Friday, July 22, 2016

32 Active Rigs Going Into The Weekend -- July 22, 2016; With One Deal ExxonMobil Acquires Natural Gas Footprint Larger Than Qatar

See story below: think about this. Saudi Aramco budgets almost $14 billion for a single natural gas processing plant. Meanwhile, for slightly less than $3 billion (and a pittance against its market cap), ExxonMobil acquires natural gas assets that may be greater than all of Qatar.

Today's Daily Activity Report

Active rigs:

Active Rigs3268196207182

Seven new permits:
  • Operator: Statoil
  • Field: Avoca (Williams)
  • Comments:
Eight permits renewed:
  • Statoil (4): four Mark permits in Williams County
  • Thunderbird Resources (3): three Watson permits in McKenzie County
  • Crescent Point Energy: one Makowsky permit in Williams County
Samson Resources canceled a Trooper permit in Divide County.

Slawson resurved seven locations: Torpedo (6) and Rebel (1), all in section 30-152-91, Mountrail County.

ExxonMobil Acquires InterOil 

  • market cap: $390 billion
  • total cash: $5 billion
  • total debt: $43 billion
  • operating cash flow: $27 billion
  • independent oil and gas business
  • primary focus on Papua New Guinea
  • assets includes one of Asia's largest undeveloped gas fields, Elk-Antelope, in the gulf Province
  • 3.9 million acres (an area larger than Qatar)
  • main offices in Singapore and Port Moresby
  • formed in 1997; incorporated in Canada
  • market cap: $3 billion
  • this is the first significant transaction by ExxonMobil since the beginning of the current downturn
  • it is not the long hoped-for US onshore transaction, but it represents a solid example of ExxonMobil leveraging its considerable footprint and technical capability
  • while the deal is relatively small for ExxonMobil, Barron's views the asset as a high-quality addition
  • many analysts thought ExxonMobil would buy US onshore (Permian); this deal doesn't preclude this from happening, but it suggests that onshore transaction economics may remain problematic for large-scale moves by Majors
Exxon has its eye on InterOil’s Elk-Antelope gas fields which contain some 10.2 trillion cubic meters. This acquisition is in line with Exxon’s strategy to target gas fields with sufficient reserves to supply the UK for three years. Due to low downstream costs, specifically regarding labour and land development, Exxon has positioned itself to dominate Papua New Guinea’s nascent LNG sector: the country only began exporting natural gas in 2014. Moreover, Exxon already owns the country’s only LNG terminal; a $19 billion project.
Exxon et al. must tread carefully, lest they face the same pitfalls as the mining sector, and thus severely tarnish their reputations in Papua New Guinea. Tensions between locals and multinationals are always present even in the best of times, yet the people power movement sweeping the country is shaking up the corrupt business-as-usual system. It is very likely that O’Neill will lose the no-confidence vote, thus bringing in a new regime which will be beholden to the populace to improve living standards. This will have to be done by wrangling more favourable deals from investors.
The Market

S & P 500 hits a new record.

Job Watch

June unemployment stories are starting to trickle in. Bottom line: as the economy improves, more people looking for jobs, resulting in higher unemployment rates, even as more folks go back to work.

At least that's the story line.

Unemployment rates "ticked up noticeably" in six states in June. The national figure is 4.9%. The rate is higher in 14 states.

Increases: Colorado (up 0.4 to a very low 3.7%); Nevada and Oregon (each up 0.3%); California, Maine and South Dakota (each up 0.2%).  But South Dakota still had the nation's lowest unemployment rate of 2.7% -- incredible, no matter how you look at it.

Of course, no one believes these rates but they are what they are. I still argue that anything below 8% in the US is full employment.

It's the demographics of unemployment (and underemployment) that is challenging.

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