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Stakes Could Get Higher for US E&Ps

Analyst predictions for cuts to fall base borrowing deepen for small and mid-cap exploration and production companies that depend on banker credit and support. Small and mid-cap exploration and production (E&P) companies have been bracing for the fall recalculation of their bank lines of credit since the post-spring markets continued to leave oil in the ground and commodity prices on the floor. And an industry brief from Raymond James and Associates suggests the cuts could be much deeper than those earlier this year. “We think fall borrowing base redeterminations will likely be more punitive this fall, leading to a 15 to 20 percent reduction in overall U.S. E&P bank credit facilities,” the analysts said in an Oct. 12 brief. Taking into account that company hedge books continue to fall off; proved undeveloped (PUD) reserves are likely to drop with the slowdown in drilling; the government is getting involved; and […]

Posted On : Published By : Tom Whipple
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Schlumberger Cancels New Year: Liam Denning

Ladies and gentlemen, 2016 has been canceled. Thanks for coming. Schlumberger, the oilfield services giant, sure knows how to kill the mood — which wasn’t great in the oil patch anyway. Its third-quarter results, reported late on Thursday, were broadly unremarkable. The company beat earnings estimates slightly, largely at the tax line, and displayed the resilience that investors have come to expect, with margins holding up and $1.7 billion of free cash flow. Good for them. But the commentary that followed on Friday morning’s analyst call will take what little air there was out of the oil industry’s sails. Schlumberger effectively wrote off the idea of things getting better next year. It will take more charges in the current quarter as it cranks up efforts to cut costs again, and that will hit earnings. It expects first-quarter earnings next year to be lower still. It hopes that will mark […]

Posted On : Published By : Tom Whipple
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Schlumberger says oil outlook is ‘increasingly challenging’

Sign up for quick access to a wealth of global business news, including: Schlumberger says oil outlook is ‘increasingly challenging’ Newspaper + Premium online Newspaper + Premium online Premium Full FT.com subscription Premium Full FT.com subscription Standard Full news & archive Standard Full news & archive Trial Try Premium online Trial Try Premium online Price Monthly Annual $66.30 $11.77 per week $53.00 $9.25 per week $36.00 $6.45 per week $1.00 for 4 weeks $1.00 for 4 weeks FT Alphaville plus selected FT blogs yes yes yes yes Unlimited FT.com article access yes yes yes yes Unlimited mobile and tablet access yes yes yes yes Unlimited fast FT yes yes yes yes 5 year company financials archive yes yes yes yes The LEX column yes yes no yes ePaper access yes yes no yes Three exclusive weekly emails yes yes no yes Daily newspaper delivery yes no no For 4 […]

Posted On : Published By : Tom Whipple
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Occidental’s North Dakota deal mixed omen for pending oilfield deals

Occidental Petroleum Corp’s move to sell its North Dakota acreage likely removes a logjam that had impeded U.S. oilfield deals for much of the year, though the deal’s price sets an unusually low bar for future deals and gives buyers the advantage over sellers. Oxy is selling all of its roughly 300,000 acres in North Dakota’s Bakken shale formation to a private equity fund in a deal valued around $500 million, sources familiar with the matter told Reuters. The price is roughly one-sixth, though, of what Wall Street had expected Oxy to fetch for the assets as recently as last year. Houston-based Oxy did not sell the North Dakota assets out of distress; indeed, it has $2.8 billion in cash in the bank. Rather, the deal removes an operational distraction from managers focused elsewhere and helps the company achieve its goal of being cash-flow neutral. Still, for ConocoPhillips, Whiting […]

Posted On : Published By : Tom Whipple
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How Banks Funded the U.S. Oil Boom and (So Far) Escaped the Bust

When Whiting Petroleum needed cash earlier this year as oil prices plummeted, JPMorgan Chase, its lead lender, found investors willing to step in. The bank helped Whiting sell $3.1 billion in stocks and bonds in March. Whiting used almost all the money to repay the $2.9 billion it owed JPMorgan and its 25 other lenders. The proceeds also covered the $45 million in fees Whiting paid to get the deal done, regulatory filings show. Analysts expect Whiting, one of the largest producers in North Dakota’s Bakken shale basin, to spend almost $1 billion more than it earns from oil and gas this year. The company has sold $300 million in assets, reduced the number of rigs drilling for oil to eight from a high of 24, and announced plans to cut spending by $1 billion next year. Eric Hagen, a Whiting spokesman, says the company has “demonstrated that it […]

Posted On : Published By : Tom Whipple
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Canadian Oil Sands Takeover `Ill Advised,’ Venator’s Osten Says

Suncor Energy Inc.’s offer to buy Canadian Oil Sands Ltd., the largest stakeholder in oil-sands miner Syncrude Canada Ltd., is “ill advised” because of the low oil price and the potential for further share-price declines, said Venator Capital Management Chief Executive Officer Brandon Osten. For the the Canadian Oil Sands purchase “to offer reasonable rates of return, you kind of need $70 dollar-plus oil and you’re not really there,’’ Osten said in an interview Wednesday at Bloomberg’s Toronto office. Venator Capital is a Toronto-based hedge fund with about C$300 million ($233 million) under management, and has shorted Suncor since the first quarter, he said. Suncor, Canada’s largest crude producer, is taking advantage of a prolonged oil rout to renew its effort to take over Canadian Oil Sands after two friendly offers were turned down earlier this year. Suncor has offered to trade 0.25 Suncor share for each share of […]

Posted On : Published By : Tom Whipple
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Schlumberger Now Sees ‘Challenging’ Global Oil Market Continuing

Three months ago, the head of Schlumberger Ltd. thought the industry had seen the worst of the U.S. oil market collapse. Now he’s not so sure. Chief Executive Officer Paal Kibsgaard said in July that a recovery might begin by the end of the year. Now he says it could be delayed. Kibsgaard’s comments came in a statement Thursday as Schlumberger reported a 49 percent drop in third-quarter profit. The market is "increasingly challenging with activity expected to be reduced further, " Kibsgaard said. The world’s largest oilfield services provider reported that profit fell to $989 million, or 78 cents a share, from $1.95 billion in the year-ago quarter. The earnings beat by 1 cent the average of 37 analysts’ estimates compiled by Bloomberg. Even if demand catches up to supply, business will probably continue to decline, Kibsgaard said, as a “lack of available cash flow exhausts capital spending […]

Posted On : Published By : Tom Whipple
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Oxy to exit North Dakota’s oil fields in sale to private equity fund

The Occidental Petroleum Corp headquarters is pictured in Los Angeles, California September 16, 2013. Occidental Petroleum Corp, the fourth-largest U.S. oil producer, has agreed to sell all of its North Dakota shale oil acreage and assets to private equity fund Lime Rock Resources in a deal worth around $500 million, according to sources familiar with the matter. The sale, which marks the first exit of this downturn by a major oil company from the Bakken shale formation, encompasses all of Oxy’s more than 300,000 acres in the state, including a 21,000 square-foot regional office built just three years ago. Lime Rock, which already operates in North Dakota, is buying the assets as the oil industry contends with the worst crude price crash in more than six years, a drop the fund used to its advantage. As recently as last fall, Wall Street had expected Oxy’s Bakken assets to sell […]

Posted On : Published By : Tom Whipple
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Oil glut up by half a billion barrels in 2015

An oil pumping machine is seen as non-usable gases are being burnt behind it in Sakir, south of Manama, October 11, 2014. The world’s big oil exporters pumped more than half a billion barrels more crude than needed in the first nine months of this year, industry data gathered by Reuters and major energy market forecasters show. The Organization of the Petroleum Exporting Countries pumped an average of 31.20 million barrels of oil per day (bpd) between January and September, Reuters estimates show, more than 2 million bpd higher than demand for their oil. That is a total of more than 550 million barrels of crude, all of which needs to be stored somewhere. Core OPEC countries, led by Saudi Arabia, decided almost a year ago to concentrate on building market share rather than defending oil prices, and the result has been a huge oversupply that has pushed the […]

Posted On : Published By : Tom Whipple