Mark Latham Commodity Equity Intelligence Service

Wednesday 9th December 2015
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    Bitcoin breaking out? China?

    After trading in a very narrow $1 range for hours, Bitcoin suddenly exploded $17 higher on very heavy volume. Normally this wouldn't warrant an explicit mention, but this time... something odd happened in Chinese currency markets...

    Offshore Yuan suddenly snapped 12 pips lower after noise trading in a 1 pip range for hours... just as Bitcoin spiked...


    Image titleOn heavy volume...

    Image titleBoth moves signal a move away from the USDollar with Bitcoin and Yuan strengthening.

    The last time Bitcoin spiked notably like this was at the start of theChinese crackdown on capital controls.

    But... with the spread between Offshore and Onshore Yuan (the former dramatically weaker than the latter), it appears the market is expecting a devaluation sooner rather than later...

    Perhaps, just perhaps, that is what Bitcoin is 'hinting' at. For sure, a Yuan devaluation now would be enough to spook global markets once again, and force The Fed to put a rate hike on hold... only this time, everyone and their pet rabbit is neck-deep in "priced in" liftoff expectations.


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    Brazil's Congress names impeachment panel stacked against Rousseff

    The lower house of Brazil's Congress voted on Tuesday to appoint a committee stacked with opponents of President Dilma Rousseff to study whether to impeach her for breaking budget rules, in a blow to the leftist leader battling for political survival.

    By secret ballot, lawmakers voted 272-199 for a list of committee members drawn up by the opposition and pro-impeachment members of the centrist Brazilian Democratic Movement Party (PMDB), the biggest party in Rousseff's governing coalition.

    It was a clear defeat for Rousseff in the first battle of an impeachment process started last week, which threatens to paralyze Congress for months, distracting policymakers from Brazil's worst recession in decades.

    Controversy over the vote descended into chaos on the floor of the house, as lawmakers outraged by the secret ballot smashed an electronic voting urn, while pro-impeachment parties waved a flag in celebration of the win.

    Rousseff's supporters in Congress appealed to the Supreme Court in protest of the voting procedure. Several newspapers reported near midnight local time that a Supreme Court justice had suspended impeachment proceedings for a week. Court representatives could not be reached immediately for comment.

    The vote was a slap in the face for the leader of the PMDB party in the lower house, Leonardo Picciani, who has backed Rousseff since she appointed two ministers from his wing of the party to secure support and fend off impeachment.

    Picciani's embarrassment in the high-profile secret vote underscored the deep divisions within his party, which has veered away from the government in recent months as the economy plunges and a vast corruption scandal rattles the capital.

    The sweeping investigation into bribery at state-run oil company Petroleo Brasileiro SA threatened to further strain Rousseff's fragile coalition on Tuesday, as a veteran lawmaker in jail was reported to have decided to negotiate a plea bargain.

    Senator Delcídio do Amaral, Rousseff's point man on economic affairs, hired a lawyer to write up a plea deal, reported the websites of newspaper Folha de Sao Paulo and news magazine Veja, without saying how they got the information.

    Amaral and billionaire Andre Esteves, the former controlling shareholder and chief executive of investment bank BTG Pactual SA, were arrested last month and accused of obstructing the probe into the oil giant known as Petrobras.

    House Speaker Eduardo Cunha, who has been charged with corruption and money laundering in the Petrobras probe, outflanked Rousseff's allies with Tuesday's secret vote and postponed an ethics hearing into his activities for another day.

    Amaral, Esteves and Cunha have denied any wrongdoing. Lawyers for Amaral could not immediately be reached following the reports of a plea deal.


    While the result was hard blow for Rousseff, the fact that 199 lawmakers voted for the pro-government list was a sign that she may still have the more than one-third of support needed to block an eventual impeachment vote before the full house.

    "The result shows that the government is in a delicate situation," the political consultancy Arko said in a note to clients.

    The committee, whose final members should be named on Wednesday, will have the task of reporting on whether Rousseff committed an impeachable offense.

    Opponents who filed the impeachment request that set the process in motion accuse her of breaking budget rules to boost spending during her re-election campaign last year. Rousseff has denied any taking any illegal measures.

    If the committee finds an offense was committed, the process will go to a full vote on the house floor. The opposition needs two-thirds of the votes to begin a 180-day impeachment trial in the Senate. During that trial the president would be suspended and replaced by her vice president, Michel Temer of the PMDB.

    Speculation mounted on Tuesday that Temer was preparing for that scenario after publication of a letter he sent Rousseff on Monday complaining that she had sidelined him and his party in her government.

    Read more at Reuters

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    Minmetals takes over MCC as Beijing reforms state-run firms

    China's consolidation drive took aim at the mining sector on Tuesday with China Minmetals Corp to take over equipment maker China Metallurgical Group Corp.

    Minmetals is China's biggest steel and base metals trader with revenue of more than $50 billion last year.

    It owns a major stake in Hong Kong-listed, Australia-based MMG Ltd, an operator of copper and zinc mines in Australia, Africa and Laos.

    It will take over China Metallurgical Group Corp, known as MCC, which builds and designs mining and plant equipment and had revenue of more than $33 billion in 2014.

    The merger marks one of the largest in China's metals sector as Beijing looks to overhaul state-owned enterprises (SOEs) in sectors including steel, coal and oil.

    It comes as global miners grapple with a downturn in demand and a year-long rout in metals prices.

    China's SOEs are dominated by just over 100 central government-owned conglomerates overseen by the Assets Supervision and Administration Commission (SASAC).

    Overhaul steps are expected to cut that number to around 40, according to media reports.

    SASAC announced the mining merger but gave no further details of the transaction.

    Read more at Reuters
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    Anglo’s shadow hangs over Glencore investor day as shorts circle

    Short sellers sensed something was amiss at Anglo American this month, pushing bearish bets against the miner to a record high on the eve of yesterday’s investor meeting. It paid off when the stock plunged 12% after announcing a dividend cut.

    Are they on to something at Glencore too? Short interest has been rising ahead of the Swiss company’s shareholder day tomorrow, climbing to a two-year high of 5.3% of shares outstanding, according to Markit.

    A multitude of concerns could be driving the bets. Combined with a 27% plunge in copper this year, Glencore’s debt burden is putting pressure on chief executive officer Ivan Glasenberg to deliver on a $10 billion debt-cutting plan. At the meeting, executives are expected discuss measures to achieve that goal.

    “It’s the interaction between the low commodity-price environment and the debt on the balance sheet,” said Tyler Broda, an analyst at RBC Capital Markets in London. “It definitely adds to the challenges facing management at the moment because the overall environment remains negative.”

    Broda isn’t a bear. He suggests buying Glencore shares before tomorrow’s meeting in anticipation of asset sales and operational improvements. Still, he says, weak commodity prices will continue to cloud the longer term.

    Shorts are probably using Glencore as a proxy to play the slump in copper and coal prices, says Marc Elliott, the mining analyst at Investec whose bearish research spurred a record drop in the shares in September. Still, any good news out of tomorrow’s meeting and those bets might go the wrong way.

    “Typically, they present a good story on their investor updates,” Elliott said in an interview. “Going short ahead of the investor day is quite a risky call.”

    Compared to peers with high short interest, Glencore’s isn’t that high. That might be because getting hold of stock to short can be difficult — five of the company’s eight largest shareholders are directors. Wm Morrison Supermarkets and J Sainsbury are the most shorted companies in Britain’s FTSE 100 Index, with more than 17% of shares outstanding.

    Glencore’s debt is adding to price slump woes. It’s the biggest in the industry at $30 billion, and it’s also among the most expensive to insure in Europe, according to data from S&P Capital IQ. Anglo’s debt — at about $12 billion — is the next riskiest to insure.
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    Latest Glencore 5-yr CDS 860bps (+90bps)

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    Dow Chemical and DuPont in merger talks: sources

    Dow Chemical Co and DuPont are in talks to merge, creating a chemicals giant with a market value of more than $120 billion that could then break up into different businesses, people familiar with the matter said on Tuesday.

    A deal, which would face regulatory approval in several countries, would allow the two U.S. companies to rejig their assets based on their diverging fortunes. Their plastics and specialty chemical businesses have benefited from lower energy costs, while their agrochemicals divisions have struggled to cope with weak demand for crop protection products.

    Following what would be structured as a merger of equals, the combined company could split into material sciences, specialty products and agrochemicals, the people said, cautioning that the plans have not been finalized.

    Dow's Chief Executive, Andrew Liveris, and DuPont Chief Executive Edward Breen would have the two top jobs in the combined company, one of the people said. An agreement could be reached in the coming days, that person added.

    Dow and DuPont declined to comment. The Wall Street Journal first reported on the merger talks earlier on Tuesday.

    The possible merger of the companies may see cost synergies to the tune of $3 billion, CNBC said citing people familiar with the matter.

    As of Tuesday's trading close, Dow had a market valuation of $58.97 billion, while DuPont (DD.N) was valued at $58.37 billion.

    DuPont, under Breen, who took over as CEO last month, had already been in talks with rivals, including Dow, about exploring options about its agriculture business.

    Dow had also been reviewing all options for its farm chemicals and seeds unit, which has reported falling sales for nearly a year.

    In August, the world's largest seed company, Monsanto (MON.N), abandoned a $45 billion bid for rival Syngenta (SYNN.VX) as declining grain prices and farm income led to the major players in the farm chemicals and seeds business becoming the subject of consolidation talks.

    The current chief of DuPont, Edward Breen, was appointed CEO last month after his predecessor and company veteran Ellen Kullman, resigned abruptly in October. Breen, who was the CEO of Tyco between 2002 and 2012, and is best known as a turnaround expert, split Tyco into six companies, a sprawling conglomerate beset by scandal and strategic flipflops.

    DuPont, which gets about 60 percent of its sales from outside North America, has seen a strong dollar chip away 53 cents per share from its earnings this year. The company has been facing sliding sales for nearly two years.

    Kullman had blamed much of the stock price drop on global markets including a rising dollar but some investors had already grown restless with her leadership, complaining that she was not fully executing on the changes she initiated.

    In the intervening period in May, when Kullman was fending off a proxy battle from activist investor Nelson Peltz to get representation on the board, the company's stock price fell over 25 percent, weakening her support among investors.

    In analyst views, the appointment of Breen has been welcomed by Peltz, who has been pushing for DuPont to separate its volatile materials businesses from more stable businesses and save $2 billion to $4 billion in annual costs.

    A 213-year-old company, DuPont makes products and chemicals that go into industries such as petrochemicals, pharmaceuticals, food and construction.

    Read more at Reuters
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    Oil and Gas

    Saudi Arabia shipping more Nov-Dec crude to Asia to meet robust demand

    Saudi Arabia is shipping more crude oil to Asia over the last two months of the year as strong refining margins boost demand, trade sources said, helping the top oil exporter defend its market share amid fierce competition.

    Cheap Saudi oil - in comparison with prices for other Middle Eastern grades - has drawn several Asian refiners to request a few million barrels above contractual volumes as they ramp up crude run rates to capture robust margins.

    The increment in demand will require Saudi Arabia to pump at near record volumes just as a battle over global market share is expected to intensify following the failure of the Organization of the Petroleum Exporting Countries (OPEC) to set a production quota, and ahead of higher exports from Iran next year once sanctions over its nuclear programme are lifted.

    "There is a bigger call for Saudi crude as monthly supply nominations from Asian refiners have gone up," said an industry source familiar with the matter, adding that the kingdom will raise shipments to Asia by a few million barrels over November and December.

    The trend may continue into early next year as a drop in exports from key light sour producer Abu Dhabi has increased demand for Saudi grades of a similar quality.

    Nearly half of Saudi's crude production is exported to Asia. Saudi Arabia's major Asian customers received about 4.6 million barrels per day (bpd) of crude in the first 11 months this year, up 12 percent from the same period a year ago, data from Thomson Reuters Research & Forecasts showed.

    Saudi Arabia last raised oil exports to Asia over contract volumes in January and February this year to meet peak winter demand in the Northern Hemisphere. The OPEC member's offers of extra crude in low-season October, however, failed to attract interest from Asia.

    Demand for Saudi crude picked up again in November and December as refining margins rebounded.

    At least four Asian refiners lifted more crude as Saudi Aramco set more competitive official selling prices (OSPs), sources close to the matter said.

    Under oil contracts, the seller or buyer can adjust loading volumes, depending on demand and shipping logistics, using an operational tolerance that ranges from plus to minus 10 percent of the contracted volume.

    "The OSP is not bad and the (refining) margin is wonderful," said a trader with a North Asian refiner that has requested more Saudi crude.

    Saudi Aramco's Arab Extra Light OSP is about $7 a barrel below Abu Dhabi's Murban, the widest discount since August.

    Light sour crude supply is expected to tighten early next year as Abu Dhabi National Oil Company has cut Murban and Das crude exports on field maintenance and higher domestic demand.

    Light crudes typically yield more light products such as naphtha, whose crack to Brent NAF-SIN-CRK averaged $111.93 a tonne in November, the highest since September 2014.

    This helped boost refining margins at a typical complex refinery in Singapore to the highest in eight months in November.

    Taking the strong refining margins in Asia into greater consideration, Saudi Arabia cut its January OSPs for most of the crude grades it sells to Asia by a smaller extent than expected last week.

    Asian refiners are now waiting for other Middle Eastern producers to set their prices before deciding on how much Saudi crude to ask for in January, sources said.

    Read more at Reuters

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    Oil price hits fresh post 2009 lows as glut grows

    Oil prices resumed their slide on Tuesday, with U.S. crude falling below $37 per barrel and Brent below $40 for the first time since early 2009, amid fears the world was running out of storage capacity as a global glut intensifies.

    The global oversupply is being compounded by OPEC's failure last week to agree a production ceiling, with members Iran and Iraq promising to ramp up output and exports next year.

    Benchmark Brent and WTI futures both fell more than 6 percent on Monday, and on Tuesday they hit fresh lows last seen during the credit crunch of 2008/09.

    Brent futures LCOc1 were down 23 cents at $40.50 a barrel by 1450 GMT. U.S. crude CLc1 was trading at $37.44 a barrel, down 11 cents from its last settlement.

    "The lower levels are largely the result of a renewed focus on fundamentals now that the bulls’ hope for an OPEC cut is off the table," JBC Energy said in a note.

    The failure to agree production levels means OPEC core members are readying for new battles for share in a market already heavily oversupplied and consuming almost 2 million barrels per day less than it is producing.

    "OPEC has lost control of the oil market and unless something fundamental changes that causes demand to overtake the oversupply in the market, the path of least resistance is the 2008 lows of $35-$38," said Michael Hewson, chief market analyst at CMC Markets.

    If Brent falls below $36 per barrel, it would reach levels last seen in 2004 at the start of the so-called commodities super cycle.

    "We are only around $5 away and the oil price has moved almost $5 in the last two days. It might seem miles away, but it’s not really," said Tamas Varga, analyst at PVM Oil Associates.

    Banks such as Goldman Sachs have said oil could fall to as low as $20 per barrel as the world might run out of storage to place unwanted crude. World oil stockpiles are at a record, according to the International Energy Agency.

    In yet another indication of fierce market battles, trading sources said Saudi Arabia was shipping more crude oil to Asia over the last two months of the year.

    On the demand side, China's crude oil importsor the first 11 months of the year rose 8.7 percent to 6.61 million barrels per day, with November crude imports growing 7.6 percent from the same month a year ago.

    China's November sales of new vehicles jumped 17.6 percent over the same period.

    With crude prices near record lows, China is seen as likely to double its strategic oil purchases in 2016, adding 70-90 million barrels to its strategic petroleum reserves (SPR).

    Read more at Reuters
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    Oil Doubling $200 Billion of Cuts Risks Imbalance, Eni CEO Says

    The global oil industry is set to repeat this year’s $200 billion of investment cuts in 2016, raising even more concerns than the current slump in crude prices, according to the chief executive officer of Italy’s Eni SpA.

    "What is worrying me is not the price of today; it is what is happening in the industry,” CEO Claudio Descalzi said in an interview with Bloomberg TV from the COP21 climate change conference in Le Bourget, France. “We cut about $200 billion and I think next year we are going to do the same and that can create in the mid term an imbalance between supply and demand."

    The 65 percent collapse in oil prices since June 2014 has forced the industry to defer exploration to preserve cash and safeguard dividends. Cutbacks of $180 billion were announced in the first nine months of this year, according to consultancy Rystad Energy AS. There may be more to come after OPEC set aside its production target on Dec. 4, potentially lifting the lid on millions of barrels of additional crude.

    Descalzi said a “right price” for oil stood at $60 a barrel. That’s about $20 above benchmark Brent crude, which fell below $40 a barrel for the first time in almost seven years on Tuesday.

    “I think that the right price is not just the right price for us,” the CEO of the Italian oil producer said. “It’s the right price for the average in the industry and also for the producer country.”
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    This Is Why $20 Oil Is A Possibility

    The day of reckoning has arrived for the oil price with the head and shoulders pattern I have been tracking for two months finally being completed in recent weeks. It became a rather drawn out affair with markets awaiting the outcome of the OPEC meeting of 4 December where OPEC elected to stay the course and do nothing. With WTI closing at $40 and Brent on $43 on Friday both are testing support levels. WTI in particular has had strong support at $40 in recent weeks. Should this support be broken then another major down leg is to be expected to the vicinity of $20. I can see nothing in the numbers presented below to provide hope that $40 may hold. The market remains over-supplied and awash in oil. Lower price is required to remove supply from the market.

    World total liquids production up 240,000 bpd to 97.09 Mbpd, a new record high.
     OPEC production down 20,000 bpd to 31.72 Mbpd (C+C)
     N America production up 260,000 bpd to 19.66 Mbpd.
     Russia and FSU up 90,000 bpd to 14.01 Mbpd
     Europe down 10,000 bpd to 3.40 Mbpd (compared with October 2014)
     Asia down 50,000 bpd to 7.99 Mbpd.
    Middle East rig count is rising. The international oil rig count is stable. The US oil rig count is falling.

    Image titleFigure 1 The oil price has trended down this month in a saw tooth pattern to support levels and to complete the head and shoulders pattern. Friday’s close was just above the near term lows of $38.22 for WTI and $41.59 for Brent, both on August 24th. If these lows are broken traders and companies should be prepared for a plunge.

    The October 2015 Vital Statistics are here. EIA oil price and Baker Hughes rig count charts are updated to the beginning of December 2015, the remaining oil production charts are updated to October 2015 using the IEA OMR data.

    Figure 2 The bigger picture shows how the second shoulder has already breached the long-term trend line and the chart appears to be very bearish. Chart patterns alone do not tell the whole story, but it is difficult to find ANY near term bullish indicators in the production and rig count data.

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    This time next year, what will the oil price be?

    121 votes•Final results

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    Apache boss says still possible to make money in UK sector despite oil price

    Cory Loegering, Apache’s regional VP and MD for the North Sea said it was possible to make money from the UK sector despite the current oil price.

    He said the company’s North Sea business centred on the mature Beryl and Forties fields was both competitive and delivering high rates of return.

    Moreover, it had lately been boosted by significant drilling successes on Beryl; indeed the two latest local discoveries were described as “exceptional”.

    Despite their age, Mr Loegering pointed out that Beryl and Forties remained two of the most prolific North Sea hydrocarbon accumulations and not only that as they ranked best in class for production efficiency at about 92%.

    He said too that Apache enjoyed “industry-leading operating costs in the North Sea; indeed, the company had a “50% operating cost advantage”.

    “Our operating costs are half the UK average and will come in below $14 per barrel this year,” said Mr Loegering, pointing out that making the effort to achieve top quartile production efficiency really did deliver lower operating costs.

    Last year, Apache achieved a unit operating cost of $16.66 per barrel versus the UK average of $30.49.

    He said that, thus far, the emphasis had been on capital investment in these two great brownfield assets but that over the period 2016-2020 the accent would increasingly swing to stepping up the drilling effort and shooting further seismic.

    On Forties alone, since its acquisition in 2003, Apache has invested $2.3billion in infrastructure and $2.3billion on drilling and workovers to date. Loegering described Forties as the most resilient field in the North Sea.

    And still the opportunities keep on coming, with 84 drilling targets currently listed for drilling up on Forties and about the same again for Beryl. And that’s not taking into account what else might be identified through further seismic.
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    Japan Nov average LNG spot arrival price at lowest since March 2014

    The price of liquefied natural gas (LNG) spot cargoes arriving in November in Japan, the world's biggest buyer, fell to its lowest since the Japanese government
    started publishing figures last year, official data released on Wednesday showed.

    The average price for cargoes arriving last month fell to $7.50 per million British thermal units (mmBtu), down from $7.90 per mmBtu in October and the lowest since March last year, then trade ministry said in a release.

    A supply glut of LNG has pushed prices steadily lower during the last year-and-a-half, with benchmark Asian spot LNG prices LNG-AS last quoted at $7.20.

    The average price for cargoes contracted during November fell to $7.40 per mmBtu, down from $7.60 in October and matching the level in September, which was the lowest since March last year, according to the ministry's release.

    The ministry surveys spot LNG cargoes bought by Japanese utilities and other importers, while excluding cargo-by-cargo deals linked to benchmark prices such as the U.S. natural gas Henry Hub index.
    It only publishes a price if there is a minimum of two eligible cargoes reported by buyers. Prices are converted to a delivery-ex ship basis.

    Read more at Reuters
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    Carl Icahn buys more of LNG player Cheniere

    Billionaire investor and a major Cheniere Energy shareholder, Carl Icahn, has raised its stake in the Houston-based LNG player to 13.83 percent.

    A filing with the Securities and Exchange Commission (SEC) from Monday reveals that Icahn bought 2,781,694 shares of Cheniere’s stock at an average price of $43.25 per share.

    The total transaction was valued at about $120 million. Icahn now owns 32,649,671 shares in Cheniere.

    The billionaire reported an 8.18 percent activist stake in Cheniere in August and has since then boosted its stake in the company for several times.

    Cheniere also in September appointed two managing directors of Icahn Capital, a subsidiary of Icahn Enterprises, to its board of directors.

    Cheniere, that is developing two LNG export projects in the United States, expects to ship the first cargo from its Sabine Pass liquefaction facility in January 2016.
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    EQT reduces Marcellus drilling plans for 2016

    EQT Corp. plans to again cut its capital spending and shale gas drilling program as it faces the prospect of continued low prices next year.

    The Downtown-based gas producer on Monday set a capital budget of $1 billion for 2016, including $820 for well development. That's down from the $1.9 billion it set for 2015 in February, which was a reduction from what it had announced a few months before.

    Natural gas prices are hovering around $1.36 per thousand cubic feet in Pennsylvania, half what companies got a year ago, when most major Marcellus producers started cutting 2015 budgets by up to 40 percent. Prices are expected to remain low until at least 2017 because of a supply glut.

    EQT said it plans to drill 72 Marcellus wells — down from the 122 it planned for 2015 — and up to 10 wells in the deeper Utica shale. It will concentrate Marcellus drilling in a core area of southwestern Pennsylvania on multi-well pads to increase efficiency and lower costs. The company predicted it would increase production by about 18 percent next year.

    Read more:

    The company plans to spend $1 billion on drilling next year, which is half of what they spent this year. Although EQT’s top brass previously said they were dumping the Marcellus and concentrating on the Utica Shale instead, it seems they’ve had a change of heart. Yesterday’s forecast says EQT will drill 72 Marcellus wells in 2016 and just 5 Utica wells. What happened? We don’t know–but we suspect EQT is finding it more of a challenge than they thought to get the price of a deep Utica well down to the $12.5 to $14 million range they predicted they could get it to.
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    Driller becomes 18th to seek bankruptcy in Texas

    A North Texas oil company that went public around the time crude prices started slipping in 2014 is seeking Chapter 11 bankruptcy protection, becoming the 18th driller in the state to succumb to the downturn.

    Energy & Exploration Partners, a Fort Worth company that drills for oil and gas mostly in East Texas and in Wyoming, said capital markets have closed to producers in the wake of $40 oil, leaving it unable to raise to funds that could have prevented bankruptcy.

    “The impact of the depression in oil prices on the debtors’ business cannot be overstated,” John Castellano, a managing director at turnaround specialist AlixPartners and the company’s interim chief financial officer, said in court documents.

    U.S. crude sank as low as $36.64 per barrel on Tuesday before recovering to $37.88 per barrel in early trading on the New York Mercantile Exchange. And international Brent dipped 43 cents to $40.30 per barrel on the ICE Futures Europe, briefly trading under $40 per barrel for the first time since early 2009.

    In addition to sunken crude prices, massive storms this summer cut off roads leading to Energy & Exploration’s East Texas oil fields near the Trinidad River, crimping nearly half of the company’s crude production more than a year after the firm took out debt to partially fund a $700 million purchase in the region.

    The firm recently cut 15 employees and saw several managers resign, including the company’s chief operating officer, its top acquisition and divestiture coordinator, its chief accounting officer and its chief financial officer.

    In court papers, the company indicated it had up to $500 million in assets and more than $1 billion in liabilities. It had 59 employees.
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    Pipeline giant Kinder Morgan slashes dividend 75 percent

    Kinder Morgan Inc slashed its dividend 75 percent on Tuesday, marking the first time the U.S. pipeline giant has cut payouts to shareholders since it has been a publicly traded company.

    The move, which will reduce the annual dividend to 50 cents a share from about $2 a share, is an acknowledgement that the worst oil price crash in six years is hurting once-resilient pipeline companies.

    Kinder Morgan shares have shed about half their value since the company first warned on Oct. 21 that payouts would slow. In after hours trade on Tuesday the shares fell nearly 7 percent to $14.67.

    Moody's put the company on credit watch negative last week after it bought a stake in a leveraged natural gas pipeline system, and several analysts downgraded the stock.

    Founder Rich Kinder said the smaller payout to investors would allow Kinder Morgan to avoid issuing equity while maintaining its investment grade credit rating.

    "We evaluated numerous options, including significant asset sales, but ultimately concluded that these other options were uneconomic to our investors in the long run. This decision was not made lightly," he said in a statement.

    Analysts at Tudor Pickering Holt told clients in a note that the cash would be better spent reinvesting or buying back shares.

    "We'd argue that while market clearly hates the possibility of a dividend cut, a full payout is the least effective use for that cash."

    Once the darlings of investors, growth prospects of pipeline companies have been undercut by a 50 percent slide in oil prices and tough environmental reviews that have delayed projects.

    Pipeline companies have been especially popular with investors in recent years for their ability consistently to pay and grow large dividends.

    But their attractiveness has faded since at least the summer as executives at some of the biggest pipeline companies, including Plains All American LP, have warned of slower or variable dividend growth.

    Investors say they are skittish over the prospect of rising U.S. interest rates, a dimmer outlook for additional new volumes of oil and natural gas flowing onto new midstream systems, as well as the potential for lower shipments and fees on existing lines.

    Read more at Reuters
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    Alternative Energy

    How world can go 100% renewables by 2050 – and save money

    On the eve of the Paris climate conference, a new analysis from Stanford University has laid out a roadmap for 139 countries to power their economies with solar, wind, and hydro energy by 2050.

    The idea of net zero emissions, or a decarbonised economy, is being openly discussed at the Paris conference, even by Australia, with prime minister Malcolm Turnbull talking (but not yet acting) of a push to zero carbon energy, and Labor putting it into their policy modelling. The Greens are pushing for 90 per cent renewables by 2030.

    For most however, zero carbon means including carbon capture and storage and nuclear, or offsets from forestry, land use and other sequestration. Some, though, are talking of meeting that talking with 100 per cent renewable energy only.

    The Stanford study focuses on what is has dubbed “WWS” – wind, water and sunlight. And it includes not just electricity but transportation, heating and cooling, industry, and agriculture, forestry and fishing.

    It says the world can reach 80 per cent “WWS” by 2030, which puts the Greens target for 90 per cent renewable energy for electricity only for Australia by the same date in a different perspective.
    Image title

    The roadmap outlines numerous benefits – millions of jobs, no impact on economic growth – and total savings from fuel costs, environment and climate damage of nearly $US5,000 a year.

    Stanford study estimates that it will save each person in the 139 countries an average of $170 a year on fuel costs, and $2,880 a year in air-pollution-damage cost and $US1,930/person/year in climate costs (2013 dollars).

    They have even broken now the equipment and installations needed into each country. It appears eye watering, but Stanford says the land use requirements are minimal – just 0.29 per cent of the land area, mostly for solar PV, not including reclaimed fossil fuel plants.

    Their plan, under one generalised scenario, would require:

     496,900 50-MW utility-scale solar-PV power plants (providing the most power, 42..2% of the 139-country power for all purposes).
    1.17 million new onshore 5-MW wind turbines (19.4%).
    762,000 off-shore 5-MW wind turbines (12.9%)
    15,400 100-MW utility-scale CSP power plants with storage (7.7%).
    653 million 5-kW residential rooftop PV systems (5.6%).
    35.3 million 100-kW commercial/government rooftop systems (6.0%).
    840 100- MW geothermal plants (0.74%).
    496,000 0.75-MW wave devices (0.72%).
    32,100 1-MW tidal turbines (0.07%)
    Zero new hydropower plants. (Stanford says the capacity factor of existing hydropower plants will increase slightly so that hydropower supplies 4.8% of all-purpose power).
    Another estimated 9,300 100-MW CSP plants with storage and 99,400 50-MW solar thermal collectors for heat generation and storage will be needed to help stabilize the grid.

    Energy efficiency and changing industrial practises will be important. The average end use load will fall 39.2 per cent, with 82 per cent of this fall due to electrification and eliminating the need for mining, transport, and refining of conventional fuels.

    The cost reductions come from the fact that that levellised costs of electricity for hydropower, onshore wind, utility-scale solar, and solar thermal for heat is already similar to or less than natural gas combined-cycle power plants.

    And as the LCOE for rooftop PV, offshore wind, tidal, and wave energy fall below conventional fuels in coming years and decades.

    Stanford says the major benefits of a conversion to WWS are the near-elimination of air pollution morbidity and mortality and global warming, net job creation, energy-price stability, reduced international conflict over energy because each country will be energy independent.

    It will bring power 4 billion people worldwide who currently collect their own energy and burn it, and reduced risks of large-scale system disruptions because much of the world power supply will be decentralized.

    “Finally, the aggressive worldwide conversion to WWS proposed here will avoid exploding levels of CO2 and catastrophic climate change.”

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    This Joint Venture Could Stir Up The Lithium Market

    Rumors are swirling that the rare metals space is close to an unusual joint venture deal. One that shows how alternative financing arrangements are continuing to become a major story for the beaten-down mining sector.

    The deal is all the more interesting because it involves the world’s largest copper miner: Chile’s state-run Codelco. Which local papers said late last week is looking at a joint venture for a completely different commodity.

    This of course isn’t a major step out for Codelco. Chile is the largest producer of lithium in the world — and Codelco holds a major land package across the country.

    But the rumored partner with Codelco on the lithium investment is more surprising: U.S. electric car manufacturing phenomenon Tesla.

    According to the local press, “top executives” from Tesla have met with Chile’s government in recent weeks. With the goal being to “suggest an agreement with Codelco” on lithium.

    Few details were given about what a potential Tesla-Codelco deal might look like. But it would presumably involve Codelco contributing exploration or development lands from its portfolio — and Tesla contributing some or all of the capital for identifying and producing lithium deposits.

    If such an arrangement does materialize, it would be an extremely interesting move for Tesla. The company needs large amounts of lithium for its electric car batteries. And supply for this metal is somewhat unnerving — given that only five countries outside the U.S. produce significant amounts of the metal.

    Three of those lithium-producing nations are China, Argentina and Zimbabwe. Which Tesla might be hesitant to rely upon for output.

    The only other major producers are Chile and Australia. A fact Tesla has obviously decided to act on — attempting to secure a direct deal with the closest and most apparently-reliable supply nation. Such an approach might have got little attention three years ago. But the fact that Codelco is now apparently considering the concept shows how the current downturn has changed big miners’ ideas on funding sources.

    Officially, Codelco says it has not made any formal agreement yet. Watch for announcements over the coming weeks — which may show the “age of the end user” rising in mining investment.
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    Base Metals

    Turquoise Hill forecasts lower Oyu Tolgoi gold output in 2016

    Gold production from the Oyu Tolgoi mine, in Mongolia, would be materially lower in 2016, compared with the forecast output for 2015, owing to the mining of lower-grade gold areas, owner Turquoise Hill Resources reported on Tuesday. 

    In its 2016 production and financial guidance, the Canadian company stated that the mine would produce between 210 000 oz and 260 000 oz of gold in concentrates in 2016. This compared with the 2015 gold production forecast of between 600 000 oz and 700 000 oz of gold in concentrates. The majority of 2016’s gold production would occur in the first half of the year. 

    Oyu Tolgoi’s copper production was forecast to remain steady at between 175 000 t and 195 000 t. Turquoise Hill said it expected its operating cash costs for 2016 to be about $800-million, compared with expected operating cash costs of $900-million for 2015. 

    The year-on-year reduction was mainly owing to additional capitalisation of Phase 4 deferred stripping costs. Capital expenditures for 2016 on a cash-basis, excluding underground development, were expected to be about $300-million, of which about $280-million related to sustaining capital. 

    Turquoise Hill would provide capital guidance for its underground development once a final 'notice to proceed' decision was confirmed. Turquoise Hill owner Rio Tinto and the government of Mongolia in May 2015 signed an underground mine development and financing plan in May this year, which addressed outstanding shareholder matters.

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    Steel, Iron Ore and Coal

    Anglo’s Kumba faces more cutbacks as iron-ore rout deepens

    Kumba Iron Ore, majority owned by Anglo American, said it will restructure Africa’s biggest mine for the steelmaking ingredient, cutting output there by 28% to combat the plunging price of the raw material. The stock fell to the lowest on record.

    The new plan for the Sishen operation will target free-on-board unit costs of about $30 a metric ton and a break-even price of about $40 a ton cost and freight, Centurion, South Africa-based Kumba said onTuesday in a statement. Output for 2016 will be about 26 million tons, compared with a previous plan to produce 36 million tons.

    Iron ore with 62% metal content delivered to Qingdao fell 2.4% to $39.06 a dry ton yesterday, a record low in daily prices compiled by Metal Bulletin dating back to May 2009. The metal has plunged 80% since its 2011 peak.

    “Our industry is under tremendous pressure with the market now pricing in a more muted trend for the iron-ore price over the medium to longer term,” chief executive officer Norman Mbazima said in the statement. “These circumstances have reinforced the need to make tough decisions for our business, that will enable it to withstand a longer period of much lower prices.”
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    China offers stricken steelmakers lifeline with export tax cut

    China will cut export taxes on steel billet and pig iron from the start of 2016, the finance ministry said on Wednesday, the latest move by the world's top steel producer to erode a domestic glut and offer a lifeline to the stricken industry.

    Exports of the two products are relatively modest, but the move will likely fuel concerns that the world's biggest consumer of industrial raw materials is exporting its excess output to a saturated global market, accelerating a price rout.

    "This kind of strategy is aimed at redirecting this oversupply in China to other countries," said Helen Lau, analyst with Argonaut Securities in Hong Kong.

    As part of a raft of measures aimed at boosting economic growth in the world's second-largest economy, the ministry said it will cut the 25 percent export tariff on billet and pig iron to 20 percent and 10 percent respectively from Jan. 1.

    The move underscores the deepening crisis in the world's biggest steel industry as the country's economic growth slows, leaving stricken mills to struggle with plunging prices, waning demand from real estate to shipbuilding, and tight credit. Many have gone bankrupt or cut output.

    Chinese steel mills have cut shipments of both products since 2008 when duties were raised to current levels. In January-October, China exported 141,659 tonnes of pig iron and 5,367 tonnes of steel billet, said Kevin Bai, analyst at CRU in Beijing.

    Preliminary customs data on Tuesday showed China's shipments of steel products topped 100 million tonnes for the first time in the first 11 months of the year.

    Two exporters in China said the tariff cut was too small to help boost exports, but it will likely escalate trade tensions with Europe and the United States, which have accused the country's mills of deliberately dumping surplus production.

    Market participants were surprised by the move, coming just weeks after authorities hit back at criticism from abroad about its support for the industry and saying Beijing did not set out to encourage steel firms to boost exports.

    As part of Wednesday's statement, the government said it would also eliminate export tariffs on phosphoric acid and ammonia and cut taxes on some energy raw materials, but it did not identify which materials would be subject to the cut.

    It kept tariffs on naphtha, jet kerosene, diesel, fuel oil, ethylene/propylene, propane and benzene unchanged. It also kept base metals and nickel pig iron tariffs unchanged.

    Read more at Reuters

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    India ready to impose more curbs on steel imports

    India is readying to impose more curbs on steel imports, including introducing a safeguard duty, after a 20 percent import tax failed to contain losses for producers such as Steel Authority of India.

    SAIL, JSW Steel and Essar Steel have complained that surging imports from Indonesia, China, Japan, Russia, Ukraine and South Korea were squeezing their market share and profit margins.

    In October, steelmakers asked the government to impose a safeguard duty for four years on imports of hot rolled flat sheets and plates of alloy or non-alloy steel, and set a minimum import price, to contain cheaper steel imports.

    The Directorate General of Safeguards, a branch of the finance ministry that can impose temporary import curbs, said on Tuesday that it found prima facie evidence that increases in imports "have caused or threatening to cause serious injury to the domestic producers".

    In a statement on its website, the directorate said it has asked foreign companies and other stake holders to submit their views within 30 days before taking a decision. 

    Indian companies, struggling to compete due to high borrowing and raw materials costs, have in recent months successfully lobbied to get duties on some products and quality checks strengthened.

    In September, India imposed the 20 percent import tax on some steel products as the government initiated an investigation into rising imports from China, Japan, South Korea and Russia.

    Government sources said the steel ministry has also supported local manufacturers' demand to impose a minimum floor price for steel imports to curb cheaper imports.

    Imports of iron and steel declined slightly to $6.9 billion during April-October period in the current financial year 2015/16 from $7.1 billion a year ago, Commerce and Industry Ministry data show.

    The government has asked the industry to submit figures on the cost of production so that it could consider a floor price for imports, said one official, with knowledge of policy decisions.

    Read more at Reuters
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