Sunday, September 30, 2007
Tuesday, September 25, 2007
Analysts watch, wince as Mexico's oil supply dwindles.
"Mexico's oil production is in decline. There's probably no way to stop it," said Mike Rodgers, an expert at one of the top oil industry consulting firms, PFC Energy in Houston.
Mexico is the second largest supplier of oil to the United States (about 1.5-million barrels a day). But output from its major fields is dwindling fast, according to official figures from the state-owned oil giant Petroleos Mexicanos (Pemex). The country's known oil reserves will run out in nine years, the government says, potentially undermining the nation's oil-dependent budget.
Mexico's decline only adds more pressure to prices in a tight global oil market, which hit $83 a barrel Thursday. Worse still, its emptying wells are only a reflection of a global decline in aging oil fields around the world.
With no major oil fields left to discover, analysts say the world is approaching "peak oil," the moment at which oil production hits its maximum capacity and slowly starts to fall.
Mexican output peaked at just over 3.4-million barrels a day in 2004. "I don't believe we'll ever see it that high again, no matter how much is invested," said David Shields, an oil industry consultant in Mexico City.
Daily output at Mexico's biggest oil field, Cantarell, highlights the problem. Production there dropped by a staggering half a million barrels in the last 18 months, to 1.5-million barrels from 2-million. Once the world's second-biggest oil field, it is expected to continue losing production, down to as little as 600,000 barrels a day by 2013.
Thursday, September 20, 2007
Getting Crude in All the Wrong Places
you may just conclude that our energy situation appears to be far more precarious than you'd previously thought.I prefer ConocoPhillips and ChevronTexaco over ExxonMobil just because they are cheaper. For the same reason I prefer Halliburton over Schlumberger. Of course Transocean is my favorite: indeed Transocean is the deepwater drilling king. Merger with GlobalSantaFe approved today.
As a result, I've repeatedly urged my Foolish friends to make certain that their portfolios contain a reasonable blend of energy names. I don't think you need to get too fancy here, perhaps beginning with the two big enchiladas in the production and oilfield service sectors, ExxonMobil (NYSE: XOM) and Schlumberger (NYSE: SLB). Beyond that, it might make sense to fill in with other solid names in the sector, such as natural gas growth story and Motley Fool Inside Value recommendation Chesapeake (NYSE: CHK) or deepwater drilling king Transocean (NYSE: RIG).
Wednesday, September 19, 2007
Oil will hit $100 but probably not in 2007: Pickens
NEW YORK (Reuters) - Oil will continue to trend higher after hitting fresh highs over $82 a barrel but is unlikely to puncture the $100 level this year, Texas oilman and investor T. Boone Pickens said on Wednesday.
"You'll hit $100 -- I don't think you'll hit $100 this year unless you have some kind of geopolitical event that causes that to happen, but you're going to get to $100 at some point," Pickens told Reuters in New York.
Concerns that supplies will struggle to keep up with demand as the Northern Hemisphere gears up for winter pushed U.S. crude oil futures to a record $82.51 a barrel on Wednesday before they settled at $81.93, prompting forecasts prices could rise to $100.
"The trend is up, and if your supplies are 85 million barrels per day (bpd) globally, and you look at what demand is predicted to be for the fourth quarter, it is 88 million bpd," Pickens said.
"It means probably demand is greater than supply and the price goes up further."
Pickens said that while oil will eventually reach triple-digit levels, it was unlikely to spike to $100 this year unless an unforeseen event upsets fundamentals.
Pickens, who heads the BP Capital hedge fund, which was valued at $4 billion earlier this year, said prices could be pressured if demand shows signs of wavering.
"We haven't been at this level, so I don't have a feel for when we start killing demand with price," he said, adding oil could fall back to $78 a barrel before rising further.
In April when prices were around $65 a barrel, the legendary oilman forecast oil prices could tip $80 in late 2007 due to supply constraints.
Monday, September 17, 2007
Goldman Raises Year-End Oil Price Forecast to $85
Sept. 17 (Bloomberg) -- Goldman Sachs Group Inc. raised its yearend oil-price forecast to $85 a barrel and said there was a ``high risk'' of a jump above $90 because supplies will drop to critical levels in the fourth quarter, when heating demand peaks.This is extremely bullish. Moo.
Goldman increased its 2007 yearend forecast from a previous prediction of $72 a barrel, analysts at the world's biggest securities firm said in a research note today. Prices are forecast to reach as high as $95 a barrel by the end of 2008, Goldman said.
Surging oil prices threaten to erode the profits at energy consuming companies such as Air France-KLM Group, Europe's biggest airline, whose first-quarter earnings missed analyst estimates because of higher jet fuel costs. Crude oil touched a record $80.50 a barrel in New York today on concern an OPEC production increase starting Nov. 1 won't come soon enough to bolster supplies for the northern hemisphere winter.
``In the current environment, the risk of oil prices spiking to $95 remains very high should inventories continue to draw down to critical levels,'' Jeffrey Currie, a London-based commodity analyst at Goldman, said in a telephone interview today.
The 500,000-barrel-a-day output increase announced by the Organization of Petroleum Exporting Countries last week to assuage fears of a supply shortfall ``will be too little, too late,'' the Goldman report said.
Oil inventories held in Organization for Economic Cooperation and Development nations will shrink at a rate of 1.5 million barrels a day next quarter, compared with the seasonal norm of a 0.5 million-barrel-a-day drop, because demand is that much stronger than supply, Goldman said.
World oil production during the summer was almost 1 million barrels a day lower than a year earlier while demand was 1 million barrels a day higher, the research note said.
Sunday, September 16, 2007
Former Shell chairman says that diminishing resources could push price of crude to $150 a barrel
Lord Oxburgh, the former chairman of Shell, has issued a stark warning that the price of oil could hit $150 per barrel, with oil production peaking within the next 20 years.
He accused the industry of having its head "in the sand" about the depletion of supplies, and warned: "We may be sleepwalking into a problem which is actually going to be very serious and it may be too late to do anything about it by the time we are fully aware."
In an interview with The Independent on Sunday ahead of his address to the Association for the Study of Peak Oil in Ireland this week, Lord Oxburgh, one of the most respected names in the energy industry, said a rapid increase in the price of oil was inevitable as demand continued to outstrip supply. He said: "We can probably go on extracting oil from the ground for a very long time, but it is going to get very expensive indeed.
"And once you see oil prices in excess of $100 or $150 a barrel, the alternatives simply become more attractive on price grounds if on no others."
Lord Oxburgh added that oil majors must invest more heavily in developing viable alternatives to oil and gas. "If you look at it from oil companies' point of view, effectively what they're doing at the moment is continuing business as usual, and sticking their toes in the water in a number of areas which might become important in future.
"But at present there is a relatively poor business case for making significantly greater investment in these new areas."
Commenting on whether "peak oil" – the point when global oil production goes into terminal decline – was likely to be reached in the near future, he said: "In a way it scarcely matters; what really matters is the gap between production and demand. I don't know whether there is going to be a peak in world oil production, whether it's going to plateau and then slowly come down.
"It could well plateau within the next 20 years, and I guess I would be surprised if it hadn't."
The price of crude oil closed above $80 a barrel for the first time on Thursday, as a hurricane in Texas raised supply concerns.
US light crude hit $80.20, two cents higher than the price it touched on Wednesday. Oil prices have risen 30 per cent since the start of this year and are four times higher than their 2002 level.
The latest figures from the US Energy Information Administration show that global liquid fuels production in August was almost a million barrels per day lower than the same period in 2006.
The International Energy Agency has forecast what it calls an oil "supply crunch" by 2012, a prediction that Lord Oxburgh said could possibly come to pass.
Thursday, September 13, 2007
Oil Closes Above $80 for First Time.
NEW YORK (AP) -- Oil prices finished above $80 a barrel for the first time Thursday and gasoline prices rose as refiners reported production problems after Hurricane Humberto hit Texas.
Oil first traded over $80 a barrel on Wednesday after the Energy Department reported declines in crude and gasoline inventories and a drop in refinery activity, but ended the day below that psychologically important mark.
Wednesday, September 12, 2007
Ahead of the Bell: RIG, GlobalSantaFe
NEW YORK (AP) -- A J.P. Morgan Securities analyst upgraded Transocean Inc. and GlobalSantaFe Corp. on Wednesday, saying the combined oil services company will be shielded somewhat from the global jackup rig market and it can pay off debt.
J.P. Morgan Securities analyst David Smith upgraded Transocean and GlobalSantaFe to "Neutral" from "Underweight." This is in contrast to several analysts who in the past week have cut earnings estimates or downgraded the companies.
The two companies, which have agreed to a $53 billion combination, lease to oil companies ships that help drill for oil underwater.
The deal will shield the companies' exposure to the jackup rig market, or operation of ships that float and send down legs to drill for oil on the seafloor.
Prices for jackup rigs are slipping, he said. Strength in the markets for ships that go underwater to seek oil will offset weakness in the jackup market, he said.
Tuesday, September 11, 2007
GlobalSanteFe orders new $740 mln drillship
HOUSTON, Sept 11 (Reuters) - Oil and gas drilling contractor GlobalSanteFe Corp. (GSF.N) said on Tuesday it ordered a drillship from Hyundai Heavy Industries Ltd (009540.KS) in a bid to boost its ultra-deepwater business.
Shipyard costs for the drillship are expected to total about $740 million and delivery is expected in September 2010. The drillship is not yet under contract.
The new drillship, which is a vessel designed for drilling in deep water without legs or anchors holding it to the sea floor, will be capable of drilling in water depths up to 10,000 feet and is upgradeable to depths of up to 12,000 feet.
"Our decision to move forward without an executed drilling contract is clearly a departure from our much more conservative past approach," Jon Marshall, GlobalSantaFe's chief executive officer, said in a statement. "However we would not have taken such a capital risk without a very high degree of confidence in the ongoing strength of the ultra-deepwater market."
In a note to clients, energy investment bank Simmons & Co. said the the drillship, the most expensive ordered to date, "provides a strong signal about future demand for ultra-deepwater."
In July, world's largest offshore driller Transocean Inc. (RIG.N) said it would buy GlobalSantaFe for nearly $18 billion. The combination will expand the companies' global reach by creating a fleet of nearly 150 rigs with a market-leading role in the deepwater market, where contracts are more lucrative.
Shares of GlobalSanteFe were down $1.13, or 1.6 percent at $71.54 and shares of Transocean were off 1.5 percent, or $1.67 at $106.64. Both trade on the New York Stock Exchange. (Additional reporting by Matt Daily)
Monday, September 10, 2007
UPDATE 1-RESEARCH ALERT-UBS starts Halliburton, 3 others
Sept 10 (Reuters) - UBS initiated coverage of Halliburton Co (HAL.N), Baker Hughes Inc (BHI.N) and Schlumberger Ltd (SLB.N) with "buy" ratings.
It also started Weatherford International Inc (WFT.N) with a "neutral" rating.
UBS said in a research note that Halliburton was its top pick in the large cap oilfield service and equipment sector, followed by Baker Hughes and Schlumberger.
The brokerage, which has a price target of $52 on Halliburton, said the company was growing as quickly internationally as its competitors, leading with its core competencies in production optimization and drilling services.
UBS said Baker Hughes sought the best-in-class status across all product lines, specifically directional drilling, completions, and drill bits, with considerable offshore success.
The brokerage has a price target of $102 on Baker Hughes.
UBS, which has a price target of $121 on Schlumberger, said the company had become "the gold standard" in the industry by building relationships in key growth areas, stressing local content among personnel, and focusing on providing the highest service quality worldwide.
UBS said it expected Weatherford's growth to moderate with more challenging market share gains, but it should still outpace global upstream spending growth.
The brokerage has a price target of $70 on the stock. (Reporting by Sharangdhar Limaye in Bangalore)
Sector Snap: Offshore Drillers
NEW YORK (AP) -- Shares of Ensco International Inc., Noble Corp. and Rowan Companies Inc. fell Monday, after a Jefferies & Co. analyst cut his ratings and target prices on the offshore drillers, citing lower day rates amid rising rig supplies.
Noble shares sank $2.70, or 5.3 percent, to $47.80, while Rowan shares fell 94 cents to $35.62. Ensco shares declined $1.50, or 2.7 percent, to $53.70, in morning trading. GlobalSantaFe slipped $1.89, or 2.6 percent, to $71.05.
Judson E. Bailey, in a client note, cut his ratings on the three offshore drillers to "Hold" from "Buy." He said the global supply of jack-up rigs -- a type of offshore drilling platform often used in relatively shallow waters -- is set to increase about 15 percent in the next 24 months.
In the meantime, per-day-per-rig revenue rates -- or dayrates -- for these kinds of rigs is already showing signs of softness in some international markets, wrote Bailey, citing a GlobalSantaFe Corp. disclosure that a jack-up rig was contracted for $185,000 per day, down from its previous rate of $210,000.
Dayrates could decline through 2009, and the stocks are fairly priced for their earnings growth prospects in the meantime, he added.
The analyst cut his target price on Rowan to $40 from $47, on Noble to $55 from $59, and trimmed his target on Ensco to $60 from $76.
Companies with more exposure deepwater drilling, like Diamond Offshore Drilling Inc. and Transocean Inc., are better investment bets for now, added Bailey. He has a "Buy" rating on both stocks.
Oil services firms fall amid possible pricing slide.
Noble Corp. (NE:noble corporation) said in a meeting with RBC Capital Markets that prices have been falling to the $185 million to $215 million range for jackup rigs, down from $225 million to $250 million. Noble Energy is concerned that national oil companies have started to build their own rigs, "which would effectively displace demand," RBC said in a note to clients.
Wednesday, September 5, 2007
Conoco, Statoil have chance for Shtokman field - paper.
MOSCOW, Sept 6 (Reuters) - U.S. oil major ConocoPhillips (COP.N) and Norway's Statoil (STL.OL) have a chance to join in the development of Russian gas export monopoly Gazprom's (GAZP.MM) giant Shtokman field, a newspaper reported on Thursday.
Vedomosti business daily quoted sources close to Gazprom as saying Conoco could get 14 percent in Shtokman's first phase development while Statoil would get 10 percent.
The newspaper quoted sources as saying Gazprom thought it was important to invite the U.S. firm into the project to avoid a further souring of Russian relations with the United States.
Gazprom has so far invited only one partner to Shtokman, French oil major Total (TOTF.PA) which agreed to take 25 percent in the company-operator of the $18 billion first phase Shtokman development.
Gazprom has said it would keep 50 percent in the company-operator but would continue talks with both Conoco and Statoil on the remaining 24 percent. The company declined to comment on Thursday.
Shtokman, in the Barents Sea, is one of the world's biggest gas fields with reserves enough to supply the world for over a year. Its gas is slated for delivery to Europe by pipelines and to the United States as liquefied natural gas from the middle of next decade.
Tuesday, September 4, 2007
Flexible Tack Wins For Hartford Fund.
Transocean (NYSE:RIG) is up 34% this year. The world's largest offshore oil and gas driller was a top buy for the fund in its latest disclosure period. The stock has had three quarters of triple-digit earnings growth. EPS growth has accelerated for four quarters.
Its Q2 earnings rose 338%, beating analyst estimates by 7%. Use of its drilling rigs is up, as are its rates.
But the stock slipped 23% from its late July high to a mid-August low. The downturn came at around the time Transocean said it would take over GlobalSantaFe (NYSE:GSF). Leverage to help finance the takeover will boost the firm's debt at a time when credit is growing scarcer and costlier.
The company's cautious outlook for shallow-water rigs seemed to further spook investors.
But the stock has rallied about 11% from its recent low and sits 10% off its old high. It shot above its 10-week moving average Tuesday as volume ticked up to just below average.
Noble Corporation Takes Delivery of New High-Spec Jackup.
SUGAR LAND, Texas, Sept. 4 /PRNewswire-FirstCall/ -- Noble Corporation (NYSE: NE) today reported that the Company has taken delivery of a new high-specification jackup drilling rig constructed by Dalian Shipbuilding Industry Co. Ltd. in Dalian, People's Republic of China. The Noble Roger Lewis, the first of three such rigs being built for the Company, is in transit to its inaugural drilling assignment in Qatar, where it will work under contract to Shell.
The Noble Roger Lewis was constructed based on the proven F&G JU-2000E design, which includes enhanced environmental protection, safety and drilling efficiency features to meet the ever-increasing requirements of worldwide exploration and production operations.
"With the delivery of the Noble Roger Lewis, the Company has successfully added both a high-specification jackup and an ultra-deepwater semisubmersible, the Noble Clyde Boudreaux, to our fleet this year," said Noble Chief Operating Officer David W. Williams. "These additions, as well as the units we expect to take delivery of in 2008 and 2009, continue to enhance our asset and revenue base and further strengthen our ability to serve our customers."
The Noble Roger Lewis is designed to operate in water depths up to 400 feet and is equipped to drill wells in high-pressure/high-temperature environments up to 30,000 feet deep. Compared to many other jackups, the Noble Roger Lewis has more deck space, higher variable load, more drilling capacity, greater cantilever reach (up to 75 feet), and accommodations for a greater number of personnel.
Noble is the leading supplier of premium jackups (independent-leg cantilevered jackups capable of operating in water depths of 250 feet to 400 feet) in the Middle East and India, with a fleet that now includes 17 drilling units.
Noble Corporation is a leading provider of diversified services for the oil and gas industry. The Company performs contract drilling services with its fleet of 62 mobile offshore drilling units located in key markets worldwide, including the U.S. Gulf of Mexico, Middle East, Mexico, the North Sea, Brazil, West Africa and India. The fleet count includes five rigs under construction.