ExxonMobil Strikes 1-Billion-Barrel Well off Nigerian Shores

ExxonMobil says it has discovered up to 1 billion barrels of oil off Nigeria’s shores.

A statement Thursday says the “significant discovery” at Owowo-3 well extends an existing field worked by the U.S. multinational. ExxonMobil is the operator and owns 27 percent of Owowo. Nigeria’s state oil company holds majority shares. Other partners include Chevron, France’s Total and Chinese-Canadian Nexen.

The news comes the day before ExxonMobil announces third-quarter results.

Oil multinationals in Nigeria are suffering attacks by militants who have slashed production, driving this West African oil giant into recession.

Lagos-based SBM Intelligence risk analysts estimate that ExxonMobil, Dutch-British Shell and Chevron lost $7.1 billion in the first half of this year — some 70 percent of earnings — through militant attacks, low oil prices and weak refinery margins.

A US oil company just filed for bankruptcy — for the second time this year

Offshore oil platform is seen in Huntington Beach
Offshore oil platform is seen in Huntington Beach

For the second time in less than a year, oil services provider Hercules Offshore is heading for Chapter 11 bankruptcy protection by entering a restructuring support agreement (RSA).

The Wall Street Journal writes that ”In a prepackaged bankruptcy, companies line up creditor support for their debt-payment plans before seeking chapter 11 protection, allowing them a speedier—and cheaper—trip through bankruptcy.

Last August, Hercules filed for Chapter 11 protection—the first time. At the time, the company showed US$13 billion in debt and just over US$546 million in assets, trying to restructure with a new US$450-million credit line.

It resurfaced from this bankruptcy only in November, but the perpetual low oil price environment led to a slump in exploration investment and project cancellations.

Under the new Chapter 11 filing, Hercules is selling assets to pay off investors. The company has reportedly agreed to transfer the right to buy the Hercules Highlander jack-up rig to a subsidiary of Maersk Drilling for US$196 million.

The company said that its international units will not be included in the Chapter 11 filing, but will be part of the sale process.

In just the first four months of 2016 there were double the the number of energy company bankruptcies than in all of 2015. The total secured and unsecured defaults rose to $34 billion, double the $17 billion total for all of 2015. In 2015, 42 oil companies filed for bankruptcy.

In April this year, 27 North American oil and gas companies filed for bankruptcy—11 of them filing under Chapter 11, according to a Haynes and Boone report. Some 69 North American oil and gas producers have filed for various forces of bankruptcy.

Thomson ReutersFile photo of pump jacks at Lukoil company owned Imilorskoye oil field outside West Siberian city of Kogalym

More than one-third of public oil companies globally face bankruptcy, according to a new Deloitte report that paints a fairly gloomy picture of the US shale patch as it struggles to survive under mountains of debt.

The Deloitte report—the first high-profile report on the current financial situation of global oil and gas companies—surveyed 500 companies and found that 175 are facing “a combination of high leverage and low debt service coverage ratios”.

Shale producers amassed huge debts that they are now struggling to service in the oil price downturn. These debts totaled $353 billion for US and Canadian energy companies at end-2015. To compare, Deloitte puts the combined debt of those 175 bankruptcy-threatened companies at more than $150 billion, nearly half of the total for U..S and Canada.

 

Royal Dutch Shell says to axe further 2,200 jobs

However Shell still pressed ahead with its £47-billion ($69-billion, 62 billion-euro) takeover of British company BG Group, in a deal aimed at strengthening Shell's position in the liquefied natural gas (LNG) market.
However Shell still pressed ahead with its £47-billion ($69-billion, 62 billion-euro) takeover of British company BG Group, in a deal aimed at strengthening Shell’s position in the liquefied natural gas (LNG) market.

London (AFP) – Energy giant Royal Dutch Shell on Wednesday said it was cutting at least another 2,200 jobs owing to low oil prices and following its takeover of smaller rival BG Group.

“Shell staff have today been informed about the progress being made on integrating BG into the company, and on further measures that are necessary to ensure Shell is competitive in a ‘lower for longer’ oil price environment,” the Anglo-Dutch group said in a statement.

Shell said the latest losses bring to at least 12,500 the number of staff and direct contractor roles being cut from the company between the start of last year and end of 2016.

Jobs are being axed at its operations in the North Sea off the coast of Scotland, as well as in Ireland and elsewhere.

“These are tough times for our industry and we have to take further difficult decisions to ensure Shell remains competitive through the current, prolonged downturn,” said Paul Goodfellow, Shell’s vice president for UK & Ireland.

“In 2016, the number of job reductions in response to low prices and as a result of the BG integration is expected to total at least 5,000 globally.”

Goodfellow added that Shell was seeking to “create a competitive and sustainable business in the North Sea”.

Shell had earlier this month announced an 89-percent drop in net profit for the first quarter of 2016, blamed the slump on low oil prices. It also said that investment would be lower than expected.

The global oil market had nosedived from above $100 in mid-2014 to 13-year lows of around $27 in February, plagued by a stubborn supply glut.

But prices have since rebounded to trade at nearly $50 a barrel.

The slump in prices has caused energy groups worldwide to cut spending, slash jobs and sell assets during the past year.

However Shell still pressed ahead with its £47-billion ($69-billion, 62 billion-euro) takeover of British company BG Group, in a deal aimed at strengthening Shell’s position in the liquefied natural gas (LNG) market.

At the end of 2015, Shell employed around 90,000 people globally, while BG had some 4,600 staff.

Halliburton, Baker Hughes set to end $28 billion deal: source

huges

(Reuters) – Halliburton Co (HAL.N) and Baker Hughes Inc (BHI.N) are expected to announce the termination of their merger agreement on Monday following opposition from U.S. and European antitrust regulators, a person familiar with the matter said.

The deal would have brought together the world’s No. 2 and No. 3 oil services companies, raising concerns it could result in higher prices in the sector. It is the latest example of a large merger deal failing to make it to the finish line because of antitrust hurdles.

The contract governing Halliburton’s cash-and-stock acquisition of Baker Hughes, which was valued at $34.6 billion when it was announced in November 2014, and is now worth about $28 billion, expired on Saturday without an agreement by the companies to extend it, the person added.

Baker Hughes stands to receive a $3.5 billion breakup fee as a result of the deal falling apart, and Halliburton is expected to say on Monday it will meet that obligation, according to the source.

Halliburton is also expected to cite the impact that lower oil prices have had on the deal’s financial appeal as a reason for ending the merger agreement, in addition to the lengthy regulatory process, the source added. The Houston-based company will continue to focus on keeping its profit margins and rig count high, the source said.

The source asked not to be identified because no official announcement has yet been made. Halliburton and Baker Hughes did not immediately respond to requests for comment.

The U.S. Justice Department filed a lawsuit to stop the deal last month, arguing it would leave only two dominant suppliers in 20 business lines in the global well drilling and oil construction services industry, with Schlumberger NV (SLB.N) being the other.

The European Commission also previously expressed concerns that the deal may reduce competition and innovation.

The Justice Department and Federal Trade Commission, which enforce U.S. antitrust law, have filed lawsuits to stop an unusually high number of deals in the past 18 months. Attorney General Loretta Lynch said last month that the number of big and complex deals being proposed made it “a unique moment in antitrust enforcement.”

The collapse of Halliburton’s acquisition of Baker Hughes comes as both companies struggle to cope with the impact that lower energy prices are having on their clients.

Last week, Baker Hughes reported a bigger-than-expected first-quarter loss and warned that the rig count globally would drop steadily through the end of the year because of fewer new projects.

Halliburton said last month it cut more than 6,000 jobs in the first quarter, during which revenue slumped 40.4 percent, and it took a $2.1 billion restructuring charge mainly for severance costs and asset write-offs.

Oil expected to drop after meeting in Qatar collapses

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DOHA, Qatar (AP) — A meeting of oil-rich countries in Qatar that had been expected to boost crude prices by freezing production fell apart Sunday as Iran stayed home and vowed to increase its output despite threats by Saudi Arabia.

Oil prices, which hit a 12-year low in January by dipping under $30 a barrel, had risen above $40 in recent days, buoyed by the bullish talks surrounding the Doha summit.

But instead of a quick approval of a production freeze, the meeting of 18 oil-producing nations saw hours of debate and resembled the dysfunction of an unsuccessful meeting of the Organization of the Petroleum Exporting Countries in December that sent oil prices tumbling.

The fact that producers couldn’t agree to a freeze, let alone a production cut, likely means oil prices will drop again as markets open Monday.

“Prices will trade lower. Maybe sharply lower,” said Robert Yawger, director of energy futures at Mizuho Securities USA, noting the failure to reach agreement in Doha.

He noted that other factors were negatively impacting prices: U.S. crude oil storage remaining at all -time highs, Iran increasing production, and Libya looming on the horizon to boost output.

Speaking to journalists after the summit, Mohammed bin Saleh al-Sada, Qatar’s energy and industry minister, tried to say the lack of a decision showed officials believed “the fundamentals of the market are generally improving.”

However, he largely dodged the questions about whether another special summit will be called before OPEC’s next meeting in June and whether Iran had anything to do with the breakdown of the talks.

“We of course respect their position and … we still don’t know how the future will unroll but it was a sovereign decision by Iran,” said al-Sada, who is serving as OPEC’s president. “The freeze could be more effective definitely if major producers, be it from OPEC members like Iran and others, as well as non-OPEC members, are included in the freeze.”

Sunday’s gathering grew out a surprise Doha meeting in February between Qatar, Russia, Saudi Arabia and Venezuela, in which they pledged to cap their crude output at January levels if other producers did the same.

The idea of a freeze and not a cut initially looked more palatable to producers already suffering after oil’s dramatic fall since the summer of 2014, when prices were above $100 a barrel.

Production continues to rise as countries try to make up the difference. Ahead of Sunday’s meeting, Iraq boosted its production to record territory of over 4 million barrels a day in March, and Kuwait pumped 3 million barrels a day with homes of reaching 4 million a day by 2020.

And while car owners and airlines have enjoyed the low oil prices, the plunging oil revenues have wreaked havoc on countries like Nigeria and Venezuela, both of which attended Sunday’s meeting along with non-OPEC member Russia.

The biggest wild card of the talks, however, wasn’t even in the room. Iran decided to stay home late Saturday after saying the day before it would send an emissary to the meeting. Speaking to Iranian state television, Oil Minister Bijan Namdar Zangeneh said it didn’t make sense to send any representative from the Islamic Republic “as we are not part of the decision to freeze output.”

“We can’t cooperate with them to freeze our own output, and in other words impose sanctions on ourselves,” Zangeneh said.

With many international sanctions lifted under its nuclear deal with the U.S. and other world powers, Iran began exporting oil into the European market again and is eager to claw back market share. It produces 3.2 million barrels of oil a day now, with hopes of increasing to 4 million by April 2017.

Sunni-ruled Saudi Arabia had said it wouldn’t back any freeze if Iran, its Shiite rival, didn’t agree to it, throwing the deal into question before the meeting. The kingdom seems determined to ride out the low prices that could squeeze Tehran.

The enmity between Saudi Arabia and Iran has spiked in recent months.

In January, Saudi Arabia executed a prominent Shiite cleric, a move that sparked protests in Iran that saw demonstrators attack two of the kingdom’s diplomatic posts there. That broke the conflict between the two countries into the open, amid them backing opposing sides in both Syria’s civil war and the war in Yemen.

Saudi Oil Minister Ali al-Naimi repeatedly declined to speak to journalists during the meeting.

The dispute underscores the level of discord inside OPEC as it faces arguably its biggest challenge since the oil glut of the 1980s. Though more-costly U.S. shale oil production has dropped, it could re-enter the market if oil prices rise. And a large amount of crude already building up provides a major damper on prices, as does a generally weakened global economy, according to the U.S. Energy Information Administration.

The immediate effect of the summit’s collapse likely will be seen in crude prices. Western markets were closed Sunday and not immediately affected. Stock exchanges in Saudi Arabia and Dubai closed in negative territory Sunday, with the Saudi Tadawul down 1.48 percent.

Global oil producers meeting disrupted by absence of U.S. and Iran

Attendees, including Saudi Oil Minister Ali al-Naimi, silently swept past gathered journalists at a luxury hotel in Doha ahead of the meeting.
Attendees, including Saudi Oil Minister Ali al-Naimi, silently swept past gathered journalists at a luxury hotel in Doha ahead of the meeting.

DOHA, QatarOil-producing countries met Sunday in Qatar to discuss a possible freeze of production to counter low global prices, but Iran’s last-minute decision to stay home could dilute the impact of any agreement.

The attendees, including Saudi Oil Minister Ali al-Naimi, silently swept past gathered journalists at a luxury hotel in Doha ahead of the meeting. Also on hand was Russia, another of the world’s top oil producers. The U.S., now a major producer because of shale oil, did not attend.

At least 15 oil-producing nations representing about 73 percent of world output were expected at the Doha meeting, Qatar’s energy and industry minister, Mohammed bin Saleh al-Sada, has said.

The gathering follows a surprise Doha meeting in February between Qatar, Russia, Saudi Arabia and Venezuela, in which they pledged to cap their crude output at January levels if other producers do the same.

They hope the cap will help global oil prices rebound from their dramatic fall since the summer of 2014, when prices were above $100 a barrel, though no one is talking seriously about the more dramatic step of cutting production.

Prices dropped briefly under $30 a barrel, a 12-year low, in January, but have climbed to the mid-$40s this week, boosted in part by market speculation about the Qatar meeting. Western markets were closed Sunday and not immediately affected by the discussions.

Iran decided to stay home late Saturday after saying the day before it would send an emissary to the meeting.

“We reached the conclusion that the Doha meeting is for those who want to sign the oil freeze plans, and if we wanted to have a representative at the meeting, it was to show our support of this project,” Oil Minister Bijan Namdar Zangeneh said, according to a report by the ministry’s SHANA news agency.

“But since Iran is not going to sign this, there is no need for the presence of Iran’s representative at the meeting.”

With many international sanctions lifted under its nuclear deal with world powers, Iran began exporting oil into the European market again and is eager to claw back a market share. It produces 3.2 million barrels of oil a day now, with hopes of increasing to 4 million by April 2017. On Friday, the Iranian Oil Ministry reiterated it would not join a freeze “before it brings its oil exports to the pre-sanctions levels.”

Sunni-ruled Saudi Arabia has said it won’t back any freeze if Iran, its Shiite rival, doesn’t agree to it, throwing into question whether any deal will be reached. The kingdom seems determined to ride out the low prices that could squeeze Tehran.

That dispute underscores the level of discord inside OPEC as it faces arguably its biggest challenge since the oil glut of the 1980s. Even if officials reach a deal, Iran’s production and oil from other sources, like the U.S., could keep prices down.

The meeting broke up just before 11 a.m. as attendees planned to meet with Qatar’s emir, Sheikh Tamim bin Hamad Al Thani, said Kabalan Abisaab, Ecuador’s ambassador to Qatar, who was on hand for the meeting. Abisaab said participants would return to the meeting in the afternoon and continue their deliberations.

Asked if Iran’s absence had an effect, he responded in Spanish that it “didn’t matter.”

“Believe me, everything is going well,” he said.

The biggest oil meeting in decades will take place on Sunday — here’s what you need to know

Saudi oil minister Ali al-Naimi speaks to media on his arrives for the Gulf Cooperation Council Oil Ministers' meeting in Riyadh on October 9, 2012.
Saudi oil minister Ali al-Naimi speaks to media on his arrives for the Gulf Cooperation Council Oil Ministers’ meeting in Riyadh on October 9, 2012.


Major oil players will be gathering to discuss a potential production freeze on Sunday, April 17, in Doha, Qatar, in what some analysts have called “the most important meeting of the last three decades.”

Analysts have been hoping for a coordinated move ever since mid-February, when Saudi Arabia, Russia, Venezuela, and Qatar agreed to freeze production at January levels if other producers joined in.

Since then, several states, including the relatively better-off Gulf Cooperation Council members Kuwait and the United Arab Emirates, expressed willingness to support the deal.

But others weren’t as supportive. Most notably, Iran’s oil minister, Bijan Zangeneh, previously called the idea to freeze production “a joke.

Plus, not everyone is planning to attend the Doha meeting. Libya said that it’s not going. Whether or not Iran actually shows up is a bit fuzzy after reports on Wednesday suggested that Zangeneh doesn’t plan on attending the upcoming Doha meeting, but will instead send a representative.

In light of all this, analysts aren’t exactly feeling optimistic about the meeting’s outcome.

A Macquarie Research team, led by Vikas Dwivedi, argued in a note to clients (emphasis added):

We have muted expectations for any meaningful impact on crude fundamentals from the April 17th Doha meeting. Practically, implementation of any accord that is reached would be so difficult that we view anything beyond foregoing splashy growth in 2016 as too optimistic.

The commodities-research team at RBC Capital Markets, headed by Helima Croft, also voiced doubts about the meeting’s outcome.

“As it stands now, we believe that the most likely outcome is that producers fail to close the deal and announce a freeze on Sunday, but that they instead pledge to continue to conversation and even possibly put an additional OPEC/non-OPEC meeting on the calendar for later in the year,” Croft wrote.

“Saudi Arabia and Iran do not appear ready to give sufficient ground to get a comprehensive freeze agreement done by Sunday, given current information,” she wrote.

“In order to get a breakthrough, we would likely need to see Saudi Arabia move beyond an outright insistence that Iran freeze production at current levels and/or for Iran to agree to a production ceiling that falls well short of their current 4 mb/d negotiating stance,” she continued.

But Croft also added that, given that the majority of oil producers — including Russia and the aforementioned GCC states — want a deal, their team can’t entirely rule out anything.

Even if some sort of deal is reached, however, it may not even have a huge impact.

“In the event an accord is reached, there will be very little impact on global crude supply/demand balances,” Dwivedi’s team wrote.

“The return of OPEC to country-level quotas replacing the current ‘free-for-all’ strategy is viewed as broadly positive, as is the elimination of the KSA/Iraqi production growth tail risk. However in light of the production growth already achieved in January by OPEC members and Russia, an accord will not significantly impact crude S/D balances,” they continued.

Notably, in the background of all this, it seems like global production is finally starting to cool down.

Credit Suisse’s Ed Westlake and Jan Stuart shared a chart on Wednesday showing that global oil production excluding Saudi Arabia slowed to approximately 83 million barrels per day in 2016, from about 84 million in mid-2015.

But the US Energy Information Administration‘s latest data showed that total world production is up to 96.27 million barrels per day in 2016, up from 95.76 million bpd in 2015.

In any case, analysts will be keeping their eyes and ears open for any news of possible coordination at Sunday’s meeting.

WTI crude is trading higher by 0.4% at $41.93 per barrel, and Brent crude is up 0.5% at $44.39 per barrel as of 11:52 a.m. EST.

Houston oil firm seeks bankruptcy after slump kills $5B spending spree

  |  Bloomberg
Energy XXI launched a joint venture in 2012 with ExxonMobil to explore for oil and gas in shallow waters on the Gulf of Mexico shelf.
Energy XXI launched a joint venture in 2012 with ExxonMobil to explore for oil and gas in shallow waters on the Gulf of Mexico shelf.

Energy XXI Ltd. filed for bankruptcy protection today after spending $5 billion on acquisitions in the years leading up to the crude slump.

The oil and gas explorer sought Chapter 11 protection in Houston, listing $1.8 billion in assets and $3.6 billion in debt and saying it has reached a restructuring agreement with noteholders.

“Energy XXI will eliminate more than $2.8 billion in debt from its balance sheet, substantially deleverage its capital structure and position the company for long-term success,” the company said in a statement.

Energy XXI bills itself as the largest publicly traded independent producer on the Gulf of Mexico shelf. Since its initial public offering more than 10 years ago, the Houston-based company bought MitEnergy, picked up $1.01 billion of properties from Exxon Mobil Corp. and spent $2.3 billion on EPL Oil & Gas, according to its website.

As recently as three years ago, Chief Executive Officer John Schiller was planning to expand as far afield as Southeast Asia, where he said the geology is similar to the Gulf’s.

With oil hovering around $30 a barrel, Energy XXI wound up buying back more than $1.7 billion in debt over seven months to trim its interest expense. In a February regulatory filing, the company said it doubted it could meet financial commitments over the coming year and continue operating. Crude’s recovery to about $40 since then hasn’t been enough.

Schiller, a protege of wildcatter James “Jim Bob” Moffett, had also steered the company into costly exploration projects with Moffett’s Freeport-McMoRan Inc. several miles beneath the Gulf of Mexico. Energy XXI said Schiller will continue as CEO.

The company, which plans to operate as normal during the restructuring, has about $180 million in cash and said it expects to pay suppliers and vendors in full. It asked the court for a freeze on stock transfers in order to preserve tax benefits. Energy XXI has $1 billion in “net operating losses” which help it save on federal and state taxes, according to court papers.

Oil began its slide in mid-2014 when crude was at about $100 a barrel. A glut has driven dozens of energy explorers into Chapter 11, including Magnum Hunter Resources Corp., Samson Resources Corp. and Sabine Oil & Gas Corp. Rig operators such as Paragon Offshore Plc and Hercules Offshore Inc. also declared bankruptcy as demand for their services dropped.

About 35 percent of exploration and production companies worldwide — some 175 firms — are at risk of bankruptcy this year, according to a Deloitte LLP study published in February. Together, these companies have around $150 billion in debt on their balance sheets, according to the report.

Money manager Franklin Resources Inc. was the biggest owner of the company’s second-lien bonds as of Feb. 29, with a 32.4 percent holding.

An Energy XXI subsidiary that leases subsea pipelines off the Louisiana coast remained outside Chapter 11 case and those leases remain intact, according to CorEnergy Infrastructure Trust Inc., which owns the pipe network.

Oil prices back to square one

oil prices

NEW YORK, April 1 (UPI) — Oil prices took one of their biggest hits of the year Friday as pressure from Riyadh’s response to a production freeze was doubled by weak U.S. labor figures.

Mohammed bin Salman, the deputy crown prince of Saudi Arabia, poured water on a fire set by talks of a production freeze from Russia and members of the Organization of Petroleum Exporting Countries in an interview with Bloomberg News.

“If all countries agree to freeze production, we’re ready,” he said. “If there is anyone that decides to raise their production, then we will not reject any opportunity that knocks on our door.”

Saudi Oil Minister Ali al-Naimi in December suggested there would be no limit to the kingdom’s oil production.

A meeting planned later this month in Doha is aimed at controlling production levels in an effort to stabilize an oil market skewed heavily toward the supply side. Iran, which is returning to the oil market after years of isolation triggered by economic sanctions, said it would freeze its production, but only after it regained a stronger market position.

When rumors of a production freeze first surfaced in January, Neil Atkinson, the head of the oil markets division at the International Energy Agency, told UPI the market in 2016 would favor the supply side unless there was widespread agreement on controlling production.

Crude oil prices nearly erased all of their gains for the year following the comments from the Saudi official. Brent crude oil was down nearly 4 percent at the start of trading in New York to $38.75 per barrel. West Texas Intermediate, the U.S. benchmark price for crude oil, lost 3.6 percent from Thursday’s close to $36.94 per barrel early in the trading day.

Negative pressure on crude oil prices was influenced further by a slight increase in the U.S. unemployment rate to 5 percent in March. The U.S. Bureau of Labor Statistics reported retail, construction and healthcare jobs increased, though job losses occurred in manufacturing and mining.

The labor sector has been one of the stronger points for the U.S. economy. The latest data show, however, that those left out of the work force for 27 weeks or more were still unable to find jobs, with figures showing little movement since June. Wages, meanwhile, remained relatively flat, growing only 2.3 percent over the year.

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