi Lu'an Environmental Energy Development, the group’s listed company, posted net profit of 113.7 million yuan ($17.8 million) in the first half of the year, plunging 76.1% year on year.

    The group sold 14.09 million tonnes of commercial coal during the same period, down 9% on year, with combined PCI and washed metallurgical coal sales accounting for nearly half of the total, reaching 6.31 million tonnes and 101,600 tonnes, respectively.

    Lu’an Group cut free-on-rail price by 40 yuan/t for washed coal from its Sima and Wuyang mines, and cut price of other lean coals by 30 yuan/t, effective on October 1.

    As of October 20, the CCI Met Shanxi PCI index assessed the ex-washplant price of Shanxi PCI coal at 405 yuan/t, dropping 21.4% from six months ago.

    Besides Lu’an Group, Shanxi's another four major miners -- Datong Group, Shanxi Coking Coal, Yangquan Coal and Jincheng Anthracite -- also have announced similar measures to encourage workers to leave without pay or work in shifts. This, according to industry insiders, is expected to cut around 10% staff in total.

    Underground workers or 2/3 of the total staff and most ground service staff would be encouraged to work in shifts; while administrative officials would stay in positions, sources said.

    All of them would be paid salaries during work and living allowance during the leave period. The measure is estimated to cut labor cost by 20-30% and cut raw coal production cost by 10%, industry insiders said.

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    Sinosteel's debt woes cast doubt on China's SOE reform programme

    The prospect of China's state-owned metals trader Sinosteel defaulting on its debt leaves Beijing with a dilemma: stick with its pledge to let market forces operate in its sprawling state sector or step in to save jobs and keep the steel giant afloat.

    On Monday Sinosteel extended the date investors can start redeeming its bonds and also deferred interest payments, citing liquidity problems, fuelling concerns about the mounting default risks in China's bloated state-owned enterprises (SOEs).

    Last month China promised to create "stronger, better and larger" SOEs through a far-reaching reform programme, which includes restructuring those that are performing poorly and allowing some to close.

    The programme is expected to take five years to implement, but the huge debts facing many of China's mammoth state-owned firms, which together employ around 7.5 million people, need more urgent attention.

    Chinese media has reported Beijing is on the verge of intervening to save Sinosteel, a move some in the metals industry say would set the wrong precedent for other struggling SOEs.

    "Sinosteel is a typical 'zombie enterprise'...the government should let the company go bust," said Xu Zhongbo, a steel industry veteran and president of Beijing Metal Consulting in Beijing.

    Total debts at China's state-owned firms rose 11 percent from a year earlier to 71.76 trillion yuan ($11.29 trillion) in the first eight months of 2015, according to the latest Ministry of Finance data. Servicing those loans is getting costlier, with financing costs up 12.1 percent over the period.

    Sinosteel's liabilities are estimated at more than 100 billion yuan, with a debt-to-asset ratio of 98 percent over the 2011-2013 period, according to a report issued last year by domestic credit rating agency China Cheng Xin.

    Sinosteel's spokespeople could not be reached for comment to confirm those figures or comment on their current situation.

    Several SOE executives believe China will have to pull back from its reform programme while companies grapple with the slowing economy, particularly in the commodities and shipbuildling sectors.

    "The government will still want the market to allocate resources, but the government will have to put social stability first and consider bad loans for it won't just sit on the sidelines," Xu Lejiang, chairman of China's no.2 steel maker Baosteel, told reporters on Wednesday.

    "Aggressive acquisitions...big investment in overseas mining and fooling around with private mills all caused the firm to become what it is today," he said.

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    JSW Steel avoids loss in Q2

    JSW Steel Ltd reported an 84 percent fall in net profit for the July-September quarter as the steel sector continues to struggle with weak demand and high debts, but was able to avoid an expected loss after lowering expenses.

    JSW Steel, which counts itself among the lowest cost steel producers in the world, reported a consolidated net profit of 1.17 billion rupees ($17.96 million) for the second quarter ended Sept. 30 versus 7.49 billion rupees a year ago.

    Analysts had expected a loss of 1.65 billion rupees, according to data compiled by Thomson Reuters.

    Net sales fell 21.5 percent to 107.43 billion rupees.

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