Mark Latham Commodity Equity Intelligence Service

Wednesday 4th November 2015
Background Stories on

News and Views:

Attached Files


    U.S. rail freight falls as industrial economy struggles

    Freight carried by major U.S. railroads fell by 7 percent in the second quarter of 2015 compared with the same period in 2014, confirming that large parts of the industrial economy are in recession.

    The major Class 1 railroads carried 431 billion ton-miles of freight in the three months ending June, down from 463 billion ton-miles in 2014, according to the U.S. Surface Transportation Board 

    Changes in freight volumes reflect broader difficulties in the industrial economy. Rail operators have been struck by a perfect storm which has hit both their traditional and new business lines 

    Coal shipments to power plants, the biggest commodity on the network, accounting for about one-third of total tonnage, have been hit by a combination of environmental regulations and low gas prices.

    Coal shipments were down by 27 million tonnes, around 15 percent, in the second quarter compared with same 2014 period.

    Petroleum shipments, one of the fastest growing sources of new business during the oil boom, fell more than 650,000 tonnes, 5 percent, as production began to peak and new pipelines diverted crude from the rails.

    And shipments of sand and gravel, a key ingredient in fracking, plunged by more than 2 million tonnes, nearly 14 percent, as the number of new wells drilled and fracked tumbled.

    Shipments of a range of other items from chemicals to fertilisers and other industrial supplies were also lower as the industrial economy ran into stiff headwinds from a stronger dollar and sluggish capital spending.

    The slowdown in industrial-related freight has continued into the second half of the year according to data from a range of other sources.

    Total traffic on U.S. railroads in the 42 weeks ending on Oct. 24 was down 1.3 percent compared with 2014, according to weekly carload statistics published by the Association of American Railroads (AAR).

    Shipments of intermodal shipping containers, which mostly handle manufactured products, were up 2.2 percent but shipments using box cars, tank cars, hoppers and gondolas, which handle farm and industrial products, were down 4.5 percent.

    Shipments were down in five of the 10 freight categories including coal (10 percent), forest products (3 percent), metallic ores and minerals (10 percent), nonmetallic minerals (2 percent) and petroleum (7 percent).

    The downturn has deepened and spread to more sectors as the year has progressed, according to AAR data.

    According to the U.S. Federal Reserve, total industrial output was 0.4 percent higher in September 2015 than September 2014.

    But while production of consumer goods was up 2.6 percent and business equipment 1.8 percent, industrial supplies were up just 0.2 percent and production of raw materials was actually down 0.2 percent.

    Attached Files
    Back to Top

    Kazakhstan mulls selling stake in miner ERG, dozens other firms

    Kazakhstan's government is considering selling some or all of its stakes in 60 companies, including miner Eurasian Resources Group (ERG), flagship carrier Air Astana and Kazakhtelecom, two sources close to the cabinet told Reuters.

    Both sources provided what they described as a preliminary list of companies that the government, which faces a plunge in oil revenues, plans to privatise. The list has no price estimates.

    The government has a 40 percent stake in ERG, the owner of mining group ENRC. Kazakhstan owns 51 percent of Air Astana, with the rest held by Britain's BAE Systems, and 52 percent of common stock in Kazakhtelecom.

    Also on the list is Tau-Ken Samruk, a unit of sovereign fund Samruk Kazyna, which has a 30 percent stake in Glencore-controlled zinc producer Kazzinc.

    ERG had no immediate comment on the matter, Air Astana referred the query to Samruk Kazyna and Kazakhtelecom and Kazzinc could not be reached for comments.
    Back to Top

    Japanese researchers develop glass as strong as steel reported that in a revolutionary breakthrough, Japanese researchers have developed a new type of glass that is nearly unbreakable and is said to be as strong as steel. To make glass tougher, alumina- an oxide of aluminium and silicon dioxide- is used.

    However, in the past, when researchers tried building strong glass by using large amounts of alumina, it caused the mixture to crystallize as soon as it touched any kind of container, preventing glass from being formed. Overcoming the obstacle, the team at the University of Tokyo’s Institute of Industrial Science, instead did away with the need of using container to make the glass.

    The researchers used gas to push the chemical components into the air, where they synthesized together

    The resultant transparent ultra glass was 50 per cent alumina and rivals the Young’s modulus of steel and iron, which measures rigidity and elasticity in solids.

    Once commercialised, practical use of the thin, light yet strong glass could range from buildings and vehicles to even electronics like tablets, computers, and even smartphones.
    Back to Top

    China Sept thermal plants capacity utilization sees 20th straight yearly drop

    The capacity utilization of China’s thermal power generating units fell 265 hours on year to 3,247 hours in the first three quarters this year, with September utilization hours posting the 20th straight yearly drop, showed data from the China Electricity Council (CEC).

    However, China continued to expand thermal plants capacity, with 6MW-above installed capacity rising 6.8% on year to 947GW by end-September this year, including 855GW capacity from coal-fired plants.

    The thermal power output during the same period stood at 3,153.2TWh, falling 2.2% year on year.

    On the contrary, the electricity output from wind, solar and nuclear energy registered a year-on-year rise of 23.5%, 74% and 32.4% during the same period, respectively.

    Capacity utilization of wind, solar and nuclear power plants reached 1,317 hours, 996 hours and 5,525 hours, respectively.

    Over January-September, China’s power consumption climbed 0.8% on year to 4,130TWh, compared with a growth of 3.8% last year, which was mainly attributed to downward industrial manufacture, structural adjustment, industrial transformation and cooling weather.

    However, newly-added installed capacity hit a new high in recent years. The 6MW-above installed capacity stood at 1.39 TW by end-September, rising 9.4% from a year ago. The capacity utilization of power-generating units across the country fell 232 hours to 2,972 hours during the same period.

    Power output of the above-sized power plants across the country saw an increase of 0.1% on year over January-September, with non-fossil energy power output up 7.7%.

    The electricity demand in the fourth quarter is expected to maintain the Q3 level. China’s power consumption for the whole year would stand at 5,550TWh, with year-on-year rise at or below 1%, the CEC predicted.

    Newly-added installed capacity would be 100GW in the whole year, with non-fossil energy capacity accounting for over 53% of the total. The 2015 utilization hours of power-generating units would be 4,000 hours, with thermal power utilization hours falling sharply to less than 4,400 hours, said the CEC.
    Back to Top

    Natural gas losing its shine as Asia holds faith in coal power

    The shine is coming off once bright prospects for natural gas as the future fossil fuel of choice in Asia as power companies in India and Southeast Asia tap abundant and cheap domestic coal resources to generate electricity.

    Asian loyalty to coal is shrinking the space available for natural gas just as supplies are ramping up after massive investments in U.S. and Australian output. Demand growth for natural gas is also slowing in top energy consumer China, further dampening the fuel's prospects.

    While much attention has been given to a potential peak in China's coal demand and worries about emissions, in Asia alone this year power companies are building more than 500 coal-fired plants, with at least a thousand more on planning boards. Coal is not only cheaper than natural gas, it is often available locally and has no heavy import costs.

    Growth in coal use is expected to hit liquefied natural gas (LNG) producers hardest, especially with prices half of year-ago levels as Australia and North America wind up their spending spree of hundreds of billions of dollars.

    "Electricity is increasing its share in total energy consumption and coal is increasing its share in power generation," said Laszlo Varro, head of the gas, coal and power markets division for the International Energy Agency (IEA).

    Some of the biggest growth in coal use is in India, where it meets 45 percent of total energy demand, compared with just over 20 percent each for petroleum products and biomass/waste.

    "We're absolutely sure India's coal demand will continue to grow," Varro said.

    At the same time, costs for solar, wind and other renewables are falling, and countries are stepping up investments, eating away more of natural gas' portion of the market.

    China, in particular, added nearly as much wind capacity as the rest of the world in 2014, according to the latest annual report from the Global Wind Energy Council, and India is also investing heavily in renewable energy.

    Renewables are attractive as an offset to the carbon emissions and pollution associated with coal, and also because they help reduce import bills for expensive fossil fuels.

    Other emerging Asian economies are seeing similar growth to India's in coal-fired generation.

    "Coal is still the cheapest and the fuel that most Asian countries will use," said Loreta G. Ayson, undersecretary at the Philippine Department of Energy.

    Forty percent of the 400 gigawatts in generation capacity to be added in Southeast Asia by 2040 will be coal-fired, the IEA says. That will raise coal's share of the Southeast Asian power market to 50 percent from 32 percent, while natural gas declines to 26 percent from 44 percent.

    And growth in coal is not only seen in developing economies. Coal's share of the energy mix in Japan, top importer of LNG, will rise to 30 percent by 2030, up from 22 percent in 2010, according to the nation's Institute of Energy Economics, while natural gas will hold at 18 percent.

    Attached Files
    Back to Top

    A second act in Volkswagen's massive emissions scandal just began.

    Late on Tuesday night VW Group announced that the company had identified "irregularities in CO2 levels" which had emerged as part of internal investigations.

    As many as 800,000 vehicles could be affected across the entire group, according to the release.

    The previous finding, revealed by the US Environmental Protection Agency in September, related to NOx, a different emission which can be extremely harmful to humans, but is less of a driver of climate change.

    The announcement late on Tuesday relates to CO2, the main pollutant associated with global warming. It's not clear if it relates to precisely the same issue — the use of illegal cheating software designed to game environmental emission tests required for all carmakers.

    Here's what Volkswagen say in their own words:

    Under the ongoing review of all processes and workflows in connection with diesel engines it was established that the CO2 levels and thus the fuel consumption figures for some models were set too low during the CO2 certification process. The majority of the vehicles concerned have diesel engines.

    Volkswagen says that "An initial estimate puts the economic risks at approximately two billion euros." Analysts at Credit Suisse show how far implies a cost of "€2,500 per car vs. c.€609 per car provisioned for Diesel so far."

    The note from CS goes on (emphasis ours):

    At this point the financial impact from today's release is unclear, as only limited details have been provided. However, given that that provisions per vehicle are 4.1x higher versus the NOx issue, the magnitude could be much bigger in scale. In our view, today's announcement could concern those who believe that the economic impact is manageable and more than priced in post the drop in share price.

    In the third quarter, the company made its first loss in 15 years, and it seems like things could still get worst for the Volkswagen.

    Volkswagen shares dropped by 1.51% in trading on Tuesday after more bad news from the EPA — the regulators found another 10,000 vehicles on cars with larger diesel engines which had contained the same cheating software.
    Back to Top

    Vedanta scraps dividend as commodities market ‘challenging’

    Vedanta Resources Plc, India’s biggest aluminum and copper producer, will pay no interim dividend after revenue declined because of a rout in commodity prices.

    Earnings before interest, taxes, depreciation and amortization fell 39 percent to $1.29 billion in the six months ended September from a year earlier, the London-based company, controlled by billionaire Anil Agarwal, said in a statement Wednesday. Sales dropped 12 percent to $5.7 billion.

    “During this period, we have witnessed continued volatility in commodity markets, creating challenging conditions for all resource companies,” Agarwal said in the statement. “As a result of this market uncertainty, the board has decided not to pay an interim dividend.”

    Like all miners and metals producers, Vedanta is adjusting to a slump in prices amid weakening demand from top consumer China. The shares have fallen 11 percent this year in London trading as the Bloomberg World Mining Index is down 25 percent.

    Vedanta’s board will review dividend payments in May when it delivers its full-year results, the company said. Its interim dividend was 23 cents a share last year.

    The company reduced debt by $900 million to $7.5 billion in the period.
    Back to Top

    Oil and Gas

    BP Says Technology Can Keep Oil and Gas Abundant, Affordable

    Technology can be used to increase the world’s proved oil and gas reserves by two thirds -- almost double the amount needed to meet demand through 2050 -- keeping energy supplies plentiful and affordable, according to BP Plc.

    The amount of oil and gas recoverable from known reservoirs could rise to 4.8 trillion barrels of oil equivalent through the application of existing technologies, compared with proved reserves of 2.9 trillion currently, said David Eyton, the group head of technology at BP. Energy consumption will rise by 40 percent by 2035 and about 2.5 trillion barrels equivalent will be needed to meet global demand through to 2050, he said.

    Image title

    “Technology is one of the very few levers that you have to pull to make a significant impact,” Eyton said in a presentation in London on Monday.

    New techniques developed in the U.S. to unlock oil and gas from shale formations have turned global energy markets on their heads. The nation reversed decades of decline to pump a record 9.6 million barrels of oil in June, contributing to a crude-price slump of almost 60 percent since June 2014. While future breakthroughs may allow a further 2.7 trillion barrels of oil equivalent to be added to technically recoverable reserves through 2050, government limits on carbon emissions may mean not all fossil fuel resources are extracted, according to BP.

    Attached Files
    Back to Top

    Yergin give the bulls on Oil hope.

    Oil is near a bottom and global supplies look poised to close their gap with demand as investments in new production decline and consumption grows, according to Pulitzer Prize-winning author Daniel Yergin.

    U.S. crude output, which surged to the most in more than three decades this year and triggered a price collapse, will retreat by about 10 percent in the 12-months ending April, according to Yergin, vice chairman at IHS Inc. Global oil supply and demand will begin to move into balance by late 2016 or 2017 and prices may rise to $70 to $80 a barrel by the end of the decade.

    “We are in the bottom part of the cycle and a year from now the the market will be looking different,” Yergin, author of the award-winning book “The Prize,” said in Tokyo on Oct. 30. “These prices are having such a big impact on investment.”

    Back to Top

    Sinopec, PetroChina cut domestic oil product sales, boost exports

    China's state-owned oil giants Sinopec and PetroChina reported a modest 1.73 million mt or 0.7% increase in their domestic oil products sales in the first nine months of 2015, but exports rose by 2.59 million mt or 12% in the same period, Platts calculations based on recently released results by the two companies showed.

    The data from the companies, which account for around 85% of China's domestic market share, underscores the softness in China's oil demand and illustrates how refiners are ramping up exports in a bid to reduce rising stocks.

    Sinopec's domestic oil product sales edged up 0.8% year on year to 126.71 million mt over January-September, while exports rose 12.4% to 14.04 million mt, the company's third-quarter report released last week showed. Total sales came in at 140.75 million mt, up 1.9%.

    In comparison, PetroChina's gasoline, jet/kerosene and gasoil sales rose 1.5% year on year to 119.3 million mt, according to a report released last week.

    PetroChina does not split its sales between the export and domestic segment, but according to Platts calculations, the company sold around 109.54 million mt of these three oil products to the domestic market, up 0.6% from last year, but exports increased 12% to around 9.76 million mt.

    PetroChina said in its press release that the challenges in the domestic oil and gas market, including oversupply and a mismatch between production and sales, will remain unchanged.

    Amid sluggish demand and oversupply, both Sinopec and PetroChina reported a drop in the earnings of their marketing segments in the first three quarters.

    Sinopec's marketing profit declined 18.7% year on year to Yuan 21.5 billion, while PetroChina reported a loss of Yuan 978 million compared with a profit of Yuan 10.57 billion in the same period of 2014.

    In the refining segment, both Sinopec and PetroChina cut their operating rates over January to September.

    During the period, Sinopec refined 178.32 million mt of crude, up 1.4% year on year, the company said.

    Based on Sinopec's reported refining capacity of 292.4 million mt/year as of end-December 2014, its refinery utilization averaged 81.5% in the first three quarters of 2015, down from 83.3% in the same period of last year.

    Meanwhile, PetroChina cut its refinery utilization more sharply to average 79.5% in the first nine months of 2015 from 84.9% a year earlier.

    Attached Files
    Back to Top

    Pertrobras strike cuts output 25%...Union

    A strike of oil workers in Brazil, the ninth biggest global producer, helped push oil back up towards $50 per barrel on Tuesday.

    The strike that began on Sunday at Brazil's state-run oil producer Petroleo Brasileiro has slowed daily oil output by around 25 percent, and cut around half a million barrels of output in the first 24 hours, the country's largest union FUP said on Tuesday.

    A labor strike that began on Sunday has reduced oil production from Brazil's state-run oil producer Petroleo Brasileiro SA by 273,000 barrels on Monday, or 13 percent of its output, the company said in a Tuesday security filing.

    Petrobras said it estimated oil production would show a 8.5 percent drop on Tuesday and natural gas output would fall by 13 percent compared with the production level of the day before the strike began. It said fuel distribution has not been affected by the stoppage and does not expect supply shortages in Brazil.

    Read more at Reuters

    Attached Files
    Back to Top

    European Oil's $8 Billion Plan to Pay Investors and Retain Cash

    Image titleIn a record downturn for the oil industry, cash is everything to companies and dividends are everything to their investors. One tool is helping Europe’s three biggest producers preserve both, but there’s a long-term price to pay.

    Royal Dutch Shell Plc, Total SA and BP Plc will retain $8 billion a year in cash by giving investors the option of receiving payouts in shares instead, according to Jean-Pierre Dmirdjian, an analyst at Liberum Capital Ltd. That’s equivalent to about 8.5 percent of total cash and equivalents currently on their books, making the so-called scrip dividend a vital tool as companies curb spending to ride out the slump in oil prices.

    Oil companies’ balance sheets are under pressure as investors expect them to keep paying dividends and spending to develop new resources even as earnings tumble. BP and Total didn’t generate enough cash from operations in the first nine months of this year to cover these expenditures. While issuing new shares to investors eases the burden today, it also means future earnings will be spread more thinly.

    “The scrip dividend is postponing the cash payout for the future in the hope oil prices recover,” Alexandre Andlauer, a Paris-based oil sector analyst with AlphaValue SAS, said by phone. “While it preserves cash, for now, it dilutes earnings per share. When oil prices rise to $60, investors will start looking at more value through earnings per share rather than cash.”

    Attached Files
    Back to Top

    State Oil Company Says Statoil Must Push Ahead on Arctic Project

    After three delays, Statoil ASA must make a decision to move ahead with the Johan Castberg oil project in Norway’s Arctic next year as planned, the Norwegian government’s oil company said.

    “There’s a milestone planned for next year, and we believe it’s time to make that decision,” said Grethe Moen, chief executive officer of Petoro AS, which manages the state’s direct stakes in offshore fields and is one of the owners of the Castberg oil deposits. “The project should definitely be mature for next year.”

    Statoil, which is cutting spending and costs to weather a collapse in oil prices, has postponed the project in the Barents Sea three times since 2013 to make it more profitable. A decision on the development concept is planned for the second half of 2016 and an investment decision for 2017. The company has now managed to lower the project’s break-even price to $60 a barrel from $80 and is seeking to reduce costs even further, Chief Financial Officer Hans Jakob Hegge said last week.

    The project encompasses the Skrugard and Havis finds, which hold as much as as 650 million barrels of oil and were considered breakthrough discoveries when they were made in 2011 and 2012. Yet the frontier area in the Barents Sea lacks production infrastructure such as pipelines, making it expensive to develop the deposits.

    The first delay came in 2013 after Norway decided to raise taxes, leading the owners to shelve a $15 billion plan that included pipelines to shore and a new terminal at North Cape. Statoil then put it off in 2014 after a disappointing exploration campaign in the surrounding area before a third postponement in March this year following a collapse in oil prices.
    Back to Top

    Libya Oil Guard Halts Zueitina Port Exports Amid Political Rift

    Libya’s Petroleum Facilities Guard halted crude shipments from Zueitina port indefinitely amid the escalating conflict between the divided country’s two rival administrations, putting the OPEC member’s oil exports at risk.

    A tanker moored at Zueitina for two days has been prevented from loading, the port’s workers union president, Ramadan Lefkaih, said Tuesday by phone. Zueitina will be closed until further notice and tankers seeking to load crude at the eastern port in the future must register with the National Oil Corp. administration loyal to the internationally recognized government in the eastern region, according to Petroleum Guard spokesman Ali al-Hasy.

    Vessels registered with the rival NOC headquarters in Tripoli, seat of an Islamist-backed government in western Libya, are “illegitimate” and won’t be permitted to load at the port, al-Hasy said Tuesday by phone.

    The Tripoli-based NOC, which has been in charge at Zueitina port, declared force majeure and said in a statement that the port was closed for all exports due to a “deteriorated security situation.” Force majeure is a legal status protecting a party from liability if it can’t fulfill a contract for reasons beyond its control.

    Libya, with Africa’s largest oil reserves, pumped about 1.6 million barrels a day of crude before a 2011 rebellion ended Muammar Qaddafi’s 42-year rule. Like the country’s leadership, the NOC has competing eastern and western administrations seeking to control energy facilities. Political infighting and worker protests curtailed output to 430,000 barrels a day in October, data compiled by Bloomberg show. Libya is currently the smallest producer in the Organization of Petroleum Exporting Countries.

    Wintershall AG temporarily suspended crude exports from As-Sarah field in Libya because Zueitina is currently unable to load cargoes, company spokesman Stefan Leunig said in an e-mailed response to questions.
    Back to Top

    Noble Energy 3Q15: Marcellus Prod. Up 50%, 1st Utica Well Drilled

    Noble Energy is a global driller involved in a number of shale plays in the U.S. including the DJ Basin, Eagle Ford Shale, Delaware Basin and Marcellus Shale.

    Noble idled the last remaining drilling rig they were operating in the Marcellus in September. Even so, they had a banner third quarter in the Marcellus.

    Noble issued their third quarter update yesterday and although the section on their Marcellus operations is brief, it packs a punch. Even with reducing rigs to zero, Noble completed and brought online their first Utica Shale well (in Marshall County, WV). Noble’s production volumes in the Marcellus in 3Q15 rocketed to 493 million cubic feet of natural gas equivalent per day (MMcfe/d), more than a 50% increase over 3Q14 numbers.
    Back to Top

    Despite gloom, four U.S. shale oil firms lift output views

    A handful of U.S. shale oil producers are pushing up their production forecasts, saying efficiency gains from drilling in prime rock are helping them eke out more crude in the middle of the worst price crash in six years.

    The slightly bolder outlooks this week from Oasis Petroleum Inc, Devon Energy Corp, Pioneer Natural Resources Co and Diamondback Energy Inc show that the confident swagger that typified the U.S. shale boom's early days has yet to be fully tempered by the more than 50 percent drop in oil prices since last year.

    Though the consensus view is that rig productivity in U.S. shale basins is stalling to portend a drop in national output as companies struggle to pump more with less, some firms appear to still be finding new ways to drill wells faster and frack them more intensively at a lower price.

    "Over time, we continue to think we'll need less rigs than we're even saying now," Pioneer Chief Executive Officer Scott Sheffield told investors on Thursday.

    Shares of Oasis, Devon and Pioneer rose more than 2 percent after their respective forecasts were announced. Shares of Oasis and Devon have lost about a quarter of their value this year, while those of Pioneer have held mostly steady.

    Sheffield said Pioneer, which is adding rigs, expects to grow production 11 percent this year, up from a previous view of 10 percent. The company also confirmed it would grow 15 percent per year through 2018 thanks in part to cost cuts and tweaked technology. It produced 211,000 barrels of oil equivalent per day (boepd) in the third quarter.

    Some of the flatlining of U.S. rig productivity has come as producers experiment with lower cost techniques for fracking, which involves injecting liquids and sand at high pressure into wells to coax oil from rock.

    Pioneer said some of its well performance in the Eagle Ford shale of Texas was hurt recently when it tried to complete wells with lower fluid concentrations. In the future, it said wells would be fracked with more fluid and more sand so as to boost production.

    At Oasis, executives now expect the company to produce 49,700 to 50,100 boepd, up from a previous estimate of 49,000 to 50,000 boepd.

    Oasis Chief Executive Thomas Nusz cited the company's use of ceramics and other techniques to boost production, and touted a drop of more than 50 percent in capital spending and other costs.

    And at Devon, Chief Executive Dave Hager raised the company's full-year production growth outlook for the second time this year.

    "We are delivering this incremental production growth with significantly lower costs," Hager said in a statement, adding he expects Devon to cut about $1 billion from its budget by year end.

    Diamondback raised the lower end of the range for its production guidance to 31,000 boepd from 30,000 boepd while saying it would come in at the low end of its expected capital spending of $400 million to $450 million. The top end for production stayed at 32,000 boepd.

    "We continue to deliver robust well results ... while lowering both well costs and totalexpenses," stated Diamondback CEO Travis Stice.

    Read more at Reuters

    Attached Files
    Back to Top

    Oasis Petroleum profit beats thanks to cost cuts

    North Dakota oil producer Oasis Petroleum Inc posted a better-than-expected quarterly profit on Tuesday as it successfully slashed costs to offset plunging crude prices.

    Bucking the industry trend to hunker down, Oasis also boosted its production forecast for the year and locked in hedges for 2017, steps that signal the Houston-based company's confidence it can weather the low-price storm.

    For the third quarter, the company posted net income of $27.1 million, or 20 cents per share, compared with $121.6 million, or $1.21 per share, in the year-ago period.

    Excluding one-time items, including a gain from oil hedges, Oasis earned 9 cents per share.

    By that measure, analysts expected earnings of 6 cents per share, according to Thomson Reuters I/B/E/S.

    Oasis slashed its capital budget by 54 percent from the second quarter to $78 million, sharply curtailing spending on its exploration projects as well as its wastewater disposal division, which the company is marketing to potential investors.

    Production rose 10 percent in the quarter to 50,546 barrels of oil equivalent per day (boe/d).

    For the year, Oasis now expects to produce 49,700 to 50,100 boe/d, up from a previous estimate of 49,000 to 50,000 boe/d.

    Oasis also hedged 4,000 boe/d of production for 2017 at $53.62 per barrel, in line with Wall Street's expectations on where oil prices should be that year. 

    Oasis, which only operates in North Dakota's Bakken shale, said it plans to continue to operate three drilling rigs for the foreseeable future, though it likely will continue to expand its backlog of drilled-but-uncompleted wells from the current 87 due to cold winter weather.

    Oasis and other oil producers received a lifeline last month from regulators who approved a plan to extend the time required to bring a well online.

    The change will let the industry preserve cash. Oasis had $1.34 billion left to draw on its $1.53 billion credit line as of Sept. 30.

    The company received permission from its bondholders last month to make changes that restrict its ability to take on second-lien debt, a step that maintain its access to that line of credit.

    Read more at Reuters

    Attached Files
    Back to Top

    Alternative Energy

    SunEdison to supply cheapest solar power in India

    U.S.-based SunEdison has won a bid to sell solar power in India at a record low tariff, which could boost the appeal of the renewable source at a time when Prime Minister Narendra Modi is pushing for clean energy to combat climate change.

    Solar energy still has a long way to go before it can effectively compete with coal, given questions over consistent supply and transmission. But falling rates could unlock more government support for solar and wind energy.

    Modi's government expects clean energy to yield business. Worth $160 billion in India in the next five years, and established U.S. companies like SunEdison and First Solar Inc are likely to be the biggest beneficiaries.

    SunEdison won the auction for a 500 megawatt project in the southern state of Andhra Pradesh, bidding to supply power at 4.63 rupees ($0.0706) per kilowatt-hour, Upendra Tripathy, new and renewable energy secretary, told Reuters on Wednesday.

    "Delighted that an all time low solar tariff ... has been achieved during reverse e-auction conducted by NTPC," tweeted power, coal and renewable energy minister Piyush Goyal, referring to India's biggest power utility.

    The previous lowest solar tariff in India was about 5.05 rupees per kilowatt-hour for Canadian company SkyPower's project in Madhya Pradesh state in central India. Coal power costs anywhere between 1.5 rupees to 5 rupees, according to a government official who declined to be named.

    India is providing cheap loans to set up solar projects and helping companies buy land to meet its ambitious target of multiplying renewable energy generation to 175 gigawatts by 2020. Solar energy is targeted to leap five-fold to 100 gigawatts.

    The country is relying on renewables to fight climate change rather than committing to emission cuts like China, arguing that any target could hinder economic growth vital to lifting millions of its people out of poverty.

    Read more at Reuters

    Attached Files
    Back to Top


    Mosaic profit beats estimates on lower costs

    U.S. fertilizer company Mosaic Co reported a better-than-expected quarterly profit, helped by lower costs and a smaller tax bill.

    Excluding one-time items, Mosaic earned 62 cents per share in the third quarter ended Sept. 30, above the average analyst estimate of 53 cents, according to Thomson Reuters I/B/E/S.

    "Cost reduction combination with our share repurchases and a lower effective tax rate, drove an improvement in adjusted earnings per share," Chief Financial Officer Rich Mack said in a statement.

    The company said selling, general and administrative expenses in the quarter were the lowest in the past six years despite an expanded business footprint.

    The selling, general and administrative expenses fell nearly 9 percent to $76.6 million.

    However, net earnings attributable to Mosaic dropped nearly 21 percent to $160 million, or 45 cents per share, hurt by lower sales of phosphates and potash and a strong dollar.

    Mosaic's net phosphates sales fell to $1 billion in the quarter from $1.1 billion a year earlier, while potash net sales dropped to $492 million from $593 million.

    The company also cut the upper end of its full-year capital expenditure forecast to $1.2 billion from $1.3 billion, while retaining the lower end at $1.1 billion.

    The Plymouth, Minnesota-based company's net sales fell 6.5 percent to $2.11 billion in the third quarter, below analysts' estimate of $2.33 billion.
    Back to Top

    Amid sour ag economy, Deere to buy Monsanto equipment maker unit

    Monsanto Co's Climate Corp will sell its Precision Planting farm equipment business to Deere & Co for an undisclosed sum, a move that underscores how turmoil in the agriculture sector has made it ripe for consolidation.

    For Climate, a unit of the world's largest seed company, the deal marks the latest push to shed businesses that are not focused on either software or services

    Deere, the world's largest farm equipment maker, hopes the deal will create a revenue stream in retrofitting older machinery to help offset slumping sales elsewhere.

    With a glut of used farm equipment on the market and most farmers not interested in buying new machinery due to soft commodity prices, both companies are hoping the deal will tempt farmers to update equipment and buy into new farm-data services.

    Grain prices are hovering around five-year lows and farm income is expected to tumble 21 percent this year, keeping a lid on spending by farmers and putting pressure on companies across the sector to consolidate and seek cost savings.

    Tuesday's deal is Deere's second push into the precision-planting equipment arena this week. On Monday, it announced plans to acquire France-based Monosem. Monosem makes farm equipment known as "precision planters, that use a technologically advanced process in which farmers can specify seed planting depths by crop row.

    Last month, Deere entered a joint venture with DN2K to create a software platform for agricultural advisers and consultants.

    One key for Climate in the deal is size: Deere controls about 60 percent of the U.S. farm equipment market, according to industry analysts.

    Climate said it will have a multi-year, exclusive agreement to move near real-time data between certain John Deere farm equipment and Climate's farming software programs, Climate FieldView.

    Deere will take most of Precision Planting's equipment business - which is built on a series of mechanical products that attach to planters and other farm machinery. In addition, the deal also gives Deere all of the company's hardware, sensors and display systems.

    Deere will also acquire the Precision Planting brand and facilities and most of its product portfolio, spokesman Ken Golden told Reuters.

    Deere plans to run Precision Planting as an independent, wholly owned subsidiary. Deere officials said the deal is expected to close within 90 days, pending regulatory approval.

    The deal also is part of a strategic shift for Monsanto, which made its first major move into high-tech farming when it bought Precision Planting for $250 million in 2012.

    The seed giant is restructuring its operations to cut costs in a slumping commodity market, company officials and industry analysts say.

    Read more at Reuters

    Attached Files
    Back to Top

    Precious Metals

    Bitcoin Surges To 1 Year Highs, Up 100% From "China Capital Controls"

    Bitcoin, at $400, is now at its highest since November 2014, having surged over 100% since the late-August 2015 lows when we first warned of China capital outflows using the virtual currency conduit. As we suggested, and was confirmed overnight, it appears the Chinese are just getting started...

    As we noted previously, here is the validation that, just as predicted here two months ago, bitcoin has become the go-to asset class for millions of Chinese savers seeking to quietly and under the radar transfer funds from point A to point B, whatever that may be, in the process circumventing the recently expanded governmental capital controls:

    While he didn’t provide any concrete numbers, he did comment last week on what was driving the adoption. “Some Chinese traders are expressing a view on the CNY exchange rate after the last devaluation and you have interest by mainland speculators to move to other assets after the stock market fallout,” he explained in an interview with Bitcoin Magazine.
    Back to Top

    Silver Wheaton pays $900m for Glencore silver stream

    Silver Wheaton announced on Tuesday a deal to acquire a portion of future silver output from Glencore's Antamina copper mine in Peru for $900 million cash.

    As part of the streaming deal, Silver Wheaton will make ongoing payments of 20% of the spot price for silver for every ounce of metal delivered.

    Silver Wheaton will receive from Glencore an amount equal to 33.75% of the Antamina silver production until the delivery of 140 million ounces of silver and 22.5% of silver production thereafter for life of mine at a fixed 100% payable rate according to a statement from the company.

    The Vancouver-based silver and gold streaming company said the deal immediately increases its production and cash flow profile by adding expected average silver production of 5.1 million in 2016 and 2017, and 4.7 million ounces per annum over the first 20 years.

    "Silver Wheaton has focussed on building a portfolio of streams on high-quality, low-cost mines. Antamina has both the quality and the scale to make it an ideal addition to this portfolio, as it is not only the eighth largest copper mine in the world, but it is also one of the lowest cost," said Randy Smallwood, Silver Wheaton's President and Chief Executive Officer.
    Back to Top

    Gold Standard Intersects 149.4m of 1.38 g Au/t

    Gold Standard Ventures Corp.  today announced assay results from five reverse-circulation (RC) holes drilled in the 2015 Phase 2 program at the Dark Star oxide gold deposit on its 100%-owned/controlled Railroad-Pinion Project in Nevada's Carlin Trend. Four of the five holes returned significant intercepts containing gold values above the cut-off grade of 0.14 g Au/t established by APEX Geoscience Ltd. of Edmonton, Canada in its Dark Star NI43-101 resource estimate announced on March 3, 2015. Results include multiple oxide intercepts grading above one gram per tonne and are highlighted by a thicker zone of 149.4 meters of 1.38 grams gold per tonne (g Au/t).

    The DS15-10 intercept represents the discovery of a new gold zone that is thicker and higher grade by an order of magnitude than anything drilled to date at Dark Star.

    Jonathan Awde, CEO and Director of Gold Standard commented: "These results fundamentally change the character and potential of the Dark Star Deposit. In the short term, we anticipate significant resource expansion at Dark Star. In the bigger picture, we now see the Dark Star Structural Corridor emerging as a major feature of the district that could extend for many hundreds of meters north and south of the known resource."
    Back to Top

    Base Metals

    Chile’s Codelco lays off over 4,000 workers

    Codelco’s chief executive Nelson Pizarro is following through with hispromise of cutting costs “to the bone” as the Chile-owned miner announced it has cut almost 3,900 jobs, including contractors, in response to low prices and weak demand.

    Until now, the world’s top copper producer had only disclosed the layoff of about 400 employees, mostly staff members in top positions.

    The fresh and massive cuts bring the number of layoffs to over 4,000, making of Codelco the mining company that has let go the highest amount of workers in Chile since metal prices began their decline over a year ago.

    According to Pizarro, the “painful, but necessary” move has not affected production, local newspaper El Mercurio reports (in Spanish). “What’s more, the company’s output has grown 5.5% during the last year, and costs have dropped by about 11%,” he told the paper.
    Back to Top

    Steel, Iron Ore and Coal

    Looming default by China coal producer

    Hidili Industry International Development Ltd, a leading private-sector coal company based in Southwest China's Sichuan Province, may not be able to repay $183 million in debt due on Wednesday, a situation that experts said underscores the difficulties that many domestic coal companies face.

    The coking coal producer said it would be unable to repay a six-month bond totaling $190.6 million of principal and interest with a coupon rate of 8.625 percent that was to fall as of Wednesday, according to a statement the company released on Friday.

    Hidili said in the statement that it had defaulted on 6 billion yuan ($947 million) in loans as of June 30. In addition, an affiliated company defaulted on a 289.6 million yuan bank loan.

    More coal companies will default due to sluggish industry conditions amid an economic downturn, experts said.

    "The ongoing economic structural transformation in China has put heavy pressure on the secondary industry including the coal sector," Liu Xuezhi, an analyst at Bank of Communications, told the Global Times on Tuesday.

    Liu noted that a transformation is also taking place within the coal sector. "The government is calling for industries with low rates of energy use and low levels of pollution," he said.

     "But the traditional coal industry is in the opposite situation," Liu added.

    More than 70 percent of China's large- and medium-sized coal companies lost money in the first half of this year, news portal reported on October 8, citing the China National Coal Association.

    Companies in North China's Hebei Province, East China's Shandong Province and East China's Anhui Province were worst affected, it said.

    The asset-liability ratio in the coal sector has been rising, reaching 52.57 percent as of the end of the third quarter, up 1.58 percentage points year-on-year, according to a report released Tuesday by Shenwan Hongyuan Securities Co.

    Analysts attributed the coal industry's difficulties to declining demand caused by a prolonged economic downturn and excessive supply.

    A core subsidiary of State-owned Sinosteel Corp announced on October 19 that it would delay payment of interest on its 2 billion yuan bonds, leading to the first debt default in the industry.

    Attached Files
    Back to Top

    Daqin Oct coal transport down 13.8pct on year

    Daqin line, China’s major coal-dedicated rail line, transported 29.79 million tonnes of coal in October, a decline of 13.8% on year -- the 14th consecutive year-on-year drop, and down 4.53% from September, showed the latest data on November 3.

    It completed 91.7% of its monthly target, data showed.

    In October, Daqin’s daily coal transport averaged 961,000 tonnes, down 7.6% month on month.

    Over January-October this year, Daqin accomplished a coal transport volume of 334.83 million tonnes, a decline of 10.5% from the year prior. That was 79.7% of its annual target, which was set at 420 million tonnes.

    In 2014, Daqin line accomplished a total coal transport volume of 450.2 million tonnes, up 1.11% on year, accounting for 27.42% of the nation’s total.

    In addition, Houyue line transported 6.42 million tonnes of coal in October, falling 16.3 % on year and down 6.96% from September.

    Over January-October, total coal transport of Houyue line stood at 67.61 million tonnes or 84.5% of its annual target, down 6.6% from a year ago.
    Back to Top

    Essar Steel Minnesota behind on payments to some contractors

    Minneapolis Star Tribune reported that cash hobbled Essar Steel Minnesota is in hot water again. Contractors and workers have called the state saying the company is late on payments for the massive $1.9 billion taconite production facility being built on the Iron Range.

    Some contractors said they are considering pulling workers from the job site, and a union representing workers there said others already have pulled some of their employees.

    State Rep Mr Tom Anzelc, who is also chairman of the Legislature’s Iron Range delegation said “Based on constituent calls and calls from businesses and workers I received, the buzz is that there appears to be another cash-flow issue at Essar with contractor and vendor payments being late [or] reduced. There have been layoffs at the site.”

    Essar originally was going to build a steel production plant in Nashwauk. It pulled back, however, to a taconite operation that instead of opening Oct. 1 will start production next year.

    The state of Minnesota has been pulled into Essar’s financing woes. Essar owes the state nearly $67 million in grants and $6 million in state-issued loans after failing to comply with the terms of an agreement in which Essar promised to deliver a working iron ore-to-steel mill by Oct. 1. Essar and the state are in negotiations over how that money will be paid back. Officials at the Minnesota Department of Employment and Economic Development said negotiations continue. Brunfelt said Essar officials are waiting to hear back from the state on its latest proposal.
    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