Google the title for an interesting article on building cash hoard being targeted at North American oil and gas.
"Many investors will be shocked at a new report this week. Showing that investment in the downtrodden natural resources sector is actually hitting record highs right now. Research firm Preqin, as covered by Law360, reported that resource-focused private equity funds have raised an incredible $28 billion so far in 2015.
That lofty figure puts resource investors on pace to eclipse -- and likely crush -- the $30 billion that was raised during full-year 2013. Which currently stands as the highest-ever year for natural resource investment.
The interesting thing is that this massive pool of capital is coming from an increasingly concentrated group of investors. With this year's $28 billion figure being raised by just 13 funds.
That's well below the 32 funds that closed in 2014, and down significantly from the 42 groups that raised cash for resources investment during 2013.
Much of this year's cash is being earmarked for the North American oil and gas sector. Led by Houston's EnCap Energy, which raised $6.5 billion for energy-focused investments."
And some more back up to this story
One of the most important production numbers is also the least reliable. Texas, the state with the most oil output, is slow to provide comprehensive data. The EIA adjusts the state’s preliminary figures to account for reporting delays, which means the most recent Texas numbers are particularly vulnerable to revision. Consulting firm PIRA Energy Group says its April production figure is 9.3 million barrels a day, 400,000 barrels a day lower than the EIA’s, due to its adjustment of Texas data.
Google "EIA Capitulates Under Cover Of Darkness" for full story
Many investors know that when a company wants to mitigate media coverage of bad news, they typically release data on a Friday after the close.
Well last Friday, that is exactly what the EIA did, admitting the very thing I and Cornerstone Analytics have been arguing all year: EIA was and still is overstating U.S. production. The amount that they admitted to so far, as of Friday afternoon, was 254,000 barrels per day (b/d) or 1,778,000 barrels per week, 7,112,000 per month or 14,224,000 for June and July alone.
To be clear, the EIA, on a weekly basis, uses a proprietary model to estimate U.S. oil production and then on a monthly basis uses actual data to revise those figures. Thus, what we were witnessing from Texas RRC data and Bakken output appears to be spot on in estimating that actual production was well below EIA estimates.As a result, the EIA made the correct choice to revise their figures. As time passes, I suspect both June and July will be revised even lower, rendering the analysis of a 14 million barrel overstatement for June and July too conservative.
By Leonard Brecken
1. Iran Agreement to flood market. FALSE. OPEC has even stated that the natural 1.0 to 1.5 million barrels per day (MB/D) rise in demand in 2016 will more than offset any production rises in Iran which, contrary to earlier reports, won’t come on line until early 2016. In addition, China will open up refining to third party, non-state-owned refineries which will reportedly add another 600,000 B/D in demand in 2016.
2. Iran floating storage will flood market. FALSE. As initially reported in the media, it was Iranian oil floating in storage but it now turns out to be low grade condensate as stated by PIRA on Bloomberg a few weeks back and then supported by tankers attempting to move inventory to Asia. Later media reports corrected earlier ones that the storage is in fact condensate while failing to report on its grade.
3. U.S. production resilient. FALSE. The latest EIA data refutes this as does data via EPS calls at Whiting Petroleum (WLL) & Hess Corporation (HES). Yes, some are increasing production such as Concho resources (CXO), but in the Bakken both companies confirm that 2H15 production will decline due to lower rigs and depletion. HES raised production for the year as a result of 1H15 production being higher than expected by some 5 percent. All in all, next week should see further production drops.
4. U.S. Inventory resilient. FALSE. EIA data would have fallen last week by some 4MB as it did this week ex import surges and continues to be overstated by “adjustments” made to production that amount to millions of barrels in daily production.
5. Cushing inventory fears revived. FALSE…see above.
6. OPEC supply will continue. The Saudis, as OPEC’s largest producer and largest contributor to growth in 2015, have already stated that they will reduce output by 200,000-300,000 by summers end. Yes true, OPEC as an entity won’t formally announce a cut but isn’t it misleading to report this?
Google above topic title for full article
"I knew fuel was cheap in Saudi Arabia, but I had no idea how ridiculously cheap. I found out when the driver of the big BMW who picked me up at the Jeddah airport pulled off the highway and paid the equivalent of $8 (U.S.) for a fill-up. Gasoline in the kingdom costs about 16 cents a litre. Water costs more.
No wonder that the notion of oil conservation is considered absurd in this country. In my six days in Saudi Arabia, in three cities on two coasts, I never saw a bicycle, a scooter or an electric car. The cars are huge; the most popular vehicle is the Toyota Hilux, the equivalent of the Ford F-series pickup truck. Everyone drives (except women, who are denied the privilege) and no one walks. With apologies to Fran Lebowitz, the outdoors in Saudi Arabia is what you must pass through to get from your apartment to your car.
No wonder there are worries that Saudi Arabia, the world’s central bank of oil and OPEC’s biggest producer and exporter, faces an energy crisis in a couple of decades. Domestic demand for oil is climbing so fast that Citigroup, in a 2012 report, predicted that the country would be a net oil importer by 2030.
While the idea seems outrageous, it is mathematically feasible. That’s because strong economic and population growth – two-thirds of Saudis are under age 30 – are pushing up oil demand by about 5 per cent a year. The apparent effort to turn Saudi Arabia into a sand box jammed with cars can’t take all the blame. Oil supplies about half of the country’s electricity demand and that too is soaring. The extreme heat means that air conditioning is a necessity. Ditto desalinization plants to provide fresh water (a Saudi aquifer that was once the size of Lake Erie is 97 per cent drained). In the summer inferno, 800,000 barrels a day of oil is required for electricity generation alone.
Cutting oil exports to feed the domestic economy would be financial suicide for Saudi Arabia, all the more so since dome
Its summer in the gulf and domestic consumption is soaring
"Saudi Arabia's crude export record could be near-term peak
Singapore (Platts)--21 May 2015 237 am EDT/637 GMT
Saudi Arabia's recent push to maintain international oil market share saw its oil exports surging in March, but the kingdom may find itself unable to maintain much upward momentum in the coming months.
The latest official data from the Riyadh-headquartered Joint Organizations Data Initiative or JODI, published Monday, May 18 showed that Saudi crude exports rose by 548,000 b/d in March to 7.898 million -- their highest level in over a decade.
However, March is the last month of the Arabian Peninsula's cooler season, with maximum daytime temperatures in Riyadh still averaging below 30 degrees Celsius.
Temperatures start to rise rapidly thereafter, with the daytime maximum typically averaging 45 degrees Celsius by July, the hottest month of the year.
As the mercury rises and demand for air conditioning soars, so does Saudi Arabia's domestic oil consumption, as the kingdom burns significant volumes of fuel oil and crude for power generation.
Since 2012, the winter-to-summer swing in domestic oil consumption has run at around 1 million b/d, with direct crude burning accounting for most of the difference, according to a study by the Oxford Institute and US Energy Information Administration.
The seasonal fluctuation in domestic oil demand is most pronounced when the Muslim Holy month of Ramadan falls during summer, as it does this year, running from mid-June to mid-July.
YASREF REFINERY START-UP
Another reason why Saudi Arabia may have difficulty raising oil exports further, or even maintaining them at the level reached in March, is that its new 400,000 b/d Yasref refinery at Yanbu was still undergoing commissioning at that time.
Although the first cargo of diesel from the Yasref refinery, which is operated by a joint venture between state-owned Saudi Aramco and China's Sinopec, was loaded in January, the refinery was not expected to operate at full capacity until the second quarter, Jadwa Investment said in its last quarterly oil market update, published in April.
As a result, crude uptake by Saudi refineries this year was forecast to average 2.2 million b/d from Q2 onwards, up 100,000 b/d from Q1, the Jadwa report said.
CRUDE OIL PRODUCTION
Since most of Saudi Arabia's products output, especially the gasoline component, is sold domestically, that means the kingdom would have to raise crude output further to keep oil exports flat.
Trouble in Oman
"Lower oil prices may be a boon to European consumers but oil producing countries like Oman are experiencing a crisis.
Crude oil prices in the Gulf have dropped around 40 percent from their peak last year. As a result, oil exploration and drilling companies are not digging new wells and workers on existing oil rigs face unemployment, according to Saud al Salmi, chair of the trade union at Petroleum Development Oman, the country's largest oil company.
Al Salmi says contracts between the workers and oil drillers used to be automatically renewed.
"Now some contracts are finishing and there is no other contract coming," he said. "The companies basically started laying off staff.
And the impact of the crisis isn't limited to those directly employed in the oil industry.
Slashing public spending
Oman is among the Gulf countries that are heavily dependent on oil to fund their national budgets. The Omani government made $4.35 billion from oil sales in the first quarter of this year, down 35 percent from one year ago.
It now plans to slash its spending on defense by a quarter, and halve social spending.
"We need to learn from previous ups and downs of the oil price, and not sleep when the prices are high," said al Salmi. "Keep that money for the dark days when prices go down."
But so far, that hasn't happened. During boom times, the Omani government spent freely on subsidizing gasoline, as well as in social spending to appease Arab Spring demonstrators.
Corruption and lavish spending on the country's autocratic monarchy also drained billions of dollars from the national budget.
According to Sadeq Sulaiman, a former Omani ambassador to the United States, the budget cuts won't hurt the rich.
"The most affected is the middle class, not the top people," he said. "They can survive, like the Gulf States, for another 30 years with the money they have."
Omanis blame Saudi Arabia"
Not a big problem yet but things could get painful quickly if larger defense spending is required to face off ISIS and Iran
"Saudi Arabia’s decision in late 2014 to lead OPEC into not supporting the sliding price of oil with output cuts has had a number of consequences, the least commented on being its adverse effect on the Kingdom’s own finances. A key consideration is whether Saudi Arabia’s massive likely fiscal deficit in 2015 will compel it to change its policy regarding oil prices.
There is little doubt that the halving of oil prices since June 2014 has had severe repercussions for oil producers everywhere, but especially for the tight oil producers of the US, who have slashed their development budgets and the hiring of rotary rigs. The Saudi government, usually reliant on oil for around 88% of state revenues, cannot expect to Saudi Quote 1escape from the impact of the collapse in the oil price either. Already the Kingdom has registered a $17.5bn fiscal deficit in 2014 (2.3% of GDP), but what is significant is the startling size of the likely deficit this year, which may well exceed $145bn, hitting 19% of GDP. Saudi Arabia has never had to contend with such a huge hole in its public finances."
Google " How long can Saudi Arabia sustain low oil prices?" for the full article
Pay attention now, From the conference call WHITING HAS NOT DRAWN ON THIER 4.5 Billion credit line.
"On slide number 15, you can see we maintain a strong balance sheet, with $60 million of cash on hand and nothing drawn on our $4.5 billion credit facility."
Symon. Below is a little something from the call that I found interesting. Financially they are solid. Earnings will suffer like all oilers due to low oil prices but they are set to be a survivor.
"One other note on our 2016 outlook, some analysts seem to have confused discretionary cash flow with EBITDA and are getting much higher implied 2016 multiples than our guidance suggests. The $1 billion of discretionary cash flow we cite equates to about $1.3 billion of EBITDA. So on a price to cash flow basis, we are trading at under five times cash flow and on an enterprise value to EBITDA basis around 7.5 times. These are far below the 10 times we have seen in a few notes.
On slide number 15, you can see we maintain a strong balance sheet, with $60 million of cash on hand and nothing drawn on our $4.5 billion credit facility. Slide number 16 shows our outstanding bonds as of June 30, 2015. It also shows that we are well within all the covenants in our credit agreements and our bond indentures."
There is a great presentation out there from Feb 2014. Google to get the link"Global Oil Market Forecasting: Main Approaches & Key Drivers
Steven Kopits, Managing Director, Douglas-Westwood"
This presentation makes a strong case that it is Big Oil that is in trouble right now. Not the shale producers. Below is from slide 17. Quite interesting point on results for the investment dollar
• Total spend since 2005 on upstream
exploration and production:
• Of which, $350 bn on US and Canadian
unconventional oil and gas…
• …and another $150 bn on LNG and GTL
• $3.5 trillion was spent maintaining the
2005 legacy oil and gas system
• About $2.5 trillion* was spent on legacy
crude oil production—94% of the
petroleum liquids supply today.
• Result: legacy oil production has fallen by
• Peak oil for legacy system: still 2005
• For comparison: ‘98-’05, $1.5 trillion
spend added +8.6 mbpd crude
• Compared to ‘98-’05 period, vaporized
GDP of Germany
More work for Rockpile
This explains why rigs are falling and production is not. It also translates to big cost reductions
"Oil production per rig
The number of rigs working at the Niobrara shale decreased from 50 in May to 46 in June. A year ago, there were 98 drilling rigs in the region.
By June, Niobrara produced 489 bpd (barrels per day) per rig, or a 31% gain in production per rig since June 2014.
According to the EIA, the Niobrara shale in Colorado and Wyoming has become one of the fastest-growing oil-producing regions in the United States.
Neuquén governor says YPF, PAE and Wintershall will invest US$38B over 20 years
Three oil companies — state-run YPF, Pan American Energy and Wintershall — will invest US$38 billion to explore for resources partly in the country’s vast but mostly untapped Vaca Muerta shale formation, Neuquén Governor Jorge Sapag said yesterday.
The companies will use the new concessions to develop the Lindero Atravesado and Bandurria oil and natural gas blocks, Sapag said.
The US$38 billion will be invested over the next 20 years and assumes that pilot programmes — requiring investment of around US$1.4 billion from 2015 to 2018 — will be succesful.
“With Lindero Atravesado and Bandurrias we estimate that over the years ahead ... Neuquén will double its oil production and that the gas produced by these fields could replace more than 40 shiploads of imports, which would represent US$1.6 billion in savings for Argentina,” Sapag said.
According to the province, the specific blocks to be developed by the 35-year concessions are Lindero Atravesado, Bandurria Sur, Bandurria Centro and Bandurria Norte.
Pan American Energy, which is majority controlled by BP and the rest by Bridas, will operate 63.5 percent of Lindero Atravesado and YPF 37.5 percent. Bandurria Sur will be operated by YPF, Bandurria Centro by Pan American Energy and Bandurria Norte by German firm Wintershall, it said.
Over the next 20 years, the companies will pay around 180 billion pesos in royalties and provincial taxes, according to Sapag.
YPF pilot programmes
The Bandurria block was a joint venture between the three companies that has now been split into three parts.
YPF will operate Bandurria Sur with the objective of beginning production in shale oil and a goal of drilling 20 wells in a period of three years for a total investment of US$282.2 million, according to a company source.
Bandurria Sur, which involves an area of 228.27 square kilometres, is located in Vaca Muerta, near the shale oil block that YPF is exploiting