Mark Latham Commodity Equity Intelligence Service

Thursday 29th October 2015
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    Early Forecasts Show China Economy Stabilizing in October

    With a preliminary reading of the manufacturing industryscrapped this month by Markit Economics and Caixin Media, analysts must search a bit harder for the pulse of the world’s second-largest economy. Early signs suggest stabilization.

    Domestically compiled gauges of manufacturing and services improved in October, while an index based on search engine data for small and medium-sized businesses weakened slightly. They come ahead of official Purchasing Managers’ Indexes for manufacturing and services, both due Sunday.

    The People’s Bank of China cut interest rates for the sixth time in a year last week amid mounting challenges to the government’s growth target of about 7 percent for 2015. As economists set their forecasts for future policy moves, here are a few early indicators that may help:

    The unofficial purchasing managers indexes jointly compiled by China Minsheng Banking Corp. and the China Academy of New Supply-side Economics showed a much sharper slowdown in the summer and a faster pickup since then.

    The manufacturing reading rose to 43.3 this month from 43 in September, while the non-manufacturing measure climbed to 44.2 from 42.3. PMI readings below 50 signal contraction.

    Jia Kang, director of the Beijing-based academy and former head of the finance ministry’s research institute, expects more attention will shift to the Minxin gauge after Caixin stopped publishing its flash PMI.

    "This is a very sensitive indicator,” Jia said. "When the official PMI was still steady, we already noticed a downward trend,” and now the gauge has reversed to signal a pickup.

    The monthly surveys cover purchasing managers at more than 4,000 companies, mainly private business and smaller enterprises. The gauges started in October 2014. In contrast to the official measure, which has shown non-manufacturing businesses holding up better this year, services are also mired in contraction zone in the private survey.

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    Look at Waste Shipements in the EU and USA: Going down?!

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    Peak in 1993 after 50 years growth.Image title
    Here's the EU, sharp peak in 2007
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    Barclays Bankers Create $1.7 Billion Commodities Buyout Firm

    The bankers behind the private-equity investments of Barclays Plc in the natural resources sector bought the business from the British lender, creating a new buyout firm with $1.7 billion in assets.

    The management-led deal forms Global Natural Resource Investments, a London-based private equity firm with offices in Doha, Qatar, that will focus on commodities deals outside the U.S. oil and gas upstream sector, the company said on Wednesday in a statement. GNRI didn’t disclose how much it paid.

    Barclays, which has scaled back its presence in commodities over the past five years, will remain an investor alongside the sovereign wealth fund of Qatar. The billionaire brothers Eddie and Sol Zakay are also investors.

    “The requirement for private equity capital in the global natural resources sector is stronger than ever and the current volatility in commodity prices is creating a positive backdrop for patient private equity,” said GNRI Chief Executive Officer Mark Brown, who previously headed Barclays’s natural resources investments.

    Brown said the business has returned 2.4 times the money invested since its inception in 2006 as a unit of Barclays. Of the $1.7 billion that GNRI has under management, the company has yet to invest $800 million.

    The new buyout joins a rush of private equity firms searching for deals in the natural resources sector after oil and other commodities prices plunged. The top four private-equity groups, Carlyle Group LP, Apollo Global Management LLC, Blackstone Group LP and KKR & Co., have raised at least $30 billion for commodities deals in the past 18 months, according to data compiled by Bloomberg.

    Former bankers and executives, including Mick Davis, a past chief of Xstrata, Barrick Gold Corp.’s ex-CEO Aaron Regent, former JPMorgan Chase & Co. banker Lloyd Pengilly and Sam Laidlaw, once chief of Centrica Plc, have set up companies and funds to bid for assets put up for sale by the world’s biggest oil and mining companies.

    Brown, who is taking a team of around 14 people with him, said his company wasn’t just another startup private-equity firm trying to raise funds.

    “The difference is we have a portfolio,” he said in an interview. “We have invested in 15 companies, and we are managing $1.7 billion. It’s a real business: we have copper assets in Botswana and Peru, we are drilling in the North Sea.”

    The former Barclays banker said the biggest opportunities lay in copper, oil and gas. He cautioned, however, that the drop in commodities prices hadn’t yet created a buyers market, other than for poor assets he wasn’t interested in. “Good assets are still commanding premium prices,” Brown said.
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    EU member states reach compromise on car engine tests

    European countries reached a compromise deal on new testing rules for cars on Wednesday that allows vehicles to carry on emitting more than twice agreed pollution limits despite an outcry caused by the Volkswagen emissions scandal.

    The agreement, thrashed out in extended talks, diluted a proposal from the European Commission, the EU executive, after many of the 28 member states demanded leeway to protect the car industry.

    EU sources, speaking on condition of anonymity, said the Netherlands had been among a handful of countries seeking stricter rules and it alone voted against the compromise as too weak.

    Before the talks that began at 10 am (0900 GMT) and finished around 3.30 pm, two hours later than planned, national position papers seen by Reuters showed deep divisions between nations.

    Among those calling for more latitude for the car industry, the German government said: "the diesel engine should be preserved as a powertrain option on the mass market." Germany also said controls on enforcement of legal limits needed to be pragmatic.

    The European Commission had heaped pressure on EU governments to reach a swift deal.

    Industry Commissioner Elzbieta Bienkowska said earlier on Wednesday if member states could not agree, they would dent consumer confidence and have negative consequences for the automotive industry.

    The European Commission proposed "real-world" testing would become operational from next year, but would only take full effect after a two-year phase-in for new vehicles from 2017.

    Initially nitrogen oxide (NOx) readings, primarily associated with diesel cars, could exceed an 80 milligramme/kilometre limit by 60 percent before falling to 20 percent.

    Instead, the compromise agreed on Wednesday sets a "conformity factor" of 2.1 from late 2017, meaning cars could emit more than twice the official limit.

    Two years later, it would fall to 1.5, the EU sources said, meaning vehicles could emit nitrogen oxides, associated with respiratory disease and premature death, up to 50 percent above the legal ceiling.

    Volkswagen is battling the biggest business crisis in its 78-year history after admitting in September it installed software in diesel vehicles to deceive U.S. regulators about toxic emissions.

    In Europe, a failure to close the gap between NOx emissions in real driving conditions compared with tests, confirmed by European Commission research, has drawn unfavourable comparisons with Washington's track record in policing business.

    "Today's decision on new car emission tests is contemptible," Dutch Liberal politician Gerben-Jan Gerbrandy said.

    "We will now look at all legal means to challenge this decision and will push for the European Parliament to object to the proposal," Green environment spokesperson and vice-president Bas Eickhout said in a statement.

    "It seems governments would rather citizens die as a result of diesel exhaust emissions than require car makers to fit technology typically costing 100 euros," Greg Archer, clean vehicles manager at Transport & Environment, said.

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    GOP Debate III Post Mortem: Trump Top, Fiorina Flop, Bush Biggest Loser

    "Debates in Turmoil" would have been an appropriate summary for tonight's free-for-all CNBC-sponsored screamfest in Boulder, Colorado. Argumentative moderators, mis-stated facts, time complaints, and general whining was everywhere but Trump still managed to come out the other side of this gauntlet unscathed. One major highlight included Santelli and Paul pushing 'Audit The Fed', calls for gold-backed currency,and exclaimed thatThe Fed "has been a great problem" in US society. However, what was odd was the apparent slights to Trump and Carson (questioned less directly) which resulted in an aberrantly low 'talking time' for the leading candidates

    .But across all polls, Trump was the clear winner in the main event (and Bush nearly the biggest loser)...

    Source: Drudge (left) and CNBC (right)

    And Bush was the "biggest loser"..Jeb Bush finally, 85 minutes in, gets to talk about his plan for 4% growth. It’s hard to figure how bland talk of reform is going to win him much new support. There was no applause for his explanation...

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    State Grid 3Q UHV electricity sales up 10.5pct on year

    The State Grid Corp. of China (SGCC), the world’s leading power utility company, realized 114.04 TWh of electricity transaction through its ultra-high voltage (UHV) power transmission lines during the first three quarters of the year, posting a year-on-year rise of 10.46%, said the company on October 22.

    Total electricity sales of the company between January and September stood at 537.7 TWh, falling 1.74% year on year, it said.

    The four major UHV DC power transmission lines—Fufeng, Jinsu, Tianzhong and Binjin—have transmitted a total 100.15 TWh of electricity to eastern and central China by October 13 this year, saving more than 40.1 million tonnes of standard coal equivalent.

    Between January and September this year, Fufeng, Jinsu and Binjin UHV power transmission lines transmitted a total 75.34 TWh of electricity, rising 8.44% on year. Tianzhong transmission line transmitted 19.43 TWh of electricity during the same period, up 120.3% on year.

    Newly-added installed capacity of the company amounted to 89.96 GW during the same period, with hydropower, thermal, nuclear, wind and solar power at 8.68GW, 52.26GW, 3.18GW, 11.44GW, and 10.38 GW, respectively.

    Total power generating installed capacity of the company stood at 1.1 TW by end-September this year, a year-on-year rise of 9.7%.

    The power consumption within the company’s business area was expected to rise 0.6% from the previous year to 1,126 TWh in the fourth quarter; while that of the whole year would reach 4,385 TWh, up 0.5% on year, the State Grid Energy Research Institute said.

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    Oil and Gas

    Iran total oil loading hits 7-month low in Oct -shipping source

    Iran's exports of crude oil and condensate dropped to a seven-month low this month, hit by refinery maintenance and a lull in demand ahead of winter, according to an industry source with knowledge of the nation's tanker loading schedule.

    Still, loadings of the light oil condensate grade were robust - the second highest for the year - due to Iran's attractive pricing relative to other producers, the source said.

    Iran this month exported 1.07 million barrels per day (bpd) of crude and condensate, down 13 percent from revised figures in September and the lowest since March, when India and Japan took no oil to stay within sanction limits, said the source who keeps a close watch on the producer's shipping programme.

    Asia's Iranian crude oil imports for the last two years have dipped in October, however, before recovering due to seasonal winter demand, and some industry sources said Chinese loadings are likely to rebound again in the coming months.

    Iran's exports of condensate, a by-product of natural gas output, in October totalled 240,000 bpd, the second-highest this year and down 10 percent from top-month September.

    Industry sources attributed the recent high condensate shipments in part to Unipec - the trading arm of Chinese state giant Sinopec - resuming its purchases after laying off the light oil for several months, taking about 1 million barrels each month in September and October.

    Regional grades such as Australia's North West Shelf condensate have also become more expensive and Iranian supply more competitive, industry sources said.

    "Iranian condensate is very cheap and we have been paying close attention," said a source with a North Asian buyer of condensate from Iran's South Pars gas fields.

    To counter competing condensate from Qatar, among others, Iran has offered discounts to retain market share after its crude exports have more than halved from 2.5 million bpd in 2011, sources said.

    Officials at state-owned National Iranian Oil Company did not immediately respond to an emailed request for comment.

    Iranian crude and condensate loadings by Tehran's main customers - China, India, Japan and South Korea - declined for a third straight month to around 850,000 bpd in October, down 12 percent from September.

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    Shell horror show.

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    Profit adjusted for one-time items and inventory changes dropped to $1.77billion from $5.85billion a year earlier. The firm’s upstream business bore the brunt of the financial dip.

    Chief executive Ben van Burden said:“Shell’s integrated business and our performance drive are helping to mitigate the impact of low oil prices on the bottom line, in what is a difficult environment for the industry today.

    “We continue to improve the operational performance of our assets, and production volumes are up. Costs are falling across the company and Shell’s performance drive is delivering at the bottom line.
    Our financial framework is highly competitive, with balance sheet gearing at 12.7%, similar to year ago levels, despite a halving of oil prices. Both net investments and dividends have been covered by operating cash flow over the last year, when oil prices have averaged $60 per barrel.

    “While our cash flow and our operating performance in the quarter were strong, the headline numbers we’re reporting today include substantial charges. These charges reflect both a lower oil and gas price outlook and the firm steps we are taking to review and reduce Shell’s longer-term option set.

    “We have halted exploration activities offshore Alaska, and stopped the construction of the Carmon Creek in-situ oil project in Canada.

    “These are difficult, but impactful decisions. I am determined that Shell will become a more focused and competitive company as a result.”

    The company leader confirmed its takeover of BG was still on track for 2016 target date. He said the deal would act as a “springboard to focus Shell into fewer and more profitable themes, especially deep water and integrated gas.”

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    Total beats forecast, raises production target

    French oil and gas company Total's net adjusted profit tumbled 23 percent to $2.756 billion in the third quarter compared with the same period a year ago, the firm said on Thursday, hit by a sharp fall in global oil prices.

    The firm however revised its production growth target higher to more than 9 percent this year from 8 percent previously following a 10 percent jump in production in a third quarter boosted by new projects.

    Analysts on average had expected $2.391 billion in net adjusted profit, according to Thomson Reuters I/B/E/S estimates.

    "In a context where the oil price has fallen by 50 percent in one year, Total was able to demonstrate its resilience by limiting to 23 percent the decrease in its third quarter adjusted net income of $2.8 billion," Chief Executive Officer Patrick Pouyanne said in a statement.

    Record-high margins in the European refining sector boosted profits at Total's downstream division, which were up 82 percent on the previous year in the third quarter.

    Total said that it was on track to more than beat its target of $1.2 billion in cost reductions in 2015, while organic investments after nine months were $16.6 billion, in line with the objective of $23-24 billion for 2015.

    Rival BP on Tuesday announced a third round of spending cuts and more asset sales over the coming years to tackle the extended period of low oil prices and help pay for its $54 billion U.S. oil spill settlement.
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    PetroChina Profit Plunges to Record Low on Oil Price Rout

    PetroChina Co., the country’s biggest oil and gas producer, posted its worst quarterly profit as a plunge in crude prices punished revenue.

    Net income dropped to 5.2 billion yuan ($818 million), or 0.03 yuan a share, from 27.9 billion yuan, or 0.15 yuan, a year earlier, the Beijing-based company said in a statement to the Shanghai Stock Exchange on Thursday. That compared with the 10.9 billion yuan average of four analyst estimates compiled by Bloomberg.

    “It’s a pretty weak performance across all segments,” Neil Beveridge, an analyst at Sanford C. Bernstein & Co., said by phone from Hong Kong. “PetroChina is struggling in the low crude environment and needs to find a way to stop the bleeding.”

    PetroChina relies on oil and gas production for most of its revenue, and the tumble in crude prices since last year has taken a toll on the explorer.

    Sales dropped 29 percent to 427 billion yuan in the third quarter. The company’s realized crude price fell 49 percent to $51.16 a barrel in the first nine months, according to the statement, while oil and gas output rose 3.6 percent to 1.1 billion barrels of oil equivalent.
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    CNOOC Limited Announces Key Operational Statistics for Q3 2015

    In the third quarter, the Company achieved a total net production of 127.5 million barrels of oil equivalent (BOE), representing a significant increase of 23.8% year over year (yoy). Net production from offshore China reached 83.3 million BOE, a 28.2% yoy increase, primarily due to the production contribution from newly commenced projects in Bohai and the Eastern South China Sea. Meanwhile, net production from overseas rose 16.5% yoy to 44.3 million BOE, mainly because of maintenance at the Buzzard oilfield during the same period last year and new production from the Golden Eagle project in the U.K. North Sea.

    CNOOC Ltd said its third-quarter unaudited sales revenue from oil and gas fell 32.3 percent on low oil prices as its average realized oil price declined by 51 percent to $48.84 a barrel.

    The company reported sales of 36.25 billion yuan ($5.70 billion) for the third quarter, compared with 53.57 billion a year earlier, according to a filing with the Hong Kong bourse. The state-controlled firm does not publish quarterly earnings.

    The company said its capital expenditure fell 44.0 percent on year to roughly 14.75 billion yuan ($2.32 billion) amid belt-tightening.

    During the period, the Company made 3 new discoveries and drilled fourteen successful appraisal wells in offshore China . The Caofeidian 6-4 structure was successfully appraised and proved to be a mid-sized oilfield, which represents a significant breakthrough after several years of oil and gas exploration in western Bohai. The new discovery of Liuhua 21-2 further demonstrated the exploration potential of Baiyun Sag in Pearl River Mouth basin and is expected to be developed jointly with adjacent oil structures in the area, including Liuhua 20-2. In the third quarter, the Luda 10-1 oilfield comprehensive adjustment project commenced production, while other projects progressed smoothly.

    In the third quarter, the unaudited oil and gas sales revenue of the Company reached approximately RMB36.25 billion , representing a decline of 32.3% yoy. The Company's average realized oil price declined by 50.7% yoy to US$48.84 per barrel, while the average realized natural gas price declined by 3.0% yoy to US$6.41 per thousand cubic feet.

    Facing a low oil price environment, the Company continued to lower costs and enhance efficiency, in addition to decreasing its full-year capital expenditures. During the period, the Company reduced its capital expenditures by 44.0% yoy to approximately RMB14.75 billion .

    Mr. Li Fanrong , CEO of the Company commented, "In the third quarter, the Company made smooth progress in overall business, including exploration, development and production. Our cost controls and enhanced efficiency measures were executed effectively and achieved remarkable results as we aimed to proactively respond to the impact of low oil prices. Meanwhile, we are confident that we will achieve our production and operation targets for the year."
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    Pemex imports 75kbpd per day of light crude.

    Oct 28 (Reuters) - State oil firm Pemex said on Wednesday it had received a license from the United States to import U.S. light crude in exchange for exports of Mexico's heavier crude oil for the first time, albeit with a lower ceiling than originally planned.

    The terms of the year-long license will allow Pemex's commercial arm, P.M.I. Comercio Internacional, to import U.S. light crude to process in its refineries from October, with the limit capped at 75,000 barrels per day (bpd).

    Pemex will initially receive conventional U.S. light crudes as part of the swap and later shipments could carry shale crudes as well.

    A Pemex spokesman said the decision to cut the original plan to import up to 100,000 barrels per day was made in accordance with the company's present needs at its refineries.

    The first U.S. shipment would arrive in Mexico from the first half of November, he said.

    "The permit is for 75,000 (bpd) because that's what we asked for," he said. "They gave us permission for 75,000 (bpd) for one year, but when that year ends, we can ask for more or less, whatever we need."

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    Engie said it has executed a 5-year deal with Cheniere

    France’s Engie said it has executed a 5-year deal with US LNG player Cheniere to buy up to 12 LNG cargoes per annum.

    According to the agreement, the cargoes will be delivered ex-ship at the Montoir-de-Bretagne regasification terminal in France from Cheniere’s Corpus Christi and Sabine Pass LNG export plants currently under construction in Texas.

    The sales price for the LNG cargoes is linked to Northern European indexes. The deliveries will start in 2018, Engie said on Wednesday.

    The US LNG can alternatively be shipped to other European terminals, the French company added.

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    Saipem plans 3.5 bln euro rights issue as Eni steps back

    Italian oil contractor Saipem is asking investors to pump in fresh capital equivalent to its current market value to help it to weather the oil service recession and plot a path to recovery as main investor Eni takes a step back.

    Saipem, which is 43 percent owned by Eni, said on Wednesday that it would hold a 3.5 billion euro ($3.87 billion)rights issue in the first quarter of next year as part of a new four-year turnaround plan aimed at ensuring the company's survival without its Eni safety net.

    At the same time Eni said it had agreed to sell about 12.5 percent of its Saipem stake to state-owned investment fund Fondo Strategico Italiano (FSI). That deal, in conjunction with a shareholder pact with FSI, will see Eni relinquish its control and cut 5.1 billion euros of debt from its balance sheet.

    State-controlled Eni, the A- credit rating of which had previously helped Saipem to service its debt, is looking to focus on its bread-and-butter business of finding oil and gas and is keen to get its subsidiary on a standalone footing.

    Saipem, which has now been given a Baa3 investment grade rating by Moody's, said the 3.2 billion euros of gross debt remaining after the rights issue would be refinanced by new credit lines.

    "We are ready to go it alone. I think there's always a good time in the history of a company for step change. This is certainly a major change," Saipem Chief Executive Stefano Cao told Reuters.

    With margins and orders battered by low oil prices, Saipem needs a large capital injection to get the group back on its feet. It has issued two profit warnings in a little more than 30 months and in July announced cost cuts including 8,800 redundancies.

    Saipem, which expects the market to recover in 2017, said it had expanded a previous cost savings target of 1.3 billion euros to 1.5 billion euros and is ready to dispose of non-core assets to lift its profit margins.

    "The rights issue was good news, since it was bigger than expected, but it will only happen next year and that means dragging out the pain and suffering for another four months or so," he said.

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    Valero pumps out strong profit as refining margins rise

    U.S. refiner Valero Energy Corp reported a better-than-expected quarterly profit, helped by robust demand for refined products and lower crude costs.

    Valero also raised its quarterly cash dividend to 50 cents per share from 40 cents.

    The company's shares were up 2.4 percent at $63.99 in premarket trading on Wednesday.

    Refiners have been pumping out strong profits due to high crack spreads, the difference between crude oil and prices of refined products, as crude prices have more than halved since June last year due to a supply glut.

    Valero expects continued healthy gasoline demand in the fourth quarter, Chief Executive Joe Gorder said in a statement on Wednesday.

    Gasoline demand is expected to remain buoyant, helped by lower prices, even after accounting for a seasonal winter downturn in the consumption of motor fuel.

    Valero's refining margin rose to $14.38 per barrel in the third quarter ended Sept. 30, from $11.81 per barrel a year earlier.

    Net income from continuing operations attributable to Valero's stockholders rose 30 percent to $1.38 billion, or $2.79 per share.

    Analysts on average had expected earnings of $2.66 per share, according to Thomson Reuters I/B/E/S.

    Operating revenue fell 34.4 percent to $22.58 billion.
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    Hess Slashes 2016 Drilling Budget 27 Percent on Oil Swoon

    Hess Corp. plans to cut spending by about 27 percent next year after its oil and natural gas business lost more than $2 million a day during the third quarter.

    Hess estimated its 2016 capital budget will fall to $2.9 billion to $3.1 billion from $4.1 billion this year, according to a statement from the New York-based company on Wednesday. Daily oil and gas output will decline to the equivalent of 330,000 barrels to 350,000 barrels next year, an 8.7 percent drop from the full-year 2015 target, based on the mid-range of those numbers.

    The company posted a net loss of $279 million, or 98 cents a share, compared with profit of $1.01 billion, or $3.31, a year earlier, according to the statement. Excluding one-time items, the per-share loss was $1.03, beating the average estimated loss of $1.20 from analysts in a Bloomberg survey.

    Hess’s exploration and production unit lost $188 million during the quarter as a 53 percent plunge in the price the company received for each barrel of crude more than offset a 19 percent jump in production. Even with hedges in place intended to help the company lock in prices for its output, its average selling prices for crude was $45.66 a barrel, compared with $96.78 a year earlier.

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    Occidental swings to quarterly loss on $2.6 bln in charges

    Occidental Petroleum Corp, the fourth-largest U.S. oil producer, swung to a significant net loss for the third quarter on Wednesday as it booked charges for dropping futures prices and halted projects while saying it was exiting North Dakota.

    The company, which also has operations in the Middle East and Colombia, showed a net loss of $2.61 billion, or $3.42 per share, in the third quarter ended Sept. 30, compared with a profit of $1.21 billion, or $1.55 per share, in the year-ago quarter.

    The result reflects the tough times a more than 50 percent drop in crude prices over the last year has wrought on oil companies.

    Charges it took "reflect the sharp decline in the oil and gas futures price curves, as well as projects that management determined it would cease to pursue," Occidental said in a statement.

    On an adjusted basis, Occidental was able to beat expectations as it lifted output from a year earlier and slashed costs to offset tumbling prices.

    Houston-based Occidental slashed its capital budget by $300 million in the quarter, and Chief Executive Steve Chazen said the company has "made a strategic decision to exit" the Bakken, which had drained resources away from Occidental's core Texan shale fields.

    Reuters reported this month that Occidental had sold its North Dakota assets to private equity fund Lime Rock Resources. It was the most significant pullback by a big company from the Bakken fields of North Dakota since the downturn started.

    Excluding one-time items, the company earned 3 cents per share.

    By that measure, analysts expected a loss of a penny per share, according to Thomson Reuters I/B/E/S.

    Average daily production rose 16 percent to 689,000 barrels of oil equivalent (BOE) from the year-ago quarter, even as the average price Occidental received for its oil fell 49 percent to $47.78 per barrel. It had started up its Al Hosn oil field in the United Arab Emirates, which produced 50,000 barrels a day in the third quarter, and its oil output in West Texas surged 72 percent to 74,000 barrels a day.

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    US weekly oil production rises slightly

                                         Last Week   Week Before   Year Before

    Domestic Production...... 9,112             9,096             8,970

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    Summary of Weekly Petroleum Data for the Week Ending October 23, 2015

    U.S. crude oil refinery inputs averaged over 15.6 million barrels per day during the week ending October 23, 2015, 271,000 barrels per day more than the previous week’s average. Refineries operated at 87.6% of their operable capacity last week. Gasoline production increased last week, averaging 9.7 million barrels per day. Distillate fuel production increased last week, averaging 4.9 million barrels per day.

    U.S. crude oil imports averaged over 7.0 million barrels per day last week, down by 439,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 7.2 million barrels per day, 3.8% below the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 722,000 barrels per day. Distillate fuel imports averaged 108,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 3.4 million barrels from the previous week. At 480.0 million barrels, U.S. crude oil inventories remain near levels not seen for this time of year in at least the last 80 years. Total motor gasoline inventories decreased by 1.1 million barrels last week, but are above the upper limit of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories decreased by 3.0 million barrels last week but are in the middle of the average range for this time of year. Propane/propylene inventories remain unchanged last week and are well above the upper limit of the average range. Total commercial petroleum inventories decreased by 3.7 million barrels last week.

    Total products supplied over the last four-week period averaged over 19.5 million barrels per day, up by 1.0% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged over 9.1 million barrels per day, up by 3.4% from the same period last year. Distillate fuel product supplied averaged about 4.0 million barrels per day over the last four weeks, up by 10.0% from the same period last year. Jet fuel product supplied is up 1.9% compared to the same four-week period last year.

    Cushing saw a draw of 785k barrels (the largest in 4 weeks)

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    PPT The Next Big Thing In Enhanced Oil Recovery

    Sleeping giant oilfields that were once thought mature and largely tapped out are getting a second lease on life with the latest in revolutionary enhanced oil technology: the futuristic-sounding Plasma Pulse Technology—a potentially billion-dollar business hitting the markets hard and backed by major investments.

    Major strategic investors have been playing the enhanced oil recovery (EOR) market for some time, but a recent $15-million investment specifically in Propell Technologies Group, Inc. (OTCQB:PROP)’s Plasma Pulse Technology (PPT) gives us a glimpse of where this revolutionary tech is going.

    The past few years have demonstrated that EOR is the savior of the North American oil boom, and the only thing that makes sense for producers who understand that operators have to be able to withstand price volatility.

    Plasma Pulse Technology uses a series of impulse waves to reopen permeability for up to one year per treatment. Data from an average of 27 oil wells showed a 295% increase in initial production after a single PPT treatment, while an average from 36 injector wells showed a 545% increase of the amount of fluid after a single plasma treatment.

    In an Oklahoma oil field, the application of PPT led to an amazing 1040% increase in daily well production—and that is just one of many successful plasma pulse case studies.

    In addition to making wells more profitable, PPT enables the re-opening of wells without requiring water, without polluting chemicals, and without causing earthquakes. The technology doesn’t open rock like fracking; rather, it comes in afterwards and cleans up well bores to clear the pathway for oil to flow faster and more efficiently to the surface.

    We’re looking at the immediate returns for this commercially proven method of getting more oil out of the ground, with the potential to double a well’s output by using PPT. This is exactly what investors today want to see from an operator, particularly in an atmosphere of depressed oil prices.

    And the savings go far beyond the well. With anti-fracking sentiments at an all-time high, and new stringent regulations popping up, PPT offers a cheap and easy alternative.

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    Marcellus Driller EdgeMarc Gets $300M from Ontario Teachers

    EdgeMarc Energy is a small driller headquartered in the Pittsburgh area, formed in 2012.

    The company has leased 50,000 acres in the Marcellus and Utica Shales. On Monday EdgeMarc issued a press release to announce they’ve attracted a new investor–the Ontario Teachers’ Pension Plan–which has promised the company up to $300 million in cash in return for part ownership (called an “equity commitment”).

    The announcement also says EdgeMarc currently drills and produces natural gas in Monroe and Washington counties in Ohio, and Butler County in Pennsylvania.

    In checking the latest issue of our 2015 Marcellus and Utica Shale Databook series, Volume 2, we find that EM Energy (which we assume is EdgeMarc) received permits to drill or continue work on 11 different wells in Butler County from May through August 2015.

    Including an existing equity commitment from Goldman Sachs, EdgeMarc, a private company, has now sold off $750 million worth of the company to outside investors…
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    National Oilwell Varco’s third quarter results reflect downturn

    National Oilwell Varco posted better than expected third quarter results, recording earnings of $155million, compared to $289million in the previous three-month period, whilst stating it expected to take advantage of investment opportunities in the continued downturn.

    Revenues for the third quarter of 2015 were $3.31 billion, a decrease of 15% from the second quarter of 2015 and a decrease of 41% from the third quarter of 2014. Analysts had predicted lower revenue and earnings ahead of today’s results.

    Chief executive Clay Williams, said: “The sharp decline in oil prices and activity since late last year has impacted each of our segments, and will drive activity lower in the fourth quarter.

    We believe our strong financial resources will enable National Oilwell Varco to invest in the extraordinary opportunities that will arise from this downturn, and we expect to emerge with greater capability and efficiency.

    “In the meantime, with limited visibility into the timing of a recovery, we remain focused on managing costs and improving performance, while continuing to develop technologies that help our customers to improve their returns in a lower commodity price world.”

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    Suncor posts third-quarter loss of $376 million

    Suncor Energy Inc. has posted a third-quarter net loss of $376 million, a sharp reversal from the $919-million profit from the same period a year earlier.

    However, stripped of one-time items, Suncor eked out operating earnings of $410 million, down from $1.3 billion during the third quarter of 2014.

    U.S. pipeline opponents celebrate downturn in Alberta oilsands
    Canada's oil patch on track for deep losses in 2015, slow recovery until 2019

    In the release announcing Suncor's third-quarter results late Wednesday, CEO Steve Williams said that if Suncor were able to increase its stake in the Syncrude oilsands mine, operations at the sprawling development north of Fort McMurray, Alta., would run more smoothly.

    "We believe that we can drive real improvements in Syncrude's performance with a larger ownership interest," Williams said.

    Oil producers like Suncor have been squeezed by persistent weakness in crude prices, which have fallen to around $43 a barrel — down 60 per cent from the high point of last year.

    During the third quarter, oilsands cash operating costs per barrel decreased to $27 — the lowest Suncor has seen since 2007 — from $31.10 a year earlier.

    Overall production rose to 566,100 barrels of oil equivalent per day from 519,300.

    "Our focus on operational discipline continues to pay off," said Williams.

    "We're delivering on the reliability targets and cost reduction measures we established, leading to the lowest cash operating cost per barrel for oilsands operations in eight years — the results clearly demonstrate the impact this discipline has on Suncor's performance."
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    Tesoro’s profits soar

    Tesoro Corp. reported record profit Wednesday for third quarter, as earnings jumped 91 percent.

    The San Antonio-based refiner’s earnings from continuing operations jumped to $759 million, or $6.13 a share, compared with earnings of $397 million, or $3.06 a share, for the same period a year ago.

    Favorable margins and high utilization of its plants aided the results. Margins on Tesoro’s products rose to $15.57 a barrel compared with $11.82 for the third quarter of last year.

    “We reported very strong results for the third quarter,” CEO Greg Goff said, attributing the results in part to “strong performance across all business segments.”
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    Alternative Energy

    SunPower to sell projects in power plant unit - CEO

    No. 2 U.S. solar panel maker SunPower Corp is looking to sell projects in its power plant business and potential buyers include Berkshire Hathaway Energy, Chief Executive Officer Thomas Werner told Reuters.

    The company first plans to offer the project to 8Point3 Energy Partners LP, a joint venture between SunPower and rival First Solar Inc that went public in June.

    If the deal does not go through, SunPower would directly approach other American utilities and American banks that fit the right profile of buyers, Werner said.

    "Berkshire Hathaway (Energy) is one of the potential buyers of the power plant projects if 8Point3 chooses not to buy," Werner said on Wednesday.

    Berkshire Hathaway Energy, a unit of Warren Buffett-led holding company Berkshire Hathaway Inc, was not immediately available for comment.

    SunPower's power plant business, which has been posting falling revenues for the past three quarters, accounted for nearly 35 percent of its total revenue in the quarter ended Sept. 27.

    The company said it would make its final decision by the first half of 2016.

    SunPower, majority owned by French energy giant Total SA , in 2013 had sold one of the largest solar projects in the world to Berkshire Hathaway Energy. The project, which is located in Southern California, has a capacity to generate 579 megawatts of power.


    SunPower on Wednesday also reported a surprise quarterly profit, helped by strong demand for rooftop installation, and forecast 2015 earnings above expectations.

    SunPower said it expected 2015 adjusted profit of $1.95 to $2.05 per share, above the average analyst estimate of $1.56, according to Thomson Reuters I/B/E/S.

    Third-quarter revenue of $441.4 million also beat analysts expectations of $428.9 million.

    Excluding items, SunPower earned 13 cents per share. Analysts expected a loss of 2 cents per share.
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    Precious Metals

    Barrick earnings beat market expectations, cuts debt

    Barrick Gold Corp, the world's biggest gold producer, reported lower quarterly adjusted earnings on Wednesday due to weaker gold and copper prices but results were better than the market expected.

    The Toronto-based miner, which has the highest debt of any gold miner, said it had reduced its debt to $11.2 billion as of Wednesday. That is down from $12.8 billion at the end of June and $13.1 billion at the start of the year.

    Barrick, like rival Newmont Mining Corp, gave an improved cost outlook for the year.

    It also expects to announce the outcome of the sale of a package of six U.S. gold assets in the fourth quarter.

    Earlier, Barrick reported adjusted net earnings of $131 million, or 11 cents a share in the three months to end-September, compared to $222 million, or 19 cents a share in the same period a year ago. Analysts expected the miner to earn 7 cents a share, according to Thomson Reuters I/B/E/S.

    On a net basis, Barrick swung to a third-quarter loss of $264 million, or 23 cents a share, as it booked a $455 million impairment charge related primarily to an accounting reclassification of its Zaldivar copper mine in Chile as "held-for-sale."

    Barrick agreed in July to sell 50 percent of its Zaldivar mine to copper miner Antofagasta Plc for $1 billion in cash.

    Barrick said it now expected lower all-in sustaining costs of between $830 and $870 per ounce this year. That compared with a previous forecast of between $840 and $880 per ounce.

    Full-year gold production is expected to be between 6.1 million and 6.3 million ounces, as Barrick lowered the top end of the band from 6.4 million ounces to reflect expectations of lower gold production from Acacia Mining Plc.

    Barrick said it plans to use about $1 billion of the proceeds from the Zaldívar sale, which is expected to close in the fourth quarter, to reduce debt. This would bring total debt repayments this year to about $2.9 billion. It will use free cash flow to reach its target of $3 billion for the year.

    Barrick, which has mines in the Americas, Australia and Africa, said it produced 1.663 million ounces of gold in the third quarter, slightly up from 1.649 million ounces in the comparable quarter in 2013.

    The miner said its all-in sustaining costs, the industry cost benchmark, were $771 per ounce in the quarter, compared with $834 an ounce in the same quarter a year ago.
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    Newmont earnings beat market expectations, cuts cost outlook

    Newmont Mining Corp, the biggest U.S.-based gold miner, reported lower earnings on Wednesday but the results were better than the market expected on the back higher gold production and lower cost.

    Denver-based Newmont also improved its cost outlook for the year and announced it would expand its Tanami gold mine in Australia.

    Newmont said its net income from continuing operations was $202 million, or 38 cents a share, in the quarter ended September 30, from $210 million, or a 42 cents a share, in the same period a year ago.

    Adjusted net income was $126 million, or 23 cents a share, ahead of analysts expectations of 17 cents, on average, according to Thomson Reuters I/B/E/S.

    Newmont lowered its forecast for all-in sustaining costs this year to between $880 and $940 an ounce. Its previous forecast was for costs of between $920 and $980 in 2015.

    It left its 2015 production forecast of 4.7 million ounces to 5.1 million ounces unchanged.

    In the third quarter, attributable gold production from Newmont mines in the Americas, Australia, Asia and Africa rose to 1.34 million ounces of gold and 48,000 tonnes of copper in the quarter. That compares with 1.15 million ounces of gold and 13,000 tonnes of copper in the third quarter of 2014.

    All-in sustaining costs to produce one ounce of gold improved to $835 an ounce in the third quarter from $995 in the same quarter a year ago.
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    Base Metals

    Antofagasta cuts annual copper output forecast for third time

    Chile's Antofagasta Plc on Wednesday cut its annual copper production forecast for the third time this year, sending its shares lower as the miner posted steady output in the third quarter versus the second.

    Like its peers, London-listed Antofagasta is battling a slide in commodity prices as a result of slowing growth in China, the world's top consumer of industrial metals.

    The miner has this year also been hurt by declining ore grades, unfavourable weather and environmental protests.

    It cut its full-year copper output guidance to 635,000 tonnes from 665,000 after delayed ramp-up at its Centinela Concentrates operations and a minor pit wall slide at its Centinela Cathodes operations.

    The company had to suspend operations at its Centinela, Michilla and Antucoya operations in March due to unusually heavy rains in the Atacama desert.

    Antofagasta said its copper production in the third quarter was 157,000 tonnes, in line with the second quarter.

    The miner had been focusing on its $1.9 billion Antucoya greenfield project and other brownfield expansions to cope with a fall in production, due to ageing mines and declining copper grades.

    It said on Wednesday that it achieved its first output at Antucoya in September, producing 2,200 tonnes of copper cathode.

    Net cash costs were down 11.3 percent quarter on quarter to $1.42 per pound and the company maintained its net cash cost guidance for the year at $1.47 per pound.

    "That cash cost guidance remains intact is a bonus provided by the macro environment, however still not ideal in a falling commodity price environment," Investec analysts said in a note.

    "We remain bearish on the stock and warn investors of increasingly reduced dividend potential from weaker earnings profile, high capex spend and acquisition of Zaldivar undermining the balance sheet."

    Antofagasta agreed in July to buy a 50 percent stake in Barrick Gold's Zaldivar copper mine in Chile for $1 billion in cash..

    The deal is expected to close in the fourth-quarter of this year, the company said.

    The company is targeting savings of about $160 million this year and its chief executive told Reuters earlier this month it had cut back on exploration to cut costs.
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    Philex can extend Padcal copper-gold mining by 2 years

    Philex Mining Corp, one of the Philippines' biggest miners, said on Thursday it had found additional ore reserves at its Padcal copper-gold project that will extend the mine's life by two more years to 2022.

    Philex, which exports most of its Padcal copper concentrate to Japan for smelting by Pan Pacific Copper Co Ltd, part of JX Holdings Inc and partly owned by Mitsui Mining and Smelting Co Ltd, said the extra reserves should enhance the company's value.

    The additional ore reserves found at Padcal in northern Philippines, estimated at 20 million tonnes, provide the company with more flexibility before the Silangan project comes onstream, Philex said in a statement.

    The $1.2 billion Silangan copper-gold project in Surigao del Norte province in the southern Philippines represents Philex's biggest prospective revenue driver when its Padcal mine closes after operating for several decades.

    Philex has been cleared by the government to proceed with the development of Silangan, which will initially have a 25-year mine life, paving the way for production to potentially begin in 2018, four years before Padcal closes.

    Philex, owned by Hong Kong-listed conglomerate First Pacific Co Ltd, suffered a 21 percent drop in nine-month profit due to depressed metal prices.
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    Steel, Iron Ore and Coal

    Mining machinery sold dirt cheap in Australia as downturn bites

    Image Source: ABCABC reported that auctioneers are hard at work selling tens of millions of dollars of coal mining machinery for just a fraction of its original market value.The severe downturn in the Australian resources sector has led to a massive oversupply of equipment, and much of it is unsuitable for use in any other industry. This means unwanted excavators, trucks and sundry heavy machinery will end up as scrap, if not sold at auction.

    The plant and equipment at auction at Charbon in central New South Wales was owned by Big Rim, a mining services contractor which collapsed after the miners it serviced also closed. When the auction began the owners of a once-thriving business were hoping this fire sale would at the very least cover their debts.

    Mr Peter Turner's Gold Coast company Turner Engineering used to compete for contracts with Big Rim. He said "I'd be interested in at least 50 per cent of what's here, and there are at least 100 machines here. It's got to be at least 30 per cent or 40 per cent under value. Closer to 50 most probably. It's been a very good day for me, very profitable day for me.”

    Mr Chris Hassall, whose company is conducting the auction, said "At the moment we've probably got the worst downturn I've seen in 25 years.”

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    China's Baosteel logs first quarterly loss in almost three years

    Baoshan Iron & Steel Co Ltd (Baosteel), China's biggest listed steel company, posted its first quarterly loss in nearly three years, plagued by sluggish demand as key pillars of the economy, such as property, slowed.

    Baosteel swung to a net loss of 920.5 million yuan ($145 million) for July through September from a net profit of 1.86 billion a year ago, the steel maker said on Wednesday.

    The last time it logged a quarterly loss was in the fourth quarter of 2012, according to Reuters data based on company information.

    In the first nine months net profit fell 55 percent to 2.25 billion yuan.

    "The steel sector was undergoing severe adjustments in the third quarter, with consumption remaining weak as the country's macro economy was sluggish," Baosteel said.

    Its results reflected a dismal performance in China's steel sector, the largest producer in the world.

    Shanxi Taigang Stainless Steel Co Ltd and Liuzhou Iron & Steel Co Ltd said on Tuesday they had swung to the red in the third quarter, while Hebei Iron and Steel Co Ltd posted a 10 percent fall in net profit.

    Baosteel's results came after China's market closed with its shares down 0.7 percent, outperforming a 1.9 percent decline in the CSI300 index of the largest listed companies in Shanghai and Shenzhen.

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