Mark Latham Commodity Equity Intelligence Service

Tuesday 10th May 2016
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    Rousseff impeachment takes another twist

    Today, the story of Rousseff's impeachment took another unexpected, and sharp U-turn when moments ago, Bloomberg reported that the interim chief of Brazil’s lower house, Waldir Maranhao, accepted a request from the government's attorney general to annul the procedure that approved the impeachment motion in the house, according to reports from Folha de S.Paulo newspaper and Epoca magazine. The stated reason: procedural flaws.


    Whether this means that Rouseff's entire impeachment process has now been derailed (arguably as a lot of money has been transferred under the table) will be revealed shortly.

    And while nobody expected Rousseff to exit without a fight, if this new twist in the Brazilian political soap opera is confirmed and is actually implemented - just three months before the Rio Summer Olympics - it would mark a dramatic anticlimax to a process that was supposed to conclude with the expulsion of Dilma from the presidential seat and unveil a new (if just as corrupt) government, which has been the catalyst for a 40%+ surge in Brazilian stocks YTD, even as Brazil's economy has continued to deteriorate sharply.

    The immediate result: a slump for both Brazilian stocks and the currency, both of which are sharply lower on the initial report.
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    Incitec Pivot H1 profit falls on fertiliser price drop, mining slump

    Fertiliser and explosives maker Incitec Pivot Ltd reported a 6.4 percent fall in half-year profit before one-off items on Tuesday, hit by sliding fertiliser prices and weaker mine explosives demand and warned of a tough second half.

    "The markets in which IPL operates are expected to continue to be challenging in the second half of the financial year. This includes the potential for further declines in coal volumes in the U.S. and below trend fertiliser prices," Incitec said in its results statement.

    The world no.2 maker of mine explosives said net profit before one-offs for the six months to March fell to A$137.1 million ($100.2 million) from A$146.4 million a year earlier. That was better than a forecast of A$109 million from Macquarie.

    Its bottom line was dented by a A$105.6 million writedown on its Gibson Island plant, reflecting a slide in fertiliser prices and rising gas input costs on Australia's east coast. That took its net profit down to A$31.5 million.

    Incitec cut its interim dividend by 7 percent to 4.1 cents a share. Its bigger rival Orica rocked the market on Monday by slashing its explosives volume outlook for 2016 and cutting its dividend in half.
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    Oil and Gas

    Saudi Aramco CEO Sees `Significant Growth' in Oil Output in 2016

    Saudi Arabia, the world’s biggest oil exporter, plans “significant growth” in output in 2016 and further international expansion, the head of the country’s state-run producer said, even as global oversupply contributed to a drop in crude prices from a year ago.

    Saudi Arabian Oil Co., also known as Saudi Aramco, will boost capacity at the Shaybah oil field by 33 percent to 1 million barrels a day in the next couple of weeks and will double natural gas production over the next decade, Amin Nasser, chief executive officer told reporters Tuesday at its headquarters in Dhahran, eastern Saudi Arabia.

    “Even though it is challenging, it’s still an opportunity for us to grow,” Nasser said of the international expansion plans.

    Saudi Arabia is seeking to reduce its reliance on oil sales amid lower prices for its most lucrative export. As part of that effort, the king’s increasingly influential son, Deputy Crown Prince Mohammed bin Salman, wants to sell stock in Saudi Aramco for the first time, creating what could be the world’s largest listed company.

    The kingdom is leading Organization of Petroleum Exporting Countries members in a battle for market share against higher-cost producers including U.S. shale drillers. Nasser’s predecessor as CEO, Khalid Al-Falih, who was appointed oil minister Saturday, said he’ll keep Saudi oil policy unchanged.

    “Saudi Arabia will maintain its stable petroleum policies. We remain committed to maintaining our role in international energy markets and strengthening our position as the world’s most reliable supplier of energy,” Al-Falih, who remains Aramco’s chairman, said in a statement Sunday, his first day in office.

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    Iran Seen Taking Its Time on Joint Action With OPEC Members

    Iran says it’s almost ready to talk with other OPEC members about limiting oil production as the country’s exports recover to levels reached before international sanctions crippled crude sales. Morgan Stanley and Barclays Plc say no agreement is in the cards for now.

    With prices up 65 percent from the 12-year low in January, joint action by members of the Organization of Petroleum Exporting Countries may not be needed, according to Barclays analyst Miswin Mahesh in London. Morgan Stanley says higher prices are reducing the urgency for OPEC to act.

    “The market is set to balance, but higher prices could slow down the process,” Mahesh said by phone Monday.  “Would it really be in their long term interest of balancing the oil market if oil prices move higher too quickly?”

    The Persian Gulf country will double crude exports to 2 million barrels a day this month compared with sales before sanctions were lifted in January, Oil Minister Bijan Namdar Zanganeh said in a speech in Tehran Sunday. Lifting sales to the pre-sanctions level could pave the way for Iran and other OPEC members to talk about limits on production in as soon as one or two months, Rokneddin Javadi, managing director at National Iranian Oil Co., said Thursday.

    Iran is seeking to rebuild its energy industry and restore crude sales after a January nuclear deal expanded its access to global oil markets and investment. The country last month refused to join other nations in a push to freeze output.

    Iran exported about 2 million barrels of crude daily in 2011, before U.S. and European restrictions forced countries to stop buying from Iran, according to the Joint Organisations Data Initiative. Iran sold about half that amount once sanctions kicked in, Zanganeh said Sunday. The country produced 3.5 million barrels a day of crude in April compared with about 2.8 million a year earlier, according to data compiled by Bloomberg.

    Oil prices

    Rising production and exports from Iran is bearish for oil prices as output returns faster than expected, Adam Longson, a Morgan Stanley analyst, said in a report e-mailed Monday. Crude and condensate output of about 4.2 million barrels a day is 800,000 barrels more than the country pumped in November and exceeds consensus estimates for the amount Iran would actually add to the market, according to the report.

    “Iran may be willing to join a freeze, but only because production has exceeded expectations,” Longson said.

    OPEC members can’t be expected to reach a freeze deal when they next meet in June, according to Robin Mills, chief executive officer of Dubai-based consultants Qamar Energy. Iran’s oil production needs to be closer to 3.6 million to 3.8 million barrels a day to consider a freeze, and that probably won’t happen until the third or fourth quarter, Mills said.

    Morgan Stanley forecasts oil to drop to an average of $30 a barrel in the third and fourth quarters while Mills expects Brent crude to end 2016 at about $50 a barrel.

    “OPEC intervention is unlikely,” according to Morgan Stanley. “It remains to be seen whether producers are truly willing to agree to an artificial cap, particularly as higher prices reduce the urgency.”
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    Shell workers evacuated from Nigerian oil field after threat as VP meets oil majors

    Shell workers at Nigeria's Bonga oil field in the southern Niger Delta are being evacuated following a militant threat, a labor union official said on Monday as the vice president met oil majors to discuss a surge in violence.

    Last week, militants attacked a Chevron facility in the impoverished Delta where tensions have been building up since authorities issued an arrest warrant in January for a former militant leader on corruption charges.

    Shell has been evacuating workers from Bonga, a union official said as local media reported an unconfirmed militant attack in the area.

    "The evacuation is being done in categories of workers and cadres," Cogent Ojobor, chairman of the Warri branch of the Nupeng oil labor union, said. "My members are yet to be evacuated."

    He gave no numbers.

    A Shell spokesman said earlier that oil output was continuing at its oil fields in Nigeria while it was monitoring the security situation.

    Vice President Yemi Osinbajo in the evening in the capital Abuja met executives from Shell, France's Total, and Italy's Agip and Chevron. All declined to talk to Reuters.

    "All of us as stakeholders are concerned and we have agreed to work together to ensure that production is not disrupted," said Henry Dickson, governor of the oil-producing Bayelsa state in the Delta, who took part in the meeting.

    "This is a time that we cannot afford to have any disruption, not to talk of vandalism of critical national assets," he said.

    In separate violence, gunmen killed four policemen traveling to Bayelsa's capital Yenagoa, police said.

    A group known as the Niger Delta Avengers has claimed responsibility for the Chevron attack. The same group has said it carried out an attack on a Shell oil pipeline in February which shut down the 250,000 barrel-a-day Forcados export terminal.

    Residents in the Delta have been demanding a greater share of oil revenues. Crude oil sales account for around 70 percent of national income in Nigeria but there has not been much development in the region.

    President Muhammadu Buhari has extended a multimillion-dollar amnesty signed with militants in 2009 but upset them by ending generous pipeline protection contracts.

    The militancy is a further challenge for a government faced with an insurgency by the Islamist militant Boko Haram group in the northeast and violent clashes between armed nomadic herdsmen and locals over land use in various parts of the country.
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    Petrobras Seeks $1 Billion China Loan Faster Than Planned

    Brazil’s state-controlled oil company Petrobras is seeking a $1 billion loan from the Export-Import Bank of China before originally planned as its debt service costs surge in the coming years amid the worst oil market in a generation.

    Petroleo Brasileiro SA, as it is formally known, is negotiating a definitive contract with the Chinese lender after signing a term sheet, the Rio de Janeiro-based producer said Monday in a filing. The financing is tied to equipment and service contracts from Chinese suppliers, and was originally planned for 2017, it said.

    The oil producer, which has been mired in Brazil’s biggest corruption investigation known as Carwash, has been leaning more heavily on Chinese lenders recently at a time ratings downgrades, the rout in oil prices, and Brazil’s recession have led to higher borrowing costs in international debt markets. China has invested in oil-rich nations to ensure supplies to the world’s second-biggest crude market after the U.S., and similar deals have helped Venezuela fund its ballooning debt.

    In February, Petrobras secured a $10 billion loan from China Development Bank Corp. that is part of a deal to supply crude to the Asian country. The $1 billion loan announced Monday is part of Petrobras’ strategy of diversifying its financing sources, it said.

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    Statoil to get rare respite from green criticisms at AGM

    Norwegian oil company Statoil will face only muted criticism of its environmental record at an annual general meeting (AGM) on Wednesday, in a rare respite caused by a small shift towards green energy.

    All major oil firms say they are working to protect the environment, but analysts say it is frequently hard to judge their sincerity. That makes the stridency of green activists' protests at AGMs one yardstick.

    On Wednesday, the only critical environmental resolution will be by the Norwegian Grandparents' Climate Campaign, urging Statoil to halt oil and gas exploration worldwide and to pull out of projects such as tar sands in Canada.

    Other groups such as the WWF conservation organisation and Greenpeace, which have submitted critical resolutions every year since at least 2010 that attract little support from shareholders, reckon state-controlled Statoil deserves a break.

    "We do see a shift in Statoil that we wanted to acknowledge by not pestering them at this year's AGM," said Nina Jensen, head of WWF Norway.

    "They have still got a huge way to go," she said, adding that organising resolutions and lobbying also takes a lot of time.

    Among shifts in the past year, Statoil has set up a renewable energy area, backed by a $200 million venture capital fund. Last month, Statoil agreed to invest 1.2 billion euros ($1.37 billion) with E.ON to develop a wind farm off Germany.

    "There's been a shift since Eldar Saetre took over as CEO" in February 2015, said Martin Norman of Greenpeace. "He's doing things that (former CEO) Helge Lund would never have done."

    Saetre welcomed the relative lack of criticism.

    "They obviously reckon that we are working with some of the right things and I think so too," he told Reuters. "Over time, I believe that aiming for a low-carbon society is also the most profitable."

    Halfdan Wiik, a retired librarian who chairs the Grandparents' Climate Campaign, said Statoil was not doing enough. "You have to keep on annoying them," he said. "We have heard nice words before."

    In May 2015, Statoil joined European firms BG Group , BP, Eni, Royal Dutch Shell and France's Total in calling for a pricing system for carbon emissions.

    A Paris summit on climate change in December set a goal of phasing out net greenhouse gas emissions by 2100. Statoil says its emissions per barrel of oil produced are among the lowest in the world.

    Analysts say it is too early to say much about the financial implications of Statoil's shift.

    "It remains to be seen. So far the renewable business in Statoil is a very small part of the overall picture," said Kjetil Bakken, an analyst at Carnegie. "My guess is that it obviously helps when it comes to the public image."

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    Argentina shale development moves forward, but still slow

    Argentina has the potential to become a net exporter of oil and natural gas from its huge shale resources, a task that will require large investments not just by majors but also a lot of junior players, executives said Monday.

    "If Argentina does things right, it could become a big exporter of oil and gas," Arturo Vilas, general manager of Canada's Miramar Hydrocarbons, said at the Argentina Shale Gas and Oil Summit in Buenos Aires.

    Argentina has among the world's largest shale oil and gas resources, and big companies like the country's state-run YPF, Chevron and Dow Chemical have started to put them into production, while ExxonMobil, Shell and Total are pursuing production pilots.

    The investments have achieved stable production, but it is still "very little," Vilas said.

    The country is producing about 50,000 b/d of oil equivalent in shale oil, gas and liquids, according to Neuquen government data. Neuquen is a southwestern province that is home to the giant Vaca Muerta play and most of the country's shale drilling.

    There could be an increase in investment this year thanks to improved conditions for doing business in the country. The new right-of-center government of President Mauricio Macri, who took office in December, has returned the country to global financial markets by ending a 15-year sovereign debt default, expanding financing opportunities for companies. His administration has also raised most energy prices, lifted capital controls and scrapped trade restrictions.

    "Investment conditions have improved," Vilas said.

    What is more, he said the investments over the past few years have reduced operational risks and proven that Vaca Muerta can extract oil and gas.

    To expand production, Argentina needs an influx of junior companies, Vilas said, drawing a comparison to their role in the shale boom in Canada and the United States.

    A longer-term necessity is to integrate the region so that the future surplus in Argentine oil and gas production can be sold to neighboring countries, he added.

    If Argentina can bring in the investments needed to develop Vaca Muerta and other shale and tight plays, then it could become a net exporter in the nearly 15 years it took the US to go from a big energy importer to a "potentially big exporter," Vilas said.

    However, to attract investment, Argentina faces competition from other shale plays in Latin America, including in Brazil, Colombia and Mexico, as well as the offshore subsalt resources in Brazil, he said.

    Hermann Steinbuch, the manager of production and operations in Argentina for Canada's Madalena Energy, also said that more companies are needed in the plays to achieve explosive growth.

    "We need small companies to work in the formations, to take on the risks," he said.

    With more operators as well as services companies, this will help to cut cost and improve profit potential, he said.

    YPF produces 44% of the country's 520,000 b/d of oil and one-third of the 120 million cu m/d of gas, trailed by BP-backed Pan American Energy, France's Total, Argentina's Pluspetrol and Tecpetrol, China's Sipetrol and Chevron. Most of the juniors produce less than 1% of national oil and gas and have little acreage.
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    In rare reversal, Brazil exports diesel to Europe

    Brazil has joined a list of countries exporting diesel to Europe, reversing a traditional route and underscoring a weakening of the largest South American economy.

    At least two 37,000 tonne cargoes of diesel, on the tankers Torm Gunhild and MT Alexandros, have sailed in recent weeks from Brazil to Europe, according to Reuters ship tracking data and traders.

    Torm Gunhild is heading to Venice and is chartered by Italian oil company Eni while MT Alexandros has been chartered by trading house Glencore and is set to discharge in the Canary Islands.

    Traders linked the rare arbitrage to Brazil's economy, which has struggled with a deepening recession in recent years. Its economic output fell 3.8 percent in 2015 and is expected to decline by the same amount in 2016, according to the International Monetary Fund.

    According to trade sources, one of the cargoes loaded distillates off the coast of Brazil from a vessel that originated at India's Reliance oil refinery.

    Diesel consumption in Brazil, which imports much of its needs from the United States, Asia and, at times, Europe, has also been on a steady decline.

    "We do not expect diesel demand to increase significantly until the wider economy recovers," consultancy Energy Aspects said last month.

    Europe is the world's main hub for diesel due its heavy use. A sharp increase in diesel refining capacity around the world has led over the past year to a sharp increase in supply, in Europe in particular, putting heavy pressure on diesel refining margins.

    France's Total is offering to sell a 270,000 tonne cargo of diesel into Europe, which would be the largest cargo ever sold in the region, according to traders.
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    Kosmos Energy announces significant gas discovery offshore Senegal

    Kosmos Energy announced today that its Teranga-1 exploration well offshore Senegal has made a significant gas discovery.

    Located in the Cayar Offshore Profond block approximately 65 kilometers northwest of Dakar in nearly 1,800 meters of water, the Teranga-1 well was drilled to a total depth of 4,485 meters. The well encountered 31 meters (102 feet) of net gas pay in good quality reservoir in the Lower Cenomanian objective.

    Well results confirm that a prolific inboard gas fairway extends approximately 200 kilometers from the Marsouin-1 well in Mauritania through the Greater Tortue area on the maritime boundary to the Teranga-1 well in Senegal. Kosmos has now drilled five consecutive successful exploration and appraisal wells in this fairway with a 100 percent success rate.

    In the process, the company has discovered a gross Pmean resource of approximately 25 Tcf and estimates the fairway may hold more than 50 Tcf of resource potential.
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    Resilient U.S. drillers squeezing out more oil than expected, Goldman says

    The nation’s oil production is set to drop less than expected this year as drillers in West Texas and Oklahoma find ways to pump crude faster, and for less money, Goldman Sachs says.

    U.S. crude output should fall by 650,000 barrels a day this year, the investment bank said Monday, revising its previous forecast from a decline of 725,000 barrels a day after two weeks of earnings reports by oil and gas explorers.

    It’s not a large adjustment, and it doesn’t change Goldman’s mind that falling domestic crude production will, over the next few months, help lift energy prices by realigning oil supply and demand after a two-year glut.

    But it’s a sign U.S. drillers are still pushing back against the sharp natural declines across shale plays in Texas and elsewhere, and that they could get an assist from the recent rally in crude prices.

    And the fact that oil prices are rising in the face of resilient shale output and higher-than-expected production out of Iran shows global demand is stronger than many believe, and production is falling off elsewhere, Goldman said.

    “Signs the world will need a restart of the shale machine remains a potential positive catalyst for oil (companies) despite the recent rally,” Goldman analysts wrote.

    One place crude production is falling is Canada, which has suffered an output loss of 1 million barrels a day as wildfires continue to rage across the country.

    If Canadian oil sands producers are able to begin pumping oil again by the end of the week, Goldman said, an average 650,000 barrels a day of oil production could be lost over three weeks as facilities are ramped back up.

    That’s about 14 million barrels, Goldman estimates, and while that’s a big number, it wouldn’t disrupt North American crude inventories much, as U.S. storage tanks have some 543 million barrels of oil sloshing around, near record levels.
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    Suncor looks to restart oil-sands production after wildfires

    Canada oil-sands producers including Suncor Energy Inc. could resume production within a week after the threat subsides from wildfires that cut as much as 40 percent of the region’s output.

    A quick restart depends on whether companies managed shutdowns properly and if power and pipeline infrastructure is unscathed, according to analysts at Wood Mackenzie Ltd. and IHS Energy.

    Suncor and Syncrude Canada Ltd., two of the biggest producers in the area that’s been ravaged by wildfires near Fort McMurray, Alberta, both said they managed safe shutdowns. Only one oil-sands site, Cnooc Ltd.’s Nexen operations, has suffered minor damage.

    “The best possible case, you’re probably looking at somewhere within a week to get them restarted,” said Harold York, vice president of integrated energy at Wood MacKenzie. Restarts will also depend on availability of workers after large-scale evacuations, which may be hindered given destruction of homes in the area, he said.

    If companies executed controlled shutdowns, that means bitumen has been cleared from the system so that restarts won’t be hindered, according to Kevin Birn, a director at IHS Energy in Calgary.

    The bulk of the nation’s large oil-sands projects shut some or all output in recent days, cutting supplies by about 1 million barrels a day, according to an IHS Energy estimate. Energy companies evacuated workers and shut upgraders, mines and wells as the inferno grew to more than twice the size of New York City.

    Suncor, Canada’s largest energy producer, Syncrude, Husky Energy Inc.,  Imperial Oil Ltd. and Cnooc’s Nexen are among operators that have taken output offline

    Suncor, which has closed about 700,000 barrels a day of capacity, said Sunday that it’s beginning to implement a plan for resuming operations and will restart once it can do so safely, depending on “availability of critical third-party pipeline infrastructure.” The company began shutting sites last week “in a controlled manner to facilitate a quick and reliable startup,” it said.

    Syncrude, which can produce as much as 350,000 barrels a day, cut rates to a minimum when the fires began and then shut and evacuated all personnel from its Mildred Lake and Aurora oil-sands operations Saturday, according to Leithan Slade, a spokesman. The shutdown, which included bringing down all three cokers in its upgrader for the first time, was done in a “safe and orderly manner,” he said.

    Houston-based ConocoPhillips has a team of people “working day and night” to figure out how and when the company can resume operations on its Surmont oil-sands operation, which was producing at 30,000 barrels a day before the blaze, said Rob Evans, a spokesman. While the site has power, returning workers to the site poses a challenge, he said.

    Nexen’s operations to the south of Fort McMurray suffered “minor” fire damage, said Chad Morrison, a wildfire manager for the Alberta government. The facility was already at reduced rates after an oil spill last summer and upgrader blast in January. A company spokeswoman didn’t immediately respond to requests for comment Sunday.

    Some companies were also already producing at reduced rates because of scheduled maintenance on upgraders. Syncrude, was scheduled to complete work on May 5. Suncor’s work on its No. 2 upgrader was to wrap up by mid-May.

    When wildfires last year threatened oil-sands facilities including Cenovus Energy Inc.’s Foster Creek site, the company was able to return workers to begin restarting production nine days after evacuations and shut downs.

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    Genscape sees large Cushing build

    Genscape has just reported a forecast 1.4 million barrel build at Cushing - significantly above expectations and recent activity.
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    Sanchez Energy announces first quarter 2016 financial results

    Highlights include:

    - Total production of 5.1 million barrels of oil equivalent ('MMBoe') during the first quarter 2016, up approximately 26% over the first quarter 2015
    - Average production of approximately 56,500 barrels of oil equivalent per day ('Boe/d'), which exceeded the high end of the Company's guidance of 48,000 to 52,000 Boe/d for the first quarter 2016 by over 8.5%
    - Revenues of $79.8 million (approximately $133 million inclusive of hedge settlements) and Adjusted EBITDA (a non-GAAP financial measure) of $64.6 million
    - Total liquidity of approximately $662 million as of March 31, 2016, which consisted of $362 million in cash and cash equivalents and an undrawn bank credit facility with an elected commitment amount of $300 million
    - Average drilling and completion costs during the first quarter 2016 of $3.3 million per well at Catarina and $3.4 million per well at Cotulla, with the Company's best wells coming in at approximately $3.0 million per well in both areas
    - South-Central Catarina wells continue to exceed expectations, with average 30-day rates of greater than 1,300 Boe/d from all South-Central wells the Company has brought on-line to date
    - The Company has met its 50 well annual drilling commitment at Catarina for the period July 2015 through June 2016 and has banked 13 wells toward the 50 well annual drilling commitment for the period July 2016 through June 2017
    - The Carnero Pipeline, constructed by Sanchez Energy's joint venture with a subsidiary of Targa Resources Corp. , went in-service in March 2016 and now transports the majority of Catarina gas volumes


    'We are off to a strong start in 2016,' said Tony Sanchez, III, Chief Executive Officer of Sanchez Energy. 'As previously reported, we achieved excellent production results in the first quarter 2016, exceeding the high end of our guidance by over 8.5%. Process improvements and efficiency gains continue to drive our performance, with several wells coming in at a cost of approximately $3.0 million.
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    Chaparral Files for Bankruptcy to Cut $1.2 Billion in Debt

    Chaparral Energy Inc. filed for bankruptcy protection as it continues talks with creditors to reach an exchange agreement that would cut bondholder debt by about $1.2 billion.

    The Oklahoma City-based oil and gas explorer listed estimated liabilities of $1 billion to $10 billion in a Chapter 11 petition filed Monday in Delaware federal court and blamed its bankruptcy on the commodity slump that’s plagued the energy industry since oil started its slide in 2014.

    “By significantly reducing our debt and restructuring our balance sheet, Chaparral will be better positioned to not only weather this down environment, but also increase our long-term financial security,” Chief Executive Officer Mark Fischer said in a statement. Chaparral said it plans to continue operating for the duration of the reorganization while it continues to negotiate a debt-for-equity swap.

    In February, to build liquidity, the company borrowed substantially all of the remaining funds available under $548 million credit agreement from 2010. It also retained Latham & Watkins LLP and Evercore to advise it on financial and strategic alternatives.

    Dozens of energy-linked businesses, including drillers and service providers, have sought creditor protection since crude began its slide in mid-2014, according to law firm Haynes & Boone LLP. In the past year alone, 13 oil and gas companies have filed for bankruptcy protection in the U.S. listing liabilities of more than $1 billion each, according to data compiled by Bloomberg.

    According to its court filing, Chaparral’s biggest unsecured creditors include holders of $525.9 million in 7.625 percent 2022 senior notes; $384 million in 8.25 percent senior notes due in 2021; and $298 million in 9.875 percent 2020 senior notes.

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    Canadian natgas storage nearly full?

    Bentek reporting a surge in Canadian natgas exports to the US, up 0.8 Bcf/d so far this month versus a year ago. Canada storage near full.

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    Alternative Energy

    SolarCity stock slides as forecast slashed

    SolarCity Corp cut its forecast for solar panel installations this year and reported a bigger-than-expected quarterly loss, sending its shares down nearly 20 percent in extended trading on Monday.

    The company, which is backed by Tesla Motors Inc founder Elon Musk, said it expects to install 1.0-1.1 gigawatts in 2016, lower than the 1.25 GW it had forecast in February.

    A pullback in a key solar support policy in Nevada, a January price increase on residential systems and a redesign of its solar loan product were among the reasons SolarCity cited for the lowered forecast.

    "We had a bunch of headwinds that hit us all at the same time," Chief Executive Lyndon Rive said on a conference call with analysts. "These have all been addressed."

    Still, the lower volumes drove up the company's costs to acquire new business. It will take "about two quarters" to get back to normal customer acquisition cost levels, Rive said.

    SolarCity said it raised $728 million in financing during the quarter for its rooftop solar systems.

    SolarCity became a Wall Street darling thanks to its innovative no-money-down financing schemes that underpinned a rapid growth in solar installations in recent years. But late last year, the company said it would slow its pace of growth to focus on generating cash.

    The slower growth, combined with complex financials that rely heavily on renewableenergy subsidies, has spooked some investors. The company's stock is 65 percent below its 52-week high set nearly a year ago.

    In extended trade on Monday, the stock fell to $18.07 after closing at $22.51 on Nasdaq.

    Solar panel installments of 214 MW during the quarter, however, were higher than the company's own expectations as it completed a project in Maryland ahead of time. The company had forecast installations of 180 MW in February.

    SolarCity said its net loss attributable to shareholders increased to $25 million, or 25 cents per share, in the first quarter ended March 31, from $21.5 million, or 22 cents per share, a year earlier. (

    Total expenses jumped about 54 percent to $226.9 million.

    On an adjusted basis, the company posted a loss of $2.56 per share, compared with a loss of $2.32 per share expected by analysts on average.

    Revenue rose 81.6 percent to $122.6 million, above analysts' average estimate of $109.9 million, according to Thomson Reuters I/B/E/S.
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    U.S. traders reject GMO crops that lack global approval

    Across the U.S. Farm Belt, top grain handlers have banned genetically modified crops that are not approved in all major overseas markets, shaking up a decades-old system that used the world's biggest exporting country as a launchpad for new seeds from companies like Monsanto Co.

    Bold yellow signs from global trader Bunge Ltd are posted at U.S. grain elevators barring 19 varieties of GMO corn and soybeans that lack approval in important markets.

    CHS Inc, the country's largest farm cooperative, wants companies to keep seeds with new biotech traits off the market until they have full approval from major foreign buyers, Gary Anderson, a senior vice president for CHS, told Reuters.

    "I think that would be the safest thing for the supply chain," he said. CHS implemented a policy last year under which it will not sell seeds or buy grain that contains traits lacking approvals needed for export.

    The U.S. farm sector is trying to avoid a repeat of the turmoil that occurred in 2013 and 2014, when China turned away boatloads of U.S. corn containing a Syngenta AG trait called Viptera that it had not approved. Viptera corn was engineered to control insects.

    Cargill Inc and Archer Daniels Midland Co each said the rejections cost them millions of dollars, and both companies have sued Syngenta for damages. ADM is refusing GMO crops that lack global approval. Cargill did not respond to requests for comment.

    The United States is the biggest producer of GMO crops and has long been at the forefront of technology aiming to protect crops against insects or allow them to resist herbicides.

    That innovation is now seen as a risk to trade because it is hard to segregate crops containing unapproved traits from the billions of identical-looking bushels exported every year.

    Soren Schroder, chief executive officer for Bunge, said the practice of launching GMO seeds without full approval is "very risky."

    "It's an uncomfortable position for the industry when there are traits out there that haven't had major market approval," he said in an interview.

    The latest crop being banned is Monsanto's Roundup Ready 2 Xtend soybean, whose seeds are genetically engineered to resist the herbicides glyphosate and dicamba. It is being sold for the first time in the United States and Canada this year despite lacking clearance from the European Union, an important export market for North American soybeans.

    Monsanto said it expects EU approval soon. It initially projected farmers would plant the seed on 3 million acres in the United States, roughly 4 percent of overall plantings, and 420,000 acres in Canada.

    Plantings have already begun in North America, and Monsanto spokeswoman Trish Jordan said that each passing week without EU authorization lowers the forecast for acreage in Canada.

    The company is allowing growers to switch to another variety and has not yet shipped Xtend seeds to farmers who have ordered it in Canada. Monsanto has not publicly lowered its U.S. forecast.

    ADM, Bunge and CHS have said they will not accept Xtend soybeans until the trait is fully approved by major markets. Bunge also declined to accept Viptera corn before China cleared it in December 2014.

    The company's list of banned traits on its yellow posters contains products from Monsanto, Syngenta, Dow AgroSciences, Stine Seeds, DuPont Pioneer and Bayer, many of which are not commercially available to farmers yet.

    CHS has its own list of restricted traits that includes products from Monsanto, Syngenta and DuPont Pioneer.

    Seed companies, including Syngenta and Dow, are addressing industry concerns by selling biotech products under programs that restrict where growers can deliver their harvests to keep crops out of unapproved markets.

    Farmers also produce crops containing biotech traits from Monsanto and DuPont Pioneer under contracts with end users that designate approved locations where they can be delivered.

    However, such approaches are not fool-proof methods of protecting the supply chain, Anderson said.

    Stine Seed and Bayer said they have policies against selling seed traits that lack approvals in major export markets.

    Bayer this week seized on concerns about Monsanto's launch of Xtend soybeans to promote its own brand, LibertyLink.

    "Soybeans, once considered such a simple crop to grow and market, is becoming more complicated," Bayer said. It called the situation faced by growers "downright confusing."

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    Precious Metals

    Indians shun gold buys during key festival as prices, drought sting

    Indians bought a third less gold than last year during the annual Hindu and Jain holy festival of Akshaya Tritiya on Monday, industry officials estimate, as droughts have hit the earnings of millions of farmers and the metal's price rallied.

    Weaker demand from the world's second-biggest consumer could limit a rally in global prices, which are up around a fifth this year. Indian prices were around 30,000 rupees per 10 grams on Monday, up nearly 10 percent from a year ago.

    Akshaya Tritiya is the second-biggest gold-buying festival in India after Dhanteras around October-November, but jewellers failed to draw buyers despite spending heavily on print and television advertisements and offering discounts on design fees.

    "Compared to last year demand is nearly 35 percent lower," said Kumar Jain, vice-president of the Mumbai Jewellers Association, who was hoping for sales to pick up after several jewellers reopened recently after a weeks-long strike.

    "Higher price is the key deterrent. We thought pent-up demand would drive sales, but demand is quite weak."

    Somasundaram PR, head of the World Gold Council's Indian operations, said that through aggressive advertising jewellers had been trying to build sales momentum, which was lost due to the strike earlier this year.

    Gold buying is also down because of the plight of farmers hit by extremely dry weather, according to Mangesh Devi, a jeweller from the rural town of Satara in the western state of Maharashtra.

    Mumbai resident Mangesh Chawan said he had cut purchases by half this year.

    "I wanted to completely avoid purchases but later decided to buy a small amount as every year we buy something," Chawan said after buying gold earrings for his wife.

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    Silver Wheaton Q1 earnings-miss

    Silver Wheaton reported weaker-than-expected earnings for the first quarter ended March 31. Net income for the period totaled $41-million, or $0.10 a share, down from $49-million or $0.13 a share a year earlier and falling short of the $0.12 a share consensus. 

    During the first quarter of 2016, attributable silver equivalent output was 12.7-million ounces, comprising 7.6-million ounces of silver and 64 900 oz of gold, representing an increase of 24% over the first quarter of 2015. “Silver Wheaton had a solid start to 2016, and the company is on track to realising its production guidance of 54 million silver equivalence ounces for the year," president and CEO Randy Smallwood stated Monday. 

    The attributable silver-equivalent sales volume in the first quarter was up 65% year-over-year at 12.8-million ounces. The company advised that it had realised the second-best quarter ever in terms of production and sales volumes, as Vale’s Salobo mine, in Brazil, once more reported record output. 

    Silver Wheaton had also for the first time sold more than 65 000 oz of gold in a quarter. Revenues of $188-million in the period was 44% higher year-over-year when compared with $131-million the same period of 2015. The company had declared its second quarterly cash dividend of $0.05 a share to be paid to holders of record of Silver Wheaton common shares on May 19, and will be distributed on or about June 2. 

    Early in January, Silver Wheaton had started an appeal in the Tax Court of Canada regarding a tax dispute with the Canadian Revenue Agency (CRA). The company advised that in order to commence the appeal, it was required to make a deposit of 50% of the reassessed amounts of tax, interest and penalties. 

    Upon approval from the CRA, Silver Wheaton posted security on March 15, in the form of a letter of guarantee in the amount of C$192-million, rather than making a cash deposit. 

    During the quarter, the company had raised total net proceeds of about $607-million through a bought-deal common share financing, which was used to repay debt that was outstanding under the company's $2-billion revolving credit facility, it advised.
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    Production at giant Arctic diamond mine just weeks away

    Production at giant Arctic diamond mine just weeks away

    Gahcho Kué, the largest new diamond mine under development globally, is now 94% complete with first production planned for the second half of this year, one of the companies behind the project said Monday.

    Gahcho Kué, the world's largest new diamond mine under development, is now 94% complete with first production planned for the second half of this year.

    According to Mountain Province Diamonds, which holds a 49% stake in the mine, both the processing plant and truck shop have been finished and the firm is on schedule to achieve mechanical completion of the primary crusher during the current quarter.

    "The project also continues to meet our lending group's tests-to-completion with US$47M advanced to fund cash calls during Q2 2016," Mountain Province President and CEO, Patrick Evans, said in a statement. "A total of US$266M has been drawn against the US$370M facility," he added.

    Situated almost 300 kilometres east of Yellowknife, in Canada’s Northwest Territories, and southeast of the now closed Snap Lake diamond mine, Gahcho Kué is employing about 700 people during construction, majority owner De Beers told

    At least 400 workers will be employed during the mine’s 12-year operational life, in which it’s expected to produce an average of 4.5 million carats a year, making it the world’s biggest new diamond mine.

    Additionally, as Canada's major diamond mines — Diavik and Ekati — are approaching the end of their productive lives, Gahcho Kué—although it's smaller— is expected to offset the production drop-off.
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    Base Metals

    Freeport sells prized African copper mine

    Top publicly-held copper producer Freeport-McMoRan Copper & Gold on Monday announced the sale of its largest African copper mine to China Molybdenum for up to $2.65 billion.

    Like many of its peers Freeport has been struggling to get its debt load under control which ballooned to $20 billion following the ill-timed acquisition of oil and gas assets three years ago. In February the Phoenix-based company sold a 13% stake in its US Morenci mine, the world's fifth largest, for $1 billion to Japan's Sumitomo, but so far has not been able to offload the energy operations despite putting them on the block a year ago.

    Richard C. Adkerson, Freeport's President and CEO, said since the start of 2016 the company has announced over $4 billion in asset sale transactions: "We are committed to our immediate objective of reducing debt while retaining a large portfolio of high quality assets and resources and a leading position in the global copper industry.”

    Apart from the sale of the high-grade Tenke Fungurume mine in the Democratic Republic of Congo, Freeport is also in talks with CMOC to sell its interests in Freeport Cobalt, including the Kokkola Cobalt Refinery in Finland, for $100 million and the Kisanfu Exploration project in the DRC for $50 million. Freeport reported consolidated Tenke sales for the year 2015 totaling 467 million pounds of copper (215,ooo tonnes) and 35 million pounds of cobalt (16,ooo tonnes) at a net unit cash cost of $1.21 per pound of copper.

    It is also the second big acquisition by China Molybdenum within the space of a couple of weeks. China Molybdenum in March picked up Brazilian assets from Anglo American which is also in the midst of a radical restructuring and asset sale program. The Chinese company paid $1.5 billion cash for niobium and phosphates operations inside the South American country.

    Shares in Freeport fell sharply on Monday and the company is now worth $13.8 billion on the NYSE, down 24.7% over just five days of trading.

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    Eramet agrees rescue plan for New Caledonia nickel business

    The board of Eramet agreed on Monday to financing and cost-saving measures to help its SLM nickel business in New Caledonia survive a severe market downturn, supported by a loan from the French government.

    The deal follows months of wrangling between Eramet and local authorities in New Caledonia, which is a minority shareholder in SLN, about how to salvage the nickel producer that lost around 250 million euros ($284.48 million) last year.

    Eramet said that the STCPI, the vehicle representing the New Caledonian provinces, had agreed to contribute to additional financing for SLN under a package to run to 2018.

    Eramet also said it would inject 40 million euros, on top of 150 million euros provided since December, to ensure SLN's liquidity needs were covered until the end of June while the terms of the recovery plan were finalised.

    Monday's deal followed a proposal by French prime minister Manuel Valls at the end of April to lend up to 200 million euros to the STCPI to allow it to fund SLN's support measures.

    The STCPI has decided to request 127 million euros to inject into SLN, Philippe Gomes, a member of parliament and an Eramet board member representing the STCPI, told Reuters.

    Eramet reiterated a previously announced target to reduce SLN's production costs by 25 percent to $4.50 a pound by the end of 2017, compared with the 2015 average.

    It did not give details, but has previously announced plans to switch its New Caledonian production to ferronickel exclusively and also export more unrefined ore.

    The group said last month it had already reduced its nickel costs by 10 percent in the first quarter, but that the lowest nickel prices in more than a decade were expected to drive it to another operating loss in the first half.

    Gomes said the cost savings to 2018 would put SLN in the top third of the most efficient producers worldwide. But he also said the development of a delayed plan to build anew electricity plant for SLN's nickel smelter was crucial to maintain the miner's long-term competitiveness.

    Valls also pledged during his recent visit to New Caledonia that the government would support the power plant project.
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    Steel, Iron Ore and Coal

    China steel, iron ore futures dive again Monday as demand worries batter commodities

    Chinese commodities dived on Monday, led by 6 percent falls in steel and iron ore futures, as deepening worries about China's demand extended a fortnight of sharp drops and false rebounds in the country's market for industrial metals.

    Speculative funds rushed into China's commodities futures last month, betting the country's economy was bottoming. The buying frenzy alarmed domestic exchanges and regulators fearing a bubble could be forming as volumes and prices soared.

    To limit speculation on futures from steel to coal, the country's three commodity exchanges have taken aggressive measures, including raising trading margins and transaction fees, and widening daily movement limits.

    The big market swings and the response of authorities have raised concerns about the risk of contagion for global markets, particularly after last year's stock boom and bust.

    On Monday, the Dalian Commodity Exchange said it would continue to strengthen its market monitoring and may raise transaction fees further to curb speculation.

    "Futures liquidity has dropped sharply following exchanges' measures, and now investors are worried China's economic trend will be weaker than previously expected, hurting sentiment," said Zhao Chaoyue, an analyst at Merchant Futures in Shenzhen.

    The most-traded rebar, or reinforced steel, on the Shanghai Futures Exchange posted its biggest daily fall on record on Monday. It hit a downside limit of 6 percent to 2,175 yuan ($334.41) a ton, the lowest since April 7.

    September iron ore futures on the Dalian Commodity Exchange also tumbled by their daily permissible limit of 6 percent to 388 yuan a ton.

    Spot prices of billet, a semi-finished steel product, regarded as a key reference point for the physical market, have tumbled over the last few days, traders said.

    The declines followed customs data on Sunday that showed iron ore imports fell 2.2 percent in April from March, while copper ore and concentrate imports shed 8 percent on the month.

    Fanning concerns about weak fundamentals, iron ore inventories at China's big ports topped 100 million tonnes by the end of April, the China Iron & Steel Association said on Monday.
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    China April steel exports down 9pct on month

    China exported 9.08 million tonnes of steel products in April, dropping 9% from March but up 6.3% year on year, showed the latest data from the General Administration of Customs (GAC).

    Exports of steel products rose 7.6% on year to 36.9 million tonnes over January-April, data showed.

    Analysts said China’s sharp rise of steel products over March-April bridled steel exports to some extent, and left China in a less disadvantaged position.

    Global trade conflicts also bring some negative effects on China’s steel exports. European Commission released an announcement on April 28 to impose supervision and control on some imported steel products from China and other third countries.

    In 2015, China’s steel exports to European Commission members accounted for 10% of its total steel exports, and it accounted for as much as 30% of total steel supplies of those member countries. The intensified anti-dumping measures will make China’s steel exports increasingly difficult.

    Meanwhile, China imported 1.1 million tonnes of steel products in April, falling 8.3% year on year and down 13.4% month on month; combined imports over January-April stood at 4.23 million tonnes, dropping 4.6% from the year prior.

    China’s imports of iron ore reached at 83.92 million tonnes in April, 2.16% lower than previous month but up 4.6% from April 2015. Over January-April, China imported 325 million tonnes of iron ore, rising 6.1% year on year.

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    China’s key steel mills daily output hit a new high in late-April

    The daily crude steel output of China’s key steel mills climbed 1.86% from ten days ago to 1.72 million tonnes in late-April, posting the third ten-day increase in a row, and hitting a new high since 2016, according to data released by the China Iron and Steel Association (CISA).

    China’s daily crude steel output is expected to be 2.31 million tonnes in late-April, up 1.51% from ten days ago, CISA forecasted.

    The recent surging steel prices prompted Hebei and many other areas to resume production, and China’s average furnace operation rate rebounded above 78%, which may exert some pressure on upturn of domestic steel prices.

    By April 30, stocks of steel products in key steel mills rose 5.09% from ten days ago to 12.34 million tonnes; social stocks of steel products stood at 9.08 million tonnes, sliding 3.19% on month.

    A drop of over 200 yuan/t in steel prices was observed in eastern and northern China after the National Labor s’ Day in early May, and market participants panicked toward the sharp decline.

    The factors supporting the previous pick-up have all changed. The quickened production recovery, the cooling real estate market in China’s large cities, as well as the easy monetary policy that has exhausted its impacts, may all lead to the continuous going down of steel prices.

    Analysts said the furnace operation rate was very likely to be around 80%, mainly restrained by suspension of some furnaces for maintenance, the production limits during the International Horticultural Exposition, as well as the decreased atmosphere for production recovery amid falling prices.
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