Mark Latham Commodity Equity Intelligence Service

Wednesday 28th October 2015
Background Stories on www.commodityintelligence.com

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    Macro

    Climate change deal will not include global carbon price-UN climate chief


    A climate change deal to be agreed in Paris in December will not be able to come up with a global carbon price, the United Nations' climate chief, Christiana Figueres, said on Tuesday.

    Big multinational companies and investors, and most recently oil majors, have called for a global carbon price to help spur investments in low-carbon energy.

    A global carbon price would help to create an incentive for operators of power plants and factories to switch to cleaner fuels such as gas or to buy more energy-efficient equipment.

    When the European Union launched a carbon trading scheme in 2005 there were expectations this would eventually lead to a global carbon scheme by 2020 worth around $2 trillion.

    But the difficulties of bringing together different carbon schemes from countries around the world means the goal of a global carbon price remains elusive.

    "(Many have said) we need a carbon price and (investment) would be so much easier with a carbon price, but life is much more complex than that," Figueres told a climate investor event in London.

    "I agree it would be more simple ... but it's not quite what we will have," she said, adding that the world would move towards that in the future.

    Figueres said six jurisdictions around the world already have a carbon price or carbon pricing mechanism such as a tax.

    "I would argue we already have a strong carbon price signal," she said.

    Countries are due to meet in Paris from November 30 to December 11 to agree on a global deal to cut greenhouse gas emissions and tackle climate change.

    This month, the leaders of 10 companies that produce 20 percent of the world's oil and gas recognised that current greenhouse gas levels were inconsistent with a goal of limiting global warming to 2 degrees Celsius over pre-industrial times. But they stopped short of outlining goals to cut their own emissions.

    http://www.reuters.com/article/2015/10/27/climatechange-summit-figueres-idUSL8N12R37S20151027
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    European Parliament adds to pressure for cleaner car industry


    The European Parliament on Tuesday stoked the pressure on EU regulators to end emissions cheating in the car industry with a resolution urging swift adoption of tougher vehicle testing and early results of investigations into what went wrong.

    Europe's largest carmaker Volkswagen is battling the biggest business crisis in its 78-year history after admitting in September it installed software in diesel vehicles to deceive regulators about their toxic emissions.

    The European Commission, the EU executive, has had evidence for years of a yawning gap between the performance of cars in the real world and in test conditions and has proposed legislation to improve the testing regime.

    A resolution backed by a majority of members of the European Parliament meeting in Strasbourg demanded the Commission report to the EU assembly following "a full and transparent investigation" by the end of March next year.

    It also called for swift implementation of real driving emissions tests to close the gap between the amount of emissions cars produce on the road as opposed to in artificial test environments.

    "We now have the political momentum for a radical overhaul," Liberal Democrat politician Catherine Bearder said in a statement.

    The resolution is not binding but increases pressure on the Commission and member states, whose representatives are expected to vote in a closed-door meeting on Wednesday on the proposed new testing regime.

    The Commission has proposed real-world testing for nitrogen oxides should begin next year but full implementation for new models would only be phased in from 2017, seven years after the European Commission announced the initiative.

    Carole Dieschbourg, environment minister for Luxembourg, holder of the EU presidency, said after a meeting on Monday that ministers from most nations had expressed the need for urgent action, while Industry Commissioner Elzbieta Bienkowska said ministers were "very close" to agreeing a compromise.

    EU sources have said the nations lobbying to weaken the proposal include Germany, home to Volkswagen.

    "Governments like Germany's must rise from under the wheels of the car lobby to put air quality before big business," Greenpeace climate and energy expert Jiri Jerabek said.

    Nitrogen oxides from diesel cars are a prime source of air pollution that has been blamed for more than 400,000 premature deaths in the EU yearly, according to Commission data, and costs up to 940 billion euros ($1.04 trillion) annually because of health bills.

    Separately, the European Parliament will on Wednesday vote on proposals to reduce limits for air pollutants, such as nitrogen oxides. Member states will get their chance to rule on the plans later this year.

    http://www.reuters.com/article/2015/10/27/volkswagen-emissions-eu-idUSL5N11R41J20151027

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    Bitcoin Breakout?

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    Oil and Gas

    Saudi Yasref Oil Plant Running at Capacity as Margins Improve


    Yasref oil refinery, a joint venture between Saudi Arabian Oil Co. and China Petroleum & Chemical Corp., is processing crude at full capacity of 400,000 barrels a day amid improving refining margins for the plant, its chief executive officer said.

    The facility on Saudi Arabia’s Red Sea coast reached its output limits in July and currently produces 265,000 barrels a day of low-sulfur diesel and 91,000 barrels a day of 91-octane and 95-octane gasoline, Mohammad Alshammari said at a conference in Riyadh. Yasref’s refining margins have improved since August even as the global industry faces a significant capacity surplus, he said.

    “I think we suffered back in August quite a dip in refining margin, but now we see them turning around,” Alshammari said in an interview later in the day. “Last month, we averaged much much better than August, and this month the numbers are much better. It’s still a tight-margin market.”

    Yasref’s main international markets are Europe, Asia and Egypt, Alshammari said.

    “Our target market for diesel is mainly Europe because we produce ultra-low-sulfur diesel that’s the cleanest diesel you can get,” he said. The plant’s output may put pressure on refining margins in Europe but probably not in Asia, he said.

    http://www.bloomberg.com/news/articles/2015-10-27/saudi-yasref-oil-plant-running-at-capacity-as-margins-improve
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    U.S. to sell 58 mln barrels from strategic oil reserve - but not yet


    The United States plans to sell 58 million barrels of crude oil from its strategic petroleum reserve between 2018 and 2025 under a budget deal reached on Monday by the White House and top lawmakers from both parties, Bloomberg reported.

    The proposed sale represents more than 8 percent of the 695 million barrels of reserves, held in four sites along the Gulf of Mexico coast, the report said.

    http://www.reuters.com/article/2015/10/27/usa-reserves-idUSL3N12R3UI20151027
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    Kazakhs Said to Weigh $2 Billion Penalty on BG, Eni Project


    Kazakhstan’s government is considering levying a penalty on a venture led by BG Group Plc and Eni SpA that operates the nation’s second-biggest producing oil and gas field as the state seeks extra revenue to bolster its finances, according to two people familiar with the plan.

    The fine on the Karachaganak project could be as much as $2 billion, one of the people said. That would be roughly in line with penalties the government threatened to impose in a 2010 dispute that ended with the state taking a 10 percent stake in the project.

    The Central Asia nation is studying the possibility of imposing the fine because the companies haven’t fulfilled certain contractual obligations, the people said, asking not to be identified because the matter isn’t public. The penalty may be a precursor to the government increasing its stake in Karachaganak, they said.

    Kazakhstan, which depends on energy products for about three quarters of its exports, needs additional funds to balance its budget after the collapse in crude oil reduced state revenue and weakened the currency by about 45 percent against the dollar since the beginning of last year. The government of President Nursultan Nazarbayev has in the past forced its oil company KazMunaiGaz National Co. into projects to increase state control over operations.

    http://www.bloomberg.com/news/articles/2015-10-27/kazakhstan-said-to-weigh-2-billion-penalty-on-bg-eni-project

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    Saudi Stocks Tumble as Government Studies Cutting Fuel Subsidies


    Saudi Arabian government said it’s considering an increase in domestic energy prices.

    OPEC’s biggest producer is studying whether to raise domestic energy prices in order to cope with the decline in oil prices, Reuters reported, citing Ali Al-Naimi, the kingdom’s oil minister. The country drained 11 percent of its foreign reserves in the year to August, started selling debt and is curbing domestic investment to cope with a more than 40 percent decline in Brent crude prices in the past 12 months. The Tadawul is poised for the worst year since 2008.

    "Reports that Saudi Arabia may reduce oil subsidies caused panic among investors because the cost of doing business will rise," said Tariq Qaqish, the head of asset management at Dubai-based Al Mal Capital PSC, which is seeking opportunities to buy Saudi stocks if prices fall further.

    "Raising government revenues in a weak oil-price environment is a trend emerging throughout the region," said Riyadh-based Muhammad Faisal Potrik, the head of research at Riyad Capital. "Reducing or eliminating subsidies for industries such as petrochemical producers and cement for example can have a very direct negative impact on corporate profits.”

    http://www.bloomberg.com/news/articles/2015-10-27/saudi-arabian-stocks-decline-to-two-month-low-as-oil-retreats
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    Oil at $60 Is the Magic Number for BP in Prolonged Downturn


    For Europe’s biggest oil companies, $60 is the magic number.

    BP Plc, one of the first companies to predict a prolonged price downturn, has “reset” its business to generate surplus cash flow with oil at about $60 a barrel by 2017. It joins Total SA, which last month unveiled investment cutbacks and project delays that will enable it to fund dividend payouts in the same circumstances without the need to borrow.

    A year after oil sank into a bear market, the industry is preparing for an extended downturn, with drillers slashing investments in exploration and production by a record 20 percent this year, according to International Energy Agency. With third-quarter earnings season barely under way, producers in the U.S. have already written down the value of their assets by $6.5 billion. BP’s Chief Financial Officer Brian Gilvary doesn’t expect a recovery in prices until late 2016.

    “For the next nine months, I can’t see any up move,” Gilvary said in an interview Tuesday. “We’re in the process of resetting the company. Fortunately, we had a sense that the oil price is going to go low sooner than most people anticipated.”  

    BP, Europe’s third-largest oil company, said Tuesday it will cut capital spending to about $19 billion this year after investing roughly $23 billion in 2014. Annual spending will remain curtailed at $17 billion to $19 billion to 2017, the company said as it reported a 40 percent drop in third-quarter profit.

    Total, Europe’s No. 2, has similar plans, trimming investment to $20 billion to $21 billion in 2016 from as much as $24 billion this year, the company said at its annual strategy update last month. Like BP, it plans annual capital spending of $17 billion to $19 billion in 2017, down from a previous target of $20 billion.

    In the first nine months of this year, with Brent crude averaging about $56, BP’s cash flow from operations and asset sales totaled $16.9 billion, not enough to cover $18.5 billion in capital expenditure and dividend payouts, according to the company. If oil recovers to around $60 in two years, the companies say they will have sufficient cash flow to maintain payouts to shareholders while still investing in new projects for the future.

    http://www.bloomberg.com/news/articles/2015-10-28/oil-at-60-is-the-magic-number-for-bp-in-prolonged-downturn
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    Local content back on agenda


    Brazil's government is set to introduce regulatory changes aimed at making local content policies more responsive to the challenges faced by oil companies and Brazilian suppliers.

    http://www.upstreamonline.com/live/1415063/local-content-back-on-agenda?utm_source=twitterfeed&utm_medium=twitter
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    Statoil Deepens Spending Cuts as Profit Tumbles on Oil Slump


    Statoil ASA, Norway’s biggest oil company, stepped up cuts in its investments and delayed projects after third-quarter earnings missed forecasts amid a collapse in crude prices.

    The Stavanger-based company cut planned investments in 2015 by $1 billion to $16.5 billion and pushed production start of its Aasta Hansteen and Mariner fields to the second half of 2018 from 2017, it said Wednesday in its quarterly earnings report.

    Adjusted net income, which excludes financial and other items, fell to 3.7 billion kroner ($436 million) from 9.1 billion kroner a year earlier, missing a 5.1 billion-krone estimate in a Bloomberg poll of analysts. The company reported a net loss of 2.8 billion kroner after booking net impairment charges of 4.8 billion kroner.

    "We continue to reduce underlying operational costs and deliver a quarter with strong operational performance and solid results from marketing and trading,” Eldar Saetre, Statoil’s chief executive officer, said in a statement. “In the third quarter, our financial results continued to be affected by low liquids prices.”

    Statoil, 67 percent owned by the Norwegian government, is cutting investments and costs alongside competitors such as Royal Dutch Shell Plc and BP Plc. The world’s biggest oil companies are seeking to shield shareholder payouts after oil prices fell as low as $42 a barrel in August from highs of about $115 in June, 2014.

    Statoil’s production rose to 1.91 million barrels of oil equivalent in the third quarter from 1.83 million barrels a year earlier. That beat a 1.9 million barrel a day estimate in a survey of 31 analysts conducted by Statoil. The company now expects production growth in 2015 to exceed 3 percent, compared to a previous forecast of about 2 percent.

    A reduction in maintenance to save costs has boosted oil and gas production for Norway as a whole this year.

    Adjusted earning for marketing, midstream and processing unit rose 39 percent to 6 billion kroner in the quarter. Lower oil prices have made refining more profitable.

    Statoil is cutting capital expenditure from $20 billion in 2014 as it shields shareholders payouts. The company said it will pay a dividend of 22 cents a share for the third quarter, in line with its July forecast.

    http://www.bloomberg.com/news/articles/2015-10-28/statoil-quarterly-profit-falls-60-percent-after-crude-collapse
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    Turkey's Botas seeks arbitration over Russian gas deal


    Turkish pipeline operator Botas said on Tuesday it would take Russia's Gazprom to international arbitration over a price discount it said it was promised on imports of Russian natural gas.

    Russia has looked to bolster gas ties with Turkey after the European Union rejected its proposed South Stream pipeline to Bulgaria but political relations have soured over Moscow's military involvement in Syria.

    Turkey announced a deal in February under which it was to receive a 10.25 percent price discount on gas from Gazprom but a final deal has proved elusive and state-run Botas said it had appealed to the International Chamber of Commerce (ICC).

    Botas said it notified Russia's Gazprom on Monday that the arbitration would aim to cover the price of Russian natural gas purchased since the start of the year.

    A spokesman for Gazprom said: "The possibility of an out-of-court settlement as well as an arbitration decision still remains."

    "Gazprom has failed to sign the amendments regarding the agreement on price discount between the two companies," Botas said in a statement. It said it had written a final letter to Gazprom calling on it to sign the deal.

    Turkish energy officials have said Russia has added preconditions for finalising the gas deal linked to its planned TurkStream gas pipeline.

    Russia is Turkey's largest gas supplier with sales of 28-30 billion cubic metres annually worth around $6.5 billion.

    Turkey imports 60 percent of its gas and 35 percent of its oil from Russia. Russians also make up a growing proportion of Turkey's tourist traffic, key for financing the country's current account deficit.

    But political relations have soured since Russia began air strikes in Syria in support of President Bashar al-Assad, whose removal from power has long been advocated by Turkish President Tayyip Erdogan.

    Gazprom said this month it had decided to halve the planned capacity of TurkStream to 32 billion cubic metres of gas per annum and delay its launch, in further evidence of strained relations.

    http://www.reuters.com/article/2015/10/27/russia-turkey-gas-idUSL8N12R1RX20151027
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    International Paper creates virtual pipeline

    Last year International Paper’s Ticonderoga mill in northern New York, near the Vermont border, received $1.75 million in grant money from Andrew Cuomo and New York State (that is to say, from we the taxpayers) to help with an $11 million project to convert the plant from using oil to using natural gas (see the Albany Times Unionstory: $100M in upgrades at International Paper mill in Ticonderoga follows state deal for aid, cheap power). Kind of ironic that Andy was willing to give big money to an evil corporation to use more natural gas because he banned the extraction of fracked natural gas in NY later that same year. However, the plant was threatening to close. It’s the biggest employer in the area representing 600 jobs. Because of Cuomo’s $1.75M grant, the plant stayed open and converted to natgas, but that means it needs a lot of natgas on a regular basis. International Paper had planned to build a pipeline from Vermont to feed the plant as a permanent solution. In the meantime, it was using a “virtual pipeline” of a constant stream of trucks delivering compressed natural gas (CNG) from NG Advantage (subsidiary of Clean Energy Fuels Corp.), trucking CNG to the plant 24/7. International liked the CNG operation so much, and disliked the regulatory hassles of building the pipeline so much, they’ve decided to keep the virtual pipeline over a real one as a permanent solution…
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    Ecopetrol announces decision to take over operation of Rubiales field


    Ecopetrol S.A. hereby reports that, as decided by its Board of Directors, Ecopetrol will take over the operation of the Rubiales field following the conclusion of the Rubiales risk participation and Piriri joint venture contracts on June 30, 2016. These joint venture contracts were signed with Metapetroleum, an affiliate of Pacific Exploration & Production Corp.

    The Company congratulates Pacific for the work it has done on the Rubiales field, which made it possible to convert this field into one of the most important in Colombia and the Americas.

    Ecopetrol and Pacific will continue to jointly undertake activities and initiatives with the goal of optimizing operations, infrastructure and social responsibility endeavors in the production areas of Llanos Orientales.

    Furthermore, they affirm their interest in building synergies to carry forward future projects that will generate value for the benefit of the two companies and for all Colombians.

    http://www.oilvoice.com/n/Ecopetrol-announces-decision-to-take-over-operation-of-Rubiales-field/99c08aa3e337.aspx
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    Apache Corporation Is Built to Thrive at $50 Oil


    A lot of oil companies are struggling with the price of crude stubbornly stuck below $50 a barrel. Their struggles are largely due to two factors: They have too much debt and their costs are too high. However, neither is a problem at Apache Corporation, which has reduced both substantially over the past year. As a result, the company is poised to thrive even if oil stays in its current range.

    Over the past year, Apache has repositioned its portfolio to focus its attention on three core areas. It has sold a number of assets, including its deepwater assets in the Gulf of Mexico to Freeport McMoRan, its LNG assets, and a number of its international assets. Those sales brought in $10 billion in cash since the start of last year, which it used to pay down debt. It's reduced net debt by 28% just since the end of the first quarter of this year:

    Not only has the company substantially reduced its outstanding debt, but it also has a tremendous amount of liquidity, with $2 billion in cash on its balance sheet to go along with $3.5 billion available on its credit facility. That gives the company ample cash to operate in the currently tough environment.

    Now, contrast that with Freeport-McMoRan, which has been burdened by weak oil prices, as well as weakness in its mining operations. Because of this price weakness, Freeport expects to produce only $3.3 million in operating cash flow this year, which isn't nearly enough to cover the company's $6.3 billion in planned capex spending. With more than $20 billion in debt already on the books, and a troubling 3.9 debt-to-EBITDA ratio, the company can't really afford to bridge the gap between cash flow and capex with debt. This situation is forcing Freeport to look for other alternatives, including the potential sale of a stake in its oil and gas business to bring in some much-needed cash.

    Freeport-McMoRan is far from the only company struggling to bridge a growing gap between its cash flow and capex. However, it's a struggle we don't see at Apache. It can easily grow its production by the low single digits even while staying within the cash flow its oil and gas production has generated. In other words, that $2 billion in cash on its balance sheet is a real cushion that the company would need only in an emergency situation. It's an emergency stash that Freeport-McMoRan and many of its other peers would really love to have in the current environment.

    That Apache has such strong cash flow is largely a result of the abundant cash flow from the international assets it held onto, in Egypt and the U.K. North Sea, even at a low oil price. Further, its legacy North American assets are low-decline plays, which don't require much capital to maintain production. Also helping the company is that it jettisoned cash-consuming projects, such as the Gulf of Mexico assets it sold to Freeport-McMoRan and its stakes in LNG projects. Because of this strategic shift, the company has a lot of cash flow to reinvest elsewhere, which is primarily going toward drilling North American shale wells that start generating their own cash flow really quickly.

    The other important factor here is that the company has captured strong cost reductions, with its North American well costs and G&A cash costs both down 25% year over year, while its lease operating expense per barrel of oil equivalent is down 13% over that same time frame. All of its key plays thus have economic drilling opportunities at sub-$50 oil. This combination of lower capital requirements and strong economic drilling opportunities are the key to Apache's ability to live within its cash flow next year, while still being able to deliver modest production growth even if oil prices remain weak.

    http://www.fool.com/investing/general/2015/10/27/apache-corporation-is-built-to-thrive-at-50-oil.aspx?source=eogyholnk0000001&utm_source=yahoo&utm_medium=feed&utm_campaign=article

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    Anadarko Petroleum posts loss as crude prices slump


    U.S. oil and natural gas company Anadarko Petroleum Corp reported a quarterly loss that met Wall Street expectations compared with a year-earlier profit as results were hurt by a slump in crude prices.

    Anadarko, like other oil companies faced with a more than 50-percent decline in crude, is working to improve drilling efficiency and productivity while keeping a close eye on costs, Chief Executive Officer Al Walker said in a news release.

    The Houston-based company reported a third-quarter net loss of $2.24 billion, or $4.41 per share, for the third quarter ended Sept. 30. A year earlier, Anadarko had a profit of $1.09 billion, or $2.12 per share.

    Excluding one-time items, Anadarko had a per-share loss of 72 cents per share, a figure that was in line with Wall Street's expectations for a loss of 73 cents per share, according to Thomson Reuters I/B/E/S.

    In the third quarter, the company's total sales volumes of oil and gas averaged 787,000 barrels oil equivalent per day, down from 849,000 boepd in the year-ago period.

    Anadarko said it has so reached deals to shed $2 billion in assets this year, sales that have affected output.
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    Shell halts construction on new Alberta oil sands project


    Royal Dutch Shell Plc will not continue construction of its 80,000 barrel per day Carmon Creek thermal oil sands project in northern Alberta because of the lack of infrastructure to move Canadian crude to market, the company said on Tuesday.

    Shell said the decision to halt the project was also the result of "current uncertainties" and chief executive Ben van Beurden said the company was having to manage costs in today's low oil price environment.

    "We are making changes to Shell's portfolio mix by reviewing our longer-term upstream options world-wide, and managing affordability and exposure in the current world of lower oil prices. This is forcing tough choices at Shell," van Beurden said in a statement.

    Canada's oil sands hold the world's third largest crude reserves but carry some of the highest project breakeven costs globally. Western Canada also struggles with market access issues due to limited export pipelines, which can lead to a glut of crude building up in Alberta and weighing on prices.

    The plunge in benchmark oil prices has prompted a number of companies to defer costly new oil sands projects, although so far few have been cancelled outright once underway.

    Shell originally sanctioned the Carmon Creek in October 2013 but said in March that it would be delayed by two years as the company retendered some contracts and adjusted the design to take advantage of lower costs during the market downturn.

    On Tuesday the company said following a review of potential design options, updated costs, and capital priorities, it had decided the project did not rank in its portfolio at this time.

    Shell, which owns 100 percent of Carmon Creek, will retain the leases and preserve some equipment while continuing to study options for the project.

    The company expects to take net impairment, contract provision, and redundancy and restructuring charges of around C$2 billion ($1.51 billion) as a result of the decision.

    Last month Shell also pulled the plug on its plans to drill for oil in the Arctic, citing high costs and disappointing well results and in February shelved plans for its 200,000 bpd Pierre River oil sands mining project.

    http://www.reuters.com/article/2015/10/27/shell-canada-carmon-creek-idUSL1N12R3LD20151027
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    Despite third-quarter profit, low prices weigh on Consol Energy


    Cuts to retiree benefits and an asset sale brought Consol Energy Inc. into a profit for the third quarter 2015.

    The Cecil-based oil and gas, and coal company reported income of $119 million, or 52 cents per share, during the past three months, compared to a loss of $1.6 million, or 1 cent per share, a year ago.

    Revenue was $814 million, down from $885 million in the third quarter of 2014.

    Falling natural gas prices continued to hammer the company, resulting in a 28 cent loss for every thousand cubic feet of gas it produced during the quarter.

    Coal prices followed a similar trajectory, but Consol reported a margin of about $15 for each ton of Pennsylvania coal it sold during the third quarter. At Buchanan, its Virginia metallurgical coal mine, however, costs exceeded the sales price by $2 per ton.

    Consol’s coal spinout, CNX Coal Resources LP, which operates the Pennsylvania thermal coal complex and went public in June, reported earnings Monday, showing a profit of $14.7 million.

    Consol reaffirmed next year’s capital budget of $400 million to $500 million, a significantly reduced figure that reflects Consol’s decision not to drill any new wells until 2017.

    http://powersource.post-gazette.com/powersource/companies/2015/10/27/Oil-and-gas-to-the-masses-crowdfunding-drilling/stories/201510270014

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    Nabors posts $296 million loss amid weakening oil field activity


    Nabors Industries posted a $296 million loss in the third quarter amid a slowdown in the oil patch that has dried up demand for its services in the United States and abroad.

    The company, which provides drilling and rig services across the globe, said it does not expect oil field activity to significantly rebound soon and will continue slashing costs to meet its minimum goal of breakeven free cash flow.

    “We remain committed to emerge from this cycle a stronger and even more financially sound drilling company,” William Restrepo, Nabors’ chief financial officer, said in a statement.

    The company’s loss of $1.02 per share in the the three-month period ending Sept. 30 was down from a profit of $106 million, or 36 cents per share, during the same time last year.

    Its third quarter earnings included $251 million in pre-tax charges, largely due to its stake in C&J Energy Services, but also related to other small asset impairments and severance costs.

    Nabors, which is based in Bermuda but has main offices in Houston, saw an uptick in its international operating revenues from the prior quarter, and expects to end the year with better international results than it did last year, but income still slipped 11 percent. As several international programs start to wind down, Nabors predicts further declines.

    Weakening North American activity continues to hammer the company’s finances, the company said. Nabors operated 14 percent fewer rigs in the third quarter and saw income plunge by $45.5 million from the prior quarter.

    The company has indefinitely delayed commencement of the full operating day rate for its newest platform rig in the Gulf of Mexico because of problems with the installation of the customer’s platform, Nabors said. It did not elaborate.

    http://fuelfix.com/blog/2015/10/27/nabors-posts-296-million-loss-amid-weakening-oil-field-activity/
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    Agriculture

    DuPont sees sales falling on strong dollar, weak farm demand


    Chemicals and seed producer DuPont said it expects full-year sales to fall by 11-12 percent, hurt by a strong dollar and weak demand for pesticides and insecticides, particularly in Brazil.

    DuPont, which gets about 60 percent of its sales from outside North America, said net sales fell 17.5 percent to $4.87 billion in the third quarter ended Sept. 30, missing the average analyst estimate of $5.3 billion.

    However, lower costs helped the company post a bigger-than-expected quarterly profit.

    DuPont has speeded up cost cuts to counter weakening sales and to appease activist investor Nelson Peltz, who has criticized the company's cost structure and its inability to meet financial targets.

    Cost cuts contributed 10 cents per share to third-quarter operating earnings of 13 cents, helping the company beat the average analyst estimate of 10 cents.

    "Amid the current challenging macro environment, our priority is to aggressively manage what is within our control, including taking a fresh look at DuPont's cost structure and capital allocation strategy to identify ways to further improve shareholder return," Edward Breen, DuPont's interim chief executive, said in a statement on Tuesday.

    Breen, who took over after Ellen Kullman stepped down from her post earlier this month, is expected to take a more aggressive approach to cost-cutting.

    DuPont is targeting about $1.6 billion in annual savings by the end of 2017.

    The company's agriculture business was a major drag on third-quarter earnings as weak demand for seed and crop protection products in a competitive market hurt the business.

    DuPont expects sales in the unit to fall by "low-teens" in percentage terms in the current quarter.

    The strong dollar also contributed to the weakness in DuPont's agriculture business and weighed on four of its other five units.

    Net income attributable to DuPont nearly halved to $235 million, or 26 cents per share, in the quarter ended Sept. 30.

    DuPont is in M&A talks with rivals for its agriculture business, interim Chief Executive Edward Breen said on Tuesday, less than a week after Dow Chemical Co announced a review of its farm chemicals and seeds unit.

    Falling crop prices and rising fertilizer output have triggered talk of consolidation among farm-focused companies


    http://www.reuters.com/article/2015/10/27/du-pont-results-idUSL3N12R3H920151027
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    Precious Metals

    China's gold imports from Hong Kong jump to 10-month high


    China's net gold imports from main conduit Hong Kong jumped to a ten-month high in September, data showed on Tuesday, in a strong sign of recovering demand in the second half of the year.

    Imports by the world's top consumer have now risen for three consecutive months, with the third quarter recording the best quarter of the year for overseas purchases.

    China's appetite for gold has improved in the second half of 2015, as domestic stock markets performed badly.

    Its net gold imports from Hong Kong rose to 97.242 tonnes last month from 59.319 tonnes in August, according to data emailed to Reuters by the Hong Kong Census and Statistics Department.

    September's imports were the highest monthly overseas purchases since November 2014.

    The robust numbers came in the lead up to a seasonally strong fourth quarter.

    China's peak season for gold demand kicked off from the national day holiday in the first week of October. It lasts until the Lunar New Year early next year as gold is a popular choice for gift giving.

    Imports have also been boosted by higher premiums as banks can make a good profit from the difference between global and Chinese gold prices, traders have said.

    "Having said that, we still expect China's total gold demand to record a second consecutive annual decline in 2015," GFMS said.

    Chinese demand hit in a record high in 2013, when gold prices slumped following a 12-year rally, but consumption has eased since that buying frenzy.

    http://www.reuters.com/article/2015/10/27/china-gold-imports-idUSL3N12R3AM20151027
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    Base Metals

    New Silk Road Could See China Gain Control Of The Copper Markets


    A few offhand comments last week may show a massive new plan underway in global copper investment; one that could see major consumer China take the metals world by surprise.

    High-level Chinese officials gave some strong hints of such a move at an industry conference last week in the southwestern city of Nanning, saying that Chinese companies may use a recent geo-strategic initiative as a device to control copper concentrate supply.

    The development in question is China's new "Silk Road" investment initiative. A policy I've previously discussed in relation to the gold market, but which now looks set to impact base metals as well.

    Under the Silk Road plan, China is building stronger economic links with nations along the ancient trade route -- spanning 60 countries from the Stans through to Iran, Turkey and Serbia. And that creates a major opportunity in copper, according to speakers at last week's Nanning conference.

    China's state metals research firm Antaike kicked off the theme, with senior analyst Yang Changhua telling conference attendees that many Silk Road nations produce substantial amounts of copper ore -- but few possess large-scale copper smelters.

    Changhua pointed to this a major opportunity for Chinese metals companies, suggesting that Chinese firms should preferentially buy copper concentrates from these countries for processing at facilities in China.

    He also noted that Chinese firms should cement their influence in Silk Road copper nations by building smelters in these countries. A sentiment that was later echoed at the conference by the head of copper for China Nonferrous Metals Industry Association, Duan Shaofu -- who said at least one Chinese metals firm is looking at constructing a copper smelter in Kazakhstan in "support of Beijing's strategy."

    Those last words suggest a concerted effort is underway to control copper supply in this important producing region; an important note for both buyers and sellers in the copper market.

    http://oilprice.com/Finance/investing-and-trading-reports/New-Silk-Road-Could-See-China-Gain-Control-Of-The-Copper-Markets.html

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    Grupo Mexico profit falls almost 40 pct, hit by lower revenue


    Mexican mining, rail and infrastructure company Grupo Mexico said on Tuesday its third-quarter net profit fell nearly 40 percent compared with the year-earlier period, hit by a drop in sales.

    Grupo Mexico posted a net profit of $297 million for the three-month period, down from $485 million in the same quarter a year earlier.

    Revenue for the quarter dropped 22 percent to $1.9 billion.

    Metals prices have gone down in recent years and the company has come to rely more on its rail division. Grupo Mexico decided, however, to postpone an initial public offering of its rail unit ITM that was planned for June.

    It is not clear when the offering will now take place.

    http://www.reuters.com/article/2015/10/27/grupomexico-results-idUSL1N12R3L220151027
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    Vedanta Limited Consolidated Results for the Second Quarter Ended 30 Sept


    Vedanta Limited today announced its unaudited consolidated results for the second quarter ended 30 September 2015.

    Financial Highlights

    Continued optimization of opex and capex to maximise free cash flow and reduce net debt; generated free cash flow of Rs. 7,145 crore and net debt reduced by. Rs. 5,335 crore in Q2
    Revenues at Rs. 16,349 crore
    EBITDA at Rs. 4,113 crore up by 2% QoQ; robust EBITDA margin1 at 32%
    Attributable PAT at Rs. 974 crore, 12% higher QoQ
    Strong balance sheet with Cash & Cash Equivalents of over Rs. 52,000 crore, up 11%
    Contribution of Rs. 12,104 crore to the Indian Exchequer during H1 FY2016, in the form of taxes, duties, royalties and profit petroleum
    Interim dividend of Rs. 3.50 per share

    Operational Highlights

    Zinc-India: Strong mined and refined metal production; integrated silver production up 64%, underground mining ramping up
    Oil & Gas: Q2 production up 6% & H1 in line with guidance
    Aluminium: Stable volumes from existing smelters; cost reduction initiatives in progress; further pots at Jharsuguda–II smelter to commence ramp up in Q3
    Copper India: Stable operations at 94% capacity utilization
    Iron Ore: Mining commenced in Goa, 1st export shipment made in October
    Power: TSPL Unit-I achieved 86% availability; Unit-II commissioning activities commenced, to be synchronized in Q3

    Tom Albanese, Chief Executive Officer, Vedanta Limited, said: "Our diversified asset portfolio has delivered a strong operating performance, including record production from our tier-1 Zinc mines, resulting in strong free cash flows during the quarter. We are continuing to drive efficiency improvements and optimise opex and capex across the business, taking measured steps to reduce net debt and maximise free cash flow. While the near-term market outlook is challenging, we believe we have the right mix of low cost assets fuelled with new technologies to benefit from future demand in India and globally."

    http://www.prnewswire.com/news-releases/vedanta-limited-consolidated-results-for-the-second-quarter-ended-30-september-2015-300166885.html

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    Rusal keeps Q3 aluminium production steady in face of price slump


    Russia's United Company Rusal Plc held its aluminium output steady in the third quarter and reaffirmed it was reviewing some of its operations, as global prices droop to six-year lows.

    The world's top aluminium producer churned out 916,000 tonnes in the third quarter, up 1 percent on the prior quarter. For the first three quarters, production edged up by 1.4 percent to 2.7 million tonnes.

    Aluminium prices have slumped 20 percent this year on the London Metal Exchange to below $1,500 a tonne, levels last seen after the 2008-2009 financial crisis, as growing appetite for the metal used in aerospace and automotives is eclipsed by increased exports from China.

    Rusal, insulated by a weaker ruble, said sales prices were down by 13 percent on the previous quarter.

    The supply glut is stoking trade tensions. The U.S. Aluminum Association asked U.S. authorities to investigate allegations of misclassification of Chinese aluminium exports in September.

    In Shanghai, prices have struck successive record lows this month and are expected to fall further, reflecting lower input costs and a reluctance by regional governments to shutter capacity that provides jobs and contributes to economic growth.

    Rusal reiterated its April guidance that it is considering further aluminium capacity production cuts of some 200,000 tonnes.

    http://www.reuters.com/article/2015/10/28/united-co-rusal-output-idUSL8N12S01U20151028
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    Steel, Iron Ore and Coal

    China Coal Energy Jan-Sep profit slump 353pct on yr


    China Coal Energy Co., Ltd, the country’s second largest coal producer, saw its net profits slump 352.8% from 659 million yuan ($103.7 million) last year to a loss of 1.67 billion yuan over January-September this year, said the latest announcement of the company.

    The plunging coal prices amid persisting sluggish market may be the one to blame, the announcement said.

    In the first half of the year, the company suffered a net loss of 0.97 billion yuan, which was the first half-year loss since the company’s IPO in 2008.

    The company produced 71.59 million tonnes of commercial coal in the first nine months, falling 18.1% on year. Of this, thermal coal output fell 21.7% on year to 64.96 million tonnes; coking coal output rose 50% on year to 6.63 million tonnes.

    During the same period, commercial coal sales of the company decreased 12% from a year ago to 101.2 million tonnes, with self-produced coal sales at 71.58 million tonnes, down 11.6% on year.

    Sales of thermal coal slid 14.7% on year to 65.21 million tonnes between January and September, with average sales price at 289 yuan/t, a year-on-year decline of 19%.

    Those of coking coal increased 39.4% from the previous year to 6.37 million tonnes, with average price at 451 yuan/t, down 18.9% on year.

    The sales cost for the company’s self-produced commercial coal averaged 167.71 yuan/t over January-September, falling 12.5% from the same period last year and lower 14.2% from the annual average level last year.

    The company may continue to face losses amid overall supply glut and flat demand in coal market, it predicted.

    http://en.sxcoal.com/0/133729/DataShow.html
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    Rio Tinto steals Vale’s iron ore crown ahead of Q4 decider


    Rio Tinto’s new-found leadership status was confirmed by iron ore shipments stretching to a record 91.3 million mt in the third quarter, around 5 million mt more than Vale’s quarterly total for its fines, run-of-mine ores and pellet sales, latest company data show.

    Vale, however, had something to brag about.

    “We have the lowest cost in the world,” Vale CFO Luciano Siani exclaimed as the company unveiled its Q3 figures this week.

    The outcome of lower costs aided by a weaker real, however, may result in prolonged and even weaker global iron ore prices.

    A selloff in the real came as a result of political infighting, and slower Brazilian growth and with it steel demand, leaving Vale more exposed as its largest customers, China and Europe, fight over steel trade.

    Vale is trailing faster growth from Australian majors, who this year posted stronger increases to volumes from new capacity ramp-ups. Vale faced delays in expansions.

    The Rio de Janeiro-based company is still a year or more from making a bigger mark when it opens further new sections at its Carajas mine in northeast Brazil.

    Vale’s Q3 shipment total of 86 million mt compares to shipments of 83.6 million mt in the second quarter — when Rio Tinto shipped 81.43 million mt — and 73.6 million mt in Q1, as iron ore operations in Brazil recovered from seasonal lows.

    Rio’s iron ore production of 86.1 million mt in Q3 fell short of Vale’s quarterly record at 88.2 million mt for the period.

    http://blogs.platts.com/2015/10/27/rio-tinto-vale-iron-ore/
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    China steel industry expected to be forced into deeper output cuts


    Chinese steel mills are likely to be forced into making deeper cuts in output over the next few months, as shrinking demand, soaring losses and tighter credit undermine firms in the world's biggest producer, industry officials and analysts said.

    The industry has defied pressure to make big cuts so far, though the bottom line of steel firms is suffering and efforts to boost exports have riled rival producers in countries ranging from India to the United States.

    Major steel producers suffered total losses of 28.12 billion yuan ($4.42 billion) in the first three quarters of 2015, the China Iron and Steel Association (CISA) said.

    "Since 2010, government departments have issued 20 policy documents to eliminate inefficient capacity, and some has been shut, but overall capacity still hasn't fallen," CISA vice-chairman Zhu Jimin told a briefing.

    But with steel prices at their lowest in decades state-owned mills are starting to close plants.

    Bayi Steel, a unit of China's second-largest steelmaker, the Baosteel Group, has already shut a production base that has an annual capacity of 3 million tonnes.

    Hangzhou Iron & Steel, another state-owned mill, will close its main Banshan production base by the end of 2015, while Maanshan Iron & Steel will shut some production lines in the fourth quarter, the firms said.

    "Output cuts will accelerate by the first quarter of 2016, though a cliff drop is still unlikely, and iron ore prices could fall further to an average of $40-50 a tonne next year," said Zhao Chaoyue, an analyst with Merchant Futures in Guangzhou.

    Iron ore prices .IO62-CNI=SI have slumped nearly 30 percent since the beginning of this year to $50.80 on a rising tide of production and slowing demand.

    Private Chinese steel firms running at a loss are also at risk of going bust if banks demand loan repayments.

    "It is a clear trend that credit is getting tighter and tighter. Once the cash chain is cut off, steel mills will go bust," Xu Lejiang, chairman of Baosteel, told reporters.

    Custeel, a CISA-affiliated consultancy, said this week that 24 blast furnaces had suspended operations in October as mills scheduled overhauls, adding that the number was expected to rise as losses mount.

    China's steel output in the first nine months dropped 2.1 percent from a year ago to 609 million tonnes. Apparent domestic consumption fell 5.8 percent, CISA figures showed.

    China currently has 1.25 billion tonnes of annual crude steel capacity, a surplus of around 300 million tonnes.

    "There are two ways of resolving the supply imbalance - raising demand or cutting supply, and in the current economic conditions, there is no hope of raising demand," CISA's Zhu said.

    http://www.reuters.com/article/2015/10/28/china-steel-output-idUSL3N12S15O20151028

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