Wednesday, November 20, 2019

As Oil Prices Drop And Money Dries Up, Is The U.S. Shale Boom Going Bust?

Oil prices are down amid weak demand, and investors no longer seem willing to write the industry a blank check.
Spencer Platt/Getty Images


The shale oil boom that catapulted the U.S. into being the world's largest oil producer may be going bust. Oil prices are dropping amid weakening demand, bankruptcies and layoffs are up, and drilling is down — signs of a crisis that's quietly roiling the industry.

Some of the most successful companies in the oil business are household names — think Exxon Mobil or Chevron. But the boom in shale drilling has been driven by smaller, independent operators. These companies have pushed the limits of drilling technology and taken big risks on unproven oil fields.

Today, shale accounts for about two-thirds of U.S. oil production and nearly all of the industry's growth, but many of the companies that made that growth possible are now struggling to stay afloat.

That has a lot to do with the business model of U.S. shale, says David Deckelbaum, an analyst at investment bank Cowen. "This is an industry that for every dollar that they brought in, they would spend two," he says.

For years operators focused on drilling lots of new wells very fast, prioritizing explosive growth over profitability. Until now they've been able to rely on deep-pocketed investors who were willing to pour fresh capital into the industry, despite years of lackluster returns.

It's a story that may be familiar to anyone who's been following the tech industry in recent years. Deckelbaum compares it to a kind of a prospector mentality.

"There's always this idea of this brand new play that's going to have billions of barrels of upside and if you can just get in early, then it'll pay off in the long run," he says.

Oil has always been a boom-and-bust industry. In 2014, for instance, a catastrophic price crash left the industry reeling. But even then, billions in new investment flowed into U.S. shale.
Today, shrinking global demand for oil is driving the price down once again. What's different this time around? Investors no longer seem willing to write the industry a blank check.
"I think now you've seen a lot of pressure of, 'We want you to be a real business. Your cost structure's too high, you have too much debt, I'm not funding your drilling anymore with external capital. You have to live within your own means,' " Deckelbaum says.
Without access to new cash, many producers are pulling back on exploration. The number of rigs drilling for new oil is at its lowest point in two years.
That's bad news for people like Ron Fountain, who works on a drilling rig in the Bakken shale of North Dakota. He thinks back to a few years ago, when the price of oil was more than $100 a barrel and companies were drilling with abandon.
"That's when we were still booming," Fountain says. "There was rigs coming out every month. We couldn't keep up, there was so much work going on."

Today though, with more and more rigs sitting idle, life has become uncertain for Fountain and his fellow drillers.

"We went from having three-year contracts to well-to-well contracts, which means you drill one hole and if you did a good job, then they'll give you another. Or they drop you and you gotta figure it out from there," Fountain says.

He's not the only one feeling the pinch. Halliburton, one of the biggest players in U.S. shale drilling, has laid off nearly 3,000 workers. In the Permian Basin, the country's most prolific oil field, employment has almost completely stalled out — after growing more than 11% last year.

Meanwhile, many of the smaller producers who piled up debt are struggling to pay it back. That has led to a wave of bankruptcies — nearly three dozen so far this year.

All of this is adding up to slower oil output. Production was flat in the first half of 2019, after growing more than 20% last year, according to Department of Energy data. In theory, as production slows and supply shrinks, the price of oil should go back up, which could provide a much-needed boost. The question, Fountain says, is how many companies will be able to survive until then.

"I think as an industry we're going to be OK," he says. "But I think there's a lot of people that are kinda holding their breath."

Tuesday, November 19, 2019

OPEC's share of Indian oil imports in October hits lowest since 2011

A boy walks past an oil tanker train stationed at a railway station in Ghaziabad

https://finance.yahoo.com/news/opecs-share-indian-oil-imports-140405873.html

OPEC's share of India's oil imports fell to 73% in October, its lowest monthly share since at least 2011, tanker data from sources showed, as refiners shipped in fuel from the United States and other suppliers.

India, which usually imports about 80% of its needs from members of the Organization of the Petroleum Exporting Countries (OPEC), has been diversifying its sources of oil as local refiners have upgraded plants to process cheaper crude grades.

India, the world's third-biggest oil importer, shipped in 4.56 million barrels per day (bpd) of oil in October, about 3.3% less compared with a year ago, data showed. Of that, it bought 3.43 million bpd from OPEC.

OPEC's share of India's imports in September was about 81% although total volumes were lower, as the South Asian nation cut imports to a three-year low due to maintenance at some refineries.

OPEC oil output dipped to an eight-year low in September after attacks on Saudi oil plants led to production cuts, a Reuters survey showed. The kingdom's output has since recovered.

In October, Iraq replaced Saudi Arabia as India's top oil supplier, tanker arrival data showed, with refiners cutting purchases of the more expensive Saudi oil.

Sources who supplied the data asked not to be named.

"Saudi had raised its official selling price (OSP). That led to some buyers migrating to Iraqi and other producers," said Ehsan Ul Haq, an analyst with Refinitiv.

Saudi Arabia raised its October OSP for its Arab Light grade for Asia by $0.60/barrel compared to a $0.35/barrel increase in Iraq's Basra Light.

To make up for lower Saudi purchases, India also boosted purchases from Nigeria, its third-biggest supplier in October, as well as from Kuwait and Mexico.

India shipped in a record 336,000 bpd of U.S. oil in October, about 7.5% of total imports, as private refiner Reliance Industries bought three tanker cargoes, data showed. The United States was Indian's fourth-biggest supplier in October.

"Indian demand for gasoil has been falling but overall Asian demand has been relatively strong because of new marine fuel rules from January. And good diesel cracks is prompting refiners to buy distillate rich crudes like that of Nigeria," Haq said.

Refining margins or cracks for 10 ppm gasoil traded at $15.46 per barrel over Dubai crude during Asian trade on Monday. Cash premiums for the fuel climbed to 34 cents per barrel to Singapore quotes, compared with 31 cents per barrel on Friday.

India's fuel demand in October declined by 1.4% from a year earlier, and its diesel consumption fell by the steepest in about three years, government data showed on Thursday.

(Reporting by Nidhi Verma; Editing by Edmund Blair and Tom Hogue)

Monday, November 18, 2019

Saudi Aramco gives nine banks top roles on world's biggest IPO: sources

GP: Jamie Dimon, chairman, president and chief executive officer of JPMorgan Chase & Co WEF
Jamie Dimon, chief executive officer of JPMorgan Chase & Co.
Jason Alden | Bloomberg | Getty Images


DUBAI (Reuters) - Saudi Aramco has hired nine banks as joint global coordinators to lead its planned initial public offering (IPO), slated to be the world’s largest, two sources familiar with the matter told Reuters on Wednesday. 

The mandates have been heavily sought by the world’s biggest investment banks for a transaction which, according to Saudi Crown Prince Mohammed bin Salman’s initial plans, could generate around $100 billion for Saudi Arabia’s state coffers. 

The kingdom plans to list 1% of the state oil giant - the world’s largest oil company - on the Riyadh stock exchange before the end of this year and another 1% in 2020, sources told Reuters this week, as initial steps ahead of a public sale of around 5% of Aramco. 

Aramco has selected JPMorgan Chase & Co (JPM.N), Morgan Stanley (MS.N) and Saudi Arabia’s National Commercial Bank (1180.SE), which were previously working on the share sale before it was paused last year, the sources said, declining to be identified due to commercial sensitivities. 

It has also chosen Bank of America Merrill Lynch (BAC.N), Goldman Sachs Group Inc (GS.N), Credit Suisse Group AG (CSGN.S), Citigroup Inc (C.N), HSBC Holdings PLC (HSBA.L) and Saudi Arabia’s Samba Financial Group (1090.SE), they added. 

To secure the lead role on the IPO, JPMorgan’s efforts were led by senior bankers in New York, London and Saudi Arabia who had long-standing relationships in Saudi Arabia, rather than Chief Executive Jamie Dimon, according to a person familiar with the matter. 

Aramco, JPMorgan, Bank of America, Citi, Credit Suisse, Goldman Sachs and HSBC declined to comment. The remaining banks did not immediately respond to requests for comment. 

The IPO plan has rapidly gained momentum in recent days with the appointment of the head of the kingdom’s PIF sovereign wealth fund, Yasser al-Rumayyan, as Aramco’s new chairman. 

Rumayyan, a close ally of Prince Mohammed, took over from former energy minister Khalid al-Falih in a move to separate Aramco from the ministry, a step Saudi officials have said was important to pave the way for the IPO. 

Bankers have been courting Saudi Arabia to secure roles in the transaction, which has faced repeated delays, but which officials have said will happen by 2020-2021. 

Aramco’s chief executive, Amin Nasser, said this week that the domestic IPO would be the “primary” listing but that the company was also ready for an international share sale. He said the final decision on venue and timing rested with the government. 

The flotation is crucial for Prince Mohammed’s plans to diversify the Saudi economy in an era of low oil prices. 

Based on the indicated $2 trillion valuation that Saudi Aramco had hoped to achieve, a 1% float would be worth $20 billion, a huge milestone for the local stock market. 

FILE PHOTO: Logo of Saudi Aramco is seen at the 20th Middle East Oil & Gas Show and Conference (MOES 2017) in Manama, Bahrain, March 7, 2017. REUTERS/Hamad I Mohammed/File Photo
 
Analysts and bankers, however, have said $1.5 trillion is a more achievable valuation for Aramco.
Aramco raised $12 billion this year in its first international bond, gaining more than $100 billion in demand, in a deal that many saw as a pre-IPO relationship-building exercise with international investors. 

Reporting by Hadeel Al Sayegh and Davide Barbuscia; Additional reporting by Joshua Franklin in New York; Editing by Ghaida Ghantous and Marguerita Choy

Morgan Stanley Values Saudi Aramco at $1trn


https://images.law.com/contrib/content/uploads/sites/378/2019/11/Saudi-Aramco-Article-201911111043.jpg

Saudi Aramco has been given a $1trn valuation by Morgan Stanley, as Wall Street is still divided on how much the world’s biggest oil company is actually worth.

Aramco has been given a valuation range spanning hundreds of billions of dollars, according to research from two Wall Street banks that underlines the dilemma facing lenders working on what is expected to be the world’s largest initial public offering.

In a presentation for investors, Morgan Stanley bankers ran through several valuation models that gave a spread of about $1trn between the most bearish and bullish scenarios. For example, based on a dividend discount model the spread ran from $1.06trn up to $2trn.

The base case was $1.52trn, according to the presentation seen by Aramco faces a delicate balance as it seeks to push its IPO valuation as close as possible to Crown Prince Mohammed Bin Salman’s $2trn — a figure that’s been met with skepticism from many professional investors — while making sure it’s attractive to potential Saudi buyers.

Among 16 banks that offered a valuation, the range in estimates ran from $1.1trn at the bottom right up to $2.5trn, a nuber that even the crown prince might find optimistic. The midpoint was $1.75trn, according to people who’ve reviewed all the research.

Friday, November 15, 2019

Safety in Polar waters addressed

Arctic Aframax Tanker is a joint development by Deltamarin and Aker Arctic Technology. Image courtesy of Aker Arctic.


New joint guidelines for Polar waters operation have been released by the ICS and OCIMF. 
 
Maritime trade between Arctic destinations and the rest of the world is expected to expand and an increasing number of ships are now undertaking voyages in Polar waters.
 
Technical developments in ship design and equipment continue to facilitate more and more ship operations in remote Polar areas, despite challenging and unpredictable sea and weather conditions.
 
The Polar Code, adopted by the IMO, requires shipping companies intending to operate in Polar waters to develop a Polar Water Operational Manual (PWOM) in order for their ships to be issued with a Polar Ship Certificate.
 
New joint guidelines from the International Chamber of Shipping (ICS) and the Oil Companies International Marine Forum (OCIMF) were aimed at supporting shipping companies by providing advice on how to develop a PWOM that best suits their needs.
 
Appendix II of the IMO Polar Code already provides a model PWOM. However, the ICS and OCIMF recognised that additional guidance is necessary to help shipping companies to develop a quality PWOM that is truly fit for purpose.
 
The new Guidelines purpose is to provide the means for shipping companies and Masters to develop a comprehensive PWOM tailored to the needs of their individual ships, taking into account the environmental hazards and the nature of their operations.
 
’Guidelines for the Development of a Polar Water Operational Manual’ has been prepared by expert contributors with in-depth experience of operating ships in Polar waters, as well as knowledge of the challenges faced by seafarers on board.
 
Topics addressed include: identifying hazards; understanding operational limitations; updating procedures; upgrading equipment and systems; understanding relevant legislation and ensuring that the results of assessments are fully addressed in the PWOM.

Wednesday, November 13, 2019

Aramco’s Breakeven Costs Are The Lowest In The World

Aramco


Aramco has the lowest production costs for oil projects in the world, the company said in its newly released IPO prospectus, adding that partner producers such as Russia, Venezuela, and Nigeria had much higher production costs.

The Saudi state company said its after-tax breakeven costs for producing fields were below $10 per barrel, compared with just over $20 per barrel for the UAE, more than $40 per barrel for Russia, and almost $50 per barrel for Nigeria.
Low production costs are one of the main reasons Aramco is considered an attractive investment opportunity for energy investors, along with its massive reserves.

However, there have been several factors that may discourage international investors from betting on the Saudi giant, including the intensifying climate change fight that many worry will affect oil demand negatively as well as the risk of outages after the September attacks on Saudi oil infrastructure that took off the market some 5.7 million bpd in production capacity.

Aramco released its IPO prospectus earlier this week but the 658-page document did not address some important questions such as the exact day of the float, the number of stock to be offered—though it said it will constitute 0.5 percent of Aramco’s total shares—and the price per share. 
 

There is also the issue with supervolatile oil prices that have some wondering how close Riyadh could get to its desired $2-trillion valuation for the company. Now, some analysts are also warning investors to consider the overwhelming influence of the Saudi royal family over the business of Aramco.
“The biggest issue with Aramco is that everything about this company is controlled by the Saudi royal family — shareholder opinions, your board votes, none of that makes any difference,” Pavel Molchanov from Raymond James told CNBC.

“There’s a lot to think about when buying Aramco,” State Street senior global multi-asset strategist Daniel Gerard said, adding the focus should be on “how much political influence would there be over the investment decisions.”

By Irina Slav for Oilprice.com

Tuesday, November 12, 2019

Oxy to Sell Permian Campus After Anadarko Acquisition


https://www.rigzone.com/news/wire/oxy_to_sell_permian_campus_after_anadarko_acquisition-11-nov-2019-160295-article/

(Bloomberg) -- Occidental Petroleum Corp. plans to sell a four-story office building in the heart of the Permian Basin and move employees into a nearby one owned by Anadarko Petroleum Corp., the oil producer it bought for $37 billion three months ago.

The 213,000 square-foot complex will be vacated by April 2020 and is a “compelling” investment opportunity, according to a marketing document from CBRE Group Inc., the real-estate broker handling the sale alongside Midland-based Moriah Real Estate Co.

The property was built in 2014 and is located in Westridge Park on the west side of Midland, near the airport. It’s also close to Anadarko’s campus and directly opposite Chevron, which Occidental outbid to acquire Anadarko. EOG Resources Inc. also has an office nearby.

“We have told our employees in Midland that they will be moving into the state-of-the-art building that Anadarko began constructing prior to the acquisition,” Melissa Schoeb, a spokeswoman for Occidental, said by email. “The building is large enough to house our combined workforce and we will begin the move when it’s ready for occupancy.”

Occidental is under pressure to sell assets and pay down debt after the acquisition, which has been criticized by investors including billionaire activist Carl Icahn. The stock plunged this week after Chief Executive Officer Vicki Hollub slashed 2020 capital spending by 40%, raising concern that the company won’t pump enough oil to cover dividend payouts and debt service.

To contact the reporter on this story:
Kevin Crowley in Houston at kcrowley1@bloomberg.net
To contact the editors responsible for this story:
Simon Casey at scasey4@bloomberg.net
Mike Jeffers

Repsol Looks to Alberta to Replace Mexican and Venezuelan Oil


https://finance.yahoo.com/news/repsol-looks-alberta-replace-mexican-110000684.html

(Bloomberg) -- Repsol SA is looking as far away as Western Canada for oil for its European refineries amid dwindling supplies from Mexico and Venezuela.

The Spanish oil company is considering using rail to transport as much as half-a-million barrels of heavy crude a month 1,911 miles (3,075 kilometers) from Alberta to Montreal before loading it onto tankers bound for Europe, according to people familiar with the situation. The company has also considered shipping the crude to New Jersey for shipment to Europe.

The European company has typically sourced heavy crude supplies from Latin America, particularly Mexico and Venezuela. But U.S. sanctions, as well as civil strife, have crippled Venezuela’s oil production, which has fallen to less than 700,000 barrels a day from more than 2 million four years ago. Mexico’s oil production has fallen for 14 straight years to 1.83 million barrels a day in 2018. That’s left Repsol looking for alternatives.

Repsol declined to comment in an email.

Repsol’s European refineries hold about 25% of the continent’s coking capacity, according to the company. Coking units allow refineries to process heavier crude, which is typically cheaper than lighter oil, into high-value fuels such as gasoline and diesel.

Alberta’s landlocked status means it ships nearly all of its crude oil to the U.S. by pipeline or rail. The Trans Mountain pipeline to the Pacific Coast allows a tiny fraction to be shipped to Asia. The long distance to market has kept Canadian heavy crude selling for less than West Texas Intermediate futures. The discount was more than $20 a barrel on Monday.

Shipments of oil sands crude to Europe are rare. Repsol occasionally gets heavy Canadian crude via U.S. Gulf ports, where Canadian oil competes with U.S. crude for sea berths and space on pipelines.

About 400,000 barrels of Alberta crude were sent to the U.K. last year, the first significant shipment to Europe since 2014, when a tanker of Alberta crude left a terminal near Montreal for shipment to Italy, according to the Canadian International Merchandise Trade database.

Repsol produces conventional heavy crude in west-central Alberta at its Chauvin field.

To contact the reporters on this story: Robert Tuttle in Calgary at rtuttle@bloomberg.net;Lucia Kassai in Houston at lkassai@bloomberg.net;Rodrigo Orihuela in Madrid at rorihuela@bloomberg.net

To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net, Mike Jeffers, Kevin Orland

For more articles like this, please visit us at bloomberg.com

Monday, November 11, 2019

Venezuela's mass migration poses a danger to the Western Hemisphere

Venezuela's mass migration poses a danger to the Western Hemisphere


Latin America is erupting in one political crisis after the other. The chaos follows ongoing protests and instability in Haiti, Ecuador, Peru, Argentina, Honduras and, lately, Chile, a stable country that generally tops the rankings in economic freedom. After a trip to Pyongyang to expand ties with North Korea, one of Venezuela’s most powerful men, Diosdado Cabello, sanctioned by the U.S. government for narco-trafficking, recently said: “What is happening in Peru, Chile, Ecuador, Argentina [and] Honduras is a gentle Bolivarian breeze, and a hurricane is coming,” when referring to the role of the Bolivarian revolution in the recent conflicts and its ability to undermine the region’s stability.
The regional chaos is exacerbated by Venezuela’s mass migration, which beyond a humanitarian crisis poses a dangerous threat to the Western Hemisphere because it’s weaponized by the Maduro regime.
The majority of the 4.3 million Venezuelans who have fled their country — driven by hyperinflation, crime and food and medicine shortages, which all stem from the Bolivarian revolution — have stayed within the region. An estimated 1.4 million Venezuelans have settled in Colombia; nearly 860,000 in Peru; 288,000 in Chile; 330,000 in Ecuador; 130,000 in Argentina; and 178,000 in Brazil. About 300,000 Venezuelans are in the United States and more than 255,000 in Spain, according to the U.N. International Organization on Migration.
A small percentage of these Venezuelan migrants appear to be undercover subversive agents embedded by the Maduro regime and his regional and extra-regional allies. Ecuadorian President Lenin Moreno has blamed Venezuela directly over the protests in the country last month. Furthermore, Defense Minister Oswaldo Jarrin said “criminal elements” were using the marches as cover to loot, destroy property and commit acts of “terrorism” aimed at weakening the country. Julio Borges, commissioner for Foreign Relations of Venezuelan Interim President Juan Guaidó, recently stated that 41 of the 57 foreigners arrested in Ecuador’s protests last month were Venezuelan nationals.  

Kelly M. Greenhill, a researcher at Harvard University, focuses on “new security challenges,” including civil wars and the use of forced migration as a weapon, and argues that “strategic engineered migration refers to in- or out-migration that is deliberately induced or manipulated by state or non-state actors.” This description aptly fits the crisis in Venezuela, which goes beyond the result of an incompetent government or grave socio-economic conditions. The Venezuelan refugee crisis is the product of a wicked revolution built on a political-military strategy that converges armed groups and criminal elements in Venezuela and beyond.

In 1999, Hugo Chavez, a former lieutenant colonel who led a failed coup d’état, took power and started the Bolivarian revolution. Chavez’s lust for power used an insurgency-style, revolutionary model with external support to implement profound changes within Venezuelan society and its institutions. This turned a once prosperous country into a brutal tyranny. In 2013, after Chavez’s death, Nicolas Maduro rose to power and doubled down on this strategy — not only to disrupt anti-regime protests through intimidation and violent repression in Venezuela but to converge criminal and terrorist networks.

The two most prominent crime-terror groups in Venezuela are the Revolutionary Armed Forces of Colombia (FARC) and the National Liberation Army (ELN). According to the Colombian Foreign Ministry, the ELN has a presence in at least 12 states within Venezuela, and FARC leaders who abandoned the peace accord, such as Iván Márquez and Jesús Santrich, appeared in August in a video inside Venezuela announcing a return to the armed struggle.

This is combined with at least eight major armed criminal groups in Venezuela that engage in various forms of illicit activity under the protection of the Venezuelan Armed Forces. Pro-government militias (“Colectivos”), paramilitaries such as the “Rastrojos,” criminal gangs such as the “Pranes,” and even Islamist terrorists, namely Hezbollah, use the Maduro regime as a protective shield, which cedes the monopoly on violence.

In short, Venezuela has become what some have called a “Mafia state” with organized crime and terrorist groups controlling vast swaths of Venezuelan territory through transnational illicit networks involved in drug trafficking, money laundering, illegal mining, kidnapping, etc. that spills across borders. The Center for a Secure Free Society, a national security think tank based in Washington, has gone a step further and labeled Venezuela a “parallel state” that combines a “criminalized state” with a revolutionary framework that draws its source of support from external state actors: Russia, Iran and China, or the VRIC.

“We are fulfilling the plan, you understand me,” Maduro recently said, hinting at the well-orchestrated plan behind the Bolivarian revolution, which functions less as a hierarchy and more as a regional network. It is a network that grows stronger as it gains territory; therefore, the goal of the revolution is to expand its territory by destabilizing all of Latin America. Mass migration and increasing refugee outflows from Venezuela is the method.

According to the Organization of American States, the man-made humanitarian crisis in Venezuela could push refugee outflows to as high as 8.2 million next year.

The math is simple. The more refugees that flow out of Venezuela, the easier it is for these transnational and transregional threat networks to spread north, south, east and west. The only way to prevent the Bolivarian “hurricane” from destroying the Western Hemisphere is to stop the Bolivarian revolution that gave life to this threat network and has figured out how to weaponize mass migration.
José Gustavo Arocha is a research fellow for the Center for a Secure Free Society. He is a retired lieutenant colonel from the Venezuelan Army and former political prisoner (2014-2015). Follow him on Twitter @ArochaJG.

God Bless Our Military

God bless our military happy Veterans Day

Thursday, November 7, 2019

Feds order Keystone pipeline to remain shut down in North Dakota

 
Keystone Pipeline Breach

https://www.gowatertown.net/2019/11/07/feds-order-keystone-pipeline-to-remain-shut-down-in-north-dakota/

BISMARCK, N.D. (AP) – Federal regulators have ordered the Keystone pipeline to remain shut down until its Canadian owner takes corrective action aimed at determining the cause of a breach that leaked an estimated 383,000 gallons of oil in northeastern North Dakota.

The Pipeline and Hazardous Materials Safety Administration issued the order Tuesday to TC Energy. The action comes one week after the pipeline leak was discovered and affected about 22,500 square feet of land near Edinburg, North Dakota.

The order requires the company to send the affected portion of the pipe to an independent laboratory for testing.

TC Energy says it has about 200 people are at the site “focused on clean-up and remediation activities.”

Regulators say about 252,000 gallons of crude oil has been recovered.

Tuesday, November 5, 2019

Oxy slashes spending, reports nearly $1B loss after Anadarko deal

 Vicki Hollub, chief executive officer of Occidental Petroleum Corp, is pictured.
NEXT: See recent earnings from area energy companies. Photo: Kyle Grillot, Bloomberg / Bloomberg / © 2019 Bloomberg Finance LP

https://www.chron.com/business/energy/article/Occidental-vows-to-slash-spending-after-Anadarko-14810018.php

Occidental Petroleum said it would dramatically slash its spending by nearly 40 percent next year after reporting a nearly $1 billion quarterly loss in the aftermath of its $38 billion acquisition of Anadarko Petroleum.

Houston-based Oxy said it estimates $5.4 billion in capital spending next year after the combined Oxy-Anadarko will spend an estimated $8.6 billion this year. The megadeal to absorb The Woodlands-based Anadarko and its crown jewel Permian Basin acreage closed in the middle of the third quarter on Aug. 8.

Oxy on its own had planned to spend just less than $5 billion this year before the Anadarko deal, but the cutbacks are still much larger than anticipated. The biggest cost-cutting is coming in the Permian as Oxy combines their operations in West Texas. But Oxy will remain the Permian's largest producer and arguably the second-most-active driller after Exxon Mobil.

Oxy's estimated oil and gas production in 2020 is still projected to rise 2 percent from both Oxy and Anadarko this year, Chief Executive Vicki Hollub, but that's a smaller growth projection than previously anticipated. Oxy plans to resume faster growth in 2021 with a 5 percent leap in production volumes.

Oxy's $912 million loss in the third quarter is almost entirely from the Anadarko deal as Oxy reported $969 million in merger-related transaction costs and fees from debt financing. Oxy also recorded $325 million in quarterly write downs, primarily on the loss of value in unproven acreage where Oxy no longer plans to explore.

Oxy's stock is down 37 percent since the bidding war against Chevron to buy Anadarko went public in April, including another 4 percent dip on Tuesday.

Hollub said the company is making good progress on the Anadarko integration.

“We’re as excited today as we have anytime in the last two years about the opportunities in front of us,” Hollub said. “Now that we’ve had a chance to work together - the two teams - we’re coming up with more synergies.”

She described Oxy's Permian acreage in New Mexico as its "1A" top production area and she said the Anadarko Permian acreage in West Texas is "1B."

Oxy is focusing heavily on cost cutting and debt reduction in part so it can maintain healthy dividend payouts to skeptical investors, many of whom feared the company bit off more than it could chew with the hefty Anadarko deal. Oxy is still facing an ongoing proxy war and litigation from shareholder and famed corporate raider Carl Icahn. Hollub said Oxy is going to be much more attentive to shareholders' concerns moving forward, including lowering the bar for investors calling special board meetings as shareholders voted on earlier this year.

Already, at the end of September, Oxy closed on the $3.9 billion sale of Anadarko's Mozambique liquefied natural gas export project to the French energy major Total. Oxy is selling all of Anadarko's Africa assets to Total for a combined $8.8 billion, but the sales of the remaining Africa transactions in Algeria, Ghana and South Africa are yet to close.

“We are very focused, very intense on getting the asset sales done," Hollub said, including additional sales.

“We are approaching asset sales very aggressively and intently,” she said, while refusing to compromise on the values of the assets.

Hollub reiterated her interest in selling a stake in Anadarko's pipeline business, Western Midstream. But she refused to speculate on other potential asset sales.

“There will be some creativity," she said. "There will be some things you might not expect."

Monday, November 4, 2019

Venezuela's Maduro pledges funds for Argentine shipyard to finish PDVSA tankers

With President of Venezuela Nicolas Maduro.
With President of Venezuela Nicolas Madur

https://www.reuters.com/article/us-venezuela-pdvsa-argentina/venezuelas-maduro-pledges-funds-for-argentine-shipyard-to-finish-pdvsa-tankers-idUSKBN1XE02B

(Reuters) - Venezuelan President Nicolas Maduro on Sunday pledged funds for a state-owned Argentine shipyard to finish building two long- overdue tankers for state oil company Petroleos de Venezuela[PDVSA.UL], which is struggling with a diminished tanker fleet.

Maduro, a socialist who has overseen a drastic economic collapse in the once-prosperous OPEC nation and stands accused of corruption and human rights violations, did not say how much money Venezuela would provide or when it would be disbursed. 

But the statement suggests he sees left-leaning Alberto Fernandez’ victory in last month’s Argentine presidential election as an opening to revive the construction. He accused current President Mauricio Macri, an outspoken Maduro critic, of “sabotage” to delay the tankers’ completion, without evidence.
“Macri, who hates us and fears us at the same time, stopped everything,” Maduro told a gathering of leftist organizations in Cuba. “There’s a new president. I’ll tell you: Venezuela has the resources and is ready to invest and finish those two ships.”

Maduro added that he had not been aware of the situation until union leaders from the Rio Santiago shipyard building the tankers - who also attended the Havana summit - approached him in a restaurant this weekend. 

Representatives for Macri and Fernandez did not immediately respond to requests for comment. Maria Eugenia Vidal, a close Macri ally and outgoing governor of Buenos Aires province, which owns the shipyard, has said she would rather spend money on schools than subsidize it. 

Fernandez is set to be inaugurated next month. 

Delivery of the ships was delayed long before Macri took office in late 2015. Maduro’s late predecessor Hugo Chavez and late Argentine President Nestor Kirchner first signed a pact to build them in 2005. 

One tanker, the medium-sized Eva Peron Aframax, was officially launched in 2012, but construction delays and a lack of funds have meant neither has yet been delivered. 

PDVSA, hit by a freefall in its crude output and U.S. sanctions intended to force out Maduro, is in desperate need of new tankers, after losing control of part of its fleet due to mounting unpaid bills to operators. 

Many shipping firms are no longer calling at Venezuela’s ports or carrying its oil due to sanctions, say maritime sources, leading to a scarcity of tankers for exports and a consequent accumulation of unsold oil stocks, which has forced PDVSA to further cut back output. 

Reporting by Luc Cohen; additional reporting by Hugh Bronstein and Maximilian Heath in Buenos Aires; editing by Richard Pullin

Friday, November 1, 2019

Planeloads of Cash From Russia Have Been Shipped to Venezuela

An airplane with the Russian flag is seen at Simon Bolivar International Airport in Caracas,
Russian military planes land near Caracas

  • About $315 million of euros and greenbacks were transferred
  • Bills allow Venezuela to use hard currency to skirt sanctions
Hundreds of millions of dollars in cash has been shipped from Russia to Venezuela, providing a lifeline to the South American country as U.S. sanctions limit its access to the global financial system.

A total of $315 million of U.S. dollar and euro notes were sent in six separate shipments from Moscow to Caracas from May 2018 to April 2019, according to data reviewed by Bloomberg from ImportGenius, which compiled Russian customs records it obtains through private sources. The cash came from lenders run by the countries’ governments and went to Venezuela’s development bank, the records show.
President Nicolas Maduro Holds Press Conference
Nicolas Maduro
Photographer: Carolina Cabral Fernandez/Bloomberg
While the money could be for any number of things -- like Venezuela repatriating cash held overseas or dividends from a stake in a Moscow-based bank or revenue from sales of crude or gold -- the complex logistical feat shows one of the ways President Nicolas Maduro’s administration has sought to skirt aggressive U.S. financial sanctions. As a consequence of the scrutiny, the central bank is conducting more transactions in cash, sometimes offering local clients access to euro bills.

ImportGenius’s data goes through April this year. That month, about $97 million in notes were sent in two loads from Moscow-based bank Evrofinance Mosnarbank to Venezuela’s Banco de Desarrollo Economico y Social de Venezuela, or Bandes. Evrofinance is a joint venture between Bandes and Russia’s state property management agency.

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In January, $113 million worth of 100-euro bills were sent from state-controlled lender Gazprombank, which at the time had a stake in Evrofinance. The same entity shipped $50 million in U.S. dollar bills just two days earlier, and two separate shipments of unspecified currency totaling $55 million were made in May and July of last year.

Press officials for Evrofinance didn’t respond to requests for comment. Requests made to Bandes through Venezuela’s Finance Ministry were redirected to the Information Ministry, which didn’t respond.

A Venezuelan government official, who asked not to be identified discussing sensitive matters, confirmed the country had received cash shipments tied to Evrofinance but declined further comment.

Gazprombank spokesman Anton Trifonov declined to comment on any cash shipments but noted that “the correspondent account of Bandes with Gazprombank, as well as any cooperation between the banks, was totally terminated in March 2019.”

The Venezuelan regime has gone to great lengths to maintain access to hard currency as the U.S. crackdown leaves it isolated from conventional financial systems, with major banks mostly refusing to do business with Maduro. Among other ventures, the regime has used secret gold sales to raise funds, while also studying the possibility of using cryptocurrencies or a Russia-run global payment system to send money.

Bandes was sanctioned in March by the U.S., which alleged Maduro uses the bank’s accounts to keep a substantial amount of money abroad, mostly in Europe. The officials said the Venezuelan government had started moving funds away from the central bank, shifting them to Bandes.

Last year, Evrofinance was selected by the Maduro government to handle some payments to its suppliers, which were urged to channel international transactions through the Moscow bank. Later that year, Venezuela appointed a former Evrofinance board member as a top official in the nation’s banking system.

ake Rudnitsky, and Ben Bartenstein