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Oil Investors Betting on Payout Cuts Ignore Years of History

Shares of the largest oil companies have slumped so low it suggests investors expect the crash in crude prices to force cuts in dividends. History tells a different story. Oil’s collapse has driven the annual dividend yield at Royal Dutch Shell Plc to at least a 20-year high of 7.7 percent this week, compared with 4.4 percent for the benchmark FTSE 100 Index. The yield — the annual return divided by the share price — is also at a two-decade high at Exxon Mobil Corp. and Chevron Corp. “The market is telling us that investors think the dividend payouts may not be sustainable with oil at this level,” said Ahmed Ben Salem, a Paris-based analyst with Oddo & Cie. “History suggests otherwise. Oil companies are very attached to their dividend policy and if they were to cut it they’d lose a lot of investors.” Shell, Europe’s biggest oil company, […]

Posted On : Published By : Tom Whipple
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Jean Laherrere’s Bakken Update

The rest of North Dakota, less the Bakken, is just about finished. With this chart Jean puts North Dakota production right at the peak. Being a self confessed techno-optimist of sorts I’ll bite but before I do, here are some news stories that will support some of the arguments I will be putting forward The target was unveiled by ACT chief minister Andrew Barr at the ACT Labor Party conference on Saturday. The ACT already had a 90 per cent renewable energy target by 2020, but decided to go the “whole hog” by 2025 to show leadership in the climate and clean energy debate that has been lacking at the federal level. “Canberra can and should be a beacon for everyone who realises the world must act decisively now to stave off a future of catastrophic climate change,” Barr told the conference on Saturday. The ACT is able to […]

Posted On : Published By : Tom Whipple
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Refinery issues skewing U.S. gasoline prices

High demand and refinery issues in the United States mean gasoline prices could be lower than they are, markets analyses find. File Photo by UPI/Gary C. Caskey WASHINGTON, Aug. 25 (UPI) — Though at historic lows on average, refinery issues in the United States and higher demand put upward pressure on gasoline prices, retail market analyses find. Motor club AAA reports a national average retail price for a gallon of unleaded gasoline for Tuesday at $2.57, down a fraction of a percent from Monday. Tuesday’s price is down about 5 percent from one month ago and represents the lowest price for this date in more than a decade. The average retail price nation-wide was skewed upward in early August after BP reported an unscheduled outage at its refinery in Whiting , Ind., the sixth largest in the nation and a key gasoline supplier to the Great Lakes states. Prices […]

Posted On : Published By : Tom Whipple
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Encana Corp. leaves Louisiana shale

Canadian energy company Encana sells shale acreage in Louisiana in an effort to ease debt burden. Photo by Christopher Halloran/Shutterstock CALGARY, Alberta, Aug. 25 (UPI) — In an effort to cut debt, Canadian energy company Encana Corp. said Tuesday it was selling its shale natural gas assets in Louisiana for $850 million. Encana said it was unloading its assets in the Haynesville shale basin to GEP Haynesville, LLC, a joint venture formed by fund manager GSO Capital Partners and GeoSouthern Haynesville. The Canadian company said it would use the cash from the sale, as well as savings from the footprint reduction, to cut debt. "By further focusing our portfolio, we are making Encana more efficient as we proceed through the second half of 2015 and into 2016," Encana President and Chief Executive Officer Doug Suttles said in a statement. "This transaction delivers significant proceeds that we’ll use to strengthen […]

Posted On : Published By : Tom Whipple
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Bakken Oil Production Up Slightly

Bakken Production North Dakota saw increased production in July after slipping for two months. In April, the EIA predicted that production had peaked across the U.S. at 9.7 million barrels per day, the highest level since 1971. This proved to be true as production fell in May by 50,000 barrels per day and in June, Bakken shale month-over-month crude oil production dipped 1.3%. This week, Bentek Energy reported a slight increase in oil production for North Dakota in July, saying that the Bakken formation follows closely behind the Eagle Ford Basin in terms of efficiency gains and internal rates of return. Drill times in the Bakken dropped from about 15 days per well in late 2014 to about 13 days per well during the second quarter of this year. Bentek analyst, Sami Yahya, explained “Substantial cost savings protocols alongside reduced drill times have kept internal rates of return in […]

Posted On : Published By : Tom Whipple
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More oil than expected in Norwegian North Sea

Norwegian energy regulator revises estimates of potential oil in North Sea field tapped by Lundin Petroleum. Photo by num_skyman/Shutterstock STAVANGER, Norway, Aug. 25 (UPI) — The national energy regulator in Norway said preliminary results from a North Sea field show a potential increase in estimated recoverable oil reserves. The National Petroleum Directorate said it was reviewing the preliminary results from an appraisal well drilled by Lundin Petroleum in the Edvard Grieg oil field in the central section of the North Sea. "Preliminary calculations show that the results from the well may result in an increase of between 6.2 million and 50 million barrels of recoverable oil in this section of the Edvard Grieg field," the regulator said in a statement. "Further work is expected to reduce the uncertainty of this estimate." Lundin in early August revised its production guidance lower to 32,000 barrels of oil equivalents per day as […]

Posted On : Published By : Tom Whipple
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Oil rallies but still near 6-1/2-year lows

A customer prepares to fill the tank of her car at a fuel station in Sint Pieters Leeuw December 5, 2014. Oil bounced back from heavy losses on Tuesday but global oversupply and worries over the severity of the economic slowdown in China, the world’s top commodity consumer, kept prices near 6-1/2-year lows. European equity markets recovered on Tuesday but Chinese stock markets closed down more than 7 percent, with panic selling intensifying after the flagship Shanghai Composite Index .SSEC crashed through key support at 3,000 points. U.S. crude CLc1, also known at West Texas Intermediate or WTI, was up 65 cents at $38.89 a barrel by 0840 GMT (0440 EDT), while Brent LCOc1 was up 60 cents at $43.29. "It all depends on the European stock market," Commerzbank oil analyst Carsten Fritsch told Reuters Global Oil Forum. "If stocks fall further, oil will follow suit." Oil prices dropped […]

Posted On : Published By : Tom Whipple
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Oil Tumbles to Fresh Lows on China Market Turmoil

Oil prices tumbled to fresh lows in Asian trade Monday, in line with the selloff in wider financial markets, as investors were shaken by the rout in Chinese equity markets and worries about global economic growth. Brent crude, the global oil-price benchmark, dropped below the $45 a barrel mark for the first time since March 2009. It is now trading around 56% lower from its year-high of $103.19 a barrel reached in August last year. Oil prices have been under pressure for several months due to oversupply concerns, but the slump deepened in recent weeks on fears of a sharp slowdown in the Chinese economy and its impact on global markets. The recent devaluation of the yuan also added to market uncertainty, stoking concerns that China’s oil and commodities imports could fall further. On the New York Mercantile Exchange, light, sweet crude futures for delivery in October traded at […]

Posted On : Published By : Tom Whipple
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Brent Oil Falls Below $45 for First Time Since 2009 on Supplies

Crude in London slid below $45 a barrel for the first time since March 2009 on concerns Chinese demand is slowing just as Iran and the U.S. threaten to expand a global glut. Brent oil fell as much as 6.5 percent, extending a 7.3 percent drop last week that was the biggest in five months. Commodities sank to the lowest in 16 years as forecasts for the weakest Chinese growth since 1990 spurred investors to seek out the safest assets. U.S. energy companies declined as much as 6 percent on the Standard & Poor’s 500 index. Losses eased after equities pulled back from the brink of a correction. Iran’s Oil Minister Bijan Namdar Zanganeh vowed to expand output “at any cost,” according to the ministry’s news website. The number of active oil rigs in the U.S. rose for the seventh time in eight weeks, data showed Friday. Oil’s worsening […]

Posted On : Published By : Tom Whipple
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Analysts: New Price Downfall Not Sustainable

With both the U.S. and global benchmarks for oil prices hitting fresh six-year lows , analysts are scrambling to figure out where the slide will end. In Monday morning trading, Brent was trading at $43 per barrel and North America’s benchmark, West Texas Intermediate (WTI) was at $39 per barrel. Analysts at Tudor Pickering Holt & Co. in Houston said in their daily note to investors that it’s hard to buy energy stocks with oil prices dropping almost every day at a drip-drip-drip pace. “With oil down again, $20 per barrel predictions will be amplified,” TPH said. “Remember the oil business doesn’t work at these prices.” At Robert W. Baird & Co. in Ohio, analysts said global risks are among the forces working to push West Texas Intermediate below $40 per barrel. The sell-off in global equities witnessed in the last three trading sessions extended overnight, punctuated by an […]

Posted On : Published By : Tom Whipple