Schlumberger, Halliburton Consider Pulling Out Of North America -- April 27, 2016

Bloomberg/Rigzone is reporting:

Two of the three largest oil rig operators and frackers are considering pulling back from the North American market as losses mount.

Schlumberger Ltd. -- after posting its first North American operating loss since at least the turn of the century, according to Barclays Plc -- is evaluating whether it’s worth temporarily shuttering its business in the region. Baker Hughes Inc. said Wednesday it has decided to limit its exposure to unprofitable onshore fracking work in North America because of the "unsustainable pricing."

It’s the first time in at least a decade that those companies and Halliburton Co., the big 3 in oil services, all lost money in the region during the first three months of the year.

"Activity is coming down to basically critical-mass type of levels," Schlumberger Chairman and Chief Executive Officer Paal Kibsgaard told analysts and investors Friday on a conference call. "What’s the benefit of taking the losses versus shutting down and then making the investments later on to start back up again?"

Even FMC Technologies Inc., the largest provider of subsea equipment to the industry, said Wednesday the amount of lost work in the region was surprising.

Jeff Miller, president of Halliburton, was one executive using the word this past week to describe operations.

"My definition of an unsustainable market is one where all service companies are losing money in North America, which is where we are now,” he said Friday in a statement in which the Houston-based company reported an operating loss margin of 2.2 percent.

More than half of U.S. fracking equipment, measured at a total of 17.5 million horsepower, is unused. Prices charged for fracking are estimated to have fallen as much as 40 percent since the downturn began in the third quarter 2014.

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XOM Increases Dividend

Exxon Mobil Corp raised its quarterly dividend by 3 percent on Wednesday, a day after Standard & Poor's downgraded the U.S. oil and gas company citing its generous payouts to shareholders.

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Noble Corp Quarterly Profit Plunges 41 Percent

Noble Corp Plc's quarterly profit plunged 41 percent, coming slightly below analysts' expectations, hurt by lower demand for rigs as oil prices hover around decade lows. The prolonged slump in oil prices has led to a steep decline in drilling activity, mainly in the offshore market, as oil and gas producers cut costs.

Nine (9) New Permits -- Permits Are Much A Better Barometer Than Number Of Active Rigs -- April 27, 2016

Active rigs:

	4/27/2016	04/27/2015	04/27/2014	04/27/2013	04/27/2012
Active Rigs	27	85	182	187	209

No wells are scheduled to come off the confidential list Thursday.

Nine (9) new permits:

• Operators: WPX (5), Statoil (4)
• Fields: Spotted Horn (McKenzie), Banks (McKenzie)
• Comments: see note below from an earlier post (it doesn't hurt that Statoil reported great profits)

Attention to detail: the following wells had a name change:

• New name: Knutson-Werr 34 2; old name: Knutson-Werre  34  2
• New name: Bear Creek Unit 3-1; old name: Bear Creek Unit  3-1

Rigzone is reporting that Europe's energy giants (Statoil and Total) reported profits in 1Q16:

Norway’s Statoil ASA and France-based Total S.A. both posted profits in the first quarter of this year.

Statoil’s adjusted earnings after tax amounted to $122 million in 1Q 2016, beating an average forecast which predicted a $125 million loss for the period. The Norwegian energy firm posted a loss of $1.5 billion in the previous quarter and a profit of $902 million in the first quarter of 2015.

Statoil delivered equity production of 2.05 million barrels of oil equivalent per day in 1Q 2016, which was roughly two percent higher compared to the first quarter last year. Higher production than expected in Norway helped Statoil’s profit beat expectations.

The company’s equity production for 2016 is estimated to be lower than the 2015 level due to Statoil’s “value over volume-approach”.

Scheduled maintenance activity is estimated to reduce quarterly production by approximately 55,000 boepd in the second quarter of 2016. In total, maintenance is estimated to reduce equity production by around 60,000 boepd for the full fiscal year 2016, which is higher than the 2015 impact.

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Salmon - Artichoke - Broccoli - Mezcal 

Hess Production YoY Flat; Reported Loss Less Than Forecast; Unnecessary Talk About Rig Counts -- April 27, 2016

Hess reports; link here.

Quarterly revenue dropped 36% year over year to $993 million, falling short of estimates of $1.02 billion for the first three months of the year.

Before today's market open, New York City-based Hess posted a loss of $1.72 per share for the quarter, beating estimates of a loss of $1.83 per share for the quarter. Last year, Hess reported a loss of 98 cents per share for the 2015 first quarter.

Oil and gas production fell to 350,000 barrels of oil equivalent per day for the latest quarter, compared with 355,000 barrels of oil equivalent per day in the same period last year.

Exploration and production capital and exploratory expenditures declined 56% to $544 million.

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With Regard To Earnings And Rigs

If this was in response to an analyst's question, it speaks volumes about the analyst -- I'll explain why after the link. The Dickinson Press is reporting:

Hess Corp. said on Wednesday it would add drilling rigs in North Dakota's Bakken shale basin, its largest area of operations, if oil prices approach $60 per barrel, a level executives believe offers the best chance to return to profitability.

The update came after the U.S. oil producer reported a smaller-than-expected quarterly loss, with cost cuts helping offset more than 60 percent drop in crude prices in the past 18 months.

My thoughts, in an e-mail sent to a reader:

It seems to me I recall another company saying the same thing some time ago, maybe EOG, although maybe it was Hess.

I think this (the number of rigs) will be interesting to watch. As I've always said, rig count provides a measure of activity, but seems to be fairly irrelevant in the Bakken where 29 active rigs now are producing what 200 rigs did two years ago, and on top of that: 1,000 DUCs; 1,500 inactive wells; and, countless wells taken off-line every day.

My hunch is that as oil moves above $50, smart operators are going to worry more about getting their financial statements back in order. Based on what little I know, every section (that matters) in the Bakken has been tied up with "leases held by production." There certainly should not be any urgency to drill.

Except that oil men like to drill, my hunch is that adding rigs remains near the bottom of their list of things to get done.

I think smaller operators will add their first rig before larger companies like EOG, Whiting, CLR, add another rig to the ones they already have.

For newbies, let's put the 1,000 DUCs, 1,500 active wells; and countless wells taken off-line every day: during the boom, around 2,000 new wells were drilled every year. Plus or minus half-a-thousand. 

Why The Saudi Aramco IPO Will Not Be Enough -- Oilprice.com -- April 27, 2016

This is as good an update/opinion on the Saudi Aramco IPO as any, I suppose. See my thoughts here.

This is the "headline" from the linked oilprice.com article: Why The Saudi Aramco IPO Will Not Be Enough.

The Saudi Arabian sale of Saudi Aramco is already starting to attract widespread attention after Mohammad bin Salman, deputy crown prince of the Kingdom, indicated that an IPO for the state owned giant will proceed next year. That IPO, likely to be for less than 5 percent of the company, is being talked about as a way for Saudi Arabia to raise funds in a time of continued low oil prices. While the additional funding would be a welcome boon – Saudi Aramco would likely be valued at over $2 trillion dollars – the reality is that the IPO only distracts from the Kingdom’s deep well of future challenges.

I think the Saudi Aramco IPO is a big, big deal. I think it's a much bigger deal than a lot of folks might think. The company will (though its publicly traded "subsdidiary" will not) dwarf any existing company and for a few days after its announcement, the IPO will suck all the oxygen out of the NYSE. Cramer will devote a full show to the IPO. In the big scheme of things -- in the global oil and gas industry, as far as the consumer is concerned -- probably not much will change. But for Big Oil a lot will change. Literally overnight, there will be a new publicly traded competitor.

Market caps (rounded and generously rounded up in some cases):

• XOM: $400 billion
• Statoil: $60 billion
• Total: $120 billion
• COP: $60 billion
• PSX: $50 billion
• CVX: $200 billion

4% of $2 trillion: $80 billion and most of this is downstream assets, apparently. 

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Texas Wild Flowers

Set #2, 2016

Set #1, 2016

Weekly Energy Tweet And News -- April 27, 2016; Statoil Profits Surprise

Get ready for higher summer prices for gasoline: US refinery throughput edged down a bit; the second decline in three weeks; refinery throughput this past week is now below that of what was seen at this time in 2015.

Even US distillate stocks are dropping; now below that of 2015 this time last year. Get ready for a jump in prices.

US distillate consumption has surged; now back over the 10-year average. 

US gasoline stocks now at 2015 levels (which was was a 10-year record) but going in the "right direction" for the oil and gas industry.

US gasoline stocks still "off the chart" but they have really, really dome down over the past three months.

Crude oil (price) hits recent high after release of crude oil data.

"There's a possibility we could see newer highs from here, notwithstanding the EIA data, as the market is really fired up on the idea of tightening supplies," said John Kilduff, partner at New York energy hedge fund Again Capital.

US crude and products stocks continue an upward trend; up 5.3 million bbl but YoY surplus continued to narrow (but the gap is still incredible).

US crude stocks rose 2 million bbls, to 540.6 million bbls; this should be the seasonal peak; current US crude oil stocks are "still off the chart." Last year at this time, US crude stocks around 490 million bbls; the ten-year low -- around 310 million bbls.

US crude oil imports last week, 7.6 million bopd vs 8.2 bopd previous week.

Rigzone is reporting that Europe's energy giants (Statoil and Total) reported profits in 1Q16:

Norway’s Statoil ASA and France-based Total S.A. both posted profits in the first quarter of this year.

Statoil’s adjusted earnings after tax amounted to $122 million in 1Q 2016, beating an average forecast which predicted a $125 million loss for the period. The Norwegian energy firm posted a loss of $1.5 billion in the previous quarter and a profit of $902 million in the first quarter of 2015.

Statoil delivered equity production of 2.05 million barrels of oil equivalent per day in 1Q 2016, which was roughly two percent higher compared to the first quarter last year. Higher production than expected in Norway helped Statoil’s profit beat expectations.

The company’s equity production for 2016 is estimated to be lower than the 2015 level due to Statoil’s “value over volume-approach”.

Scheduled maintenance activity is estimated to reduce quarterly production by approximately 55,000 boepd in the second quarter of 2016. In total, maintenance is estimated to reduce equity production by around 60,000 boepd for the full fiscal year 2016, which is higher than the 2015 impact.

Will XOM surprise?

No Recession ... Yet -- April 27, 2016; The Fed: We've Hit A Soft Patch

Updates

Later, 7:59 p.m. Central Time: one has to laugh -- the mainstream media says "we've" hit a "soft patch" economically. In fact, the economy has never looked so good under the past six or seven years of the Obama administration. Just when I thought it was looking better, mainstream media says we've hit a "soft patch." Why is that topical? If we've hit a "soft patch," the Fed is unlikely to raise rates. And that's what is being telegraphed. And that's why the market will continue to hold its own, and possibly even continue its "upward" trend.  One wonders if the Fed should not be nominated for the 2016 Geico Award?
 

Original Post

 

Due to electrical storm last night we lost our wi-fi internet at home; blogging was delayed a bit, but we will get up and running soon.

After hitting an all-time post-boom low of 24 active rigs the other day, "we're" back to 28 today. [By mid-day, it dropped back to 27, and I've updated the graphic below to reflect that "27."]

Wow! Talk about missing a forecast, from Zacks:

Baker Hughes posted wider loss than the consensus. Loss per share from continuing operations (excluding special items) came in at $1.58, higher than the Zacks Consensus Estimate of 33 cents loss per share. This also came wider than the year-ago quarterly loss of seven cents per share.

Just a few of the other companies reporting today that are of interest; results will be posted at "earnings page" when I get around to it:

• Facebook, after market close, 62 cents/share forecast.
• First Solar, after market close, 93 cents/share forecast. 
• QEP, after market close, a 60-cent loss/share forecast. 
• Whiting, after market close, a 72-cent loss/share forecast. 
• Xilinx, after market close, 52 cents/share forecast.

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Back to the Bakken

Active rigs:

	4/27/2016	04/27/2015	04/27/2014	04/27/2013	04/27/2012
Active Rigs	27	85	182	187	209

RBN Energy: US E&P Upstream Capital Spending Plunging Again.

In connection with year-end 2015 earnings announcements, North American exploration and production companies (E&Ps) continued to announce large reductions in 2016 capital budgets.

But the most dramatic news is that RBN’s analysis of a study group of 30 E&Ps indicates that these companies are finally expecting oil and gas production to fall in 2016 after a 7% gain in 2015.

In today’s blog we update our continuing analysis of E&P capital spending and oil and gas production guidance. As U.S. benchmark West Texas Intermediate (WTI) crude oil prices continue to hover around $40/Bbl, RBN’s analysis of 2016 capital expenditure guidance indicates that our study group of 30 E&Ps are cutting CAPEX in half, from $60.3 billion in 2015 to $30.6 billion in 2016.

In just two years, upstream investment has plummeted by two-thirds from $94.9 billion in 2014. Importantly, the precipitous falloff in drilling is finally leading to lower expected US hydrocarbon output, driven by a decline in oil. As we examine below, the Large Oil-Weighted E&Ps and Small/Mid-Size Oil-Weighted E&Ps are guiding to 10% and 7% production declines, respectively, after a collective 6% increase between 2014 and 2015.

This forecasted output decline has already contributed to modest gains for oil prices in recent weeks. Guidance for the Diversified US Gas-Weighted E&Ps indicates their output will fall 8%. But an expected 15% increase by the Appalachian Gas-Weighted E&Ps will leave the overall gas volumes delivered by our “universe” of 30 E&Ps about flat at 1.18 billion barrels of oil equivalent (boe).

GDP forecast:

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2016 is 0.4 percent on April 26, up from 0.3 percent on April 19. After last Wednesday's existing-home sales release from the National Association of Realtors, the forecast for first-quarter real residential investment growth increased from 8.5 percent to 10.8 percent. After this morning's advance report on durable manufacturing from the U.S. Census Bureau, the forecast for real equipment investment growth declined slightly while the forecast for real inventory investment increased slightly.

"Dramatic shift" in Saudi strategy? Bloomberg/Rigzone is reporting:

Saudi Arabia made its first sale of oil to a small, independent Chinese refiner.

What’s more significant to markets is that the world’s biggest crude exporter broke from its usual practice of selling via long-term contracts.

The world’s biggest crude exporter sold a spot cargo to teapot refiner Shandong Chambroad.

The 730,000-barrel shipment is expected to load in June from state-owned Saudi Arabian Oil Co.’s leased storage tank in Japan.

“News that Saudi Arabia is selling a cargo on the spot market to Asia may mark the turning of a dramatic new chapter in the Saudi playbook. What is unusual is that the sale is spot rather than the initiation of a new term contract. Spot sales are about the only way the Kingdom can gain new market share in a world in which chunky buyers are interested in securing incremental purchases via spot rather than term arrangements.”

Brent crude is almost 40 percent lower than in November 2014, when Saudi Arabia led a decision by the Organization of Petroleum Exporting Countries to keep pumping to defend market share in the face of swelling global inventories.

Aramco will complete the expansion of its Shaybah oilfield by the end of May to maintain the level of its total production capacity.

This summer, the Kingdom may be targeting an additional 500,000 barrels a day of sales, boosting daily production to 11 million barrels as power-generation demand peaks, Citigroup estimated.

Saudi Arabia’s output reached a record 10.57 million barrels a day last July, helping to send Brent lower for a third year. Prices rallied from a 12-year low in January amid the potential for agreement between major oil producers to cap output.

These are "interesting" numbers for Saudi Arabia.

• record output: 10.57 million bopd
• will expand an oil field to maintain production
• target: 11 million bopd this summer 

These numbers are significantly different that what has been reported in the past.

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Environmental Concerns In The Mideast? LOL

Meanwhile, over in Khafji, Reuters/Rigzone is reporting:

Kuwait and Saudi Arabia appear no closer to restarting their jointly operated Khafji oilfield despite Kuwait saying the sides had agreed to ramp up output after an 18-month shutdown.

Any delay in the restart of the Neutral Zone field that produced 280,000 to 300,000 barrels per day before environmental problems forced its closure in October 2014 will be seen as a boost to global oil markets struggling to shake off a glut that has sent prices diving over the past two years.

Kuwait's acting oil minister said on March 29, 2016, that Kuwait had agreed with neighbouring Saudi Arabia to resume production at the field. Riyadh has yet to confirm that announcement, and Saudi-based industry sources say there has been no breakthrough in talks to resolve what has become a political sticking point between the two Gulf OPEC allies.

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Over The Top -- The Politics Page

Mr Trump will probably come up short in the "official" number of delegates he needs to win on the first vote at the convention. At least that's the conventional convention thinking.

In fact, there are uncommitted delegates that can be "bought."

Some contenders with a few committed delegates could release their delegates on the first vote if given some incentive by Mr Trump.

Trump won every county in every one of the five states last night. EVERY COUNTY IN EVERY ONE OF THE FIVE STATES. Not trivial. 

Bottom line: the Republican Party -- the GOP -- has been usurped by a third party candidate.  

Keep this woman in mind: Susana Martinez is an American attorney and politician. She is the 31st and current Governor of New Mexico and current chairwoman of the Republican Governors Association.

Best line of the day: Ted Cruz called a basketball hoop a "basketball ring" while creating a scen from Hoosiers. Local broadcasters suggested he may not know a lot about sports. Well, duh. Can you imagine if George Bush had said this?

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No Will?

If, in fact, Prince left no will, it speaks volumes about his priorities. Many, many story lines. Most of them very, very sad. Maybe pathetic.

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The Literature Page

A Note for the Granddaughters

Current books. I'm re-reading Keld Zeruneith's The Wooden Horse: The Liberation of the Western Mind, From Odysseus to Socrates. That's my "main book" right now. Off and on during the day I read Richard Feynman's lectures (a commemorative edition released many decades ago). I'm pretty much done with my "Wars of the Roses" and Shakespeare phase for the moment. And before going to bed, Dorothy Parker's reviews of Broadway shows back around 1920. It's hard to believe her formal education ended in 8th grade or thereabouts, so she could stay home, and take care of her ailing father, or something to that effect; I've forgotten the specifics.