Mark Latham Commodity Equity Intelligence Service

Tuesday 23rd February 2016
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BHP Billiton slashes dividend, posts $5.67 billion net loss

Top global miner BHP Billiton  slashed its interim dividend by 75 percent on Tuesday, abandoning a long-held policy of steady or higher payouts as it braces for a longer-than-expected commodities downturn.

The end to BHP's so-called progressive dividend policy came as the world's biggest diversified miner slumped to a net loss of $5.67 billion for the six months to Dec. 31, its first loss in more than 16 years.

"We need to recognize we are in a new era, a new world and we need a different dividend policy to handle that," Chief Executive Andrew Mackenzie said on a media call, warning of a prolonged period of weaker prices and higher volatility.

The dividend cut to 16 cents was more severe than market expectations for a payout as high as 35 cents. BHP pledged a minimum 50 percent payout of underlying profit going forward.

"Given months of anguish and market debate regarding the dividend, we expect that 16 cents while disappointing, is a cash flow positive and therefore will likely be absorbed by the market," said Shaw and Partners analyst Peter O'Connor.

Mackenzie said the shift was part of a broader strategy to help BHP Billiton manage volatility.

"The financial flexibility we will gain as a company from this move ... will allow us to invest counter cyclically," he said. "It will allow us to look at tier one assets in distress."

Standard & Poor's cut BHP's credit rating to 'A' from 'A+' this month and warned it might downgrade again if the company failed to take more steps to preserve cash and review its dividend policy.

"I can't see (the ratings agencies) downgrading. They probably would have if the commodity outlook was still poor, but I think the outlook is starting to turn in BHP's favor," said Fat Prophets mining analyst David Lennox.

Mackenzie also announced a revamp of BHP's corporate structure in a bid to simplify operations, creating U.S. and Australian mineral divisions in a move that will see its iron ore chief Jimmy Wilson and petroleum head Tim Cutt depart.

BHP shares rose 2.5 percent to $17.62 by early afternoon in a slightly weaker overall market.

Australian Shareholders Association director Geoffrey Bowd said the dividend cut was "very prudent" in light of the commodities outlook.

Shares in close peer Rio Tinto have risen some 9 percent since it swapped its progressive dividend policy for a payout ratio on Feb. 11.


Underlying attributable profit plunged to $412 million from $4.89 billion a year earlier, missing analysts' forecasts for around $585 million, as commodities prices plummeted to multi-year lows.

"While the miss looks big in percentage terms, the numbers are quite frankly disappointingly low anyway," said Shaw's O'Connor, pointing to BHP's $100 billion asset base.

Despite the tough outlook, Mackenzie said BHP was still generating EBITDA (earnings before interest, tax, depreciation and amortization) margins of 40 percent, which is ahead of the reported figure of around 34 percent for Rio Tinto.

At today's spot prices, the company would expect to generate $10 billion in operating cash flow for the year, he said.

BHP's results included an after tax charge of $858 million following a dam disaster in Brazil at its Samarco joint venture with Vale (VALE5.SA), which killed 17 people in that country's worst environmental disaster.

A total of $6.1 billion of exceptional items included an impairment charge of $4.9 billion against the carrying value of its U.S. onshore oil and gas assets and $390 million for global taxation matters

Mackenzie said there were no immediate plans to expand shale operations in the United States, but BHP remained committed to the business.
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World's Biggest Miner Adds $10 Billion in Boost to M&A War Chest

BHP Billiton Ltd. gave notice Tuesday that it’s on the hunt for assets after tipping an estimated $10 billion extra cash into its coffers by cutting its dividend and capital spending.

The world’s biggest mining company bowed to pressure from investors and credit ratings agencies by lowering its dividend payout for the first time in 15 years after the rout in commodities saw first-half profit tumble 92 percent. A new dividend policy will also give BHP more M&A firepower, with oil and copper the main targets for any acquisitions, Chief Executive Officer Andrew Mackenzie told reporters on a call from Melbourne.

“Investors for months have been telling the company not to pay the dividend and instead to focus on growth, to go out and buy something and be counter-cyclical,” Peter O’Connor, a Sydney-based analyst at Shaw and Partners Ltd. said by phone. “That said, M&A is fraught with difficulty. It’s not often that you buy well.”

BHP will face stiff competition. Distress from the commodity-price rout may soon spread from small mine operators to industry majors, forcing desirable assets on to the market and spurring deals, Rio Tinto Group CEO Sam Walsh told Bloomberg Television earlier this month. Sumitomo Metal Mining Co. last week paid $1 billion to boost its stake in a Freeport-McMoRan Inc. copper project in Arizona, signaling there’s plenty of buyers.
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Brazil police sweep targets Rousseff's campaigner, Globo says

Brazilian police on Monday launched a new round of arrests and seizures targeting both the manager of President Dilma Rousseff's successful election campaigns and the country's largest engineering group in the latest stage of nation's worst corruption probe, Globo TV reported.

More than 300 officers are conducting searches and arrests in the cities of São Paulo, Rio de Janeiro and Salvador, the police said in a statement, without elaborating. The police were carrying out two preventive and six temporary prison warrants in the so-called 23rd phase of "Operation Car Wash" probe.

Globo TV's news morning program said Monday's raids included an arrest warrant for Jõao Santana, Rousseff's campaign manager and who was currently out of the country. Nicknamed the "maker of presidents", Santana, 63, also advised Rousseff's predecessor Luiz Inácio Lula da Silva and late Venezuelan President Hugo Chavez in his re-election bid in 2012.

According to TV Globo, some of the raids were also aimed at Grupo Odebrecht, an engineering conglomerate linked to the Car Wash investigation. The police will hold a news conference at 10:00 a.m. local time (13:00 GMT) to detail the operation.

Immediate efforts to reach Santana and Odebrecht's officials for comment were unsuccessful.

The nationwide Car Wash operation began uncovering kickbacks and influence-peddling in state companies nearly two years ago. Dozens of executives and politicians have been arrested or are under investigation on suspicion of overcharging state-controlled Petróleo Brasileiro SA and other state firms on contracts and using part of the proceeds to bribe members of Rousseff's ruling coalition.
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CIBC, Scotiabank Hardest Hit in Severe Oil Slump, Moody's Says

Canadian Imperial Bank of Commerce and Bank of Nova Scotia would be nation’s hardest hit lenders if the oil slump became sharply worse, while Toronto-Dominion Bank would best be able weather a worsening rout, Moody’s Investors Service said.

“The prolonged slump in oil prices will increase the financial stress on oil producers and the drillers and service companies that support them, as well as on consumers in oil-producing provinces," the New York-based ratings company said in a report released Monday. “Correspondingly, the Canadian banks’ losses in related corporate and consumer portfolios will increase, and their capital markets income is likely to decline."

Canadian bank profits would fall though capital levels wouldn’t be hurt in a moderate stress scenario, Moody’s said, while a severe stress scenario could force lenders to cut dividends, sell shares or take measures to preserve capital. The six biggest banks would see losses of C$5.56 billion ($4 billion) in a moderate scenario, while losses in a severe scenario would reach C$12.9 billion, or about 1.5 times the lenders’ combined quarterly profits.

“There is some moderate expectation that we could see the moderate stress scenario," David Beattie, Moody’s senior vice president, said in a telephone interview. “Even if that happens, it’s pretty addressable in terms of the earnings power of the Canadian banks. They could absorb this over a couple of quarters and move on."
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Chinese leadership vows stable macro economic policies to sustain growth

China's top leadership on Monday pledged that it would stabilize and improve macro policies to create an amicable environment for economic growth and ongoing structural reforms.

In a meeting convened to discuss the draft of the annual government work report andproposals for the 13th Five-Year Plan, the Political Bureau of the Communist Party ofChina's (CPC) Central Committee said enhancing growth quality and efficiency will be thefocus of the 2016-2020 period.

China will continue to implement proactive fiscal policies and prudent monetary policies,while stepping up supply-side structural reforms to power growth, according to astatement released after the meeting, chaired by President Xi Jinping.

More should be done to make the most out of domestic demand potentials, the statementsaid.

The leadership also pledged it would speed up the development of modern agriculture andpush forward a new round of high-level opening-up. Green development will also be madea priority, they added.

Eyeing 2016 as a critical year for China to deliver the country's social and economic targets,the leadership listed the cutting of industrial capacity, destocking, de-leveraging, loweringcorporate costs and identifying weak links as major tasks for the year.

China's economy grew by 6.9 percent year on year in 2015, its lowest annual expansion ina quarter of a century, but well in line with government target of around 7 percent.

Reviewing China's economic performance for the 2010-2015 period, the meeting saidChina had achieved "landmark progress" in economic restructuring.

Consumption contributed 66.4 percent of China's gross domestic product (GDP) in 2015,up 15.4 percentage points from 2014.

The meeting came ahead of China's annual two sessions in March, during which lawmakersand political advisors will gather in Beijing to discuss the social and economic policies for theyear.
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Anything but reality please.

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Noble Group flags first loss in two decades, blames coal price slide

Commodity trader Noble Group warned of its first full-year loss in nearly two decades, blaming $1.2 billion of writedowns on a slide in coal prices - a move seen by analysts as a response to pressure to be more conservative in its accounting practices.

The Singapore-listed company, which has sought to reassure investors after an accounting dispute and as tumbling commodity markets battered its stocks and bonds, set its 2020 and beyond estimate for thermal coal contracts at $55 per tonne - a level that it said was 14 percent below the average market consensus.

Australian spot cargo prices for thermal coal are currently trading around $53.70 per tonne.

A bleak outlook for coal and many other commodities means that firms like Noble or Glencore not only face falling demand for many of the goods they trade, but also declining values for many assets they own, such as storage facilities or vessels.

"What's driving this is their decision to be more prudent in terms of fair value prices. One potential outcome is that it cleans up the balance sheet from the banks' perspective," said Conrad Werner, an analyst at Macquarie Equity Research.

Shares in the company have lost nearly 70 percent of their value over the past year after Iceberg Research alleged it was inflating its assets by billions of dollars. Noble rejected the claims and board-appointed consultants PricewaterhouseCoopers found it had complied with international accounting rules.

Iceberg Research on Tuesday criticized Noble's reasons for the impairments, saying it was absurd for the company to say that their forward curves were too aggressive 48 hours before it was due to post annual results.

Noble reports detailed earnings on Thursday. Prior to Wednesday's announcement, analysts had forecast the trader would make a net profit although projections had varied widely.

But Noble, one of the world's biggest traders of commodities from coal to iron ore to oil, stressed that it generated positive cash flow in the fourth quarter and that it expects to have $1 billion in further liquidity by the end of March including proceeds from its sale of its stake in Noble Agri.

It also said that its cash balance stood at a record $1.95 billion as of end December.

Noble's stock and bond investors have been concerned about the company's ability to refinance its debt. Both Standard & Poor's and Moody's Investors Service have cut their credit ratings for the company to junk.

It has about $2.5 billion worth of debt due this year, according to Thomson Reuters LPC data. Noble's bonds and credit default swaps are trading at depressed levels, but Noble has blamed this on illiquid markets.
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Oil and Gas

IEA sees oil market rebalancing in 2017; US production at record high by 2021

Oil markets will begin to rebalance in 2017 thanks to falling U.S. production but that decline will prove short-lived as efficiency gains will push U.S. output to new records by the beginning of the next decade, the International Energy Agency said on Monday.

"Only in 2017 will we finally see oil supply and demand aligned but the enormous stocksbeing accumulated will act as a dampener on the pace of recovery in oil prices when the market, having balanced, then starts to draw down those stocks," the IEA said in its medium-term outlook.

"Today's oil market conditions do not suggest that prices can recover sharply in the immediate future," it added.

Over the course of 2015 to 2021, U.S. output is expected to reach a record high of 14.2 million barrels per day (bpd), after dipping initially this year and next, the IEA said in its report.

Production of U.S. shale oil, known as light, tight oil (LTO), is expected to drop by 600,000 bpd this year, and a further 200,000 bpd next year before gradually recovering.

"Anybody who believes that we have seen the last of rising LTO production in the United States should think again; by the end of our forecast in 2021, total U.S. liquids production will have increased by a net 1.3 million bpd compared to 2015," the IEA said.

Overall, global oil supply is expected to rise by 4.1 million bpd between 2015 and 2021, compared with growth of 11 million bpd between 2009 and 2015, the IEA said.

The report forecast OPEC crude oil production capacity would rise by 800,000 bpd by 2021 as lower oil prices force the re-consideration of development projects in the early period of the forecast.

"Iran, now free of nuclear sanctions, emerges as the biggest source of growth within OPEC over the six-year forecast period. The higher capacity will not, however, allow Iran to reclaim its rank as OPEC's second-biggest crude oil producer after Saudi Arabia. That position is maintained by Iraq through 2021 despite a marked slowdown in its capacity building," the IEA said.
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OPEC sees further action if output 'freeze' deal holds

The world's biggest oil producers may consider "other steps" to eliminate a persistent global oversupply if a recent deal to freeze current output holds firm for several months, the top official of the Organization of the Petroleum Exporting Countries said on Monday.

OPEC Secretary-General Abdullah al-Badri reiterated the group's readiness to work with non-OPEC producers to tackle a supply glut that has knocked prices to their lowest in over a decade. He told the IHS CERAWeek conference in Houston that the tentative pact to freeze output reached last week between Saudi Arabia, Russia, Venezuela and Qatar was just a start.

Al-Badri admitted the oil cartel had not expected prices to fall so sharply since the group decided in late 2014 not to cut output in the face of rising global supplies, fueled in large part by the fast growth of the U.S. shale production.

"This cycle is very nasty," Badri said.

He said OPEC had also held talks with other key producers including Brazil, China, Oman and Mexico on a possible freeze.

Other steps could include a production cut.

"Let us freeze production... If this is successful we can take other steps in the future," Badri said. Parties must first manage to cap output levels for three to four months, he added.

He nevertheless cautioned that when oil prices recover from their current levels in the mid-$30 per barrel to around $60 per barrel, shale producers would quickly start drilling again, capping any gains.

Global production exceeded demand by as much as 2 million barrels per day last year. A gradual decline in output due to lower investment is expected to balance the market in early 2017, according to the International Energy Agency.

However, a huge build in global oil inventories, which Badri said has reached 350 million barrels, means it will take longer for prices to recover.

He underlined that understanding between OPEC and non-OPEC producers is increasingly necessary to balance the market.

Addressing a room filled with hundreds of global oil executives, Badri said he was willing to speak with U.S. officials about the collapse in oil prices.

The rout in prices of more than 70 percent in 20 months, is not the same as oil's previous boom-bust cycles, he said.

"I don't know how we are going to live together," Badri said of the once booming shale oil sector. "If prices will go up in 2017 or 2018, the price rally will be capped by U.S. shale oil. That's what is different this time."

Any deal on a production freeze would be tough to implement. Iran, which has pledged to increase output sharply since sanctions were lifted last month, has yet to formally sign on to the agreement, leaving its implementation uncertain.
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Global excess refining capacity to grow 1.1 Million B/D BY 2021: IEA

Global surplus refining capacity is expected to rise by more 1 million b/d to 5.3 million b/d in 2021 creating "significant pressure" on refining margins in the medium term, the International Energy Agency said Monday.

In addition to nearly 8 million b/d of new global refining capacity due to come on stream over the next five years, growing volumes of non-refining fuels mean the gap between capacity expansions and demand will rise to about 2 million b/d, according to the IEA's latest medium-term report.

Global crude distillation capacity is expected to rise by 7.7 million b/d from 2016 to 105 million b/d in 2021, the IEA said.

Regionally, nearly two-thirds of global spare capacity will be found in non-OECD countries, where many refineries are under-utilized for various reasons, the IEA said.

It cautioned, however, that the oil price downturn has raised the likelihood of delays for many new refining projects as oil companies seek to conserve their dwindling cash flows.

Annual capacity additions are estimated to average 1.3 million b/d through 2021, despite some 1.7 million b/d of projects deferred beyond 2021, the IEA said.

The IEA said it sees low capacity additions this year -- about half of the expected annual demand growth -- potentially tightening the oil product market. But a massive overhang of oil product stocks means a resulting margin boost "may not materialise".

The IEA estimates that almost one-sixth of global oil demand will be met by fuels by-passing the refining sector such as biofuels and NGL's in 2021, which will exacerbate the surplus capacity issue.

Global biofuels production is estimated to rise to 2.7 million b/d in 2021, up from 2.3 million b/d in 2015.
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Diesel dogfight: Huge China exports dent Asia margins

China's emergence as a major oil product exporter is depressing oil refining margins across Asia as favorable domestic fuel policies encourage Chinese refiners to keep output high and flood regional markets with surplus supplies.

The surge in Chinese shipments has been felt the most in the diesel market, where benchmark Asian margins recently slumped to 6-year lows following an almost 80 percent jump in Chinese exports in 2015.

The world's No.2 diesel producer had until last year been only a modest exporter of the fuel, as the country's large mining, power generation and trucking industries used up most of its diesel output.

But as China's industrial engine slowed, refinery run rates remained high to meet still strong demand for gasoline and jet fuel, used for transport. That led to a surplus of diesel that was steered on to regional markets with increased aggression over the course of 2015.

Average monthly exports over the second half of 2015 were 865,000 tonnes, compared to 329,000 tonnes a month over the first half.

"As independent refineries in China have increased access to crude, this positively affects their run rates. In turn every additional barrel in the already oversupplied middle-distillates market has a negative effect on the gasoil margins," said David Wech, managing director of research institute JBC Energy.

Additional export quotas for independent refineries along with export-linked incentives for refineries owned by state-owned oil giant Sinopec Corp are expected to lead to higher shipments in 2016. January exports eased back from December levels, but were more than 10 times higher than the same month in 2015.

China's net surplus of diesel could more than double to 220,000 barrels per day or about 10.8 million tonnes in 2018 from 100,000 bpd in 2015, Wech said.

"The sizable diesel supply glut created by an upsurge in Chinese exports of diesel ...(will) remain intact, leading diesel prices in Asia to underperform diesel prices in Europe and North America over 2016 to 2020," said BMI Research's Asia oil analyst Peter Lee.

While China's increased exports have slashed Asian diesel margins - from roughly $16 a barrel a year ago to around $10 now - the impact has been partly offset by tumbling oil prices, which have kept other refiners profitable.

Chinese refiners have also been protected by a domestic floor price that is above international rates and provides a buffer for competitively priced exports.

On a monthly basis, China has already overtaken Japan and Taiwan to become Asia's fourth-largest diesel exporter after South Korea, Singapore and India.

China accounted for 12 percent of Asian diesel exports in the month of December, 2015, up from just four percent nine months earlier, according to trade data and a Reuters analysis of ship loadings in the region.

New refineries in China are also able to meet more stringent specifications required by developed countries such as Australia, where the closure of aging refineries has boosted import demand.

"I think the immediate attraction for them is Australia and maybe to some extent Africa, but I'm sure they will want to expand their reach to Europe and the United States," said a source with a Japanese refiner.
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Panama Canal expansion to transmit suesmaxes from Q2

The Panama Canal is set to open the Third Set of Locks expansion project in the second quarter of 2016, which will allow Suezmax tankers, carrying cargoes of up to 130,000 mt or 1 million barrels of petroleum liquids, to transit the waterway, a source said Friday. The current cargo limit is 55,000-60,000 mt.

Grupo Unidos por el Canal (GUPC), the consortium responsible for the design and construction of the expansion, successfully completed testing of the reinforcements in sill number three of the expanded Pacific locks earlier this week and less than 4% of the overall project work remains to be completed, according to the canal operator, the Panama Canal Authority. The canal expansion is expected to be inaugurated later this year, it said.

Repairs to a large crack at the third set of locks, which first appeared in August 2015 at the concrete sill between the lower and middle chamber of the Cocoli locks, have been fixed, it said. "We expect to be operational in the second quarter of 2016," a PCA source told Platts Friday.

Once the expansion is completed, the draft for vessels transiting the canal will increase from the current 39.05 feet in the old locks to 50 feet in the new locks. While the PCA does not limit deadweight tonnage, the expanded locks can accommodate larger size vessels, as maximum beam increases from 106 feet to 140 feet and overall length (LOA) from 965 feet to 1,200 feet, according to the PCA source.
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Oil Search to push LNG ties to offset oil price slump

Oil Search chief executive Peter Botten says the time is ripe for much closer ties between the company's two liquefied natural gas projects in Papua New Guinea, to help counter the collapse in oil prices that has clouded the prospects for even the most competitive of petroleum ventures.

"It is a high priority in 2016 to discover how these things can be brought together," Mr Botten said after announcing Oil Search's swing to a $US39.4 million ($54.8 million) loss for the full year.

"The focus of every board and management is on driving every single dollar further and getting the best possible value out of that investment. There could not be a better environment to discuss co-operation."

The drop in oil prices has cut revenue for the Papua New Guinea LNG project. 

Oil Search, which in 2015 rebuffed an $11.6 billion takeover approach from Woodside Petroleum, is ExxonMobil's biggest partner in the successful PNG LNG venture, which began production in 2014 and is working towards adding a third production unit. It also has a stake in the Papua LNG venture with French oil major Total and US-listed InterOil, which is seeking to develop a separate project using gas from the large Elk-Antelope field using the same processing site near Port Moresby.

Mr Botten said the base case for the projects still involved separate production units, with the expansion of PNG LNG running ahead of plans for an initial LNG train at Papua LNG.

At Papua LNG, the results of an independent assessment to determine how much gas Elk-Antelope holds is expected by mid-year, driving whether the project could involve one or two LNG trains.

LNG projects still viable

The two LNG projects, widely seen as the most competitive in Asia, were still viable on probable oil and LNG price scenarios, Mr Botten said, while admitting that any large project would need prices higher than today's of just more than $US30 to proceed.

Still, oil prices should have stabilised and be on a path to recovery by the time of the final go-ahead decisions on both projects, which were due in only "maybe two years' time", he said.

Oil Search's full-year loss was forced by a $US399.3 million write-down on the Taza exploration venture in Kurdistan, which the company is looking to sell.

Oil Search was also expecting to be active as an acquirer, and was eyeing potential assets in PNG, Mr Botten said.

"I do see a range of potential opportunities in Papua New Guinea that would support the strategy we have to commercialise our gas resources," he said.

The interim loss compared with a profit of $US353.2 million a year earlier. Revenue fell 2 per cent to $1.58 billion.

Core net profit for 2015 fell 25 per cent to $US359.9 million, about in line with consensus.

Oil Search declared a final dividend of US4¢ a share, taking the full-year payout to US10¢, down from US14¢ for 2014.

Cost-cutting is still in full swing at the company, with Mr Botten targeting a further 25 per cent reduction in production costs in 2016, and capex to be slashed 34 per cent.

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Halliburton Deal Deadline Suspended as EU Seeks More Data

The European Union suspended the deadline for its review of Halliburton Co.’s acquisition of Baker Hughes regulators said the companies failed to supply “important information.”

The EU regulator “stopped the clock in its in-depth investigation into the Baker Hughes -- Halliburton deal,” EU spokesman Ricardo Cardoso said in an e-mailed response to questions. The move could mean the EU delays its decision on the merger of the two oil services rivals past the existing deadline of June 23.

“This is a standard procedure on merger investigations which is activated if the notifying parties do not provide an important piece of information,” he said. “The clock is then stopped until such missing information is supplied the deadline for the decision date will be adjusted accordingly.”

The EU review of the deal was previously held up last year by four months after regulators rejected the companies’ initial filing as incomplete.

Halliburton agreed to buy Baker Hughes in November 2014 in a cash-and-stock deal that at the time was valued at about $35 billion. The transaction was scheduled to close last year, but has been delayed as the companies seek to resolve antitrust concerns in the U.S. and Europe.

Emily Mir, a spokeswoman for Halliburton, did not immediately reply to a request for comment outside Houston working hours.

Halliburton has been adding yet more assets to the list of businesses it plans to sell to gain antitrust approval. The company plans to divest Baker’s offshore drilling-and-completions fluids division and the bulk of Baker’s completion systems, people familiar with the matter said earlier this month.

The EU merger authority opened an in-depth probe into the deal on Jan. 12, citing concerns that combining the the second- and third-largest suppliers to oil exploration companies may impede competition and increase prices.
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Oil rigs dive, but well productivity soars

Drilling activity has crashed, but efficiencies and American ingenuity have helped make each well far more productive.

The number of oil rigs fell by 26 last week to 413, Baker Hughes (BHI) reported Friday. That’s down 19% over the last four weeks and 59.5% vs. a year earlier.

But U.S. oil output, though off peak levels, has held up remarkably well. That’s in large part because Continental Resources, Concho Resources and other shale producers are becoming, well, more productive with every well. They focused on the best wells, kept the best crews, while employing new technical advances and practices. They’ve also been able to squeeze suppliers and services firms such as Baker Hughes, Schlumberger  and Halliburton.

• Bakken Shale new wells should produce 737 barrels per day in March, up from 558 bpd in March 2015. That’s a 32% increase — 88.5% vs. March 2014.

• Eagle Ford new wells are expected to generate 812 barrels per day in March, up from 665 bpd a year earlier. That’s a 22% jump.

• Niobrara new wells should produce 741 barrels per day, up 39% from 533 bpd in March 2015.

• Permian Basin new wells should produce a 423 barrels per day, a 49% spike from 284 bpd a year earlier.

• Utica new wells should generate 309 barrels per day, a whopping 83% increase from 168 bpd in March 2015.

Continental Resources, Concho Resources and other shale firms have been able to concentrate efforts, slashing capital spending and operating costs without a big blow to production. But with oil down to $30 a barrel or lower, these companies are under heavy  strain. Continental and Concho earnings reports are due this week, with the former expected to post a loss and the latter a 96% EPS dive.

As for suppliers such as Halliburton, Schlumberger and Baker Hughes, they’ve cut tens of thousands of jobs.  But those oil services giants should emerge stronger after the oil bust, D.A. Davidson said in research reports last week.
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Alternative Energy

SunPower Launches Its Most Powerful Solar Panel Available to Homeowners

A new solar power system is installed in the United States every 1.6 minutes, according to the Solar Energy Industries Association (SEIA). With the number of residential solar installations expected to increase this year by 35 percent according to GTM Research, more consumers will have an opportunity to choose the best solar solution for their home, saving on electricity bills while generating clean energy. Offering a record-setting, proven solar power solution, SunPower reminds homeowners that better solar technology exists and is accessible today.

“Solar technology differs widely from brand to brand, so it’s important for consumers to consider that not all panels deliver the same amount of energy, look elegant on a roof, or are guaranteed to last as long as promised,” said Howard Wenger, SunPower president, business units. “SunPower® panels are the most efficient that homeowners can buy, and we stand behind them for a quarter century. We’re proud to hold the world-record title for efficiency.”

The National Renewable Energy Laboratory (NREL), a federal laboratory that rigorously evaluates renewable energy and energy efficiency technologies, recently tested and verified that a SunPower® X-Series solar panel reached 22.8 percent efficiency – a new world record. SunPower’s newest X-Series solar panel, the X22, offers efficiencies of more than 22 percent. The high efficiency solar panels generate more energy in the same amount of space as conventional solar panels, which can reduce the number of panels needed to meet consumers’ energy needs. Compared to conventional solar panels with efficiencies that range from 15 to 18 percent, a SunPower X-Series solar panel produces over 70 percent more energy in the same space over the first 25 years.
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Precious Metals

Zimbabwe tells diamond mining companies to cease operations

Diamond mining companies in Zimbabwe’s Marange fields are to stop their operations immediately because their licences have expired, the country’s mines minister said on Monday.

The diamond fields, located in the eastern part of the country close to the Mozambican border, are mined by nine joint-venture companies, each with a 50% stake while the government holds the other half.

“Since they no longer hold any titles, these companies were notified this morning to cease all mining activities with immediate effect,” Walter Chidhakwa told reporters and executives from the affected mines.

The new state-owned Zimbabwe Consolidated Diamond Company will now hold all the diamond claims in the country, Chidhakwa said, adding that the move was an imperative of national economic development.
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Base Metals

'Short interest' in Rio and Antofagasta hit multi-year highs

"Short interest" in miners Rio Tinto and Antofagasta have surged to multi-year highs, suggesting that some investors are not convinced about the sustainability of their recent share price rally, analysts said.

According to Markit data, short interest - which measures the number of shares lent to speculators betting on a fall in the stock - in Rio Tinto has climbed to 1.6 percent of the shares out on loan, the highest since June 2009 and up from 0.8 percent on Jan. 20, when its shares slumped to a seven-year low.

Short interest in Antofagasta has also surged to 6.8 percent from 4.8 percent during the same period, during which the shares of Rio and Antofagasta rose more than 20 percent and 40 percent respectively.

Short interest in miners Anglo American and Glencore has also gone up this year, although their shares have spiked by around 100 percent and nearly 70 percent respectively during the period, Thomson Reuters data showed.

"There is a lot of short selling going on as credit spreads on the metals and mining companies have blown out so much recently," said Lex Van Dam, hedge fund manager at Hampstead Capital.

"The whole sector has got some support from some stability in mining prices, but the share price rally doesn't look sustainable unless we see major cuts on the supply side."

In order to profit from a stock falling, short sellers borrow the stock and sell it, expecting it to drop in value so they can buy it back at a lower price and pocket the difference.

Analysts and fund managers said that the sector's outlook still remained bearish as concerns about the pace of global economic growth, especially in top consumer China, could continue to put pressure on prices of industrial metals.

"The global macro picture hasn't changed and we are still seeing a supply glut and a weak demand environment," said Lorne Baring, managing director of B CapitalWealth Management.

"I believe the recent spike in share prices is a short-term phenomenon. Do not chase commodities-related companies."
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Major Indonesian tin smelter stops refining operations -shareholder

Major Indonesian tin smelter PT Refined Bangka Tin (RBT) has stopped refining operations and its plant will be scrapped due to environmental concerns, a companyshareholder told Reuters.

The exit of privately-owned RBT from the market could provide some support to global tin prices as falling shipments from Indonesia, the world's largest exporter of the soldering material, take a further hit.

Benchmark tin on the London Metal Exchange rose 0.9 percent to $15,910 a tonne, up from $15,880 before the news.

"All Indonesian shareholders and Singaporean partners have agreed to cease operation," Artha Graha Group founder Tomy Winata told Reuters.

"The area will be made a conservation area. The refinery won't be sold, but will be scrapped."

Winata said the decision was made after the company failed to meet "environmentally friendly" expectations.

RBT officials were not immediately available for comment.

The company slashed output last year due to rock bottom prices, producing as little as 200 tonnes a month compared with an average of around 1,000 tonnes previously.

Established in 2007, RBT had shipped refined tin to major markets such as the United States, Netherlands, Germany, Spain, China, Korea, Taiwan, Hong Kong, and Pakistan, according to the company's website.

This is the latest hit to Indonesian tin exports, which have been declining for several years due to tightening government regulations on miners and smelters operating on the islands of Bangka and Belitung.

In January, the country's shipments were just 2,486 tonnes, a 63 percent year-on-year drop.

The Southeast Asian country is concerned about the scale of illegal tin mining and smuggling, while green groups and electronics firms have expressed worries about environmental damage.
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Chinese driven aluminium overhang to foil price bulls

A massive overhang of aluminium stocks, mostly due to rising Chinese production, is set to cap a tentative price recovery triggered by large output cuts.

Last year plummeting prices and squeezed margins led to production cuts of around 5.5 million tonnes with the bulk, about 4 million tonnes, in China.

Benchmark aluminium on the London Metal Exchange hit $1,432.50 a tonne last November, the lowest since May 2009.

Prices of the metal used in transport and packaging have since recovered to around $1,500 a tonne, but a stronger rally may only encourage producers to restart idled output capacity.

Large surpluses are due to a ramp-up in China, which accounted for nearly 55 percent of global supplies of around 57 million tonnes last year.

"We think prices will stay around the $1,400/$1,500 level, that's low enough to force more supply cuts in China," said CRU's head of aluminium Marco Georgiou.

"For a price rally we need to see exports from China falling and for inventories to come down, a process which could take many years," Georgiou said.

With total reported and unreported stocks of about 15 million tonnes, chances of a price rally are thin, particularly given higher supplies from China.

Part of the reason is investment in low-cost capacity. Analysts in China estimate total costs of new smelters in the remote region of Xinjiang to be below 10,000 yuan, possibly the lowest in China.

Chinese producers have also been able to negotiate better deals for power supplies.

Up to 40 percent of aluminium smelting costs globally are accounted for by power. In China it is said to vary between 25 and 35 percent.

Production costs around the world are generally estimated at between $1,000 and $1,600.

The China Nonferrous Metals Industry Association in late 2015 estimated total aluminium production costs in China at an average around 12,000 yuan ($1,841) per tonne. Aluminium on the Shanghai Futures Exchange is around 11,000 yuan.

The latest Reuters survey showed the aluminium market in surplus by 392,000 tonnes this year.

"Aluminium has started moving towards balance...but it will need to be in deficit for a long time before the mountain of inventory is exhausted," a commodity trader said, adding that the process could be impeded by slower demand growth.

Norsk Hydro, one of the world's largest aluminium producers, cut its 2016 forecast for global demand growth to 3-4 percent from 4-5 percent, its chief executive Svein Richard Brandtzaeg told Reuters last week.

"Global aluminum production increased by 9 percent last year, compared to 4 percent growth in demand," JPMorgan said.

"Chinese aluminum production is expected to increase by 1.4 million tonnes this year, as projects in the West of China continue to ramp up."
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China alumina prices firm as stock levels dip, metal prices rise

Chinese spot alumina prices firmed further Monday on the back of stronger domestic aluminum prices and reduced alumina reserves following refinery cutbacks in recent months.

Platts ex-works Shanxi alumina spot price stood at Yuan 1,710/mt ($262/mt) full cash payment terms Monday, rising Yuan 15 from Friday, and up Yuan 65 on the week. The current price also reflected an increase of Yuan 85 from a month ago.

The front-month aluminum contract on the Shanghai Futures Exchange closed at Yuan 11,145 mt Monday, up from Yuan 10,780/mt a week ago, and also from Yuan 10,830/mt a month ago.

Spot alumina offers in Shanxi were heard at Yuan 1,730-1,750/mt cash Monday, up from Yuan 1,720-1,730/mt on Friday, and mostly around Yuan 1,700/mt at the start of last week. Tradeable prices were pegged at Yuan 1,700-1,720/mt, buyers and sellers agreed.

"Available stocks are very limited in Shanxi and Henan now, so that's the main support for alumina," a Henan smelter source said. "Domestic ingot prices are also higher, so there's more confidence overall as well."

In Henan province, tradeable ex-works alumina prices were indicated at Yuan 1,750-1,800/mt cash to partial credit terms Monday, up from Yuan 1,700-1,750/mt last week.

"Offers are high, trades are few, and general expectation is that prices will still test higher," a Beijing trader said. "But the economy is still weak, so not sure if the higher prices can sustain. We must wait and see."

In Guangxi in the south, spot alumina offers were pegged around Yuan 1,650/mt cash, with tradeable prices indicated around Yuan 1,600/mt, though no trades have been reported.

Chinese alumina prices in Shanxi and Henan are expected to rise further to Yuan 1,800-1,850/mt cash in March-April, sources said. But the levels may fall back in the second quarter on the back of increased supply as many refiners who had idled capacity earlier are expected to resume production, sources said.
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Steel, Iron Ore and Coal

CIL to set up India’s largest coal washing plant

South Eastern Coalfields Limited (SECL), a subsidiary of the Coal India Limited (CIL), would be setting up country’s largest coal washing plantwith a capacity of 25 million tonnes per annum (Mtpa) in Korba district of Chhattisgarh, Business Standard reported on February 16.

The project would be known as Kusmunda coal washery. It would be an integral part of Kusmunda Open Cast coal mine, one of the three mines operated by the SECL in Korba coalfields having an estimated reserve of 10,074.77 million tonnes.

“The total capital cost of the project would be about Rs 942 crore,” SECL spokesperson told Business Standard. The life of the coal washery that would feed different thermal power plants across the country would be 17 years, he said, adding that the project would be implemented on a turn-key basis.

The Kusmunda coal washery would be the largest in the country. The existing largest coal washery is also located in Korba district. The ACB (India) Limited had set up a coal washery at Dipka area in 1999. The Initial capacity of the plant was 1 Mtpa that had been gradually upgraded to capacity of 12 Mtpa, the reported largest coal washery in the country.

The project is reported to be part of CIL plan to achieve production of 1 billion tonnes by 2019-20. Presently, the world's largest coal miner has 15 washeries that include 12 in coking and three in non-coking coal segments. The cumulative capacity of these washeries stands at 36.8 Mtpa every year. The coking coal washeries handle 23.30 Mtpa while the non-coking washeries are able to wash 13.50 Mtpa of coal.

The CIL had planned to set up 15 new coal washeries in next three years. Of the 15 new coal washeries, 9 are non-coking of a capacity of 94 Mtpa and six are coking washeries of capacity of 18.6 Mtpa.
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China Coal Jan coal sales climb 27.3pct on year, China Shenhua up 16.9pct

China Coal Jan coal sales climb 27.3pct on year, China Shenhua up 16.9pct

China coal energy Co., Ltd, the second largest coal producer in China, sold 9.65 million tonnes of commercial coal in January, a year-on-year climb of 27.3% but a slump of 34.58% month on month, the company announced in a statement on February 22.

Of this, self-produced commercial coal accounted for 7.52 million tonnes or 77.93% of the total in January, rising 37.7% on year but down 26.27% on month.

Meanwhile, the company’s commercial coal output in January also witnessed a yearly increase of 7.0% to 7.32 million tonnes, which however dropped 7.11% from the month prior.

The yearly rises were mainly due to the relatively low levels from the same period last year, caused by high coal stocks in downstream industries and a slower progress in annual contract negotiation, industry insiders said.

However, in January, power enterprises showed little buying interest amid surplus coal stocks, which to some extent contributed to the marked monthly slumps.

China Shenhua Energy Co., Ltd., the listed arm of coal giant Shenhua Group, saw its coal sales increase 16.9% on year to 20.7 million tonnes in January 2016, the company announced on February 23.
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Yancoal Australia to raise $950 mln through asset securitization

Yancoal Australia, a unit of China's Yanzhou Coal Mining Co., Ltd, will raise $950 million (A$1.32 billion) in new debt funding through an issue of nine year secured debt bonds for continued investment within the Australian resources sector, it said on February 17.

The value translates to 6.175 billion yuan with the exchange rate of yuan against US dollar at 6.5, Yancoal said.

The issue will be made to a consortium of financiers comprising Industrial Bank Co. Ltd, BOCI Financial Products and United NSW Energy.

The bonds will be issued by a newly established wholly owned subsidiary of Yancoal -- SPV. Yancoal's interest in the New South Wales mining assets of Ashton, Austar and Donaldson will be transferred to and held by the issuer SPV.

The move is expected to increase Yancoal’s liquidity and thus improve its financial situation.

Of the total $950-million funds to be collected through asset securitization, $550 million will be invested by Yancoal in its flagship expansion project of Moolarben coal mine Phase Two, which is projected to go into operation in the third quarter of this year.

Moolarben Coal Mine is among just a few profitable mines in Australia, and its profitability is forecast to see a clear improvement on completion of the expansion project, Yancoal said.

Established in 2014, Yancoal has evolved into the No. 1 independent listed coal company in Australia. It owns a total nine mines in the state including Moolarben Coal Mine, and 27% stake in Newcastle Infrastructure Group together with 5.6% stake in Wiggins Island Wharf.
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