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Monday, August 5, 2013

Moller-Maersk Net Profit Falls, Demand to Stay Subdued

The world's largest container shipping company A.P. Moller-Maersk A/S Friday posted a smaller-than-expected drop in first-quarter net profit, supported by increased freight rates and efficiency measures at its main shipping unit, but said it expects container transport demand to remain subdued this year amid "challenging" conditions.

Last year's earnings were boosted by the settlement of a tax dispute in Algeria.

The Danish shipping and oil conglomerate said it is maintaining its full-year guidance, expecting a result for 2013 below that of 2012 of $4 billion, while the net result excluding exceptionals is expected to be in line with the 2012 figure of $2.9 billion.

"Global demand for seaborne containers is expected to increase by 2%-4% in 2013, lower on the Asia-Europe trades but supported by higher growth for imports to emerging economies," the company said.

Indications for the first quarter of 2013 "show modest improvements in the global demand for container transport, reflecting the weak economic situation, especially in developed countries."

"Demand is expected to stay subdued in 2013 while capacity will grow significantly. Accordingly, conditions for the container industry remain challenging and managing supply will be even more important this year," it said.

The company posted a first-quarter net profit of 4.01 billion Danish kroner ($693 million), beating analyst expectations of DKK3.4 billion. In the year-earlier period, the company recorded a net of DKK6.15 billion.

Revenue was lower than expected, dipping 2% to DKK79.32 billion, from DKK81.31 billion in the year-ago period. Analysts had forecast revenue of DKK82.32 billion.

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Monday, July 29, 2013

Nymex Crude Falls as Dollar, Weak Fuel Demand Weigh

Crude-oil futures fell Friday on a stronger U.S. dollar and new indications of sluggish global fuel demand.

Light, sweet crude for June delivery settled 35 cents or 0.4% lower at $96.04 a barrel on the New York Mercantile Exchange. Futures traded as low as $93.37 a barrel early in the session, but pared more than $1 of the early losses in the last half-hour of trading.

Brent crude on the ICE futures exchange fell 75 cents to trade $103.72 a barrel.

Futures were stung by gains in the dollar against its largest trading partners, which also weighed on broader commodities markets. The Dow Jones-UBS Commodity Index was recently down 1.1%.

Additionally, a report from the Organization of the Petroleum Exporting Countries suggested global oil demand remains weak.

"It was a whipsaw session," said Peter Donovan, a broker at Vantage Trading, who said that worries about China's growth and economic weakness in the euro zone have kept some investors on edge. "Some of the bulls are on the defensive."

In its monthly outlook, OPEC kept its 2013 oil-demand outlook unchanged from last month, when it predicted demand would increase by 800,000 barrels a day compared to last year. But the group said demand growth was weaker than expected in the first quarter, and warned that slowing growth in China and economic weakness in the euro zone are threatening to further slow the global economy.

"The OPEC report today is not encouraging for demand in the second half of this year," said Andy Lebow, an oil broker at Jefferies Bache in New York. "We need a significant increase in demand to get oil above the top of this trading range."

After rallying to end 2012, U.S. oil prices have been stuck below $98 a barrel since the beginning of the year, and fell as low as $86 in April.

Analysts and traders say that without an improvement in the broader economy, fuel usage will remain sluggish. And increasing production, particularly in the U.S., is leading to rising stockpiles.

U.S. oil inventories rose to 395.5 million barrels last week, the highest level in over thirty years. Additionally, output is increasing in Saudi Arabia, the world's largest oil exporter.

U.K.-based tanker tracker Oil Movements said Thursday that seaborne oil shipments from OPEC members will rise by 290,000 barrels a day in the four weeks to May 25, compared with the previous four-week period.

"This physical oversupply prevents prices from gaining at the moment," said Carsten Fritsch, commodity analyst at Commerzbank.

Front-month June reformulated gasoline blendstock, or RBOB, settled 2.48 cents, or 0.9%, lower at $2.8603 a gallon. June heating oil settled 1% lower at $2.9062 a gallon.

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Thursday, July 25, 2013

Apache 1Q Profit Falls 10% Amid Weak Commodity Prices

Apache Corp. said it would seek to sell $4 billion in assets this year, doubling its divestiture program as the U.S. oil and gas company tries to pay down debt and boost its stock price.

The move by the Houston company follows similar strategies by Chesapeake Energy Corp. and other independent energy producers, which expanded aggressively during the recent energy boom but now are scaling back. Apache, which engaged in acquisitions in the deep-water U.S. Gulf of Mexico and other places, now plans to focus on production in onshore North America, which it thinks will provide the best return, and jettison land that has turned out less profitable than first hoped. Apache declined to say, however, which assets were on its sales list.

"We've spent the past several months going through assets to see which to keep and which would be worth more to others," Chief Executive Steven Farris said during a call with investors. "The asset list we have generated, at today's prices, would exceed $4 billion."

Apache plans to use the first half of the expected proceeds to pay down its debt. The company reported $11.5 billion in long-term debt for the first quarter, up from $7.4 billion a year ago, partly because of the $3 billion debt-financed acquisition of West Texas energy producer Cordilla Energy Partners III LLC in May 2012 and a $2 billion debt offering in November.

The remaining $2 billion will go toward buying back up to 30 million Apache shares, the company said.

Investors who had been worried that Apache was taking a hands-off approach to share price cheered the announcement. Apache shares climbed 4.2% to reach $81.04 in recent trading, the first highest price since February.

"See, management does care," Wells Fargo analyst David Tameron said in a note to clients.

Apache had been said to be trying to sell properties in the U.S. Gulf Coast, The Wall Street Journal reported in April, citing people familiar with the sales plan. Apache drills globally, with operations in Australia, Alaska, Canada, Egypt and offshore England.

Apache wants to focus more of its efforts on onshore drilling in the U.S., which accounted for more than a quarter of its daily oil and gas output of 781,819 barrels in the first three months of this year, the company said.

Apache's share buyback plan helped turn attention away from what had been a weak first quarter. Apache reported Thursday a profit of $698 million, or $1.76 a share, down from $778 million, or $2 a share, a year earlier. Excluding merger-and-acquisition expenses, asset write-downs and other items, adjusted earnings were down at $2.02 from $3. Revenue fell 10% to $4.08 billion.

Output in Egypt declined by 2%, to 365.6 million cubic feet a day. Mr. Farris told investors The production decline, plus worries about civil unrest in the region, "has had some impact on our stock price."

Analysts polled by Thomson Reuters most recently projected earnings of $2.21 on revenue of $4.31 billion.

Production rose 1.6% to 781,819 barrels of oil equivalent a day, driven by a 45% increase in North American onshore liquid hydrocarbons output.

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Saturday, July 13, 2013

Technip's 1Q 2013 Order Intake Falls 32%

French oilfield services provider Technip announced Thursday first quarter results that showed the company's order intake for the first three months of the year declined to EUR 2.9 billion ($3.8 billion) from EUR 3.3 billion ($4.3 billion) in 1Q 2012.

Order intake for Technip's onshore/offshore business declined by 32.4 percent to EUR 980.2 million ($1.3 billion) for 1Q 2013, although the firm's subsea business fared better with EUR 1.93 billion ($2.5 billion) of orders compared with EUR 1.86 billion ($2.4 billion) in 1Q 2012.

The firm's order backlog improved by 19.7 percent to EUR 14.8 billion ($19.4 billion) by March 31 compared to a year earlier.

Technip said its order intake during the quarter included a major EPCI contract for Moho Nord, offshore Congo, which combines two field developments. The firm also an offshore project in India, the Heera Redevelopment platform, which is to be installed offshore Mumbia, while Shell's Prelude Floating LNG project offshore Western Australia also contributed to its order intake.

Technip improved its net income for the quarter by 3.6 percent to EUR 116.2 million ($152 million) on the back of revenues that increased 14.2 percent to EUR 2 billion ($2.6 billion).

Technip CEO Thierry Pilenko commented in a company statement:

“In the first quarter we grew revenue in both our segments, reflecting the strong project awards over the last two years. Subsea performance reflected the early phases of recently won large contracts, the absence of major projects completing and some disruptions to offshore operations including for weather. In Onshore/Offshore there was steady progress on projects, including those in later phases such as the Lucius Spar and the Jubail refinery."

Pileno added that the next few months "are important in terms of operations", noting that in its Subsea business Technip is continuing to ramp up its newer projects and it is in the critical phases of its 2013 subsea projects in several regions, including Venezuela, the North Sea, Mexico and Australia.

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Friday, July 12, 2013

Technip's 1Q 2013 Order Intake Falls 32%

The firm's order backlog improved by 19.7 percent to EUR 14.8 billion ($19.4 billion) by March 31 compared to a year earlier.

Technip improved its net income for the quarter by 3.6 percent to EUR 116.2 million ($152 million) on the back of revenues that increased 14.2 percent to EUR 2 billion ($2.6 billion).

Technip CEO Thierry Pilenko commented in a company statement:

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Monday, June 24, 2013

Crude Oil Settles Lower on Weak Demand; Brent falls to 9-Month Low

Crude-oil futures prices fell sharply Friday, hit by growing worries over rising U.S. oil supplies and slowing growth in global oil demand.

ICE North Sea Brent crude-oil futures, a key global benchmark, dropped for a third straight day, settling at a nine-month low.

Traders said Brent is under pressure from continued worries about weakness in European economies and reduced demand caused by refinery maintenance in Europe and Asia, along with growing competition from rising U.S. oil output.

U.S. benchmark oil futures settled at five-week lows as crude oil inventories have risen to their highest level since July 1990, even as domestic refiners have lifted crude oil processing rates to the highest early April level in eight years. Those busy processers are increasing supplies of gasoline, erasing concerns about tight supplies ahead of the peak spring-summer driving season, which looks to be stuck in reverse this year due to weak demand.

Government forecasters, while warning of a slowdown in the growth of global oil consumption, expect demand for gasoline --the most widely used petroleum product in the world's biggest oil consumer--to slip to a 12-year low in the peak season. The EIA said U.S. vehicles' increased miles per gallon more than offsets the expected rise in miles traveled, the EIA said.

Spurred by the weak outlook and news that inventories in the key East Coast region now top five-year averages, traders slashed gasoline futures by 14 cents as gallon over the past three sessions, leaving prices at a three-month low on Friday.

"It's simply a supply-demand situation," said Dan Flynn, an analyst at Price Futures. "We've basically got more supply here than we know what to do with."

Light, sweet crude oil for May delivery on the New York Mercantile Exchange settled 2.4%, or $2.22 lower, at $91.29 a barrel, the lowest price since March 6.

ICE North Sea Brent for May delivery settled 1.1%, or $1.16 a barrel lower, at $103.11 a barrel, after an intraday low of $101.09 a barrel.

Forecasts this week from the U.S. Energy Information Administration, the Organization of the Petroleum Exporting Countries, and the International Energy Agency call for demand in the current quarter to drop by 180,000 to 400,000 barrels a day from the first-quarter level. That compares with a quarter-to-quarter rise at this time last year of 300,000 barrels a day, according the IEA, the energy watchdog of the major industrialized nations.

Tim Evans, analyst at Citi Futures, said prices have been hit hard by a "relatively consistent gloomy picture that is weighing on market sentiment."

Weak seasonal demand in the current quarter means, "there's simply no reason to anticipate a quick recovery," Mr. Evans said. "Demand and prices may rebound in the third quarter, but it will likely begin from a lower price level."

Analysts at Barclays said current oil-price weakness is "transient" and demand will pick up in coming months, as European refiners return from maintenance by late May and boost crude oil demand. Asian refiners are expected to wrap up seasonal work in June, providing a further lift for crude prices.

Lower global refiner demand for Brent comes as imported crudes are losing market share in the U.S. due to rising domestic output. PBF Energy Inc. said this week it plans to process up to 70,000 barrels a day of crude oil from North Dakota's Bakken shale oil region at its 190,000 barrels-a-day refnery in Delaware, a move which analyst said will lower crude imports, adding to pressure on Brent crude prices.

Gene McGillian, broker and analyst at Tradition Energy noted that U.S. crude prices have fallen by more than more than $7.50 a barrel since the April 1 high of $97.80, and said good part of the worries about the global economy may be factored into current prices.

"We may see a test of $90 a barrel, but I don't think the bears will get much more ferocious unless we get signs a further downturn," he said.

May reformulated gasoline blendstock futures settled 1%, or 2.92 cents, lower at $2.8018 a gallon, the lowest price since Jan. 18.

May heating oil futures fell 2.73 cents, to settle at $2.8719 a gallon, the lowest price since March 19.

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Friday, May 24, 2013

CNOOC 2012 Net Profit Falls 9.3%; Slightly Below Analysts' View

HONG KONG - CNOOC Ltd., which completed its acquisition of Canada's Nexen Inc. last month, Friday posted a 9.3% fall in 2012 net profit, a decline that was largely anticipated because of rising operating costs and higher resources tax expenses.

CNOOC, China's largest publicly traded offshore oil-and-gas producer by capacity, posted a net profit of 63.69 billion yuan (US $10.3 billion) in 2012, down from CNY70.26 billion the previous year. The figure was slightly below the average CNY64.86 billion net profit forecast of 32 analysts polled earlier by Thomson Reuters.

Revenue rose 2.8% to CNY247.63 billion from CNY240.94 billion on higher oil and gas sales.

China's state-run CNOOC and its parent China National Offshore Oil Corp. have been the most aggressive among Chinese oil giants in terms of acquiring overseas shale gas and oil assets. Since 2011, the two have spent over US $24.8 billion on overseas upstream assets, mostly in Africa, Australia and Canada.

The Nexen acquisition, China's largest single overseas investment, is vital for CNOOC's long-term growth and energy security, as its oil-and-gas output growth has been slowing since 2011 due to maturing fields.

"We strongly believe that the acquisition of Nexen conforms to our development strategy and will bring long-term benefits to our shareholders," CNOOC Chairman Wang Yilin said Friday.

The company proposed a final dividend of HK$0.32, up from HK$0.28 a year earlier.

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Thursday, May 16, 2013

Musings: Natural Gas Output Falls In December; Start Of A Trend?

This opinion piece presents the opinions of the author.
It does not necessarily reflect the views of Rigzone.

The Energy Information Administration's (EIA) survey of natural gas production from the Lower 48 states for the month of December 2012 showed the first decline in output since March of that year. With the continued decline in drilling rigs targeting natural gas formations, analysts are encouraged that possibly we are witnessing the first results of the drilling slowdown. The EIA's commentary associated with the release of the data, however, mentioned weather related factors impacting gas output, especially in the associated gas production from the Bakken where an early and severe winter caused a drilling and well completion slowdown. Additionally, many producers ran out of budget money before the end of the year and were forced to slow activity. If nothing else, however, the slowdown in gas output reinforces the phenomenon the industry may soon be confronting, which is the need to ramp up drilling activity to offset the steep decline in existing well production due to the nature of shale gas wells.

Overall, the initial estimate of gross natural gas production for the entire United States fell just about 1 billion cubic feet (Bcf) in December. Alaskan gas production actually rose about 0.2 Bcf while output in the Gulf of Mexico fell almost as much (-0.14 Bcf), meaning that virtually the entirety of the production decline occurred in Lower 48 basins. If we examine the revision to the prior monthly's initial production estimate, there was a reduction of 0.32 Bcf, which suggests the December production decline may only have been about 0.7 Bcf, but of sufficient size to be meaningful. Before analysts get too excited about this potential change in trend and what it might mean for natural gas prices, a new report from natural gas research firm, Bentek Energy, suggests that 2013 and 2014 will be a replay of the past several years – growth in production rather than a decline. The firm's forecast, however, calls for a slowing in the rate of increase in gas production during the next two years compared to the rate of growth experienced in the prior two years.

According to Bentek, natural gas production in the U.S. rose 3.6%, or by 1.6 Bcf per day in 2010 and increased by an average of 3.5
Bcf/d in 2011-2012. They are projecting that overall gas output will grow by 2 Bcf/d in 2013, as nine key shale basins will grow by 4.9 Bcf/d, which will be offset by other production falling by 2.9 Bcf/d. In 2014, the firm sees production increasing by 3.4 Bcf/d. An interesting point in the historical data is that in 2011 offshore gas output fell by 1.2 Bcf/d and then by another 0.9 Bcf/d in 2012. Bentek sees offshore production declining by only about 0.3 Bcf/d in 2013 and reaching steady output in 2014. If we were to exclude the impact of the decline in offshore production in 2011-12, the average annual output increase was about 4.3 Bcf/d, or nearly 0.8 Bcf/d more coming from onshore basins. By the end of 2014, Bentek foresees gas output above 70 Bcf/d, up from current production of slightly be low 65 Bcf/d.

Bentek's forecast for output is based on three primary factors. These include: debottlenecking of geographic regions where output has been constrained by a lack of infrastructure; operators continuing to focus on wet gas and associated gas from oil plays; and continued improvement in drilling rig efficiencies. The impact of the last two factors is shown in several charts from the Bentek forecast report that crystalize their views.

The chart in Exhibit 11 shows the impact of wet gas (green) output on total incremental natural gas production beginning in 2010 and continuing through the 2014 forecast period. As the chart shows, associated wet gas was only a minor contributor to gas output in 2010 but grew in 2011 as the impact of low natural gas prices drove operators to emphasize oil and wet gas formations. With natural gas prices continuing to languish in 2012, that trend became more pronounced with expected results. Because of the strong focus on natural gas liquids (NGLs) and crude oil due to high world oil prices and better investment returns for operators, Bentek sees wet gas production growing as we move through 2013 and 2014. Part of the strength in NGL and oil demand and their prices is due to debottlenecking Bentek assumes will occur based on the list of new pipeline and gas processing facilities either being built or planned to be built in the coming months.

The last major trend is the impact on shale gas costs from improvements in drilling. Exhibit 12 contains a chart showing the number of horizontal wells drilled since 2008 (blue columns), the number of horizontal rigs working (red line) and the average number of wells drilled per rig per month (black dotted line). The wells per month line in most impressive showing how after about a three-year downward trend between 2008 and 2010, the number rose in 2011 and remained essentially stable throughout the year but then started a steady upward climb throughout 2012. This rise in rig performance reflects not only improved knowledge about how and where to drill and the greater use of pad drilling facilities, but also the impact from the growing fleet of new AC (electric) rigs that bring greater capabilities for drilling deeper and longer horizontal wells.

Improvements in drilling in the Bakken have been meaningful as shown in Exhibit 13. Since the first quarter of 2010, the average time to drill a well has declined roughly 15%, although from the fourth quarter of 2010 the decline is much more significant – off nearly 40%! As the average rig can drill more wells per year and more rigs are moving into the Bakken, wells drilled have jumped in the past several quarters - from around 375 wells per quarter to 500 wells and then to a 600-wells per quarter rate for the final three quarters of 2012. The question is can the industry operate more drilling rigs in the region and will those rigs be capable of continuing to drill wells in fewer days in the future?

Last summer, the North Dakota Department of Mineral Resources presented an expected case for the future number of drilling rigs (red columns) working in the state's Bakken formation and the number of producing wells (green columns). As can be seen in Exhibit 14, the forecast calls for a small increase in the number of drilling rigs for 2013 and again in 2014, with rigs remaining flat in 2015 before spiking to a peak of just over 250 rigs in 2016. From that point the rig count begins a modest downward stepping pattern until it reaches a low point of 50 rigs in 2036 where it remains through the balance of the 2050 forecast period. As a result of the boom in drilling between 2010 and 2024, the total number of Bakken wells rises sharply from 5,000 to about 35,000. Thereafter, due to the decline in the active drilling rig count, the climb in the number of producing wells is modest reaching almost 40,000 wells in 2050.

A big challenge for producers in the Bakken is the lack of pipeline infrastructure to move associated natural gas production from the
region. Many people are familiar with the NASA photo of the United States at night showing the gas flaring in the Bakken (red) compared to the lights of Minneapolis, Minnesota on the right hand side of the picture. This picture rivals ones from the past showing the huge volumes of gas being burned in Nigeria and Russia that could be seen from space.

A chart from the North Dakota Department of Mineral Resources shows how the percentage of natural gas produced in the state is
burned. As the chart in Exhibit 16 shows, gas flaring was relatively minor until about 2005 and then it grew to about 24% in 2008 before falling 10 percentage points as a pipeline was opened up. From about 14% in 2009, the percentage of gas burned rose to the 35% area where it remains today awaiting more pipeline capacity and liquids-processing plants being built.

The Bentek natural gas production forecast relies on the continuation of the triumvirate of factors that have made oil shale plays as successful as they have been to date. Debottlenecking of various key producing basins appears a safe bet since it is based on projects already approved and in many cases already under construction with attractive returns. A continuation of improvements in drilling efficiency appears less secure as it depends on the drilling industry converting the balance of its old, conventional rig fleet into a new, AC-based one. That means higher day rates for working rigs in order for contractors to justify the investment in new rigs. What will higher dayrates mean for well economics? What happens to these oil and wet gas plays should oil prices fall from their current lofty levels? These latter considerations could impact the economics of shale drilling and thus gas output that would negatively impact the Bentek forecast since it is based on economic models employing 12-month forward strip pricing for crude oil and NGLs. The one offset to this logic is the dedication of large integrated and independent producers to drill through the period of poor economic returns because they believe in the eventual recovery of oil and natural gas prices that will reward them for their strategy.

G. Allen Brooks works as the Managing Director at PPHB LP. Reprinted with permission of PPHB.

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Saturday, March 30, 2013

Nymex Crude Falls to One-Month Low, Under $95/Bbl

U.S. crude futures dropped 2.3% Wednesday on a sharp bout of midmorning selling that also pulled down gasoline prices as some investors grow concerned that high prices at the pump could crimp demand.

Oil fell to the lowest level in over a month, dropping below $95 a barrel after trading volume surged in March and April futures just after 11:00 a.m. EST.

After trading below 2,000 contracts per minute through most of the session, nearly 10,000 lots of April crude-oil futures changed hands at 11:01 a.m. EST.

The move spooked many investors and traders who have grown concerned about rising bullish bets on oil and gasoline.

"The volume spike, and the front-month going off the board hit the market," said Tariq Zahir, managing member and oil trader at Tyche Capital Advisors.

Light, sweet crude for March delivery settled $94.46 a barrel on the New York Mercantile Exchange, down $2.20. The March futures contract expired at settlement Wednesday, and the more-actively traded April futures settled $1.88 lower at $95.22 a barrel.

Brent crude for April delivery was 1.9% lower at $115.30 a barrel.

Crude-oil futures have been stuck in a tight trading range between $95 and $98 a barrel for over a month. While investors have grown optimistic about the U.S. economic recovery, many are increasingly concerned that high gasoline prices could result in lower demand from drivers wary of high prices.

U.S. retail gasoline prices stood at $3.766 a gallon Wednesday, according to the AAA FuelGauge report, up from $3.305 a gallon a month ago.

After hitting a four-month high above $3.12 a gallon last week, gasoline futures have slumped. Front-month March reformulated gasoline blendstock, or RBOB, settled 6.17 cents, or 2%, lower at $3.0595 a gallon Wednesday.

Traders have piled into bullish bets on oil in recent months. Last week, the net-long position of hedge funds and other money managers stood at 209,565 contracts, according to the Commodity Futures Trading Commission, the highest level since March.

"There have been a lot of speculators in this market, so it could be time for it to correct," said Andy Lebow, a broker at Jefferies Bache.

March heating oil settled 2.43 cents lower at $3.1563 a gallon.

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Friday, March 8, 2013

Oil & Natural Gas Net Profit Falls 17.5%

NEW DELHI - India's Oil & Natural Gas Corp. Monday said its third-quarter net profit fell 17.5%, hurt by state-mandated discounts given to government-run fuel retailers.

India's largest oil explorer by output said that its net profit for the October-December period shrank to 55.62 billion rupees ($1.04 billion) from 67.41 billion rupees a year earlier.

Sales rose 16% to 209.87 billion rupees from 181.24 billion rupees.

ONGC's year-earlier net profit was boosted by a one-time gain of 31.42 billion rupees.

At a press conference, ONGC Chairman Sudhir Vasudeva said net profit would have been higher by 72.70 billion rupees had the company not given discounts to fuel retailers.

He added that the company's net realization -- or the income on each barrel of oil -- rose to $47.97 from $44.71 a year earlier.

However, the cost of production climbed 18% to 141.62 billion rupees.

ONGC, like the country's other state-run explorer Oil India Ltd., is forced to give large discounts to fuel retailers Indian Oil Corp., Hindustan Petroleum Corp. Ltd. and Bharat Petroleum Corp. Ltd..

The retailers are, in turn, made to sell diesel and cooking fuels at government-set discounted prices to help control inflation.

Apart from the discounts, the government also gives cash to the fuel marketing companies to offset part of their losses.

ONGC, which contributes just under two-thirds of India's local crude oil output, has been struggling to raise production. It hasn't been able to bring any new major fields into operation in recent years.

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Thursday, February 28, 2013

Marathon Oil 4Q Net Falls 41% on Lower Exploration, Production Income

Marathon Oil Corp.'s fourth-quarter earnings fell 41%, partly due to write-downs and other charges, and the company fell short of analysts' expectations as high taxes and exploration costs offset increased oil and gas sales.

Marathon Oil spun off its downstream and petroleum assets in 2011, creating Marathon Petroleum Corp., in order to focus its drilling efforts on oil-rich unconventional fields in the U.S. The company's profits from oil and gas operations have risen in recent quarters as its production has exceeded expectations.

In the fourth quarter, the company reported a profit of $322 million, or 45 cents a share, down from $549 million, or 78 cents, a year earlier. Taking out items such as impairment, pension settlement and unrealized gains on crude-oil derivative instruments, earnings from continuing operations fell to 55 cents from 78 cents. Revenue jumped 11% to $4.24 billion. Marathon's fourth-quarter results came in 12 cents under the 67 cents per-share forecast of analysts polled by Thomson Reuters, who had anticipated revenue of $3.93 billion.

The company reported that its exploration-and production segment's income fell 10% to $501 million from the year-before period, as higher costs offset increased production volumes. Since last year, Marathon has seen a more-than-four-fold increase in average net production in the south Texas Eagle Ford formation, from about 15,000 barrels of oil equivalent per day in December 2011 to more than 65,000 BOE/D in December 2012. Output in the oil-rich Bakken formation increased by 45% in the same period. However, higher costs have accompanied the production ramp-up in those areas, the company said.

The fourth quarter also included an $85 million in expenses associated with the Innsbruck well in the Gulf of Mexico, a dry hole, and the company reported another well in Iraq's Kurdistan is being plugged and abandoned.

Raymond James analyst Stacey Hudson said Marathon's production came in ahead of expectations and prices held up well. In a note, Raymond James analysts wrote that the rate at which Marathon's reserves are being replaced through organic growth is "solid." But taxes were also higher than Ms. Hudson anticipated.

"It's taxes eating up the upside," she said. Late last year, Marathon resumed production in Libya, where the company has reported a statutory tax rate of 93%.

Marathon said in December it would bump up this year's capital, investment and exploration budget to $5.2 billion from $5 billion in 2012 and spend most of it in oil-bearing shale formations such as the Bakken in North Dakota, the Anadarko Woodford in Oklahoma and the Eagle Ford in South Texas. The company expects the effort to give it a 6% to 8% production boost this year.

Oil and mining income dropped 70% to $19 million while integrated-gas income climbed 75% to $35 million.

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Sunday, February 24, 2013

Marathon Oil 4Q Net Falls 41% on Lower Exploration, Production Income

"It's taxes eating up the upside," she said. Late last year, Marathon resumed production in Libya, where the company has reported a statutory tax rate of 93%.

Oil and mining income dropped 70% to $19 million while integrated-gas income climbed 75% to $35 million.

View the original article here

Tuesday, February 19, 2013

Diamond Offshore 4Q Net Falls 17% Amid Lower Day Rates

Diamond Offshore Drilling Inc.'s fourth-quarter earnings fell 17% as lower day rates dampened improved utilization of ultradeep-water and midwater floaters.

Results topped consensus estimates and the contract driller's board once again declared a special cash dividend of 75 cents a share. The board also reiterated its policy of considering the payment of special cash dividends on a quarterly basis.

Diamond Offshore, which is majority owned by Loews Corp. (L), had seen declining revenue over the past year as the offshore-drilling sector struggles with a recovery from 2010's Deepwater Horizon rig explosion in the Gulf of Mexico. U.S. authorities in February 2011 resumed the approval of deep-water drilling programs, which now face heightened scrutiny.

Diamond Offshore reported a profit of $155.7 million, or $1.12 a share, down from $188.5 million, or $1.36 a share, a year earlier. Revenue climbed 0.3% to $750.5 million.

Analysts polled by Thomson Reuters had most recently forecast earnings of $1.10 a share on revenue of $740 million.

Operating margin shrank to 26% from 29.2%.

Day rates for ultradeep-water floaters fell 2.2%, while utilization increased to 89% from 70% a year earlier.

For deep-water floaters, day rates dropped 12% while utilization fell to 85% from 97%.

Meanwhile, midwater floaters saw a 1.1% decline in day rates, with utilization improving to 70% from 60%.

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Sunday, February 10, 2013

Occidental Petroleum 4Q Profit Falls 79% on Write-Down

Occidental Petroleum Corp.'s (OXY) fourth-quarter earnings tumbled 79% as the energy producer recorded a $1.1 billion write-down of gas assets in the Midcontinent that offset higher oil production and cost-cutting.

Occidental, based in Los Angeles, boosted its oil and gas production in West Texas, California and the so-called Midcontinent region, where advances in drilling methods have helped unlock previously unreachable hydrocarbons. The growing production, combined with a still-tepid economy, has caused prices for oil and natural gas to fall, however.

Occidental said oil and gas output rose by 31,000 barrels a day, or 4%, to 779,000 barrels of oil equivalent a day. Even with the increase, Occidental also said its operations were more efficient, shaving production costs by $1.04 a barrel from the third quarter.

Revenue rose 2.3% to $6.17 billion.

Still, Occidental's capital expenditures budget continued to swell despite the company's promises to rein it in. The oil producer reported $2.5 billion in capital expenditures in the fourth quarter, essentially unchanged from the year before. Full year capex was $10.2 billion, 36% higher than 2011.

"Lone negative of the quarter appears to be stubbornly high capex," Simmons & Co. International analyst Bill Herbert said in a note to clients.

Occidental said it will spend $9.6 billion on capital expenditures in 2013, down nearly 6% from 2012. At the same time, the company plans to boost oil production by as much as 10%, Occidental Chief Executive Stephen Chazen said.

"We're trying to keep capital under control this year," Mr. Chazen said during a call with investors. "We're trying to be conservative and spend it only on the best things we can."

Lower oil and natural gas prices took a toll, however. Realized prices fell 3.4% for crude oil, while natural-gas liquids prices dropped 18%. Domestic-gas prices sank 14%.

Overall, Occidental reported a profit of $336 million, or 42 cents a share, down from $1.63 billion, or $2.01 a share, a year earlier. Excluding a $1.1 billion charge related to the impairment of gas assets in the Midcontinent, per-share earnings were $1.83.

Analysts polled by Thomson Reuters recently forecast earnings of $1.66 a share on revenue of $5.85 billion.

Investors cheered Los Angeles-based Occidental overall performance.

View the original article here

Sunday, December 23, 2012

Where Are We Heading—Bedford Falls or Pottersville?

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Posted on Dec 23, 2012

Screenshot from "It's a Wonderful Life"

By Robert Reich

This post originally ran on Robert Reich’s Web page, www.robertreich.org.

It’s easy to feel discouraged about the bullying by right-wing Republicans and their patrons over everything from gun control to taxes and social safety nets to trade unions and jobs.

Every year about now I watch “It’s a Wonderful Life” again to remind myself what Frank Capra understood about America — its essential decency and common sense.

In many ways the nation is better than it was in 1946 when the movie first appeared. Women have gained economic power and reproductive rights; we enacted civil rights and voting rights and, through Medicare and Medicaid, dramatically reduced poverty among the elderly; we began to tackle environmental devastation; we stopped treating gays as criminals and have even started to recognize equal marriage rights. We elected and then re-elected the first black president of the United States. We have enacted the bare beginnings of universal healthcare.

But we are still in danger of the Pottersville Capra saw as the consequence of what happens when Americans fail to join together and forget the meaning of the public good.

If Lionel Barrymore’s Mr. Potter were alive today he’d call himself a job creator and condemn George Bailey as a socialist. He’d be financing a fleet of lobbyists to get lower taxes on multimillionaires like himself, overturn environmental laws, trample on workers’ rights, and shred social safety nets. He’d fight any form of gun control. He’d want the citizens of Pottersville to be economically insecure – living paycheck to paycheck and worried about losing their jobs – so they’d be dependent on his good graces.

The Mr. Potters are still alive and well in America, threatening our democracy with their money and our common morality with their greed.

Call me naive or sentimental but I still believe the George Baileys will continue to win this contest. They know we’re all in it together, and that if we succumb to the bullying selfishness of the Potters we lose America and relinquish the future.

Happy holidays.

Robert B. Reich, chancellor’s professor of public policy at UC Berkeley, was secretary of labor in the Clinton administration. Time magazine named him one of the 10 most effective Cabinet secretaries of the last century. He has written 13 books, including the best-sellers “Aftershock” and “The Work of Nations.” His latest, “Beyond Outrage,” is now out in paperback. He is also a founding editor of The American Prospect magazine and chairman of Common Cause.

Beyond Outrage Expanded Edition: What has gone wrong with our economy and our democracy, and how to fix it

TAGS: christmas economy fiscal cliff holiday holiday season it's a wonderful life politics republicans

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Monday, August 5, 2013

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Monday, July 29, 2013

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Thursday, July 25, 2013

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Monday, June 24, 2013

Crude Oil Settles Lower on Weak Demand; Brent falls to 9-Month Low

Friday, May 24, 2013

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Thursday, May 16, 2013

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Saturday, March 30, 2013

Nymex Crude Falls to One-Month Low, Under $95/Bbl

Friday, March 8, 2013

Oil & Natural Gas Net Profit Falls 17.5%

Thursday, February 28, 2013

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Sunday, February 24, 2013

Marathon Oil 4Q Net Falls 41% on Lower Exploration, Production Income

Tuesday, February 19, 2013

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Sunday, February 10, 2013

Occidental Petroleum 4Q Profit Falls 79% on Write-Down

Sunday, December 23, 2012

Where Are We Heading—Bedford Falls or Pottersville?

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