Mark Latham Commodity Equity Intelligence Service

Tuesday 9th February 2016
Background Stories on www.commodityintelligence.com

News and Views:

Attached Files






    Macro

    How To Survive A Bear Market – Trading Rules And Guidelines


    This is what characterizes bear markets:

    Sellers are in control
    Oversold often stays oversold for a long time
    Markets drop a lot faster than they go up
    Bear markets burn and churn accounts with long only exposure
    Volume and liquidity can dry up but price can still drop significantly
    ‘Cheap’ can get a lot ‘cheaper’
    Hope is slowly destroyed
    Vicious bear market rallies try to suck in traders to trap them
    Expect lots of gaps to the downside
    It takes a long time until market participants throw in the towel

    This is appropriate trading behaviour during bear markets:

    Either in cash or short
    Sell the rallies mentality
    Do NOT buy the dips
    Do not even think about going long if you are not an active and experienced trader

    - See more at: http://www.tischendorf.com/2011/08/08/how-to-survive-a-bear-market-trading-rules-and-guidelines/#sthash.Gmsn1KLs.dpuf
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    Engie to sell 15-20 bln eur of assets - Lettre de l'Expansion


    French gas and power group Engie plans to sell 15 to 20 billion euros worth of assets over 2016-18, including 7 billion euros ($7.8 billion) in the short term, French newsletter La Lettre de l'Expansion   reported on Monday.

    The newsletter said Engie plans to sell 2.5 to 3 billion euros worth of exploration and production assets, 2 to 3 billion euros of coal-fired power plants, 5 billion euros worth of U.S. plants, and some infrastructure assets.

    The asset sales list also includes various other non-strategic assets worth 3 to 5 billion euros, as well as the opening of the capital of Engie's Belgian unit Electrabel, the newsletter said.

    The newsletter also said Engie planned to speed up its "Perform" cost-cutting plan, aiming for 2.8 billion euros worth of cost cuts over 2016-18, up from 1.9 billion between 2012 and 2015.

    http://www.reuters.com/article/engie-assets-idUSFWN15M016
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    Oil and Gas

    Iraq raises March Basra Light crude OSP to Asia


    Iraq has raised the March official selling price (OSP) for Basra Light crude to Asia by $0.20 to minus $2.60 a barrel against the average of Oman/Dubai quotes from the previous month, the State Oil Marketing Organization (SOMO) said.

    Basra Heavy to Asia in the same month was priced at minus $6.30 a barrel to Oman/Dubai quotes, SOMO said in an e-mailed statement late on Monday.

    Iraq's OSPs came after Saudi Arabia made relatively modest changes to its crude prices for Asian buyer in March, in line with expectations, by lowering the price differentials for light grades, while raising those for heavier grades.

    Saudi crude OSPs set the trend for Iranian, Kuwaiti and Iraqi prices, affecting more than 12 million barrels per day (bpd) of crude bound for Asia.

    Crude prices often offer a glimpse into whether Mideast OPEC producers will continue a strategy of keeping output high and defending market share, particularly as rival producer Iran ramps up crude shipments into an already oversupplied market despite low prices.

    Iraq's March Basra Light OSP to the North and South American markets was set at the Argus Sour Crude Index (ASCI) minus $0.55 a barrel, up from the previous month, and the price of Kirkuk to the United States increased to ASCI plus $0.70 a barrel.

    For Europe, the March OSP for Basra Light rose by $0.10 to dated Brent minus $4.95 a barrel and the March Kirkuk OSP rose to minus $4.50.

    http://www.reuters.com/article/iraq-crude-prices-idUSL8N15O09S
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    Iran considers stakes in refineries in other countries - Shana


    Iran holds a stake in a refinery project in Malaysia and is considering taking stakes in projects in five other countries, the managing director of the National Iranian Oil Engineering and Construction Company (NIOEC) was quoted as saying on Monday.

    Hamid Sharif Razi said the NIOEC holds a 30 percent stake in a 250,000 barrel a day refinery project in Malaysia, and was planning to take a 40 percent stake in a 300,000 barrel a day refinery in Indonesia, according to the Shana news agency.

    The NIOEC is also in talks with South Africa, Sierra Leone, Brazil and India, he said, adding the purpose of the projects was to guarantee Iranian crude exports and, if necessary, a source of product imports.

    http://www.reuters.com/article/oil-iran-refineries-idUSL8N15N1WX
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    Diamond Offshore's profit beats on lower costs; div scrapped


    Diamond Offshore Drilling Inc (DO.N), one of the world's top five offshore rig contractors, reported a better-than-expected quarterly profit as cost cutting pays off, and the company said it was suspending its dividend to add to cost savings.

    A near-70 percent fall in crude oil prices since mid-2014 has pushed Diamond Offshore's oil and gas customers to lower spending and scale back drilling activity, forcing rig contractors to idle or even scrap rigs.

    The dividend suspension comes after the company scrapped a special dividend of 75 cents last February.

    The company, which initiated the special dividend in 2006, has paid a regular dividend of 12.5 cents per share every quarter since mid-2005.

    Suspending the quarterly cash dividend will help Diamond Offshore save about $69 million annually, the company said on Monday.

    "By conserving additional cash, we will have increased flexibility to manage the company through difficult market conditions and position ourselves for the eventual recovery in offshore drilling," Chief Executive Marc Edwards said in a statement.

    In a bid to simplify operations and reduce downtime, Diamond Offshore said it was transferring the maintenance and service of well-control equipment to General Electric Co's (GE.N) oil & gas unit.

    Under the 10-year service agreement, GE will buy the blowout preventer systems on four of Diamond Offshore's rigs located in the U.S. Gulf of Mexico for $210 million
    .

    Loews Corp, which owns a majority stake in Diamond Offshore, swung to a loss in the fourth quarter.

    Loews, controlled by New York's wealthy Tisch family was hurt by a $499 million impairment charge at Diamond Offshore and lower revenue from its insurance business, CNA Financial Corp.

    Excluding the charge, Diamond Offshore's profit was 90 cents per share, above analysts' average estimate of 54 cents, according to Thomson Reuters I/B/E/S.

    The Houston-based company posted a net loss of $245.4 million, or $1.79 per share in the quarter ended Dec. 31, compared with a profit of $98.8 million, or 72 cents per share, a year earlier.

    Revenue fell about 18 percent to $555.6 million, while contract drilling expenses, excluding depreciation, fell by nearly 29 percent.

    http://www.reuters.com/article/diamond-offshore-results-idUSL3N15N2B1

    Attached Files
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    NOC in West Libya Warns About `Illicit' Oil Sales From East


    National Oil Corp. in western Libya warned traders against loading “illicit” cargoes of oil at Hariga port in the eastern part of the country amid claims by a competing organization that it’s arranging such sales.

    Six or seven foreign companies signed oil-purchase contracts from the port with people who “have no authority to sell Libyan oil,” the Tripoli-based NOC said in a statement, citing Ahmad Shawki, general manager for international marketing. It identified Loyd Capital and Netoil as among buyers attempting to load crude at Hariga. “The only authority legally empowered to sell Libyan crude oil is the National Oil Corporation, with its seat in Tripoli,” NOC said.

    Libya, which holds Africa’s largest proven oil reserves, split into two administrations late in 2014, one in the west and an internationally recognized government in the east. It’s now in the process of setting up a Government of National Accord. The NOC in the west is recognized by traders such as Glencore Plc and Vitol Group as the official marketer of Libyan oil. It also claims United Nations recognition.

    The eastern government set up a separate NOC administration and sent an official to OPEC meetings.

    “Tripoli isn’t internationally recognized and so they don’t have the power to say who is and isn’t authorized to sell crude,” Loyd Capital Management LP Chief Executive Officer Edward Loyd said Friday in a phone interview. Loyd plans to send oil to refiners in two “western-leaning governments,” and three shipping companies have agreed to lift crude for Loyd on condition that it provides necessary documentation, he said.

    Mustaffa Sanalla, chairman of the Tripoli NOC, said his organization is the one with UN recognition and potential buyers can get the situation clarified by their own governments’ Foreign Offices if in doubt. He cited two UN resolutions.

    One of those was resolution 2259, in December, which called for support to “parallel institutions” to halt in order to preserve the integrity of the National Oil Corp. and other government institutions. That amounts to support for the Western NOC, according to Sanalla. Libya is in the process of forming a Government of National Accord.

    The letter from NOC in Tripoli advised shipowners to “verify whether charterers’ contracts are legitimate, or run the risk of having their ships impounded.”

    http://www.bloomberg.com/news/articles/2016-02-08/noc-in-west-libya-warns-about-illicit-oil-sales-from-east
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    India exploring Australian gas supplies for clean, affordable power: Piyush Goyal


    Union Minister of State for Power, Coal, New and Renewable Energy Piyush Goyal on Monday said that the Government of India is willing to consider long term fixed price contracts with Australia for the supply of gas which will enable power producer to enter into a power supply contract at an affordable price.

    "Two round table conference happened today and till now the dialogue has been formal. The India-Australia energy dialogue will give good results. The motive is to provide good quality electricity which is uninterrupted and reaches to the common man. India and Australia could work together for energy efficiency," Goyal told ANI here.

    Goyal is leading a delegation for the 3rd India-Australia Energy Security dialogue in Australia.

    While addressing a roundtable in Brisbane earlier today on the business opportunities for LNG (Liquefied Natural Gas) and Coal Bed Methane, Goyal stated that additionally, opportunities to control the entire value chain right from gas production, liquefaction, shipping, re-gasification and power generation can be evaluated at the current historic low prices of many of these activities.

    Goyal highlighted that India is running one of the world's largest renewable energy programme which aims to increase the capacity 5 times to 175 GW over the next seven years which will require gas based plants which can act as spinning reserve and supply power during deficit times of day (like evenings) when renewable energy production reduces while stabilizing the grid.

    He also stressed that since coal based power is available in India at less than 5 cents per unit, the LNG providers should consider supplying gas to India at a price that is comparable.

    Pointing out that India is the fourth largest energy consumer in the world A.K. Jana, Executive Director, GAIL stated that India has also developed sufficient infrastructure in pipeline transportation, regasification facilities as well as end consumers facilities such as gas based power plants.

    These facilities enable the consumption of around 300 MMSCMD, whereas the present consumption is less than 50% of the same. This provides good opportunities to countries which have a surplus of Natural Gas provided it is available at affordable prices.

    In order to explore the opportunities to affordably supply Australian LNG to India, an LNG sub-group has been created under the joint leadership of a Joint Secretary, Ministry of Petroleum and Natural Gas and a senior Australian official.

    http://news.yahoo.com/india-exploring-australian-gas-supplies-clean-affordable-power-132846826.html?soc_src=mediacontentstory&soc_trk=tw

    Attached Files
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    Statoil and Rosneft commence well testing at the North-Komsomolskoye field


    Statoil and Rosneft have commenced well testing at the North-Komsomolskoye field onshore Russia.

    The companies have implemented a pilot operation of the horizontal wells with an average starting flowrate of 75t per day.

    A spokesman said during well testing the companies are planning to undertake a complex of studies including hydrodynamic and tracer studies.

    Laboratory investigations of the surface oil samples will also be implemented.

    The data is expected to be used as the companies look at the strategy of the full-scale development of the North Komsomolskoye field.

    https://www.energyvoice.com/oilandgas/101045/statoil-and-rosneft-commence-well-testing-at-the-north-komsomolskoye-field/
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    Oversupplied Market Eying Floating Storage Opportunities


    In spite of the oversupplied market, OPEC - led by Saudi Arabia - continues to pump in order to defend its market share against non-OPEC supply. With a coordinated change in strategy highly unlikely, prices will have to remain lower for longer to force the market to reach a new equilibrium.

    However, a critical turning point - when a produced barrel no longer finds spare capacity within existing onshore storage - is approaching. According to the IEA, global oil stocks increased by 1 billion barrels in 2015, and the Agency expects a further increase of 285 million barrels over the course of this year.

    In the case where onshore storage gets filled, the excess barrels will need to be stored in the form of floating storage, which is a more expensive option. Despite the high cost, this would not be without precedent: in 2009, trading companies stored circa 120 million barrels offshore in 64 tankers. In order to make this type of storage economical, the market would need to be in a state of 'super-contango' - a situation in which the front few crude spreads are wide enough to cover the costs of storage in tankers. This implies that prices may need to remain lower for longer than previously anticipated. Current market trends suggest that widespread filling of offshore storage is likely before significant erosion of supply takes place and the market eventually starts to rebalance.

    http://www.oilvoice.com/n/Oversupplied-Market-Eying-Floating-Storage-Opportunities/4fb67cc79f15.aspx?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A+OilvoiceHeadlines+%28OilVoice+Headlines%29
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    Bears hit my local gasoline station.

    Image title
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    Charity watchdog probes Friends of the Earth over campaign against 'toxic' fracking giant


    THE TRUSTEES at one of Britain’s biggest charities are being investigated by regulators over a high profile campaign against “toxic” fracking giants.

    The Charity Commission has opened a compliance case into Friends of the Earth – after discovering the charity has continued to blast Cuadrilla, a company wanting to drill for gas in Lancashire.

    Trustees told the Commission the propaganda from one of the biggest fundraisers in the country would stop last summer.

    But hard-hitting ads have continued to come out – claiming Cuadrilla wants to use “toxic chemicals” and its actions could cause house prices to “plummet”.

    The Commission is not investigating the ads.

    But it is understood to be furious at the trustees for appearing to “lose control” and has demanded the board explains why they were misled.

    The regulator could use new powers granted under the Charities Bill to pile pressure onto the charity. Ultimately it could request trustees are removed.

    Energy Minister Andrea Leadsom last summer blasted the green lobby for delaying the fracking revolution by at least a year.

    Speaking in September, she said eco-warriors were living in a fantasy world if they believed Britain could do without new reserves of shale gas.

    Friends of the Earth has argued that its anti-fracking activity is put out by its limited company- rather than the main charitable, fundraising arm.

    In an explosive letter to the Commission last month, Cuadrilla said this was laughable.

    Chief exec Francis Egan said it was “deplorable” that the charity was trying to hide behind its non-charitable arm.

    He added: “The public has had enough of charities which abuse the fundraising process.”

    A Commission spokesman today said: “We have an ongoing engagement with Friends of the Earth Trust, particularly regarding its relationship to the non-charitable company, Friends of the Earth Limited.

    “We cannot comment further whilst this engagement continues.”

    The row comes just 72 hours after the Government said charities would no longer be able to lobby Ministers to change policies.

    Friends of the Earth said the Commission was acting on the back of a complaint from Cuadrilla who seemed to be "trying to silence their opposition".

    http://www.thesun.co.uk/sol/homepage/news/politics/6916994/Charity-watchdog-probes-Friends-of-the-Earth-over-campaign-against-toxic-fracking-giant.html
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    US Oil Production to Fall 92,000 B/D in March in Key Plays: EIA


    Oil production will fall by 92,000 b/d from February to March in key US onshore plays, the US Energy Information Administration said Monday.

    The biggest forecast drop will be in the Eagle Ford, where EIA sees supply falling 50,000 b/d to 1.222 million b/d in March from 1.272 million b/d in February. The Bakken, where EIA expects production to fall to 1.1 million in March from 1.125 million b/d in February, and the Niobrara, where production is forecast to fall to 389,000 b/d in March from 404,000 b/d in February, are also expected to see substantial drops.

    In addition, production in the Permian will climb to 2.04 million b/d in March, just 1,000 b/d more than the play's estimated production this month. Permian supply, which has grown despite declines in other US plays, appears to be nearing its first month-to-month decline since the EIA began tracking drilling productivity in late 2013.

    The EIA has forecast month-to-month production declines in the Bakken, Eagle Ford and Niobrara since March 2015, but the projected drops appear to be more modest than those forecast by EIA late last year, despite persistent low prices and planned spending cuts by US producers.

    In November, EIA forecast Eagle Ford production would fall by 78,000 b/d from November to December and in May EIA forecast Bakken production would fall by 31,000 b/d from May to June.

    The new estimates Monday were included in the EIA's monthly Drilling Productivity Report, which looks at supply in seven onshore regions that have seen the most prolific growth recently. The report does not, for example, look at Gulf of Mexico or Alaska production.

    Overall, EIA forecasts oil production to decline by 92,000 b/d from February to March in these regions, compared with the same time a year earlier when EIA forecast growth of 68,000 b/d.

    EIA has shown production declines for 15 straight months, after the month-over-month forecast peaked at an estimated 125,000 b/d increase in December 2014.

    Despite the expected decline, EIA continues to see improvements in rig efficiency in these seven regions, as new well oil production is expected to climb to an average of 504 b/d per rig in March from 500 b/d in February. A year ago, wells in these regions averaged 352 b/d, according to EIA.

    The EIA's report comes as exploration and production companies plan for capital spending cuts as they release fourth-quarter earnings featuring billions of dollars in losses. North American producers plan to cut on average about 23% from 2015 spending levels, according to an analysis by IHS Energy. That analysis shows, however, that these companies will need to cut these spending levels by 50% in order to maintain the traditional ratio between capital spending and cash flow.

    "Given that most companies made preliminary 2016 spending plans when the price outlook was comparatively higher, we expect to see further spending cuts announced throughout the fourth-quarter 2015 earnings cycle that reflect the current price environment," Paul O'Donnell, principal analyst at IHS Energy and author of the analysis, said in a statement.

    http://www.platts.com/latest-news/oil/washington/us-oil-production-to-fall-92000-bd-in-march-in-21901829
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    NA Oil Drillers Must Slash Another $24 Billion This Year, IHS Says


    North American oil and natural gas drillers will need to cut an additional 30 percent from their capital budgets to balance their spending with the cash coming in their doors even if crude rises to $40 a barrel, according to an analysis by IHS Inc.

    A group of 44 North American exploration and production companies are planning to spend $78 billion on capital projects this year, down from $101 billion last year. Those companies need to cut another $24 billion this year to get their spending in line with a historical 130 percent ratio of spending to cash flow, IHS said Monday.

    “These spending cuts will be particularly troublesome for the highly leveraged companies,” said Paul O’Donnell, principal analyst at IHS Energy. “These E&Ps are torn between slashing spending further to avoid additional weakening of their balance sheets, and the need to maintain sufficient production and cash flow to meet financial obligations.”

    The analysis is based on IHS’s low-case price scenario of $40-a-barrel oil and $2.50-per-million-cubic-feet natural gas prices. IHS cited Concho Resources Inc., Whiting Petroleum Corp., WPX Energy Inc., and PDC Energy Inc. as examples of companies displaying the best spending discipline.

    West Texas Intermediate for March delivery dropped 91 cents, or 3 percent, to $29.98 a barrel at 1:29 p.m. on the New York Mercantile Exchange. Crude prices are expected to average $41.13 this year, according to the median of 26 analyst estimates compiled by Bloomberg.

    http://www.bloomberg.com/news/articles/2016-02-08/oil-drillers-must-slash-another-24-billion-this-year-ihs-says
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    Chesapeake shares cut in half, denies planning bankruptcy


    Chesapeake Energy Corp., once led by an early pioneer of shale gas, saw its shares plummet 51 percent on Monday after reports that the company had hired restructuring and bankruptcy specialists at Kirkland & Ellis.

    Chesapeake denied the reports, saying it “has no plans to pursue bankruptcy.”

    “Kirkland & Ellis LLP has served as one of Chesapeake’s counsel since 2010 and continues to advise the company as it seeks to further strengthen its balance sheet following its recent debt exchange,” Chesapeake said.

    Kirkland & Ellis declined to comment. Market intelligence firm Debtwire first reported the hire early Monday, according to Bloomberg.

    The Oklahoma City oil and gas producer has some $11.6 billion in debt and a $500 million note due next month, according to regulatory filings. In the past year, its stock price has collapsed, tumbling 91 percent as the oil market crashed and domestic natural gas remained abundant and cheap.

    Its stock-market value fell to $995 million on Monday. Before oil prices collapsed in 2014, the company was worth $18.8 billion. Chesapeake shares on Monday fell $1.56 to $1.50 a share — about 51 percent — on the New York Stock Exchange, and trading halted shortly before 10 a.m.

    A few years ago, Chesapeake, then led by wildcatter Aubrey McClendon, had been one of the most aggressive companies in the U.S. shale land grab and become the nation’s second-largest natural gas producer after Exxon Mobil Corp., snapping up thousands of acres across the nation searching for natural gas trapped in once-inaccessible shale plays.

    http://fuelfix.com/blog/2016/02/08/chesapeake-shares-cut-in-half-on-possible-restructuring/?utm_source=twitterfeed&utm_medium=twitter#36696101=0
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    Chesapeake Energy woes cast shadow on U.S. pipeline companies


    U.S. oil and gas pipeline companies including Williams Companies Inc and Kinder Morgan Inc have contracts worth billions of dollars that might be at risk as Chesapeake Energy Corp aims to slash its debts amid collapsing energy prices.

    Chesapeake said on Monday it had no plans to file for bankruptcy after sources told Reuters the firm, whose debt is eight times its market value, had asked its longtime counsel to look at restructuring options.

    The way it deals with its financial woes could be a lifeline or death sentence for midstream pipeline companies. Often called the energy market's "toll takers," they have long-term contracts with producers such as Chesapeake to move, process and store energy products, experts said. Many of these companies are master-limited partnerships, or MLPs.

    Chesapeake said it has commitments to pay about $2 billion a year for space on pipelines run by MLPs, federal filings show.

    During the U.S. shale boom, investors flocked to MLPs, which were growing as much as 8 percent a year.

    But investors have fled in droves out of fear that the companies will not maintain their hefty dividend-style distributions.

    But with oil prices at their lowest in 12 years due to a global supply glut with OPEC unwilling to slow production, profits at energy companies have plummeted and analysts do not expect any significant price recovery until at least 2017.

    CONTRACT RENEGOTIATION LIKELY

    Williams has the most exposure to Chesapeake after buying Chesapeake's logistics assets for $6 billion in 2014, Jay Hatfield, portfolio manager of New York-based InfraCap, said.

    Williams did not respond to requests for comment.

    Other companies with contracts include Spectra Energy Partners LP, Columbia Pipeline Partners LP and Marathon Petroleum Corp's unit MPLX LP, according to SEC filings.

    These long-term contracts, often referred to as minimum volume commitments, were supposed to protect MLPs from major oil and gas price drops, because they include so-called minimum volume commitments, where customers pay pipeline operators whether they move any oil or not.

    But the latest leg down in crude's 19-month plunge has cast doubt over the perceived safety of those contracts as producers try to navigate the oil crisis.

    Experts said they expect Chesapeake will try to renegotiate contract terms, which would be the first major test of these deals and the so-called midstream companies that flourished during the U.S. shale boom.

    Another risk is it could file for bankruptcy protection, which could give it the option discontinuing or renegotiating commercial contracts.

    Hatfield said he expects Williams will be forced to accept a 50-percent price cut in its contract price with Chesapeake, either through the courts or mutual renegotiation.

    That translates to a drop of about $300 million in annual cash flow for the $4 billion company.

    http://www.reuters.com/article/chesapeake-restructuring-pipelines-idUSL2N15N236

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    Oil Drillers Exposed in Three-Way Hedges as Crude Dips Below $30


    Oil at $30 a barrel is blowing a hole in the insurance that U.S. shale drillers bought to protect themselves against a crash.

    Companies including Marathon Oil Corp., Noble Energy Inc., Callon Petroleum Inc., Pioneer Natural Resources Co., Rex Energy Corp. and Bonanza Creek Energy Inc. used a strategy known as a three-way collar that doesn’t guarantee a minimum price if oil falls below a certain level, company records show. While three-ways can be cheaper than other hedges, they leave drillers exposed to sharp declines.

    "At the time people hedged, they did it without thinking that oil would go to $28," said Thomas Finlon, director of Energy Analytics Group LLC in Jupiter, Florida. "They didn’t have a realistic view about whether the market would crumble or not."

    The three-way hedges risk worsening a cash shortfall for companies trying to survive the worst oil crash in 30 years. The insurance is all the more important after oil plummeted 43 percent in the past year to $26 a barrel in January, exacerbating the pressure on debt-burdened producers.

    "In 2015, everyone was given a hall pass and had a little protection from hedges," said Irene Haas, an analyst with Wunderlich Securities. "But as we roll into 2016, the hedges aren’t as attractively priced anymore and the hedges aren’t going to exactly bail you out."

    The U.S. shale boom was built on high oil prices and low-cost financing, which enabled drillers to spend more than they earned while making up the difference with debt. With oil at a 12-year-low, financing is much harder to come by. Locking in a minimum price for crude reassures investors and lenders that companies will have the cash to pay their debts.

    Joseph Gatto, Jr., Callon’s chief financial officer, told investors at a conference in December that the company had hedged about 4,000 barrels a day in 2016, or 40 percent of its projected output, at a price of $56 a barrel.

    About half of those contracts are worth significantly less at $30 a barrel because Callon employed three-ways, Securities & Exchange Commission records show. While the company is guaranteed $58.23 for 364,000 barrels in the first half of 2016, or about 2,000 barrels a day, the remaining 364,000 has lost value because the strategy sacrifices protection when prices fall below $40.

    http://www.bloomberg.com/news/articles/2016-02-09/oil-drillers-exposed-in-three-way-hedges-as-crude-dips-below-30

    Attached Files
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    Tisch Sees Dark Cloud Over Natural Gas, Chaos Reigning in Energy


    Jim Tisch said “chaos continues to reign over the energy market” after the slump in commodity prices fueled a fourth-quarter loss and stock decline at his Loews Corp.

    “If these pricing levels persist over the next two years, we’ll be in a drastically under-supplied oil market,” Tisch said Monday in a conference call discussing results at New York-based Loews. “The natural-gas market is under the same dark cloud, as the entire energy industry is being affected by this precipitous downturn.”

    Loews posted a net loss of $201 million for the three months ended Dec. 31, as the Diamond Offshore Drilling Inc. unit wrote down the value of rigs and halted its quarterly dividend. Loews fell 1.6 percent to $35.71 at 11:29 a.m., extending its decline for the year to 7 percent after slumping at least 8 percent in both 2014 and 2015.

    Tisch took a more pessimistic tone than in late 2014 when he said “trouble is opportunity” for Diamond Offshore and said the company might have a chance to add to its fleet of rigs. Oil has dropped by more than half since those remarks to about $30 a barrel.

    Stark Reality

    “The reality for offshore drilling companies is stark,” he said Monday. “The drop in oil prices is causing oil companies to slash exploration and development budgets and reduce or cancel drilling contracts, decimating day rates and idling rigs. The market for rigs of all types, including new, ultra-deepwater drill ships, is currently, and will for the immediate future, be drastically oversupplied.”

    He said there is still high demand for oil and that low prices will lead to less exploration and an eventual rebound. Loews also has a hotel business, the CNA Financial Corp. insurance unit, and Boardwalk Pipeline Partners LP, which transports and stores natural gas. Tisch agreed in 2014 to sell HighMount Exploration & Production LLC after being caught off guard by a decline in natural gas prices.

    http://www.bloomberg.com/news/articles/2016-02-08/tisch-sees-dark-cloud-over-natural-gas-chaos-reigning-in-energy
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    Plains GP misses Street 4Q forecasts


    Plains GP Holdings LP on Monday reported fourth-quarter profit of $25 million.

    The Houston-based company said it had profit of 11 cents per share.

    The results did not meet Wall Street expectations. The average estimate of seven analysts surveyed by Zacks Investment Research was for earnings of 18 cents per share.

    The oil and gas holding company posted revenue of $5 billion in the period, which also missed Street forecasts. Three analysts surveyed by Zacks expected $8.17 billion.

    For the year, the company reported profit of $118 million, or 53 cents per share. Revenue was reported as $23.15 billion.

    Plains GP shares have declined 33 percent since the beginning of the year. In the final minutes of trading on Monday, shares hit $6.37, a fall of 76 percent in the last 12 months.

    http://drillbitmedia.com/plains-gp-misses-street-4q-forecasts/

    Armstrong, Chairman and CEO of Plains All American. “Our fourth-quarter results were negatively impacted by approximately $15 million associated with deficiencies on minimum volume commitments and an approximate $15 million shift in earnings recognition on certain NGL sales activities from the fourth quarter of 2015 to the first quarter of 2016. This earnings shift is primarily the result of delayed inventory draws due to unseasonably warm temperatures in certain parts of the U.S. and Canada as well as impacts of inventory pricing during the fourth quarter. Additionally, severe weather in West Texas and the Mid-continent resulted in volume shortfalls impacting results by approximately $5 million.”

    Armstrong stated that the partnership is well positioned to manage through near-term challenges and to grow meaningfully in the intermediate and long-term as industry conditions improve.

    “The $1.6 billion of proceeds from our recent preferred equity placement satisfies PAA’s equity financing needs for 2016 and substantially all of 2017 and enables PAA to complete its multi-year, multi-billion dollar capital expansion program, while maintaining substantial liquidity and a solid balance sheet.”

    Armstrong continued, “PAA has visibility for incremental cash flow contributions over the next 24 months from the completion of these projects, the majority of which are backed by minimum volume commitments and other contractual support. These projects enhance PAA’s existing footprint and provide further significant leverage to a sustained increase in U.S. production levels with little to no incremental investment.”

    http://www.businesswire.com/news/home/20160208006295/en/Plains-American-Pipeline-L.P.-Plains-GP-Holdings
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    Alternative Energy

    Vestas record order intake points to strong 2016


    Denmark's Vestas beat forecasts with record orders for new wind turbines last year, signalling continued strong demand for renewable energy despite a plunge in fossil fuel prices.

    Hit by overcapacity and the withdrawal of some government subsidies during the global economic downturn, big wind turbine makers are now benefiting from a new focus on renewable energy generation, encouraged by the Paris global climate summit in December, as well as the extension of a key U.S. tax credit.

    Vestas, the world's biggest wind turbine maker, said on Tuesday it received orders to build turbines with a total capacity of 8,943 megawatts (MW) last year, beating its previous record of 8,673 MW in 2010 and more than the 8,639 MW expected by analysts in a Reuters poll.

    The strong order intake prompted the company to announce higher-than-expected financial guidance for 2016.

    Vestas said it expected sales to rise to at least 9 billion euros ($10.1 billion) from 8.42 billion last year, and its operating profit margin before special items to grow to at least 11 percent from 10.2 percent. Analysts had expected 2016 revenues of about 8.65 billion euros.

    "We have a fairly good insight into the order situation and the order backlog that we need to execute during 2016," chief executive Anders Runevad told Reuters.

    Vestas shares jumped by more than 10 percent in early trade. At 0913 GMT, they were up 7.8 percent at 405.20 Danish crowns, the biggest rise by a European blue-chip stock.

    "Guidance showed what we had hoped for, but did not dare to believe in. 2016 will be a very strong year," analyst Michael Friis Jorgensen from Alm. Brand Bank said.

    Fourth-quarter operating profit before special items rose to 404 million euros from 252 million a year earlier and well above the 374 million expected by analysts.

    http://www.reuters.com/article/vestas-wind-results-idUSL8N15O127
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    Precious Metals

    Tahoe Resources gets Ontario gold mines with Lake Shore buy


    Miner Tahoe Resources Inc said it would buy Canada's Lake Shore Gold Corp for about C$751 million ($539.63 million) to add low-cost gold mines in Ontario to its portfolio.

    Lake Shore Gold operates Timmins West and Bell Creek mines in Timmins, Ontario, while Tahoe has a mine in Guatemala and two mines in Peru.

    "The combination with Lake Shore Gold enhances Tahoe's position as the new leader in precious metals by adding another low-cost operation in Timmins, one of the most prolific gold camps in the world," Tahoe Executive Chairman Kevin McArthur said in a statement.

    Tahoe will pay 0.1467 of its stock for each Lake Shore Gold share. The offer works out to C$1.71, representing a 15 percent premium to Lake Shore shares, based on both stocks' Friday close.

    Lake Shore had 439.23 million shares outstanding as of Sept 30, 2015, according to a regulatory filing.

    The deal has an implied equity value of C$945 million, assuming the conversion of some debentures, the companies said.

    Tahoe is expected to own about 74 percent of the combined company after the deal closes - likely in early April 2016 - while Lake Shore Gold shareholders will get 26 percent.

    http://www.reuters.com/article/lakeshore-ma-tahoe-resources-idUSL3N15N2J1
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    Ramelius forecasts surge in profits


    Gold miner Ramelius Resources on Tuesday flagged an expected half-year pretax profit of A$28.7-million for the interim period ended December 31. This compared with a pretax net profit of A$5.7-million for the previous corresponding period.

    “The half-year financial results support the company’s claims of continued operational improvement, with a steadily performing Mt Magnet gold mine, combined nicely with high-margin production from the Kathleen Valley operation near Leinster,” said Ramelius MD Mark Zeptner. “It is also particularly pleasing that the company has been able to complete the upfront capital development of the Vivien project, both without drawing down on the finance facility and increasing our cash balance all the while.” 

    Ramelius was spending some A$20-million to build Vivien into a mine delivering about 109 000 oz of gold over 30 months. Meanwhile, Ramelius on Tuesday also reported that the company had forward sold an additional 60 000 oz of gold at a flat forward price of A$1 600/oz. 

    Total forward gold sales now represented some 50% of production, compared with the 40% previously, and extended over a two-year period until December 2017. “The additional forward sales are in line with our risk management strategy by delivering a portion of cash flow certainty, while retaining exposure to gold price upside,” said Zeptner. 

    He added that locking in a A$1 600/oz forward sales price secured a robust operating margin at a level that had only been seen a handful of times over the past few years.

    http://www.miningweekly.com/article/ramelius-forecasts-surge-in-profits-2016-02-09
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    Base Metals

    Leakage at Anglo American’s Los Bronces mine forces firm to halt grinding


    Grinding at Anglo American’s Los Bronces copper mine in Chile has been halted after the firm detected a leak in a pipe carrying ground ore mixed with water on Sunday evening.

    According to local newspaper La Tercera (in Spanish), the discharge was noticed on farmland outside the capital Santiago during a routine inspection of the pipe, which connects Anglo’s flagship mine with the Las Tortolas flotation plant.

    Anglo American said the pipe does not carry tailings from the mining process and that an investigation was underway. It also noted that water in the nearby river does is not for human consumption.

    Anglo American said the pipe does not carry tailings from the mining process, but only ground ore mixed with water.

    The company, however, will hire an external company to carry out sampling and determine whether any contamination was caused by the leakage.

    Last year, Chile's environment regulatorhit Anglo American with a $6.2 million fine, ordering the company to shut one of its waste dumps at the Los Bronces mine, as it said irreparable damage had been done to surrounding land.

    Production at Los Bronces, perched 3,500 meters high up in the Andes 65km north-east of Santiago, increased by 27% to 111,000 tonnes in 2015 driven by higher throughput, grades and recoveries. The mine’s output represents roughly 7% of the South American nation’s total annual copper production.

    Anglo owns 50.1% of the operation. Chilean state miner Codelco and Japanese trading houses Mitsui & Co. and Mitsubishi Corp. also have stakes in the complex.

    http://www.mining.com/leakage-at-anglo-americans-los-bronces-mine-forces-firm-to-halt-grinding/
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    Hindalco Industries likely to big report loss for Q3 - IIFL



    Infoline News Service reported that Hindalco Industries Ltd, one of the leading aluminium producers in India, will announce its financial results on February 9 for the third quarter ended December 31, 2015.

    IIFL forecasts that the company is likely to report a loss of INR 159 crore for Q3 FY16. IIFL expects net revenue to decline to INR 8,108 crore at 5.8% YoY and 9.2% QoQ. IFL expects EBIDTA margin at 7%, with a YoY fall of 3.7 bps.

    According to IIFL, for the non?ferrous space, volumes for most of the players would be higher on a YoY basis. Hindalco’s aluminium volumes would be strong on the back of higher output from new capacities.

    http://steelguru.com/metal/hindalco-industries-likely-to-big-report-loss-for-q3-iifl/445769#tag
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    Steel, Iron Ore and Coal

    One-Third of Australia's Queensland Coal Mines Operating at Loss: QRC


    One-third of coal mines operating in Australia's Queensland state are operating at a loss, industry group Queensland Resources Council said in a report Monday.

    About 60 mines are operational in the state, indicating around 20 mines are unable to cover their cash costs from incoming revenue, the report said.

    Of the 37 metallurgical coal mines in the state, one in four has negative operating cash flow, representing about 29 million mt of production when based on a spot market price of $80/mt, the report said.

    The situation is worse for Queensland's 22 thermal coal mines, as 12 are out of the money based on a seaborne market spot price of about $50/mt.

    QRC commissioned the study from resources consultancy Wood Mackenzie.

    QRC CEO Michael Roche said the data reflects stark anecdotal evidence from the industry. The industry group has members such as BHP Billiton and Rio Tinto.

    "While the cost curves and profitability analyses provide hard data on the state of our sector, the opinions of the industry leaders in Queensland -- many of them veterans of 30 or more years -- tell the story more starkly," Roche said.

    A participant in the survey said mines would be facing closure if it were not for the weakness of the Australian dollar, which has helped to offset lower coal prices to some degree.

    In the past two years, the mining industry in Queensland, which is predominantly coal-based, has shed 21,000 jobs as a result of low commodity prices, despite mine production touching historically high levels.

    Industry employment in Queensland's mining sector is now down to about 60,000, he said.

    "Companies tell us they are bringing a forensic intensity to bear as they conduct a deep dive into all their costs," said an extract from the report.

    http://www.platts.com/latest-news/coal/perth/one-third-of-australias-queensland-coal-mines-26361980

    Attached Files
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    Anglo’s Kumba to cut output on muted iron-ore price forecast


    Kumba Iron Ore said it will cut output at Africa’s largest mine for the steelmaking ingredient as it doesn’t foresee a recovery in prices that have slumped more than two-thirds since the start of 2013.

    “The period ahead is likely to result in formidable changes for the industry, with the market now pricing in a more muted trend for the iron-ore price,” the Pretoria-based unit of Anglo American Plc said in a statement on Tuesday. “These circumstances have reinforced the need to make tough decisions for the business.”

    Kumba is scaling back production as it targets a third of its workforce in job cuts to weather a collapse in iron ore. A slowdown in China restricts demand from the biggest user while the largest miners, including Vale SA and Rio Tinto Group, have raised production to build market share, spurring a glut. The World Bank forecasts the raw material will post the biggest loss among metals this year as low-cost supply continues to outstrip consumption.

    Headline earnings fell 66% to R11.82 ($0.73) a share from a year earlier, Kumba said. Total production decreased 7% to 44.9 million metric tons. The company cut its forecast for output this year from Sishen, its biggest mine, by 25% to 27 million metric tons. The pit produced 31.4 million tons in 2015.

    Kumba is also booking an impairment of R6 billion on Sishen and plans to reduce its breakeven costs by about $10 a ton in 2016, from $41 a ton achieved at the end of 2015, the company said. Ore with 62% ferrous content delivered to China’s Qingdao port, a benchmark, was at $45.73 a dry ton on Friday, according to Metal Bulletin Ltd.

    Following an audit, South African Revenue Service wants Kumba to pay additional tax of about R1.8 billion for 2006 to 2010. Kumba lodged an objection and is awaiting SARS’s response, it said.

    The producer appealed to the minister of mineral resources against conditions imposed by the ministry when it granted Kumba a 21.4% right to Sishen, it said.

    http://www.mineweb.com/news/iron-and-steel/kumba-fy-heps-down-66/?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A%20MasterGold%20%28Gold%20News%29&utm_term=MasterMetals
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