For international oil companies that saw access to Brazil’s gargantuan offshore reserves curtailed back in 2010, the tide is turning.

Brazil’s interim government is studying the benefits of scrapping nationalistic oil legislation that was championed by now suspended President Dilma Rousseff and her leftist Workers’ Party, said three people involved in the discussions who asked not to be to be named because the plans aren’t public. The government is considering going as far as returning to a concession model that companies prefer and consider more profitable, the people said.

The studies are expected to be presented in September to Acting President Michel Temer, who has yet to take a side in the debate, one of the people said. The plans under study go beyond a bill currently in Congress that, if passed, would remove the obligation that state-controlled oil company Petrobras operate all pre-salt fields even if it doesn’t find them attractive.

The discussion has just begun and any changes to the oil legislation would require a broad debate in Congress, which could take a couple of years, the people said. Rousseff’s predecessor, Luiz Inacio Lula da Silva, put Petrobras in charge of the country’s most prolific oil fields during the commodities boom. The Workers’ Party also pursued interventionist policies in the electricity industry, discouraging foreign investment.

Temer’s press office didn’t respond to an emailed request for comment on studies to change the auction model for the pre-salt oil fields.

Ideological Issue

Under the current production-sharing model for Brazil’s most promising offshore region known as the pre-salt, Petrobras and its partners share a portion of production with the federal government through a consortium member known as PPSA, which represents the government’s interests. The first and only time this model was put to the test at the Libra field auction in 2013, only one consortium participated and paid the minimum signing bonus, underscoring the reluctance by foreign oil companies.

The rules governing access to the country’s oil reserves are a deeply ideological issue for many Brazilian, especially members of Rousseff’s Workers’ Party who accuse Temer of trying to hand Brazil’s geologic riches to foreign oil companies. But now Brazil’s oil industry, dominated by Petrobras, has been slammed by widespread corruption, government interference and low oil prices, and those who support changing the legislation say new rules are necessary to attract investment and create jobs.

A return to a more traditional concession model for the pre-salt fields, which hasn’t yet been discussed publicly, could generate more competition at licensing rounds and accelerate the development of the region, bringing much-needed tax revenue to producing states and the federal government. The concession regime doesn’t have a mandatory participation by the state, and all oil production belongs to concession partners after paying royalties and taxes.

Even if Temer decides to throw his administration’s support behind such changes, the legislation would probably not be sent to Congress until at least next year, two of the people said.

The government is also preparing other changes that could be implemented faster to attract foreign investment to the industry. The government plans to start announcing new measures in August that include easing buy-in-Brazil requirements, extending a tax refund on imported equipment, and clarifying how to develop oil deposits that extend outside of the concession boundaries into unlicensed acreage, Oil and Gas Secretary Marcio Felix said in a Tuesday interview. The lack of clarity has delayed several large discoveries, including Petrobras’ Carcara field and Gato do Mato, operated by Royal Dutch Shell Plc, he said.

http://www.bloomberg.com/news/articles/2016-07-26/brazil-said-to-study-scrapping-nationalist-deep-water-oil-rules

Norwegian oil giant Statoil on Wednesday posted a loss for the second quarter of 2016 due to low oil prices, compared to a profit in the same period last year, and decided to cut its capex guidance by $1 billion.

The company’s net operating income in the second quarter 2016 dropped to $180 million, compared to $3.6 billion in the same period of 2015. The reduction was primarily due to the drop in prices for oil and gas and lower refinery margins. Cost reductions contributed positively to the results.

Statoil reported a loss of $302 million for the quarter, compared to a profit of $866 million in the corresponding quarter of 2015.

Further, the company’s revenues dropped 37 percent during the quarter to $10.895 billion, from $17.4 billion in the same period last year.

The Norwegian company delivered equity production of 1,959 mboe per day in the second quarter. The underlying production growth in the quarter, after adjusting for divestments, was 6% compared to the second quarter of last year.

Statoil said it is lowering its capex guidance for 2016 from $13 billion to $12 billion and its exploration guidance for 2016 from $2 billion to $1.8 billion. Production guidance remains unchanged, and expected annual organic production growth is 1% from 2014 to 2017.

“We delivered solid operational performance with strong production growth and progress on project development and execution. Our financial results were affected by low oil and gas prices in the quarter,” says Eldar Sætre, President and CEO of Statoil ASA.

http://www.offshoreenergytoday.com/statoil-sinks-to-red-in-2q/

BP will forge ahead with at least three more new projects this year, its CEO said, despite the British oil major reporting a 45 percent drop in second-quarter earnings that prompted a cut in its 2016 investment budget to below $17 billion.

Tuesday's results missed expectations, with analysts surprised by higher corporate charges, including administrative costs relating to Gulf of Mexico oil spill liabilities, and a lower contribution from BP's stake in Russian oil producer Rosneft.

Rivals Shell, Statoil, Total and Eni also report second-quarter numbers this week, sharpening the focus on Tuesday's drop in crude oil prices towards $44 a barrel, well short of the $60 previously cited as the level at which oil majors can break even.

Though BP chief Bob Dudley acknowledged that the global oil glut's impact on refining margins and revenue continues to make for a challenging environment, he said that capital expenditure plans have been helped by a drop in associated costs.

"We're going to choose our projects really carefully and the cost reductions and re-engineering of the projects has really brought them down to what I think is a very attractive (price range)," Dudley told Reuters.

Dudley said that BP could make another three final investment decisions this year, having already signed off on the expansion of its Tangguh liquefied natural gas (LNG) plant in Indonesia and the Atoll offshore gas project in Egypt.

PROJECTS EARMARKED

A gas project in India, the second phase of the Mad Dog deepwater oil field in the Gulf of Mexico and a Trinidad project could all get the green light, he said.

BP's projects pipeline is expected to add 500,000 barrels of oil equivalent a day by the end of 2017, with a further 300,000 bpd by the end of the decade.

Shares in the company fell 2.5 percent to 429 pence by 1128 GMT, but RBC Capital Markets analyst Biraj Borkhataria said: "We think continued cost and capex deflation reads positively for the sector."

Second-quarter underlying replacement cost profit, BP's most-watched profit measure, was $720 million, down from $1.3 billion in the same period last year and $120 million below an analyst consensus provided by the company.

BP's refining margins hit a six-year low for the second quarter and the company said they would remain under significant pressure in the coming months.

It continues to reduce costs and now expects full-year capital expenditure to come in below the previous target of $17 billion target, saying that its 2017 investments could drop to as low as $15 billion if crude prices remain weak.

"I don't think BP should go below that because then you start to take away from important growth," Dudley said.

Total costs for the 2010 Deepwater Horizon explosion and oil spill, which killed 11 workers, has reached $62 billion but the majority of claims have now been settled.

BP maintained its quarterly dividend at 10 cents a share, reassuring investors in a sector valued for its consistent payouts.

http://www.reuters.com/article/us-bp-results-idUSKCN1060J7

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China National Petroleum Corp., the country’s oil and gas behemoth, said first-half profit rose 11 percent and that spending cuts at the country’s largest field helped boost earnings.

The parent company of listed unit PetroChina Co. posted a profit of 27.58 billion yuan ($4.13 billion) in the six months ended June 30, according to a Beijing-based spokesman, who asked not to be identified, citing company policy. That compares with a profit 24.82 billion yuan a year ago, according to data compiled by Bloomberg. Sales were 853.4 billion yuan, according to the spokesman, versus 1.02 trillion yuan a year earlier.

“CNPC is doing what it can to cut costs, but low oil prices still sets a floor for how much the company can really make,” Tian Miao, an analyst with policy researcher North Square Blue Oak Ltd., said by phone. “PetroChina owns the best-quality assets of CNPC, including upstream, pipeline and refining, so improved CNPC earnings are a good sign that PetroChina may also report improved performance.”

CNPC saw “better than expected” results in the first half, Chairman Wang Yilin said earlier this month, without providing details. “Operational performance” improved every month in the first six months, though the company’s crude oil business still posted a loss, according to Wang. The state-owned explorer will give priority to natural gas exploration and production in the second half of the year, he said.

China’s largest oil and gas producer said in a separate statement Tuesday that its Changqing field produced 26.5 million tons of oil equivalent in the six months through June and that the unit operating it posted a profit during that period, overcoming losses during January and February.

Changqing produced 11.76 million tons of crude (about 473,600 barrels a day), less than half the field’s total, while gas production reached 18.52 billion cubic meters. CNPC improved single-well output at Changqing and controlled production costs by investing the “lowest possible” amount in exploring for new reserves, the company said.

Brent crude, the global benchmark, averaged about $47 during the second quarter, up from about $35 during the first three months of the year. Prices during the first half of the year averaged about $41 a barrel, down roughly 30 percent from the same period in 2015.

PetroChina may break even in the first half on one-off gains and higher oil prices in the second quarter, Citigroup Inc. analysts including Graham Cunningham wrote in a July 15 research note. The listed unit posted a 13.8 billion yuan loss in the January to March period, its first-ever quarterly loss since listing in 2000. The company closed 1.3 percent lower at HK$5.28 on Tuesday, compared with a 0.6 percent gain in the city’s benchmark Hang Seng Index.

http://www.bloomberg.com/news/articles/2016-07-26/china-oil-giant-s-income-rises-as-costs-cut-amid-shift-to-gas

Former InterOil CEO Phil Mulacek issued a comment on the recent ExxonMobil’s US$2.5 billion offer to acquire InterOil, claiming the shareholders will forego billions of dollars of value.

He added that by accepting the ExxonMobil proposal, the InterOil shareholders would also miss on five cash payments Total agreed with InterOil in 2014.

According to Mulacek, the contingent resource payment (CRP) is “vastly inadequate for InterOil shareholders” as well as potentially manipulative and structurally flawed.

“The recent certification of the Elk and Antelope resource, which Oil Search, recently conducted in connection with its purchase of a minority interest in PRL15 in 2014, shows an average estimated 2C resource of only 6.43 tcfe,” Mulacek said.

He added that this is materially below the 10 tcfe estimate Oil Search suggested claiming this supports the view that the CRP as proposed by ExxonMobil would have only a minimal value unless modified.

Mulacek, representing the group called ‘Concerned InterOil Shareholders’ said the group’s main concern is that the ExxonMobil’s CRP proposal is based only on a single resource estimate performed after Antelope-7 and before any gas or LNG is produced, which will not fully reflect the true resource size.

The group calls for ExxonMobil to provide for recertifying the resource after production is underway and for supplemental payments based on the recertification, in each case back-to-back with similar recertifications and payments under the existing Total agreement with InterOil, saying, “this is reasonable and fair to both parties.”

Mulacek urged ExxonMobil to amend the CRP proposal and certification review process “to provide a fair outcome for InterOil shareholders as well as Exxon.”

http://www.lngworldnews.com/exxonmobil-offer-inadequate-former-interoil-ceo-says/

Chemical company BASF's adjusted operating profit dropped 16 percent in the second quarter, hurt by a slump in oil and gas unit and by weak demand for its agricultural pesticides.

The world's largest chemical company by sales reported earnings before interest and tax (EBIT), adjusted for one-off items, of 1.7 billion euros, compared with the average forecast for 1.71 billion in a Reuters poll of analysts.

The group reaffirmed its forecast for a considerable decline in 2016 sales - due to the sale of its gas trading business and as it adjusts prices to lower energy and raw material costs - and for adjusted EBIT to be slightly below the year-earlier level.

It repeated that the goal was ambitious and depended on oil prices.

http://www.reuters.com/article/us-basf-se-results-idUSKCN1070FA

DuPont reported a higher-than-expected rise in quarterly profit as lower costs boosted margins, and the chemicals and seeds producer said it expected a 50 percent jump in operating earnings per share in the current quarter from a year earlier.

The company, which is in the process of merging with Dow Chemical Co, raised the low-end of its 2016 operating earnings forecast by 10 cents per share to $3.15. It maintained the upper end at $3.20.

DuPont continues to expect to close the merger later this year as the companies are working closely with regulators in all relevant jurisdictions, Chief Executive Ed Breen said in a statement on Tuesday.

European Union antitrust authorities are expected to rule on the merger by July 28.

Both Dow and DuPont have said that any asset sales required would likely be minor, but pressure to scrutinize the impact of the rapid consolidation in agriculture on farmers and consumers is mounting.

The chairman of the U.S. Senate Judiciary Committee last month urged federal antitrust officials to conduct a "careful analysis" of the merger between Dow and DuPont.

DuPont and Dow are merging in an all-stock deal, a first step toward breaking up the combined company into three separate businesses focused on agriculture, material science and specialty products.

DuPont, which gets about half of its revenue from outside the United States and Canada, said on Tuesday it now expected a strong dollar to hurt full-year profit by about 15 cents per share, less than the 20 cents it had estimated earlier.

The company is also benefiting from its cost-cutting program, and is on track to reach $1 billion in cost savings on a run-rate basis by year-end.

Net income attributable to the company rose to $1.02 billion, or $1.16 per share, in the second quarter ended June 30 from $940 million, or $1.03 per share, a year earlier.

Excluding items, the company earned $1.24 per share, easily beating analysts' average estimate of $1.10, according to Thomson Reuters I/B/E/S.

Net sales fell 0.8 percent to $7.06 billion, but beat analysts' expectation of $7.01 billion.

http://www.reuters.com/article/dupont-results-idUSL4N1AC3ES

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Unconventional development in the US Lower 48 has been the most reactive to the oil price collapse, with operators nimbly halting drilling plans and scaling back activity to balance the books.

US tight oil operators drilling with positive NPV today are generating interest for investors, but will they continue to be economic in the future? After looking at data for more than 120 operators across the Lower 48, we can see where the largest low-cost inventories reside.

While most operators across the major tight oil plays high-graded to the core, focusing the majority of spend on the more prolific and economic areas, operators in the Bakken withdrew the most rigs and stopped development in hundreds of wells - so much so, that the Bakken is now home to more drilled but uncompleted wells (DUCs) than any other play in the US Lower 48.

These DUC inventories are critical to forecasting production volumes and are responsible for a slower production and supply reponse relative to the rig count, as rigs are no longer fully indicative of how many wells will be brought online. These DUCs provide cash flow to these operators, enabling them to focus on completions at will once rig commitments expire.

US Lower 48 DUC backlog and horizontal rig count



The Permian, after a decade in the shadows of the Bakken and the Eagle Ford, is showing more promise in the US tight oil space due to its substantial drilling inventory of stacked pay and low breakeven resource.

Compared to our global view in 2014, we now expect 7 billion boe less will be produced from 2016 to 2020, with the US Lower 48 accounting for more than 70% of those volumes in the near-term, through 2017. The agility that brought costs and breakevens down will slowly resurrect them again, with dormant inventories coming online and getting back on track to profitability.

http://www.woodmac.com/lp/highest-returns/Lower48_NPV/?utm_source=twitter&utm_medium=social&utm_campaign=sm-lower48-capex-buyside&utm_content=p

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Valero Energy Corp reported a bigger-than-expected quarterly profit as the U.S. refiner continued to benefit from low crude costs.

Crude oil prices have remained depressed for the past two years, lowering costs for refiners and weighing on prices for refined products, which has boosted consumer demand.

"We are also encouraged by ample supplies of medium and heavy sour crude oils in the market, which should help to expand their discounts relative to Brent crude oil, and by a positive demand outlook," Chief Executive Joe Gorder said in a statement on Tuesday.

However, crack spreads - the difference between the prices of crude oil and refined products - have narrowed sharply due to a spike in gasoline and distillate inventories in the United States.

This has hurt refining margins. Valero's refining throughput margin fell to $8.93 per barrel in the second quarter ended June 30 from $13.71 per barrel, a year earlier.

Net income attributable to shareholders fell to $814 million, or $1.73 per share, in the latest quarter, from $1.35 billion, or $2.66 per share, a year earlier.

Operating revenue fell 22 percent to $19.58 billion, but total costs and expenses fell by a fifth.

Excluding items, Valero reported earnings of $1.07 per share, beating analysts' average estimate of $1, according to Thomson Reuters I/B/E/S.

http://www.reuters.com/article/valero-energy-results-idUSL4N1AC3S7

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Valero Energy Corp, the largest U.S. refiner, expects to get hit with a half-billion-dollar bill in the second half of the year thanks to the rising cost of meeting government mandates to blend biofuels.

For the full year, the company's cost to blend renewable fuels like ethanol will swell to between $750 million to $850 million, mainly to pay for the paper credits used to meet the U.S. biofuels program, the Renewable Fuel Standard (RFS), the San Antonio, Texas-based refiner said on Tuesday as it reported second-quarter results.

The RFS program requires oil refiners and importers to blend more renewable fuel or buy paper credits in an opaque, sometimes volatile market. Compliance credits to meet the standards, known as Renewable Identification Numbers (RINs), were about 25 percent higher in the second quarter than a year earlier.

It is another blow for the company, which is already dealing with weak refining margins.

The price tag would be up from the $440 million Valero paid for biofuels compliance in 2015, the most it has paid to meet RFS requirements since at least 2009, according to U.S. Securities and Exchange Commission filings.

Valero spent about $334 million in the first six months of 2016 on biofuels compliance, the company said.

Elevated costs for RINs credits are one of the headwinds the company faces, said John Locke, Valero's vice president of investor relations, on a call with investors.

The biofuels program was launched more than a decade ago to boost the use of renewables to cut greenhouse gas emissions and promote energy independence. This year's more ambitious requirements could hurt U.S. refiners, already facing what could be their worst year since the shale boom began.

That puts expected second-half costs at as much as $516 million, nearly matching the $517 million it spent for all of 2013, when RIN prices surpassed a record of $1.40 apiece. The current price is around 96 cents.

Prices of RINs have been rising since regulators set annual targets in May for the amount of biofuels including ethanol required to blend with gasoline and diesel and as worries have mounted of tightening inventories.

"If I'm a refiner with a lot of gasoline and distillate production, why wouldn't I be concerned about rising RIN prices? The conditions are there for them to (rise)," said Timothy Cheung, vice president at ClearView Energy Partners in Washington. He estimated that RIN prices could rise another 25 percent by year-end.

Valero and companies such as Delta Air Lines Inc (DAL.N), which owns a refinery, are stepping up their push to get regulators to tweak the program to shift onus to comply further downstream.

http://www.reuters.com/article/us-valero-energy-results-biofuels-idUSKCN1062K4

Oil and gas producer Anadarko Petroleum Corp (APC.N) reported a smaller-than-expected quarterly loss as it cut costs to counter a prolonged slump in crude prices.

The company, which has cut this year's capital budget by half, said costs were lower by 11.8 percent in the quarter ended June 30.

The company said early this year that it laid off about 1,000 workers and sold more than $1 billion in assets.

Texas-based Anadarko raised the mid-point of its full-year sales volume forecast by 2 million barrels of oil equivalent (MMBOE) on increased sales from Gulf of Mexico, Delaware and DJ basins. The company estimated in March sales volumes of 282-286 MMBOE after adjusting for divestitures.

Net loss attributable to Anadarko was $692 million, or $1.36 per share, in the second quarter, compared with a profit of $61 million, or 12 cents per share, a year earlier.

Excluding items, the company lost 60 cents per share, compared with analysts' average estimate of 80 cents, according to Thomson Reuters I/B/E/S.

Revenue fell 27 percent to about $1.92 billion, above analysts' estimate of about $1.89 billion.

http://www.reuters.com/article/us-anadarko-petrol-results-idUSKCN1062J5

Understanding reservoir parameters can help successfully optimize fracturing treatments per well

Hydraulic fracturing operations affect reservoir flow dynamics and increase production in unconventional tight reservoirs. The control of fracture growth and geometry presents challenges in formations in which the boundary lithologies are not highly stressed in comparison to the pay zone, thus failing to prevent the upward migration of fractures. Several factors influence the growth and geometry of fractures, including reservoir, wellbore, and fluid/proppant parameters. Successful results require a thorough knowledge of reservoir parameters, including stress distribution and the appropriate use of corresponding wellbore components and fluid/proppant. The success of a hydraulic fracturing treatment is highly correlated with control of the created fracture geometry.

This paper discusses a study in which a numerical fracture model is used to design the fractures in a tight oil reservoir. Fracture treatment designs include the selection of fracturing fluids, additives, proppant materials, injection rate, pumping schedule, and fracture dimensions. Using the fracture model, a statistically representative synthetic set of data is generated for each parameter to build data-driven models.

Follow link to paper https://www.onepetro.org/conference-paper/SPE-177549-MS

Just last week MDN predicted that Atlas Resource Partners (ARP), a publicly-traded exploration and production master limited partnership (“MLP”) with operations in basins across the United States including the Marcellus and Utica Shale plays, was heading for a bankruptcy.

Yesterday ARP announced it has been working behind the scenes with the people it owes money (lenders and bondholders) on a deal to convert their debt into common units (in essence, shares of stock). The deal worked out will eliminate $900 million in debt ARP owes.

The deal is like many others we’ve written about over the past six months or so–where a company waves the magic wand and turns debt into ownership.

The problem with these plans, in our humble opinion, is that it punishes those who currently own equity in the company. The stockholders (in this case, since it’s a master limited partnership, called unitholders), find their shares are devalued to the point of being worth toilet paper.

We live in a screwed up world where owning debt is better than owning equity. But we digress. Here’s ARP’s so-called pre-packaged bankruptcy plan to screw current owners, and turn debtholders into the new owners. ARP plans to file the paperwork in court tomorrow…

http://marcellusdrilling.com/2016/07/atlas-resource-partners-filing-for-bankruptcy-tomorrow/