Another Week Of Layoffs And Bankruptcies For Oil

COVID Market Update

For oil suffering under a pandemic, it’s been another week of layoffs and bankruptcies …

- Sable Permian Resources LLC was the first shale patch bankruptcy of the week. In the early part of the week, bankrupt Sable agreed to sell itself to a group of lenders led by JPMorgan. The price tag? Its current outstanding debt.

- Equinor and Exxon are the latest oil majors to make job cuts. Norway-based Equinor is cutting one-third of its workforce in its exploration unit to cut cuts. Exxon will be cutting 1600 jobs in Europe by the end of next year--which is about 10% of its total European workforce. This is not Exxon’s first tranche of job cuts either. It has already shed jobs in Australia and the United States. Speaking of the United States, Deloitte is predicting that of the 107,000 oil and gas jobs that have been lost in the United States so far this year, 70% of them will not be recovered if oil stays around $45 per barrel. In a worst-case scenario, should oil fall to $35 per barrel, only 3% of those lost jobs will be recovered. Of course, Texas will be the hardest hit of all the states.

- First, it was U.S.-based renewables major NextEra Energy overtaking Exxon as America’s most valuable energy company. Now, the same is happening in Canada. Canadian Natural Resources has overtaken Suncor as Canada’s most valuable energy company as investors move to dump oil and favor companies with larger natural gas holdings.

- Chevron, too, has upset the normal way of things, unseating Exxon as America’s most valuable oil company. Exxon has shed 50% of its market cap this year while Chevron’s is down 39%.

Politics, Geopolitics & Conflict

- The Libyan Central Bank warned that unless oil production is restored the country is facing economic collapse. The bank informed the parliament the country needs to produce 1.7 million barrels per day to compensate for current spending levels. From less than 100,000 bpd in early September, oil production has now reached 300,000 bpd. Since 2013, when the shutdown of the country’s oil production and exportation started, Libya has lost some $180 billion.

- Turkey is withdrawing its energy research vessel from offshore Cyprus. Turkish President Recep Tayyip Erdogan played this off as a gesture of diplomacy. Drilling failure, however, is the more likely reason. EU pressure, which has never been much of a threat to Turkey, would not have motivated this move. Turkish state-run TPAO has come up completely dry in these waters after drilling eight wells.

- Poland's anti-trust regulator UOKiK has ordered Russia's Gazprom to pay $7.61 billion in fine over the construction of the Nord Stream 2 pipeline. The agency said that the pipeline, which would allow Germany to double its gas imports from Russia, would increase Gazprom's dominance on the Polish market. UOKiK also imposed penalties on the five western companies — Engie, Uniper, OMV, Shell, and Wintershall — that are co-financing the project to the tune of $62 million.

- British major BP is stepping up security at its facilities in Azerbaijan following reports of possible attacks on the Baku-Tbilisi-Ceyhan (BTC) pipeline amid an intensifying conflict between Armenia and Azerbaijan over Nagorno Karabakh. Azerbaijan has accused Armenia of targeting the BTC pipeline.

- Kyrgyzstan is in the throes of mob rule following days of unrest that saw protesters storm parliament after controversial elections. In the ensuing days, a number of figures have been declared prime minister by rival groups and unrest is growing by the hour.

Deals, Mergers & Acquisitions

- Mergers and acquisitions keep trickling into the oil and gas space as the pandemic makes it difficult for all sector players to breakeven. This week, Premier Oil is being snapped up by Chrysaor Holdings in a reverse takeover. The newly formed entity, as a result of the takeover, will be the largest independent oil and gas producer in the UK’s North Sea capable of producing 250,000 boepd--Chrysaor’s stakeholders will get 77% of the new company. Premier’s creditors, who hold Premier’s $2.7 billion debt pile, will get a cash payment of just $1.23 billion.

Discovery & Development

- Volga Gas has announced what it claims to be a “potentially significant” discovery in a new oil field in Russia.

- South Sudan is hoping to have its new refinery operational in a few years. When complete, the refinery will distribute refined petroleum products to Kenya, Uganda, DR Congo, and Tanzania - but not by pipeline, by road. South Sudan is desperately trying to regain its footing in the oil industry before its clash with neighboring Sudan when it produced 350,000 bpd.

- An oil workers strike that has already disrupted oil and gas production in Norway is now threatening to take offline a total of 35% of all production in the North Sea. Equinor has stated that its giant Johan Sverdrup oilfield will have to close if a deal is not reached by October 14. Equinor has already shuttered multiple fields. If Sverdrup indeed closes, the disruption could reach almost a million boepd.

- The disruptions to oil installations in the U.S. Gulf of Mexico are widespread, affecting Shell, Murphy Oil, and many others. By Wednesday, 80% of all GoM oil production had been shut in ahead of Hurricane Delta. By Thursday, 91.5% of all oil production had been shut in, along with 61.8% of all gas production.

- To no one’s surprise, Nigeria has once again dropped the ball with its oil reform law. The bill has been delayed time and time again over the course of the last twenty years. Some may have gotten their hopes up last month when the bill made it through the Senate, but now it will not make it to the House debates until the first quarter of next year. This time, the reason is that Nigeria lawmakers have more pressing items on the agenda--a 2021 appropriations bill. Although one could argue that there will be nothing to budget without its oil revenues. The law hopes to completely overhaul Nigeria’s troubled oil and gas sector.

Renewables

- Volkswagen is claiming that electric cars will make up 90% of its total car sales in Norway next year--and may completely replace diesel and petrol engines there in the next three years. Norway hopes to end the sale of fossil-fueled vehicles within five years. The country’s September new vehicle sales were 61.5% electric, so it’s well on its way.

- Total SE has snagged a 20% stake in a floating wind farm project in the Mediterranean Sea. The Eolmed wind farm will bring Total closer to becoming the world leader in floating offshore wind, after acquiring wind farm projects in South Korea and the UK. The oil major expects to have 12 GW of total power generation capacity by the end of this year, 7 GW of which should be renewable energy. Total SE hopes to grow its renewable capacity to 35 GW by 2025.