COVID Market Update
More oil and gas companies reported their quarterly financials this week, and it's more of the same unfavorable news as the companies struggle to churn profits or at a minimum, beat analyst expectations as oil prices continue range-bound at sub-$40 levels.
- First on our list is Texas-based shale driller Diamondback Energy (FANG.O), which reported its third quarterly loss this week. Its Q3 production was 287,315 boe/d, with total equivalent prices averaging a disappointing $26.75 per barrel. Diamondback reported a net loss of $1.11 billion in the quarter, after taking a $1.45 billion impairment charge.
- Next up, Oklahoma-based WPX Energy, which will soon be taken over by Devon Energy, reported a loss as well, of $148 million, largely as a result of a $110 million net loss on derivatives.
- Houston-based EOG Resources also posted a quarterly loss for the quarter, of $42 million. This compares with a profit of $615 million for Q3 2019.
- Shell (RDS.A) has announced that it would begin the process of shutting down its large 211,000 barrel Convent refinery in Louisiana within the next week or so after failing to find any interested takers. Other majors have shut down refineries as well. Shell will continue its search for a buyer. The divestment of this refinery is part of the company’s plan to rid itself of eight refineries over the next five years--keeping only those that have integrated oil refineries and chemical plants. The…
COVID Market Update
More oil and gas companies reported their quarterly financials this week, and it's more of the same unfavorable news as the companies struggle to churn profits or at a minimum, beat analyst expectations as oil prices continue range-bound at sub-$40 levels.
- First on our list is Texas-based shale driller Diamondback Energy (FANG.O), which reported its third quarterly loss this week. Its Q3 production was 287,315 boe/d, with total equivalent prices averaging a disappointing $26.75 per barrel. Diamondback reported a net loss of $1.11 billion in the quarter, after taking a $1.45 billion impairment charge.
- Next up, Oklahoma-based WPX Energy, which will soon be taken over by Devon Energy, reported a loss as well, of $148 million, largely as a result of a $110 million net loss on derivatives.
- Houston-based EOG Resources also posted a quarterly loss for the quarter, of $42 million. This compares with a profit of $615 million for Q3 2019.
- Shell (RDS.A) has announced that it would begin the process of shutting down its large 211,000 barrel Convent refinery in Louisiana within the next week or so after failing to find any interested takers. Other majors have shut down refineries as well. Shell will continue its search for a buyer. The divestment of this refinery is part of the company’s plan to rid itself of eight refineries over the next five years--keeping only those that have integrated oil refineries and chemical plants. The move fits with Shell’s agenda to transition to a low-carbon future, while it keeps just the plants that fit within that agenda.
- Marathon Oil reported a net loss of $317 million for the quarter. Unlike some of the other companies on our list that reported this week, however, Marathon did better than third quarter last year, when it reported a $750 million net loss.
- Murphy Oil Corp also posted a loss of $244 million.
- Comstock Resources Inc (CRK) missed revenue expectations spectacularly and reported a net loss of $130.9 million, due--like WPX Energy-- to $155.6 million “unrealized loss on the mark-to-market value of the Company’s derivative financial instruments that are held to hedge oil and natural gas prices,” the latter which increased significantly in Q3.
- An important bellwether for oil prices, Saudi Arabia has once again lowered its official selling price for Arab Light to its prime market: Asia. It lowered it by $.10 per barrel in a sign that Saudi Arabia is not confident in the demand for its flagship-grade--at least not to China. The move comes after Asian refiners asked for a price cut due to lower refining margins.
Politics, Geopolitics & Conflict
- France’s Engie has pulled out of a $7-billion deal to import LNG from Texas-based NextDecade Corp. At issue are the methane emissions from and footprint of nat gas from the United States, which France is implying isn’t regulated to the standard that Europe can accept. It’s a blow for Texas, who is struggling to find outlets for its abundance of nat gas--the byproduct of oil.
- Libya’s crude oil production has reached 800,000 bpd, a 100,000-bpd increase in just a few days. During the more than eight months of the blockade, Libya’s oil output slumped from over 1 million bpd to less than 100,000 bpd. Ramping up production started in September when the Libyan national Army agreed to a ceasefire with the Government of National Accord (GNA) and lifted the oil facilities blockade. Force majeure was lifted on Sidra and Ras Lanuf ports on October 23rd, and as of October 26th, the NOC had announced that all other ports and fields had seen force majeure lifted.
Discovery & Development
- BP is halting production at its 146,000 bpd Kwinana Refinery in Australia as it is no longer economical. It is the largest refinery in Australia, and the only refinery in Western Australia. The refinery will be turned into an import terminal by 2022.
- Total is rumored to be looking to pull up stakes, for its stakes, in some of its oilfields in Angola--Africa’s second-largest oil-producing country. Angola relies on its oil industry to contribute nearly one-third of its GDP. Angola’s oil production has been on a steady decline over the last five years, and expectations are that even more Big Oil companies will bail on their Angolan oilfields during the tough times in the oil industry, mostly because production is complex and expensive. For Total, it could also be part of its shift to focus on larger fields, as well as its declared shift toward renewables.
- The Philippines has given the go-ahead for PXP Energy Corp to explore for oil in the South China Sea--without China’s CNOOC if they have the ability to do it alone. Up until last month, the Philippines had banned exploring for oil in the South China Sea oil, but now the Philippines is asserting its rights in the disputed sea.
- Apache will appraise offshore Suriname oil discoveries in Block 58 for Maka and Sapakara, with Kwaskwasi to come by the end of the year. The company will drill a fifth well in the block. Earlier this year, Apache its partner Total announced their third oil discovery in Block 58, in the Kwaskwasi-1 well, which, according to Apache, turned out to be the biggest one in the basin so far.
- Turkey has started drilling for gas at a second location in the Black Sea following the major natural gas discovery earlier this year. Turkish authorities said that the drillship Fatih returned to drill for gas in the Black Sea at the Türkali-1 borehole.
Deals, Mergers & Acquisitions
- Australia-based Beach Energy has scooped up an interest in 6.8 million barrels of oil equivalent of proven and probable reserves in the Cooper basin from Senex Energy for $62 million. The estimated production from Cooper is expected to be 600,000 barrels of oil equivalent, with about 2/3rds of that being oil.
- In an effort to divest itself from all of its non-core assets, Petrofac has completed the sale of its remaining 51% interest in its upstream operations in Mexico. Perenco Energies International Limited now owns 100% of those operations in Mexico.
- Tourmaline Oil has acquired independent Jupiter Resources for $479 million, which produces 67,000 boepd in the Alberta Deep Basin.
Regulations and Legislation
- Lost in the craziness that is the U.S. Presidential election this week was President Donald Trump’s signing of a bill that would require certain government agencies to study the economic effects of a fracking ban or fracking restrictions. With challenger Joe Biden’s anti-fracking gaff in the run-up to the election, and with the election hinging--in part--on the vote count in Pennsylvania, Biden’s attitude toward fracking, and Trump’s last-ditch effort to use fracking to solidify a win there, could very well determine the outcome of the race for the President of the United States.
- Norway’s Supreme Court this week heard beginning arguments against Arctic oil drilling. The argument was brought by Greenpeace Norway on climate grounds. Arguments are expected to last a week, but a ruling is not expected until December or January.
- Greenland is opening up three offshore areas up for drilling, after conducting a resource assessment on the territory. The Norwegian Petroleum Directorate has said that the territory contains several very promising areas, specifically in the Baffin Bay area. Greenland also plans on opening two license areas off the territory’s east coast in the next two years.
Renewables
- Spain’s Iberdrola will invest $88 billion by 2025 in renewable energy production, grids, and retail operations. By 2030, Iberdrola hopes to bolster its solar and onshore wind capacity by 2.5 times, and offshore wind by 4.5 times, reaching 95 GW of total generation.
- Tesla plans to build a 300-MW/450-MWh battery storage system in Victoria, Australia, three times bigger than the once biggest battery the company had constructed, also in Australia. Tesla has again partnered with Neoen, a French renewable energy company, to deploy a 300 MW/450 MW.
