Oil Prices

Starting to feel like the perfect storm approaching for the O&G sector - the combination of a rising USD, tightening credit conditions and collapsing oil prices with futures trading contango.

Rig speculators, over-leveraged platform owners, E&P operators over-spent on capex along the entire value-chain are looking more and more vulnerable. Quite a few corporate bonds on the OTC markets looking rather dodgy as well, quite a few balance sheets looking very stretched.

Pricking of the bubble is inevitable but hopefully it will be self-contained and not prove to be overly contagious.

Did you hear about the bunker oil fraud? Already we are starting to see who is swimming naked B-)

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O&G appears to be a major sector on SGX by virtue of our Rig/ship repairers.

Support industry players only came about when rara show began b4 GFC starting with KS Energy, Ezra, Jaya, Swiber.

I got badly burnt even with dividend rich Jaya pre GFC. I deliberately stayed clear of Ezra as it has consistently been boosted by one-offs. True to my analysis, Ezra's bubble burst and never recovered till this very day. Jaya's problem was restricted to speculative buildings that coincided with industry downturn.

In fact, if one analyse conservatively operated CHO, then there is absolutely and hardly any excitement within the sector without stock manipulation and questionable corporate strategies.

Of course some share operators made a pile pre GFC and respinned the model - that came with the birth of Ezion, the darling post GFC. Ezion is exactly a carbon copy of Ezra. After Ezion, they are trying very hard to replicate it in Swissco. Of course we have POSH being listed and bombed...

In the meantime, some of us might be wondering as to why Jaya PE owner decided to sell away Jaya's core business at a discount to book when everything appeared to be rosy - huh now we know that PE looks far ahead and sold when the time is ripe for them but not to stock market players.

O&G cycle has been way extended. When I was covering FELS in mid 90s, there was no contracts at all and FPSO was the solution that may kick start a renewal in fleet. Since early 2000, it has been never ending. Now that Choo CB and Teo SH have both retired from Kep Corp at its peak, it should set everyone thinking who are those that are insightful to the global cycle.

No Core Interests in O&G
GG

(07-11-2014, 08:41 PM)AlphaQuant Wrote: Starting to feel like the perfect storm approaching for the O&G sector - the combination of a rising USD, tightening credit conditions and collapsing oil prices with futures trading contango.

Rig speculators, over-leveraged platform owners, E&P operators over-spent on capex along the entire value-chain are looking more and more vulnerable. Quite a few corporate bonds on the OTC markets looking rather dodgy as well, quite a few balance sheets looking very stretched.

Pricking of the bubble is inevitable but hopefully it will be self-contained and not prove to be overly contagious.

(28-10-2014, 08:56 AM)specuvestor Wrote: A bit ironic that I was championing shale more than a year ago in this forum when people were still skeptical but when people are fearful now i am saying shale production likely plateau if oil price remains $80 WTI or below

Shale Drillers Idle Rigs From Texas to Utah as Oil Rout Deepens
2014-11-08 01:00:00.0 GMT


By Lynn Doan
Nov. 8 (Bloomberg) -- The shale-oil drilling boom in the
U.S. is showing early signs of cracking.
Rigs targeting oil sank by 14 to 1,568 this week, the
lowest since Aug. 22, Baker Hughes Inc. said yesterday. The
Eagle Ford shale formation in south Texas lost the most,
dropping nine to 197. The nation’s oil rig count is down from a
peak of 1,609 on Oct. 10.
Drillers are slowing down as crude prices tumbled 24
percent in the past four months. Transocean Ltd. said yesterday
that its earnings would take a hit by a drop in fees and demand
for its rigs. The slide threatens to curb a production boom in
U.S. shale formations that has helped bring prices at the pump
below $3 a gallon for the first time since 2010 and shrink the
nation’s dependence on foreign oil imports.
“We are officially seeing the slowdown in oil drilling,”
James Williams, president of energy consulting company WTRG
Economics, said by telephone from London, Arkansas, yesterday.
“There’s no doubt about it now. We’re already down 49 rigs
since the peak in October. It’ll have fallen by more than 100
rigs by the end of year.”
U.S. benchmark West Texas Intermediate crude for December
delivery rose 74 cents to settle at $78.65 a barrel on the New
York Mercantile Exchange yesterday. Prices are down 17 percent
in the past year.

Chesapeake, EOG

Executives at several large U.S. shale producers, including
Chesapeake Energy Corp. and EOG Resources Inc., have vowed to
maintain or even raise production as they reported earnings this
week. They say their success in bringing down costs means they
can make money even if prices slump further.
The oil rig count will drop to 1,325 by the middle of next
year amid lower prices, Genscape Inc., an energy data company
based in Louisville, Kentucky, said in a report Nov. 6.
Drillers from Apache Corp. to Continental Resources Inc.
have said this week that they’re laying down rigs in some oil
plays.
Transocean, owner of the biggest fleet of deep-water
drilling rigs, is delaying the release of its third-quarter
results after saying its earnings would be hit by $2.76 billion
in charges from a decline in the value of its contracts drilling
business and a drop in rig-use fees. The company had been
scheduled to report earnings yesterday.
Transocean’s competitors will probably have to take similar
measures as “this is going to be an industry wide phenomenon,”
Goldman Sachs Group Inc. said in a research note yesterday.

Self-sufficient

While the drop in oil prices limits spending in shale
plays, production will continue to boom next year and North
America may become self-sufficient in oil by 2016, Per Magnus
Nysveen, head of analysis for Oslo-based consulting company
Rystad Energy AS, said by e-mail yesterday. Liquid output from
North American shale will rise to 6.5 million barrels a day in
December and to 12 million barrels by 2020, he said.
U.S. oil production climbed 2,000 barrels a day in the week
ended Oct. 31 to 8.972 million, the highest level in at least
three decades, Energy Information Administration data show.
WTI futures are still a “long way off” from rebounding,
said Mike Wittner, the head of oil market research at Societe
Generale SA.
“The market needs to see much more significant reductions
in the rig count on a steady, sustained basis for it to have any
impact on production and prices,” he said by telephone from New
York yesterday. “Growth is so strong now that it’s going to
take a long time and many months for it to actually peter out
and turn into negative growth.”

Second Half

Halliburton Co., the second-largest oil and gas services
company by market value, was told by its U.S. customers that
they won’t be changing frac activities for the first or second
quarters of next year, UBS AG analysts including Angie Sedita in
New York said in an e-mailed research note Nov. 6. Customers
said they would start cutting back in the second half of 2015
should oil prices remain low, she said.
Gas rigs were up 10 at 356, Baker Hughes said in data
posted on the Houston-based field services company’s website.
U.S. gas stockpiles rose 91 billion cubic feet last week to
3.571 trillion, according to the EIA. Supplies were 6.8 percent
below the five-year average and 6.3 percent under year-earlier
inventories.
Natural gas for December delivery gained 0.8 cent to $4.412
per million British thermal units yesterday on the Nymex, up 25
percent in the past year.
“The gas rig count is responding to prices a little
higher,” Williams said.

World oil prices tumble as Kuwait downplays output cut
AFP NOVEMBER 11, 2014 8:40AM

Kuwaiti oil minister Ali al-Omair, right, has downplayed the prospect of an OPEC output c
Kuwaiti oil minister Ali al-Omair, right, has downplayed the prospect of an OPEC output cut. Source: AFP
WORLD oil prices sank after Kuwait downplayed prospects for an OPEC output cut in the face of abundant global supplies.

US benchmark West Texas Intermediate for December dived $US1.25, or 1.6 per cent, to close at $US77.40 a barrel on the New York Mercantile Exchange.

Brent North Sea crude for delivery in December closed in London at $US82.34 a barrel — its lowest price since October 2010 — down $US1.05 from Friday.

The oil market was dragged lower by Kuwait’s comment suggesting that OPEC “is going to have struggles coming to an agreement on a cut”, said Michael Lynch of Strategic Energy and Economic Research.

The Kuwaiti oil minister, Ali al-Omair, said earlier that OPEC was unlikely to cut crude output when it meets in Vienna on November 27 amid hopes the market will absorb surplus supplies. “I do not expect OPEC to make any production cut. A decision like this will be very difficult,” Mr Omair said in Abu Dhabi, cited by the official KUNA news agency.

Mr Omair, who was attending an oil conference in the UAE capital, expressed hope that the oil market will soon absorb surplus production, adding that “the size of the surplus is unknown”. KUNA quoted OPEC secretary-general Abdullah el-Badri as saying that “there was no cause for panic in the markets as a result of the sharp decline in oil prices because the situation will improve”

In a unified display of dissension, Venezuela and Ecuador last week publicly declared their joint support for an output cut. The cartel, which pumps about a third of global crude, is currently producing just under 31 million barrels per day, around one million barrels higher than its ceiling.

AFP

why is oil headed south?

Need to be a bit conspiracy theorist or imagine yourself as one.

A lot of oil exporting countries need oil to be minimum $80 to support their social programs back in their own country, countries like middle east including Russia.

Look at what's happen now ukraine situation. Sanctions against Russia + weakening oil could hurt and destabalize Russia but is also hurting US middle east allies who also need oil minimum $80 for their own programs. Russia is also world largest gold producer look at where the price of gold has been heading. All tied together.

what they doing to russia now is similar to what happen during the Reagan years that caused the soviet union to collapse.

(11-11-2014, 04:02 PM)sgd Wrote: why is oil headed south?

Need to be a bit conspiracy theorist or imagine yourself as one.

A lot of oil exporting countries need oil to be minimum $80 to support their social programs back in their own country, countries like middle east including Russia.

Look at what's happen now ukraine situation. Sanctions against Russia + weakening oil could hurt and destabalize Russia but is also hurting US middle east allies who also need oil minimum $80 for their own programs. Russia is also world largest gold producer look at where the price of gold has been heading. All tied together.

what they doing to russia now is similar to what happen during the Reagan years that caused the soviet union to collapse.

further news

http://www.theguardian.com/business/econ...ices-shale


Stakes are high as US plays the oil card against Iran and Russia
Washington is trying to drive down prices by flooding the market with crude but risks collateral damage to its own shale industry

Q1: Why did Harold Hamm sell all of Continental's crude oil hedges through 2016?

a. He thinks crude oil prices will go up
b. He thinks crude oil prices will go down
c. He thinks crude oil prices will stay the same
d. He is just a closet gambler

P.S. Continental Resources is one of the biggest players in shale oil in the USA.

From www.naturalgasintel.com

Continental Resources Inc. is betting that the sell-off in crude oil has hit bottom and has monetized nearly all of its hedge positions through 2016, while keeping about one-third of its natural gas hedged in 2015 at an average price of $4.34/Mcf.

The sell-off sent investors scrambling on Thursday, pushing the stock price down, but CEO Harold Hamm was defiant during a conference call.

"Our view ultimately comes back to global supply and demand, which in my opinion has not fundamentally changed in the past three months, certainly not enough to justify a sell-off" in Brent and West Texas Intermediate crude oil, he told analysts.

The discussion today, he said, centers around "political wrangling and price changes, not demand destruction. In my opinion, it's a great buying opportunity for equities in well capitalized...producers. We believe the pullback in oil prices will prove to be ultimately beneficial to Continental."

The company expects crude oil prices will "strengthen to the mid $80s and the lower $90 range," with the recent drop to be "short lived."

However, just in case, "we felt it was sensible to adjust 2015 guidance" and reduced capital expenditures (capex) for 2015 by 12%, said the CEO.

"While awaiting this recovery, we have elected to maintain our current level of activity and plan to defer adding rigs in 2015. This translates to a $600 million reduction in our 2015 capex budget, resulting in a revised 2015 capex budget of $4.6 billion, with 23-29% production growth."

Q2: For the folks who answered (a) for Q1, why do you think Harold Hamm is so bullish on crude oil prices?

a. He is aware that Continental and its competitors are hurting badly from the current crude oil prices
b. Continental and its competitors are expected to earn bucket loads of money even at current crude oil prices
c. He has a great economist who is forecasting strong global economic growth in the next 2 years, resulting in strong crude oil demand

Obama is punishing Putin for his invasion in Cremia! Low oil is also good for US economy and avoids stagflation. From this, it looks like the trend won't revert any time soon, until maybe the Fed start officially raising rates.

(11-11-2014, 04:02 PM)sgd Wrote: why is oil headed south?

Need to be a bit conspiracy theorist or imagine yourself as one.

A lot of oil exporting countries need oil to be minimum $80 to support their social programs back in their own country, countries like middle east including Russia.

Look at what's happen now ukraine situation. Sanctions against Russia + weakening oil could hurt and destabalize Russia but is also hurting US middle east allies who also need oil minimum $80 for their own programs. Russia is also world largest gold producer look at where the price of gold has been heading. All tied together.

what they doing to russia now is similar to what happen during the Reagan years that caused the soviet union to collapse.