Raise NPV for DMLP and FRHLF
Summary and Recommendation
With all the action in RTF (Royalty Trust Fund) stocks in 2014, we raise estimated Net Present
Value (NPV) for two of the nine in the group and add timely input for others. The median total
return is 22% year-to-date while the range is 12% to 78 % and the average is 32% (see Table 4 on
page 7). We advocate owning all of the stocks with rebalancing to keep the total position at a
constant share of an investor’s diversified portfolio.
• Raise NPV to $32 a unit from $28 for Dorchester Minerals (DMLP) on an increase in
estimated value of perpetual mineral rights underlying Top Line – Royalty Interests to 2
times that for Bottom Line – Net Profits Interests (see table Present Value on page 2).
Our confidence in making that change was aroused when we learned at the DMLP annual
meeting presentation last month that the general partner would take advantage of the
mineral owner’s right to participate fully in the Bottom Line – Net Profits of new wells in
the Bakken trend of North Dakota. Previously the general partner was more skeptical of
the drilling profitability and chose not to invest and thereby give up some profit.
• Raise NPV to $26 a share from $21 for Freehold Royalties (FRHLF) on an increase in
estimated value of perpetual mineral rights underlying Top Line – Royalty Interests to 2
times that for Bottom Line – Net Profits Interests (see table Present Value on page 2).
That change keeps the estimate consistent with DMLP above and is further reinforced by
the strong market reception for closely similar PrairieSky Royalties (see Meter Reader
June 3, 2014).
• Trustee change was approved by unitholders at rescheduled meetings on June 20 for
Permian Basin Royalty Trust (PBT) and Cross Timbers Royalty Trust (CRT).
McDep Ratios of 0.82 and 0.84 are the lowest in the RTF group (see Tables 1-3 on pages
4 to 6). Rising oil volume is a bright spot for Top Line Cash Payers (see chart Oi
I believe it may have more to do with this, via WSJ:
Viper Energy's IPO Prices Well Above Forecast
Pricing Is Latest Sign of Strong Investor Demand for High-Yield
By MATT JARZEMSKY
June 17, 2014 7:07 p.m. ET
Mineral-rights owner Viper Energy Partners LP's initial public offering priced well above expectations Tuesday, people familiar with the deal said, in the latest sign of strong investors demand for high-yielding stocks tied to the energy sector.
The Midland, Tex.-based company sold 5 million shares for $26 apiece, these people said, raising $130 million before the potential sale of additional shares to underwriters. Viper had forecast the shares would fetch $19 to $21 apiece, according to a regulatory filing.
Viper Energy is the first U.S.-listed master limited partnership, or MLP, whose business consists solely of owning mineral rights, according to bankers and analysts. These assets entitle it to royalties on sales of oil and gas drilled beneath 14,804 acres in Texas' Permian Basin region.
As such, the deal marked a new twist on recent years' boom in MLPs, which typically own steadily cash-producing assets and pay out much of their income to shareholders as dividends.
Viper, which plans to pay dividends four times a year, estimates it will pay a total of about $1.10 in distributions over the next four quarters through June 30, 2015, which equates an annual yield of about 4.22%. The Alerian MLP exchange-traded fund, which tracks a basket of MLPs, carries a 5.95% dividend yield, according to FactSet.
Texas shale-oil driller Diamondback Energy Inc. FANG -0.91% is spinning out Viper Energy after acquiring the Permian Basin mineral rights for $440 million in September. The IPO valued the new company at $1.98 billion.
Oil Trade Dormant Since ’10 Revives as Brent Spreads Grow
By Grant Smith and Naomi Christie - Jul 16, 2014
Oil traders have the most incentive in four years to store crude at sea and sell it as prices rise, prompting speculation about a revival in the trade once used by companies including BP Plc and Citigroup Inc.
Brent for September traded at $107.03 a barrel at 1 p.m. Singapore time today, 94 cents more than the same grade for August, according to the ICE Futures Europe exchange. That premium hasn’t been bigger since May 2010, the bourse’s data show. That was also around the time oil companies last used tankers for storage in this way, according to E.A. Gibson Shipbrokers Ltd., a London-based broker that arranges charters.
The gap between the two months is wide enough for oil traders to profit from keeping oil at sea for delivery later, according to Energy Aspects Ltd., a consultant in London. Frontline Ltd., an operator of the biggest tankers, said July 14 the premium should be enough to encourage such bookings. The price structure, known as contango, hasn’t translated into vessels being hired for storage so far and other analysts say it still needs to get bigger for that to happen.
“The prompt Brent spreads are at a level that incentivizes floating storage, that is, it becomes economic for companies to store crude on tankers,” Amrita Sen, the chief oil analyst for Energy Aspects, said by e-mail yesterday. “It’s a trade that proved profitable during the period of contango in 2008 to 2009.”
Oil companies and banks, including BP, Royal Dutch Shell Plc and Citigroup’s commodities trading unit, anchored ships laden with crude off the U.K. coast in 2009 to take advantage of the contango. London-based BP said “interesting trading opportunities” helped it earn $500 million more than normal in the first quarter of 2009.
Contango encourages traders to put oil in storage, then profitably sell futures contracts and deliver the supplies at a later date, according to Petromatrix, a consultant based in Zug, Switzerland. The structure can penalize financial investors seeking to maintain a position from one month to the next as the subsequent contract is more expensive, according to Olivier Jakob, Petromatrix’s managing director.
The August Brent contract expires today. Price movements can be amplified on the day before expiration as traders seek to close outstanding positions. Still, contango has also developed between the second- and third-month contracts on ICE Futures Europe, with September Brent trading at a discount of about 60 cents to October.
The collapse in the premium for near-term Brent supplies reflects both the return of Libyan shipments and subdued crude demand from refiners, Torbjoern Kjus, a senior analyst at DNB ASA in Oslo, said on July 10. Libya, the holder of Africa’s biggest crude reserves, is preparing to resume exports from the Es Sider and Ras Lanuf terminals that were handed over last week by rebels seeking self-rule in the nation’s east.
The front-month Brent contract hasn’t traded at a discount of more than $1 a barrel to the second month since May 2010, toward the end of the yearlong spell of contango in which traders implemented the floating storage strategy. A spread of 75 cents to 80 cents a barrel per month makes stockpiling crude on tankers viable, Energy Aspects estimates.
While September is trading at a premium to next-month prices, a better measure of contango for determining if storage works is between August and January, according to Eugene Lindell, a senior analyst at JBC Energy GmbH in Vienna. That spread is currently almost $2 a barrel. It would need to rise to about $2.50 to $3 a barrel before traders began booking vessels, he said.
The last time traders stored crude on tankers was June 2010, according to Patrick Tye, an analyst at Gibson. There have been no reported bookings of tankers for storage so far as a result of the contango, said Odysseus Valatsas, the chartering manager at Dynacom Tankers Management Ltd. The Glyfada, Greece-based company operates VLCCs and other tankers.
Barclays Plc, Citigroup and Societe Generale SA predict that the discount to the front month is unlikely to persist as rising Chinese demand will bolster refinery operating rates and curb a short-term surplus. Lower output from the North Sea will also support near-term Brent, Citigroup predicts.
If Libyan exports continue to recover, Saudi Arabia, the biggest oil exporter, will adjust its output to prevent a surplus, supporting the front month, Barclays and Societe Generale said. This will cause the contango to reverse into the opposite condition, known as backwardation, in which the front-month trades at a premium to later deliveries, the banks said.
Equities researchers at Goldman Sachs increased their price objective on shares of RPC (NYSE:RES) from $26.00 to $27.00 in a research report issued on Thursday. Goldman Sachs’ price target indicates a potential upside of 17.29% from the company’s current price.
Choking Smog Puts Chinese Driver in Natural Gas Fast Lane
By Bloomberg News - Jul 3, 2014
Powering vehicles with natural gas, a cleaner alternative to diesel fuel and gasoline, is catching on faster in China than in any other nation as President Xi Jinping seeks to reduce smog.
About 3.8 million cars, trucks and buses in China, the world’s biggest energy consumer and emitter of greenhouse gases, will be filling up with compressed or liquefied natural gas by 2020, according to Bloomberg New Energy Finance. That’s almost double the current number, making Asia’s largest economy the fastest-growing market.
The emergence of natural gas as a motor fuel emitting 32 percent less than diesel is buttressed by China’s network of almost 4,900 refueling stations and a $400 billion gas import deal with Russia. The fuel is also about 30 percent cheaper than its diesel equivalent as LNG trades at a three-year-low in Asia. Chinese Premier Li Keqiang has promised to ban dirtier vehicles as smog in the capital, Beijing, increasingly exceeds World Health Organization limits and forces residents to don masks outdoors.
“Natural gas vehicles have significant growth potential in China because they’re more economical than conventional models and because the government is committed to fighting pollution,” Ricky Wang, an analyst at ICIS-C1 Energy, a Shanghai-based commodity consultant, said by phone on July 1. “Gas demand from the transport sector is booming.”
India, Pakistan and Iran are among other fast-growing markets for natural gas-powered vehicles, said Tony Regan, founder of Tri-Zen International Inc., a Singapore-based consultant with clients including Royal Dutch Shell Plc and OAO Lukoil. The U.S., enjoying a rising supply of low-cost natural gas because of the boom in hydraulic fracturing, or fracking, was one of the first to use LNG as a truck fuel.
In China, leaders are starting to heed demands for cleaner air in the nation, which the World Bank estimates has 16 of the planet’s 20 most-polluted cities.
Exposure to PM2.5 pollution, the small particles that pose the greatest risk to human health, contributed to an estimated 8,572 premature deaths in Beijing, Shanghai, Guangzhou and Xi’an in 2012 and more than $1 billion of economic losses, according to a study by Greenpeace and Peking University’s School of Public Health.
China is now the largest and fastest-growing market for LNG used in trucking, Regan said. By 2015, 220,000 heavy trucks and 40,000 buses in China are expected to run on LNG, he said in an e-mail July 2.
“While natural gas has been used as a fuel for vehicles since the 1930s, this was mainly for cars and taxis,” Regan said. “CNG was the first way to use gas as a motor fuel, but there is growing awareness of how much cheaper LNG is than diesel and how suitable that is to fuel trucks, trains and buses.”
Even so, China’s ability to switch drivers to natural gas will be constrained. The country is far behind the U.S. in using fracking to expand domestic production of gas. In the U.S., the technology has unlocked natural gas trapped in formations like the Marcellus shale. China’s electricity makers also are competing for gas to replace coal, meaning the nation will face a long-term shortage, according to Charlie Cao, a Beijing-based analyst at New Energy Finance.
“The lack of fueling infrastructure has been the single largest constraint to the natural gas vehicle market,” Cao said. “Drivers have to compete for already limited gas supplies, especially in the peak heating season, when the tight gas flows are prioritized for residential use.”
China will have 200 million vehicles running on all types of fuel by 2020, according to the China Association of Automobile Manufacturers. That means natural gas will fuel only about 2 percent of the total even as the use of gas surges.
Compressed natural gas, or CNG, currently dominates China’s market and accounts for 97 percent of vehicles running on natural gas, Cao said. LNG has a smaller share in transport because of higher costs for liquefaction and a shortage of infrastructure for deliveries.
Still, transportation is forecast to surpass manufacturing as China’s biggest downstream consumer of LNG by 2016, Gordon Kwan, the regional head of oil and gas research at Nomura Holdings Inc. (8604) in Hong Kong, said in an e-mail last month.
China’s LNG-powered fleet will more than double to 180,000 vehicles and use 5.3 million metric tons for a 40 percent share of LNG consumption by 2016, Kwan said.
“Natural gas vehicles are more economically attractive and technically mature than other new-energy vehicles,” Cao said. “Electric or hybrid vehicles, for example, still requires government subsidies to compete with the gasoline and diesel-fueled passenger vehicles. Building the gas fueling stations is also less capital-intensive than the charging networks.”
While China is struggling to keep up with demand, it had 51 percent more natural gas refueling stations at the end of 2013 than the year before, ICIS-C1’s Wang said. She expects about 6,000 natural gas pumps at the end of 2014, up 24 percent from last year.
China National Offshore Oil Corp., the nation’s biggest operator of LNG receiving terminals, plans to triple its filling stations supplying the fuel to 400 this year. China will have more than 12,000 such stations by 2020, with Cnooc taking 20 percent of market share, it said on April 2.
Shaanxi Automobile Group, western China’s largest truck maker, and Dongfeng Yangste Motor Co., the region’s biggest bus manufacturer, are among those producing natural gas vehicles that are outwardly indistinguishable from conventional models.
China signed a 30-year deal in May to import natural gas from Russia through a new pipeline. The agreement with OAO Gazprom, Russia’s pipeline-gas monopoly, is forecast to provide 38 billion cubic meters of gas annually, according to Alexey Miller, Gazprom’s chief executive officer. China is set to increase imports via Turkmenistan as well.
LNG costs 30 percent less than China III-standard diesel as of May this year, according to ICIS-C1 Energy.
LNG in northeast Asia dropped in the week ended June 30 to $11.25 per million British thermal units, the lowest price since March 2011, New York-based Energy Intelligence Group said on its World Gas Intelligence website.
Switching from diesel to natural gas for trucks and buses can pay for itself after 12 to 15 months and it saves 686,000 yuan over a lifetime of 10 years, Cao said.
“The growth of gas in the transportation sector is expected to be significantly faster for the foreseeable future,” said Thomas Chhoa, Shell’s Singapore-based general manager for Global LNG to transport. “Natural gas for mobility is widely available, cleaner burning than other conventional transportation fuels, cost competitive and technically ready,” he said in a webcast hosted by the company in April.
Substantial discount for LNG-powered ships in the Port of Gothenburg
Sam Jermy Sam Jermy - Logistics - 21 hours ago
Ships powered by liquefied natural gas (LNG) can expect a substantial reduction in the port tariff when they call at the Port of Gothenburg in the future.
A discount will come into effect in 2015 and will continue for three years. The aim is to induce more shipping companies to switch to cleaner fuel. Magnus Kårestedt, Chief Executive at the Port of Gothenburg, said: "It has been our firm belief for a long time that LNG is the fuel of the future.
“This initiative is entirely in line with our ambition to reduce the environmental impact of shipping and create a sustainable Scandinavian freight hub."
LNG-powered ships receive a total tariff discount of 30 percent when they call at the port. The discount will apply until December 2018. In one year alone this would represent a substantial saving for ships that call at the Port of Gothenburg on a regular basis.
There are considerable environmental benefits to be gained from using LNG in shipping and industry. Sulphur and particle emissions are reduced to almost zero, nitrogen emissions by 85-90 per cent and carbon dioxide emissions by 25 percent.
Carl Carlsson of the Swedish Shipowners' Association said: "It's not technology that is the limiting factor, it's the financial considerations. Working within the framework of the Zero Vision Tool project, we will attempt to convince other ports in the Baltic to offer the same type of support."
New sulphur regulations
From January 1, 2015, conditions for shipping in the Baltic and North Sea will change with the introduction of new, stricter regulations governing sulphur emissions. In response, the Port of Gothenburg will revise its port tariff.
Ships that maintain a high level of environmental performance will be recompensed. Two indexes will be applied as a basis for discounting – Environmental Ship Index, which is used by many ports around the world, and Clean Shipping Index, which is an environmental index where the freight-owners' make demands on the shipping industry.
At the same time, ships that switch from oil to LNG will receive a further discount.
LNG terminal underway in Gothenburg
Preparations are currently being made for the construction of a terminal at the Port of Gothenburg that will supply both shipping and industry with liquefied natural gas. The terminal is part of a collaborative venture between Rotterdam and Gothenburg to build an infrastructure for LNG, an initiative that is also supported by the EU.
Cut & paste from Navios Acquisition (nna)
Benefits Crude Oil Tankers.
Jefferies Analyst Doug Mavrinac wrote: Even though we believe the condensate export volumes are likely to be limited, any increase in export volumes should have a net positive impact on the crude oil tanker market, even if minimal. That being said, because the volumes are likely to be minimal, we would expect any heavy condensate volumes exported out of the U.S. to be carried out on either Aframax crude oil tankers and/or Panamax crude oil tankers.” Less
U.S. Ruling Loosens Four-Decade Ban On Oil Exports
Shipments of Unrefined American Oil Could Begin As Early As August
By CHRISTIAN BERTHELSEN And LYNN COOK CONNECT
June 24, 2014 5:14 p.m. ET Wall Street Journal
The Obama administration has quietly cleared the way for the first exports of unrefined American oil in four decades, allowing energy companies to chip away at the long-standing ban on selling U.S. crude overseas.
Federal officials have told two energy companies that they can legally export a kind of ultra-light oil that has become plentiful as drillers tap shale formations across the U.S. With relatively minimal processing, oil shipments could begin as early as August, according to one industry executive involved in the matter.
Using a process known as a private ruling, the U.S. Commerce Dept.'s Bureau of Industry and Security is allowing Pioneer Natural Resources Co. of Irving, Texas, and Enterprise Products Partners LP of Houston to export ultra-light oil known as condensate to foreign buyers who could turn it into gasoline, jet fuel and diesel.
Both companies confirmed they had received the rulings.
Under current rules, companies can export refined fuel, such as gasoline and diesel, but not oil itself. The Administration's new approach, which hasn't been publicly announced, redefines some ultra-light oil as fuel after it has been minimally processed, making it eligible for sale abroad.
The Commerce Department said the companies have improved the processing of the crude in a way that qualifies it for export, even though the oil wouldn't count as being traditionally refined. Exactly how the agency defines condensate and remains unclear.
The first shipments are likely to be small, but could ultimately encompass a lot of the 3 million barrels a day of oil that energy companies are pumping from shale, industry experts say, depending on how regulators define what qualifies for export.
-After oil, natural gas may be next on North American rails
By Edward McAllister
NEW YORK, June 16 (Reuters) - As politicians debate the dangers of a massive increase in oil carried by rail in North America, railroads and energy producers are considering the same for natural gas.
Buoyed by the unexpected success of crude by rail, companies are beginning to consider transporting natural gas as remote drilling frontiers emerge beyond the reach of pipelines, executives said.
Natural gas by rail is years away and likely to face strong public resistance after a series of explosive crude-by-rail accidents. But the potentially multibillion-dollar development could connect gas-rich regions like North Dakota with urban centers, presenting an opportunity for railroads, drillers and tank car makers already cashing in from hauling oil on trains.
It could also be a cure for environmentally unfriendly flaring, a growing problem in far-flung areas where more than $1 billion of natural gas produced alongside oil is burned off each year for lack of processing plants or pipelines that can take years to build.
"Everyone is talking about moving gas by rail," said David Demers, chief executive officer of Westport Innovations , which is developing technology for natural gas-powered locomotives. "They see this as a large opportunity and have their pencils out to see how it could work."
Demers said Berkshire Hathaway's BNSF was one railroad considering the move.
BNSF declined to comment on its plans, but a spokeswoman said it would take time for any development of gas by rail.
Transporting gas by rail, most likely as cryogenic liquefied natural gas (LNG), faces obstacles. The technology is in its infancy, and so far no tank car is permitted to carry the fuel on U.S. rails. Nor are there enough plants that convert natural gas to LNG to support a robust gas-by-rail market, experts said.
More-volatile liquids like ethylene and propane already travel on the rails in growing volumes. But as concerns about the safety of crude by rail intensify, regulators are exercising extreme caution with uncertified fuels like LNG, said executives involved in developing the technology.
Stressing that it is too early to say, many of the major Class 1 railroads that have embraced crude by rail declined to speak about specific plans for gas by rail. Calgary-based Canadian Pacific Railway Ltd, for example, was just "monitoring any discussions in this area," a spokesman said.
Breitling Energy Corp CEO Chris Faulkner said he and other gas producers were discussing the idea, but his company was not considering it.
"I can only imagine the amount of pushback we're going to have on transporting gas by rail," Faulkner said. "The discussion isn't about safety and fact, it's about fear."
But as railroads team up with companies like General Electric Co and Caterpillar Inc to develop technology to run locomotives on LNG, many say that hauling the fuel as cargo is the next step as a drilling revolution transforms North American energy markets.
"A LOT OF MONEY"
LNG, natural gas cooled and shrunk to a liquid for shipping, already powers heavy-duty trucks and boats in the United States and Canada. A network of fueling stations is cropping up with backing from the likes of Royal Dutch Shell Plc and Clean Energy Fuels Corp.
Small-scale refrigeration plants that can turn gas to LNG are being built in drilling regions to reduce gas flaring. In remote North Dakota, one-third of the gas produced is flared.
Now, gas by rail is emerging as a possibility. Energy producers have approached Jacksonville, Florida-based CSX Corp about moving LNG by rail, said Louis Renjel, vice president of strategic infrastructure initiatives, but the company has no plans to do so.
Westport Innovations has been approached about developing fuel systems for tank cars that would haul LNG as cargo, according to Paul Blomerus, director of the company's high horsepower sector.
"They make a lot of money transporting oil, so it would make sense" to do the same with gas, Blomerus said.
BNSF is testing LNG-powered locomotives and million-dollar tank cars that would hold the fuel, the first step in a plan announced last year to wean trains off costly diesel.
Regulators and railroads last year established a task force to establish standards for LNG rail cars. A spokesman for the U.S. Federal Railroad Administration said there was no specified deadline for drafting actual rules.
Building these tank cars would be "a natural progression into hauling LNG, similar to what we do with crude oil," said Ken Webster, chief accounting officer at Chart Industries Inc .
Outside North America, steps have already been taken. Chart is developing an LNG tank car in Germany in a joint venture with Hamburg-based manufacturer VTG Aktiengesellschaft.
Japan Petroleum Exploration Co began transporting LNG by train in 2000 by loading specially designed tanks onto railcars, supplying local distributors in regions beyond the reach of gas pipelines. The company says the trains have proven cheaper than trucks in supplying LNG.
Crude by rail has been a lesson not just in how quickly a new transport can emerge but also in the dangers.
An unmanned train carrying crude oil from North Dakota's Bakken region exploded and killed 47 people in the center of the Canadian town of Lac Megantic in July.
Among a string of other accidents, 21 oil tank cars on a BNSF train caught fire after a crash in Casselton, North Dakota, in December.
As concerns grow, a movement against new crude train infrastructure has emerged.
This has "paced" if not slowed progress in rail transport of fuels, said Tina Donikowski, who heads a team developing gas-powered locomotives at General Electric.
"The Federal Railroad Administration is being very cautious," Donikowski said. "They most definitely feel the extra pressure with the problems of crude by rail." (Reporting by Edward McAllister; Editing by Jessica Resnick-Ault and Lisa Von Ahn)
Leading video and broadband gear manufacturer Arris Group Inc. (ARRS - Analyst Report) has entered into a deal with Austrian cable operator Liwest Kabelmedien GmbH to deploy its Converged Cable Access Platform (CCAP) equipment. Liwest will utilize Arris’ E6000 converged edge router (CER) to offer Inter services at a speed up to 250 Mbps. Liwest already deployed Arris’ TG682 cable modem system and plans to upgrade Internet speed up to 1 Gbps in the long-term.
In Oct 2012, Arris launched the innovative E6000 CER which acts as a powerful C4 cable modem termination system (CMTS) for the company and can be converted into a CCAP ecosystem as well. CCAP helps carriers maximize bandwidth, simplify operational structure and evolve according to subscriber demand.
To add to the benefits, E6000 integrates Arris’ edge QAM legacy video architecture with the CMTS DOCSIS IP network to offer cable TV operators a readymade integrated-IP platform. Arris’ CCAP equipment will also allow Liwest to expand services capacity and lower costs.
In May 2013, Casa Systems was the first company to commercially introduce an integrated CCAP device. The CCAP market is highly competitive with presence of the likes of Cisco Systems Inc. (CSCO - Analyst Report), Harmonic Inc. and CommScope Holding Co. Inc.
Recently, research firm, Infonetics Research Inc. reported that Arris has become the market leader in the CCAP and CMTS devices segment, outpacing former leader Cisco. Also, several analysts have estimated that the CCAP market opportunity may reach around $1.7 billion by 2018.
Notably, Arris has stated that its E6000 CER currently support more than 5 million cable TV subscribers globally. Comcast Corp. (CMCSA - Analyst Report) and Liberty Global plc. (LBTYA - Analyst Report) are major E6000 CER customers. Furthermore, this latest deal with Liwest should boost Arris’ position in the budding CCAP equipment market. Currently, Arris has a Zacks Rank #1 (Strong Buy).
EPD Update on Seaway
NEW YORK, June 10 (Reuters) - Enterprise Product Partners will complete its Seaway Loop crude oil pipeline by the end of this month with only station checkouts and hydro-testing work remaining, the company said on Tuesday in a presentation to investors.
The parallel pipeline running alongside the 400,000-barrel-per-day (bpd) Seaway line will increase takeaway capacity from storage hub Cushing in Oklahoma by another 450,000 bpd and take oil to Houston.
Enterprise had said before that the line would be completed in the first half of this year or in May or June.
Since it reversed Seaway in May 2012, the pipeline had been the only major line taking oil out of the clogged-up Cushing hub to Gulf Coast area refineries. Inventories at Cushing peaked to all-time highs of 52 million barrels at the start of 2013.
TransCanada's Gulf Coast pipeline began operations at the start of this year, adding relief to Cushing inventories with a capacity of 700,000 bpd, although it has run at roughly half that capacity on average.
While these pipelines have helped reduce stocks at Cushing by half since the start of the year to around 21 million barrels, inventories in the country remain at very high levels after hitting a historical record of just under 400 million barrels at the end of April.
The stocks reflect the buoyancy of U.S. oil production thanks to the shale oil revolution on the one hand and the almost total ban on crude oil exports imposed by the government in the 1970s on the other hand.
The Energy Information Administration said on Tuesday that crude production in May reached its highest level in 26 years at 8.4 million bpd and will hit its highest levels since 1972 next year at 9.27 million bpd, according to its latest projections.
The export of refined products, however, is not banned and energy logistics companies such as Enterprise are increasingly building out facilities to export more distillates, gasoline and liquefied petroleum gases (LPGs).
In the latest such development, Enterprise said it had begun loading distillates at its Beaumont, Texas, facility in May and will begin loading gasoline in the third quarter of this year.
The facility can load Panamax vessels at a rate of 15,000 barrels an hour and includes storage of 2.9 million barrels.
Wood Mackenzie sees Eagle Ford crude output at 2 mln bpd by 2020
Wed Jun 4, 2014 6:14pm GMT
HOUSTON, June 4 (Reuters) - Energy consultancy Wood Mackenzie expects crude and condensate output from the Eagle Ford shale formation in Texas to double through 2020 to 2 million barrels per day (bpd), on par with output from the entire North Slope of Alaska at its peak.
The consultancy, in an update of its forecasts for U.S. shale fields on Wednesday, also said it now believes the Bakken field in North Dakota holds 21 billion barrels of recoverable crude. That is well above the 7.5 billion the government estimates.
The gaping difference stems from assumptions about the greater density of wells that operators will bore in the field and recent production data.
About 70 percent of crude now leaves the Bakken by rail, but the consultancy expects that to dip towards half by 2016 as new pipelines come online to handle growing onshore production that is moving the United States closer to energy self-sufficiency.
While projecting continued strong growth in the Permian Basin of Texas, especially the Wolfcamp shale, Wood Mackenzie also expects the Marcellus and Utica shales of Appalachia to grow further.
It sees output from the Marcellus rising to 20 billion cubic feet per day (bcf/d) of natural gas in 2018 from some 12-14 bcf/d now. For the Utica, it sees output climbing fivefold to 5 bcf/d through 2018. (Reporting By Terry Wade; Editing by Bernard Orr)
© Thomson Reuters 2014
They could also be people that want to pick up some shares. My opinion.
Seaspan: The plane truth about box shipping
Vancouver: Today’s Maritime CEO comes from our sister title, SinoShip, the leading media outlet for all things China maritime. On the cover of the tenth issue of SinoShip magazine is Gerry Wang, the head of Seaspan.
Anyone who has ever met Wang cannot fail to have clocked his true enthusiasm for the sector he is in, container shipping. He’s quick to engage, discuss, and even argue points of view on the industry he is so passionate about.
As one of the most successful players in the container segment of the last dozen years, Wang’s world view is decidedly optimistic.
“The container industry is a global infrastructure industry connecting manufacturers with consumers, the cornerstone of globalisation,” he insists. “Without container shipping there is no globalisation, there is no Walmart. Container ships make up the new Silk Road connecting China with the rest of the world.”
Wang is quick to dismiss talk of overcapacity in the industry when we meet up.
The total orderbook is some 22% of the extent fleet, he points out, which spread over three years is little more than 7%. “That is not much,” says arguably the world’s best-known container tonnage provider. Wang claims the orderbook today is actually near a historic low. Moreover, when one takes into account effective loading of a typical boxship, a fifth can be knocked off that figure, he maintains.
“Certain tradelanes have an imbalance, but overall there is no oversupply,” he stresses.
So then, why the lousy freight rates, if there is not overcapacity? Here, Wang is in his element, quick as a flash, with a lengthy reply on the travails of the industry and the solutions at hand.
“The industry has structural problems that it must deal with,” he says. Pointing to the creation of the P3 alliance between Maersk, CMA CGM and MSC, Wang says such collaboration is the way ahead. “The industry is going towards a more systematic approach to business,” he says. “Container shipping is not like dry bulk or tankers, it is more like the airlines,” he says, noting how airlines cope with capacity much better and how they work better through alliances.
Wang reckons the container industry is now in the process of copying what the airline industry has done and this should address the structural problems it has.
“Lines need to work together and learn their lesson from the past,” he says, adding: “They need to become more united to make better economic returns. This industry cannot survive if they continue to lose like money like they have.”
Wang was born in China’s Anhui province in 1962. Educated at Shanghai Maritime University and then the London School of Economics, he started out with China Merchants Group in Hong Kong. In 1990 he moved to Vancouver and a few years later joined Seaspan, owned by the billionaire Ted Washington. It was here that he linked up with China Shipping to get their containerline up and running by taking leases from Seaspan. From there, the leasing model he established snowballed. Seaspan went public in 2005, raising $700m.
Seaspan’s fleet now numbers 87 ships with a total capacity of 606,300 teu. The largest ships on its books at the moment at 14,000 teu, and Wang acknowledges even larger ships are a necessity, an “unstoppable trend”.
“You have no choice,” he says. “You have to get them as they give you economical means. Whoever has the economical means wins the battle.”
This battle for scales of economy is also bringing in an era of consolidation for the sector, something that does not surprise Wang at all.
“It is all about per teu costs. It is all about survival, arriving at the lowest teu costs,” he says. “If you can partner with someone to reduce your costs then go ahead.”
As for Seaspan itself, don’t expect this Canadian firm to hang around.
“We will continue to grow,” Wang says. “This industry is simple – if you don't grow you will be left behind. My investment theory is whatever works to become stronger, more profitable.”
Seaspan has stuck with the same philosophy over the past decade, he says, namely chasing long-term contracts with reliable, financially secure clients and always seeking the latest, modern, fuel efficient ships. “It’s a recipe for success,” says Wang with a knowing chuckle. [19/05/14]
If I'm not mistaken, that's business as usual in shipping. You have to trust management.