Oilexco Share Discussion Threads

[maywillow] 21/10/2018 08:56

Oilfield Service Companies Bet On Full Recovery
By Tsvetana Paraskova - Oct 20, 2018, 6:00 PM CDT Oil

Growing Permian drilling and production started lifting last year the revenues and profits of the world’s top oilfield service providers who were badly bruised by the 2014 oil price crash.

Schlumberger, Halliburton, and Baker Hughes saw their earnings in the past few quarters lifted by the return of frenzied drilling in North America, led by the Permian basin, while international operations lagged amid slower recovery in global investments in exploration and production.

In July this year, the mood at Schlumberger and Baker Hughes in Q2 earnings was an upbeat outlook for the immediate future, with signs that the international market outside the U.S. was also on the road to recovery.

But the top oilfield service providers started warning in September that the Permian constraints would temporarily slow down activity in the most-active U.S. shale region.

Luckily for all three of them, the international business looks increasingly positive as global spending on exploration and production is beginning to recover, rising this year—albeit slightly—for the first time since 2014.

Analysts expect all three top oilfield service companies to report higher earnings for the third quarter compared to last year, but they have been cutting their projections in recent weeks due to the takeaway capacity constraints in the Permian expected to reduce drilling activity.

“In North America, lack of additional pipeline capacity in the Permian Basin is becoming an increasing constraint to production growth,” Schlumberger Chairman and CEO Paal Kibsgaard said as early as in July on the Q2 earnings release.
Related: What Killed The Oil Price Rally?

In September, Kibsgaard said at the Barclays CEO Energy-Power Conference that the market consensus that the Permian would continue to provide 1.5 million bpd of annual production growth for the foreseeable future “is now starting to be called into question.”

“In fact, so far in the third quarter, the hydraulic fracturing market has already softened significantly more than we expected in spite of the overall rig count holding up relatively well,” Schlumberger’s head said, but added that international E&P spending has been picking up pace in the second half of the year.

At the same conference in early September, Jeff Miller, CEO at the leader on the U.S. fracking market, Halliburton, said that in order to overcome takeaway constraints in the Permian, “some operators will re-allocate capital to other basins, some will slowdown, other will build ducts.”

As early as in Q2 earnings, Halliburton had warned about a downturn in activity in North America due to budget constraints and takeaway issues.
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“There has been and it’s more than we expected,” Miller said last month, adding that weakness in pricing in several basins plus project delays in the Middle East would impact Halliburton’s Q3 earnings by between $0.08 to $0.10 per share.

But international markets are recovering, and this is where the top three oilfield service providers would look for more drilling and activity.

Baker Hughes CEO Lorenzo Simonelli said at the September Barclays conference that global E&P spending is expected to grow at a healthy pace over the next three to four years.

Related: Oil’s $133 Billion Black Market

“We are also seeing the beginnings of a recovery in the international markets. We’re expecting offshore activity to see a healthy rebound as well. It will likely remain significantly below prior-cycle peak levels but at the same time we see improving activity, and importantly, more stability as we look into the next few years,” Simonelli noted.

Both Baker Hughes and Halliburton see the North Sea and the Middle East as the key growth areas internationally, although Halliburton’s Miller warned in July that “How much improvement and how quickly it comes will depend in large part upon commodity prices and equipment absorption.”

Higher oil prices and lowered development and project costs have led to cautious optimism and measured risk-taking within the industry that is set to see an uptick in global oil investment this year, energy consultants Wood Mackenzie say.

Rystad Energy expected in May that 100 new offshore projects are likely to be sanctioned this year, compared to just 60 projects in 2017 and fewer than 40 in 2016.

The world’s top oilfield service providers will be betting on international E&P spending recovery, while they are waiting for the Permian constraints to abate, probably sometime at the end of 2019.

"…while the current Permian takeaway constraints in North America should be addressed within the next 12 to 18 months, a series of reservoir- and production-related challenges is emerging in the US shale basins that could dampen the most optimistic production growth projections," Schlumberger’s CEO said today in its press release on its Q3 earnings.

By Tsvetana Paraskova for Oilprice.com

[maywillow] 21/10/2018 08:32

BP CEO: $80 Oil Is Unhealthy For The World
By Tsvetana Paraskova - Oct 20, 2018, 11:59 PM CDT BP

Oil prices at $80 a barrel are too high and unhealthy for the world today, Bob Dudley, the chief executive of UK supermajor BP, said on the sidelines of an event on Friday.

“There’s a healthy price for oil and energy and I believe that balances producing countries and consuming countries,” Quartz quoted Dudley as saying on the sidelines of the conference One Young World in The Hague.

“In my mind, it’s somewhere between $50 and $65 a barrel. The world can live with this,” Dudley noted.

Emerging and developing economies like India, South Africa, or Turkey are seeing their highest-ever prices of gasoline because their currencies have rapidly depreciated against the U.S. dollar and because oil prices in dollars are high, BP’s chief executive said.

Currently, oil prices are “artificially high” due to Venezuela “defying gravity” and to the U.S. sanctions on Iran, according to Dudley, who said that once those geopolitical events subside, fundamentals will return to rule the market and prices should return back to $60-$65 a barrel.
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BP won’t be joining any EU special purpose vehicle designed to keep trade with Iran flowing, Dudley stressed, noting that “I think it’s full of risk.”
Related: What Killed The Oil Price Rally?

The concerns of BP’s chief executive that $80 oil is unhealthy for the world are shared by major international organizations such as the International Energy Agency (IEA) and the International Monetary Fund (IMF).

Expensive energy is back and it is threatening global economic growth, the IEA said in its Oil Market Report last week.

Also last week, the IMF slightly downgraded its projection for global growth for this year and next—at 3.7 percent, growth is now expected 0.2 percentage point lower than IMF’s forecast from April this year. The key reasons for the downgrade included trade disputes, geopolitical tensions, and a weaker outlook for emerging economies due to higher oil import bills, among other factors, according to the IMF.

By Tsvetana Paraskova for Oilprice.com

[adrian j boris] 20/10/2018 19:29

Norway’s Oil Production Continues To Decline Faster Than Expected
By Tsvetana Paraskova - Oct 19, 2018, 3:00 PM CDT oil barrels

Norway’s crude oil production has not only been sliding this year compared to last year—as expected—but it has also consistently underperformed the production forecasts of the Norwegian Petroleum Directorate (NPD).

NPD’s figures for September showed on Friday that Norway’s crude oil production stood at 1.302 million bpd, down by 13 percent compared to August 2018 and down 9.6 percent compared to September last year.

Total liquids production—including oil, natural gas liquids (NGL), and condensate—came in at 1.607 million bpd, down 13.7 percent on the month and 9.4 percent on the year.

Oil and total liquids production last month was also lower than the NPD’s forecasts, by 11.9 percent and 12.1 percent, respectively.

So far this year, only the January production met the directorate’s estimates, while production in all other months through September trailed forecasts.

“Oil production for September is about 12 percent below the NPD’s forecast for the month and about 4.4 percent below the forecast for 2018. The most important reason why production in September is lower than expected is maintenance shutdown that was not included in the prognosis for several fields,” the NPD said in its statement.

Between January and September, Norway’s crude oil production dropped by 8 percent compared to the same period of 2017, also due to technical problems at some fields of Norway’s major Equinor.

Oil production on the Norwegian Continental Shelf (NCS) is expected to continue its decline until late next year, when the Equinor-operated giant oil field Johan Sverdrup in the North Sea is slated to start production. Johan Sverdrup is expected to be the main contributor to Norway’s rising oil production until 2023.

But from the mid-2020s onward, production offshore Norway will start to decline again “so making new and large discoveries quickly is necessary for maintaining production at the same level from the mid-2020s,” Torgeir Stordal, Director exploration at the NPD, said in the directorate’s 2018 resource and exploration report in June.

By Tsvetana Paraskova for Oilprice.com

[bountyhunter] 20/10/2018 14:33

Not long until 5 Nov now so we will soon find out how the sanctions play out.

[steve73] 20/10/2018 13:49

I'm not worried about Trump.. it's those who are squeezing his balls that concern me more.. ! i.e. the military industrial complex.

[bountyhunter] 20/10/2018 13:39

Hi Steve, yes that would be a bit extreme even for Trump. I think they will stick with the financial sanctions although the extent of potential secondary sanctions is a bit unclear at the moment.

[steve73] 20/10/2018 12:57

But will the US put some warships in the Straits of Hormuz to try to prevent Iran exporting anything...? Big mistake if they do IMO, but we might get $300 oil if the SHTF.

[bountyhunter] 20/10/2018 12:34

Chinese definitely yes I agree, EU who knows for sure, also UK probably not as we need a trade deal with the US post Brexit.

[fangorn2] 20/10/2018 12:00

Well Bounty I'm sure the Chinese will keep buying from Iran - as probably will EU

[bountyhunter] 20/10/2018 08:58

The Oil Keeps Flowing: Iran Evades U.S. Sanctions

[bountyhunter] 20/10/2018 08:58

The Oil Keeps Flowing: Iran Evades U.S. Sanctions

[ariane] 19/10/2018 07:54

What Killed The Oil Price Rally?
October 18, 2018, 08:49:00 AM EDT By Oilprice.com

Shutterstock photo

Oil prices fell to a one-month low on Wednesday, pushed down by a rather bearish report from the EIA that showed a large increase in crude inventories.

Brent briefly dipped below $80 per barrel and WTI was back below $70 per barrel as of Wednesday afternoon.

The EIA said that crude oil inventories rose by 6.5 million barrels in the week ending on October 12. Crude stocks have actually been rising since mid-September, and are now back up to 416.4 million barrels. The four consecutive weeks of inventory gains is the longest streak since early 2017. “That’s a negative for oil prices right now, the larger-than-expected build in inventories this week,” Rob Thummel, managing director at Tortoise, told Bloomberg.

Despite the bottlenecks plaguing the shale sector, U.S. oil production continues to trend up. The EIA expects the Permian basin to add 53,000 bpd in November, compared to October levels. The Eagle Ford and the Bakken will add 15,000 bpd and 13,000 bpd, respectively. All told, the U.S. is set to see oil production rise by as much as 98,000 bpd between October and November, a stronger increase than in recent months.

However, the report is not as devastating to the bullish narrative as it might suggest. For one, they might be a little skewed because of recent storms. “The figures will be distorted considerably by Hurricane Michael and should therefore not be overinterpreted,R21; Commerzbank said in a note. “Roughly 40% of U.S. oil production in the Gulf of Mexico had been shut down for three days, resulting in a good 2 million barrels less crude oil being produced.”

In theory, that would mean that inventories should have climbed by even more. But the Louisiana Offshore Oil Port (LOOP) was temporarily closed during the hurricane, and exports may have been impacted a bit. That would have trapped a little more oil inside the country than might have otherwise been the case.

Moreover, the steep decline in refinery utilizations also helps explain the easing of downward pressure on crude stocks. Refinery rates have plunged from 17.094 million barrels per day (mb/d) in late September (a four-week average) down to 16.415 mb/d as of October 12. Refineries tend to undertake maintenance at this time of the year, but lower production rates means that there is less of a draw on crude stocks.

More importantly, there are several land mines that could yet push the market back up into dangerously high territory, and they are the same ones that we have known about for a while. Venezuela lost 42,000 bpd in September, and Iran lost at least 150,000 bpd in production. Iran’s export figures actually look worse than its production levels, since some of its production is being stored on ships in the Persian Gulf. So far, Iran’s oil exports are around 1.5 mb/d in October, down 900,000 bpd from April levels. Analysts expect steeper losses over the next month, volumes that will more than outweigh any gains from the United States.

The declines from Iran and Venezuela are going to be hard to cover for, without dipping too far into OPEC’s spare capacity. Standard Chartered estimates that Iran will lose another 600,000 bpd by the end of the year. Inventories are large enough to ensure there won’t be a physical shortage in the market, but the road might get rocky once again. Any unexpected supply outage, such as from Libya or Nigeria, will have an outsized impact on prices.

Oil prices are actually down a bit over the past week, but some of the losses can be chalked up to the pessimistic sentiment from broader equity markets. “Oil prices are currently being driven by a disparate mix of factors. The overall macroeconomic context remains central, in particular market concerns about trade,” Standard Charted wrote in a note. “As was seen last week, oil prices rarely weather any abrupt changes in investor risk preferences.”

The investment bank argues that the recent pullback in prices may also be a function of investors having over-estimated how tight the oil market would become in the fourth quarter. A revision of expectations, in other words, led to liquidation of bullish bets and a drop in prices. “[W]e think that one of the major factors that is leading to a scaling back of long positions is a reappraisal of short-term fundamentals by investors. We think a significant degree of money entered the market on the view that the Q4 global supply-demand balance was likely to be tight enough as to be the single dominant driver of prices.”

The hyper-bullish narrative that began to take hold in September may now look a bit overdone. Still, that doesn’t mean that the market is flush with supply once again. All it takes is another unexpected supply disruption to send prices back up again.

By Nick Cunningham of Oilprice.com

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

[edgar222] 19/10/2018 07:37

AMINEX


I sent an e mail to the friends (none of them full-time investors) that ask me about Aminex at 7:37 am on the morning of the day it went up 30%. Posting it here in case it is of any use. Just my thoughts. And yes, I am blatantly claiming credit for the rise that day!!

"I have been asked whether I have any thoughts on why the Aminex share price is tanking and thought it is probably time for an update.

Lots of news since the last time I e-mailed.

The share price is tanking because the income stream from the KN1 well has dried up. There is a problem with the pressure in the well and the gas stopped flowing. They thought that it was because of compartmentalisation (the gas is in a pocket in the reservoir) but they now think this is because of a faulty valve and are fixing it. They are also going back into the drill hole to re-perforate (punch holes into) a different part of the drill to allow gas to produce from a different area in the well. This remedial work has been delayed. We can guess at why the delay has happened but what we now know is that Bounty Oil (owner of about 8%) of the KN1 well could not pay their way. Aminex have recently announced Bounty are in breach of their obligations and have absorbed Bounty’s 8% of the licence into their own licence (effectively kicking Bounty out). That has undoubtedly delayed remediation. When the market sees the income stream restored it will mark the shares up.

The other reason for the tanking price (I believe) is the really gross delay at Ntroya in Ruvuma. This is incredibly frustrating, even for a believer like me. If you remember on this licence they drilled Ntorya 2 (N2) in March 2017. The share price went up ten times (from the lows) and hit over 7p. N2 discovered an enormous amount of gas. The changed geological data as a result of that drill updated the basin model and the estimates for how much gas they have were also updated. The estimates are a CPR (Competent Persons Report). The numbers for N2 with N1 are now at approximately 2 Trillion Cubic Feet of Gas Pmean GIIP (not proved) and about 800 Billion Cubic Feet (C2 from memory or in other words more established/proved). Those numbers are enormous. In the North Sea 200 BCF is described as enormous and very valuable and Aminex have multiples of that.

The next drill was meant to be back to back with N2 and was the one I was waiting for. It is called CH-1. It was not back to back and we are still waiting. Why this is so is unknown. I suspect it comes down to licence extensions, funding and other reasons. I do not believe it is the Directors fault though many do if you read the bulletin boards. My suspicion is that our main partner Solo could not pay for their 25% of the next drill.

In the meantime the Major Oil Company that owns 29% of Aminex shares is Zubair. (NB. 29% is the most you can own in a UK company before you are forced by rules to buy the whole company, which triggers at 30%). Zubair not only own 29% of Aminex directly but they have farmed into the Ruvuma licence (which covers N1, N2 and CH-1). Farm into means buy a proportion of the licence. They have taken 50% off Aminex, whose share is now 25%. In order to buy that they will pay $5m cash. They will also free carry Aminex (pay for everything) up to approximately $110m. They will pay for the seismic data collection, the next drill, the cost of infrastructure (building pipelines etc) up to $110m. By the time that Farmout carry is exhausted there will have been multiple wells drilled and production to the tune of millions of dollars to Aminex. The net effect of all that is that Aminex does not have to pay for a thing until they are receiving from gas sales a very large sum of money. That sort of deal is gold-dust to a small company like Aminex. To have raised $110m in the market on their own would have been impossible and if it was possible would have involved the issuing of billions of shares, diluting us original shareholders immensely.

Because Aminex are now debt free and do not have to raise money for their main project (Ruvuma) they are “safe”. A few years back they looked like they might go bust. They have cash in the bank (a few million) and are about to fix their KN1 income stream and receive $5m from Zubair. Compared to the risk profile of the Company when we all bought they are a completely different proposition. Not only is the balance sheet improved with debt paid off but the discovered gas at Ntorya (under the CPR numbers) is enormous.

The next problem the market does not like is the licence situation. On one view (it is not straightforward) the Ruvuma licence has lapsed and Aminex own nothing. But they have met all their commitments under their licence obligations and that being so, the Tanzanian authorities are legally obliged to extend the licence. My understanding is that the licence applied for is for a 25 year development/production licence. With that amount of gas, such a licence is very valuable. There is endless debate around about why the licence has not been renewed. Conspiracy theories abound and the market hates uncertainty. Experience suggests things take ages in Tanzania (you might remember the gas sales agreement delay for KN1). The two Tanzanian gas authorities have already approved the licence application and it is with the ministry awaiting sign off. We now have a clue about when that might take place.

The Farmout requires an Extraordinary General Meeting to approve it. That requires a circular. The circular (I believe) cannot be sent to shareholders until the licence has been granted because until that has been granted there is nothing to farm into or out. The company have said they expect the farmout to be approved by the end of November 2018. Which means the EGM must happen in November which means the circular must come out before that which means the licence must be granted soon.

If you believe the licence will not be granted then you have been a seller of the shares.

So by the end of November 2018 all that is due to happen. It is not guaranteed to happen and the waiting has been brutal. I am the most frustrated with Aminex I have ever been but putting emotion to one side and on the assumption that they will get their licence Aminex has never been healthier in the (many) years I have held it.

Lots of retail investors (individuals not institutions) out there think the Farmout is a bad deal and too much of the licence has been given away. I very much disagree. The history of the 75% holding in Ruvuma was that Aminex always planned to hold 37%. They drilled N1 and Tullow oil walked away from their licence and gave their 37% to Aminex (in effect). Aminex then carried on and discovered all the gas they have. So the 75% holding was almost an accident.

The demand for gas and power in Tanzania has grown enormously as industry floods in. They are building a pipeline to Uganda to export their gas. The current production cannot meet the demand. So when production can be put onstream the market is there.

The CH-1 drill is targeting (we now know) another 900BCF gas approx. Looking at the geological maps in the presentations on the company’s website I thought it might be more. Aminex have a history (believe it or not) of under promising and over delivering on the gas found by the drill-bit. There is also a chance of oil. Oil would change everything to the upside. We are expecting a new CPR before the farmout and all of the numbers mentioned might increase with that news. Every CPR to date has increased the reserves estimates.

With all of that information I have been buying Aminex again from under 2p per share. No one can pick the bottom of a descent of share price and I am not trying to. But in my opinion the shares are ridiculously cheap for what they have on the assumption the licence and farmout are approved. I own millions more than I did and my holding has doubled. My plan is to sell some on the rise towards the CH1 drill results (hopefully that can be spudded before Xmas but that may be unlikely now) and then hold for those results, which on the original plan would have been June 2017. I am trying to resist the temptation to put a share price on it on good news because like everyone else I do not know. But it hit 7p on N2 drill results and that is smaller than CH1 and Aminex were self funding at the time. They own 25% of the licence now not 75% but have a free carry. On production from 3 wells in Ruvuma (N1, N2 and CH1) and with large reserves in the ground booked the share price will be multiples of the current price. If the Zubairs wanted to buyout Aminex on good CH1 news (a distinct possibility) I would be very unhappy at the price being lower than 12p. If Aminex is allowed to remain independent and continue into the future they could be multiples of that.

I have not mentioned their other licence Nyuni as it is effectively dormant. However with Ruvuma being paid for and run by Zubair they can re-activate Nyuni which has a 5TCF prospective resources and is very close to the enormous offshore discoveries that have been so famous over the years. It is very expensive to work offshore and Aminex have not yet farmed out Nyuni. But there is one lead (Pande West I think) that we kow about because a major has discovered a lot of gas offshore and the reservoir extends into the Aminex area. Seismic data is the next plan and if Aminex can start proving that up it becomes valuable."


GLA