Asia is gearing up to witness new refining capacity growth in at least four countries in 2017, but capacity reductions in some top consuming nations will pull down the net addition to a level that would be lower than the anticipated demand growth the region is likely to see this year.

While China, India, Taiwan and Vietnam are expected to add to their refining capacities this year, Japan will witness closures, while some independent refiners in China might be forced to give up capacity, analysts and market participants told S&P Global Platts.

"Oil demand growth in the Asian region is expected to exceed the net refining additions this year," said Sri Paravaikkarasu, Head of Oil, East of Suez, at Facts Global Energy. "And looking at the next five-year horizon, oil products demand growth should exceed net refining additions every single year, helping to clear product surplus somewhat."

Growth in India is set to be one of the strongest, with the rise in oil demand expected to outpace that of China's for the third year in a row this year, according to Platts Analytics. Indian demand is expected to grow by 7% year on year to 4.13 million b/d in 2017, while China's oil consumption is expected to rise by only 3% to 11.5 million b/d in the same period.

POCKETS OF EXPANSION

In China, CNPC's 260,000 b/d PetroChina Anning Refinery in landlocked Yunnan province is expected to come online in 2017, but despite this the net refining capacity addition is seen lower as independent refineries are expected to reduce capacities following government crackdowns.

"We expect at least about 100,000 b/d of refining capacity [at various Chinese] independent refiners to possibly disappear in 2017," Paravaikkarasu said. "Their crude volumes are getting squeezed."

In India, state-run Bharat Petroleum Corp. Ltd.'s Kochi refinery is expected to add about 113,000 b/d capacity to its existing 190,000 b/d, while capacity of the Bhatinda refinery of HPCL-Mittal Energy Ltd. is expected to rise by about 42,000 b/d from the existing 180,000 b/d.

In addition to India and China, Taiwan's Talin refinery is expected to see capacity expansions, while Vietnam will bring online its new Nghi Son refinery this year.

Taiwan's CPC Corp. expects to complete the construction of its new CDU, hydrotreaters and a condensate splitter at the Talin refinery in the first quarter of 2017, delayed from an initial schedule of end-2016.

The expansion will boost Talin's total capacity to 350,000 b/d -- or 400,000 including the new condensate splitter -- from 300,000 b/d currently. The plan includes the replacement an older 100,000 b/d CDU.

Vietnam's new Nghi Son refinery, with a capacity of around 185,000 b/d, is expected to be operational in early 2017.

"The expansions in India, China, Taiwan and Vietnam should take new refinery capacity additions to about 690,000 b/d in 2017. But we also expect capacity cuts to the tune of 447,000 b/d in Asia, including 347,000 b/d in Japan and 100,000 b/d in China. That should take the net refinery capacity additions in Asia to nearly 250,000 b/d," Paravaikkarasu said.

Japanese refiners are preparing to cut around 340,000-350,000 b/d of crude distillation capacity by the end of March 2017 to comply with current regulations, which require the refiners to raise their residue cracking ratio to an average of 50% by March 2017, from 45% at the end of March 2014.

Refiners can achieve this by either adding more secondary units or cutting their nameplate crude distillation capacity, with all expected to opt for the latter. This will bring Japan's refining capacity down to 3.44 million-3.45 million b/d at the end of March 2017, from around 3.79 million b/d currently.

REFINING LANDSCAPE

Despite an anticipated rise in oil products demand in Asia, ample supply from China was seen to be a key factor influencing refining margins in 2017.

In addition, rising crude prices would also keep margins under pressure.

"China's oversupply could be a game-changer for Pan-Asia refining," Nomura said in a recent research note. "We expect Asian refining margins to be under downward pressure until the inventory has been drawn down."

China in 2016 flooded the Asian markets with competitively priced oil products. Its diesel and gasoline exports in the first 11 months of 2016 grew by 112% and 74% year on year, respectively, to 303,000 b/d and 222,000 b/d, as the country aggressively pushed sales overseas amid weak demand at home, according to customs data.

Analysts expect the trend to continue this year.

"Margins are expected to remain positive through the first half of the year before turning slightly negative in the second half. Singapore complex margins should average $6/b," Paravaikkarasu said. "We should remember that crude oil prices are recovering too."

Asia witnessed wild swings in gross refining margins in 2016, with GRMs climbing to above $10/b in early 2016, but weakening to as low as $3/b in August before recovering to $5/b in October, Nomura said in the note. It expects crude oil prices to rise to $60/b in 2017 on the back of OPEC's decision to cut output.

"We may not see fantastic margins this year in Asia, which witnessed a golden period in 2015 and early 2016. But, still, there is room for margins to hold up well and be in the positive territory in 2017," said a senior Asia-based oil analyst.

http://www.platts.com/latest-news/oil/singapore/analysis-asias-unquenchable-thirst-for-oil-to-27755117

Libya oil production up to 722,000 barrels a day. Was 708.000 early January, 655,000 last week.

@reportingLibya

Hedge funds are showing they have some faith in OPEC.  

Their bets on rising West Texas Intermediate crude prices reached the highest in data going back to 2006 as the Organization of Petroleum Exporting Countries and other producers reduce output to balance the market. Saudi Arabia, Algeria and Kuwait have already made deeper cuts than required, while Russia has been able to reduce supply faster than expected, ministers from the countries said over the weekend in Vienna as they gathered for the first meeting to monitor adherence to their output-cut accord.

Funds increased their net-long position, or the difference between wagers on a price increase and bets on a decline, by 14 percent in the week ended Jan. 17, U.S. Commodity Futures Trading Commission data show. WTI advanced 3.3 percent to $52.48 a barrel in the report week. March futures lost 6 cents to $53.16 a barrel at 2:19 p.m. Singapore time on Monday.

"Money mangers are buying oil, as they say in Texas, like too much ain’t enough," Tim Evans, an energy analyst at Citi Futures Perspective in New York, said by phone. "They are trading based on confidence that OPEC and non-OPEC producers will reduce output enough to send prices higher."

https://www.bloomberg.com/news/articles/2017-01-23/too-much-ain-t-enough-as-investors-jump-into-oil-market-rebound

OPEC and non-OPEC producers left their meeting in Vienna Sunday claiming 100% commitment with plans to cut output, but market watchers will have to wait a little longer for hard evidence of full compliance.

There was certainly convincing rhetoric from the oil ministers and there have been signs of significant cuts, but the market must now determine fact from fiction, given the expected natural declines from some countries, planned maintenance and how output is responding from exempt producers like Nigeria and Libya.

Saudi oil minister Khalid al-Falih was "positive" that non-OPEC producers were taking part in the cuts, while Russia's Alexander Novak said his expectations have been "exceeded".

But beyond the ministers' platitudes, the monitoring committee -- made up of representatives from Algeria, Kuwait, Oman, Russia and Venezuela -- still has little to work with.

Moreover, minister claims that the market could rebalance within the first six months have many analysts wondering if the recovery in US production and shale will derail this process.

"They claim growing US production is no issue because growing demand will absorb it. That may be true, but that sure sounds a lot like conceding market share to the US, and that OPEC will have to reconsider their game plan yet again in the coming months/years," said Tony Starkey from Platts Analytics, a unit of S&P Global Platts.

The cut agreement only came into effect on January 1, in the aim of pinning back production by close to 1.8 million b/d. Since then the market has been anxious to gather any news on output reductions.

Just three weeks in, with next to no published production data yet available, the producers' monitoring committee has attempted to pull together a mechanism to accurately gauge compliance.

More data will be needed to convince skeptics that the group can keep up with its commitments, and quickly.

According to OPEC's official statement from Sunday's meeting, each of the 24 signatories to the production cut agreement will nominate a technical representative who is to supply OPEC with production data.

Falih, who has just taken on the role of OPEC's latest president, summed up the balance between statements of commitment from producers and the absence of cold, hard production figures.

"We see evidence of a 1.5 [million b/d cut]. Everybody has declared their full commitment. For all I know, and I still hope we will see evidence in February, we are going to get 100% compliance, possibly more", he told journalists after the meeting.

His "back of an envelope" calculation of compliance, was based on constant communication with customers, and through lifting and loading data, Falih added.

Novak went even further with his own calculation. "If we take the overall number of countries, it should be 1.7 million b/d. So in my view as a result of statistics that we will have for January we will have an even bigger cut than 1.7 mil b/d", he told the Russia 24 television network.

MARKET BALANCE EYED BY MID-2017

Russia has in fact moved ahead with its own production cuts faster than planned, he added, and production since the beginning of January has fallen by more than 100,000 b/d.

To some extent this is due to abnormally low temperatures in some oil producing areas in early January. However, Russia has committed to a cut of 300,000 b/d over the course of the six months so it still has some way to go to make good on its pledge.

Saudi Arabia has also exceeded its target, cutting output by more than 500,000 b/d, to less than 10 million b/d, Falih confirmed. But it is not clear how much of this is due to refinery maintenance at Yanbu and lower crude burn in the Persian Gulf winter.

So too have some other OPEC producers, such as Kuwait. Kuwait was only required to cut output by 131,000 b/d, but having already reached that level, has reduced by a further 6,000 b/d, and plans to go down to 148,000 b/d, officials said.

Other producers, such as Iraq and Venezuela, have not yet cut down to their quotas, but say they are committed to reaching their required levels in the coming months.

Venezuela's production was already down by half of its commitment, newly appointed oil minister Nelson Martinez said.

"The other 300,000 b/d [on top of the 1.5 million b/d the producers already suggest has been cut], for all I know, still happened, we just haven't seen the evidence for it", he said.

Confirmation of these cuts will go a long way to easing concerns over compliance.

With the monitoring mechanism now agreed, the evidence will be presented to the committee for review on February 17, with regular monthly updates thereafter on the progress of the deal.

Novak added that the committee will judge compliance based on secondary source data, and not country self-supplied figures. These secondary sources -- including S&P Global Platts -- compile monthly estimates of each country's output for the preceding month. Their inclusion has been a contentious issue for some countries, such as Iraq, where the two figures have shown significant variance.

Full compliance, for the entire six months of the deal, and possibly beyond, could bring global crude stock levels back to their five-year average by middle of the year, "lowering oil in storage by around 300 million barrels", Falih said.

His view was echoed again by Novak, who said he had reassessed his outlook on the market rebalancing, bringing it forward. "Today, we see that balancing is possible at the end of first half of the year", he said.

This appears a little optimistic especially given the impact that increased US shale production and response of global demand to higher prices may have on the market balance. Of course, the cuts could also be offset by rising output from Libya and Nigeria, which are exempt from the deal.

"Demand is expected to be higher again this year, though there have been some worrying signs in terms of US gasoline demand in the past couple of months, as well as a generally trending higher of oil prices along with the US dollar, which may negatively impact demand growth expectations this year, and coupled with the return of OPEC supply, could spell trouble for the oil market in the latter half of 2017," Starkey cautioned.

http://www.platts.com/latest-news/oil/london/analysis-opecnon-opec-claim-compliance-but-questions-27755876

China aims to increase supply capacity for natural gas to over 360 billion cubic meters by 2020, according to the 13th Five-Year Plan released by the National Development and Reform Commission and the National Energy Administration.

The country's proven reserves of natural gas will reach 16 trillion cubic meters by 2020.

Proved reserves of shale gas will surpass 1.5 trillion cubic meters, the plan said.

Official data showed China's natural gas output came in at 121.1 billion cubic meters in the first 11 months of 2016. Imports of natural gas reached 63.4 billion cubic meters during the period.

http://www.sxcoal.com/news/4551551/info/en

China's liquefied natural gas (LNG) imports hit a record high in December, customs data showed on Monday, driven up as the country pushes towards cleaner fuels.

The world's No.2 economy shipped in 3.73 million tonnes of LNG in December, topping the previous record of 2.66 million tonnes in November and up from 2.10 million tonnes a year ago, the General Administration of Customs said.

China's government in 2014 launched a "war on pollution" to reverse the damage done by decades of untrammelled growth.

Trade flow data on Thomson Reuters Eikon shows that Australia and Qatar exported the most LNG to China in December.

Australia shipped 22 cargoes, equivalent to 1.5 million tonnes of LNG, according to that data, while Qatar exported 9 cargoes.

For the whole of 2016, China's LNG imports rose 32.8 percent to 26.06 million tonnes, China's customs data showed.

The nation's December diesel imports climbed 166.1 percent from the same month a year earlier to 110,000 tonnes, while kerosene imports fell 2.3 percent on the year to 290,000 tonnes.

Saudi Basic Industries Corp (SABIC) 2010.SE has signed an agreement to acquire the 50 percent that it does not already own in its petrochemical venture with Shell Arabia, a unit of Royal Dutch Shell (RDSa.L), for $820 million, SABIC said on Sunday.

"As per the partnership agreement between the two companies that stipulates the right of SABIC to renew or end the partnership by the end of 2020...SABIC decided to acquire the full stake of Shell, which is 50 percent," it said.

SABIC, one of the world's largest petrochemical firms, said the $820 million figure was based on the net value of the venture's assets. It said the acquisition was in line with a strategy to develop its successful investments.

The venture, known as SADAF, was established in 1980 and operates six petrochemical plants with total annual output of over 4 million tonnes year of chemicals. It makes products including ethylene, crude industrial ethanol and styrene at a complex in Jubail, on the Gulf coast of Saudi Arabia.

The acquisition agreement is expected to be carried out before the end of this year, SABIC said, adding that it signed another memorandum of understanding with Shell Arabia on Sunday to boost the companies' cooperation in unspecified international and local investments.

"We will continue to explore potential future opportunities with SABIC," Graham van’t Hoff, executive vice-president of chemicals at Shell, said in an emailed statement to Reuters.

In 2014, SABIC and Shell shelved plans to expand SADAF as the results of feasibility studies were not encouraging. The expansion was to have added production of polyols, propylene oxide and styrene monomer.

Shell is involved in other downstream activities in Saudi Arabia; it has a crude oil refinery with Saudi Aramco in Jubail.

http://www.reuters.com/article/us-sabic-shell-idUSKBN15609J

The Nigerian National Petroleum Corporation has called for tenders under its direct sale, direct purchase import model, an NNPC spokesman said Friday.

The DSDP model, under which selected overseas refiners are allocated crude supplies in exchange for the delivery of an equal value of gasoline to NNPC, started last year, replacing the controversial crude for oil product swaps and Offshore Processing Agreements.

"To ensure sustainable petroleum product supply across the country, NNPC has called tenders for the lifting of crude oil in return for the delivery and supply petroleum products under the direct sale of crude oil and direct purchase of petroleum products," the spokesman said.

Submission of bids will close on February 2, while the program is expected to commence on April 1 and will be for one-year period, he said.

The spokesman did not specify what volumes NNPC is expecting to place in the tenders.

Nigeria imports around 1 million mt/month of petroleum products but the NNPC said January 15 that imports should drop following the recent restarts of all four of the country's state-owned oil refineries.

http://www.platts.com/latest-news/oil/lagos/nigerias-nnpc-calls-for-tenders-for-oil-product-26644134

Algeria's state-owned Sonatrach has met all its French LNG supply contractual obligations, a company source said late Thursday, despite having suffered a three-week unplanned outage at its main Skikda LNG facility.

The source told Algeria's state news agency APS that France's Engie had requested additional LNG to meet demand during a cold spell that has coincided with saturated capacity between northern and southern France.

But Sonatrach was unable to meet that request, the source said.

"Sonatrach is within its rights to turn down the request to make sure it can meet its other customer obligations," the source said.

On Wednesday, a separate Sonatrach source told S&P Global Platts that the company was in the process of restarting the Skikda LNG plant after a near three-week unplanned outage.

The 4.7 million mt/year plant went down at the end of December due to a heat exchanger issue, the source said.

The last LNG cargo from Skikda left the facility on December 29 aboard the Sonatrach vessel, the Cheikh el Mokrani, which was delivered to the French LNG import terminal of Fos-sur-Mer, according to cFlow, S&P Global Platts trade flow software.

Since the outage, Sonatrach has been meeting its contractual supply obligations by sending LNG from the smaller Arzew export plant.

Since December 29, 13 LNG cargoes have left Arzew for destinations including Fos-sur-Mer, Revithoussa in Greece and Martas in Turkey, according to cFlow.

The unplanned outage at Skikda contributed to the recent spike in gas prices in France and Spain.

In France, the TRS spot price reached a record high last week of Eur40.175/MWh, according to Platts assessments.

Having fallen back this week, the price jumped again Thursday to Eur34.20/MWh due to expectations of an increased capacity restriction on the North-South link.

Thierry Trouve, CEO of French grid operator GRTGaz, said Tuesday there had been a recurring bottleneck since the beginning of the winter due to low LNG arrivals at Fos-sur-Mer.

But Algeria's energy minister Noureddine Boutarfa said Thursday that Algeria had no problems as it was meeting its contractual obligations.

"It's not up to us to worry about the French," he said.

http://www.platts.com/latest-news/natural-gas/algiers/algerias-sonatrach-supplying-contractual-volumes-26644135

U.S. liquefied natural gas (LNG) exports are continuing to remain high in January following record high levels in the previous two months, according to the Energy Information Administration.

To remind, Cheniere’s Sabine Pass liquefaction terminal in Louisiana exported twelve LNG cargoes in December, setting a new record for U.S. monthly exports.

The agency said in its latest weekly report that exports from Sabine Pass in January remain high, with 8 cargoes already exported and several more vessels currently en route to the terminal.

Feedstock gas deliveries to Sabine Pass also set a new record in January, averaging 1.7 billion cubic feet per day (Bcf/d) to-date, according to data from PointLogic.

Since this volume exceeds the maximum combined nameplate capacity of Train 1 and Train 2 of 1.4 Bcf/d, feedstock gas deliveries may indicate the start of commissioning of Train 3, EIA said.

Cheniere previously said that Train 3 is expected to reach “substantial completion” by June 2017 and to start exporting LNG in April 2017.

Cheniere started exports from the Sabine Pass liquefaction plant, currently the only such facility to ship U.S. shale gas overseas, in February last year with the majority of cargoes landing in Latin America.

However, in December this trend changed with the majority of Sabine Pass cargoes leaving for Asia where cold winter temperatures increased residential heating demand and rising spot LNG prices led to larger price spreads between the Atlantic and Pacific basins, providing greater incentive for exports from the U.S.

The U.S. is expected to become the world’s third-largest LNG supplier by 2020 with an export capacity of 60 million mt coming from five export terminals.

Henry Hub down

Natural gas spot prices in the U.S. dropped in most locations in the week ending January 18, with the Henry Hub price slipping 3¢ from last Wednesday, EIA said.

The Henry Hub spot price dropped from $3.28/MMBtu last Wednesday to $3.25/MMBtu two days ago.

“Temperatures were relatively consistent between last Wednesday and yesterday, resulting in relatively minor price movements through the week,” EIA said.

At the Chicago Citygate, prices decreased 3¢ to $3.22/MMBtu two days ago. By contrast, prices at PG&E Citygate in Northern California gained 8¢, rising to $3.61/MMBtu this Wednesday.

http://www.lngworldnews.com/eia-u-s-lng-exports-continue-to-break-records/

Schlumberger NV reported better-than-expected quarterly revenue as oil producers put more land rigs back to work in North America and prices for oilfield services recovered slightly in the region.

Shale companies, encouraged by a rise in crude oil prices after a slump of more than two years, have been drilling more wells, boosting demand for services provided by Schlumberger and other service providers.

Schlumberger, the world's No.1 oilfield services provider, said its fourth-quarter revenue from North America rose 4 percent to $1.77 billion compared with the third quarter.

The company said revenue from onshore operation in the United States grew double digits in percentage terms due to "higher activity and a modest pricing recovery."

Revenue growth in international markets was slower, rising 1 percent to $5.28 billion from the third to the fourth quarter.

Schlumberger Chief Executive Paal Kibsgaard said a recovery in international markets this year would "start off more slowly."

Net loss attributable to Schlumberger fell to $204 million, or 15 cents per share, in the three months ended Dec. 31, from $1.02 billion, or 81 cents per share, a year earlier. (bit.ly/2jGqJn7)

The latest quarter included a $536 million restructuring charge as well as a $139 million charge related to the acquisition of Cameron International and a currency devaluation loss in Egypt. It recorded more than $2 billion in restructuring and asset impairment charges in the year-ago quarter.

Excluding items, Schlumberger earned 27 cents per share in the latest quarter, which was in-line with analysts' average estimate, according to Thomson Reuters I/B/E/S.

Revenue fell 8.2 percent to $7.11 billion, marginally beating analysts' estimate of $7.07 billion.

Schlumberger shares were little changed in premarket trading on Friday. They had risen a little more than 20 percent in 2016.

http://www.reuters.com/article/us-schlumberger-results-idUSKBN1541IF

U.S. oil producers, optimistic that higher crude prices are here to stay, have issued 2017 budgets that call for dramatically greater spending to tap new wells.

Preliminary capital-spending plans released in recent weeks by more than a dozen American shale drillers, including  Hess Corp. and Noble Energy Inc., show an average 60% budget increase for the group.

The trend comes after two years of austere budget cuts and layoffs at shale companies to help them cope with a protracted oil bust. The price of U.S. crude started to collapse in 2014 from over $100 a barrel to below $30 in early 2016, prompting drillers to idle rigs and lay off more than 150,000 workers in the U.S.

Many more energy firms will announce capital budgets in the coming weeks, and early indications are that they expect to spend more, as well as pump more oil and natural gas this year.

Praveen Narra, an energy analyst with Raymond James & Associates, predicts a surge in shale spending based on an improved outlook for the sector. Raymond James is forecasting that crude prices will average $70 a barrel this year, up from a $43 average in 2016. U.S. oil prices closed at $51.37 a barrel Thursday.

“That willingness to spend is certainly there,” Mr. Narra said. “People are just optimistic that we have put the worst behind us.”

Wall Street darling RSP Permian Inc., which drills exclusively in West Texas, is boosting this year’s budget by 97% to $600 million. RSP’s stock price has more than doubled in the last year to a recent $42.41 per share.

Last week, Hess, one of the biggest drillers in North Dakota, unveiled a $2.25 billion budget for 2017, an 18% increase over the $1.9 billion it spent last year. The company will spend a significant amount putting more rigs back to work in the Bakken formation, and production is expected to rise by about 10% this year, according to Greg Hill, president of Hess.

Noble has said it would spend up to $2.5 billion this year, a potential 67% jump over last year’s $1.5 billion budget, as it doubles its rig activity from Texas to Colorado. Earlier this week, the company said it would buy Clayton Williams Energy Inc., based in West Texas, for $2.7 billion, giving it another 2,400 prospective wells to tap.

The oil price stabilized over $50 a barrel in the fall thanks, in part, to an agreement to curb output by members of the Organization of the Petroleum Exporting Countries, such as Saudi Arabia, as well as other major producers such as Russia.

Several U.S. oil producers, including Pioneer Natural Resources Co. and EOG Resources Inc., have said that advanced technology and efficiency gains implemented during the oil-price downturn will allow them to not just survive but thrive at $55 a barrel.

Spending by oil and gas producers world-wide is expected to jump 7% in 2017, according to Barclays PLC, a British bank which recently surveyed 215 energy companies about their plans.

U.S. onshore oil and gas producers will lead the way, particularly as larger shale drillers ramp back up, said J. David Anderson, a Barclays analyst. He estimates that spending among American exploration and production companies will rise more than 50%, setting off a wave of activity that may surprise OPEC and other foreign competitors. “They’re about to find out how efficient the U.S. producers have become,” Mr. Anderson said.

There are already signs of increased U.S. oil activity. The number of oil and gas rigs drilling from Colorado to Oklahoma has been steadily on the rise in recent weeks. There were 634 rigs drilling onshore in the U.S. at the end of last week, up from a low of 380 in May. Earlier this month, U.S. oil production surpassed 8.9 million barrels a day, its highest level in nine months, and has stayed roughly at that level, according to the latest weekly federal data.

One of the most pronounced increases in planned spending was announced by Denver-based Extraction Oil & Gas Inc. The company was the first initial public offering of a U.S. oil and gas producer in two years when it made its debut on the Nasdaq Stock Market in October.

Extraction said it would spend about $865 million in 2017, up 137% from the $365 million it budgeted for 2016. The company expects to boost output this year by nearly 76% to 51,000 barrels of oil equivalent a day.

Mark Erickson, Extraction’s chief executive, said $45 oil has proven to be a sweet spot for the company, and any improvement in price just means stronger returns and more activity are on the way.

“We’re looking at this just being a very high-growth year,” he said.

http://www.wsj.com/articles/u-s-oil-producers-ramp-up-spending-1484908206

---

Attached Files

General Electric Co. reported fourth-quarter sales below analysts’ estimates as the persistent slump in the oil market weighed on sales of industrial equipment.

“Revenue clearly was a bit light. Their cash flow was a bit light,” Nicholas Heymann, an analyst with William Blair & Co., said by telephone. “I don’t see any signs of big problems, but it was a grind quarter.”

GE is looking to regain momentum after a sluggish economy constrained growth in 2016 and pressured the company’s efforts to sharpen its focus on machinery such as gas turbines and jet engines. Chief Executive Officer Jeffrey Immelt is building a software business to complement the manufacturing operations while pursuing major deals, such as combining GE’s oil division with Baker Hughes Inc.

Revenue fell 2.4 percent to $33.1 billion, the Boston-based company said in a statement Friday. That was below the $33.9 billion predicted by analysts, according to the average of estimates compiled by Bloomberg.

While GE said it is “optimistic” about the U.S. economy, it cited a “slow-growth and volatile environment” in the fourth quarter, according to slides accompanying the release.

The shares declined 1 percent to $30.90 at 7:21 a.m. in New York before regular trading. GE gained 9.5 percent in the 12 months through Thursday, compared with a 20 percent advance for the Standard & Poor’s 500 Index.

Adjusted earnings fell to 46 cents a share, matching analysts’ estimates. Orders rose 4.3 percent in the quarter, but declined slightly on an organic basis.

Sales Breakdown

Revenue climbed 20 percent in the power division, which is seeing higher shipments of a new gas turbine. GE Aviation, which is boosting production of a new jet engine, posted a 6.7 percent increase.

Sales tumbled 22 percent in the oil and gas unit, which has struggled amid the plunge and sluggish recovery of crude prices. GE hopes to capitalize on an eventual rebound through the Baker Hughes deal, which would create the world’s second-largest oilfield service provider and equipment maker. GE would own 62.5 percent of the combined company.

The manufacturer also is selling two divisions, water and industrial solutions, to help fund restructuring and free up cash for potential acquisitions. GE has said the water unit, which makes products for desalination and wastewater treatment, is generating significant interest from prospective buyers.

Operating earnings in 2017 will be $1.60 to $1.70 a share, GE said, reaffirming a forecast the company gave last month. Organic revenue is expected to increase 3 percent to 5 percent.

https://www.bloomberg.com/news/articles/2017-01-20/ge-matches-profit-estimates-on-gains-in-power-aviation-units