Mark Latham Commodity Equity Intelligence Service

Thursday 7th May 2015
Background Stories on www.commodityintelligence.com

News and Views:







Macro

Something Odd about Money: Gold

By Yi Wen, Assistant Vice President and Economist, and Maria A. Arias, Research Associate

Inflation is typically described as a persistent increase in the general price level, such as in the consumer price index. One of the most important theories to explain inflation is the monetarist view that, according to Milton Friedman, “Inflation is always and everywhere a monetary phenomenon.”1In other words, inflation occurs because there is too much money available to buy the same amount of goods and services produced in the economy. This view can also be represented by the so-called “quantity theory of money,” which relates the general price level, the total goods and services produced in a given period, the total money supply and the speed (velocity) at which money circulates in the economy in facilitating transactions in the following equation:

MV = PQ

In this equation:

  • M stands for money.
  • V stands for the velocity of money (or the rate at which people spend money).
  • P stands for the general price level.
  • Q stands for the quantity of goods and services produced.

Based on this equation, holding the money velocity constant, if the money supply (M) increases at a faster rate than real economic output (Q), the price level (P) must increase to make up the difference. According to this view, inflation in the U.S. should have been about 31 percent per year between 2008 and 2013, when the money supply grew at an average pace of 33 percent per year and output grew at an average pace just below 2 percent. Why, then, has inflation remained persistently low (below 2 percent) during this period?

Declining Velocity

The issue has to do with the velocity of money, which has never been constant, as can be seen in the figure below . If for some reason the money velocity declines rapidly during an expansionary monetary policy period, it can offset the increase in money supply and even lead to deflation instead of inflation.

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Oil and Gas

Saudi holds pricing-- at a discount

Saudi Arabia to cut June Arab Light crude
price to Asia to 75c-$1/bbl below Oman/Dubai avg to try to
regain mkt share, particularly in China, Bloomberg oil
strategist Bernard Leung writes.
  * Saudis losing mkt share to Iraq as Basrah Light of better
    quality, cheaper than Saudi Medium
    * Basrah Light offered at $2.80/bbl discount to Oman/Dubai
      in May vs $2 discount for Saudi Medium
    * Saudi shr of crude to China from top 15 suppliers slid
      to 16.24% in March from 18.64% in Feb. after Aramco
      raised prices for 2 mos.; Iraq 10.88% vs 8.68%

~Bloomberg 2 days ago.

Saudi Aramco, the state-owned oil producer, kept prices for Asian refiners steady for its benchmark Arab Light crude for June-loading cargoes, while raising them for European buyers.

This was seen as a sign that Saudi Aramco wants to keep its oil competitive in Asia, while the increase for Europe reflected rising prices for rival grades in recent weeks.

It's also important to note that the official selling price (OSP) for Arab Light is still at a discount to the regional benchmark Oman/Dubai crude.

The discount for June cargoes was set at 60 cents a barrel, the same as for May.

While the discount has narrowed from $2.30 a barrel for March cargoes, it has been in negative territory for nine straight months.

OSP discounts to the benchmark are still fairly rare, with the last occurrence more than four years ago, so an extended run of discounts show that Saudi Aramco is serious about maintaining its competitive edge, especially in Asia, which accounts for roughly two-thirds of its exports.

DIVERGENCE FROM BRENT-DUBAI SPREAD

Normally the OSP tracks movements in the Brent-Dubai exchange for swaps, which measures the price differential between the main European crude benchmark and its Middle East counterpart.

The one-month exchange for swaps <DUB-EFS-1M> has been holding in a fairly narrow range anchored around $1.60 a barrel since September last year, when I first said that Saudi Arabia was more interested in protecting market share than cutting output to hold up prices.

But while the Brent-Dubai spread has been largely steady, the Saudi OSP has been lowered, breaking the usual correlation between the two, a further sign of Saudi determination to keep their prices competitive.

So, has the tactic worked, and if so, how well?

China is the main buyer of Saudi crude and here the picture is mixed.

In the first three months of the year China imported 12.75 million tonnes of crude from Saudi Arabia, or about 16 percent of its total, according to customs data.

Saudi Arabia increased its volumes by 0.5 percent in the first quarter to about 1.034 million barrels per day (bpd), but this meant it was still surrendering market share as China's overall imports grew by 7.5 percent.

Big gainers in the first quarter were number three supplier Oman, with a 30.8 percent rise in its shipments to China over the same period in 2014, Russia with a 14.3 percent increase and Kuwait with a 47 percent jump.

Iran, China's fifth-biggest supplier in the first quarter, saw its volumes drop 1.9 percent, while second-ranked Angola experienced a 7.5 percent decline.

But Saudi Arabia's modest gain in China imports in the first quarter should be seen against the light of a 7.9 percent decline in 2014 from the previous year.

It could be viewed as a positive that Saudi Arabia has managed to increase volumes to China in the first quarter, thus reversing partially last year's drop.


~Reuters, yesterday.

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Aramco to supply shale gas to industrial projects

Saudi Aramco will soon start the production of shale gas to supply industrial projects in the Kingdom, accoridng to oil minister Ali al-Naimi.

Speaking during the 18th annual meeting of the Saudi Economic Association, al-Naimi said that Saudi Aramco will initially provide shale gas to the Mining City of the North project and will supply a power generation plant, which is currently under construction.

Initial production will be from 20 MMcf/D to 200 MMcf/D, with about 20 MMcf/D due to be supplied to the Saudi Arabia Mining Company (Ma’aden) and to the power generation plant, accoridng to the minister.

Al-Naimi added that the Kingdom has made promising shale gas discoveries and has the technologies to produce it at a reasonable price.

Saudi Aramco's unconventional gas programme became fully operational in 2013, just 2 years after launching its unconventional gas programme in the northern region.

The company said at the time that it was ready to commit shale gas for the development of a 1,000-MW power plant that will feed a phosphate mining and manufacturing sector.

Saudi Aramco is exploring unconventional gas in the North West of the Kingdom, in South Ghawar, and the Rub’a al-Khali known as the Empty Quarter.

The company has projected rapid growth for its unconventional gas value chain between now and 2020. This includes site development, rig preparation, drilling, fracturing, completion, well tie-in, production, and maintenance.

http://www.arabianoilandgas.com/article-13984-aramco-to-supply-shale-gas-to-industrial-projects/
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Rowan's revenue jumps 45 pct as new rigs contribute

Rowan Companies Plc's quarterly profit more-than doubled, helped by revenue from three new ultra-deepwater rigs.

The company's revenue rose 45 percent to $547 million for the quarter ended March 31.

Net income rose to $123.7 million, or 99 cents per share, from $59.6 million, or 48 cents per share, a year earlier.


http://www.reuters.com/article/2015/05/06/rowan-results-idUSL4N0XX3N120150506
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Origin Energy pushes back Gladstone LNG timetable

Origin Energy has pushed back the timetable for sustained production at its $24.7 billion Australia Pacific LNG project at Gladstone until the final quarter of the year.

In a presentation in Sydney, Origin Energy (ORG) chief Grant King said sustained production (and therefore associated cashflow) from the APLNG plant it is building with US major ConocoPhillips would not occur until the final quarter of 2015.

The previous timetable had been for sustained LNG production from the first of two trains, or processing units, in the September quarter.

The new timetable appeared in slides from the presentation posted to the stock exchange. No reason was given for the delay and the project’s budget was not reaffirmed.

An Origin spokeswoman said first LNG (as opposed to sustained production) was still expected in the third quarter of the year.

“We have every confidence that start-up will occur in the first quarter of 2015-16 (September quarter),” she said.

The delay is in contrast to the rival Gladstone LNG plant run by Santos, which last month said it would be targeting a September start-up, but subsequently revealed to analysts it had targets of first exports by July.

http://www.theaustralian.com.au/business/mining-energy/origin-energy-pushes-back-gladstone-lng-timetable/story-e6frg9df-1227342454915
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Nigeria slashes 2015 fuel subsidy by 90 pct following oil price slide

Nigeria will slash petrol subsidies by 90 percent this year because government revenues have been hit by the slump in oil prices.

The government had said it would gradually phase out fuel subsidies which are a significant burden on public finances, but cutting subsidies risks aggravating a fuel crisis in the country.

Major cities are experiencing a crippling gasoline shortage as oil importers feel the pinch from unpaid government subsidies, a plummeting local currency and tighter credit lines triggered by lower crude prices, oil traders and local industry sources say.

While Nigeria is Africa's biggest oil producer, a neglected refining system means it is almost wholly reliant on imports for the 40 million litres per day of gasoline it consumes.

Parliament approved the reduction in subsidies to 100 billion naira ($505 million) for 2015, Finance Minister Ngozi Okonjo-Iweala said late on Tuesday. The cuts were accounted for in last week's 4.49 trillion naira budget for 2015, but the breakdown was not announced until Tuesday.

Lawmakers also approved 45.5 billion naira for a separate kerosene subsidy.

In November, the government said it hoped to gradually phase out the subsidies, reducing them to 408.68 billion naira next year and 371.18 billion naira for 2017.

Okonjo-Iweala said in her budget speech that the government had already spent half of the amount it had planned to borrow and that it had not released any funds for capital expenditure this year on account of lower oil revenue.

This year's budget took longer than usual getting through parliament, worsening a cash squeeze in government, because of the closely fought general elections in March that saw incumbent President Goodluck Jonathan defeated by opposition leader Muhammadu Buhari. He will take office later this month.

http://www.reuters.com/article/2015/05/06/nigeria-economy-idUSL5N0XX3LT20150506
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Summary of Weekly Petroleum Data for the Week Ending May 1, 2015

U.S. crude oil refinery inputs averaged over 16.3 million barrels per day during the week ending May 1, 2015, 247,000 barrels per day more than the previous week’s average. Refineries operated at 93.0% of their operable capacity last week. Gasoline production decreased last week, averaging about 9.2 million barrels per day. Distillate fuel production increased last week, averaging 5.0 million barrels per day. U.S. crude oil imports averaged over 6.5 million barrels per day last week, down by 905,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 7.2 million barrels per day, 5.0% below the same four-week period last year.

Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 626,000 barrels per day. Distillate fuel imports averaged 112,000 barrels per day last week.

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 3.9 million barrels from the previous week. At 487.0 million barrels, U.S. crude oil inventories are at the highest level for this time of year in at least the last 80 years. Total motor gasoline inventories increased by 0.4 million barrels last week, and are above the upper limit of the average range. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories increased by 1.5 million barrels last week and are in the middle of the average range for this time of year. Propane/propylene inventories rose 1.8 million barrels last week and are well above the upper limit of the average range. Total commercial petroleum inventories increased by 6.6 million barrels last week.

http://ir.eia.gov/wpsr/wpsrsummary.pdf
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Oil Producers Cast Aside Gloom as Rally Spurs Drilling Plans

Oil producers battered by the steepest market collapse in a generation are signaling for the first time that they believe the worst is behind them.

Carrizo Oil & Gas Inc., Devon Energy Corp. and Chesapeake Energy Corp. all lifted their full-year production outlooks this week. Shale explorer EOG Resources Inc. said on Tuesday it plans to increase drilling as soon as crude stabilizes around $65 a barrel, while Pioneer Natural Resources Co. has said it is preparing to deploy more rigs as soon as July.

The actions come amid a seven-week rally that’s boosted oil prices by 41 percent. They follow 10 months of dramatic cost-cutting and revamped drilling strategies that have created a new reality for some within the industry. As prices rapidly fell, a $60 price for oil looked like a death sentence. Now, with the cutbacks, it appears positively rosy.

“We didn’t think we’d be quite this good,” Stephen Chazen, Occidental Petroleum Corp.’s chief executive officer, said in an analyst call on Wednesday. The company expects to boost production as much as 14 percent this year, he said, compared to a previous forecast for 6.8 percent to 10 percent growth.

The danger, of course, is that a production surge by newly optimistic U.S. oil explorers will flood the market with excess crude and force prices back down to the $43 level seen in March, or worse.

While some analysts have speculated that a recovery would have an L-shape, settling at one lower price point by the end of the year, oil historian and economist Daniel Yergin has said he believes it will take a W-shape, with continued peaks and valleys as drillers rush out product in times of higher prices, then pull back when they drop.

Volatility Ahead

“That means oil prices are going to be a lot more volatile,” Yergin, the vice chairman of IHS Inc., said last month in an interview. “The notion of a W captures the sense of it. There isn’t going to be a landing place for oil.”

One of the most prominent executives in the international petroleum industry -- Exxon Mobil Corp.’s Rex Tillerson -- has been warning of just such a double dip in oil prices.

Tillerson, who is chairman and CEO of the world’s biggest energy producer by market value, told analysts, investors and fellow executives last month at a Houston energy conference that low prices will persist for years precisely because drillers are so ingenious about finding ways to extract oil profitably.

Even so, companies are gearing up for growth again.

New Normal

“There’s been a lot of talk around the shale patch that $65 or $70 a barrel is the new $100,” said Jim Krane, an energy fellow at Rice University in Houston who has researched the productivity gains of crude producers. “These companies are leaner and meaner and can start to play ball again at a lower price.”

Occidental has shortened the time it takes to drill a well in a layer of Texas’ Permian Basin known as the Wolfcamp A by 17 days, and lowered per-well costs by 24 percent to $8.3 million, the company said in an investor presentation on Wednesday.

“Our objective is to continue to grow the volumes through the year, to the extent we can unless you get a collapse in product prices,” Chazen said.

For EOG, $65 oil generates better returns for them now than $95 did two years ago. That’s thanks in part to equipment and drilling fees that have fallen as much as 30 percent in some regions, according to DrillingInfo Inc., a shale data and analytics company.

EOG, the largest U.S. shale producer, said it may begin fracking a backlog of hundreds of half-finished wells in the third quarter. Pioneer plans to add two rigs per month starting in July and continue doing so through the end of the year, adding up to $90 million per rig to its annual spending plan.

“We’ve made a great deal of progress in cost reductions and efficiency gains,” Pioneer President Tim Dove said. “We’re getting more confident in our ability to add rigs beginning in the third quarter.”

http://www.bloomberg.com/news/articles/2015-05-06/oil-producers-cast-aside-gloom-as-rally-spurs-drilling-plans
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Permian production nearly up to 2 million barrels per day

Production in the Permian Basin shale play is closer to the 2 million-barrels-a-day mark, even while low prices and rig counts have the nation’s other major plays shedding tens of thousands of barrels of production, according to an April report by the U.S. Energy Information Administration.

The Permian added 11,000 barrels of oil production from March to April, putting overall output at 1.992 million barrels of oil a day. The daily production count is a 134 percent increase from a low of 850,000 barrels a day in 2007, according to data from the EIA.

The increase in production has come at a time when the Permian has lost 327, or 58 percent, of oil drilling rigs since a peak of 562 in November, according to oil service company Baker Hughes. The Eagle Ford shale in South Texas has lost 115 oil rigs since October’s peak of 206, while the Bakken play in North Dakota has been reduced from a peak of 198 oil rigs in September to 80 at the beginning of May.

“I think (the production growth) is just the lag effect of wells that were drilled in the first quarter and completions have been delayed,” said Steve Pruett, president and CEO of Elevation Resources.

The Eagle Ford shale play in south Texas lost 33,000 barrels of daily production and the Bakken lost 23,000 barrels between March and April. The Niobrara play, spread between Colorado and Wyoming, dropped by 14,000 barrels of production to just more than 400,000 barrels per day. Pruett said that he and his colleagues think that things eventually will turn around in the Permian.



Read more: Permian production nearly up to 2 million barrels per day - MRT.com: Oil & Gas http://www.mrt.com/business/oil/article_f6b33998-f377-11e4-9008-774511adf9ad.html#ixzz3ZNUWKZWi
Under Creative Commons License: Attribution
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Occidental Petroleum Announces 1Q Results, production grows

Q1 2015 total company year-over-year quarterly production grew 72,000 barrels of oil equivalent per day or 13 percent to 645,000 barrels of oil equivalent per day
Q1 2015 Permian Resources year-over-year quarterly oil production growth of 68 percent and total barrels of oil equivalent growth of 46 percent
Dividend increased for the thirteenth consecutive year from $2.88 to $3.00 annualized

May 06, 2015 07:00 AM Eastern Daylight Time

HOUSTON--(BUSINESS WIRE)--Occidental Petroleum Corporation (NYSE:OXY) announced core income for the first quarter of 2015 of $31 million ($0.04 per diluted share), compared with $560 million ($0.72 per diluted share) for the fourth quarter of 2014 and $1.1 billion ($1.38 per diluted share) for the first quarter of 2014. The first quarter of 2015 had a reported loss of $218 million ($0.28 per diluted share), compared with a loss of $3.4 billion ($4.41 per diluted share) for the fourth quarter of 2014 and reported income of $1.4 billion ($1.75 per diluted share) for the first quarter of 2014. The first quarter of 2015 included non-core charges of $249 million, comprised mainly of asset impairment charges for certain domestic and international assets.

Cash flow from continuing operations before working capital changes was about $1.1 billion for the first quarter of 2015. Working capital changes of $0.6 billion were a result of lower realized prices, which impacted receivable collections and payments related to higher capital and operating spending accrued in the fourth quarter of 2014, but not paid until the first quarter of 2015. Total company capital expenditures for the first quarter of 2015 were $1.7 billion. The Oil and Gas segment spent $1.5 billion, with Permian Resources expenditures representing nearly 50 percent of the total expenditures, and the remaining $200 million was split between the Chemical and Midstream segments.

http://www.businesswire.com/news/home/20150506005427/en/Occidental-Petroleum-Announces-1st-Quarter-2015-Results#.VUoiHI5VhBc
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Carrizo Raises 2015 Crude Oil Production Growth Target to 18%

Carrizo Oil & Gas, Inc. today announced the Company's financial results for the first quarter of 2015 and provided an operational update, which included the following highlights:

Oil Production of 21,373 Bbls/d, 42% above the first quarter of 2014
Total Production of 34,595 Boe/d, 30% above the first quarter of 2014
Loss From Continuing Operations of $21.5 million, or ($0.46) per diluted share, and Adjusted Net Income (as defined below) of $6.4 million, or $0.14 per diluted share
Adjusted EBITDA of $101.8 million
Raising 2015 crude oil production growth target to 18%

For the first quarter of 2015, adjusted earnings before interest, income taxes, depreciation, depletion, and amortization, as described in the statements of operations included below ("Adjusted EBITDA"), was $101.8 million, a decrease of 11% from the prior year quarter as the impact of lower commodity prices more than offset the impact of higher production volumes.

Production volumes during the first quarter of 2015 were 3,114 MBoe, or 34,595 Boe/d, an increase of 30% versus the first quarter of 2014. The year-over-year production growth was driven primarily by strong results from the Company's Eagle Ford Shale assets. Oil production during the first quarter of 2015 averaged 21,373 Bbls/d, an increase of 42% versus the first quarter of 2014; natural gas and NGL production averaged 79,333 Mcfe/d during the first quarter of 2015. First quarter of 2015 production exceeded the high end of Company guidance for both oil and natural gas and NGLs due primarily to strong performance from the Company's Eagle Ford Shale assets, a lower-than-expected amount of voluntary production curtailments from its Marcellus Shale assets, and larger-than-expected non-operated production during the quarter.

Drilling and completion capital expenditures for the first quarter of 2015 were $151.6 million. Approximately 68% of the first quarter drilling and completion spending was in the Eagle Ford Shale. During the quarter, the Company incurred the majority of its planned 2015 drilling and completion capital expenditures for both the Utica Shale and Niobrara Formation. Land and seismic expenditures during the quarter were $12.4 million. As a result of cost savings and efficiencies realized in the Company's drilling program, Carrizo is decreasing its drilling and completion capital expenditure plan to $440.0-$460.0 million from $450.0-$470.0 million.

Carrizo is raising its 2015 oil production guidance to 22,100-22,500 Bbls/d from 21,800-22,400 Bbls/d. Using the midpoint of this range, the Company's 2015 oil production growth guidance increases to 18% from 17% previously. For natural gas and NGLs, Carrizo is increasing its 2015 guidance to 70-76 MMcfe/d from 65-75 MMcfe/d. For the second quarter of 2015, Carrizo expects oil production to be 21,400-21,800 Bbls/d and natural gas and NGL production to be 68-74 MMcfe/d.

http://globenewswire.com/news-release/2015/05/06/732693/10132882/en/Carrizo-Oil-Gas-Inc-Announces-First-Quarter-Results-and-Raises-2015-Crude-Oil-Production-Growth-Target-to-18.html
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Marathon Oil posts Q1 loss, sticks to production outlook

Marathon Oil Corp, an independent exploration and production company, reported a first-quarter loss on Wednesday as tumbling oil prices sliced its revenue nearly in half.

The first quarter adjusted net loss was $253 million, or $0.37 a diluted share. That was narrower than the $0.45 net loss forecast in a Thomson Reuters I/B/E/S consensus view.

A year ago, before oil prices fell 50 percent and revenue slumped to $1.5 billion, the company posted a quarterly adjusted profit of $613 million.

Unlike integrated companies such as Exxon Mobil Corp , Marathon lacks a refining arm it can rely on to bolster profits when oil prices fall.

In terms of operations, Marathon said it had no liftings in Libya during the first quarter, and that "considerable uncertainty remains around future timing of production and sales levels" because of civil unrest that has impacted shipments.

Although some shale oil companies raised their 2015 production outlooks this week, Marathon said its projected growth rates "remain unchanged" at 5 percent to 7 percent for the total company, excluding Libya, and 20 percent for the U.S. fields.

At the same time, Marathon said it reduced North American production costs 17 percent from the fourth quarter of 2014 and 28 percent from a year ago as producers demand discounts from services companies.

It said select non-core asset sales could generate some $500 million in revenue as it tweaks its portfolio of oil and gas properties.

http://www.reuters.com/article/2015/05/06/marathn-oil-results-idUSL1N0XX3XK20150506
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Enbridge adjusted profit misses due to weak oil prices

Enbridge Inc , Canada's largest pipeline company, reported a lower-than-expected adjusted quarterly profit, hurt by hedging losses due to a steep drop in oil and gas prices.

Enbridge, which has struggled with soft demand due to a 40 percent drop in global crude oil prices since June, is restructuring its operations after announcing late last year that it would pay out more of its profits in dividends.

It is also pushing billions of dollars worth of pipeline and other assets into affiliated funds and partnerships to improve the cost of funding new projects.

Excluding one-time items, Enbridge's profit fell to C$468 million ($390 million), or 56 Canadian cents per share, in the first quarter ended March 31 from C$492 million, or 60 Canadian cents per share, a year earlier.

The result fell short of analysts' average estimate of 60 Canadian cents, according to Thomson Reuters I/B/E/S.

Net loss attributable to shareholders was C$383 million, or 46 Canadian cents per share, compared with a profit of C$390 million, or 47 Canadian cents per share, a year earlier.

The Calgary-based company said it moved crude volumes of 2.2 million barrels per day on its mainline system across Canada and the United States during the quarter.

http://www.reuters.com/article/2015/05/06/enbridge-inc-results-idUSL4N0XX3CL20150506
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HollyFrontier profit beats, says to buy back $1 bln in stock



U.S. refiner HollyFrontier Corp's quarterly profit comfortably beat Wall Street estimates as lower crude costs boosted margins, and the company said it would buy back $1 billion in stock.

The company, formed through a merger of Holly Corp and Frontier Oil Corp in 2011, has returned $2.9 billion in cash to shareholders since the deal.

The buyback announced on Wednesday will replace the company's existing stock repurchase program, which had $462 million remaining.

"The second quarter is off to a very good start with new record crude rates being reached at several of our plants," Chief Executive Mike Jennings said.

He added that the company expects high refinery utilization rates for the rest of the year.

Refiners are benefiting as raw material costs drop, thanks to a steep decline in global oil prices. U.S. crude prices dropped 10 percent in the first quarter ended Mar. 31.

Dallas-based HollyFrontier's gross margins rose 13 percent to $16.69 per produced barrel in the March quarter, while operating costs fell 42 percent to $2.62 billion.

Net income attributable to shareholders doubled to $226.9 million, or $1.16 per share. According to Thomson Reuters I/B/E/S calculations, adjusted profit of $1.14 per share beat analysts' average estimate of 78 cents.

Sales and other revenue fell 37 percent to $3.01 billion, but beat the average estimate of $2.50 billion.

http://www.reuters.com/article/2015/05/06/hollyfrontier-results-idUSL4N0XX3EW20150506
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Chesapeake Energy reports 2015 Q1 financial and operational results



Chesapeake Energy Corporation today reported financial and operational results for the 2015 first quarter. Highlights include:

Average production of approximately 686,000 boe per day, an increase of 14% year over year, adjusted for asset sales
Adjusted net income of $0.11 per fully diluted share and adjusted ebitda of $928 million
2015 total production guidance increased to 640 - 650 mboe per day
2015 capital guidance of approximately $3.5 - $4.0 billion reiterated
Additional 600 - 700 new Eagle Ford locations added following successful down spacing test results

Doug Lawler, Chesapeake's Chief Executive Officer, commented, 'Chesapeake is meeting the challenge of low commodity prices head-on and delivered a very strong first quarter. Adjusted for asset sales, our production in the 2015 first quarter grew by 14% compared to the 2014 first quarter. Our cash costs remain at industry-low levels and we expect our assets to continue delivering greater efficiencies even as we reduce our activity levels throughout 2015. We remain on target to balance our capital spending and our cash flow by year-end, and the capital efficiencies that we are seeing in each of our operating areas are helping to strengthen that cash flow. During this challenging commodity price environment, our talented employees and high-quality assets are delivering competitive, differential performance.'

2015 First Quarter Financial Results

For the 2015 first quarter, Chesapeake reported a net loss available to common stockholders of $3.782 billion, or ($5.72) per fully diluted share, which compares to net income available to common stockholders of $374 million, or $0.54 per fully diluted share in the 2014 first quarter. Items typically excluded by securities analysts in their earnings estimates reduced 2015 first quarter net income by approximately $3.824 billion on an after-tax basis and are presented on Page 11 of this release.

The primary source of this reduction was an impairment in the carrying value of Chesapeake's oil and natural gas properties largely resulting from significant decreases in the trailing 12-month average first-day-of-the-month oil and natural gas prices as of March 31, 2015, compared to December 31, 2014. Adjusting for this and other items, 2015 first quarter net income available to common stockholders was $42 million, or $0.11 per fully diluted share, which compares to adjusted net income available to common stockholders of $405 million, or $0.59 per fully diluted share, in the 2014 first quarter.

Adjusted ebitda was $928 million in the 2015 first quarter, compared to $1.515 billion in the 2014 first quarter. Operating cash flow was $910 million in the 2015 first quarter, compared to $1.614 billion in the 2014 first quarter. The year-over-year decreases in adjusted ebitda and operating cash flow were primarily the result of lower realized oil, natural gas and natural gas liquid (NGL) prices.

http://www.oilvoice.com/n/Chesapeake-Energy-reports-2015-first-quarter-financial-and-operational-results/53afc628cbb5.aspx
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Goodrich Petroleum Announces Q1 with deferred completions

Goodrich Petroleum Corporation today announced financial results and an operational update for the first quarter ended March 31, 2015.

Adjusted Revenues were $37.1 million for the quarter versus $49.1 million in the prior year period;
Earnings before interest, taxes, non-cash General & Administrative ("G&A") expenses and exploration ("Adjusted EBITDAX") was $24.5 million in the quarter, compared to $29.1 million in the prior year period;
Capital expenditures for the quarter totaled $48.4 million, which will be reduced to an estimated $10 – 15 million in the second quarter;
Production for the quarter totaled 780,000 barrels of oil equivalent ("Boe") (56% oil), which was affected by deferred completions. Oil volume growth expected to resume in the third quarter as previously drilled wells are completed beginning in June and additional drilling operations commence;
Cost cutting initiatives in place, including a projected 20 – 25% reduction in cash G&A for 2015;
Operating expenses for the quarter were lower by $16.4 million or 30% from the prior year period due to cost reduction efforts and the sale of a non-core property in December 2014;
Additional liquidity provided from $148 million of capital raised in the first quarter.

TUSCALOOSA MARINE SHALE ("TMS"):

Industry-wide well results continuing to improve, with a recent well producing at a peak rate in excess of 1,900 Boe (92% oil) per day and the top ten well results averaging peak rates of approximately 1,500 Boe (93% oil) per day; and
Current well costs lower by approximately $3 million due to reduced drilling days and lower service costs, resulting in competitive rates of return at current strip prices.

http://www.prnewswire.com/news-releases/goodrich-petroleum-announces-first-quarter-2015-financial-results-and-operational-update-300078244.html
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Oil train derails in North Dakota, small town evacuated

A train carrying crude oil derailed and caught fire in Wells County, North Dakota on Wednesday, officials said, just days after the U.S. government announced sweeping reforms to improve safety of the volatile shipments.

The nearby town of Heimdal was evacuated after as many as many as 10 tank cars of a BNSF train came off the rails, local media and fire officials said. There were no injuries, officials said.

A photo posted on Facebook by a local radio station showed flames and heavy black smoke from several tank cars that had derailed in a field.

Heimdal is a tiny town in central North Dakota located along one of the main rail lines heading east out of the giant Bakken oil patch. About two-thirds of all North Dakota oil production is shipped by rail, three-quarters of that to refiners on the U.S. East Coast.

"We are aware of crude derailment and resulting fire near Heimdal, ND. We have investigators on their way. Will update when we know more," Sarah Feinberg, acting administrator at the Federal Railroad Administration, said in a message on Twitter.

The derailment came just days after the U.S. Department of Transportation and Canada's Transport Ministry announced new rules last Friday for oil trains, including phasing out older tank cars, adding electronic braking systems and imposing speed limits. The measures were all meant to reduce the frequency and severity of oil train crashes.

The volume of crude oil by rail has rocketed in recent years as production increases from areas like North Dakota outpaced new pipeline development.

A spate of explosive accidents have accompanied that growth, the worst of which occurred in July 2013 when a train derailed in the town of Lac Megantic in Canada, killing 47 people.

Already this year, five trains have derailed and caught fire in the United States and Canada, all in rural areas. No deaths have occurred but the accidents have stoked fears about the safety of crude oil by rail.

http://www.reuters.com/article/2015/05/06/northdakota-derailment-idUSL1N0XX1JJ20150506
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Alternative Energy

MIT says solar power fields with trillions of watts of capacity are on the way

A massive study on solar power by researchers at the Massachusetts Institute of Technology (MIT) came to two main conclusions: Solar energy holds the best potential for meeting the planet's long-term energy needs while reducing greenhouse gasses and federal and state governments must do more to promote its development.

The main goal of U.S. solar policy should be to build the foundation for a massive scale-up of solar generation over the next few decades, the study said.

"What the study shows is that our focus needs to shift toward new technologies and policies that have the potential to make solar a compelling economic option," said Richard Schmalensee, a Professor Emeritus of Economics and Management at the MIT Sloan School of Management.

Federal and state subsidy programs designed to encourage investment in solar systems should be reviewed with an eye on increasing their cost-effectiveness and with a greater emphasis on rewarding production of solar energy, the study said.

For example, the federal government's solar investment tax credit (ITC), passed in 2008, is set to expire next year. It offered a 30% tax credit for residential and business installations for solar energy. When it expires in 2016, the tax credit will drop to a more permanent 10%.

The MIT Energy Initiative (MITEI) released results of the study in a 356-page report,  TheFuture of Solar Energy, on Monday. The study found that even with today's crystalline silicon photovoltaic (PV) technologies, the industry could achieve terawatt-scale deployment of solar power by 2050 without major technological advances.

http://www.itworld.com/article/2919049/green-it/mit-says-solar-power-fields-with-trillions-of-watts-of-capacity-are-on-the-way.html#tk.rss_news
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Tesla posts wider net loss, stands by full-year delivery target

Tesla Motors Inc Wednesday reported a wider first-quarter net loss, but outperformed expectations and stuck to key milestones for the year ahead despite pressure on margins.

The company reaffirmed plans to start delivering its Model X sport utility vehicle late in the third quarter. The Model X, its second high-volume model, is critical to Tesla's goal of delivering 55,000 vehicles this year.

The automaker said it still expects to achieve that full-year sales goal, but warned that a "less rich product mix" would push down average selling prices for the Model S sedan, which now starts at $76,200.

Tesla said last month it had delivered 10,030 Model S sedans in the first quarter, a 55 percent increase from the year before. The company on Wednesday forecast deliveries of 10,000 to 11,000 vehicles in the second quarter.

Automotive gross margins for the just-ended quarter were 26 percent on an adjusted basis. The company forecast narrower automotive gross margins of "just under" 25 percent for the second quarter.

Tesla said it raised prices for cars sold in Europe by 5 percent to offset the currency exchange hit.

Tesla reported an adjusted net loss of 36 cents a share in the latest quarter, excluding certain expenses, compared with a profit of 14 cents a share on the same basis a year ago. Analysts had been expecting a loss of 50 cents a share on that adjusted basis. Tesla's net loss in the just-ended quarter was $1.22 a share, compared with a 40 cents a share net loss a year ago.

Tesla's cash reserves fell to $1.5 billion as of March 31 from $1.9 billion at the end of 2014. Company executives said in February the pace of cash consumption would slow during this year and cash flow would turn positive in the "latter half of the year."

Chief Executive Officer Elon Musk wrote in a letter to shareholders on Wednesday that Tesla still plans $1.5 billion in capital spending this year to expand production capacity, buy production tooling for the Model X and complete its large battery "gigafactory" and other facilities.

He said the company will start producing energy storage systems, marketed by a new subsidiary called Tesla Energy, in the third quarter.

Home units will start at $3,000. Analysts say the market for stationary energy storage batteries could grow into the billions of dollars as more home-owners and businesses look to store energy produced by solar or wind power systems, and take advantage of subsidies for sources of power that do not emit greenhouse gases.

Musk said the stationary battery storage systems could be "materially profitable" sometime next year.

http://www.reuters.com/article/2015/05/06/tesla-motors-results-idUSL1N0XX3I720150506
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Tata target: 400 MW solar power in 3 years

By incentivizing rooftop solar generation, Tata Power Delhi aims to produce 400 MW of solar electricity in the next three years.

On Wednesday, the discom held a workshop which unveiled the results of a US study commissioned by the power utility. The results supported the company's plans for this foray into renewable energy generation.

Tata Power opened tenders to procure solar panels this week. Aimed primarily for commercial and industrial category consumers who have higher tariff, the discom plans to start installing solar panels for interested consumers within the next few weeks.

The results of the study by leading US energy consulting firm Energy and Environmental Economics (E3) were also shared with senior officials of Delhi government, DERC and experts from the power industry. It was commissioned by Tata Power Delhi in June 2014 in line with National Solar Mission.

"We have received approval from DERC and will begin advertising for the scheme within the next two months. The idea is to reduce cost of power, specifically for commercial and industrial consumers who pay higher tariff at peak hours. They will be able to break even within five years," said an official.

Consumers may either pay the full cost upfront, go for an installment scheme or procure the panels through a third party after which the discom will provide the net metering and grid connectivity. "The cost of the project would be recovered within five years. For the 20 years thereafter, consumers will be able to get free solar power," said an official. The lifespan of a solar panel is approximately 25 years.

http://timesofindia.indiatimes.com/city/delhi/Tata-target-400-MW-solar-power-in-3-years/articleshow/47182116.cms
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LCOE US-Current Data



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Agriculture

CF Industries posts smaller profit after year-ago sale

CF Industries posts smaller profit after year-ago sale

U.S. fertilizer producer CF Industries reported lower first-quarter profit on Wednesday, with the drop reflecting a one-time gain a year ago from the sale of its phosphate business.

The world's second-largest maker of nitrogen fertilizer said it was on track to starting up a new urea plant at Donaldsonville, Louisiana in the third quarter. Other parts of its $4.2 billion capacity expansion in that state and at Port Neal, Iowa are scheduled to come online in the fourth quarter and next year.

Net earnings fell to $231 million or $4.79 per share from $708.5 million or $12.90 per share a year earlier. Net sales dipped 16 percent to $954 million, reflecting the sale of its phosphate business to Mosaic Co. Nitrogen sales eased 3 percent.

Analysts had on average expected CF to earn $4.61 a share on sales of $978 million, according to Thomson Reuters I/B/E/S.

Cold, wet weather delayed demand for nitrogen fertilizer during the period, Chief Executive Tony Will said in a statement.

Rival nitrogen producer Agrium Inc reported a smaller than expected profit on Tuesday, due in part to a late start to the U.S. spring farming season.

U.S. plantings of corn, a crop that uses much fertilizer, are expected to reach 89 million acres, according to CF, down slightly from last year's 90.6 million.

http://www.reuters.com/article/2015/05/06/cf-industries-results-idUSL1N0XX3ST20150506
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Highfield halts shares as it hopes for cash

ASX-listed potash hopeful Highfield Resources went into a trading halt on Thursday, with the company saying it was on the brink of a ‘significant’ capital raising. 

A definitive feasibility study into Highfield’s Muga project, in Spain, recently estimated that a capital investment of $256-million would be required to deliver 1.123-million tonnes a year of granular potash, over a mine-life of 24 years.

Initial production from Muga was planned for the second quarter of 2017, with full production targeted for January 2019. Highfield was expected to resume trading on May 11.

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http://www.miningweekly.com/article/highfield-halts-shares-as-it-hopes-for-cash-2015-05-07
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Precious Metals

Eastern Plats: 50% upside to cash deal??

Why is Eastern Platinum’s Share Price On the Rise?


blue graphInvestors keeping an eye on companies in the platinum space will no doubt have noticed that Eastern Platinum’s (TSX:ELR) share price is on the rise. 

Shares of the company were up 12 percent to $1.96 on Tuesday, and have risen nearly 40 percent so far this year. Since it was announced last November that Eastern Platinum would sell substantially all of its South African assets to China’s Hebei Zhongbo Platinum, the Eastern’s share price has gone up by about 130 percent.

At the time of the announcement, Eastern Platinum CEO Ian Rozier stated that the company would be “extremely well capitalized” following the transaction, while market commentators such as James Fraser of CEO.ca pointed out that the deal could mean as much as $3.25 cash per share for shareholders.

Since then, the company has reached an agreement to buy out its minority interest partners in light of the deal and has seen approval from shareholders and from the Chinese government for the transaction. On April 9th, break fees of US$11.25 million were placed into escrow by each party, as per the terms of the agreement.

On rising prices and insider buying

According to Rozier, it’s that progress towards closing the transaction that’s stoking interest in Eastern Platinum stock.

“Over the last 3 months investors have continually been quantifying the risk of the deal possibly not completing,” he said via email. “However, with shareholder approval, Chinese government approval to do the transaction, and the recently reported payment of the ‘break-fee’ by Hebei Zongbo, I think investors are feeling more confident that the transaction will complete. On the basis that upon completion the stock would  have a cash value of over $3.00 per share, the stock is becoming more attractive with time as the risks are reduced.”

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Steel, Iron Ore and Coal

China releases clean coal action plan 2015-2020

China’s National Energy Administration (NEA) released on May 5 an action plan on clean and highly efficient use of coal over the period from 2015 to 2020, detailing plans on the coal quality upgrading, retrofitting of coal-fired thermal plants, industrial boilers and coal chemical operations, as well as the controlling of scattered use of coal for residential purposes.

China will further develop coal washing and processing to improve coal quality in a more sophisticated manner, the NEA said. Large-scale coal preparation facilities – with annual capacity above 6 Mtpa for thermal coal and over 10 Mtpa for coking coal -- that are highly intelligent and highly reliable will be developed.

More than 70% of the raw coal should be washed in China by 2017, and over 80% by 2020, the NEA said.

High-quality coal distribution centers should be built at mining areas, ports and main end-user areas. By 2020, China will have 11 large coal storage and blending bases and 30 coal logistics parks each with annual circulation at 20 million tonnes or above.

Breakthrough should be achieved in low-rank coal upgrading technology by 2017 and a group of 1 Mtpa demonstration projects will be built by 2020, the NEA said.

China will continue to retrofit coal-fired thermal power plants and industrial boilers to save energy and reduce emissions. In accordance with local water resources, environment and biological situations, nine large coal and power bases will be built in coal-rich provinces, including Xinjiang, Inner Mongolia, Shaanxi, Shanxi and Ningxia, to supply electricity to consumer areas.

Coal consumption of newly-built coal-fired generating units should be above 0.3 kg standard coal per kWh of electricity output, while existing coal-fired units below 0.31 kg standard coal.

Coal used for power generation should account for over 60% of the country’s total coal consumption, the NEA said.

For industrial boilers, by 2020, China will phase out all the coal-fired boilers with capacity of 600,000 T/h. Existing boilers with low efficiency or failing to meet emission standards would be eliminated or upgraded; over half of the boilers should be high-efficient boilers, the NEA said, without elaborations.

http://en.sxcoal.com/0/117736/DataShow.html
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Bank of America's new policy to limit credit exposure to coal

Bank of America announced Wednesday it will reduce its financial exposure to coal companies, acknowledging the risk that future regulation and competition from natural gas pose on the industry.

The bank announced its new coal policy at its annual meeting, saying it would cut back its lending to coal extraction companies and coal divisions of broader mining companies.

"Our new policy reflects our decision to continue to reduce our credit exposure over time to the coal mining sector globally," said Andrew Plepler, head of corporate social responsibility at Bank of America.

The announcement comes amid a growing fossil fuel divestment movement, in which universities, churches and large asset owners are being pressured to abandon or curb their investments in high-carbon energy.

Global bank HSBC said in a client research note in April that the recent drop in energy prices has put a spotlight on "stranded" fossil fuel assets, making them a risk to investors.

"As rigs are dismantled, capex (capital expenditures) is cut and operating assets quickly become unprofitable, stranding risks have become much more urgent for investors to address, including shorter term investors," the research note said.

Bank of America's new policy arose from pressure from universities and environmental groups, the bank said.

"From these engagements, we have developed a coal policy that will ensure that Bank of America plays a continued role in promoting the responsible use of coal and other energy sources, while balancing the risks and opportunities to our shareholders and the communities we serve," it said.

The Rainforest Action Network Climate, one of the groups that pressured Bank of America on this issue, said the announcement represented a "sea change"

"It acknowledges the responsibility that the financial sector bears for supporting and profiting from the fossil fuel industry and the climate chaos it has caused," said Amanda Starbuck, RAN's energy program director.

The RAN said Bank of America has made strides since 2011, when it was one of the biggest bankrollers of coal. On Monday, it got the highest rating of any bank in the RAN's 2015 Coal Finance Report Card.

http://www.reuters.com/article/2015/05/06/banking-coal-climatechange-idUSL1N0XX3SQ20150506
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Xinjiang Q1 outbound electricity transmission firstly exceeds 7,000 GWh

Xinjiang saw outbound electricity transmission surge 120% year on year to reach 7,058.34 GWh in the first quarter this year, exceeding 7,000 GWh for the first time and equating to about 2.338 million tonnes of standard coal, said the Xinjiang Development and Reform Commission recently.

The electricity transmitted via the Hazheng ±800 KV DC transmission line, which extends from south Hami of Xinjiang to Zhengzhou in Henan province, stood at 5,489.06 GWh, while the rest 1,569.28 GWh was transmitted by a quadruple-circuit 750 KV AC transmission line to northwest China.

Over the past years, Xinjiang has been pushing ahead the construction of supporting facilities under the strategy of “transmitting Xinjiang’s electricity to other parts of China”.

The 750 KV AC line was put into operation on November 3, 2011, drawing an end to Xinjiang’s isolated power grid operation.

To date, an electricity outbound transmission network constituted by Hazheng line and 750 KV AC line has initially taken shape in Xinjiang, contributing combined transmission capacity of 13 GW.

Xinjiang has cumulatively transmitted over 30 TWh of electricity to other provinces since 2011, equating to about 9.937 million tonnes of standard coal, achieving industrial added value of about 3.87 billion yuan and increasing fiscal revenue of about 2 billion yuan.

Besides, a mine-mouth thermal power plant in Hami with four 0.66 GW generating units, constructed by Shenhua Guoneng Energy Group, was commissioned recently, marking that Xinjiang has gained another 2.64 GW outbound transmission capacity.

In light of the national plan for Xinjiang’s power grid construction, an outbound transmission network, comprising the Zhundong-Chengdu line (east Zhungeer of Xinjiang to Chengdu of Sichuan), Zhundong-East China double-circuit ±1,100 KV line, and north Hami-Chongqing ±800 KV UHV DC line, will come into being by 2020. By then, Xinjiang will own five DC and three AC outbound transmission lines, capable of supplying 30 TWh of electricity to major consumption areas each year.

http://en.sxcoal.com/0/117780/DataShow.html
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Rio Tinto unshakeable on iron ore expansion plans

Rio Tinto unshakeable on iron ore expansion plans

Rio Tinto vowed to continue producing iron ore at full tilt, despite a 55 percent plunge in prices since the start of last year, underpinned by its forecast that China's steel demand will grow towards 1 billion tonnes.

While rivals BHP Billiton and Brazil's Vale have lightly tapped the brakes on their medium term output plans, Rio said on Thursday it will focus on cutting costs so it remains the world's most profitable producer.

"With iron ore now trading around $60 a tonne delivered into China, we have more to do to ensure that we maintain the margin between ourselves and other producers," Chief Executive Sam Walsh said at the global miner's Australian annual meeting.

Rio Tinto and rivals Vale and BHP have ramped up output over the past few years just as demand growth slowed in China, the biggest user of iron ore, which has driven down prices and threatened the survival of smaller producers.

The world no.2 iron ore producer expects to ship 350 million tonnes of the steel-making ingredient this year, up from 300 in 2014.

Rio's relentless expansion has been based on its long-held forecast that demand for steel in China would grow to 1 billion tonnes around 2025, matching an estimate from BHP Billiton.

The forecasts recently came under fire from economists and former BHP executives and contradicts the view of China's steel industry association which says demand has already peaked at around 820 million tonnes.

Rio Chairman Jan du Plessis said the board and management stood by the forecast.

"We continue to believe that the long run peak steel demand of China has a long way to go to approximately the billion number," he told shareholders. "It's a serious conclusion we came to after long debate."

Walsh said the market was in transition, "with high-cost and in some cases late-entrant supply" having to cut output as more low-cost supply comes on stream, and reiterated that the shift would be bumpy.

The company shrugged off attacks from smaller rival Fortescue Metals Group which has criticised Rio Tinto and BHP for flooding the market, driving down prices, and in turn hurting smaller miners and the Australian economy.

Rio had no desire to "push competitors out of the business," du Plessis said.

He defended the company's strategy of investing $28 billion in its West Australian iron ore operations over the past eight years, saying its global market share has remained at 20 percent over the past decade.

http://www.reuters.com/article/2015/05/07/rio-tinto-ironore-idUSL4N0XY1RW20150507
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ArcelorMittal cuts 2015 view on U.S. steel, weak mining

ArcelorMittal, the world's largest producer of steel, on Thursday cut its profit forecast for 2015 due to a more bearish view of the U.S. steel market and the impact of falling iron ore prices on its mining business.

The company said it expected its 2015 core profit to come in between $6 billion and $7 billion. It had previously set a range of $6.5 billion to $7 billion.

In the first quarter, core profit (EBITDA) fell 21 percent to $1.38 million, below the $1.43 million expected in a Reuters poll of nine analysts.

Its steel operations were hit by the U.S. market, where imports increased and demand fell, largely due to destocking of inventories.

"When you look at exports to the United States at the beginning of the year, clearly there was a surge. The main driver was the price differential, there was an enormous incentive to attract imports," Chief Financial Officer Aditya Mittal told a conference call.

"Since then price levels have corrected and the incentives for imports have also declined," Aditya added. "Therefore I would expects imports to come down from the peaks of the first quarter in the coming months."

Core profit margins in the company's North American business fell to 1.1 percent in the first quarter of 2015 from 5.2 percent in the same period last year.

The group's shares fell as much as 3.3 percent in early trading on Thursday.

The profit decline was caused by a 74 percent drop in profits at the group's iron ore mining operations, which suffered from much lower market prices.

http://www.reuters.com/article/2015/05/07/arcelormittal-results-idUSL5N0XY0LB20150507
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