Mark Latham Commodity Equity Intelligence Service

Friday 13th May 2016
Background Stories on

News and Views:

Attached Files

    Oil and Gas


    Brazil Senate Votes in Favour of Dilma Rousseff Impeachment Trial

    Brazil’s Senate voted early Thursday to put President Dilma Rousseff on trial for illegally manipulating fiscal accounts, making her the second leader since democracy was restored in 1985 to be forced to step down amid impeachment proceedings.

    In a marathon voting session that began the previous day, 55 senators voted to move forward with the impeachment processwhile 22 voted against. As a result of the outcome, which was widely expected, Ms. Rousseff will have to step down almost immediately to stand trial, which could take up to 180 days.

    She could return to office if less than two-thirds of the Senate vote to convict her. But few believe the unpopular president will survive the process.

    Vice President Michel Temer will assume the presidency for the duration of the trial and would finish out her term through the end of 2018 if she is convicted.

    Ms. Rousseff is being tried on charges that she illegally moved money between state-controlled entities to make her government’s budget deficit appear smaller than it really was. She denies wrongdoing and accuses her opponents of effectively staging a coup d’état.

    Brazil’s Senate voted to begin a full impeachment trial of President Dilma Rousseff. That forces her to step aside. What went wrong for the country’s first female president? WSJ’s Jason Bellini has #TheShortAnswer.

    While Ms. Rousseff’s most loyal supporters have endorsed that view, legal scholars say the impeachment process has taken place within the framework of Brazil’s constitution.

    But many have questioned whether the charges against Ms. Rousseff are serious enough to warrant her ouster when many of the legislators leading the impeachment push have been implicated in a massive corruption scandal centered on Petróleo Brasileiro SA,known as Petrobras.
    Back to Top

    Noble Group obtains $3 bln credit facilities, Q1 profit falls

    Noble Group finalised $3 billion in bank credit facilities, a crucial move for Asia's biggest commodity trader to refinance all of its debt for this year after being whacked by credit rating downgrades.

    It reported a 62 percent fall in quarterly net profit, hit by tight credit conditions.

    Noble is trying to shore up investor confidence following Standard & Poor's and Moody's cutting its ratings to junk but the company could end up paying one of the highest interest rates in its existence, Reuters has reported.

    "The group's focus on liquidity limited the trading opportunities of our businesses during the quarter, particularly oil liquids and gas and power," Noble CEO Yusuf Alireza said in a statement.

    "These facilities address substantially all of our remaining 2016 debt," he said.

    The latest credit facilities include $1 billion in an unsecured 364 day revolving loan facility, a transaction which was supported by 25 banks, Noble said.

    Noble will be paying an interest rate of 225 basis points over the U.S. dollar Libor on the loan, more than twice the 85 basis points it paid just a year ago, sources told Reuters.

    The interest rate will be the highest for a one-year loan in Noble's history in Asia, according to Thomson Reuters LPC. Noble did not provide details of interest rates.

    It also announced a $2 billion credit facility which allows for the issuance of trade finance instruments such as letters of credit, as well as for loans.

    The Singapore-listed company reported a net profit of $40.5 million in the three months to March 31 from $106.6 million a year ago on a 32 percent fall in revenue to $11.39 billion.

    The commodity merchant hit the spotlight in February 2015 when it was accused by Iceberg Research of overstating its assets by billions of dollars, claims which Noble has rejected.

    Hit by the worst rout in commodity markets in decades, Noble's Alireza has steered the company to sell assets, cut business lines and taken big writedowns.

    The focus on short-term debt and secured financing is increasing Noble's risk profile and could reduce its financial flexibility, rating agency Fitch said last week when it placed the company on watch for a potential downgrade to junk.

    In February, Noble reported its first annual loss since 1998, battered by a $1.2 billion writedown for weak coal prices.

    Attached Files
    Back to Top

    Vedanta Resources' FY core profit falls 38 pct

    Vedanta Resources' FY core profit falls 38 pct

    Mining and energy group Vedanta Resources Plc said its full-year core profit fell 37.5 percent, weighed by the slump in the prices of commodities.

    The company said earnings before interest, tax, depreciation and amortisation fell to $2.34 billion for the year ended March 31 from $3.74 billion a year earlier.

    Vedanta, which produces iron ore, copper, aluminium, zinc and oil, said revenue fell 16.6 percent to $10.74 billion.
    Back to Top

    Ritchie Hosts record Canadian 2nd hand auction.


    Back to news list 05/02/2016

    Ritchie Bros.' largest Canadian auction ever set new company records for online sales, bidders and number of sellers:

    • CA$140+ million (US$111+ million) sold to online bidders (58 percent)
    • 16,700+ bidders from 55 countries
    • 10,200+ items sold for 1,125+ sellers

    EDMONTON, May 2, 2016 /CNW/ - Selling more than 10,000 equipment items and trucks in five days is a massive undertaking, and last week Ritchie Bros.' Edmonton team showed that it was up for the challenge.

    From April 26 - 30, 2016, Ritchie Bros. sold 10,200+ equipment items and trucks for CA$240+ million (US$191+ million) at its 200-acre Edmonton, AB auction site, making it the company's largest Canadian auction ever and the second-largest auction in company history. The five-day auction attracted 16,700+ bidders from 55 countries—a new company record, surpassing the previous record by 19 percent.

    Approximately 84 percent of the equipment was sold to Canadian buyers (by dollar value), including 46 percent sold to Alberta buyers. More than 13 percent of the equipment was sold to buyers from the United States.  

    "We would like to thank all the consignors who put their trust in us to sell their equipment last week," said Brian Glenn, Senior Vice President, Ritchie Bros. "Our ability to attract more than 16,700 bidders from every corner of the world helped us achieve solid results throughout all five days of the auction. In particular, we saw strong pricing on motor scrapers, crawler tractors, wheel loaders, highway transport and gravel hauling equipment. Of particular note, approximately 46 percent of the equipment was purchased by Alberta buyers, showcasing the strength and size of this market even when there are economic challenges."

    1,125+ companies sold equipment in the auction, including Newcom Earthmovers Ltd. The Brooks, AB-based earthworks construction contractor sold 400+ items in the Edmonton auction as part of a complete dispersal.

    "Ritchie Bros. is a one-stop shop—they know the market and they have resources no one can touch," said Harold Ward, president and owner of Newcom Earthmovers. "We've been buying and selling here since we started the company 12 years ago. With the changing landscape here in Alberta we thought it would be a good time for us to sell and we're happy with the result."

    More than 6,150 people (37 percent) registered to bid in person, while 10,550+ people (63 percent) registered to bid online—both of which are new company records. More than CA$140 million (US$111+ million) of equipment was sold to online buyers (58 percent)—also a new company record.

    "We continue to invest in both our live and online experience, welcoming our customers and offering them the best of both worlds," said Trent Vandenberghe, Vice President, Ritchie Bros. "The onsite experience in an auction of this size is particularly special. It's hard to understand the scope unless you see it in person."  

    One highlight of the auction was the charity auction of two classic cars donated by Edmonton couple Reno and Jane Trentini. The cars sold for a combined CA$182,500 with all proceeds donated to two charitable organizations: the MS Society and the Edmonton Community Foundation.

    Auction quick facts: Edmonton, AB (April 2016)

    • Gross auction proceeds – for CA$240+ million (US$191+ million) *New Canadian record
    • Amount sold to online bidders – CA$140+ million (US$111+ million) *New company record
    • Total registered bidders (onsite and online) – 16,700+ bidders from 55 countries *New company record
    • Online registered bidders – 10,550+ *New company record
    • Number of lots sold – 10,200+ *New Canadian record
    • Number of sellers – 1,125+ *New company record

    Back to Top

    Brazil mining dam reforms unsettle companies, do little for safety: -100m mt iron ore!!!

    Brazilian regulators plan to tighten rules on dams used in the mining industry after a breach last year caused the nation's worst environmental disaster but the changes, while opposed by struggling companies, look unlikely to improve safety.

    Environmental authorities say they will demand an increase in the number and focus of audits for hundreds of dams holding mining waste, known as tailings. They also want to limit the size of dams and how often their walls can be raised to store more waste.

    But engineers, prosecutors and tailings dam experts interviewed by Reuters say the changes will do little to prevent another tragedy if Brazil's chronically under-resourced regulators are not themselves improved.

    When the Fundao dam burst in November at the Samarco mine, owned by BHP Billiton and Vale SA, enough mud to fill 12,000 Olympic swimming pools flattened an entire village, killed 19 people and left hundreds homeless.

    The sludge flooded the Rio Doce river, choking fish and spitting them lifeless to the surface.

    "Fundao is the Chernobyl of the mining industry. There is a before and there is an after," said Geraldo Abreu, head of licensing at the Semad environmental agency for the state of Minas Gerais where the spill occurred.

    Abreu and the task force he joined to revise state and national rules for the industry in the wake of the disaster, is focusing on dams built the same way as Fundao, a design known as upstream.

    It costs about half the price of other dams but is regarded as having a greater risk of failure because its walls are built on a foundation of mining waste rather than external material or solid ground. It is also the most common, holding back waste at mines across the world.

    "We now understand that this type of dam needs to be treated carefully," Abreu said.

    It is still not known exactly why Fundao failed, but Abreu says it was probably the result of a loss of stability in the tailings foundation, a process known as liquefaction. This is usually caused by earthquakes but can result from other factors such as rapidly raising the dam's walls, which in an upstream design are built inwards on top of more dried tailings.

    Under new rules to take effect this month or next, Abreu said miners will have to pay for an extra annual audit to check for liquefaction. Licensing will also set a height limit on the dams and require companies to specify from the outset how much waste the dam will hold and set a date for closure. Existing dams and mines that do not comply could be forced to close.

    Abreu said he initially backed an outright ban on upstream dams but others on the task force persuaded him against it, saying it would be an over-reaction.

    A ban is exactly what some experts, like geophysicist David Chambers, say Brazil needs.

    Chambers, who heads the Montana-based Center for Science in Public Participation and advises mining communities, says companies should be forced to build tailings dams using other more expensive designs: downstream and centerline. These do not use tailings for foundations.

    The proposed regulatory changes appear to have irked Vale, Brazil's biggest miner and the world's largest producer of iron ore.

    In a rare public audience, Vale warned stricter licensing could cost it 100 million tonnes of iron ore production per year, about 8 percent of the global sea-borne market. Thousands of jobs are at stake, it said, without specifically mentioning the dam collapse or regulatory changes.

    Attached Files
    Back to Top

    Posco moves into Lithium, and in scale.

    On February 15, 2016, Posco shocked the world by announcing that it would start building a new 2,500 ton lithium carbonate plant (to become fully operational in 2017) in Argentina which had nothing to do with Western Lithium's Cauchari-Olaroz Project. Despite Western Lithium's denial that Posco chose an alternate partner, it all indicates that that might be the case. We must remember that the HOA signed was a non-binding document. The agreement signed between Posco and Lithea Inc. to construct a new lithium carbonate plant at Pozuelos Salar, Salta Province, then highlights Posco'sdesires to get into lithium carbonate production as soon as possible. Following the previous Dundee Capital Markets link, it also demonstrates that Western Lithium and Lithea are "just two of Posco's many potential partners."

    Furthermore, according to a more recent Korean report, Posco is aiming at shortening the construction period for its lithium plant in Argentina "by moving up the completion date to September this year from the initial target of the end-year." And, in response to the recent surge in demand for the white metal, it plans to hit the unbelievable target of 40,000 tons of lithium carbonate per year in 2017. This last figure can only make sense if we agree that Posco's technology to extract and process lithium carbonate and obtain lithium cathodes for Li-ion batteries developed in cooperation with Research Institute of Industrial Science and Technology (RIST) is truly revolutionary. It then comes as no surprise that Posco's new Chairman served as president of RIST from 2009 to 2011 which implies that he's well aware of the new challenge.

    Back to Top

    Mining bosses shift focus from debt and start to see new investment potential

    The bosses of big mining firms are starting to see potential for new investment as record low margins set the scene for higher commodity prices, they said on Tuesday, marking a change in tone from the focus on cost-cutting and asset sales.

    A prolonged commodities rout has forced even the biggest players to sell assets to deal with piles of debt.

    But BHP Billiton said it expected capital expenditure to rise after next year, while Glencore said structural deficits were returning, led by zinc, and copper also faced "supply challenges".

    Andrew Mackenzie, BHP's chief executive, said the firm was particularly positive on copper and oil but was not just waiting for prices to recover.

    In a copy of a speech he gave to a conference in Miami, he anticipated a $3.6 billion increase in BHP's productivity gains up to the end of 2017 with costs set to fall to half the level seen five years ago.

    He also said capital expenditure would rise after next year as the company made decisions on projects such as the Gulf of Mexico Mad Dog oilfield and Chilean copper mine Spence.

    Speaking at the same conference, Ivan Glasenberg, chief executive of Glencore, said "record low sector margins are setting the scene for the next price upswing" after a plunge in investment.

    Going forward he said growth needed to be redefined as cash flow per share, rather than production volume, and said Glencore was well placed as divestment progressed well and April disposals should be completed this quarter.

    Attached Files
    Back to Top

    Rousseff impeachment takes another strange twist

    Another day, another stunning reversal in Brazil's never ending Rousseff impeachment saga.

    Just hours after Brazilian stocks and currency tumbled when the head of Brazil's lower house Waldir Maranhao said he would annul the soon to be former president's impeachment process, the drive to oust President Dilma Rousseff is once again back on track after Maranhao reversed a decision that had earlier threatened to throw the entire impeachment process into chaos.

    As Bloomberg reports, lawmaker Waldir Maranhao released a statement in the dead of night revoking his own call to annul impeachment sessions in the lower house. Reuters adds that in his official statement to the Senate, Maranhao did not cite any reason for backtracking on his surprise announcement on Monday to annul last month's lower house vote to recommend the Senate try Rousseff for breaking budgetary laws although one can assume that it carried a substantial price tag.

    Rousseff’s allies spent most of Monday trying to capitalize on the lower house leader’s call to annul last month’s impeachment vote in the lower house. Attorney General Jose Eduardo Cardozo said the administration could file an appeal with the Supreme Court by arguing that Maranhao was right in trying to halt the process. Earlier, Maranhao argued that lower house deputies shouldn’t have announced their intention ahead of the April 17 vote to send the motion on to the Senate.
    Back to Top

    Incitec Pivot H1 profit falls on fertiliser price drop, mining slump

    Fertiliser and explosives maker Incitec Pivot Ltd reported a 6.4 percent fall in half-year profit before one-off items on Tuesday, hit by sliding fertiliser prices and weaker mine explosives demand and warned of a tough second half.

    "The markets in which IPL operates are expected to continue to be challenging in the second half of the financial year. This includes the potential for further declines in coal volumes in the U.S. and below trend fertiliser prices," Incitec said in its results statement.

    The world no.2 maker of mine explosives said net profit before one-offs for the six months to March fell to A$137.1 million ($100.2 million) from A$146.4 million a year earlier. That was better than a forecast of A$109 million from Macquarie.

    Its bottom line was dented by a A$105.6 million writedown on its Gibson Island plant, reflecting a slide in fertiliser prices and rising gas input costs on Australia's east coast. That took its net profit down to A$31.5 million.

    Incitec cut its interim dividend by 7 percent to 4.1 cents a share. Its bigger rival Orica rocked the market on Monday by slashing its explosives volume outlook for 2016 and cutting its dividend in half.
    Back to Top

    Rousseff impeachment takes another twist

    Today, the story of Rousseff's impeachment took another unexpected, and sharp U-turn when moments ago, Bloomberg reported that the interim chief of Brazil’s lower house, Waldir Maranhao, accepted a request from the government's attorney general to annul the procedure that approved the impeachment motion in the house, according to reports from Folha de S.Paulo newspaper and Epoca magazine. The stated reason: procedural flaws.


    Whether this means that Rouseff's entire impeachment process has now been derailed (arguably as a lot of money has been transferred under the table) will be revealed shortly.

    And while nobody expected Rousseff to exit without a fight, if this new twist in the Brazilian political soap opera is confirmed and is actually implemented - just three months before the Rio Summer Olympics - it would mark a dramatic anticlimax to a process that was supposed to conclude with the expulsion of Dilma from the presidential seat and unveil a new (if just as corrupt) government, which has been the catalyst for a 40%+ surge in Brazilian stocks YTD, even as Brazil's economy has continued to deteriorate sharply.

    The immediate result: a slump for both Brazilian stocks and the currency, both of which are sharply lower on the initial report.
    Back to Top

    A Panicked China Orders Media To Stick To "Positive Reporting" Or Risk "The Stability Of The Country"

    A Panicked China Orders Media To Stick To "Positive Reporting" Or Risk "The Stability Of The Country"

    If China's recent record surge in loan creation, and its revision of a key PBOC capital outflow "data" wasn't sufficient proof that the world's second largest economy is on the verge of panic, then the explicit propaganda directive issued to the the local press by China's president Xi Jinping late on Friday should certainly seal it.

    As SCMP reports, according to a commentary published by a leading mouthpiece online "having public opinions that are different from the official ones will shake the foundation of the rule of the Communist party and the country."

    Xiakedao, a social media account operated by the overseas edition of People’s Daily, said in a commentary on Friday’s high-profile tour by President Xi Jinping to the three largest state media outlets – People’s Daily, Xinhua and Central China Television — "that the party was alarmed by how different public opinion is from official media."

    And in the starkest warning to the uncontrolled media to toe the party lines, the Friday commentary warned that “if the gap lasts, it will erode the legitimacy of the rule, and destabilise the root of the party and the state,” it said.
    Back to Top

    Australia's Orica slashes sales volume forecast, dividend

    Orica Ltd, the world's largest maker of mine explosives, slashed its forecast sales volumes and halved its dividend to weather a prolonged mining slump after reporting a 10-percent fall in half-year profit.

    After predicting a year ago that 2015 would mark the trough for the mining downturn and earnings would rise modestly this year, the Australian company said on Monday that conditions had worsened sharply in January and February.

    "Market conditions deteriorated more than we anticipated during the half, marked by increased volatility. It is expected that the market will remain challenged for the foreseeable future," Chief Executive Alberto Calderon said in a statement.

    Orica's shares fell as much as 7 percent after the results were released in a broader market down just 0.1 percent.

    Underlying profit for the six months to March dropped to A$190 million ($140 million) from A$211 million a year earlier, in line with a forecast of A$191 million from Macquarie.

    The change in Orica's dividend policy was expected and the magnitude of the dividend cut just reflected that shift, said CLSA analyst Scott Hudson.

    "Of more concern is the downgrade to the volume guidance," he said.

    Ammonium nitrate sales volumes fell 8 percent to 1.71 million tonnes in the first half. The company said it now expects full-year volumes of 3.45 million tonnes, down from an earlier forecast of 3.8 million and down from last year.

    The company's weaker forecast for this year was well below UBS estimates.

    "(The) outlook for challenged markets for the foreseeable future is also likely to result in consensus downgrades beyond current year, in our view," UBS said in a note.

    Orica sliced its interim dividend to 20.5 cents a share from 40 cents a year ago, and said it would pay out 40 to 70 percent of underlying earnings each year, looking to protect its investment-grade credit rating.

    It also slashed planned capital spending for this year to A$320 million from an earlier forecast of around A$450 million.

    Standard & Poor's said the more flexible dividend policy and cut in capital spending should help preserve Orica's 'BBB' rating.
    Back to Top

    China Iron ore coal and copper imports slip in April from March

    Improving margins for steel production starting this quarter pushed iron ore imports higher, with deliveries rising 4.6 percent from a year ago to 83.92 million tonnes in April, a monthly record, customs said. However, that was down 2.2 percent from March imports.

    Iron ore shipments from Port Hedland in Australia, China's biggest supplier, slipped 0.9 percent on the month to 32.6 million tonnes in April, official data showed.

    Chinese coal imports slipped last month, dropping 5.8 percent from a year ago to 18.8 million tonnes. Expectations had been for an increase as power plants sought to replenish stockpiles with cheaper foreign supplies ahead of the summer peak power consumption period.

    The total volume over the first four months reached 67.25 million tonnes, down 2.5 percent compared to the same period of 2015. Imports over the whole of 2015 dropped 30 percent.

    Copper ore and concentrates imports stood at 1.26 million tonnes, down 8 percent on the month, though they were up 21 percent from a year ago, the customs data showed.
    Back to Top

    Japan's Itochu says willing to buy natural resource assets

    Japanese trading house Itochu Corp is willing to buy natural resource assets, taking advantage of a plunge in commodity prices, its president said on Friday. "We are standing by to make purchases of resource assets," Itochu President and CEO Masahiro Okafuji told a news conference. 

    "We are determined to buy assets with China's CITIC if prices are low," he said, without mentioning the size of possible investments or targets. Itochu has been focusing on iron-ore and coal, but the company may invest in other metals or energy assets, he said. 

    Okafuji also said, however, that he did not expect a sharp recovery in resource prices for the next decade. "We need to be selective," he said. Itochu invested in CITIC, part of China's oldest and biggest conglomerate, last year. The investment was Itochu's biggest ever.
    Back to Top

    US Large Truck Orders Continue To Plunge, Down 39% In April

    Last month, trucking fleets ordered just 13,500 Class 8 trucks, the big rigs used on long-haul routes, down 16% from March and 39% from a year earlier. It was the fewest net orders in any April since 2009, FTR said.

    DAT Solutions, an Oregon-based transportation data firm, reported that loads available for dry vans, the most common type of tractor-trailers used for shipping consumer goods, fell 28% in April while capacity on the market was up 1.7% on a year-over-year basis.

    Eaton Corp. , the sales leader in heavy-duty truck transmissions, predicted that organic sales from its vehicles unit will fall 10%-12%, after earlier predicting that sales would drop 7% to 9%. The company lowered its outlook for the business after concluding there are at least 20,000 heavy-duty trucks built last year that are still sitting on dealer lots.

    Engine maker Cummins Inc. said on Tuesday it doesn’t expect any improvement in the truck market later in the year. It now expects heavy-duty truck production in North America to be at 210,000 vehicles this year, down 5% from its earlier view and down 28% from 2015’s actual volume. Cummins’ first-quarter sales of diesel engines to the heavy-duty truck market dropped 17% from a year earlier to $631 million.
    Back to Top

    Oil and Gas

    Oil leaks at Shell’s Gulf of Mexico field. Production shut

    Shell has shut production from its oil platform in the U.S. Gulf of Mexico offshore Louisiana following an oil leak.

    Federal regulator the Bureau of Safety and Environmental Enforcement (BSEE) on Thursday said it was responding to a two mile by thirteen mile sheen in the Gulf of Mexico, approximately 97 miles south of Port Fourchon, LA.

    According to BSEE the offshore oil and gas operator, Shell Offshore Inc., reported that a sheen was observed in the area of its Glider Field, a group of four subsea wells located in Green Canyon Block 248. The production from these four wells flows through a subsea manifold to Shell’s Brutus platform located in 2,900 feet of water.

    Shell reported that production from all wells that flow to the Brutus platform have been shut-in. There are no injuries reported and no personnel have been evacuated. The total subsea release from the four wells is estimated to be 2,100 barrels of oil, BSEE said.

    A BSEE inspector conducted an overflight of the area and is currently on location at the Brutus platform. BSEE will lead the incident investigation.
    Back to Top

    Obama Gas Rules Set Table For Wide Emissions Cut, If Trump Loses

    Oil-and-gas producers have a financial incentive to make sure methane isn't leaking from wells and pipelines. Yet methane has become a well-documented problem--and once it joins the atmosphere, scientists will tell you, it becomes a potent greenhouse gas, responsible for a quarter of the Earth's extra heat.

    Today the Obama administration issued rules requiring the industry to tighten up any new and renovated infrastructure. The move is a first step in realizing a goal the president first articulated in January 2015, when he pledged to cut U.S. methane emissions over a decade to 45 percent below 2012 levels. In addition to being good for the planet, the gas saved may be worth $100 million.

    The oil-and-gas industry is the largest emitter of methane, and the U.S. is the world's largest oil-and-gas producer. It's responsible for about 10 percent of global methane emissions from the oil and gas sector, according to Mark Brownstein, vice president for the climate and energy program at the Environmental Defense Fund. His group says the new rules will have the same effect as closing 11 coal-burning power plants.

    The industry opposes the new rules because of their expected cost, suggesting they "could put [the] shale energy revolution at risk," according to an American Petroleum Institute statement. Shale oil and gas gave Americans an extra $1,337 to spend in 2015, according to the trade group. Cleaner than coal, natural gas has already helped reduce U.S. emissions significantly over the past decade, as power generators shifted fuels.

    An EPA analysis of the new methane regulations suggests the environmental benefits outweigh compliance costs by as much as $690 million.

    The new rules also set up what could be the next phase of fossil fuel regulation. The Environmental Protection Agency included an "information collection request," which asks the public what technology and practices would best cut emissions from existing facilities, which are currently exempt from the new rules. The next phase may or may not happen ...

    A Hillary Clinton or Bernie Sanders administration would likely try to protect Obama's climate-and-energy legacy, including these new rules. The EPA would take in the public comments prompted by today's information request and possibly use them to retrofit the existing system with more rule-making.

    Once rules are finalized, it's harder for a new president to uproot them. A Donald Trump administration, for example, would need to initiate a regulatory process to undo Obama's finalized regulations. That's not true of proposals that are still in the pipeline, which can be frozen and dropped.

    Attached Files
    Back to Top

    Brazil's Petrobras reports third straight quarterly loss

    Brazil's state-controlled oil company Petroleo Brasileiro SA  posted its third-straight quarterly loss on Thursday as oil prices and production fell and a weaker currency boosted debt costs.

    The result missed analyst expectations of a profit.

    The consolidated net loss at Petrobras, as the company is known, was 1.25 billion reais ($358 million) in the three months ending March 31, compared with a profit of 5.33 billion reais a year earlier, the Rio de Janeiro-based company said in a securities filing.

    The average estimate of five analysts surveyed by Reuters was for a profit of 3.64 billion reais.

    Petrobras has struggled mightily with a plunge in world oil prices and its role at the center of a massive corruption scandal. It is saddled with the oil industry's largest debt and has also been hurt by falling domestic demand due to Brazil's worst recession since the 1930s.

    That scandal helped lead to the removal of Brazilian President Dilma Rousseff, a former Petrobras chairwoman, earlier on Thursday by the country's Senate.

    The average price of benchmark Brent crude oil LCOc1 fell 36 percent in the first quarter to $35.21 a barrel from $55.13 a barrel a year earlier. Efforts to reduce Petrobras' debt were also limited by an 11 decline in the value of Brazilian real against the U.S. dollar, raising the local currency cost of foreign debt.

    "We want to increase our levels of predictability and meet our targets; when your debt is large and your risk increases you have fewer options," Chief Financial Officer Ivan Monteiro told reporters at Petrobras headquarters during an earnings presentation.

    "Petrobras is a company with high cholesterol, and that cholesterol is debt leverage," he added, saying all senior executives are now focused on cutting costs and meeting targets.

    Total debt was virtually unchanged from the fourth quarter at $126 billion. Rising debt maturities, though, dragged down Petrobras' cash position 21 percent to 77.8 billion reais from the end of 2015, according to the company's cash-flow statement.

    High maturities are expected to last for at least three years, forcing Petrobras to limit investment, Monteiro said.

    First quarter cash, though, was more than double the amount Petrobras had on hand a year earlier, thanks to lower capital spending.

    Referring to possible debt swaps that could ease short and medium-term demands for cash, Monteiro said capital markets were "starting to offer alternatives to reduce the concentration of maturities."

    Petrobras' net revenue, or total sales minus sales taxes, fell 5.4 percent to 70.3 billion reais. Adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, a measure of operating profit, fell 2 percent to 21.1 billion reais.

    Lower revenue was driven by lower production.

    Average daily output fell 6.6 percent to an average 2.617 million barrels of oil and equivalent natural gas a day (boepd) from 2.803 million boepd a year earlier. Average daily output in the first quarter 2016 was the lowest in nearly two years.

    In 2015, Petrobras met its annual oil output goal for the first time in 13 years, Monteiro said.

    Attached Files
    Back to Top

    Glencore tries a corner in Brent?

    While oil bulls were delighted by yesterday's DOE news of an inventory drawdown refuting the prior day's API news of a major build, what was ignored was the build in Cushing storage (more on that shortly), which according to Genscape hit a utilization just shy of 80%, or more than 70 million barrels, a record high since Genscape began monitoring the hub in 2009. To be sure, the risk of running out of land storage has been one we have previously discussed on various occasions and hinted that one way this is being circumvented is with substantial amounts of oil being stored on tankers at sea, mostly by commodity trading companies who take advantage of the oil contango to generate month to month profits as producers choose to keep their product away from the market until prices rise.

    As it turns out, not only is this the case, but according to Reuters, one particular energy trader - a name well-known to Zero Hedge readers - Glencore, has built up a massive inventory stake in the Brent market where it now holds an unprecedented 30% position in Brent, which it is holding for offshore storage in its tankers in hopes of pushing the price of Brent, and thus the entire energy complex higher, by limiting supply.

    As Reuters details, citing trade sources, Glencore has built up one of the largest positions in part of the Brent crude market which acts as a benchmark for global oil prices since the start of the year.

    For those unfamiliar, the Brent market is based on four North Sea crude oils - Brent, Forties, Oseberg and Ekofisk, or BFOE. And, according to Reuters Glencore is quietly cornering the Brent market, by holding more than a third of the 37 BFOE cargoes loading in June and is expected to acquire more.

    The report details that Glencore has been acquiring June BFOE cargoes through the "chains" - a forward market in which cargoes soon to be assigned loading dates are traded, according to trade sources citing data from pricing agency Platts.

    "It's definitely a bold statement of market view by Glencore," said a trading source with another company operating in the North Sea. "You'd have to be in their heads and in their books to know exactly what's going on."

    To be sure, Glencore has been alleged to "warehouse" oil previously, most recently in January when Bloomberg reported that "Glencore is said to be storing oil on ships off the coast of Singapore and Malaysia as a market structure known as contango allows traders to benefit from holding on to supplies for sale later. The commodities trader has at least 4 very large crude carriers, each of which can hold about 2 million barrels, floating at sea off the nations’ coast in Southeast Asia."

    However taking advantage of contango for contango purposes is one thing. Attempting to corner the entire market is something entirely different, and has direct implications on the price of oil, something Glencore can further benefit from if it were to be concurrently long Brent. 

    According to Reuters, just under half of June's supply of the four benchmark crude grades amounts to nearly 10 million barrels of oil - over 10 percent of daily world production. "Glencore have got big positions all over the place in BFOE," said another North Sea trading source. "They are consistently keeping cargoes in the chains."

    The company has taken this position as supply underpinning the Brent contract is set to be smaller than in a typical month. In June, output of the BFOE crudes will fall to 740,000 barrels per day - the lowest in almost two years - mainly because of maintenance at Ekofisk oilfields.  This, say analysts, helped Brent futures for June delivery strengthen against the July contract and eventually trade at a premium - a structure known as backwardation and unusual when supply is generally ample.

    It also means that Glencore was likely losing money on the actual month to month roll of its inventory, however it was more than offsetting losses if it was concurrently long Brent as removing 30% of the overall market supply has certainly pushed the price of Brent notably higher.

    Reuters sources agreed with this assessment: "Glencore have obviously been very bullish," the first trade source said. "Part of the explanation would be that they recognised there would be next to no Ekofisk around and the North Sea market would tighten up. So, why not?"

    Why not? Well, because to some this stockpiling reeks of manipulation of the price by keeping a major amount of monthly supply off the market. And snce Brent and WTI tend to trade largely in tandem, the answer to "why not" is because millions of consumers would end up paying far more at the pump than if Glencore was not choking supply just to boost its own earnings.

    One way to see the impact of this may be to look at the strip which both in Brent and WTI has flattened substantially as can be seen on the chart below, as prompt month manipulation by the likes of Glencore pushes spot higher even as hedgers and long-term investors continue to sell the long end on expectations of declining future prices.

    Back to Top

    Enbridge says slowly resumes operations after Canadian wildfire

    Enbridge says slowly resumes operations after Canadian wildfire

    Enbridge Inc said on Thursday it was steadily resuming service on its pipeline network through Canada's energy heartland about a week after a massive wildfire spread through the Fort McMurray, Alberta, area, forcing a shutdown.

    The Calgary-based company said the shutdown, which included all pipelines in and out of its Cheecham terminal some 50 km (31 miles) south of the fire-ravaged city, affected some 900,000 barrels per day of volume on its system.

    Chief Executive Officer Al Monaco said operations had resumed at Cheecham and that the Woodland pipeline was ready to restart. The company was waiting to get access to conduct a fly-over inspection as fire crews were still working in the area.

    He added that the roughly 100-km (62.14 mile) portion of the Athabasca line from Cheecham to the Kirby Lake terminal was expected to resume operations over the weekend.

    "So (we're making) good progress on getting our systems back in operations, but the process isn't like turning on a tap," Monaco told analysts on a conference call. "You've got to expect some period of ramp-up to full capacity."

    Enbridge delivered about 2.5 million barrels per day (bpd) of crude oil through its Canadian mainline system during the quarter, up from 2.2 million bpd a year earlier.

    Deliveries through the company's Lakehead pipeline system also rose, to 2.7 million bpd from 2.3 million bpd a year earlier, the company said on Thursday.

    Enbridge operates thousands of miles of crude oil and natural gas pipelines that extend across North America.
    Back to Top

    Hunting sees 30-40 pct fall in full-year revenue on oil slump

    Oilfield services company Hunting Plc said it expects revenue for the year to fall 30-40 percent due to the slump in oil prices, and warned that its full-year outlook remained uncertain.

    Hunting's lowered forecast comes at a turbulent time for the oil services sector, as the prolonged slump in oil prices has led to a steep decline in drilling activity.

    The London-based company reported an underlying earnings before interest, taxes, depreciation and amortization (EBITDA) loss of $16.2 million for the four months ending April.

    "It's not great to see. We certainly hadn't been forecasting an EBITDA loss but that's what they're talking about now," Arden Partners analyst Daniel Slater said.

    The company said it continues to take steps to cut costs, and was working with its lenders to amend terms of its loan covenants.

    "The key is whether the banks will be willing to renegotiate. It sounds like there is a good chance that they will be, which is why I wouldn't be overly concerned," Slater said.

    Hunting is looking to switch to asset-based covenants from the current profit-based covenants, as it reported a loss in EBITDA for the four months to April, Finance Director Peter Rose told Reuters.

    Shares in the company closed down 12 percent on the London Stock Exchange to trade at 284 pence, their biggest single-day loss since 2002, and were at the bottom of FTSE Small Cap Index .
    Back to Top

    Newfield May Sell Eagle Ford Assets Said Valued at $500 Million

    Newfield Exploration Co. has hired two investment banks to find buyers for its acreage in Texas’s Eagle Ford basin and other oil plays as it seeks to focus on Oklahoma’s Anadarko region.

    The Woodlands, Texas-based company has formally begun the process of selling its 35,000 net acres in the Eagle Ford, as well as parcels in other parts of South Texas, Stephen Campbell, Newfield’s vice president for investor relations, said in an interview Wednesday. The company’s assets in other areas of the country, including North Dakota and Utah, are also for sale, he said.

    “The Anadarko Basin is the asset that will continue to get the lion’s share of the capital and anything outside of the Anadarko is open for discussion," Campbell said in a telephone interview.

    The Eagle Ford assets could fetch about $500 million in a sale, according to a person familiar with the matter, who requested anonymity to discuss a private process. Campbell declined to discuss bidders or potential values.

    Newfield’s planned exit from South Texas comes as it allocates most of its drilling budget to holdings in the booming Scoop and Stack fields in Anadarko, where the industry sees hope of higher profits even at low oil prices. The driller agreed to pay $470 million last week to buy some of Chesapeake Energy Corp.’s position in the Stack.
    Back to Top

    CNPC to Start Laying Second China-Russia Oil Pipeline in June

    China National Petroleum Corp., the country’s biggest oil and gas producer, will start laying a second domestic oil pipeline in June to allow for increased Russian crude supplies to flow to China’s northeastern city of Daqing.

    The project between the Chinese border city of Mohe and Daqing runs parallel to an existing spur off of Russia’s East Siberia-Pacific Ocean crude pipeline. The 942 kilometer (585 mile) line has received construction approval from the National Development and Reform Commission, China’s top economic planner, and is expected to be completed by October 2017, CNPC said in astatement on its website Thursday. The two pipelines will have a combined annual capacity of 30 million metric tons of crude.

    “The second oil pipeline will help integrate northeast China’s crude resources, and further improve the safety and reliability of China’s crude oil supplies,” CNPC said in the statement.

    The energy relationship between the two neighbors -- one of the world’s biggest oil producers next door to the biggest oil user after the U.S. -- has continued to deepen since Russia started sending oil supplies to China from the spur off the ESPO pipeline in 2011. Imports of Russian crude last year jumped 28 percent, placing the country as China’s largest supplier on an annual basis after Saudi Arabia.

    Russia’s Transneft will be ready to ship 30 million tons of oil a year to China through the link by Jan. 1, 2018, Vice President Sergei Andronov said in April. Russia’s OAO Rosneft signed a $270 billiondeal with CNPC in 2013 to supply about 360 million metric tons of crude to China over 25 years, the second of two crude-supply deals between the countries.

    China and Russia are also considering building a second natural gas pipeline to transport as much as 30 billion cubic meters of natural gas annually from West Siberia to China over 30 years. The two signed a $400 billion pact in 2014 to send 38 billion cubic meters of natural gas annually over 30 years to China via East Siberia by as soon as 2018.
    Back to Top

    Canadian oil producer Crescent Point posts bigger loss

    Canadian oil and gas producer Crescent Point Energy Corp reported a bigger quarterly loss due to weak oil prices.

    Crescent Point, which said it continued to lower its overall cost structure, has slashed its dividend, curbed capital spending and scaled back drilling activity to operate within its cash flow amid a steep and prolonged plunge in crude prices since June 2014.

    The company forecast about C$300 million of excess free cash flow for 2016, if oil prices average $45 per barrel.

    Funds flow, a measure of Crescent's ability to fund new drilling, fell to C$378 million in thequarter from C$433.6 million, a year earlier.

    The company posted a net loss of C$87.5 million ($68.15 million), or 17 Canadian cents per share, for the first quarter ended March 31, compared with a loss of C$46.0 million, or 10 Canadian cents per share, a year earlier.

    Total production rose about 16 percent to 178,241 barrels of oil equivalent per day.

    Up to Wednesday's close, the company's Toronto-listed stock had lost about a third of its value in the past 12 months.
    Back to Top

    Canada's Enbridge posts quarterly profit as shipments rise

    Enbridge Inc , Canada's largest pipeline company, reported a quarterly profit, compared with a year ago loss, as crude shipments increased.

    Enbridge delivered about 2.5 million barrels per day (bpd) of crude oil through its Canadian mainline system during the quarter, up from 2.2 million bpd a year earlier.

    Deliveries through the company's Lakehead pipeline system also rose, to 2.7 million bpd from 2.3 million bpd a year earlier, the company said on Thursday.

    Enbridge's Line 18 pipeline, which carries crude from its Cheecham terminal, was back in service on Wednesday, nearly a week after it was shut down as wildfires raged through northern Alberta.

    The company's net earnings attributable to shareholders was C$1.21 billion ($942.4 million), or C$1.38 per share, in the first quarter ended March 31, compared with a loss of C$383 million, or 46 Canadian cents per share, a year earlier.

    Excluding items, the company earned 76 Canadian cents per share, beating analysts' estimate of 64 Canadian cents per share, according to Thomson Reuters I/B/E/S.

    Attached Files
    Back to Top

    Chesapeake says swapped debt for 4 percent of equity over past week

    Debt-laden Chesapeake Energy Corp, the second-largest U.S. natural gas producer, said on Thursday it had issued or agreed to issue about 4 percent of its outstanding shares in exchange for debt over the past week.

    The company's shares were up 4 percent at $4.54 in premarket trading following news of the privately negotiated deals.

    A number of U.S. oil producers have completed debt-for-equity swaps or bond swaps as they try to reduce their debt and interest payments as oil prices remain weak.

    Chesapeake, whose debt stands at about $9 billion, said it issued or agreed to issue about 28.1 million shares between May 5 and May 11 in exchange for senior notes worth about $153 million. The notes are due in 2017, 2019, 2037 and 2038.

    The company said in February it had tapped legal firm Kirkland & Ellis for advice as it seeks to bolster its balance sheet to manage debt maturing in the next 18 to 24 months.

    Chesapeake has said it has no plans to seek bankruptcy protection, as some analysts and investors have speculated.

    Chief Financial Officer Nick Dell'Osso said on May 5 that Chesapeake was considering "the use of additional secured debt, private transactions with bondholders and other types of exchange offers and open market purchases."

    Up to Wednesday's close, Chesapeake's shares had fallen about 24 percent since then.

    Attached Files
    Back to Top

    Latest IEA US shale scenario paints worsening outlook picture

    The International Energy Agency issued a downbeat forecast for US light tight oil production levels through 2020 Wednesday, predicting that overall shale output would not flatten out even at $60/b average oil prices over the period.

    In a presentation at the Platts Global Crude Oil Summit, IEA chief economist Laszlo Varro gave an updated set of scenarios that appeared more negative than the agency's previous World Energy Outlook, published in November 2015.

    Varro also addressed the effect of climate change policies on investment and said even under a scenario that sees global temperatures rise 2 degrees Celsius, investment in oil production would still be needed.

    Long-term demand for diesel looks "quite robust" despite recent air quality concerns, he added.

    The latest forecast expects US light tight oil production to decline by 3 million b/d in the 2015-2020 period if oil prices average $40/b over the period and would still decline slightly at $60/b.

    Only at $70/b prices would light tight oil production rise slightly, while $100/b prices would result in a 1.5 million b/d increase over the period, according to the forecast.

    "The US oil industry is fighting very hard and I'm really impressed by how hard they fight, but they cannot overcome the laws of gravity. So investment is declining in the US quite significantly," Varro said.

    November's World Energy Outlook forecast that a $60/b oil price in the 2014-2020 period would be enough to lift light tight oil output slightly and that output would rise by 2 million b/d at a $100/b average price. It said output would fall by a little over 2 million b/d at a $40/b oil price.

    Varro highlighted the contribution made by shale developments to the flexibility of global supply, saying this reversed a half-century trend.

    "There's roughly a 4.5 million b/d flexibility in US light tight oil production depending on oil prices, which can come to the market very, very rapidly," he said.

    "For almost half a century, the oil industry was moving into bigger and bigger, more and more complex ... projects. The industry was moving from two or three-year North Sea offshore projects to a 10-year Brazilian deep offshore project ... projects became bigger, the investment forecasts became more and more rigid," Varro said.

    "Then suddenly came light tight oil in the US, where the average project type is $10 million not $10 billion, where the project implementation time is three months and not 10 years. So a half-century long trend toward increasing complexity and increasing project size was broken and that led to a very different oil supply which can react to the demand changes much more rapidly," he added.

    On Tuesday, the US Energy Information Administration forecast US oil production would fall from 9.43 million b/d in 2015 to 8.6 million b/d in 2016 and 8.19 million b/d in 2017, attributing the decline entirely to onshore plays in the Lower 48 states.

    Attached Files
    Back to Top

    Linn Energy to restructure, file for Chapter 11 bankruptcy

    Linn Energy on Wednesday became the largest oil and gas driller to file for bankruptcy protection since energy prices began their slide in 2014.

    The company said it had reached an agreement with creditors to reorganize the company and planned to continue operating through the Chapter 11 bankruptcy process. Linn Energy reported about $8.3 billion in debt and employed 1,650 workers, including at its downtown Houston headquarters.

    The filing comes after Linn Energy spent 2015 struggling with low prices and high debt and much of 2016 flirting with bankruptcy.

    Linn Energy is one of the few oil producers designed to function like a partnership that pays out its cash flow to investors, and it sought to ensure those payments were safe by selling hedges on future production. In October, Linn Energy suspended those payments to preserve cash, but that wasn’t  enough to make debt payments.

    Linn Energy  put off its creditors while it sought more time to negotiate with lenders. In March, the company said that bankruptcy “may be unavoidable.”
    Back to Top

    Get your 5-cent natural gas, right here in Canada

    For a brief moment this week, Canadian natural gas was basically free.

    While oil producers fretted over what production shut-ins, caused by a massive Alberta wildfire, would do to the price of Canadian crude oil, those same producers are big buyers of natural gas, and without them the price dropped to just C$0.05 per thousand cubic feet (mcf) on Monday. A shut-in is when the product is available but not able to reach the market.

    "It was essentially free at the lows on Monday," said Martin King, an analyst at Alberta energy advisory FirstEnergy Capital, noting that these were the lowest AECO prices on record going back to at least 1985.

    Oil sands companies around the Canadian energy center of Fort McMurray, Alberta, began to restart operations on Tuesday after the wildfire forced a week-long shutdown.

    During the wildfire shutdowns, producers were not using gas to fuel cogeneration power plants that generate electricity and the steam used to cook the oil sands to produce crude.

    As a result, the Canadian benchmark AECO hub in southeast Alberta averaged less than C$0.50/mcf on Monday, at one point dropping to an intraday low of just 5 cents, King said.

    Natural gas prices have rebounded somewhat. With the return to production of one oil sands cogeneration plant at the Syncrude project this week and the expected restart of others in coming days, AECO prices have already climbed to around C$1/mcf.

    But the high level of gas in storage after a mild winter means prices are expected to remain relatively cheap for the rest of the year, according to analysts.

    AECO prices averaged C$4.47/mcf in 2014 and C$2.78 in 2015, but just C$1.62 so far in 2016, according to FirstEnergy.

    To avoid filling Alberta's inventories to their maximum capacity, some drillers will likely have to cut output later this summer if they are not able to sell more gas to the already-oversupplied U.S. markets.

    "Some producers will likely be forced to shut in some output because they won't get a decent price for their product, and some of the gas that is produced will probably make its way to the oversupplied U.S. market," said Kent Bayazitoglu, director of market analytics at energy consulting firm Gelber & Associates in Houston.

    The biggest gas producers in Alberta include units of Encana Corp, Repsol SA, Canadian Natural Resources Ltd , Cenovus Energy Inc and Husky Energy Inc.

    Canadian Natural is planning to shut in an additional 40 million cubic feet per day (mmcfd) by the end of 2016 because of low gas prices, a spokeswoman said, adding the decision was made before the wildfire outages. Canadian Natural said last week it already had about 43 mmcfd of gas shut in due to low gas prices.

    "We've seen a couple of small producers in Alberta shut-in gas production due to low prices in recent months, but Canadian Natural's planned shut-ins may only be the tip of the iceberg based on how low AECO prices are," said Richard Redash, managing director, natural gas, at energy consultancy PIRA.

    The low prices attracted U.S. buyers. So far in May, net imports of gas from Canada have averaged 5.6 billion cubic feet per day (bcfd), up from 5.4 bcfd in April. That is an increase of about 15 percent compared with the same period in 2013-2015, according to Thomson Reuters Analytics.

    Attached Files
    Back to Top

    June OPEC meet to focus on dialog, not market action: Kuwait

    OPEC member Kuwait does not expect any coordinated action to be decided during the group's upcoming meeting in Vienna on June 2, the country's acting oil minister said on Thursday.

    The "focus of the meeting will be to think and look around ... about what could be done further to stabilize the markets," Anas al-Saleh, told Reuters in Tokyo, Japan, on the sidelines of a Kuwait-Japan business seminar.

    An earlier plan to agree on measures to stabilize soaring oil production that pulled down crude prices LCOc1 by more than 70 percent between mid-2014 and early 2016 failed during producer talks in Qatar's capital Doha in April.

    At the April meeting, OPEC rivals Saudi Arabia and Iran could not agree on deal terms, triggering criticism that the producers' cartel had lost its ability to act.

    At the next official meeting of the Organization of the Petroleum Exporting Countries (OPEC), scheduled for June 2 in Austria's capital Vienna, al-Saleh said the focus would be on dialog, not market intervention.

    "The expectation is to have more dialogue between OPEC members, and then from that we will be able to determine what would be the proper action going forward," he said.

    Al-Saleh also said recent price increases from 12-year lows hit early in the year to around $47.50 per barrel for Brent crude futures were justified.

    "Based on the decrease in production that has been shown in the last three weeks, I assume fundamentally the price represents the fall of production," he said.

    While OPEC members and Russia have kept output high in a fierce battle for market share, production in other regions including the Americas, Asia and Africa has fallen sharply, fast eroding a global supply overhang that reached as much as 2 million barrels per day last year.
    Back to Top

    Latest SEC Filing Shows Chesapeake Doesn’t Rule Out Bankruptcy

    Chesapeake Energy, the second largest natural gas driller in the U.S. (behind Exxon Mobil) and one of the largest in the Marcellus/Utica, has been on a roller coaster for the past few years. 

    Corporate raider Carl Icahn bought himself a big slice of the company, and along with another corporate raider/Chesapeake investor, Mason Hawkins, they tossed CEO Aubrey McClendon out the door. The two then installed their own guy, Doug Lawler, who proceeded to slash jobs and sell assets–all in a bid to prop up the company’s stock price so these two corporate raiders can make a buck on their investment. We call it disgusting. 

    Others call it business as usual. The result? Chesapeake’s stock tanked and there were rumours of an impending bankruptcy. But then Chessy’s bankers decided to keep a $4 billion line of credit open in April. That helped set off a rally in the company’s stock. 

    But the rally has evaporated like St. Elmo’s fire. In a recent filing with the Securities and Exchange Commission, Chesapeake spoke plainly about the possibility that if the price of natgas does not recover soon, they may not be able to meet their debt obligations in 2017. In other words, “We may be heading for bankruptcy next year, if…”
    Back to Top

    Mexico onshore bidders bail on contracts

    Mexican oil regulators have finalised contracts on a key first round of mature-field blocks, but only 19 of 25 deals were signed after some bidders failed to muster the appropriate guarantees to complete the process.
    Back to Top

    Parex Resources announces first quarter 2016 results

    Parex Resources Inc., a company focused on Colombian oil and gas exploration and production, is pleased to announce unaudited financial and operating results for the three months ended March 31, 2016. All amounts herein are in United States dollars unless otherwise stated.

    Q1 2016 Financial and Operational Highlights

    Production averaged 28,900 barrels of oil equivalent per day ('boe/d'), an 8 percent increase over the comparative quarter in the prior year. Oil production for the quarter was 28,702 barrels of oil per day ('bbl/d');
    Generated $15.5 million in funds flow from operations. Realized sales price of $27.10/boe was a $8.11/boe discount to the average Brent price; the operating netback was $8.06/boe and funds flow netback was $5.35/boe;
    Quarter-over-quarter, transportation expenses decreased by $0.60/bbl (5%) and operating expenses decreased by $1.64/bbl (25%);
    Capital expenditures for the quarter were $4.5 million compared to $27.0 million in the same period of the previous year. Although no wells were drilled during the First Quarter, our 2016 drilling program commenced in May 2016; and,
    Strengthened the balance sheet further with $80.0 million in net positive working capital compared to $76.7 million in the previous quarter.

    Parex continues to maintain a strong financial position: debt free, an undrawn bank facility and holding $91.5 million of cash as at March 31, 2016.

    2016 Guidance & Operational Update

    We had previously released that assuming Brent oil prices of $35-$40/bbl, we expected our 2016 capital expenditures budget and funds flow from operations to be approximately $40-$80 million and production of 29,000 boe/d. With current Brent oil prices approximately $45/bbl, we now anticipate 2016 capital expenditures to increase to $80-$100 million and to be funded from funds flow from operations. In addition, we have approximately $80 million of net working capital, no debt and an undrawn bank facility available for future growth opportunities. Production guidance for 2016 will remain at 29,000 boe/d pending review and evaluation of exploration drilling results.

    Our 2016 drilling program has recently commenced with the Jaruki-1 exploration prospect on the Cabrestero Block in the Llanos Basin. Overall, we are targeting to drill up to 9 exploration wells and 4 appraisal/development wells. As part of this program, Parex plans to drill 3 wells in the Middle Magdalena Basin and acquire approximately 400 km2 of 3D seismic on Block VIM-1 in the Lower Magdalena Basin.
    Back to Top

    Summary of Weekly Petroleum Data for the Week Ending May 6, 2016

    U.S. crude oil refinery inputs averaged 16.2 million barrels per day during the week ending May 6, 2016, 193,000 barrels per day more than the previous week’s average. Refineries operated at 89.1% of their operable capacity last week. Gasoline production increased last week, averaging about 10.1 million barrels per day. Distillate fuel production increased last week, averaging over 4.6 million barrels per day.

    U.S. crude oil imports averaged about 7.7 million barrels per day last week, down by 5,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged about 7.8 million barrels per day, 8.4% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 779,000 barrels per day. Distillate fuel imports averaged 118,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 3.4 million barrels from the previous week. At 540.0 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Total motor gasoline inventories decreased by 1.2 million barrels last week, but are well above the upper limit of the average range. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories decreased by 1.6 million barrels last week but are well above the upper limit of the average range for this time of year. Propane/propylene inventories rose 1.3 million barrels last week and are above the upper limit of the average range. Total commercial petroleum inventories decreased by 1.4 million barrels last week.

    Total products supplied over the last four-week period averaged about 20.1 million barrels per day, up by 3.5% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged 9.5 million barrels per day, up by 5.1% from the same period last year. Distillate fuel product supplied averaged 4.1 million barrels per day over the last four weeks, up by 0.7% from the same period last year. Jet fuel product supplied is up 2.1% compared to the same four-week period last year.

    Cushing inventories grow 1.5 mln

    Attached Files
    Back to Top

    US oil production continues its weekly fall

                                                 Last Week     Previous Week    Last Year
    Domestic Production 'ooo....... 8,802                 8,825               9,374
    Back to Top

    Perpetual Energy Swaps More Senior Notes for Tourmaline Shares

    Perpetual Energy Inc. exchanged more of its senior debt for shares in Tourmaline Oil Corp.

    The Calgary-based oil and gas company said it had swapped an additional C$2 million ($1.6 million) of 8.75 percent senior notes, on top of C$150 million exchanged on April 27, for a total of C$152 million of senior notes traded for 3.1 million Tourmaline shares, it said in a statement.

    An aggregate C$211.8 million principal amount of senior notes have been tendered, including C$138.6 million held by Perpetual’s directors and officers, the company said. Perpetual has a maximum swap amount of C$235 million in senior notes.

    The deadline for noteholders to accept a swap was extended to May 13 from May 10.

    Shares of Calgary-based Tourmaline rose 0.8 percent to C$29.68 at 9:58 a.m. in Toronto, and have gained 33 percent this year.
    Back to Top

    Nigeria Oil Output Drops Further as Leak Compounds Security Woes

    At least a fifth of Nigerian oil production, equivalent to almost 400,000 barrels a day, has been shut down as a pipeline closure added to disruptions caused by militant attacks.

    Royal Dutch Shell Plc declared force majeure -- a legal clause that allows it to stop shipments without breaching contracts -- on exports of Bonny Light crude following the discovery Tuesday of a leak on the Nembe Creek Trunk Line, according to a statement Wednesday. The incident comes amid escalating attacks by militants operating in the Niger River delta, which have already halted shipments from the Forcados terminal and the Okan oil platform.

    “‘We don’t know if it’s an attack or sabotage” on the Nembe Creek line, Lagos-based Sola Omole, a spokesman for Aiteo Exploration and Production Co., the operator of the pipeline, said by phone. “It is only when the contractor gets to the site and takes a look at it that we can say definitively that this is the cause of the problem. ”

    A resurgence of attacks on oil infrastructure caused Nigerian production to drop to the lowest in 20 years last month, compounding the impact of slumping crude prices on Africa’s largest economy. Formerly the continent’s largest oil producer, the nation has slipped into second place after Angola, according to data compiled by Bloomberg.

    Production Halt

    The Nembe Creek Trunk Line runs for 100 kilometers (62 miles) through the Nigeria’s oil producing region to the Bonny crude oil terminal and has a capacity of 600,000 barrels a day, according to Shell’s website. At least 78,000 barrels a day of Aiteo’s crude output has been shut down because of the leak, Omole said. Shell said the force majeure covers all Bonny Light shipments -- scheduled at 217,000 barrels a day next month -- without specifying how much production could be disrupted.

    The shutdown last week of Chevron Corp.’s Okan platform, which feeds the Escravos export facility, affected 90,000 barrels a day of production. About 200,000 barrels a day of output has been halted at Shell’s Forcados terminal since February.

    Oil futures recouped losses following the Bonny Light force majeure, with international benchmark Brent crude gaining as much as 1.3 percent to $46.13 a barrel on the London-based ICE Futures Europe exchange.

    Delta Avengers

    A group calling itself the Niger Delta Avengers said on its website that it was responsible for the attack on the Chevron facility. The authenticity of the claim could not be verified by Bloomberg News.

    Nigeria’s armed forces are aware of a new group “who have vowed to cripple economic activities,” Brigadier General Rabe Abubakar said in a statement on Tuesday. “The military will employ all available means and measures within its rule of engagement to crush any individual or group that engages in the destruction of strategic assets and facilities of the government.”

    International producers including Shell and Chevron began evacuating non-essential workers and contractors from major oil production facilities as part of safety measures, Chika Onuebgu, Rivers state chairman of the Trade Union Congress of Nigeria, said by phone Tuesday. “It is not a lock-down, it is just a precautionary measure” and oil operations continue in areas not affected by attacks.

    The current attacks echo a similar wave of violence between 2006 and 2009, which ended after militants accepted an amnesty from late-President Umaru Musa Yar’Adua, disarming in exchange for cash payments. The militants have been frustrated by current President Muhammadu Buhari’s decision to scale back the allowances.

    The International Energy Agency estimated last month that Nigeria could lose an estimated $1 billion in revenue by May, when it expects repairs on Forcados to be completed. The terminal may not restart until June, Kachikwu said April 20.

    “The government needs to address this very quickly,” Onuegbu says. “Insecurity is becoming a big problem in the Niger delta with the return of these attacks.”

    Attached Files
    Back to Top

    EIA sees Brent oil prices rebounding to $76/barrel in 2017

    May 11 The price of Brent crude oil should rebound in the next year to about $76 a barrel as consumption continues to increase in coming years, a key U.S. energy agency said on Wednesday.

    The U.S. Energy Information Administration anticipates increased growth in fuel consumption, largely through growth in emerging economies in Asia, the Middle East and Africa, it said in an international outlook for the energy market.

    This is the first EIA International Energy Outlook report since September 2014. The EIA said that due to the glut of supply, it expects the spread between U.S. crude and Brent to remain between $0 and $10 a barrel.

    The EIA said it expects liquids production to grow by 30.5 million barrels/day by 2040. It said world GDP growth should average 3.3 percent in the next 25 years, largely due to stronger economic growth in emerging nations.
    Back to Top

    Oil's Magic Number Becomes $50 a Barrel for Promise of Recovery

    BP Plc, rig-owner Nabors Industries Ltd. and explorer Pioneer Natural Resources Co. all said in the past 24 hours that prices above $50 will encourage more drilling or provide the needed boost to cash flow. With oil bouncing close to $45 a barrel, an industry that has been shaving costs to stay competitive is ready for signs of stability at a price level less than half of 2014’s average.

    At an average price of $53 per barrel of oil means the world’s 50 biggest publicly traded companies in the industry can stop bleeding cash, according to oilfield consultant Wood Mackenzie Ltd. Nabors, which owns the world’s largest fleet of onshore drilling rigs, said it has already been talking with several large customers about plans to boost work in the second half of the year if prices rise "comfortably" above $50.

    "It’s not just about touching $50," Fraser McKay, vice president of corporate analysis at Wood Mackenzie in Houston, said Tuesday in a phone interview. "It’s about touching, maintaining and having the perception of future prices above $50 a barrel before you start sanctioning projects that are economic at $50 a barrel."

    Spending Cuts

    The global oil industry slashed more than $100 billion in spending last year and is in the midst of further cuts this year to survive what Schlumberger Ltd. has called the industry’s worst-ever financial crisis. In North America alone, spending is expected to drop by half from last year.

    Prices have rebounded by about two-thirds from a 12-year low, with Brent, the international crude benchmark, trading above $45 a barrel Tuesday. The rally has explorers from BP to Pioneer looking ahead to an eventual recovery as they release first quarter earnings this week. Next year, BP will be able to balance cash flow with shareholder payouts and capital spending at an oil price of $50 to $55 a barrel, down from a previous estimate of $60, the London-based explorer said. Pioneer expects to add as many as 10 horizontal drilling rigs when oil reaches $50 and the outlook for supply and demand of crude is positive, the company said Monday in its earnings statement.

    For every $5 that oil prices climb, above a baseline of $37, Continental Resources Inc. adds another roughly $200 million in revenue, Chief Operating Officer Jack Stark said last month in an interview in New Orleans. By the time oil prices reach $52, the Oklahoma City-based explorer would probably look at adding more rigs, he said.

    "We won’t chase price spikes," Stark said. "We’re committed to being patient."

    Failed Rally

    Yet even talk of ramping up again is bringing a stinging reminder of last year’s failed attempt to restart activity too quickly after oil prices rose.

    "We got out ahead of ourselves -- bit of a head fake there," Tony Petrello, chief executive at Nabors, told analysts and investors Tuesday on a conference call. "We’re going to be a little more guarded here."

    Exactly when oil prices hit that level and how long they need to stay there is a question no one can say for sure. Nabors said the activity could start up in the middle of the third quarter or into the final three months of this year. Continental estimated that supply and demand could be nearing balance later this year and be "absolutely in balance" or in need of more oil next year.

    "The absolute timing may be off a bit," Stark said, "but ultimately it’s going to happen."

    - See more at:

    Attached Files
    Back to Top

    How Oil’s Most Boring CEO Found Himself Atop 10 Billion Barrels

    In the fall of 2011, Tom Spalding, a slim geologist with salt-and-pepper hair, stood before the board of directors of Pioneer Natural Resources, an oil and gas exploration company, to make a presentation unlike any he’d made in his 14 years there.

    Using two flatscreens in Pioneer’s suburban Dallas boardroom, Spalding, the company’s vice president for geoscience, walked directors through the results of weeks of research. He and his team had explored for undiscovered oil in horizontal shales deep within the Permian Basin, a vast rock formation beneath West Texas. They had analyzed seismic data and core samples of 7,000 company wells as well as information on decades-old wells archived at the University of Texas. “When we first did it, we couldn’t believe it,” Spalding recalls. “We had to go back to check our measurements.”

    He showed the board a schematic of 13 slabs stacked one atop another like something out of a Frank Gehry sketchbook. Almost every tier was splashed in bright red, signifying the presence of crude. Crucially, there was scant evidence of the saltwater zones that often dot such diagrams and can spell doom. It was all oil.

    Pioneer’s chief executive officer, Scott Sheffield, watched with anticipation. He’d been drilling vertical wells in the Permian since 1979 with only modest success. After hearing his geologist, he ordered the drilling of two horizontal test wells.

    Those wells cost four times what a vertical did, but wound up spewing seven times the crude. Sheffield called for more horizontals. He had the money to invest because he’d sold off seemingly sexier oil projects and avoided borrowing while other independent drillers were wagering yet again that oil prices would forever climb.

    By 2015, Sheffield had stopped drilling new vertical wells altogether and diverted almost all of Pioneer’s effort and money into the Permian’s shale. All of which helps explain how Pioneer—a $26 billion company with less than a 10th of ExxonMobil’s market value, almost no oil fields beyond Texas, and the same boring CEO for more than 30 years—is now showing the world how to thrive amid the worst oil bust since the 1980s.

    Sheffield doesn’t get out to West Texas that often. But he has brought Pioneer home, and he bristles a little at the suggestion that he’s just lucky to have those acres. He invokes Parsley, who died in October at the age of 86. “You shouldn’t sell long-life assets,” he says. “The best decision we ever made was never to sell the foundation of the company.”
    Back to Top

    France's Engie eyes $500 mln from Asia oil and gas assets sales

    French utility Engie is looking to offload its oil and gas assets in Indonesia and Malaysia as a package in a sale process being run by Bank of America Merrill Lynch, according to a document seen by Reuters.

    Engie, which joins a number of European utilities in selling oil and gas exploration and production assets after a sharp drop in energy prices, is looking to raise up to $500 million from the sale, several banking sources close to the process said.

    The first bidding round for the assets is scheduled to be completed in mid-June, a banking source said.

    The package consists of five assets including a 33.3 percent working interest in the Muara Bakau offshore gas and very light oil project in Indonesia operated by Italy's Eni. In Malaysia, Engie is selling 20 percent stakes in two exploration blocks, according to the document seen by Reuters.

    "Engie's preference is to divest the entire interests in its upstream portfolio in Indonesia and Malaysia in a single package," the sales memorandum said.

    Engie and Bank of America declined to comment.

    Potential buyers include Asian oil firms such as Indonesia's Pertamina, Malaysia's Petronas, Thailand's PTT Exploration and Production (PTTEP) and Japan's Inpex and Mitsui, as well as companies backed by private equity funds, the sources said.

    Several other major oil companies have put assets in Southeast Asia on the block in recent months, including Chevron and ConocoPhillips.

    Deal making in the oil and gas sector has significantly slowed down since the sharp fall in oil prices nearly two years ago while the number of assets on the market has climbed as companies seek to raise cash.

    Other European utilities such as RWE, EDF , Enel and Centrica are also looking to sell upstream oil and gas assets.

    In a separate process, the French utility, formerly known as GDF Suez, is selling its 60 percent stake in the Bonaparte natural gas project in Australia, one of the sources said.

    Engie is not marketing its northwest European and North African assets but would be willing to consider offers for them, according to several of the sources.
    Back to Top

    Oilfield services provider Wood Group forecasts lower FY earnings

    May 11 Oilfield services provider John Wood Group Plc warned that full-year core earnings would be about 20 percent lower than the last year, as it had seen further margin pressure due to lower activity by customers.

    The company said the expected fall in EBITA was in line with analysts' current expectations, which it put at about $377 million, according a consensus it had compiled.

    John Wood reported EBITA of $470 million last year.
    Back to Top

    OECD and IEA ponder divorce after years of friction: document

    The West's energy watchdog, the International Energy Agency, faces a possible legal split from its parent body following decades of friction and fresh disagreements over cooperation with China, a document seen by Reuters shows.

    Any divorce from the Paris-based founder, the Organisation for Economic Co-operation and Development (OECD), might complicate funding and confuse governance of the IEA, whose role includes coordinated stocks releases to address global oil shortfalls.

    The dispute also highlights the complexity of cooperation between China and Western organizations such as the OECD, which has a stated commitment to democracy and market economies.

    An OECD document, seen by Reuters, said that its council sent a letter to the IEA in April proposing a separation, citing years of IEA resistance to OECD rules on administration, financial audits and the China issue.

    "The IEA started negotiating with China in 2016 to establish an IEA center in Beijing, without prior consultation with the OECD which, as the IEA was aware, was itself negotiating with China to create a policy center and a country office," the document said.

    The OECD declined to comment, as did an IEA spokeswoman, who said any separation would be a decision for member states.

    Created in 1961 to stimulate economic progress and world trade, the OECD originated from the Organisation for European Economic Co-operation, set up in 1948 to help administer the Marshall Plan to reconstruct Europe with U.S. financial aid.

    The IEA was established in 1974 at the proposal of U.S. Secretary of State Henry Kissinger to help industrialized nations deal with the oil crisis after the Arab embargo squeezed supplies and sent prices surging.

    Since then, energy markets have changed radically. OPEC no longer has the same power, non-IEA China has overtaken the United States as the biggest energy user and the shale revolution has turned the latter into a net exporter.

    The IEA's Executive Director Fatih Birol has made strengthening ties with emerging powers the agency's top priority, choosing China for his first trip into the job and breaking with the practice of previous chiefs, who began their tenure by visiting an IEA country.

    Should a separation take place, the OECD said it would "assist and support the IEA to ensure that the productivity and effectiveness of the IEA remain unimpaired during transition".

    But it also said that it would then be up to "the IEA member countries to provide the IEA with all the necessary powers and capacities to administer itself as a fully independent international organization."

    Compared with the much bigger OECD, which groups 34 of the world's leading economies and has about 2,500 staff, the IEA has 240 employees and 29 member states, all of which are also OECD members.

    Under its autonomous status, its governing board consists of energy ministers of member countries, which contribute four fifths of its budget of around 27 million euros ($30.74 million) with the rest generated from sales of publications.
    Back to Top

    Sweden's Lundin Petroleum Q1 beats forecast, raises Sverdrup capacity estimate

    Sweden's Lundin Petroleum raised output estimates for the first phase of the giant Johan Sverdrup field on Wednesday as it beat first-quarter core earnings expectations helped by a strong production and a forex exchange gain.

    Lundin raised its daily output estimate for the first phase of the Sverdrup field in the North Sea, the largest oil find in Norway in 30 years.

    "We have recently completed a de-bottleneck study for Phase 1 of the project which concludes a potential of an increased processing capacity from the previously guided range of 315,000 to 380,000 bopd up to a revised 440,000 bopd," it said in a statement.

    The operator of Sverdrup is Statoil, while other partners include state-owned Petoro, Det norske and Denmark's Maersk Oil.

    First-quarter earnings before interest, taxes, depreciation and amortisation (EBITDA) rose 45 percent to $125 million, well above a mean forecast for $66.9 million in a Reuters poll of analysts.

    Lundin swung to a net profit of $114 million from a loss of $231 million a year earlier.

    This "was mainly driven by the excellent production performance and a net foreign exchange gain (of $158.6 million) as a result of the weakening USD against the Norwegian Krone and the euro," it said.

    First-quarter production rose to 62,400 barrels of oil equivalent per day (boepd) from 25,800 boepd a year earlier buoyed by output from the Edvard Grieg field which came onstream at the end of 2015. (Reporting by Stine Jacobsen; editing by Gwladys Fouche and Jason Neely)

    Read more:
    Follow us: @MailOnline on Twitter | DailyMail on Facebook

    Attached Files
    Back to Top

    Path for US shale oil supply finds disagreement at Platts summit

    Roughly 4,200 miles from the heart of the Bakken Shale, the future of US shale oil became the focus of the Platts Global Crude Oil Summit in London Tuesday.

    There was sharp disagreement between analysts over whether US shale production had peaked, where the supply bottom may be, how quickly production might ramp up and even if American producers have been resilient in the face of low prices.

    While analysts said US shale has played a major role in the current global supply glut, it is unclear where US production may be headed going forward.

    Christof Ruhl, global head of research with the Abu Dhabi Investment Authority, told the summit the path of US oil supply is particularly unknown since the shale renaissance is so new.

    "Nobody knows, because we have literally never been here," said Ruhl.

    US crude production, which reached a recent peak of 9.7 million b/d in April 2015, is expected to average 8.6 million b/d this year and fall to 8.19 million b/d in 2017, the US Energy Information Administration said Tuesday.

    Paul Hornsnell, global head of commodities with Standard Chartered, said that projected, dramatic decrease in US supply shows that producers have hardly been resilient.

    "There's the narrative of the little [US] oil man standing up to the force of OPEC producers," Hornsell said. "But I don't think it holds up."

    But EIA may be overstating the decline in US production, according to Per Magnus Nysveen, head of analysis with Rystad Energy.

    Nysveen expects production to fall just 500,000 b/d from 2015 levels, due to improved rig efficiency and improved completion intensities. In addition, lower service costs and high grading have helped push the average US shale breakeven price from $80/b in 2012 to about $40/b in 2016.

    Nysveen said these improvements will likely level off and breakeven prices will climb back above $60/b as the market rebalances, where onshore may become competitive with US offshore production.

    How quickly supply can ramp up is unknown, but Ruhl said it would likely be quicker than many expect, "measured in months, not years."

    In addition, the potential rebound could vary by shale play.

    "Not all shale is created equally," said Christopher Wheaton, a director with Allianz Global Investors. "Some bits in the Bakken will never come back because they will be displaced by bits of the Permian."

    Many analysts said they expect the Bakken to face the largest hurdles in supply recovery, mainly due to infrastructure and geographic constraints.

    Nysveen said Bakken production fell by about 5,000 b/d in March from February, to about 1.113 million b/d. North Dakota officials are expected to release official statistics for March later this week.

    While the supply level is down from a peak of 1.23 million b/d in December 2014, North Dakota is expected to maintain supply flows of more than 1 million b/d until late this year due to efficiency improvements and targeted drilling.

    Attached Files
    Back to Top

    Tehran cuts crude price amid Riyadh’s surge push

    Tehran is reportedly cutting the price of Iranian crude in the Asian trade amid Saudi Arabia’s efforts to flood the already brimming world oil market.

    According to the Reuters report citing ‘an industry source with direct knowledge of the matter,’ Iran has set its June official selling prices (OSPs) for heavier crude grades it sells in Asia at the biggest discounts to Saudi and Iraqi oil since 2007-2008.

    Iran on Tuesday set the June OSP for Iranian heavy crude at $1.60 a barrel below the Oman/Dubai average, up $1 from the previous month, the source said.

    This still puts Iranian heavy at 30 cents a barrel below Saudi's Arab Medium grade, the biggest discount between the two crudes since 2007, the report added.

    This is while it said Saudi Arabia raised its June OSPs for all grades to several-month highs over claims of a rise in demand for the Saudi crude.

    “We’re seeing a global increase in demand,” said Amin Nasser, head of Saudi Arabia’s state-owned energy company Saudi Aramco in a Tuesday press conference in Dhahran. “We are meeting that call on us.”

    The Reuters report also noted that Tehran typically adjusts its crude price formulas to Asia at the beginning of each quarter following negotiations with its clients. However, this year it has changed at least some of its crude pricing formulas in March, April and June.

    The changes helped boost its exports to Asia by 50 percent in March from a year ago.

    Iranian light crude remained at 25 cents a barrel above Arab light in June, or $0.50 above the Oman/Dubai average.

    Attached Files
    Back to Top

    Qingdao port sees unprecedented congestion due to oil imports

    Crude oil tankers arriving at Qingdao are waiting for days to be unloaded in unprecedented congestion caused by importers rushing to stockpile oil as prices are on the rise.

    In the past few days, tankers have been in queues more than 10 deep off the port in east China, said Su Peng, an official with Qingdao Shihua Crude Oil Terminal. Though Qingdao is one of the world's busiest ports, Su has never seen anything like it.

    The oil pipeline linking Huangdao in Qingdao and the neighboring city of Weifang is working at its maximum capacity of 45,000 tonnes a day, more than twice the amount passing through it the same time last year.

    The monthly transport of oil away from Qingdao by road has been raised to one million tonnes from 600,000 tonnes the same period last year. And freight trains departing Qingdao are carrying 25 percent more oil than in 2015.

    Crude oil processing companies and traders began ordering oil in massive quantities in February, when prices started rising from 26 U.S. dollars per barrel. The price now stands at 45 U.S. dollars, as the arrival of cheaper orders from earlier this year challenges the port's capacity.

    Crude oil imports in ports across Shandong Province, home to Qingdao, rose 78.2 percent in the first quarter compared with the first three months of last year, according to customs statistics.

    "Big vessels are jamming big ports, and small vessels are jamming small ports," said Sun Chenglin, logistics manager of Shandong Chambroad Petrochemicals, a major privately owned oil refiner.

    The congestion is expected to be alleviated from June, authorities with Qingdao port told Xinhua, after analyzing its major customers involved in crude transport.

    Liu Xintian, secretary-general of the country's Commodity Development & Research Center, said the market had been optimistic about the prospects of rising oil prices, and many Chinese companies imported oil at relatively low prices.

    However, prices are not likely to exceed 50 dollars per barrel, said Liu. "Oil will lose its cost appeal compared with coal and natural gas if it hits 50 dollars," he said.
    Back to Top

    API Weekly Crude Oil Stock Builds 3.4mnl

    The latest American Petroleum Institute (API) inventory data recorded a build of 3.4mn barrels for the latest weekly data, compared with an expected build of around 0.3mn and the 1.3mn increase in stocksrecorded last week. The data pushed oil prices lower as markets reacted to the higher than expected inventories and, in contrast to last week, there was no major price support from the components.

    There was a build in Cushing stocks of 1.46mn barrels for the week, which was very close to the expected level after Monday’s Genscape data suggested a substantial build of 1.4mn barrels at the Cushing facility.

    There was an unexpected build in gasoline stocks of 271,000 barrels compared with an expected 0.8mn barrel draw with distillates recording a draw of 1.36mn barrels, which was broadly in line with expectations. Gasoline prices have remained stronger this week, primarily due to the impact of firm crude prices, although demand has also remained at elevated levels and the gasoline build is a surprise.
    Back to Top

    Bulk of Canada's Oil-Sands Plants Seen Starting in Days to Weeks

    Canadian oil-sands facilities representing more than 90 percent of production taken offline during a wildfire in northern Alberta have emerged unscathed and are expected to restart within days to a couple of weeks.

    Mines and drilling projects north of Fort McMurray are already bringing back some of the roughly 1 million barrels a day of supply that was curbed, Steve Williams, chief executive officer of the nation’s largest energy company Suncor Energy Inc., said Tuesday, speaking for the industry. Facilities south of the energy hub that represent much less of the lost supply and were more affected by the fire may take longer, he said.

    “It’s that quick -- some facilities are turning back up the volumes now,” Williams said at a media briefing in Edmonton, flanked by his peers at companies including Imperial Oil Ltd. and Canadian Natural Resources Ltd. Other projects to the south may take longer. “South, where there have been a few more direct impacts from the fire, we have to go in and evaluate and put the plans in place.”

    Companies took oil-sands production offline as a fire that’s ripping across northern Alberta forced the evacuation of more than 80,000 residents of Fort McMurray and destroyed about 10 percent of the community’s buildings. The industry’s safety precautions included the evacuation of workers from camps and the shutdown of pipelines and power supplies. The fire -- now 2,290 square kilometers (884 square miles), according to the latest provincial estimate -- is primarily moving east of the region toward Saskatchewan.

    Williams was among a dozen energy executives who met with Alberta Premier Rachel Notley on Tuesday to make plans to bring back the oil production that drives the provincial and national economy. Supplies taken offline by projects north of Fort McMurray represent an estimated 93 percent of volumes curbed during the fire, according to data compiled by Bloomberg from RBC Capital Markets research and company statements.

    “We will get back to normal as quickly as possible,” Notley said at the briefing. Movement of goods on the roads north of Fort McMurray restarted on Tuesday, she said. “While thousands of lives will never be the same, we can take small steps to getting back the rhythm in northeast Alberta.”
    Back to Top

    Argentina's YPF says first quarter net profit down 59.5 pct

    Argentina's state-controlled oil company YPF said on Tuesday that its first quarter net profit tumbled 59.5 percent versus a year earlier to 855 million pesos ($58.1 million).

    YPF, which was nationalized in 2012 after the Argentine government seized the stake held by Spanish oil major Repsol, posted a net profit of 2.11 billion pesos in the first quarter of 2015.
    Back to Top

    Brazil to open subsalt to some non-Petrobras oil operators

    Brazil to open subsalt to some non-Petrobras oil operators 

    May 10 Brazil plans to publish regulations in coming days to allow companies other than state-run Petrobras to operate some oil production-sharing contracts in the Subsalt Polygon, a source participating in discussions of the rules told Reuters.

    The rules will only allow non-Petrobras companies to operate Subsalt Polygon blocks if the blocks are sold to unitize oil fields connected to existing areas already leased under concession contracts signed before new production-sharing rules took effect.

    Under the production-sharing rules, Petroleo Brasileiro SA, as Petrobras is formally known, is the only company allowed to operate oil and gas exploration and production blocks in the Subsalt Polygon, an offshore area near Rio de Janeiro where some of the world's largest recent discoveries have been made.
    Back to Top

    Australia's AWE rejects $311 mln bid from Lone Star fund

    Australian oil and gas company AWE Ltd said on Wednesday it had rejected a A$421 million ($311 million) takeover approach from U.S.-based private equity fund Lone Star, calling the offer too cheap.

    The bid adds to a spate of energy deals in Australia over the past year with acquirers seeking to swoop on beaten down assets, ranging from Beach Energy's takeover of Drillsearch Energy to Woodside Petroleum's scrapped $8 billion bid for Oil Search.

    Lone Star's Japan Acquisitions unit offered A$0.80 a share, a 30 percent premium to AWE's close on Tuesday.

    "The board concluded that it is opportunistic and does not reflect the fair underlying asset value of the company," AWE said in a statement to the Australian stock exchange.

    AWE's shares have slumped 58 percent over the past year, hammered like its peers by sliding oil and gas prices.

    The company, which recently appointed a new chief executive, David Biggs, has stakes in oil and gas projects in Australia, China, Indonesia, New Zealand, and the United States. As of March 31, it had net cash of A$52 million and no debt.

    Lone Star executives in the United States were not available to comment outside office hours.

    AWE's shares jumped 20 percent to A$0.74 in first trading after the announcement, but that was well below the offer price, reflecting uncertainty over whether a higher offer would emerge.
    Back to Top

    Big Oil walks away from $2.5billion in Arctic drilling rights

    After plunking down more than $2.5 billion for drilling rights in US Arctic waters, Royal Dutch Shell, ConocoPhillips and other companies have quietly relinquished claims they once hoped would net the next big oil discovery.

    The pullout comes as crude oil prices have plummeted to less than half their June 2014 levels, forcing oil companies to slash spending.

    For Shell and ConocoPhillips, the decision to abandon Arctic acreage was formalized just before a May 1 due date to pay the US government millions of dollars in rent to keep holdings in the Chukchi Sea north of Alaska.

    The US Arctic is estimated to hold 27 billion barrels of oil and 132 trillion cubic feet of natural gas, but energy companies have struggled to tap resources buried below icy waters at the top of the globe.

    Shell last year ended a nearly $8billion, mishap-marred quest for Arctic crude after disappointing results from a test well in the Chukchi Sea.

    Shell decided the risk is not worth it for now, and other companies have likely come to the same conclusion, said Peter Kiernan, the lead energy analyst at The Economist Intelligence Unit.

    “Arctic exploration has been put back several years, given the low oil price environment, the significant cost involved in exploration and the environmental risks that it entails,” he said.

    All told, companies have relinquished 2.2 million acres of drilling rights in the Chukchi Sea – nearly 80 percent of the leases they bought from the US government in a 2008 auction. Oil companies spent more than $2.6 billion snapping up 2.8 million acres in the Chukchi Sea during that sale, on top of previous purchases in the Beaufort Sea.

    Shell relinquished 274 Chukchi leases and others in the neighboring Beaufort Sea. In doing so, the company forfeits what it paid the US government for the rights to drill in those tracts – and the millions of dollars it spent on annual rent since then.

    “These actions are consistent with our earlier decision not to explore offshore Alaska for the foreseeable future,” Shell spokesman Curtis Smith said by e-mail. The decision also reflects the high costs of operating off Alaska’s northern coast and evolving regulatory standards, Smith said.

    Other energy companies have followed Shell out of the Arctic, according to Interior Department records obtained by the conservation group Oceana under a Freedom of Information Act request and reviewed by Bloomberg News.

    ConocoPhillips formally relinquished its 61 Chukchi Sea leases on April 26, and spokeswoman Christina Kuhl said the company will end Interior Board of Land Appeals proceedings that aimed to extend their life.

    Statoil dumped 16 Chukchi Sea leases and its working interest stakes in 50 others in the US Arctic last November, conceding the portfolio was “no longer considered competitive.”

    Iona Energy, a Canadian oil and gas company that began insolvency proceedings last November, ceded its one lease in the Chukchi Sea on March 31. Italy’s Eni also gave up four leases in the Chukchi Sea on April 28.

    Shell indefinitely halted oil exploration in the US Arctic, but is seeking an extension of leases that begin to expire in 2017. That legal battle, playing out in the Interior Board of Land Appeals, will continue.

    Shell is holding on to one parcel in the Chukchi Sea: the tract it drilled last year. Smith said Shell is maintaining that lone lease – at a potential cost of $132,456 over the next four years – because there is value in the data the company gathered during its 2015 exploratory drilling.
    Back to Top

    Magnum Hunter Emerges from Bankruptcy with CEO Gary Evans Gone

    Magnum Hunter Resources Corporation, a driller focused almost entirely on the Marcellus/Utica, announced yesterday the company has emerged from bankruptcy–less than five months after filing.

    We suppose we should have seen this coming, but we were nonetheless surprised to read that MHR CEO Gary Evans is gone from the company.

    Currently two of Evans’ lieutenants will serve as co-CEOs while the new board of directors looks for a permanent replacement for Evans. Interestingly (to us), Evans’ name isn’t even mentioned in the press release–as if he never existed. That’s cold.

    MHR achieved their restructuring by converting what was $1 billion worth of debt into shares of stock, thereby screwing the old shareholders in favour of debt holders.
    Back to Top

    9 of 10 Biggest Marc/Utica Drillers Increase Production in 1Q16

    Although we often read of drillers in the northeast curtailing (shutting in) production to wait for higher natural gas prices, nine of the top ten publicly traded drillers in the Marcellus/Utica produced MORE natgas in the first quarter of 2016 than they did in the first quarter of 2015.

    Some of them, like Gulfport and Rice Energy, produced a LOT more (up 63% and 53% respectively).

    However, the Achilles heel for some drillers in our region is lack of pipeline capacity to get their gas out of the immediate region. The winners in the Marcellus/Utica are those drillers who have locked in pipeline capacity to move their gas to other regions–the northeast, south, Midwest and Gulf Coast.

    The losers are those who haven’t–and (potentially) those who were relying on pipeline projects that are either dead or delayed–including the Constitution and Northeast Energy Direct…

    Attached Files
    Back to Top

    Kuwait intends to increase oil output 44% in the next four years

    Speaking at the Platts Crude Oil Summit in London, Abdulaziz Al Attar, head of research at state-owned Kuwait Petroleum Corp., said the country aims at producing 4 million a barrels a day by 2020 and maintaining that level through 2030, reiterating its goal of ramping up production.

    According to MarketWatch, such an increase would mark a 44% jump on Kuwait's output of 2.77 million barrels a day in March, according to the latest monthly report from OPEC. It would also be the country's highest output level ever, according to Bloomberg data. "We also intend to provide fuel stock capabilities to counter for seasonality and domestic energy demand," Al Attar said at the conference.

    The comments come after a three-day strike in Kuwait sent its oil production tumbling to 1.5 million a day in April. However, Al Attar brushed off concerns that similar events would significantly impact production in the future. "I don't think there will be any future risks of strikes," he said. The oil representative said Kuwait plans to grow domestic refining capacity to 1.4 million barrels a day and boost international cooperation.

    So while the world awaits that elusive jump in demand which is the catalyst for all this upcoming excess production, in the meantime oil continues to pile up. And, as Reuters, writes, with plenty of crude available, refiners have produced large volumes of gasoline and diesel, threatening to swamp demand despite the coming U.S. summer driving season.
    Back to Top

    Energy Deals Elusive Despite $110B in Assets on the Block

    Energy companies, including some of the world's biggest, could be forced to slash prices of more than $110 billion worth of assets they want to sell after dealmaking in oil and gas fields ground to a halt due to the volatile crude market.

    The values that buyers and sellers assign to assets, largely based on their view on the future oil price, drifted far apart in the past year, according to several industry bankers.

    Asking prices have been as much as 50 percent higher than what buyers are willing to pay in the era of cheap oil, although some bankers believe the gap is now narrowing again as crude prices rally, and activity is showing signs of picking up.

    Oil majors including Royal Dutch Shell, Chevron and BP are offering assets to balance their budgets and maintain lavish dividend policies. For smaller companies with heavy debt burdens such as Tullow Oil, Genel Energy or Enquest and U.S. shale producers, the need for cash can be even stronger.

    Around 146 assets worth more than $100 million each are on the block worldwide, according to data compiled by consultancy 1Derrick. It puts their total value at $113 billion, although any estimate remains notional until buyers and sellers come to terms.

    They include Chevron's Gulf of Mexico oil fields, North Sea assets owned by Italy's Eni, Shell and France's Total as well as a myriad assets in Africa and Asia.

    "Deals have been elusive because buyers are both few in number and highly cautious," said Bobby Tudor, Chief Executive Officer of U.S. investment bank Tudor, Pickering, Holt & Co.

    Business involving energy infrastructure remains buoyant. Even at low prices, pipelines are needed to move oil and gas while demand for storage is strong as sellers hold onto crude and products, hoping the market will pick up.

    In the United States, buyers are still unwilling to value assets at prices much above the oil price curve as measured by forward contracts, Tudor said. Known as the strip, this currently values WTI at around $53 a barrel in 2020.

    Tudor believes the market needs to rise only a little and stay there for mergers and acquisitions deals to pick up. "If we can get the prompt month for WTI stabilized in the high $40s and the 2020 price at $55 or higher, the M&A market will come alive," he said.

    U.S. shale production is now declining with lower investments, and dozens of huge oil and gas projects have been scrapped around the world. Nevertheless, closing asset deals remains elusive, according to one potential buyer.

    "Did the bump up from $27 a barrel to the $40s suddenly change the pace of industry dealmaking? I am not seeing that," said Arun Subbiah, Founding Partner at Petroleum Equity, an upstream oil and gas private equity firm focused on the North Sea and onshore Europe.

    - See more at:

    Attached Files
    Back to Top

    Noble Announces Agreement With Freeport-McMoRan; To Receive $540 Mln Payment

    Noble Corporation plc announced an agreement with its client, Freeport-McMoRan Oil & Gas LLC or FMOG, and FMOG's parent company, Freeport-McMoRan Inc. (Freeport), in connection with the drilling contracts for the drillships Noble Sam Croft and Noble Tom Madden, which were scheduled to terminate in July and November 2017, respectively.

    As per the agreement, the contracts will be terminated, with operations ceasing as soon as practicable, and Freeport will make a payment to Noble of $540 million. In addition, Noble can receive additional contingent payments from Freeport of $25 million and $50 million, respectively, depending upon the average price of oil over a 12 month period. Noble also expects to realize over $100 million in direct cost savings as a result of the contract terminations through crew reductions and stacking procedures.

    Freeport recently announced a restructuring of its oil and gas business, which is operated through FMOG. As disclosed in Freeport's public filings, FMOG has substantial debt and has been negatively impacted by the crash in oil prices.

    Read more:
    Back to Top

    Libyan Oil Fields to Grind to Halt Amid Port Blockage, NOC Says

    Fields responsible for the bulk of Libya’s oil exports will be forced to halt production within a month unless a blockade is lifted on the port of Marsa el-Hariga, according to the Tripoli-based National Oil Corp.

    “In less than four weeks we will have to shut production completely because the tanks at Hariga will be full,” Mohamed Harari, a spokesman for NOC, said in an e-mailed statement late on Monday. "The blockade will cause serious harm and bring no benefits.”

    Factions controlling the east of the North African nation imposed the port blockade on April 30 after their bid to sell a crude cargo independently of Tripoli was stymied as the United Nations blacklisted the shipment. With rising tensions between the UN-backed western-based government of national unity led by Fayez al Serraj and rivals in the east, oil production by Arabian Gulf Oil Co., which ships crude through Hariga, has dropped to 90,000 barrels a day from 240,000 barrels, the producer said last week.

    The eastern branch of NOC said on Monday that it had no plans to block shipments from the port.

    Oil exports from Hariga account for three-quarters of the country’s total, Harari said, adding that payments to the central bank will dry up and the dinar will be affected if the fields are shut down. Output from Libya has slumped about 80 percent since the 2011 ouster of dictator Muammar Al Qaddafi as different groups compete for control of oil facilities in the nation with Africa’s largest proven crude reserves.

    Oil flowing from some of the fields to Hariga is high in wax and will solidify in the pipelines if it doesn’t move, causing permanent production loss, Harari said. The tanker Seachance is moored off the coast, according to ship tracking data, after being prevented from exporting 1 million barrels of crude from the terminal.

    “Open the ports for the well being of our country," NOC Chairman Mustafa Sanalla said in the statement. "Unity is the only solution.”
    Back to Top

    Idemitsu, AltaGas suspend LNG project in Canada

    Japanese oil refiner Idemitsu Kosan Co said on Tuesday its joint venture with Canada's AltaGas would suspend a liquefied natural gas (LNG) project in Canada for the foreseeable future due to low energy prices.

    The two firms had conducted a feasibility study to export about 2 million tonnes per year of LNG to Asia from Canada's west coast as early as 2017.

    If the current LNG prices continue into the future, the venture would not be able to make a commitment on development, Toshiaki Sagishima, executive officer and general manager of Idemitsu Kosan's treasury department, told reporters during a briefing on the company's full-year earnings.

    But Idemitsu left open a possibility of continuing with the project when energy prices recovered.

    A consortium of companies including AltaGas and Idemitsu in February had also halted further development of the separate Douglas Channel LNG project on British Columbia's Pacific coast in Canada citing unfavorable market conditions.

    Idemitsu said it would lower its strategic investments during the business year that started on April 1 by about a third from a year earlier to 61 billion yen ($560 million) amid lower oil prices.
    Back to Top

    Saudi Aramco CEO Sees `Significant Growth' in Oil Output in 2016

    Saudi Arabia, the world’s biggest oil exporter, plans “significant growth” in output in 2016 and further international expansion, the head of the country’s state-run producer said, even as global oversupply contributed to a drop in crude prices from a year ago.

    Saudi Arabian Oil Co., also known as Saudi Aramco, will boost capacity at the Shaybah oil field by 33 percent to 1 million barrels a day in the next couple of weeks and will double natural gas production over the next decade, Amin Nasser, chief executive officer told reporters Tuesday at its headquarters in Dhahran, eastern Saudi Arabia.

    “Even though it is challenging, it’s still an opportunity for us to grow,” Nasser said of the international expansion plans.

    Saudi Arabia is seeking to reduce its reliance on oil sales amid lower prices for its most lucrative export. As part of that effort, the king’s increasingly influential son, Deputy Crown Prince Mohammed bin Salman, wants to sell stock in Saudi Aramco for the first time, creating what could be the world’s largest listed company.

    The kingdom is leading Organization of Petroleum Exporting Countries members in a battle for market share against higher-cost producers including U.S. shale drillers. Nasser’s predecessor as CEO, Khalid Al-Falih, who was appointed oil minister Saturday, said he’ll keep Saudi oil policy unchanged.

    “Saudi Arabia will maintain its stable petroleum policies. We remain committed to maintaining our role in international energy markets and strengthening our position as the world’s most reliable supplier of energy,” Al-Falih, who remains Aramco’s chairman, said in a statement Sunday, his first day in office.

    Attached Files
    Back to Top

    Argentina shale development moves forward, but still slow

    Argentina has the potential to become a net exporter of oil and natural gas from its huge shale resources, a task that will require large investments not just by majors but also a lot of junior players, executives said Monday.

    "If Argentina does things right, it could become a big exporter of oil and gas," Arturo Vilas, general manager of Canada's Miramar Hydrocarbons, said at the Argentina Shale Gas and Oil Summit in Buenos Aires.

    Argentina has among the world's largest shale oil and gas resources, and big companies like the country's state-run YPF, Chevron and Dow Chemical have started to put them into production, while ExxonMobil, Shell and Total are pursuing production pilots.

    The investments have achieved stable production, but it is still "very little," Vilas said.

    The country is producing about 50,000 b/d of oil equivalent in shale oil, gas and liquids, according to Neuquen government data. Neuquen is a southwestern province that is home to the giant Vaca Muerta play and most of the country's shale drilling.

    There could be an increase in investment this year thanks to improved conditions for doing business in the country. The new right-of-center government of President Mauricio Macri, who took office in December, has returned the country to global financial markets by ending a 15-year sovereign debt default, expanding financing opportunities for companies. His administration has also raised most energy prices, lifted capital controls and scrapped trade restrictions.

    "Investment conditions have improved," Vilas said.

    What is more, he said the investments over the past few years have reduced operational risks and proven that Vaca Muerta can extract oil and gas.

    To expand production, Argentina needs an influx of junior companies, Vilas said, drawing a comparison to their role in the shale boom in Canada and the United States.

    A longer-term necessity is to integrate the region so that the future surplus in Argentine oil and gas production can be sold to neighboring countries, he added.

    If Argentina can bring in the investments needed to develop Vaca Muerta and other shale and tight plays, then it could become a net exporter in the nearly 15 years it took the US to go from a big energy importer to a "potentially big exporter," Vilas said.

    However, to attract investment, Argentina faces competition from other shale plays in Latin America, including in Brazil, Colombia and Mexico, as well as the offshore subsalt resources in Brazil, he said.

    Hermann Steinbuch, the manager of production and operations in Argentina for Canada's Madalena Energy, also said that more companies are needed in the plays to achieve explosive growth.

    "We need small companies to work in the formations, to take on the risks," he said.

    With more operators as well as services companies, this will help to cut cost and improve profit potential, he said.

    YPF produces 44% of the country's 520,000 b/d of oil and one-third of the 120 million cu m/d of gas, trailed by BP-backed Pan American Energy, France's Total, Argentina's Pluspetrol and Tecpetrol, China's Sipetrol and Chevron. Most of the juniors produce less than 1% of national oil and gas and have little acreage.
    Back to Top

    Chaparral Files for Bankruptcy to Cut $1.2 Billion in Debt

    Chaparral Energy Inc. filed for bankruptcy protection as it continues talks with creditors to reach an exchange agreement that would cut bondholder debt by about $1.2 billion.

    The Oklahoma City-based oil and gas explorer listed estimated liabilities of $1 billion to $10 billion in a Chapter 11 petition filed Monday in Delaware federal court and blamed its bankruptcy on the commodity slump that’s plagued the energy industry since oil started its slide in 2014.

    “By significantly reducing our debt and restructuring our balance sheet, Chaparral will be better positioned to not only weather this down environment, but also increase our long-term financial security,” Chief Executive Officer Mark Fischer said in a statement. Chaparral said it plans to continue operating for the duration of the reorganization while it continues to negotiate a debt-for-equity swap.

    In February, to build liquidity, the company borrowed substantially all of the remaining funds available under $548 million credit agreement from 2010. It also retained Latham & Watkins LLP and Evercore to advise it on financial and strategic alternatives.

    Dozens of energy-linked businesses, including drillers and service providers, have sought creditor protection since crude began its slide in mid-2014, according to law firm Haynes & Boone LLP. In the past year alone, 13 oil and gas companies have filed for bankruptcy protection in the U.S. listing liabilities of more than $1 billion each, according to data compiled by Bloomberg.

    According to its court filing, Chaparral’s biggest unsecured creditors include holders of $525.9 million in 7.625 percent 2022 senior notes; $384 million in 8.25 percent senior notes due in 2021; and $298 million in 9.875 percent 2020 senior notes.

    Attached Files
    Back to Top

    Shell workers evacuated from Nigerian oil field after threat as VP meets oil majors

    Shell workers at Nigeria's Bonga oil field in the southern Niger Delta are being evacuated following a militant threat, a labor union official said on Monday as the vice president met oil majors to discuss a surge in violence.

    Last week, militants attacked a Chevron facility in the impoverished Delta where tensions have been building up since authorities issued an arrest warrant in January for a former militant leader on corruption charges.

    Shell has been evacuating workers from Bonga, a union official said as local media reported an unconfirmed militant attack in the area.

    "The evacuation is being done in categories of workers and cadres," Cogent Ojobor, chairman of the Warri branch of the Nupeng oil labor union, said. "My members are yet to be evacuated."

    He gave no numbers.

    A Shell spokesman said earlier that oil output was continuing at its oil fields in Nigeria while it was monitoring the security situation.

    Vice President Yemi Osinbajo in the evening in the capital Abuja met executives from Shell, France's Total, and Italy's Agip and Chevron. All declined to talk to Reuters.

    "All of us as stakeholders are concerned and we have agreed to work together to ensure that production is not disrupted," said Henry Dickson, governor of the oil-producing Bayelsa state in the Delta, who took part in the meeting.

    "This is a time that we cannot afford to have any disruption, not to talk of vandalism of critical national assets," he said.

    In separate violence, gunmen killed four policemen traveling to Bayelsa's capital Yenagoa, police said.

    A group known as the Niger Delta Avengers has claimed responsibility for the Chevron attack. The same group has said it carried out an attack on a Shell oil pipeline in February which shut down the 250,000 barrel-a-day Forcados export terminal.

    Residents in the Delta have been demanding a greater share of oil revenues. Crude oil sales account for around 70 percent of national income in Nigeria but there has not been much development in the region.

    President Muhammadu Buhari has extended a multimillion-dollar amnesty signed with militants in 2009 but upset them by ending generous pipeline protection contracts.

    The militancy is a further challenge for a government faced with an insurgency by the Islamist militant Boko Haram group in the northeast and violent clashes between armed nomadic herdsmen and locals over land use in various parts of the country.
    Back to Top

    Sanchez Energy announces first quarter 2016 financial results

    Highlights include:

    - Total production of 5.1 million barrels of oil equivalent ('MMBoe') during the first quarter 2016, up approximately 26% over the first quarter 2015
    - Average production of approximately 56,500 barrels of oil equivalent per day ('Boe/d'), which exceeded the high end of the Company's guidance of 48,000 to 52,000 Boe/d for the first quarter 2016 by over 8.5%
    - Revenues of $79.8 million (approximately $133 million inclusive of hedge settlements) and Adjusted EBITDA (a non-GAAP financial measure) of $64.6 million
    - Total liquidity of approximately $662 million as of March 31, 2016, which consisted of $362 million in cash and cash equivalents and an undrawn bank credit facility with an elected commitment amount of $300 million
    - Average drilling and completion costs during the first quarter 2016 of $3.3 million per well at Catarina and $3.4 million per well at Cotulla, with the Company's best wells coming in at approximately $3.0 million per well in both areas
    - South-Central Catarina wells continue to exceed expectations, with average 30-day rates of greater than 1,300 Boe/d from all South-Central wells the Company has brought on-line to date
    - The Company has met its 50 well annual drilling commitment at Catarina for the period July 2015 through June 2016 and has banked 13 wells toward the 50 well annual drilling commitment for the period July 2016 through June 2017
    - The Carnero Pipeline, constructed by Sanchez Energy's joint venture with a subsidiary of Targa Resources Corp. , went in-service in March 2016 and now transports the majority of Catarina gas volumes


    'We are off to a strong start in 2016,' said Tony Sanchez, III, Chief Executive Officer of Sanchez Energy. 'As previously reported, we achieved excellent production results in the first quarter 2016, exceeding the high end of our guidance by over 8.5%. Process improvements and efficiency gains continue to drive our performance, with several wells coming in at a cost of approximately $3.0 million.
    Back to Top

    Resilient U.S. drillers squeezing out more oil than expected, Goldman says

    The nation’s oil production is set to drop less than expected this year as drillers in West Texas and Oklahoma find ways to pump crude faster, and for less money, Goldman Sachs says.

    U.S. crude output should fall by 650,000 barrels a day this year, the investment bank said Monday, revising its previous forecast from a decline of 725,000 barrels a day after two weeks of earnings reports by oil and gas explorers.

    It’s not a large adjustment, and it doesn’t change Goldman’s mind that falling domestic crude production will, over the next few months, help lift energy prices by realigning oil supply and demand after a two-year glut.

    But it’s a sign U.S. drillers are still pushing back against the sharp natural declines across shale plays in Texas and elsewhere, and that they could get an assist from the recent rally in crude prices.

    And the fact that oil prices are rising in the face of resilient shale output and higher-than-expected production out of Iran shows global demand is stronger than many believe, and production is falling off elsewhere, Goldman said.

    “Signs the world will need a restart of the shale machine remains a potential positive catalyst for oil (companies) despite the recent rally,” Goldman analysts wrote.

    One place crude production is falling is Canada, which has suffered an output loss of 1 million barrels a day as wildfires continue to rage across the country.

    If Canadian oil sands producers are able to begin pumping oil again by the end of the week, Goldman said, an average 650,000 barrels a day of oil production could be lost over three weeks as facilities are ramped back up.

    That’s about 14 million barrels, Goldman estimates, and while that’s a big number, it wouldn’t disrupt North American crude inventories much, as U.S. storage tanks have some 543 million barrels of oil sloshing around, near record levels.
    Back to Top

    Suncor looks to restart oil-sands production after wildfires

    Canada oil-sands producers including Suncor Energy Inc. could resume production within a week after the threat subsides from wildfires that cut as much as 40 percent of the region’s output.

    A quick restart depends on whether companies managed shutdowns properly and if power and pipeline infrastructure is unscathed, according to analysts at Wood Mackenzie Ltd. and IHS Energy.

    Suncor and Syncrude Canada Ltd., two of the biggest producers in the area that’s been ravaged by wildfires near Fort McMurray, Alberta, both said they managed safe shutdowns. Only one oil-sands site, Cnooc Ltd.’s Nexen operations, has suffered minor damage.

    “The best possible case, you’re probably looking at somewhere within a week to get them restarted,” said Harold York, vice president of integrated energy at Wood MacKenzie. Restarts will also depend on availability of workers after large-scale evacuations, which may be hindered given destruction of homes in the area, he said.

    If companies executed controlled shutdowns, that means bitumen has been cleared from the system so that restarts won’t be hindered, according to Kevin Birn, a director at IHS Energy in Calgary.

    The bulk of the nation’s large oil-sands projects shut some or all output in recent days, cutting supplies by about 1 million barrels a day, according to an IHS Energy estimate. Energy companies evacuated workers and shut upgraders, mines and wells as the inferno grew to more than twice the size of New York City.

    Suncor, Canada’s largest energy producer, Syncrude, Husky Energy Inc.,  Imperial Oil Ltd. and Cnooc’s Nexen are among operators that have taken output offline

    Suncor, which has closed about 700,000 barrels a day of capacity, said Sunday that it’s beginning to implement a plan for resuming operations and will restart once it can do so safely, depending on “availability of critical third-party pipeline infrastructure.” The company began shutting sites last week “in a controlled manner to facilitate a quick and reliable startup,” it said.

    Syncrude, which can produce as much as 350,000 barrels a day, cut rates to a minimum when the fires began and then shut and evacuated all personnel from its Mildred Lake and Aurora oil-sands operations Saturday, according to Leithan Slade, a spokesman. The shutdown, which included bringing down all three cokers in its upgrader for the first time, was done in a “safe and orderly manner,” he said.

    Houston-based ConocoPhillips has a team of people “working day and night” to figure out how and when the company can resume operations on its Surmont oil-sands operation, which was producing at 30,000 barrels a day before the blaze, said Rob Evans, a spokesman. While the site has power, returning workers to the site poses a challenge, he said.

    Nexen’s operations to the south of Fort McMurray suffered “minor” fire damage, said Chad Morrison, a wildfire manager for the Alberta government. The facility was already at reduced rates after an oil spill last summer and upgrader blast in January. A company spokeswoman didn’t immediately respond to requests for comment Sunday.

    Some companies were also already producing at reduced rates because of scheduled maintenance on upgraders. Syncrude, was scheduled to complete work on May 5. Suncor’s work on its No. 2 upgrader was to wrap up by mid-May.

    When wildfires last year threatened oil-sands facilities including Cenovus Energy Inc.’s Foster Creek site, the company was able to return workers to begin restarting production nine days after evacuations and shut downs.

    Attached Files
    Back to Top

    Genscape sees large Cushing build

    Genscape has just reported a forecast 1.4 million barrel build at Cushing - significantly above expectations and recent activity.
    Back to Top

    Canadian natgas storage nearly full?

    Bentek reporting a surge in Canadian natgas exports to the US, up 0.8 Bcf/d so far this month versus a year ago. Canada storage near full.

    Back to Top

    Iran Seen Taking Its Time on Joint Action With OPEC Members

    Iran says it’s almost ready to talk with other OPEC members about limiting oil production as the country’s exports recover to levels reached before international sanctions crippled crude sales. Morgan Stanley and Barclays Plc say no agreement is in the cards for now.

    With prices up 65 percent from the 12-year low in January, joint action by members of the Organization of Petroleum Exporting Countries may not be needed, according to Barclays analyst Miswin Mahesh in London. Morgan Stanley says higher prices are reducing the urgency for OPEC to act.

    “The market is set to balance, but higher prices could slow down the process,” Mahesh said by phone Monday.  “Would it really be in their long term interest of balancing the oil market if oil prices move higher too quickly?”

    The Persian Gulf country will double crude exports to 2 million barrels a day this month compared with sales before sanctions were lifted in January, Oil Minister Bijan Namdar Zanganeh said in a speech in Tehran Sunday. Lifting sales to the pre-sanctions level could pave the way for Iran and other OPEC members to talk about limits on production in as soon as one or two months, Rokneddin Javadi, managing director at National Iranian Oil Co., said Thursday.

    Iran is seeking to rebuild its energy industry and restore crude sales after a January nuclear deal expanded its access to global oil markets and investment. The country last month refused to join other nations in a push to freeze output.

    Iran exported about 2 million barrels of crude daily in 2011, before U.S. and European restrictions forced countries to stop buying from Iran, according to the Joint Organisations Data Initiative. Iran sold about half that amount once sanctions kicked in, Zanganeh said Sunday. The country produced 3.5 million barrels a day of crude in April compared with about 2.8 million a year earlier, according to data compiled by Bloomberg.

    Oil prices

    Rising production and exports from Iran is bearish for oil prices as output returns faster than expected, Adam Longson, a Morgan Stanley analyst, said in a report e-mailed Monday. Crude and condensate output of about 4.2 million barrels a day is 800,000 barrels more than the country pumped in November and exceeds consensus estimates for the amount Iran would actually add to the market, according to the report.

    “Iran may be willing to join a freeze, but only because production has exceeded expectations,” Longson said.

    OPEC members can’t be expected to reach a freeze deal when they next meet in June, according to Robin Mills, chief executive officer of Dubai-based consultants Qamar Energy. Iran’s oil production needs to be closer to 3.6 million to 3.8 million barrels a day to consider a freeze, and that probably won’t happen until the third or fourth quarter, Mills said.

    Morgan Stanley forecasts oil to drop to an average of $30 a barrel in the third and fourth quarters while Mills expects Brent crude to end 2016 at about $50 a barrel.

    “OPEC intervention is unlikely,” according to Morgan Stanley. “It remains to be seen whether producers are truly willing to agree to an artificial cap, particularly as higher prices reduce the urgency.”
    Back to Top

    Petrobras Seeks $1 Billion China Loan Faster Than Planned

    Brazil’s state-controlled oil company Petrobras is seeking a $1 billion loan from the Export-Import Bank of China before originally planned as its debt service costs surge in the coming years amid the worst oil market in a generation.

    Petroleo Brasileiro SA, as it is formally known, is negotiating a definitive contract with the Chinese lender after signing a term sheet, the Rio de Janeiro-based producer said Monday in a filing. The financing is tied to equipment and service contracts from Chinese suppliers, and was originally planned for 2017, it said.

    The oil producer, which has been mired in Brazil’s biggest corruption investigation known as Carwash, has been leaning more heavily on Chinese lenders recently at a time ratings downgrades, the rout in oil prices, and Brazil’s recession have led to higher borrowing costs in international debt markets. China has invested in oil-rich nations to ensure supplies to the world’s second-biggest crude market after the U.S., and similar deals have helped Venezuela fund its ballooning debt.

    In February, Petrobras secured a $10 billion loan from China Development Bank Corp. that is part of a deal to supply crude to the Asian country. The $1 billion loan announced Monday is part of Petrobras’ strategy of diversifying its financing sources, it said.

    Attached Files
    Back to Top

    In rare reversal, Brazil exports diesel to Europe

    Brazil has joined a list of countries exporting diesel to Europe, reversing a traditional route and underscoring a weakening of the largest South American economy.

    At least two 37,000 tonne cargoes of diesel, on the tankers Torm Gunhild and MT Alexandros, have sailed in recent weeks from Brazil to Europe, according to Reuters ship tracking data and traders.

    Torm Gunhild is heading to Venice and is chartered by Italian oil company Eni while MT Alexandros has been chartered by trading house Glencore and is set to discharge in the Canary Islands.

    Traders linked the rare arbitrage to Brazil's economy, which has struggled with a deepening recession in recent years. Its economic output fell 3.8 percent in 2015 and is expected to decline by the same amount in 2016, according to the International Monetary Fund.

    According to trade sources, one of the cargoes loaded distillates off the coast of Brazil from a vessel that originated at India's Reliance oil refinery.

    Diesel consumption in Brazil, which imports much of its needs from the United States, Asia and, at times, Europe, has also been on a steady decline.

    "We do not expect diesel demand to increase significantly until the wider economy recovers," consultancy Energy Aspects said last month.

    Europe is the world's main hub for diesel due its heavy use. A sharp increase in diesel refining capacity around the world has led over the past year to a sharp increase in supply, in Europe in particular, putting heavy pressure on diesel refining margins.

    France's Total is offering to sell a 270,000 tonne cargo of diesel into Europe, which would be the largest cargo ever sold in the region, according to traders.
    Back to Top

    Statoil to get rare respite from green criticisms at AGM

    Norwegian oil company Statoil will face only muted criticism of its environmental record at an annual general meeting (AGM) on Wednesday, in a rare respite caused by a small shift towards green energy.

    All major oil firms say they are working to protect the environment, but analysts say it is frequently hard to judge their sincerity. That makes the stridency of green activists' protests at AGMs one yardstick.

    On Wednesday, the only critical environmental resolution will be by the Norwegian Grandparents' Climate Campaign, urging Statoil to halt oil and gas exploration worldwide and to pull out of projects such as tar sands in Canada.

    Other groups such as the WWF conservation organisation and Greenpeace, which have submitted critical resolutions every year since at least 2010 that attract little support from shareholders, reckon state-controlled Statoil deserves a break.

    "We do see a shift in Statoil that we wanted to acknowledge by not pestering them at this year's AGM," said Nina Jensen, head of WWF Norway.

    "They have still got a huge way to go," she said, adding that organising resolutions and lobbying also takes a lot of time.

    Among shifts in the past year, Statoil has set up a renewable energy area, backed by a $200 million venture capital fund. Last month, Statoil agreed to invest 1.2 billion euros ($1.37 billion) with E.ON to develop a wind farm off Germany.

    "There's been a shift since Eldar Saetre took over as CEO" in February 2015, said Martin Norman of Greenpeace. "He's doing things that (former CEO) Helge Lund would never have done."

    Saetre welcomed the relative lack of criticism.

    "They obviously reckon that we are working with some of the right things and I think so too," he told Reuters. "Over time, I believe that aiming for a low-carbon society is also the most profitable."

    Halfdan Wiik, a retired librarian who chairs the Grandparents' Climate Campaign, said Statoil was not doing enough. "You have to keep on annoying them," he said. "We have heard nice words before."

    In May 2015, Statoil joined European firms BG Group , BP, Eni, Royal Dutch Shell and France's Total in calling for a pricing system for carbon emissions.

    A Paris summit on climate change in December set a goal of phasing out net greenhouse gas emissions by 2100. Statoil says its emissions per barrel of oil produced are among the lowest in the world.

    Analysts say it is too early to say much about the financial implications of Statoil's shift.

    "It remains to be seen. So far the renewable business in Statoil is a very small part of the overall picture," said Kjetil Bakken, an analyst at Carnegie. "My guess is that it obviously helps when it comes to the public image."

    Attached Files
    Back to Top

    Kosmos Energy announces significant gas discovery offshore Senegal

    Kosmos Energy announced today that its Teranga-1 exploration well offshore Senegal has made a significant gas discovery.

    Located in the Cayar Offshore Profond block approximately 65 kilometers northwest of Dakar in nearly 1,800 meters of water, the Teranga-1 well was drilled to a total depth of 4,485 meters. The well encountered 31 meters (102 feet) of net gas pay in good quality reservoir in the Lower Cenomanian objective.

    Well results confirm that a prolific inboard gas fairway extends approximately 200 kilometers from the Marsouin-1 well in Mauritania through the Greater Tortue area on the maritime boundary to the Teranga-1 well in Senegal. Kosmos has now drilled five consecutive successful exploration and appraisal wells in this fairway with a 100 percent success rate.

    In the process, the company has discovered a gross Pmean resource of approximately 25 Tcf and estimates the fairway may hold more than 50 Tcf of resource potential.
    Back to Top

    EOG Resources changing strategy to get more crude out of stubborn shale

    EOG Resources says it can get “triple-digit” returns at $60 a barrel oil, a sign the company has whittled down drilling costs as it moves rigs to its most profitable spots.

    Outlining a new strategy, the Houston oil company said Friday it has pointed its drill bits at its top-shelf locations in South Texas’ Eagle Ford Shale and elsewhere that get a minimum 30 percent return at $40 oil.

    “Our shift to premium is permanent and not simply a temporary high-grading process in a low-commodity price environment,” EOG Resources Chief Executive Bill Thomas told investors. “If history is any indication, we will continue to push the oil price needed for triple-digit returns even lower.”

    It’s a sharp departure from the wild and woolly wildcatter business model that was once common among U.S. shale drillers in the days of $100 a barrel oil.

    The company’s plan is among the industry’s biggest moves to address the widespread problem of low oil-production rates in the once-booming shale plays at the center of the nation’s energy renaissance. Thomas said it’s an effort that “extends our lead as the low-cost horizontal oil producer.”

    One of the reasons the downturn has been so painful for U.S. oil companies is that squeezing oil out of shale rock is expensive, and though wells across Texas and North Dakota were gushing before the downturn, the shale business has never proven itself to be profitable.

    Oil companies took out hundreds of billions in debt to drill thousands of expensive wells that gave up only 4 percent to 8 percent of the buried crude and that lost 70 percent of their production in the first year. Scores of U.S. oil companies have gone bankrupt.

    EOG Resources has 220 drilled wells that it hasn’t brought into production but could activate once management believes the oil bust is turning into a recovery. But Thomas said the U.S. oil industry will take at least a year and $60 to $65 a barrel oil prices to restart its growth cycle after the punishing downturn.

    Still, he said, his company can start pumping money back into its “premium” assets with oil at $15 to $20 a barrel lower than the average driller. EOG Resources could boost production by completing 40 percent of its backlog of drilled-but-uncompleted wells without renting any more oil field equipment.

    “Our shift to premium drilling this year is a game changer,” he said. “We expect well productivity to improve more than 50 percent in 2016.”

    Attached Files
    Back to Top

    Rig count falls by four as slowdown continues

    Oil producers set aside four more rigs this week, as low prices continued to drag on drilling activity.

    The number of active oil rigs fell by four to a total of 328, according to oil field service company Baker Hughes. Rigs seeking natural gas fell by one to 86. The U.S. combined rig count fell by five to 415, including one miscellaneous rig which was unchanged from last week.

    Oil drillers have now idled roughly 80 percent of the rigs that were once active at the Oct. 10 peak in 2014. Since this same week last year, the number of oil rigs has fallen by half. The last time the oil rig count was this low was in 1995.

    The combined oil and gas rig count is at its lowest level in recent records kept by Baker Hughes.

    U.S. oil prices, which drive oilfield activity, rose by about 1 percent Friday to roughly $44.75 per barrel in afternoon trading. Price have been buoyed in April and early May by reports that U.S. oil production has been on the decline, in part due to the falling rig count.
    Back to Top

    China April oil imports rise 7.6 pct as teapot demand steady

    China's imports of crude oil rose 7.6 percent in April from a year ago, customs data showed on Sunday, lifted by continued strong demand from domestic private refiners.

    The high April inflows were a result of the strong appetite of small domestic independent "teapot" refineries. Beijing has granted licenses to more than 20 of them since last year to import crude for the first time.

    China imported 32.58 million tonnes of crude oil in April, data from the General Administration of Customs showed, missing a Reuters forecast.

    Thomson Reuters Oil Research and Forecasts had predicted that the total crude arrivals for April into China would reach 33.14 million tonnes, up from a March reading of 32.61 million tonnes.

    On a daily basis, April imports were 3.1 percent higher from March to 7.92 million barrels per day (bpd).

    On a net basis, after factoring in exports of 440,000 tonnes, China's April crude imports were 7.26 million bpd in April.

    Armed with quotas that could make up a fifth of total Chinese crude imports, domestic independent refineries are among the bright spots in the global crude oil market as they ramped up throughput, at the same time adding to China's swelling fuel exports.

    In the first four months of the year, China imported 123.7 million tonnes of crude oil, or 7.46 million bpd, up 11.8 percent over the same period a year earlier.

    China also imported 2.51 million tonnes of oil products in April and exported 3.68 million tonnes, leaving net oil product exports at 1.17 million tonnes, customs data showed.
    Back to Top

    Oil sands fared well through Canada fire, but restart a challenge

    The mass evacuation of residents from the wildfire-devastated Canadian oil town of Fort McMurray is likely to significantly delay the restart of production, even though energy facilities themselves have escaped major damage from the flames.

    The huge wildfire that entered its second week on Sunday has destroyed entire neighborhoods in the town, forcing nearly 100,000 people to flee.

    Even though Canadian officials on Sunday showed some optimism that they were beginning to get on top of the wildfire, oil prices jumped in early Asian trading on concerns over the loss of production capacity caused by the fire -- equivalent to around half of the country's oil sands production.

    Energy facilities were barely touched through the first week of Alberta's devastating wildfire, protected by fire breaks, other defenses and provincial firefighting crews.

    But thousands of evacuees -- many of whom are essential oil industry workers -- are camped out in nearby towns and stand little chance of returning soon, even if their homes are intact. The city's gas has been turned off, its power grid is damaged, and the water is undrinkable.

    "It's the human element," said Mark Routt, chief economist for the Americas at KBC Advanced Technologies in Houston.

    "When you have an operator and his family needs to be evacuated, the plant may be in good shape, but what is the operator going to do? Humans have to operate the plant, too."

    Routt estimated that production will be shut for two to three weeks, minimum. And if fires do pass through major oil operations, he said, a restart could take months:

    "Many of these plants have a fireproof control room - the problem will be equipment on the units," he said, referring to production facilities.

    Producers whose facilities are untouched may also find that their contractors fared less well.

    "If some major service operations (in Fort McMurray) are damaged, the oil sands will still get back online, but it may be at a higher cost than before, maybe having to secure service companies from much further away," said Jackie Forrest, analyst at ARC Financial.

    A prolonged shutdown will heighten concerns about supplies after three major oil firms warned on Friday they won't be able to deliver on some contracts for Canadian crude. Fires around the oil sands last summer knocked out 10 percent of capacity but the two firms affected were back up and running within 2 weeks.

    Only one oil sands production site, CNOOC unit Nexen's Long Lake facility, has sustained minor damage, and provincial fire officials said on Sunday they expected to hold flames back from Suncor Energy Inc's main oil sands plant north of Fort McMurray.

    Alberta's vast oil sands are the world's third-largest crude reserves. The fire has shut down about 1 million barrels per day or 40 percent of total oil sands production.

    The fire that some have started calling "the beast" was not the first to hit the oil sands. But the huge scale of the inferno means there is no real precedent for the challenge.
    Back to Top

    Nigerian Oil Output Plunges to 20-Year Low as Attacks Escalate

    Nigeria is suffering a worsening bout of oil disruption that has pushed production to the lowest in 20 years, as attacks against facilities in the energy-rich but impoverished nation increase in number and audacity.

    Chevron Corp. said on Friday it had shut down about 90,000 barrels a day of output following an attack on an offshore platform that serves as a gathering point for production from several fields. Even before that strike on Wednesday night, Nigerian oil production had fallen below 1.7 million barrels a day for the first time since 1994, according to data compiled by Bloomberg.

    “This is some very, very sophisticated brazen attack,” said Dolapo Oni, the Lagos-based head of energy research at Ecobank Transnational Inc. “It is a resurgence of militancy. These guys don’t seem to be after money. They just want to frustrate the government.”

    The fresh round of attacks come after President Muhammadu Buhari vowed to stamp out corruption and oil theft. They echo a campaign waged by the self-proclaimed Movement for the Emancipation of the Niger Delta between 2006 and 2009, which cost the Nigerian government billions of dollars of lost oil revenue. That violence abated after thousands of fighters accepted an amnesty from late-President Umaru Musa Yar’Adua and disarmed, in exchange for monthly payments from the government in some cases.

    Facility Breached

    Chevron said it shut down its Okan offshore facility after it was “breached by unknown persons” and had sent “resources to respond to a resulting spill.” The facility, which feeds crude and gas into Escravos, one of the country’s largest export facilities, is jointly owned by the U.S. company and state-owned Nigeria National Petroleum Corp.

    A group calling itself the Niger Delta Avengers said on its website that it was responsible for the attack. The authenticity of the claim could not be verified by Bloomberg News.

    The Nigerian government is struggling to contain the economic damage of the slump in energy prices and separate attacks in the north of the country by the Boko Haram Islamist insurgency. The country’s foreign reserves have fallen to less than $27 billion, the lowest since 2005. The International Monetary Fund expects the economy to expand 2.3 percent this year, the weakest growth since 1999.

    "Lower oil prices have meant that the poorer oil-producing countries don’t have enough money to pay for social services,” said Ehsan Ul-Haq, senior oil analyst at KBC Process Technology Ltd. “Protests are increasing as a result."

    Force Majeure

    In February, Royal Dutch Shell Plc declared force majeure -- a legal clause that allows it to stop shipments without breaching contracts -- after an attack on a pipeline feeding the Forcados terminal, which typically exports about 200,000 barrels a day.

    The International Energy Agency estimated last month that Nigeria could lose an estimated $1 billion in revenue by May, when it expects repairs on Forcados to be completed. The terminal may not restart until June, Nigerian Oil Minister Emmanuel Kachikwu said April 20.
    Back to Top

    Occidental's New CEO Says Company's Transformation Shifts Gears

    After three years of spin-offs and asset sales from Brazil to California, Occidental Petroleum Corp. is ready to start growing again, said Chief Executive Officer Vicki Hollub.

    Once the world’s largest independent oil explorer finishes reducing its footprint in Bahrain and Libya, Occidental will have achieved all the goals it set out to do when Hollub’s predecessor and mentor, Stephen Chazen, began dismantling the company’s far-flung empire to focus on Texas, Colombia and a handful of Persian Gulf countries.

    “We’re almost done with all the things we wanted to do with our portfolio optimization,” she said during a conference call with analysts on Thursday, six days after taking on her new role.

    Hollub became the first female CEO of a major U.S. oil explorer on April 29 when she succeeded Chazen upon his retirement from management. She’s taking control of the company at a time when oil prices are barely off 12-year lows and investment in new projects can be a tough sell.

    New Goals

    Going forward, the goal will be to boost oil production in Occidental’s vast West Texas and New Mexico holdings and harvest more gas from rich deposits in places such as Abu Dhabi, she said. The company controls 1.4 billion barrels of crude in Texas that will take 22 years to flush out using high-pressure carbon dioxide; the cash generated from that will be funneled into higher-margin projects such as horizontal wells in nearby shale formations, Hollub said during the call.

    The conference call capped a day in which Occidental boosted its full-year 2016 production target for so-called "core" operating areas by as much as 6 percent even as capital spending declined during the first three months of the year. The "core" excludes fields Occidental sold during its slimming-down phase, such as in North Dakota, or places like Libya, where civil unrest has disrupted the oil industry.

    Absent a $285 million asset sale and a $550 million payment from Ecuador stemming from a 2006 oilfield seizure, Occidental’s first-quarter loss was 56 cents, wider that the average 41-cent loss estimated by 25 analysts in a Bloomberg survey. That compared with a loss of $218 million, or 28 cents, a year earlier. Shares climbed 3 percent to settle at $76.14 in New York Thursday.

    The company said on the call it expects to receive another $300 million installment in coming months from Ecuador on the $1.1 billion the Latin American nation is ultimately required to pay under a ruling by a World Bank panel.

    Spending Cuts

    Occidental, the world’s biggest independent oil explorer by market value, has been casting off lower-profit oil and gas fields and curbing spending to conserve cash and maintain dividend payouts to shareholders. Hollub said in an interview last week that she plans to expand the company’s presence in the Permian Basin of Texas and New Mexico, one of Occidental’s largest cash-generating regions.

    While other oil companies have been burning through cash reserves to cover expenses amid the market downturn, Occidental had $3.2 billion of cash on hand at the end of the first quarter. The company also has foregone the sorts of job cuts most rivals have resorted to; Hollub said on the call that layoffs have been avoided so Occidental can retain talent.
    Back to Top

    Cheniere post $320 million Q1 loss

    Cheniere Energy posted a first-quarter net loss of US$320.8 million compared to a $267.7 net loss during the corresponding period in 2015.

    The Houston-based company reported a $69 million revenue for the quarter, a statement issued on Thursday reveals.

    Cheniere’s Sabine Pass liquefaction project has started shipping cargoes in February and to date seven commissioning cargoes have been loaded and exported.

    “Commissioning activities at Train 2 are underway and our remaining Trains under construction continue ahead of their respective contractual schedules and on budget,” said Neal Shear, Cheniere’s Interim President and CEO.

    The company noted in its report that the construction of Sabine Pass LNG Trains three and four reached approximately 83.8 percent completion, which is ahead of schedule. Train five is approximately 28.8 percent complete.

    Cheniere also informed that the three trains currently under construction at the Corpus Christi LNG project are at various stages of completion.

    Trains one and two have reached 32.5 percent completion while the third liquefaction train is under development and the construction is expected to commence once the LNG sale and purchase agreements are in place and adequate financing is obtained.
    Back to Top

    Mol Net Income Surges as Downstream Unit Books Record Profit

    Mol Nyrt. more than doubled its net income in the first quarter as a record result from refining and petrochemical operations outweighed a decline from exploration and production.

    Hungary’s largest oil company booked a net income of 77.2 billion forint ($281 million) in the three months ending March, 165 percent higher than in the same period a year earlier. Earnings before interest, tax, depreciation and amortization on a clean-CCS basis, the most closely watched gauge that strips out the impact of volatile oil prices on reserve valuation, fell 8 percent to 144 billion forint, above the 137 billion-forint median estimate of eight economists in a Bloomberg survey.

    A record downstream profit for the second quarter running and widening petrochemical margins showed Mol’s ability to cushion the blow from Brent oil falling to the lowest in more than a decade in January. The company has said it is scaling down investments into production capacity to focus on assets that are still profitable in the lower oil price environment. The group remains on track to keep clean-CCS Ebitda above $2 billion this year, Chief Executive Officer Zsolt Hernadi said.

    "The company is one step closer to achieving its target for this year," said David Sandor, the head of research at KBC Groep NV’s Hungarian brokerage unit. "The earnings results are better than market expectations and we can also be satisfied with the underlying operations at the company."

    Ebitda for the company’s downstream operations rose 22 percent from a year earlier to 93 billion forint, when adjusted for stock revaluations, while upstream slumped 30 percent to 42 billion forint, according to results published on the Budapest Stock Exchange website.
    Back to Top

    GE Sees Oil Opportunities as Boston Move Nears

    General Electric Co. is hunting for acquisitions in the beleaguered oil and gas industry after missing an opportunity to buy assets when the merger between Halliburton Co. and Baker Hughes Inc. was scuttled.

    GE had been in talks for businesses the two companies were preparing to sell if the combination went through, Chief Financial Officer Jeff Bornstein said in a Bloomberg Radio interview with Tom Moroney and Anne Mostue. After resistance from antitrust authorities forced Halliburton and Baker Hughes to walk away, GE is looking for other deals “at valuations that make sense,” Bornstein said.

    “Virtually anything you do, you’re going to be very, very happy with” in three to five years, Bornstein said on the “Baystate Business Hour” program. “So to the extent that there are opportunities to fill out our portfolio, fill in product and service gaps, I think there’s an opportunity to create real value.”

    Any deal would advance a dramatic transformation GE is undergoing as it prepares to relocate to Boston later this year. The company has agreed to sell its home-appliances business and more than $160 billion in finance assets in just over a year to renew focus on industries such as energy and aviation. GE aims to be a more streamlined and technologically advanced industrial manufacturer by the time it moves to temporary offices in August.

    Attached Files
    Back to Top

    Africa Offshore Drilling at Six-Year Low as Explorers Curb Quest

    U.S. explorers aren’t the only ones idling rigs as sub-$50 crude forces oil and gas drillers in Africa to slow their search for new reserves.

    The number of oil and gas rigs offshore Africa remained at 20 in April, the lowest since 2009, according to data published on Friday by Baker Hughes Inc. Onshore rigs fell to 70 from 71 in March, leaving the total for the continent at 90, near the lowest in four years.

    Despite a rebound in crude over the past three months from a 12-year low, prices below $50 a barrel mean only a third of potential projects in Africa have investment appeal, according to Wood MacKenzie Ltd. Tullow Oil Plc, the London-based explorer focused on the continent, cut its projection for 2016 capital expenditure by $100 million to $1 billion on April 28.

    "The exploration activity has largely dried up -- I don’t see that returning anytime soon," Anish Kapadia, a London-based analyst at Tudor Pickering Holt & Co., said in a phone interview. "The drilling you’ve got is legacy drilling from oil projects going ahead, so at some point that’s going to slow down further unless you’ve got new projects being sanctioned."

    The number of rigs in Angola and Nigeria, Africa’s biggest producers, has dropped to about half of the count when oil began its steep decline two years ago. Only Algeria among the continent’s producers has shown a significant uptick in the activity, with an increase to 55 rigs.

    Eni SpA, one of the most prolific explorers in Africa, could provide a buffer against further declines on the continent. The Rome-based company will concentrate exploration through 2019 in North and West Africa and the Far East, Chief Executive Officer Claudio Descalzi, said in a March 18 strategy presentation.

    The oil price is still the ultimate determinant of exploration, according to Chris Bredenhann, a partner at PricewaterhouseCoopers in Cape Town. Brent crude traded close to $45 a barrel on Friday, with the price rallying 60 percent from a Jan. 20 low.

    "The consensus seems to be that there will be a slowdown in production, and we have already seen the U.S. coming off its 2015 highs," he said in an e-mailed response to questions. "The low oil price has put a dampener on the exploration activity in Africa as well, but the recent upward trend in the oil price may potentially change that."
    Back to Top

    Al-Falih steps forward as Saudi Energy minister.

    Saudi Arabia’s health minister, Khalid Al-Falih, a favorite to take over the oil ministry from his mentor Ali Al-Naimi, was not panicking.
    Al-Falih told an audience of oil executives, bankers and policymakers at the World Economic Forum in Davos that the world’s top oil exporter might benefit from oil below $30 per barrel.
    It could help to speed up reform and restructure the economy, and move Saudi Arabia to a smaller and more effective government and unleash its private sector, he said.
    For decades Saudi Arabia had targeted certain oil price levels.
    Things were different this time. For the first time in decades, output cuts were not on the agenda to fix the growing global glut that Saudi Arabia helped create by ramping up supply to drive higher-cost producers such as US shale firms out of the market.
    Also for the first time in decades, a royal rather than a non-royal — Deputy Crown Price Mohammed bin Salman — had been appointed a few month earlier to oversee Saudi oil policies and drive the massive change.
    Do you not think the deputy crown prince is doing it all a bit too fast for the Saudi society, Al-Falih was asked.
    “The Royal Highness is very ambitious where he wants Saudi Arabia to be sooner rather later. I can assure you that everybody who works around him is very excited by his vision and energized by his energy,” Al-Falih told the audience.
    “Some people were concerned that we were too slow in the past.. As a former runner, I can tell you that it helps to go through sprints at times to develop your muscular strengths. We are accelerating reform.”
    The writing was on the wall, said the executives leaving the Davos conference. Al-Falih would soon become oil minister reporting to the deputy crown prince.
    “It is an end of an era when Al-Naimi fought hard and struggled to create a price environment which would have been good for both consumers and producers,” said Gary Ross, a veteran OPEC watcher and founder of New York-based consultancy PIRA.
    “We are moving to a new era where OPEC will no longer be managing the market while supply and demand will determine the price. The new Saudi oil leadership believes the market will dictate the price and that means higher volatility. We will see higher highs and lower lows,” Ross said.


    Al-Naimi, born in 1935, had backed several OPEC oil output cuts and increases since taking on the oil minister job in 1995.
    The former Saudi Aramco chairman saw oil priced as low as $9 per barrel during the Asian financial crisis at the end of 1990s, as high as $147 in 2008 and back to $36 several months later after the collapse of Lehman Brothers.
    Rumors about Al-Naimi being finally allowed to retire have been hitting the market periodically in the past four years.
    But even though the Riyadh-born and US-educated Al-Falih has long been tipped to replace Al-Naimi, his fortunes and career kept zigzagging from Saudi Aramco’s chairman to health minister until finally securing the job on Saturday — combining energy, industry and mineral resources in a new super ministry.
    Al-Falih takes the job in a much better market environment compared to January — oil prices have indeed recovered from their January lows of $27 per barrel to trade at around $45 last week on the prospect that the market has began to rebalance thanks to lower US output.
    Born in 1960, Al-Falih joined Aramco in 1979, and went to study engineering at Texas A&M University in 1982 on an Aramco sponsorship program.
    Al-Falih probably knows every oil CEO in the world as he was the key negotiator behind a Saudi initiative to jointly develop gas resources with oil majors in early 2000.

    Over the past year, when Al-Naimi was carefully choosing his words or not commenting at all, Al-Falih has become more vocal about his views that the oil market needs to rebalance through low prices and that the Saudi Arabia has the resources to wait.
    “That doesn’t really point to somebody who would invest a lot of time and energy in trying to reconcile different OPEC members,” said Richard Mallinson from Energy Aspects.
    Al-Falih says job creation and economic reforms are top worries for the Saudi government these days, not an obsession with oil price levels.
    “Those transitions sometimes takes years, sometimes decades. The current low oil prices will give us an impetus to accelerate this,” Al-Falih said in Davos in January.
    Back to Top

    Alternative Energy

    China to boost energy storage 10-fold to cut power waste -industry

    China is expected to raise its power storage capacity by ten-fold to 14.5 gigawatts by 2020, as the world's second-biggest economy tries to cut massive waste from renewable energy projects, an industry association said.

    China is the world largest wind and solar power producer, but some regions are estimated to be losing more than 40 percent of their power because of technical restraints and bottlenecks in the grid, alongside weak power demand growth.

    Storage technologies, such as pumped storage hydropower or lithium ion batteries, are expected to play a critical role in improving the China's capacity to make better use of renewables.

    International companies involved in providing storage technology to China include ABB and TUV Rheinland, while domestic players include Soaring Electric, Sifang Automation and joint ventures such as Sungrow-Samsung SDI Energy Storage Power Supply company.

    China currently has 105 megawatts of storage capacity after a 110 percent increase over the previous five years, but that represented just 1.7 percent of total generation capacity by 2015, according to a report released this week by the China Energy Storage Alliance, an industry body.

    "We didn't count pumped hydropower, and we project growth to rise to 14.5 GW by 2020 based on manufacturers' orders," said Tina Zhang, managing director of the alliance.

    The government said in its latest 2016-2020 "five-year plan" that it would seek breakthroughs in the commercialisation of energy storage, but it did not set a target.

    "China is heading an energy revolution led by the transformation to low-carbon energy and the opening up of its wholesale power market, and storage will be important to bolster the changes," said Jiang Liping, vice president of the State Grid Energy Research Institute.

    Most storage projects are not yet financially viable and investors want more government support.

    Xu Honghua, president of Beijing Corona Science and Technology, which designs renewable technology, said China needed to bring in a mechanism for different prices for peak and off peak power to provide incentives to use energy from storage, and the return on investment needed to be 12 percent to support the new technology.
    Back to Top

    Eni embarks on green energy quest

    Italian oil major Eni, which has historically invested little in renewable energy given its strong track record in discovering oil and gas, plans renewable energy projects in Italy, Pakistan and Egypt.

    As part of a push into green energy, Eni aims to bring 420 megawatts of mostly solar power generation online by 2022 by reusing derelict land linked to existing fossil fuel operations.

    The world is currently adding more clean energy capacity than coal, oil and gas combined and Eni joins other oil majors in turning to green energy investments to curb carbon emissions and get a foothold in the fast growing sector.

    Last year, Europe's top oil firms urged governments around the world to introduce a pricing system for carbon emissions as part of a wider push to move to a low-carbon economy.

    French oil company Total said this week it was buying high-tech battery maker Saft as its seeks to expand its renewable energy business.

    In Italy alone, Eni said on Thursday it expects to build more than 220 megawatts of solar power capacity in regions including Liguria, Sardinia, Sicily, Calabria, Puglia and Basilicata for an estimated 200 to 250 million euros.

    Eni's existing gas-fired plants will be used in tandem with solar to cover any shortfalls when the sun doesn't shine.

    But oil and gas remains at the heart of Eni's investment plans and last month Eni Chief Executive Claudio Descalzi outlined plans to invest 20 billion euros ($23 billion) in Africa over the next four years, mostly in oil and gas, while also boosting the continent's energy mix by spending on renewables.

    Eni previously said it was ready to spend "hundreds of millions" of euros on solar power projects in Africa, where it is the largest foreign oil and gas producer.
    Back to Top

    DONG Energy says to list in Copenhagen this summer

    Denmark's DONG Energy ended months of media speculations on Thursday when it announced plans to list on the Nasdaq Copenhagen stock exchange this summer in what could be the largest initial public offering (IPO) in Denmark ever.

    The majority state-owned utility said in September it would list within 18 months and sources told Reuters on Wednesday that it would likely issue the so-called intention to float on Thursday.

    Analysts have said the IPO will value the company at around 80 billion Danish crowns ($12 billion), making it the largest ever flotation in Denmark.

    The IPO is expected to consist of a sale of at least 15 percent of the company's shares, with the Danish state keeping a 50.1 percent stake in the business, DONG said on Thursday.

    It did not provide a listing date but normally an intention to float is followed by a prospectus within a couple of weeks and a flotation another couple of weeks after that.

    DONG is the world's largest offshore wind farm developer and 75 percent of its capital was deployed in this business area at the end of 2015.

    "An IPO will facilitate DONG Energy's access to capital and make it even stronger than today, when it, for example, comes to investments in the construction of offshore wind farms," finance minister Claus Hjort Frederiksen said in a separate statement.

    DONG posted a 35 percent rise in first quarter core operating profit last month mainly driven by its offshore wind business.

    "We have significant growth opportunities in both existing and new markets. We have an aspiration to construct 1 gigawatt of additional installed offshore wind power capacity per year from 2021 to 2025," chief financial officer Marianne Wiinholt told an analyst conference call on Thursday.

    The government sold 18 percent of DONG to a group of investors led by Goldman Sachs in January 2014.

    JP Morgan, Morgan Stanley and Nordea are global co-ordinators at the listing while Citigroup, Danske Bank, UBS, RBC, Rabobank and ABG Sundal Collier are also involved.
    Back to Top

    German govt proposes cutting support for onshore wind energy starting 2017

    The German government has proposed reducing support for onshore wind energy by 7.5 percent for two years from January 2017, according to a draft proposal for a meeting on renewable energy between the federal government and Germany's 16 states.

    That would slow down the rapid construction of onshore wind turbines and would apply to new wind turbines approved in 2017 and 2018, the draft seen by Reuters said.

    It also said that support for solar plants producing less than 1 megawatt, of which few are currently being built, should be adjusted more quickly. That would mean that the subsidy rates are cut more slowly than originally planned or could even be increased more quickly if installation of new plants is very low. A minimum amount of support should continue to exist, it said.

    If solar energy production reaches 52 gigawatts in Germany as a whole, no plants should get a set amount of support, the draft said.
    Back to Top

    Scottish wind farm sends green power to Mars

    A new wind farm in the Highlands is to power the creation of some of the nation’s well known chocolate bars and pet foods.

    The energy needed to produce Mars Bars, Twix, Snickers, Dolmio and Pedigree in the UK will be supplied by the 60MW Moy Wind farm near Inverness in Scotland.

    It will generate the equivalent of 100% of the electricity required to power all 12 Mars site in the country.

    The power produced would be enough for 34,000 average UK households or to make 4.2 billion Mars bars every year.

    Mars, Incorporated has signed a 10-year deal with Eneco UK as part of its efforts to reduce its carbon footprint and become carbon neutral globally by 2040.

    Barry Parkin, Chief Sustainability and Health & Wellbeing Officer at Mars Incorporated, said: “The UK has been home to Mars for 84 years. We’re proud the brands we make here will now be manufactured using renewable electricity and that we are reducing our carbon footprint in the UK and around the world.

    “As with our wind farm in Lamesa, Texas, Moy will contribute significantly to our effort to eliminate fossil fuel energy use and greenhouse gas emissions from our global operations by 2040 as part of our ‘Sustainable in a Generation’ programme.”
    Back to Top

    Saudi Arabia’s amazing new renewables target: 9.5GW by 2023

    As part of a wide-ranging economic and social policy vision for the Kingdom of Saudi Arabia, deputy crown prince Mohammed bin Salman, son of King Salman bin Abdulaziz al Saud, announced the first cornerstones on April 25, 2016 for the deployment of renewable energy in the country.

    The presentation of the “Saudi Arabia Vision 2030” policy paper was followed by the most comprehensive reshuffle of Saudi ministries and senior government positions in years, if not decades, on May 7.
    The policy paper states an “initial” target of 9.5 gigawatts (GW) of renewable energy. No specific quotas for solar and wind are mentioned. Because no explicit timeline was originally announced, most industry observers assumed that the target applied to the year 2030, which would have represented a fairly conservative scenario given the size and energy consumption of the country.

    However, on May 5, the Saudi government further detailed these plans, stating that the 9.5 GW target should be reached by 2023 as the “first stage” of the program.

    This much more aggressive target would represent a 180 degree shift from the “wait and see” approach to renewables taken by Saudi Arabia so far.

    It would make Saudi Arabia a sizable market for the global renewable-energy industry, likely the largest in the MENA region by annual new installations. If the country deploys new power plants at a constant rate until 2023, an average of about 1,600 MW of new renewable energy capacity per year would need to be built.

    The target appears ambitious at first sight for a country that has a meager 25 MW of renewable-energy generation capacity (mostly solar photovoltaic) installed as per the end of 2015.

    Nevertheless, with the rapid growth in Saudi electricity consumption, the target would only translate to a renewable-energy share of roughly 5% of the country’s total electricity consumption.

    In contrast, Germany, a country with less than half the solar irradiation of Saudi Arabia, reached a 32.6% renewable-energy share of electricity at the end of 2015, with 6.4% generated by solar photovoltaics (PV) alone. Saudi Arabia’s neighbor Dubai just increased its renewable-energy targets to 7% by 2020 and 25% by 2030.

    Consequently, with its abundant solar resource and regions with high wind speeds, Saudi Arabia should in principle have no difficulty reaching and exceeding its target, if the political will exists and a renewable-energy program is rigorously executed.
    Back to Top

    Enbridge turns to renewable energy with French offshore wind acquisition

    Canadian oil and gas infrastructure giant Enbridge has agreed to buy a 50% interest in French offshore wind development company Éolien Maritime France, for C$282-million. NYSE- and TSX-listed Enbridge would co-own the company with EDF Energies Nouvelles (EDF EN), a subsidiary of Électricité de France (EDF), dedicated to renewable energy. 

    Closing of the acquisition was expected to occur on or about May 19. Enbridge advised that it and its new partners would develop three large-scale offshore wind farms off the coast of France that would produce a combined 1 428 MW of electricity. 

    Development of the three projects was already underway; however construction was still subject to final investment decisions and and regulatory approvals. "This is a unique and strategic opportunity for Enbridge to further grow our investment in renewable power and build on our existing presence in European offshore wind generation. 

    This investment in EMF advances our priority to build new business platforms that will extend and diversify growth," Enbridge president and CEO Al Monaco commented on Tuesday. The projects comprised the 498-MW Eoliennes Offshore des Hautes Falaises offshore wind farm, located off the coast of Fecamp; the 450-MW Eoliennes Offshore du Calvados project, located off the coast of Courseulles-sur-Mer; and the 480-MW Parc du Banc de Guerande project, located off the coast of Saint-Nazaire. 

    Enbridge, which already owned interests in 24 renewable energy facilities, either operating, secured or under construction, with a net generating operating capacity of nearly 2 000 MW, advised that each of the three wind projects had been awarded a 20-year power purchase agreement (PPA), under which EDF would pay an indexed fixed price for 100% of the power generated by each facility and through which EMF would also be significantly insulated from variances in wind capacity. 

    The three projects were in an advanced-stage of development with a permitting process close to completion, and significant technical and environmental studies already performed. Front-end engineering and design had been completed, construction contracts tendered and bids received. 

    Subject to Enbridge taking positive construction decisions on each project individually, the company would potentially invest up to C$4.5-billion in total for all three projects. Should the projects be built, construction would start gradually from 2017 and continue the next five years through 2022. Enbridge was the co-owner with EDF Energies Nouvelles' Group in four operating onshore wind projects in North America.
    Back to Top

    Engie buys 80 percent stake in battery storage company Green Charge

    French energy company Engie (ENGIE.PA) said on Tuesday it had bought an 80 percent stake in California-based battery power storage company Green Charge Networks.

    The company did not disclose the value or terms of the deal.

    "With Green Charge, Engie immediately gains a strong position in the growing battery storage market in the U.S. and further develops its offering of load management solutions," said Isabelle Kocher, Engie's chief executive officer.
    Back to Top

    Vivint Solar to take part in SunEdison's bankruptcy case

    Solar panel installer Vivint Solar Inc said it would participate in SunEdison Inc's bankruptcy case to maximize its recovery from claims against SunEdison, which terminated its agreement to buy Vivint in March.

    Vivint Solar has filed a lawsuit in Delaware against SunEdison alleging that the solar company willfully breached its obligations under their merger agreement and is seeking damages.

    SunEdison's bankruptcy filing on April 21 has created a temporary stay on the prosecution of Vivint's lawsuit, the company said in a regulatory filing on Tuesday. (

    SunEdison, once the fastest-growing U.S. renewable energy company, filed for Chapter 11 bankruptcy protection after a short-lived but aggressive spate of debt-fueled acquisitions proved unsustainable.

    Investors began to lose confidence in SunEdison's expansion, when the company announced a $2.2 billion deal to acquire Vivint in July.

    The Vivint deal also led to a lawsuit by billionaire David Tepper's Appaloosa Management, which sued to block SunEdison's unit, TerraForm Power Inc, from buying some Vivint assets.
    Back to Top

    SolarCity stock slides as forecast slashed

    SolarCity Corp cut its forecast for solar panel installations this year and reported a bigger-than-expected quarterly loss, sending its shares down nearly 20 percent in extended trading on Monday.

    The company, which is backed by Tesla Motors Inc founder Elon Musk, said it expects to install 1.0-1.1 gigawatts in 2016, lower than the 1.25 GW it had forecast in February.

    A pullback in a key solar support policy in Nevada, a January price increase on residential systems and a redesign of its solar loan product were among the reasons SolarCity cited for the lowered forecast.

    "We had a bunch of headwinds that hit us all at the same time," Chief Executive Lyndon Rive said on a conference call with analysts. "These have all been addressed."

    Still, the lower volumes drove up the company's costs to acquire new business. It will take "about two quarters" to get back to normal customer acquisition cost levels, Rive said.

    SolarCity said it raised $728 million in financing during the quarter for its rooftop solar systems.

    SolarCity became a Wall Street darling thanks to its innovative no-money-down financing schemes that underpinned a rapid growth in solar installations in recent years. But late last year, the company said it would slow its pace of growth to focus on generating cash.

    The slower growth, combined with complex financials that rely heavily on renewableenergy subsidies, has spooked some investors. The company's stock is 65 percent below its 52-week high set nearly a year ago.

    In extended trade on Monday, the stock fell to $18.07 after closing at $22.51 on Nasdaq.

    Solar panel installments of 214 MW during the quarter, however, were higher than the company's own expectations as it completed a project in Maryland ahead of time. The company had forecast installations of 180 MW in February.

    SolarCity said its net loss attributable to shareholders increased to $25 million, or 25 cents per share, in the first quarter ended March 31, from $21.5 million, or 22 cents per share, a year earlier. (

    Total expenses jumped about 54 percent to $226.9 million.

    On an adjusted basis, the company posted a loss of $2.56 per share, compared with a loss of $2.32 per share expected by analysts on average.

    Revenue rose 81.6 percent to $122.6 million, above analysts' average estimate of $109.9 million, according to Thomson Reuters I/B/E/S.
    Back to Top

    French oil firm Total to buy battery maker Saft

    French oil company Total said on Monday it plans to make a bid for battery manufacturer Saft, extending its push into new energy technologies.

    Following a signature of an agreement between the two companies, it has filed a friendly tender offer on all of the issued and outstanding shares of Saft with French market regulator AMF, Total said in a statement.

    Total will offer 36.5 euros per Saft share, ex-dividend of 0.85 per share, valuing Saft's equity at 950 million euros.

    Total said the offer price represents a 38.3 percent premium above Saft's closing share price of 26.4 euros on May 6.

    Last month Total announced the creation of a gas, renewables and power division to help drive its ambition to become a top renewables and electricity trading player within 20 years.
    Back to Top


    U.S. forecaster sees rising likelihood of La Nina in 2016

    A U.S. government weather forecaster on Thursday heightened its projections for the La Nina weather phenomenon to take place in the Northern Hemisphere later this year, on the heels of an El Nino likely to fade by early summer.

    The Climate Prediction Center (CPC), an agency of the National Weather Service, in its monthly forecast pegged the chance of La Nina developing in the fall and winter 2016-17 at 75 percent.

    That follows a forecast last month for an increasing chance of La Nina in the second half of the year.

    Global forecasters have been increasingly seeing the likelihood for La Nina to emerge this year.

    The phenomenon, which is typically less damaging than El Nino, is characterized by unusually cold ocean temperatures in the equatorial Pacific Ocean. It tends to occur unpredictably every two to seven years. Severe occurrences have been linked to floods and droughts.

    The ongoing El Nino, a warming of sea-surface temperatures in the Pacific, has been tied to crop damage, fires and flash floods.
    Back to Top

    Bayer is reportedly looking to buy Monsanto — and Monsanto's stock is surging

    The chemical and pharmaceutical giant Bayer AG is considering making a bid for the agrochemical Monsanto, Bloomberg's Aaron Kirchfeld, Ruth David and Dinesh Nair report.

    The combined company would become the largest supplier of farm chemicals and seeds, according to the report.

    Monsanto's stock was up about 17% in pre-market trading.
    Back to Top

    Intrepid Potash idles US mine, lays off hundreds

    US-based Intrepid Potash will halt its mine in south-eastern New Mexico and lay off about 300 workers, as prices for the fertilizer ingredient remain close to historic lows and demand hasn’t picked up.

    The Denver-based company said this week the decision to place its money-losing West facility in Carlsbad in "care and maintenance” was a direct consequence of a challenging environment.

    Potash producers are having a tough year as prices for the fertilizer ingredient have remained low.

    The operation will close in July, Intrepid Potash said. The company, which also first-quarter loss of $18.4 million added it is taking other actions to lower overall production costs and optimize its mine portfolio.

    Unlike metal miners, potash producers are having a tough year as prices for the fertilizer ingredient have remained low on increased competition and a supply glut triggered by lower demand from top consumers China and India.

    Prices are hovering around $270 a tonne, significantly down from more than $800 a tonne in 2008.

    In April, some of the top producers downgraded their outlook for the year as a result.

    Canada’s Potash Corp of Saskatchewan, the world’s biggest fertilizer company by capacity, cut its full-year profit forecast due to weak demand and lower prices, raising concerns of another dividend cut.

    And Russia’s Uralkali, the world’s largest potash miner by volume said it now expects demand to fall to 58-60 million metric tons, down from 61 million tons in 2015.
    Back to Top

    U.S. traders reject GMO crops that lack global approval

    Across the U.S. Farm Belt, top grain handlers have banned genetically modified crops that are not approved in all major overseas markets, shaking up a decades-old system that used the world's biggest exporting country as a launchpad for new seeds from companies like Monsanto Co.

    Bold yellow signs from global trader Bunge Ltd are posted at U.S. grain elevators barring 19 varieties of GMO corn and soybeans that lack approval in important markets.

    CHS Inc, the country's largest farm cooperative, wants companies to keep seeds with new biotech traits off the market until they have full approval from major foreign buyers, Gary Anderson, a senior vice president for CHS, told Reuters.

    "I think that would be the safest thing for the supply chain," he said. CHS implemented a policy last year under which it will not sell seeds or buy grain that contains traits lacking approvals needed for export.

    The U.S. farm sector is trying to avoid a repeat of the turmoil that occurred in 2013 and 2014, when China turned away boatloads of U.S. corn containing a Syngenta AG trait called Viptera that it had not approved. Viptera corn was engineered to control insects.

    Cargill Inc and Archer Daniels Midland Co each said the rejections cost them millions of dollars, and both companies have sued Syngenta for damages. ADM is refusing GMO crops that lack global approval. Cargill did not respond to requests for comment.

    The United States is the biggest producer of GMO crops and has long been at the forefront of technology aiming to protect crops against insects or allow them to resist herbicides.

    That innovation is now seen as a risk to trade because it is hard to segregate crops containing unapproved traits from the billions of identical-looking bushels exported every year.

    Soren Schroder, chief executive officer for Bunge, said the practice of launching GMO seeds without full approval is "very risky."

    "It's an uncomfortable position for the industry when there are traits out there that haven't had major market approval," he said in an interview.

    The latest crop being banned is Monsanto's Roundup Ready 2 Xtend soybean, whose seeds are genetically engineered to resist the herbicides glyphosate and dicamba. It is being sold for the first time in the United States and Canada this year despite lacking clearance from the European Union, an important export market for North American soybeans.

    Monsanto said it expects EU approval soon. It initially projected farmers would plant the seed on 3 million acres in the United States, roughly 4 percent of overall plantings, and 420,000 acres in Canada.

    Plantings have already begun in North America, and Monsanto spokeswoman Trish Jordan said that each passing week without EU authorization lowers the forecast for acreage in Canada.

    The company is allowing growers to switch to another variety and has not yet shipped Xtend seeds to farmers who have ordered it in Canada. Monsanto has not publicly lowered its U.S. forecast.

    ADM, Bunge and CHS have said they will not accept Xtend soybeans until the trait is fully approved by major markets. Bunge also declined to accept Viptera corn before China cleared it in December 2014.

    The company's list of banned traits on its yellow posters contains products from Monsanto, Syngenta, Dow AgroSciences, Stine Seeds, DuPont Pioneer and Bayer, many of which are not commercially available to farmers yet.

    CHS has its own list of restricted traits that includes products from Monsanto, Syngenta and DuPont Pioneer.

    Seed companies, including Syngenta and Dow, are addressing industry concerns by selling biotech products under programs that restrict where growers can deliver their harvests to keep crops out of unapproved markets.

    Farmers also produce crops containing biotech traits from Monsanto and DuPont Pioneer under contracts with end users that designate approved locations where they can be delivered.

    However, such approaches are not fool-proof methods of protecting the supply chain, Anderson said.

    Stine Seed and Bayer said they have policies against selling seed traits that lack approvals in major export markets.

    Bayer this week seized on concerns about Monsanto's launch of Xtend soybeans to promote its own brand, LibertyLink.

    "Soybeans, once considered such a simple crop to grow and market, is becoming more complicated," Bayer said. It called the situation faced by growers "downright confusing."

    Attached Files
    Back to Top

    Precious Metals

    South African court gives go ahead to silicosis class action suit against gold mining companies

    South Africa's High Court on Friday gave the green light for a class action suit seeking damages from the gold mining sector on behalf of thousands of miners who contracted the fatal lung disease silicosis while working underground.

    The court also allowed a class action to go ahead on behalf of miners who contracted tuberculosis in the mines.

    The defendants in the case include Harmony Gold, Gold Fields, AngloGold Ashanti, Sibanye Gold , African Rainbow Minerals (ARM) and Anglo American, which have formed the Occupational Lung Disease (OLD) Working Group to deal with such issues.
    Back to Top

    Goldcorp to buy Kaminak Gold for C$520 million

    Goldcorp Inc said it would buy Kaminak Gold Corp for about C$520 million ($406 million), giving it the Coffee gold project south of Dawson City, Yukon.

    Vancouver-based Goldcorp will offer 0.10896 of a share for each Kaminak share, or C$2.62 based on Goldcorp's Wednesday close.

    The offer price represents a premium of 32.3 percent to Kaminak's Wednesday close.

    Goldcorp's U.S.-listed shares were up 1.7 percent at $18.43 in premarket trading on Thursday.

    Kaminak's key asset is the Coffee gold project, which has total indicated gold mineral resources of 3 million ounces.

    Goldcorp said the board of directors of both the companies have unanimously approved the deal.

    RBC Capital Markets and Fort Capital Partners acted as financial advisers to Goldcorp and Cassels Brock & Blackwell LLP provided legal advice.
    Back to Top

    Jeweller Chow Tai Fook warns its annual profit could fall by 50 pct

    China's largest jeweller by market value, Chow Tai Fook Jewellery Group Ltd, said on Thursday that its annual profit could be half what it reported last year due to continuing weak consumer sentiment.

    Chow Tai Fook has repeatedly warned of a weaker business environment and said in January that it would close some of its Hong Kong stores. Its first-half profit was off by 42 percent.

    The firm said hedging losses and the sale of more gold items with a lower profit margin, would also impact full year profits.

    Chow Tai Fook recorded a profit of HK$5.46 billion last year. It is due to report annual results again on June 5.

    Hong Kong retail sales fell for the 13th consecutive month in March, while sales of jewellery, watches, clocks and valuable gifts posted their 19th consecutive month of decline.
    Back to Top

    Gold demand posts strongest Q1 on record as fund inflows surge

    Gold demand posts strongest Q1 on record as fund inflows surge

    Surging inflows into gold-backed exchange-traded funds drove global gold demand to its highest first-quarter total on record this year, despite a near 20
    percent drop in jewellery buying, the World Gold Council said on Thursday.

    Demand hit 1,290 tonnes in the period, the WGC said in its latest Gold Demand Trends report, the best first quarter and second strongest quarter overall since its data series began.

    Investment in products like ETFs, coins and bars more than doubled to 618 tonnes, accounting for 28 percent of the total. That helped fuel a 16 percent surge in gold prices in the period, its biggest quarterly rise in nearly 30 years.

    "Two major themes emerged in the first quarter of 2016. Spurred on by the uncertainty raised by negative interest rates, the investment sector was the dominant driver of gold demand," the WGC's head of market intelligence Alistair Hewitt said.

    "Conversely, jewellery demand endured a difficult quarter due to a continued lack of consumer confidence in the face of a weakening Chinese economy and a 42-day strike by jewellers in India."

    Jewellery buying, the largest demand segment, fell as Chinese jewellery consumption slid 17 percent to 179 tonnes, hit by higher gold prices. Bar and coin demand in China rose 5 percent, however, while Indian buying fell 31 percent.

    India's jewellery offtake slid 41 percent to a seven-year low, after a strike among Indian jewellers in March. Few counties saw much of an increase in jewellery buying, though it rose 10 percent in Iran after the lifting of Western sanctions.

    Central banks remained gold buyers for a 21st straight quarter, with China and Russia driving purchases of a total 109.4 tonnes of gold. That is its weakest quarter since the last three months of 2013, however.

    On the supply side of the market, increased hedging -- which roughly translates as producers selling output forward to lock in prices -- and a slight rise in mine supply pushed up overall output by 5 percent, despite lower recycling.
    Back to Top

    Kinross Gold revenue misses

    Kinross Gold revenue misses 

    Kinross Gold Corp reported lower-than-expected quarterly revenue as the world's fifth biggest gold miner struggled with lower realized gold prices.

    Average realized gold price in the first quarter fell 3.2 percent to $1,179 per ounce.

    Kinross produced 687,463 equivalent ounces of gold during the quarter at its 10 mines in North and South America, Africa and Russia at an all-in sustaining cost of $963 per ounce.

    This was up from the 629,360 ounces it produced in the same period last year when the costs were $964 an ounce as production in the latest quarter was boosted by the acquisitions of Round Mountain and Bald Mountain mines in Nevada.

    Kinross maintained its 2016 production outlook, but raised its capital expenditure forecast by $160 million to $755 million to include spending on the Tasiast Phase One expansion.

    The company said in March it plans to invest $300 million to expand its Tasiast gold mine in Mauritania, West Africa, that will nearly double the mine's production and slash costs.

    The Toronto-based miner's net loss attributable to shareholders rose to $13.9 million in the first quarter ended March 31 from $6.7 million.

    On a per-share basis, its loss was little changed at 1 cent per share.

    Excluding items, the company broke even, while analysts' were expecting a loss of 1 cent a share, according to Thomson Reuters I/B/E/S.

    Revenue rose marginally to $782.6 million, but fell short of the $799 million that analysts had estimated.
    Back to Top

    Silver Wheaton Q1 earnings-miss

    Silver Wheaton reported weaker-than-expected earnings for the first quarter ended March 31. Net income for the period totaled $41-million, or $0.10 a share, down from $49-million or $0.13 a share a year earlier and falling short of the $0.12 a share consensus. 

    During the first quarter of 2016, attributable silver equivalent output was 12.7-million ounces, comprising 7.6-million ounces of silver and 64 900 oz of gold, representing an increase of 24% over the first quarter of 2015. “Silver Wheaton had a solid start to 2016, and the company is on track to realising its production guidance of 54 million silver equivalence ounces for the year," president and CEO Randy Smallwood stated Monday. 

    The attributable silver-equivalent sales volume in the first quarter was up 65% year-over-year at 12.8-million ounces. The company advised that it had realised the second-best quarter ever in terms of production and sales volumes, as Vale’s Salobo mine, in Brazil, once more reported record output. 

    Silver Wheaton had also for the first time sold more than 65 000 oz of gold in a quarter. Revenues of $188-million in the period was 44% higher year-over-year when compared with $131-million the same period of 2015. The company had declared its second quarterly cash dividend of $0.05 a share to be paid to holders of record of Silver Wheaton common shares on May 19, and will be distributed on or about June 2. 

    Early in January, Silver Wheaton had started an appeal in the Tax Court of Canada regarding a tax dispute with the Canadian Revenue Agency (CRA). The company advised that in order to commence the appeal, it was required to make a deposit of 50% of the reassessed amounts of tax, interest and penalties. 

    Upon approval from the CRA, Silver Wheaton posted security on March 15, in the form of a letter of guarantee in the amount of C$192-million, rather than making a cash deposit. 

    During the quarter, the company had raised total net proceeds of about $607-million through a bought-deal common share financing, which was used to repay debt that was outstanding under the company's $2-billion revolving credit facility, it advised.
    Back to Top

    Production at giant Arctic diamond mine just weeks away

    Production at giant Arctic diamond mine just weeks away

    Gahcho Kué, the largest new diamond mine under development globally, is now 94% complete with first production planned for the second half of this year, one of the companies behind the project said Monday.

    Gahcho Kué, the world's largest new diamond mine under development, is now 94% complete with first production planned for the second half of this year.

    According to Mountain Province Diamonds, which holds a 49% stake in the mine, both the processing plant and truck shop have been finished and the firm is on schedule to achieve mechanical completion of the primary crusher during the current quarter.

    "The project also continues to meet our lending group's tests-to-completion with US$47M advanced to fund cash calls during Q2 2016," Mountain Province President and CEO, Patrick Evans, said in a statement. "A total of US$266M has been drawn against the US$370M facility," he added.

    Situated almost 300 kilometres east of Yellowknife, in Canada’s Northwest Territories, and southeast of the now closed Snap Lake diamond mine, Gahcho Kué is employing about 700 people during construction, majority owner De Beers told

    At least 400 workers will be employed during the mine’s 12-year operational life, in which it’s expected to produce an average of 4.5 million carats a year, making it the world’s biggest new diamond mine.

    Additionally, as Canada's major diamond mines — Diavik and Ekati — are approaching the end of their productive lives, Gahcho Kué—although it's smaller— is expected to offset the production drop-off.
    Back to Top

    Indians shun gold buys during key festival as prices, drought sting

    Indians bought a third less gold than last year during the annual Hindu and Jain holy festival of Akshaya Tritiya on Monday, industry officials estimate, as droughts have hit the earnings of millions of farmers and the metal's price rallied.

    Weaker demand from the world's second-biggest consumer could limit a rally in global prices, which are up around a fifth this year. Indian prices were around 30,000 rupees per 10 grams on Monday, up nearly 10 percent from a year ago.

    Akshaya Tritiya is the second-biggest gold-buying festival in India after Dhanteras around October-November, but jewellers failed to draw buyers despite spending heavily on print and television advertisements and offering discounts on design fees.

    "Compared to last year demand is nearly 35 percent lower," said Kumar Jain, vice-president of the Mumbai Jewellers Association, who was hoping for sales to pick up after several jewellers reopened recently after a weeks-long strike.

    "Higher price is the key deterrent. We thought pent-up demand would drive sales, but demand is quite weak."

    Somasundaram PR, head of the World Gold Council's Indian operations, said that through aggressive advertising jewellers had been trying to build sales momentum, which was lost due to the strike earlier this year.

    Gold buying is also down because of the plight of farmers hit by extremely dry weather, according to Mangesh Devi, a jeweller from the rural town of Satara in the western state of Maharashtra.

    Mumbai resident Mangesh Chawan said he had cut purchases by half this year.

    "I wanted to completely avoid purchases but later decided to buy a small amount as every year we buy something," Chawan said after buying gold earrings for his wife.

    Attached Files
    Back to Top

    Islamic finance’s entry into gold market could send price soaring

    On the outlook for new investment opportunities, the rapidly growing Islamic finance industry has set sight on the gold market as initiatives are underway to establish a new standard to make the metal tradable under Shariah finance rules, eliminating disputes among scholars whether gold is to be treated as a currency or as a commodity.

    So far, Islamic investors have been reluctant to invest in gold because to do so, they would need the metal in physical form as an underlying asset, which is rarely the case in conventional gold trade. Because of that, broadly traded gold futures do not qualify as a Shariah-compliant investment. Other conventional gold-based financial offerings in the form of derivatives are also widely viewed as unacceptable for Islamic scholars.

    On the other hand, investment that involves a forward purchase agreement at an agreed price against future delivery (the principle of salam) would, but there is still physical gold in the play.

    London-headquartered World Gold Council (WGC), together with Kuala Lumpur-based Amanie Advisors, an independent advisory firm on Shariah investments and the Accounting and Auditing Organisation for Islamic Financial Institutions in Bahrain, now have been developing a “Shariah Standard on Gold” which aims at “providing guidance from the Shariah perspective on the usage of gold in financial and investment transactions for Islamic financial institutions and participants,” as WGC head Natalie Dempster puts it.

    The standard also aims to increase transparency and harmonisation of the use of gold investments and reduce unclear specifications on what’s haram and what’s halal in trading the metal.

    A respective seminar was held last December in Kuala Lumpur, and a global industry roll-out of the standard is planned later this year with regulations that could also apply to silver and other precious metals. It depends, though, on the full approval of all scholars participating in the WGC-driven Islamic gold standard initiative and the outcome of related hearings in the Middle East and large Islamic finance markets such as Malaysia and Indonesia.

    What the new Islamic gold standard will exactly define is not entirely clear yet. There are still different opinions among scholars about the classification of gold either as a commodity or a currency, referring to its previous use as gold coins.
    Back to Top

    Base Metals

    Russia's Rusal Q1 core earnings fall; sees positive signs

    Russian aluminium giant Rusal Plc reported a 57 percent slump in first-quarter core earnings, hurt by weaker aluminium prices, but pointed to signs of improvement in the market.

    Rusal, which last year was overtaken by China's Hongqiao as the world's biggest aluminium producer, said it expects demand to outstrip supply by 1.2 million tonnes in 2016, following a 600,000-tonne surplus last year, led by strong Chinese demand and capacity curtailments.

    "During the first quarter of 2016 amid turbulent commodity markets, Rusal's continued focus was on tighter cost controls and operational efficiency," Chief Executive Vladislav Soloviev said in a statement.

    Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) for the March quarter fell to $312 million from $721 million a year earlier, matching forecasts around $311 million from five banks.

    Core earnings were up 2 percent from the December quarter.

    Average sale prices during the quarter fell 28 percent from a year earlier, while its sales of primary aluminium and alloys rose 2.4 percent to 957,000 tonnes.

    "Positive dynamics witnessed in the aluminium sector are supported by an accelerating ex-China deficit and solid demand fundamentals as the transportation sector continues to fuel global demand growth in primary aluminium," Soloviev said.

    Rusal expects 5.3 percent growth in global aluminium demand in 2016 to 59.6 million tonnes. Chinese demand is seen expanding by 7 percent to 31 million tonnes, driven by transportation, which will account for roughly half of new demand, followed by construction, consumer durables and packaging.

    On the supply side, Chinese production growth is expected to moderate to 4.8 percent this year, its weakest pace in five years as high cost smelters were shut down, but previously committed expansions came online.

    Rusal estimated that out of 4.4 million tonnes of production cuts in 2015 in China, 585,000 tonnes were restarted in the first quarter of this year and 715,000 tonnes were newly commissioned. At the same time, another 604,000 tonnes were idled.

    Exports of semi-manufactured Chinese aluminium products were also expected to moderate this year, it said, as premiums for metal outside China fell and Shanghai prices rose due to local capacity cuts, dampening the profitability of global shipments.

    Record China semis exports have raised the ire of major global producers and resulted in a trade investigation by U.S. authorities.

    Attached Files
    Back to Top

    Indonesia's Inalum plans to double aluminium output to 500,000 T/yr by 2020

    Indonesia's state-owned aluminium producer PT Indonesia Asahan Aluminium (Inalum) plans to increase its output to 500,000 tonnes a year by 2020 from its current production level of 260,000 tonnes, said Dante Sinaga, who heads the firm's coal power station development project.

    Inalum also plans to increase its output to 1 million tonnes per year by 2025 as demand for the metal is projected to more than double from current levels in nine years, he added.
    Back to Top

    Rusal warns on China aluminium restarts as smelters plan fund to ease closures

    Russian aluminium giant Rusal warned against Chinese smelters restarting plants to keep from undermining prices that have retreated from 2016 highs as Chinese producers consider launching a fund to deal with the layoffs from closures.

    Global aluminium prices that rebounded to nine-month highs last month have enticed some Chinese smelters that closed in the past year amid overcapacity in the sector to resume production. But, while analysts say the restarts have been slow, producers fear they could weigh on prices again. China is the world's top consumer and maker of aluminium.

    Chinese producers should continue to keep their discipline toward production to "ensure gradual improvement in prices and profitability," Rusal's Deputy Chief Executive Oleg Mukhamedshin told an industry conference on Tuesday.

    There had been instances in the past when Chinese smelters restarted output as prices bounced to make immediate profits, but it's turned out that is not helpful to prices, said Mukhamedshin.

    Aluminium on the London Metal Exchange was trading at $1,566.50 a tonne on Tuesday, down from this year's peak of $1,686 reached on April 29.

    China's aluminium producers pledged to shut 4.6 million tonnes per year of capacity, or about 10 percent of smelting, amid plunging prices for the metal. Aluminium prices on the Shanghai Futures Exchange fell for six straight years before staging a pick-up this year.

    Chinese producers are looking at establishing a fund to help companies that have shut and to cope with the big swings in futures prices, said Wen Xianjun, Vice Chairman of China Nonferrous Metals Industry Association, at the conference.

    "The recent volatility in futures is not favourable for industry players. And we are considering to set up a fund to battle big futures market swings and for smelters that have closed and have to deal with layoffs," said Wen.

    The Association will lead the coordination among the smelters who they hope will provide the capital for the fund, said Wen.

    Wen also said while restarts and investment in new capacities will be limited, he sees demand growth outpacing supply going forward.

    Aluminium consumption in China is set to grow by 7 to 10 percent a year over the next five years and hit 44 million tonnes by 2020, Aluminium Corp of China Ltd (Chalco) President Ao Hong said.

    In February, six large Chinese aluminium producers said they were considering forming a joint venture company to handle primary aluminium stockpiling to support prices.

    The stockpiling plan was put on ice in April, an industry body official said, after prices pushed higher.
    Back to Top

    Freeport sells prized African copper mine

    Top publicly-held copper producer Freeport-McMoRan Copper & Gold on Monday announced the sale of its largest African copper mine to China Molybdenum for up to $2.65 billion.

    Like many of its peers Freeport has been struggling to get its debt load under control which ballooned to $20 billion following the ill-timed acquisition of oil and gas assets three years ago. In February the Phoenix-based company sold a 13% stake in its US Morenci mine, the world's fifth largest, for $1 billion to Japan's Sumitomo, but so far has not been able to offload the energy operations despite putting them on the block a year ago.

    Richard C. Adkerson, Freeport's President and CEO, said since the start of 2016 the company has announced over $4 billion in asset sale transactions: "We are committed to our immediate objective of reducing debt while retaining a large portfolio of high quality assets and resources and a leading position in the global copper industry.”

    Apart from the sale of the high-grade Tenke Fungurume mine in the Democratic Republic of Congo, Freeport is also in talks with CMOC to sell its interests in Freeport Cobalt, including the Kokkola Cobalt Refinery in Finland, for $100 million and the Kisanfu Exploration project in the DRC for $50 million. Freeport reported consolidated Tenke sales for the year 2015 totaling 467 million pounds of copper (215,ooo tonnes) and 35 million pounds of cobalt (16,ooo tonnes) at a net unit cash cost of $1.21 per pound of copper.

    It is also the second big acquisition by China Molybdenum within the space of a couple of weeks. China Molybdenum in March picked up Brazilian assets from Anglo American which is also in the midst of a radical restructuring and asset sale program. The Chinese company paid $1.5 billion cash for niobium and phosphates operations inside the South American country.

    Shares in Freeport fell sharply on Monday and the company is now worth $13.8 billion on the NYSE, down 24.7% over just five days of trading.

    Attached Files
    Back to Top

    Eramet agrees rescue plan for New Caledonia nickel business

    The board of Eramet agreed on Monday to financing and cost-saving measures to help its SLM nickel business in New Caledonia survive a severe market downturn, supported by a loan from the French government.

    The deal follows months of wrangling between Eramet and local authorities in New Caledonia, which is a minority shareholder in SLN, about how to salvage the nickel producer that lost around 250 million euros ($284.48 million) last year.

    Eramet said that the STCPI, the vehicle representing the New Caledonian provinces, had agreed to contribute to additional financing for SLN under a package to run to 2018.

    Eramet also said it would inject 40 million euros, on top of 150 million euros provided since December, to ensure SLN's liquidity needs were covered until the end of June while the terms of the recovery plan were finalised.

    Monday's deal followed a proposal by French prime minister Manuel Valls at the end of April to lend up to 200 million euros to the STCPI to allow it to fund SLN's support measures.

    The STCPI has decided to request 127 million euros to inject into SLN, Philippe Gomes, a member of parliament and an Eramet board member representing the STCPI, told Reuters.

    Eramet reiterated a previously announced target to reduce SLN's production costs by 25 percent to $4.50 a pound by the end of 2017, compared with the 2015 average.

    It did not give details, but has previously announced plans to switch its New Caledonian production to ferronickel exclusively and also export more unrefined ore.

    The group said last month it had already reduced its nickel costs by 10 percent in the first quarter, but that the lowest nickel prices in more than a decade were expected to drive it to another operating loss in the first half.

    Gomes said the cost savings to 2018 would put SLN in the top third of the most efficient producers worldwide. But he also said the development of a delayed plan to build anew electricity plant for SLN's nickel smelter was crucial to maintain the miner's long-term competitiveness.

    Valls also pledged during his recent visit to New Caledonia that the government would support the power plant project.
    Back to Top

    MMG Said Among Firms Eyeing $2 Billion Freeport Mine Stake

    MMG Ltd., the publicly traded unit of China’s biggest state-owned metals trader, is among companies in talks to buy a majority stake in Freeport-McMoRan Inc.’s copper mine in the Democratic Republic of Congo, according to people with knowledge of the matter.

    Freeport, the biggest publicly traded copper miner, is considering a sale of its 56 percent stake in the Tenke Fungurume asset, which may fetch more than $2 billion, the people said, asking not to be identified because talks are private. The mine could also attract interest from other parties including Chinese companies, such as Citic Metal Co., the people said. The talks are ongoing, and there’s no certainty an agreement will be reached, they said.

    Freeport “continues to advance discussions for the sale of certain interests in its mining and oil and gas assets to accelerate its debt reduction initiatives,” the company said in an e-mailed statement, declining to comment further.

    A spokeswoman for MMG declined to comment. Representatives for Citic didn’t immediately respond to an e-mailed request for comment outside of regular business hours.

    Freeport is required to alert its partner in the mine, Lundin Mining Corp., once a formal bid is on the table, which hasn’t happened so far, the Canadian company’s Chief Executive Officer Paul Conibear said in an interview. Lundin also has the right to match any offer for a stake in Tenke, though Conibear said the company is happy with its holding.

    Tenke is one of Freeport’s five so-called core mines, which also include Cerro Verde and Morenci, as well as El Abra in Chile and Grasberg in Indonesia. Canada’s Lundin owns 24 percent of Tenke, while Gecamines, the Democratic Republic of Congo’s state-owned copper producer, holds 20 percent, according to Freeport’swebsite.
    Back to Top

    Steel, Iron Ore and Coal

    China steel and related products end week with another loss

    The most-traded rebar on the Shanghai Futures Exchange was down 5 percent at 2,020 yuan ($310) a tonne by 0553 GMT after falling by the 6 percent maximum allowed by the exchange.

    Rebar, or reinforcing steel used in construction, surged 80 percent from last December to April, but has since dropped more than 27 percent. It has lost more than 11 percent this week, the most since the contract was launched in 2009.

    The price rally pushed some shuttered steel mills in the world's top producer to resume production, but the ensuing price rout could make them unprofitable again.

    Iron ore on the Dalian Commodity Exchange was down 5.4 percent at 362.50 yuan a tonne after also dropping by its 6 percent downside limit.

    "We are now kind of at or past the peak in seasonal demand so prices are coming down. And maybe since we overshot on the upside so we can undershoot on the downside," said Ian Roper, commodity strategist at Macquarie.

    Other steelmaking raw materials hit hard on Friday included coke and coking coal on the Dalian exchange, which fell 5.5 percent and 3.7 percent respectively.

    Agriculture futures also slumped with soybean oil and palm olein on Dalian down 4 percent and Shanghai rubber falling nearly 5 percent. Egg and soybean dropped more than 2 percent.

    Investors appear to have pulled out more funds from Chinese markets as exchanges keep up the pressure to control speculative investment and crack down on high-frequency trading.

    Attached Files
    Back to Top

    Hebei Steel to cut 5 mln T of steelmaking capacity for 2016-17

    China's biggest steelmaker Hebei Iron & Steel Group plans to slash 5.02 million tonnes per year (tpy) of steelmaking capacity during 2016-17, the company said on Friday, as the government aims to cut overcapacity in the bloated steel sector.

    The steelmaker will also eliminate 2.6 million tpy of ironmaking capacities in the coming two years, after it has already shut 5.6 million tonnes of annual ironmaking capacity and 6.8 million tpy of steelmaking capacity since 2008, it said on the company's website.

    As part of its efforts to weather a supply glut and the slowing economy, the company also plans to raise the proportion of higher-value-added products it makes to above 70 percent by 2020 from the current 41 percent.

    A supply glut and record exports from China, the world's biggest steel producer, have been widely blamed by European countries and the United States for causing deep losses, mill shutdowns and worker layoffs.

    Hebei Steel agreed to buy a Serbian steel plant in April as it aims to expand overseas and shift capacity abroad to weather a slowing economy at home.

    State-owned Hebei Steel produced 47.75 million tonnes of crude steel last year, followed by Baosteel Group at 34.94 million tonnes and privately-owned Jiangsu Shagang Group with 34.21 million tonnes, according to data from the National Bureau of Statistics.

    China as a whole is planning to shed 100 million to 150 million tpy of capacity from a total of 1.2 billion tpy in the coming five years as the country aims to cut overcapacity in sectors including coal and steel.
    Back to Top

    China still fighting steel glut despite price surge

    China still faces severe steel oversupply, and a recent price surge is only due to temporary market expectations, a senior official said on May 12.

    Steel prices increased significantly starting in March and declined mildly in May, as surging property sales pushed up steel demand, Zhao Chenxin, spokesperson with the National Development and Reform Commission (NDRC), the nation's economic planning agency, said at a press conference.

    The price increase also followed resumed construction after winter leave and rebuilding of inventory by trading companies, Zhao said.

    He said the government's de-stocking moves reduce steel supply, which partly explains the price surge.

    "The price surge is mainly due to expectations of more policy tightening and other short-run factors. Severe steel glut has not been fundamentally reversed," he added.

    Steel makers have been in deep water over the past few years as a result of shrinking demand and excessive capacity built up during decades of rapid expansion.

    The country's steel mills were "in severe winter" last year as overcapacity and tumbling steel prices squeezed profit margins.

    The government launched a nationwide campaign to reduce overcapacity and upgrade production as part of the country's efforts to battle economic headwinds.

    Zhao said the price surge will only mildly disturb the de-stocking efforts, and the price increase will be short-lived.

    Attached Files
    Back to Top

    Anglo coal assets may gain allure after early progress

    Anglo American has delivered its first coal from a longwall operation at its Grosvenor mine in Australia seven months ahead of schedule, it said on Thursday, news that could raise its chances of selling the asset.

    Anglo American is aiming to cut its debt to $10 billion by selling $3-4 billion of assets in 2016, including its iron ore, coal and nickel units.

    The Grosvenor metallurgical coal mine in the Bowen Basin of Queensland is regarded as among the best of Anglo American's Australian coal operations and the firm is counting on it to push its asset sale programme forward, analysts say.

    "While Grosvenor may not fit Anglo American's strategic portfolio choices, its long-term commercial attractiveness is beyond question," Seamus French, CEO of Bulk Commodities for Anglo American, said in a statement.

    It said the project was delivered for $100 million below budget and in line with environmental obligations. Anglo will now step up production at Grosvenor and ship the coal to steel consumers across Asia.

    At full capacity, the Grosvenor longwall mine is expected to produce 7.5 million tonnes that can be sold every year, with 3.2 million tonnes expected to be produced in 2016.

    At full tilt, Grosvenor is expected to operate at an all-in sustaining unit cost of 110 Australian dollars ($81) per tonne.

    Sources have previously said the firm's metallurgical coal assets in Australia could be valued at about $1.5 billion.

    Steel companies, including as Taiwan's China Steel and India's JSW Steel, have been mentioned by analysts as potential parties interested in buying Grosvenor assets.
    Back to Top

    UK Mar thermal coal imports down 87pct on year

    The UK imported 306,401 tonnes of thermal coal in March, plunging 87% year on year and down 53% from February, Platts reported, citing customs data.

    During January-March this year, the UK imported 1.64 million tonnes of thermal coal, down 80% compared to the first quarter 2015.

    The UK's thermal coal imports have been declining since the doubling of its Carbon Price Support mechanism in April 2015, decreasing coal's competitiveness for power generation. A number of coal-fired power plants are also set to close in 2016, lowering demand further.

    During March, the UK imported 137,033 tonnes of Russian thermal coal, dropping 87% from a year ago and down 51% from February to a six-month low.

    Colombia delivered 99,874 tonnes to the UK in March, falling 89% on the year and 70% lower than the previous month.

    No coal has been received from the US or South Africa in 2016 so far.

    Attached Files
    Back to Top

    China Shenhua's emissions to fall after upgrades

    China Shenhua's emissions to fall after upgrades

    Shenhua Group, China's largest coal producer, has completed upgrades to its coal-fired power plants in the Beijing-Tianjin-Hebei region, which will dramatically reduce emissions, the Xinhua News Agency reported on May 11.

    A milestone in China's efforts to be more environmentally friendly, Shenhua's upgrades will take emissions of dust, sulfur dioxide (SO2) and nitrogen oxides (NOx) from the company's 22 power units in the region below 10 milligrams per cubic meter, 35 milligrams per cubic meter and 50 milligrams per cubic meter, respectively.

    This is far low than current national emission standards for the three substances of 20 milligrams per cubic meter, 50 milligrams per cubic meter and 100 milligrams per cubic meter.

    Following the change, annual emission of dust, SO2 and NOx by Shenhua facilities in the Beijing-Tianjin-Hebei region will decline 84%, 71% and 83%, Shenhua said in a statement on May 10.

    The upgrades took Shenhua three years and cost 2.35 billion yuan ($360 million), which translates into an added cost of 0.01 yuan/KWh of electricity.

    Shenhua said it will upgrade its facilities across China so that they all reach similarly low emission levels by the end of 2020, bringing its carbon emission down to 835 grams per KWh of electricity produced from 892 grams in 2015.

    Shenhua's move to cleaner use of coal comes at a time when China is at pains to balance economic activity and environmental protection.

    While China is aiming to increase the share of non-fossil energy in its primary energy consumption to 20% by 2030, the rest will still need to come from coal, oil and gas.

    To reconcile the use of coal, which China has in abundant supply, with a desire to increase use of renewable energy, adoption of clean coal technology has become the order of the day.

    Attached Files
    Back to Top

    Daqin April coal transport down 18.9pct on year

    Daqin line, China’s leading coal-dedicated rail line, transported 24.85 million tonnes of coal in April this year, sliding 13.98 % on month but down 18.9% on year – the 20th consecutive year-on-year drop, said a statement released by Daqin Railway Co., Ltd on May 10.

    In April, Daqin’s daily coal transport averaged 0.83 million tonnes, 10.8 lower than March’s 0.93 million tonnes.

    Daqin rail line realized coal transport of 108.13 million tonnes over January-April this year, falling 20.86% year on year.

    Daqin rail line started routine spring maintenance on April 6, and it lasted 3 hours each morning for 25 days. This reduced a total 5 million tonnes of coal transport during the whole period, based on a daily drop of 0.2 million tonnes averagely.

    The maintenance did not cause the expected tight transport, mainly attributed to weak demand from downstream sector, and coal stocks at ports at Bohai Rim climbed during the period.

    By April 30, the combined coal stocks at Qinhuangdao, Jingtang and Caofeidian ports stood at 7.44 million tonnes, increasing 0.49 million tonnes from the level before the maintenance.
    Back to Top

    India's JSW Steel bids for Tata UK assets

    India's JSW Steel Ltd has bid for the British operations of Tata Steel Ltd , two sources with direct knowledge of the matter confirmed, worrying bankers about its high debt levels and pulling down JSW shares on Tuesday.

    JSW Steel, controlled by acquisitive billionaire Sajjan Jindal, wants to become the world's third-largest steel company and the bid for the Tata assets is in-line with that goal, said a source close to the company.

    Financial Times first reported JSW's bid, after Tata said on Monday that seven expressions of interest for its British assets had been taken to the next stage of the sale process it began last month. Tata did not name the bidders, but metals group Liberty House and a buyout team called Excalibur confirmed submitting expressions of interest.

    Mumbai-based JSW Steel unsuccessfully bid in 2014 to buy some assets from Italy's second-largest steelmaker, Lucchini, to enter the European market. In 2010, it bought out Indian company Ispat Steel (JSWI.NS), more than a decade after JSW emerged from near-bankruptcy.

    JSW Group, with interests in steel, power, cement and ports, had a gross debt of around 400 billion rupees ($6 billion) as of April, making it one of India's most indebted conglomerates.

    Rao told Reuters last month that although the group was growth-hungry, it would not let its financial stability suffer.

    Infrastructure bankers in Mumbai say, however, that they are uncomfortable with the JSW Group's debt, and they think the company is only testing the waters with the Tata bid.

    One potential deal-killer is the big pension liabilities of the Port Talbot steel mill in Wales that JSW Steel might have to shoulder, said the bankers who did not want to be named.

    The bankers also said that a bargain deal might help JSW Steel turn around Tata's money-losing UK business given their record of making steel efficiently and profitably in India without having any raw material security.

    JSW Steel's shares, which have risen a quarter so far this year, fell more than 3 percent on Tuesday to their lowest in a month. The wider Mumbai market .BSESN was up slightly.
    Back to Top

    China’s key steel mills daily output hit a new high in late-April

    The daily crude steel output of China’s key steel mills climbed 1.86% from ten days ago to 1.72 million tonnes in late-April, posting the third ten-day increase in a row, and hitting a new high since 2016, according to data released by the China Iron and Steel Association (CISA).

    China’s daily crude steel output is expected to be 2.31 million tonnes in late-April, up 1.51% from ten days ago, CISA forecasted.

    The recent surging steel prices prompted Hebei and many other areas to resume production, and China’s average furnace operation rate rebounded above 78%, which may exert some pressure on upturn of domestic steel prices.

    By April 30, stocks of steel products in key steel mills rose 5.09% from ten days ago to 12.34 million tonnes; social stocks of steel products stood at 9.08 million tonnes, sliding 3.19% on month.

    A drop of over 200 yuan/t in steel prices was observed in eastern and northern China after the National Labor s’ Day in early May, and market participants panicked toward the sharp decline.

    The factors supporting the previous pick-up have all changed. The quickened production recovery, the cooling real estate market in China’s large cities, as well as the easy monetary policy that has exhausted its impacts, may all lead to the continuous going down of steel prices.

    Analysts said the furnace operation rate was very likely to be around 80%, mainly restrained by suspension of some furnaces for maintenance, the production limits during the International Horticultural Exposition, as well as the decreased atmosphere for production recovery amid falling prices.
    Back to Top

    China April steel exports down 9pct on month

    China exported 9.08 million tonnes of steel products in April, dropping 9% from March but up 6.3% year on year, showed the latest data from the General Administration of Customs (GAC).

    Exports of steel products rose 7.6% on year to 36.9 million tonnes over January-April, data showed.

    Analysts said China’s sharp rise of steel products over March-April bridled steel exports to some extent, and left China in a less disadvantaged position.

    Global trade conflicts also bring some negative effects on China’s steel exports. European Commission released an announcement on April 28 to impose supervision and control on some imported steel products from China and other third countries.

    In 2015, China’s steel exports to European Commission members accounted for 10% of its total steel exports, and it accounted for as much as 30% of total steel supplies of those member countries. The intensified anti-dumping measures will make China’s steel exports increasingly difficult.

    Meanwhile, China imported 1.1 million tonnes of steel products in April, falling 8.3% year on year and down 13.4% month on month; combined imports over January-April stood at 4.23 million tonnes, dropping 4.6% from the year prior.

    China’s imports of iron ore reached at 83.92 million tonnes in April, 2.16% lower than previous month but up 4.6% from April 2015. Over January-April, China imported 325 million tonnes of iron ore, rising 6.1% year on year.

    Attached Files
    Back to Top

    China steel, iron ore futures dive again Monday as demand worries batter commodities

    Chinese commodities dived on Monday, led by 6 percent falls in steel and iron ore futures, as deepening worries about China's demand extended a fortnight of sharp drops and false rebounds in the country's market for industrial metals.

    Speculative funds rushed into China's commodities futures last month, betting the country's economy was bottoming. The buying frenzy alarmed domestic exchanges and regulators fearing a bubble could be forming as volumes and prices soared.

    To limit speculation on futures from steel to coal, the country's three commodity exchanges have taken aggressive measures, including raising trading margins and transaction fees, and widening daily movement limits.

    The big market swings and the response of authorities have raised concerns about the risk of contagion for global markets, particularly after last year's stock boom and bust.

    On Monday, the Dalian Commodity Exchange said it would continue to strengthen its market monitoring and may raise transaction fees further to curb speculation.

    "Futures liquidity has dropped sharply following exchanges' measures, and now investors are worried China's economic trend will be weaker than previously expected, hurting sentiment," said Zhao Chaoyue, an analyst at Merchant Futures in Shenzhen.

    The most-traded rebar, or reinforced steel, on the Shanghai Futures Exchange posted its biggest daily fall on record on Monday. It hit a downside limit of 6 percent to 2,175 yuan ($334.41) a ton, the lowest since April 7.

    September iron ore futures on the Dalian Commodity Exchange also tumbled by their daily permissible limit of 6 percent to 388 yuan a ton.

    Spot prices of billet, a semi-finished steel product, regarded as a key reference point for the physical market, have tumbled over the last few days, traders said.

    The declines followed customs data on Sunday that showed iron ore imports fell 2.2 percent in April from March, while copper ore and concentrate imports shed 8 percent on the month.

    Fanning concerns about weak fundamentals, iron ore inventories at China's big ports topped 100 million tonnes by the end of April, the China Iron & Steel Association said on Monday.
    Back to Top

    Glencore becomes top shareholder in Australia's Atlas Iron via debt-to-equity deal

    Glencore has emerged as the top shareholder of embattled Australian iron ore miner Atlas Iron after a debt-to-equity transaction, giving the global mining and trading company its only direct exposure to production of the steelmaking ingredient. 

    Glencore has acted as an intermediary in buying and selling iron ore for third parties since 2008 but has mostly avoided, either by design or circumstances, the production side of the sector, which is dominated by Vale, Rio Tinto and BHP Billiton. 

    Glencore subsidiary Maru Sky earlier this year acquired a portion of Atlas debt as the small Australian miner negotiated with creditors to fend off collapse brought on by weak iron ore prices. 

    Atlas told the Australian Securities Exchange that Maru Sky had converted its debt ownership for 8.47% in equity, making it the single biggest shareholder. The next biggest is Commonwealth Bank of Australia with 6.36%. 

    Glencore in a statement emailed to Reuters said it did not produce any iron ore on its own, but holds rights to sell a portion of Atlas production under a supply contract. Atlas in late April agreed to a financial restructuring that transferred 70 percent of lower-grade iron ore a year to its creditors in exchange for a 48% reduction in debt. 

    The closest Glencore has come to mining its own iron ore has been through its subsidiary Sphere Minerals, which was aiming to develop a mine in Mauritania yielding 7.5 million tonnes per year - about half the projected output of Atlas. But construction work was suspended indefinitely last year due to low ore prices. 

    Glencore also owns 50% of the undeveloped Zanaga iron ore prospect in the Republic of Congo. Iron ore prices zoomed to nearly $200 a tonne in 2011, but have since fallen to as low as $37. The price stood at $57.70 on Monday. 

    Glencore has a track record of swooping on distressed assets, snapping up copper and coal assets a few years ago in Africa at prices regarded at the time as below market.
    Back to Top

    Worst week for iron ore price since October 2011

    On Friday the Northern China benchmark iron ore price fell 3% to $57.70 per dry metric tonne (62% Fe CFR Tianjin port) according to data supplied by The Steel Index, capping a brutal week of trading.

    Losses since Monday came to 11.8%, the worst weekly performance since October 2011, when prices dropped from$142 per tonne to $116 a tonne over five days of trading. Year to date the iron ore price is averaging $51.36 a tonne. Despite the bad start to May, iron ore has managed to hold onto 34% gains in 2016 and a 55% recovery from nine-year lows reached mid-December.

    Expectations are for a pullback in Chinese imports due to higher prices during the month and the inventory build-up

    Trading on the Dalian Commodities Exchange home to the world's most active iron ore price futures have quietened down from torrid levels in March and April when one billion tonnes in a single day was recorded. On Friday the most active contract settled at 412.50 yuan or $63.35 for a 9.5% decline on the week.

    While coking coal futures traded on the Dalian exchange also suffered double digit declines assessed prices have held up better  and was pegged at $97.20 a tonne for premium Australian exports on Friday after coming close to the $100 mark at the end of April. Metallurgical coal has gained nearly 20% year to date and is well up on historically low $73.40 a tonne in December on a spot price basis.
    Back to Top

    Vale sets May term premium at $1/dmt for Brazilian Blend iron ore fines

    Brazilian iron ore miner Vale has raised its term premium for Brazilian blended fines, or BRBF, cargoes to $1/dry mt to an IODEX-based matrix for May delivery cargoes at port stocks, term buyers said Friday.

    BRBF is sold at several ports in China. The term differential was set at parity for April when Vale started selling at quayside bonded house last month, according to market sources.

    Sources also said that minimum lifting quantity is 50,000 mt per lot for term buyers.

    Vale's Singapore office could not be reached for comment on the matter. BRBF cargoes typically contains 62.5% iron, 1.8% alumina, 5.2% silica, 0.07% phosphorus, 0.3% manganese, 2.7% loss on ignition and 7.5% moisture.

    As seaborne cargoes for mainstream fines are trading at premiums of around $2/dmt to IODEX in the spot market for June delivery, some sources felt that the term premium of $1/dmt is acceptable at the moment.

    "Supported by decent production margin, cargoes with iron content higher than 61% Fe are very popular among end-users as steel enterprises are trying to increase pig iron production rate. [The] $1/dmt premium is still acceptable so far," one of the term buyers said.

    Due to its low alumina and phosphorous levels, Brazilian fines is "irreplaceable" to some blast furnaces. In this regard, some buyers said that they have to accept $1/dmt premium.

    "You cannot replace all the feedstocks by Australian fines, but just try to reduce usage of Brazilian fines in the future," a large-size steelmaker said.

    The increase in the term premium for BRBF came, after the miner set a premium of $2/dmt to an IODEX-based matrix for April-delivery Southern System fines for term contract buyers.

    But looking ahead, some sources are concerned over their term contracts with Vale.

    "As a term buyer, we have to abide by the premium set by the miner. But when steel production margin falls to negative in the future, there is no need to use medium or high grade fines as it is not cost-effective compared to the other feedstocks," said a procurement source from Shandong.

    Another term buyer added that "we can carry out current term contract at the moment, it is impossible to increase volume anymore."
    Back to Top

    China helps to bolster steel price

    China is among the contributors to bolster steel price in the global market, according to a press conference held today by the Ministry of Commerce.

    Shen Danyang, a spokesman at the ministry, said China participated in the progress as the government has taken unprecedented efforts to cut supply and seek ways to expand domestic demand.

    Price of steel in the global market has surged 20 percent from US$305 per ton at the year's beginning to US$365 per ton in April.

    The State Council, China's cabinet announced in February that China plans to reduce steel production by 150 million tons over the next five years as the country aims to streamline its heavy industry.

    "Apart from limits on capacity, we are taking comprehensive measures to expand domestic demand for steel," said Shen, adding that lots of China's infrastructure constructions are still in progress to boost the needs for steel.

    Attached Files
    Back to Top

    Russian steelmaker MMK sees brighter outlook after poor first quarter

    Russian steelmaker MMK sees brighter outlook after poor first quarter

    MMK, one of Russia's largest steelmakers, said it expected better financial results in the second quarter after reporting a 39 percent drop in first-quarter core earnings on Friday due to weak domestic demand and low prices.

    Russian steelmakers have been hit by a collapse in global steel prices, which plumbed 10-year lows at the end of 2015 and early 2016. MMK competitor Severstal reported core earnings were down 53 percent year-on-year for the first quarter.

    MMK, controlled by businessman Viktor Rashnikov, said it expected stronger second-quarter results due to "early signs of a recovery in domestic demand and a gradual increase in rouble prices on the domestic market towards parity with export prices."

    MMK shares were up 1.7 percent at 0950 GMT, outperforming Moscow's broader MICEX index, which was down 0.7 percent.

    Export prices for hot-rolled steel out of Russia and Commonwealth of Independent States (CIS) rose to $480 per tonne in May, up almost 85 percent since January thanks to mill closures in China and improved demand.

    Still, Chinese producers have since ramped up output and once-shut plants have resumed production.

    MMK said the drop in its earnings before interest, taxation, depreciation and amortisation (EBITDA) to $287 million reflected the "challenging economic situation on the Russian market and low prices ... on global markets which bottomed in Jan 2016."

    First-quarter revenue tumbled 31 percent year-on-year to $1.05 billion, while net profit fell 20 percent to $157 million, the company said.

    "The results are weak, but likely to be ignored by the market due to the recovery in steel prices since March," Aton analysts said in a research note.

    MMK will use funds it is to receive from selling part of its stake in Australian iron ore company Fortescue to repay debt over 2017-2019, Chief Financial Officer Sergey Sulimov said on Friday.

    MMK is in the proccess of gradually selling its stake in Fortescue.

    Attached Files
    Back to Top

    China major listed coal firms see performance rebound in Q1

    China major listed coal firms see performance rebound in Q1

    China’s major 28 listed coal firms saw their performance rebound in the first quarter of 2016, thanks to the government’s overcapacity cut amid the supply-side structural reform.

    The average net profit ratio of these firms was -9.8%, compared with -2% from the year before but rebounded obviously from -36.1% in Q4 2015.

    However, the average net profit of these firms was 159 million yuan, falling 27.2% from the same period last year.

    In the first quarter, 12 or 42.9% of these firms posted losses, data showed.

    Ranking the top of the list based on profit, China Shenhua Energy Co., Ltd, the listed arm of coal giant Shenhua Group, realized net profit of 4.61 billion yuan ($711.8 million) in the first quarter, falling 21.4% from the year prior, said the company in its quarterly report.

    The operating revenue declined 4.6% year on year to 39.4 billion yuan during the same period.

    Shenhua said it will continue to maximum the sales of coal traded at ports, and expand the sales of outsourced and exported coal properly in 2016. Data showed that sales of coal shipped via northern ports stood at 54.4 million tonnes or 58.8% of its total sales in the first quarter.

    Besides, data showed that 16 out of these firms cut coal output in the first quarter, posting an average decline of 11.8%.

    China’s official manufacturing Purchasing Managers’ Index (PMI) was up in March, coming in at 50.2 compared with the lowest reading 49.0 in February, after consecutive eight months of decline, showed the data from the National Bureau of Statistics.

    It returned to growth for the first time since July last year, indicating the improved manufacturing activities in China.

    Shenhua will stop operating and constructing 12 mines with combined capacity at 30 Mtpa, starting from 2016. During 2016-2020, Datong Coal Mine Group will also close 12 mines with capacity at 12.55 Mtpa, with 5 mines (capacity at 6.6 Mtpa) to be shut in 2016.

    China’s continuous de-capacity campaign will prop up coal market and further benefit for the listed companies.
    Back to Top
    Commodity Intelligence LLP is Authorised and Regulated by the Financial Conduct Authority

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

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

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

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

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

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

    © 2018 - Commodity Intelligence LLP