Mark Latham Commodity Equity Intelligence Service

Wednesday 13th May 2015
Background Stories on

News and Views:

Attached Files


    China goes organic, with hints of Mrs Thatcher!

    China is considering a plan to strip its major energy companies of their oil and gas pipelines as part of a shake-up of the country's energy industry reports Bloomberg.

    Citing people with knowledge of the plans, Bloomberg says the reform would see some of the assets of state-owned giants Sinopec and PetroChina become independent businesses.

    According to Bloomberg's sources, the country's economic planning agency, the National Development and Reform Commission, is leading talks on the initiative.

    The assets could be worth as much as $US300 billion, according to an estimate provided to the news outlet by Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein.

    Speculation about a shakeup in China's energy industry has been swirling for months with rumours largely centering on a possible merger between the two state-owned giants to better compete with the world's biggest producers. Both companies denied those reports in February and again in late April.

    Sinopec's general manager was placed under criminal investigation amid an ongoing crackdown on corruption in late April.

    China's state dominated energy sector has come under special scrutiny amid President Xi Jinping's wide-ranging antigraft crackdown. Those arrested include the former head of China's biggest petroleum company, CNPC, and the party's former security chief, Zhou Yongkang, who made the energy sector his power base.

    Attached Files
    Back to Top

    Orica sees 2015 as trough for mining industry

    Orica Ltd, the world's largest supplier of mine explosives, flagged on Tuesday that 2015 is likely to mark the bottom for the mining industry and its own earnings, sending its shares to a nine-month high.

    Investors latched on to comments by interim boss Alberto Calderon that Orica had now finished renegotiating contracts at lower prices to help its customers. It had also locked in a large portion of sales through 2018, giving security on future pricing and volumes.

    While Orica faced short-term headwinds, Calderon said he agreed with consultants Wood Mackenzie that 2015 will mark the bottom of the mining slump.

    "I do believe we're in the trough," he told Reuters.

    The market also applauded Orica's move to cut its capital spending plan by a fifth to between A$400 million and A$430 million and cut operating costs by between A$140 million and A$170 million this year.

    "I imagine 2015 (profit forecast) numbers will still be coming down. But if you eliminate the price risk beyond the end of this year, it potentially implies 2015 is the bottom," said CLSA analyst Scott Hudson.

    Orica is due to open a new ammonium nitrate plant on Australia's west coast late this year to serve the huge iron ore mines in the Pilbara, starting at a time when some small miners are struggling to survive as ore prices have slumped.

    Calderon said the long-term outlook was good for the plant as the Pilbara's big producers - Rio Tinto , BHP Billiton and Fortescue Metals Group - would step up output for many years to sweat the infrastructure they spent billions of dollars building over the past decade.

    "So that whole region, if you look at the next 10 years, is going to get plenty more iron ore, and we will be there to be hopefully the partner of choice," he said in an interview.

    Orica reported a 3 percent fall in net profit from continuing operations to A$211 million ($167 million) for the half year to March, which was lower than some had expected due to weaker volumes and prices for explosives in Australia.
    Back to Top

    Oil and Gas

    Saudi Arabia's April crude output hits record high

    Top global oil exporter Saudi Arabia raised its crude production in April to a record high, feeding its flourishing Asian market share and its own power plants and refineries.

    The world's top oil exporter pumped 10.308 million barrels of oil per day in April, a Gulf industry source told Reuters on Tuesday, compared to 10.29 million bpd in March.

    "This is an indication of strong demand, especially from Asia, as well as increasing domestic consumption during summer," the source said.

    The increase underlined Saudi Arabia's determination not to cede market share to higher-cost producers, such as U.S. shale drillers. The kingdom and others in the Organization of Petroleum Exporting Countries (OPEC) had resisted cutting production to shore up oil prices.

    It also highlights the strength of global demand, which has helped lift refinery profit margins to their highest in years.

    Oil Minister Ali al-Naimi has said the kingdom's output would likely remain around 10 million bpd, and that he was "very positive" about Asian oil demand outlook.

    The amount of crude supplied to the market in April was 10.360 million bpd, the source said. Supply to the market, both domestically and for export, may differ from production depending on the movement of oil in and out of storage.

    April's output eclipsed the previous recent peak of 10.2 million bpd in August 2013, according to records going back to the early 1980s.
    Back to Top

    Chevron unit in Saudi Arabia to halt output at Wafra oil field

    A unit of Chevron Corp. operating along the Saudi-Kuwaiti border confirmed it’s shutting down the Wafra oil fields for maintenance amid a shortage of staff and equipment, trimming a potential 250,000 barrels a day from global supply.

    Saudi Arabian Chevron holds a concession to Saudi Arabia’s 50 percent stake in oil and natural gas deposits in an area called the neutral or partitioned zone, Sally Jones, a London-based Chevron spokeswoman, said late Monday in an e-mailed statement. The Wafra fields lie in Kuwait’s section of the shared zone.

    “Current difficulties in securing work permits and materials have impacted the company’s operations,” according to the statement Jones made in response to a Bloomberg request for comment. “While efforts continue with all appropriate parties to resolve the issue, Saudi Arabian Chevron and Kuwait Gulf Oil Company are jointly undertaking maintenance shut down at the onshore Partitioned Zone.”

    The stoppage at Wafra may help reduce a worldwide glut that has pushed crude prices down by about 40 percent in the last 12 months. OPEC, which counts Kuwait and Saudi Arabia as members, chose in November to keep pumping crude oil to protect its share of the market rather than cutting output to boost prices. Brent crude, a global benchmark, was trading at $65.08 a barrel Tuesday at 8:42 a.m. in London.

    The Organization of Petroleum Exporting Countries has an official output target of 30 million barrels a day. It pumped 31.3 million barrels a day last month, data compiled by Bloomberg show. The group’s 12 member states plan to meet June 5 in Vienna to assess the market.

    “A decision been taken today to stop production in Wafra joint operation for two weeks for planned maintenance,” Fadghoush Shabib Al-Ajmi, head of the labor union representing workers at state-run Kuwait Gulf Oil Co., Saudi Chevron’s partner at Wafra, said Monday on his Twitter account.

    Operations at the Wafra fields will be shut for maintenance until May 26 and probably won’t restart due to lingering difficulties, two people with knowledge of the matter said on Monday, asking not to be identified because the information was confidential.

    The fields have a capacity of about 250,000 barrels a day and were producing 180,000 barrels in February, two other people with knowledge of the matter said on April 22. Kuwait’s government stopped issuing or renewing permits for workers at Wafra last year, these people said.

    Saudi Arabia halted operations in October at the Khafji offshore fields in the same neutral zone, citing unspecified environmental concerns. Khafji also has a production capacity of about 250,000 barrels a day.
    Back to Top

    Putin’s cash-starved allies target Surgutneft's $34 billion oil hoard

    In Russia, even private companies serve at the pleasure of the president, particularly if they pump oil. A decade ago, Vladimir Putin’s allies had Mikhail Khodorkovsky jailed and seized his Yukos Oil Co. Last year, they forced billionaire Vladimir Evtushenkov to hand over OAO Bashneft. Now they’re coveting the biggest corporate treasure of all: OAO Surgutneftegas.

    The Siberian crude producer run for three decades by Soviet-trained Vladimir Bogdanov has amassed about $34 billion of cash, Bloomberg calculations based on company data released April 30 show. With sanctions over Ukraine having severed Russia from the global financial system, Putin is considering releasing some of Surgut’s hoard, one he’d previously called untouchable, say three bankers close to the Kremlin who asked not to be identified because of the sensitivity of the topic.

    “Investors are afraid Surgut will not be able to use this money at its sole discretion or that this money will ever benefit shareholders,” said Alexander Branis, chief investment adviser of Prosperity Capital Management Ltd., a Moscow-based fund company that owns Surgut shares.

    Surgutneftegas preferred shares dropped 4.2 percent to 39.17 rubles by 12:52 p.m. in Moscow, the most on the Micex stock index. Putin’s spokesman, Dmitry Peskov, declined to comment on Surgut because it’s a “private company.” Bogdanov declined to comment through his press service. The 62-year-old president signaled a policy shift on Surgut in March, saying at an event near Moscow that Bogdanov has “major investment plans,” adding, “there is work to do.”

    An option that may be considered would benefit one of Putin’s closest allies, OAO Rosneft chief Igor Sechin, the bankers and a senior government official said. In this scenario, Surgut would buy the 19.5 percent stake in Rosneft the state plans to auction, giving Sechin a partner who could help refinance $23.5 billion of debt coming due, they said.
    Such a deal would revitalize Rosneft, the world’s largest publicly traded oil company by output, and benefit the whole energy industry, which provides the bulk of the government’s revenue, according to the official.
    Back to Top

    Statoil shakes up management with new CFO, U.S. chief

    Norwegian oil firm Statoil replaced several top executives including its chief financial officer on Tuesday, continuing a shake-up since its chief executive was poached by rival BG Group last October.

    State-controlled Statoil has lost four board members, including its chairman, over the past several months, and some top managers, including from its mergers and acquisitions unit and U.S. shale business, have left the firm.

    With Tuesday's changes, the firm moved up several long-time employees, keeping with a tradition of elevating in-house talent and ensuring no sudden changes as all new executive have been with the firm for at least two decades.

    The appointments, including a new U.S. chief, also indicate Statoil will keep a focus on its U.S. shale operations, despite big investment cutback and a massive writedown, analysts said.

    Statoil appointed Hans Jacob Hegge as chief financial officer, moving Torgrim Reitan to head the firm's U.S. business, where the contract of the previous chief, Bill Maloney, was not renewed.

    "Transferring CFO Torgrim Reitan to North America shows that they will not put less weight on their North America division and they might consider a different model of ownership," Arctic Securities analyst Christian Yggeseth said.

    The wave of changes at Statoil began in February, when the firm appointed Eldar Saetre, a long-serving Statoil executive, as CEO, replacing Helge Lund who left for BG after a decade in the top job.

    Saetre has pushed through efficiency changes, written down the value of poorly performing assets, particularly in the U.S. shale business, and improved relations with unions.

    As part of Tuesday's changes, the firm also appointed Jens Oekland to head the marketing and processing unit, Saetre's old job, and picked Irene Rummelhoff to head a new division in low carbon and renewable energy.
    Back to Top

    InterOil gas discovery underpins LNG project

    InterOil Corp.’s promising appraisal results of the Elk-Antelope gas field in Papua New Guinea (PNG) underpin its multi-train LNG project, the company announced in its 1Q15 results.

    In announcing the quarterly financial results CEO Michael Hession said well results from Antelope-5 had been very encouraging: "Drilling results from Antelope-5 identify this well as having the best reservoir thickness, quality and fracture density of all wells drilled on the Elk-Antelope field.

    Reservoir quality

    "In particular, the thickness and quality of the dolomite zone with porosity readings of up to 25% is superior to other wells, signifying a high-quality reservoir. Antelope-5 has a 680 m (2231 ft) gross gas column and appears to have even better reservoir quality than we initially thought.

    "Evaluation of seismic and new high-definition gravity data indicates that the field could extend further west than originally modelled. This data, combined with the top reservoir being higher than expected, suggests potential for significant upside."

    The appraisal results underpin a multi-train LNG development at Elk-Antelope, as well as the quantification of volumes in the “world-class resource”.

    LNG development

    Total, the operator of PRL 15, has continued work on the development, with a large team across the joint venture working in France, Papua New Guinea, Singapore and Australia.

    It is anticipated that a preferred development concept will be announced by mid 2015.

    Financial update

    The net loss for the first quarter of 2015 was US$21.9 million, compared to a net profit of US$318.6 million for 1Q14. Most of this loss resulted from expensing US$19.3 million of seismic that the company acquired over its extensive exploration portfolio during the quarter.

    Attached Files
    Back to Top

    Colombian oil exploration activity in Q1 sinks 83% from prior year

    Exploration drilling in Colombia's oil patch in the first quarter fell 82.5% compared with the year-ago period, while seismic exploration sank by an even steeper 92%, the Colombian Petroleum Association (ACP) said Tuesday.

    Speaking at a press conference in Bogota, ACP president Francisco Jose Lloreda issued another in a series of recent appeals to the government to enhance the royalty and tax incentives available to wildcatters or face the possibility of declining production and reserves in coming years.

    "Without tax incentives, it will not be feasible to reactivate exploration and current production levels of 1 million b/d, which would impact state revenue even more," Lloreda told reporters.

    He said only nine exploratory wells were drilled in Q1, down from 52 drilled in the year-ago period. Seismic exploration totaled 800 square kilometers, down from 10,000 sq km.

    Lloreda acknowledged that the Colombian government had made some moves in recent months to make exploration and development more appealing to global oil companies. Those measures included royalty discounts on finds made from unconventional sources and in deep offshore waters, as well as a higher oil price threshold on the windfall tax paid by producers.

    But the measures aren't enough, he said, as evidenced by weakened exploration activity. "What's needed are additional measures to make operations more viable, attract investment, and to reanimate the industry," Lloreda said.

    He added that positive signs included a diversification of Colombia's export market to lessen its reliance on US Gulf Coast refiners. Between 2010 and 2014, the percentage of Colombian exports shipped to China rose from 5% to 23%, to India from 3% to 13% and to Spain from 0.3% to 9%.

    But Lloreda warned that the "slight improvement" in oil prices in recent weeks "does not guarantee that exploration activity will take off and reach levels achieved in past years."

    Last year, royalties and taxes from crude, natural gas and product sales accounted for 17% of all government revenues. Exports of hydrocarbons in 2014 accounted for more than 50% of the total export dollars collected.
    Back to Top

    Parex Resources announces Q1 results and Colombian oil discovery

    Q1 2015 Financial and Operational Highlights

    • Managed quarterly average oil production of 26,729 barrels of oil per day compared to production guidance of 26,500 bopd, an increase of 45 percent over the comparative quarter in 2014, and a slight increase from the prior period production of 26,544 bopd;
    • Generated funds flow from operations of $33.0 million ($0.24 per share basic as compared to $0.71 per share for the comparative period). Funds flow has decreased from the comparative period due to lower oil prices partially offset by higher production volumes;
    • Capital expenditures for the quarter were $26.9 million compared to $61.4 million in the comparative period. Parex participated in drilling one well (net 0.55) during Q1(1). However, the 2015 exploration program began with the Block LLA-26 Rumba-1 exploration well which was spud on March 25, 2015;
    • Reduced net debt to $29.6 million at March 31, 2015 compared to $31.7 million at December 31, 2014;
    • Realized Brent referenced sales price of $49.42 per barrel ('bbl') during the period which was a $5.71/bbl discount to the average Brent price, and an operating netback of $21.66/bbl.
    • Parex reduced combined operating and transportation unit costs by 17% ($4.76/bbl) to $23.47/bbl compared to the prior quarter;
    • Increased the syndicated bank credit facility to a current borrowing base of $200 million from the borrowing base of $175 million at December 31, 2014;
    • Subsequent to Q1 2015, on May 5, 2015 Parex closed a CAD$136.8 million bought deal financing, issuing 14.95 million common shares at a price of CAD$9.15 per share. The net proceeds of approximately USD$108 million from the financing will initially be used to pay down bank indebtedness, increase net working capital and subsequently is expected to be used to fund capital expenditures and future growth opportunities as set out below; and
    • Upon closing of the bought deal financing and after subsequent repayment of bank indebtedness, the company has approximately USD$80 million of working capital and an undrawn credit facility of USD$200 million.

    Rumba (Operated, Block LLA-26, WI 100%): The Rumba-1 exploration well was spud on March 25, 2015 and successfully drilled to the Une Formation at a depth of 13,396 feet. The well encountered two potential productive zones in the Mirador Formation that were completed and tested with the drilling rig on location. The lower Mirador interval was tested over a 50 hour period under natural flowing conditions at an average rate of 1,135 bopd. A total of 2,365 barrels of 18.6 API oil was recovered from the interval with a final measured rate of 1,298 bopd and a final measured watercut of 3%. The watercut trend was dropping throughout the test. The lower Mirador interval was then isolated to allow testing of the upper Mirador interval and the drilling rig was moved over to spud the Bazar-1 exploration well while testing the upper Mirador. The upper Mirador was tested under natural flowing conditions for a period of 7 days at an average rate of 832 bopd. A total of 5,824 barrels of 18.6 API oil was recovered from the test with a final measured rate of 860 bopd at a watercut of 0.4%.
    Back to Top

    Mexico sees $620 mln investment from 26 oil areas under tender

    The next round of contracts in Mexico's opening of its oil and natural gas industry should bring in about $620 million in investment in the first five years, Energy Minister Pedro Joaquin Coldwell said on Tuesday.

    The 26 onshore oil and gas areas to be tendered are spread across five states and are believed to contain 2.5 billion barrels of oil equivalent in remaining resources.

    Edgar Rangel, a member of the National Hydrocarbons Commission oil and gas regulator, said the 26 areas would have average production costs of between $10 and $20 per barrel, below previously announced shallow water contracts.

    The 26 areas are the third installment of the so-called Round One tender, which features packages of blocks grouped by type of petroleum basin and heralds the opening of Mexico's oil industry after an energy reform finalized last year.

    The reform ended the decades-long monopoly enjoyed by state-run oil company Pemex.

    To compete for the onshore contracts, companies must document financial capacity of between $5 million and $200 million, depending on the size of the area, as well as the operational experience of their personnel.

    All but eight of the areas are already producing oil or gas, thanks to past exploration and extraction by Pemex.

    The 25-year license contracts allow companies extensions of up to two additional periods of five years each.

    Officials said the draft license contract makes more sense for smaller oil and gas fields, as a company's compensation will be based on a percentage of gross profits.

    However, the license will not allow for cost recovery unlike production-sharing contracts, which were selected for previously announced shallow water tenders set to be awarded in July.

    The hydrocarbons commission will award all contracts based on which company offers the biggest share of profits to the government via a weighted formula that also includes an investment commitment.

    The formula's minimum values, however, will not be known until weeks before bids are due, said Miguel Messmacher, a deputy finance minister.

    The onshore tender covers a total of about 311 square miles (807 sq km) and calls for a minimum of 29 wells to be drilled in the first year of the contracts.

    The final version of the license contract for the onshore areas as well as the bidding terms will be published in October, ahead of awards set for December 15.
    Back to Top

    Ecopetrol profit tumbles 96 pct on lower oil prices

    Net profit at Colombia's state-controlled oil producer Ecopetrol tumbled 96 percent in the first quarter from the same period last year, largely due to the sharp drop in crude oil prices since the middle of last year.

    The company posted a consolidated net profit of 160 billion Colombian pesos ($67.2 million) in the quarter, compared with 3.88 trillion pesos in the same period a year earlier.

    Earnings before interest, taxes, depreciation and amortization, EBITDA or cash flow, fell 60 percent to 3.15 trillion pesos in the first quarter versus 7.86 trillion pesos in the same period of 2014.

    The company's consolidated oil and gas production, which includes subsidiaries, rose 1 percent from the first quarter last year to 773,400 barrels per day equivalent. The non-consolidated figure for Ecopetrol alone was 722,000 barrels.

    Ecopetrol said its latest results and comparative year-ago figures were prepared according to newly adopted NIIF international accounting standards, meaning figures reported for the first quarter of 2014 have now changed.
    Back to Top

    U.S. set to get more accurate oil production data

     "The data must be wrong," according to veteran oil analyst Phil Verleger, who wrote in a blistering note that the Energy Information Administration is probably overestimating U.S. oil production by 1.6 million barrels per day.

    Verleger argues substantially lower U.S. production is the most likely explanation for why global stocks are not rising as fast as predicted and discounts for storing barrels are narrowing ("Notes at the margin" May 11).

    Other reasons why the stock build is smaller and the forward price structure is firmer could be stronger demand and/or more oil stockpiling in developing countries.

    But if Verleger is correct, U.S. production would be only 7.7 million barrels per day (bpd) compared with the 9.3 million bpd reported in the agency's most recent weekly and monthly statistics.

    The global oil market would be nearly balanced, since most estimates put the global supply surplus at between 1.5 and 2.5 million bpd.

    In practice, it is highly unlikely EIA is making an error as large as 1.6 million bpd in its statistics on domestic oil production, but Verleger has drawn attention to the well-known shortcomings in this area of the data.

    The U.S. government on Tuesday lowered its 2015 and 2016 crude oil production growth forecasts amid lower prices and fewer active drilling rigs.

    In its short term energy outlook, the U.S. Energy Information Administration lowered its 2015 crude oil production growth forecast to 530,000 barrels per day (bpd) from 550,000 bpd, while 2016 growth was seen at 20,000 bpd, down from 80,000 bpd previously.

    Meanwhile, it raised its 2015 U.S. oil demand growth forecast to 340,000 bpd vs 330,000 bpd seen last month and cut its 2016 demand growth forecast to 70,000 bpd from 90,000 bpd previously.

    Since last June, U.S. producers have reacted quickly to a nearly 60 percent drop in prices by cutting spending, eliminating jobs and idling more than a half of the country's rigs. Active oil rigs last week declined for the 22nd week in a row, Baker Hughes reported.

    Still, "while there are fewer rigs drilling for crude, U.S. oil production this year is still on track to be the highest in more than four decades," EIA Administrator Adam Sieminski said in a statement.

    The EIA added that U.S. crude oil production averaged some 9.3 million bpd in March, but is expected to decline from June through September before growth resumes.

    Attached Files
    Back to Top

    The Permian Productivity Puzzle: Does shale kill the Oil recovery?

    Image title

    Attached Files
    Back to Top

    Alberta premier-elect says royalty review coming in current term

    Rachel Notley, premier-elect of the Canadian province of Alberta, the largest source of U.S. oil imports, said on Tuesday her newly elected government intends to hold its promised review of royalty rates for oil and gas producers in its current term.

    Notley, whose left-wing New Democratic Party last week ended the 44-year rule of the right-wing Progressive Conservatives, said the dates for the review have not yet been set, nor has the timing of her government's first budget, which will be set in the next few days as she finalizes her cabinet.

    The royalty review was among the more controversial planks in the new government's platform. Oil and gas producers protested that potentially squeezing additional revenues from the sector while oil prices are low threatened jobs and the province's economy.

    However Notley said that while the timing of the review has not been set, it would take place before the next election is due to take place in four years.

    "I'm not going to make any specific determinations around timing except to say it was in our platform, it will happen within this term and it will be preceded by good, thorough discussions with all stakeholders, including industry," she told reporters. "No one will be surprised by the way it unfolds."

    Notley said she is already holding talks with some of the province's oil and gas producers. She said those discussion went well and the executives were "looking forward to working collaboratively".

    "My guiding principles are the economic health of Alberta, job creation and maintenance," she said.

    Notley also said Richard Dicerni, appointed by outgoing Premier Jim Prentice as the province's top civil servant, had agreed to remain as deputy minister to the executive council and head of the public service.
    Back to Top

    Encana posts surprise operating profit as costs fall

    Encana Corp , Canada's largest natural gas producer, posted a surprise quarterly operating profit as investments in technology to lower well costs and increase production begin paying off.

    Encana has been diversifying into oil production and has invested heavily in technology and drilling techniques, such as applying simultaneous drilling and completions operations on wells, to drive greater productivity and cost efficiencies.

    The company said the application of such drilling techniques is increasing initial production rates and delivering stronger well performance.

    Encana said production costs in the Permian, Eagle Ford, Duvernay and Montney plays fell in the first quarter ended March 31 from the fourth quarter.

    The company has said it would direct most of its investments into these four areas, which its says are its highest margin growth plays.

    Still total production averaged about 430,100 barrels of oil equivalent per day (boe/d) during the quarter, down from about 536,100 boe/d a year earlier, reflecting the sale of lower-margin assets and a shift to produce more liquids.

    Oil and natural-gas liquids production rose 78 percent to about 120,700 barrels per day (bbls/d) in the quarter. Realized liquids prices fell to $37.83 per barrel from $69.19.

    Natural gas output fell 34 percent, while realized natgas prices fell 18 percent.

    Encana posted a net loss attributable to shareholders of $1.71 billion compared with a year-ago profit of $116 million, mainly due to $1.22 billion in impairment charges.

    The company's operating profit, which excludes most one-time items, fell 98 percent to $9 million, or 1 cent per share.

    Analyst on average were expecting a loss of 9 cents per share, according to Thomson Reuters I/B/E/S.

    Encana's cash flow, an indicator of its ability to pay for new projects and drilling, fell 55 percent to $495 million, or 65 cents per share.
    Back to Top

    Chaparral Energy announces Q1 financial and operational results

    Chaparral Energy, Inc. announced its first quarter 2015 financial results and provided an update on its operations today. Highlights included:

    Average total production of 31.4 MBoe/d during the first quarter, a 26 percent increase year over year pro-forma for the sale of its Ark-La-Tx properties
    Continued growth in production associated with its North Burbank Unit with 2,160 Bo/d of gross production, a 23 percent increase quarter over quarter
    Adjusted EBITDA of $120.8 million, a 10 percent increase quarter over quarter
    Significant and continued cost reductions associated with CAPEX, LOE and G&A

    'Our proactive and aggressive approach in responding to the weakened pricing environment continues to be effective as we have realized significant cost reductions in our D&C, LOE and G&A programs. We anticipate seeing overall cost decreases between 20 to 30 percent in drilling and completion, 15 to 20 percent in lease operating expenses and 20 to 30 percent in G&A for the year,' said Chief Executive Officer Mark Fischer. 'I believe, however, most impressive is our ability to reduce our projected annual CAPEX spend by almost 75 percent and move from a 10-rig to one-rig E&P program while managing to maintain our overall year over year production levels from 2014 to 2015 on a proforma basis. This feat speaks volumes to not only our balanced business plan, which combines E&P and EOR activities, but also to the tremendous quality of the assets in our portfolio.'

    For the quarter, Chaparral produced 31.4 MBoe/d of which 56 percent was oil, 15 percent NGLs and 29 percent gas. This accounts for a 26 percent production increase on a year over year pro-forma basis and an absolute nine percent increase compared to the fourth quarter of 2014. The company drilled 15 gross operated E&P wells in the first quarter, with nine in the Mississippi Lime, three in the Oswego, two in the Marmaton, and one in the Meramec.

    In response to the current market environment, the company will focus its drilling program primarily in the Mississippi Lime, Meramec and Oswego plays in Woods, Alfalfa and Kingfisher counties. It will also benefit from continued production growth in its North Burbank EOR Unit, which will not require a significant additional capital investment this year because of large investments in previous years.
    Back to Top

    Canada Aboriginals Vote to Reject $960 Million Petronas Gas Deal

    An aboriginal group along Canada’s Pacific Coast voted against an almost $1 billion offer by Petroliam Nasional Bhd. meant to compensate the community for building a natural gas export terminal on its ancestral lands.

    The vote to reject the money by the third of three groups in the Lax Kw’alaams Band in northern British Columbia presents a new obstacle to plans to export liquefied natural gas to Asian markets. Two earlier votes by other Lax Kw’alaams members also rejected the plan.

    The vote against the plan was overwhelming, Lax Kw’alaams Mayor Garry Reece said Tuesday in an interview in Vancouver. The final decision on whether to accept the C$1.15 billion ($960 million) on offer will be made by the 13-member Lax Kw’alaams council and announced at 9 a.m. New York time on Wednesday, Reece told reporters.

    The money was offered by backers of the $30 billion LNG project led by Petronas, as the Malaysian state-owned company is known, and the British Columbia government, according to a summary on the band’s website. Lax Kw’alaams is both an aboriginal band and a British Columbia town of the same name.

    Winning the support of indigenous groups including the 3,600-member Lax Kw’alaams is critical for Petronas to advance its Pacific NorthWest LNG project. A landmark Supreme Court ruling in Canada last year paved the way for aboriginal communities that don’t have treaties with the federal government, such as Lax Kw’alaams, to have greater say over resource developments on their ancestral lands.
    Back to Top

    Base Metals

    Aurubis confirms first-half profit jump

    Aurubis, Europe's biggest copper smelter, on Tuesday confirmed a sharp jump in operating pretax profit in the first half of its fiscal year, and repeated expectations of a significant rise in operating earnings in the full year.

    The company had on April 29 made an advance announcement of a rise in operating pretax profit to 180 million euros ($161 million) in the first half of its 2014/15 financial year up from 27 million a year earlier, helped by robust business and a 50 million euro one-off gain related to low precious metal inventories.

    Second-quarter operating pretax profit rose to 141 million euros from 30 million in the same year-ago period, Aurubis said on Tuesday.

    "Even without the extraordinary effects, we have generated very good results supported by a favorable market environment and a good production performance, especially in the second quarter," Aurubis CEO Bernd Drouven said in a statement.

    Drouven said Aurubis expects both operating earnings before tax and return on capital employed "to be considerably higher for fiscal year 2014/15 compared to the previous year."

    "We still anticipate a good supply of copper concentrates and high treatment and refining charges accordingly," he said.

    Copper ore treatment and refining charges (TC/RCs) are paid by miners to smelters to refine concentrate into metal and are a key part of the global copper industry's earnings.

    Continued stable demand and good sales opportunities are expected for the by-product sulphuric acid for the next few months, he said.

    "The good conditions on the copper scrap market should also continue," he said. "However, declining copper prices could lead to a tightening of the market with decreasing refining charges in the short term."

    "For cathode demand, we expect the premium level to soften towards the end of the fiscal year."

    Attached Files
    Back to Top

    Rusal executive says positive on China market growth

    Top aluminium producer Rusal is positive about growth in the Chinese market and expects a deficit in other markets to remain through to 2018, a senior executive said on Tuesday.

    "There is around 1 million tonnes of deficit outside of China," Steve Hodgson, director of sales and marketing at Rusal, told an industry conference in Dubai.

    He also said consumption of aluminium per capita in China was expected to grow from 17.8 kilograms per person in 2014 to 22.9 kg per person in 2018.
    Back to Top

    Century Aluminium US plant lockout in prospect after union rejects deal

    The United Steelworkers union has rejected a pay deal from Century Aluminum for workers at the fourth-largest aluminium smelter in the United States, the local branch said on Tuesday, and a lockout is now set to go ahead.

    Unionized workers at the Century Aluminum smelter in Hawesville, Kentucky, had voted on Monday on the revised labour deal after management agreed to postpone a lockout of staff to Tuesday.

    The rejection of the deal, which would replace the contract that expired at end-March, was posted on the website of the Hawesville branch.

    Century, which is controlled by Glencore, said it is prepared for a lockout which will start on Tuesday morning and is expected to continue to operate at full production. The smelter has a capacity of 244,000 tonnes per year.

    The vote "leaves us with no choice but to lock out union represented workers," said John Hoerner, senior vice president, North America operations in a statement following the result.

    This is the third time the members have vetoed a deal between the union's negotiating committee and management.

    The latest offer included pay increases of more than 14 percent over five years, fixed costs for health insurance, and new language on overtime, Century said.

    "In essence, we're out of options," he said.
    Back to Top

    Steel, Iron Ore and Coal

    Patriot Coal bankruptcy filing statement

    Patriot Coal Corporation ("Patriot" or "the Company"), a producer and marketer of coal in the eastern United States, today announced that it is engaged in active negotiations for the sale of substantially all of the Company's operating assets to a strategic partner. The Company is also engaged in ongoing discussions with key stakeholders as it evaluates a range of strategic alternatives to maximize the value of its assets.

    In conjunction with these activities, Patriot and its wholly-owned subsidiaries today filed voluntary petitions for restructuring under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of Virginia, in Richmond, VA. The Company intends to complete its review of strategic alternatives and present a value-maximizing restructuring plan to the Court as quickly as possible.

    Patriot expects its customer shipments and mining operations to continue in the ordinary course during the restructuring process. The Company has received a commitment for $100 million in "debtor in possession" ("DIP") financing led by a consortium of the Company's secured debt holders to support its continued operations. Upon approval by the Court, the DIP financing, combined with cash generated from ongoing operations will provide sufficient liquidity to support the business during the restructuring process.
    Back to Top

    Pertamina signs $530 mln deal to sell diesel to Adaro

    Indonesia's state oil and gas PT Pertamina has signed a 10-year agreement to sell diesel to coal miner PT Adaro Energy Tbk worth 7 trillion rupiah ($531 million) a year, Pertamina CEO Dwi Soetjipto said on Wednesday.

    In two months, Pertamina will start annual sales totalling 550,000 kilolitres of diesel to Adaro, eventually ramping up to 800,000 kilolitres a year.

    The two companies were also in talks to use idle oil storage facilities that could replace Pertamina's plan for a floating terminal.

    "Looking ahead we want to work together to utilize idle storage and we are not ruling out the possibility of expanding other logistical businesses that may cover fuel transportation," said Adaro CEO Garibaldi Tohir.

    Attached Files
    Back to Top

    China key steel mills daily output up 3.5pct in late-Apr

    Daily crude steel output of key Chinese steel producers increased 3.49% from ten days ago to 1.79 million tonnes over April 21-30, hitting the highest since October 1-10 last year, showed data from the China Iron and Steel Association (CISA).

    The CISA didn’t give an estimate on China’s total daily output during the same period.

    The rise was mainly due to improved demand as construction activities resumed in spring, but the whole sector is still struggling with low prices and weak demand.

    As of April 20, total stocks in key steel mills stood at 14.96 million tonnes, down 10.27% from ten days ago.

    In April, China exported 8.54 million tonnes of steel products, up 13.3% on year and up 10.9% on month, as domestic producers turned to international market to ease stock pressure.

    Meanwhile, the CISA members produced 1.75 million tonnes of pig iron on average each day over April 21-30, up 2.79% from the previous ten days.

    Industry insiders said crude steel output may continue to rise in early May, as producers anticipated demand increase amid traditional consumption season.
    Back to Top
    Commodity Intelligence LLP is Authorised and Regulated by the Financial Conduct Authority

    The material is based on information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. Opinions expressed are our current opinions as of the date appearing on this material only.

    Officers and employees, including persons involved in the preparation or issuance of this material may from time to time have "long" or "short" positions in the securities of companies mentioned herein. No part of this material may be redistributed without the prior written consent of Commodity Intelligence LLP.

    Company Incorporated in England and Wales, Partnership number OC334951 Registered address: Highfield, Ockham Lane, Cobham KT11 1LW.

    Commodity Intelligence LLP is Authorised and Regulated by the Financial Conduct Authority.

    The material is based on information that we consider reliable, but we do not guarantee that it is accurate or complete, and it should not be relied on as such. Opinions expressed are our current opinions as of the date appearing on this material only.

    Officers and employees, including persons involved in the preparation or issuance of this material may from time to time have 'long' or 'short' positions in the securities of companies mentioned herein. No part of this material may be redistributed without the prior written consent of Commodity Intelligence LLP.

    © 2018 - Commodity Intelligence LLP