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WTI OIL: US$86.56-$1.110 per barrelDecemberdelivery
NYMEX: N Gas: US$3.529-$0.009 per MMBTUNovember delivery ilfield NEWS
oilfieldnews.ca www.markmilne.com
NORTH AMERICANRIG COUNTS
The U.S. rotary rig count was up 4 rigs at 1,839 for the week of October 19, 2012. It is 174 rigs (8.6%) lower than last year. The number of rotary rigs drilling for oil was down one at 1,410. There are 331 more rigs targeting oil than last year. Rigs drilling for oil represent 76.7 percent of all drilling activity. Rigs directed toward natural gas were up 5 at 427. The number of rigs currently drilling for gas is 500 lower than last year's level of 927. Year-over-year oil exploration in the U.S. is up 30.7 percent. Gas exploration is down 53.9 percent. The weekly average of crude oil spot prices is 6.2 percent higher than last year and natural gas spot prices are 8.8 percent lower. Canadian rig activity is down 6 at 355 for the week of October 19, 2012 and is 142 (28.6%) lower than last year's rig count. The number of rigs drilling for oil was down 8 at 268 and is 66 (19.8%) lower than last year. Gas directed rig count was up 3 at 86 and is 77 (47.2%) lower than a year ago.
OIL SLUMPS ON GROWTH CONCERNS
Oil prices fell sharply on Tuesday as slowing global economic growth, Europe's continuing debt crisis and weak earnings forecasts from U.S. corporations pressured commodities and equities. Brent fell for a sixth straight session and U.S. crude was down for a fourth consecutive day to settle at a three-month low. Evidence of slowing economic growth and an improving crude oil supply picture continued to counter any potential lift from Middle East turmoil and Iran's dispute with Israel and the West over Tehran's nuclear program. Chemical company DuPont lowered its earnings forecast, announced 1,500 job cuts and posted lower-than-expected prof i t , pressuring equities, oil and other commodities. The Thomson Reuters-Jefferies CRB index, a gauge widely followed by commodity investors, fell 1.2 percent. DuPont's gloomy outlook came a day after heavy machinery maker Caterpillar Inc warned that the U.S. economy was slowing faster than expected. Rising Spanish borrowing costs and slumping business morale in France's manufacturing sector added to concerns about Europe's debt crisis and sputtering economic growth. "The main bearish driver is the state of the economy," said Filip Petersson, an analyst at SEB in Stockholm.
"And that's taken all markets down quite a bit." TransCanada Corp's Monday restart of its Keystone pipeline carrying crude oil from Canada to the United States added pressure on oil futures. Brent December crude fell $1.19 to settle at $108.25 a barrel, its lowest settlement since Oct. 3. It slumped to $107.31, its lowest level since Sept. 20 and below the 100-day moving average of $107.42. U.S. December crude fell $1.98 to settle at $86.67 a barrel, its lowest settlement since July 12. Tuesday's low trade was $85.69. Tuesday's move lower left U.S. crude poised "for a test on the 61.8 percent retracement of the $77.28 to $100.42 move at $86.12, and possibly below," Michael Fitzpatrick, editor-in-chief, wrote in the indust ry newslet ter EnergyOverview.
CN AND TUNDRA TO CONSTRUCT LOADING TERMINAL IN MANITOBA
CN and Tundra Energy Marketing Limited have announced that they have signed a memorandum of understanding to construct a crude oil rail car loading terminal near Cromer, Man., to meet the needs of Bakken crude oil producers in Manitoba and Saskatchewan. The terminal will initially
load 30,000 barrels of crude oil per day into rail cars - the equivalent of more than 50 tank cars worth - starting in the second quarter of 2013. The facility will have the
potential to accommodate a unit train of 100 tank cars, with each train carrying approximately 60,000 barrels per day of crude oil. Bryan Lankester, president of
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Tundra Energy Marketing, said: "This project, combined with 410,000 barrels of oil storage currently under construction at our terminal in Cromer - a six-fold increase in existing capacity -- will provide us with access to alternative North American markets for Williston Basin crude oil over CN's network at a time when there is inadequate pipeline takeaway capacity. Our Cromer location at the most easterly point of crude oil production in Canada should provide a market advantage to our crude oil producers and shippers." Jean-Jacques Ruest, CN executive vice-president and chief marketing officer, said: "We are pleased to be a key supply chain enabler for Tundra Energy Marketing. CN will help Tundra's customers reach markets with good net-backs for their crude. And further growth will be part of the story - the Cromer transload terminal is expandable, with the potential to handle complete crude oil unit trains of more than 100 cars, which will generate greater efficiencies and market reach for Canadian crude oil. "Working closely with companies such as Tundra Energy Marketing is making the transportation of crude oil one of CN's fastest growing businesses. We expect to move more than 30,000 carloads of crude oil in 2012, and we believe we have the
scope to double this crude oil business next year."
SUNCOR ENERGY PROVIDESUPDATE ON FIREBAG OPERATIONS
Suncor Energy's Firebag oil sands facility has reached full design capacity of nearly 120,000 barrels per day (bbls/day). First oil at stage 3 of the facility was brought online in August of last year and with the application of infill well technology, the pace of production ramp-up at Firebag stage 3 exceeded prev ious expecta t ions . Production at the Firebag complex averaged 113,000 bbls/day in the third quarter of 2012, with exit rates of approximately 120,000 bbls/day. Quarterly production was up over 100% from last year's third quarter production of approximately 55,000 bbls/day. In addition, the Firebag stage 4 facility was safely commissioned during the third quarter of this year and steaming of the wells has begun. First oil is expected by year end, approximately three months ahead of the original schedule, and the project is approximately 10% under the current budget estimate of $2 billion. "We're seeing strong results from our disciplined focus on management of cost and quality - an excellent example of our commitment to create value for investors," said Steve
Williams, Suncor president and chief executive officer. The expected total production from the Firebag complex will rise to approximately 180,000 bbls/day once stage 4 reaches full planned capacity. There is significant integration between Firebag stages 1 through 4 allowing operational flexibility to optimize production, maintenance, reliability and costs. "The Firebag resource continues to provide among the most productive wells in the industry from one of the largest resource basins in the world," continued Williams. "Firebag is a high quality asset and a crucial component of our Oil Sands portfolio."
PETRONAS TO MEET CANADIAN OFFICIALS ON PROGRESS DEAL
Canada has blocked Malaysian state oil firm Petronas' C$5.17 billion ($5.2 billion) bid for gas producer Progress Energy Resources in a surprise move that could signal problems for a much larger Chinese deal in the country's energy sector. Canada's announcement late on Friday, minutes before a deadline, was a blow to Petronas, whose domestic oil supplies are shrinking and which has been seeking to boost its resources beyond Malaysia and volatile areas such as Sudan. It also raises doubts over Chinese oil group CNOOC's C$15.1
billion offer for oil producer Nexen and could weigh on other Canadian firms hoping for foreign investment to tap their vast energy reserves. A rejection of the CNOOC bid would likely damage trade ties Canada has been trying to build with China, underlining political sensitivity to Chinese corporate expansion in North America. "I have sent a notice letter to Petronas indicating that I am not satisfied that the proposed investment is likely to be of net benefit to Canada," Industry Minister Christian Paradis said in a statement. The government, which has said C$630 billion investment is needed in Canada's energy sector over the next decade, has been trying to balance concerns over the deals with that requirement for capital. The companies have 30 days to make the offer more palatable. Progress Chief Executive Michael Culbert said he was disappointed with the ruling and his company would take the next month to try to determine what concerns led to the rejection and what potential remedies might assuage them. Petronas had no comment on Saturday. The bid had not been expected to run into hurdles in a review process that asks whether a deal is of "net benefit" to Canada. But in a sign that it was attracting greater scrutiny, Canada earlier this month
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lengthened its review period by two weeks. Investment industry sources said Progress officials had initially told them that Investment Canada wanted the unusual two-week extension because it was experiencing staffing and workload issues due to numerous files it was juggling, and that no serious issues had arisen or new information requests made. Then at the last minute, Ottawa came back to Petronas to ask for another extension, a request the
Malaysian company, already irked by the delays, refused, forcing Paradis' hand, the Canadian and U.S. sources said. The sources suggested Prime Minister Stephen Harper wanted the extra time to allow his government to draw up a set of rules for takeovers by foreign state-owned enterprises, something he has said he would deliver with the Nexen decision. Some investors heaped criticism on Ottawa, saying the move and other recent
deal rejections smacked of protectionism. But the Conservative government insisted it was still open for business. "Canada has a broad framework in place to promote trade and investment, while at the same time protecting Canadian interests. Our government welcomes foreign investment that benefits Canada," said Margaux Stastny, spokeswoman for Paradis. TPetronas, Malaysia's only Fortune 500 company, made a big push into Canada's
shale gas sector last year when it bought a $1.1 billion stake in a field from Progress. Petronas first bid for Progress in June to gain control of its 800,000 acres holdings in the Montney shale-gas region of northeastern British Columbia, reserves that could feed a planned liquefied natural gas facility on the Pacific coast. It raised its initial offer of C$20.45 per share to C$22 in July after a rival bid from an unnamed suitor. Petronas had seen the Progress deal as a
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crucial step to increase its presence in a more stable country after clashes on the border between South Sudan and Sudan this year all but shut its pipelines there. Progress Energy Resources Corp's CEO blamed a "communications breakdown" for Canada's surprise rejection of the natural gas producer's proposed takeover by Malaysia's Petronas, and said he believes the deal can get back on track with new talks starting this week. In a conciliatory move, Petronas agreed on Monday to extend its deadline by up to 90 days to close the $5.2 billion acquisition of Progress, one of the largest owners of exploration lands in the gas-rich Montney shale region of British Columbia. That would give Canada more time to develop a set of long-promised guidelines on foreign investment, especially by state-owned enterprises such as Petronas, as Ottawa also scrutinizes a much larger and more contentious transaction, the $15.1 billion takeover of Nexen Inc by China's CNOOC Ltd. "I think
in a lot of cases ... like this, it's a communications breakdown. What I'm hoping is that bridge can be rebuilt here this week and we can actually have some good effective discussions and move this along," Progress Chief Executive Michael Culbert told Reuters in an interview. "We got willing parties on either side and that's always positive for communications." Canadian Industry Minister Christian Paradis said late on Friday that Petronas' friendly bid would not provide the "net benefit" the government seeks under fore ign investment laws - a decision that shocked investors and pushed Progress shares down as much as 13 percent on Monday. Paradis gave the companies 30 days to make their offer more palatable. The news also hit other energy stocks, and the Canadian dollar fell to a two-month low, as the veto prompted discussion about whether Canada was really open to foreign business as the government frequently insists. Shares of Nexen were down nearly
4 percent in mid-afternoon trading. But Prime Minister Stephen Harper said on Monday that Paradis simply had not been in a position to decide if the Petronas deal met the "net benefit" test. Harper, who has actively sought investment in Canada's energy sector, especially from Asia, said the government aims to provide guidelines for foreign buyers "fairly shortly." Investors have complained that the process is far too murky. "Let me be clear. As we said repeatedly, our view is that foreign investment, generally speaking, is a benefit to the Canadian economy and as a general rule we obviously welcome interest in the Canadian economy," Harper told reporters. "At the same time, we are committed to the Investment Canada Act, which requires us to evaluate whether individual transactions are of net benefit to Canada, and this government has, as you know, in certain cases decided that this is not the case." Leading Canadian energy companies' shares tumbled on Monday after the government's shock rejection of a
Malaysian takeover bid. Progress Energy fell 11 percent to C$19.26 on the Toronto Stock Exchange, below Petronas's initial C$20.45-per-share offer in June, a nearly 80 percent premium at the time. Nexen Inc shares were down about 5.3 percent at C$23.82 on heightened uncertainty over a C$15.1 billion ($15.24 billion) offer for the company by Chinese state-owned CNOOC Ltd , which Ottawa is also scrutinizing. Other top decliners on Toronto Stock Exchange's S&P/TSX composite index were Encana Corp, which lost 3.5 percent to C$22.94 and Talisman Energy, down 3 percent to C$12.65. Mid-tier energy companies, which typically carry a takeover premium, were hit especially hard. Major decliners that space included Birchcliff Energy, down 4.8 percent to C$8.23 and Advantage Oil and Gas, off 6.7 percent to C$3.65. Among other energy names, Penn West Petroleum dropped 3.6 percent to C$13.57 and Arc Resources lost 2.7 percent to C$24.24. Celtic Exploration, the
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target of a C$2.6 billon takeover bid from Exxon Mobil Corp, was down only 1.4 percent to C$25.84. Invesco's MacDonald said he did not expect the Celtic deal to have as much trouble meeting Ottawa's net benefit test as Exxon has a long history of operating in Canada and, as an investor-owned company, is not subject to concerns surrounding state-controlled enterprises. Representatives of Petronas were to meet later on Tuesday wi th Canadian government officials. Canadian Industry Minister Christian Paradis said. "They will do it later today," Paradis told Reuters in the Canadian capital of Ottawa, where the talks will take place. Petronas issued a statement earlier saying it would meet with officials to try to address the government's concerns about the bid. "Petronas and Progress will work together to ensure that the minister has the necessary information to determine that the proposed acquisition of Progress will likely be of net benefit to Canada," Petronas said in a statement.
NABORS Q3 RESULTSNNabors Industries Ltd.has announced its results for the third quarter and nine months ended September 30, 2012. Adjusted income derived from operating activities was $225.5 million for the third quarter, compared to $269.3 million in the third quarter of 2011 and $230.4 million in the second quarter of this year. Excluding the Company's portion of its NFR affiliate's third quarter ceiling test impairment, which amounted to a pre-tax charge of approximately $96.3 million, or ($0.20) per diluted share, net income from continuing operations was $123.6 million, or $0.42 per diluted share. This compares to $132.5 million, or $0.45 per diluted share, in the
third quarter of 2011 and $109.7 million, or $0.38 per diluted share, in the second quarter of this year when all non-cash charges are excluded. Third quarter GAAP net income from continuing operations was $65.8 million, or $0.22 per diluted share, compared to $87.2 million, or $0.30 per diluted share, in the third quarter of 2011 and a net loss of $98.7 million, or ($0.34) per diluted share, in the second quarter of this year. Operating revenues totaled $1.77 billion in the current quarter, compared to $1.61 billion in the third quarter of last year and $1.74 billion in the second quarter of this year. For the nine months ended September 30, 2012, adjusted income derived from operating activities was $777.1 million, compared to $654.4 million in 2011. Net income from continuing operations for the first nine months of 2012 was $422.2 million, or $1.45 per diluted share, compared to $297.9 million, or $1.02 per diluted share, in 2011. Year-to-date GAAP net income from continuing operations was $109.8 million, or $0.38 per diluted share, compared to $252.6 million or $0.86 per diluted share in 2011. The quarter's results reflect the receipt of $25.3 million in contract termination payments in the Company's US Lower 48 and International operations, of which $6.7 million, or $0.02 per diluted share, would have been received in future periods extending as far as December 2013. They also reflect a lower effective tax rate, a portion of which (approximately $5.5 million, or $0.02 per diluted share) was attributable to favorable return-to-provision tax adjustments in multiple jurisdictions. Tony Petrello, Nabors' Chairman and CEO, commented, "These results reflect improved operational performance in our
US land well servicing, International and Canada operations. Unfortunately, a sharper than anticipated drop in US land drilling activity, the seasonal hurricane pause in the Gulf of Mexico, further seasonal slowing in Alaska, and reduced shipments in C a n r i g e s s e n t i a l l y o f f s e t t h o s e improvements. Net income also benefitted from a meaningful reduction in our effective tax rate, which we expect to be ongoing. "The quarterly exit rates in US land drilling activity, along with the seasonal slowdown in well servicing and pressure pumping utilization, signal a significantly weaker fourth quarter followed by a modest uptick in the first quarter with the seasonal improvement in Alaska and Canada. "Our initiatives to reduce leverage and improve financial flexibility are beginning to yield meaningful results, with third quarter operating cash flow of $495 million exceeding capital expenditures by approximately $247 million. We also achieved an $80 million reduction in accounts receivable despite a $30 million increase in revenues, primarily attributable to an improvement in DSO (days sales outstanding). This improvement in cash generation contributed to funding the redemption of $275 million in maturing notes, $120 million in semi-annual interest payments and approximately $250 million in capital expenditures, while effecting a $159 million reduction in net debt during the quarter. We will continue to diligently manage capital expenditures and working capital and expect to further reduce net debt. Proceeds from any potential asset sales will accelerate this progress. "We continue to streamline our business through a conversion from our historical business unit structure into two lines of business, Nabors
Completion & Production Services (NCPS) and Nabors Drilling & Rig Services (NDRS). The consolidation of our US well servicing and pressure pumping operations into NCPS is progressing under a matrix organizational structure. The NCPS management team has been established down to the local operations level, while the integration of support functions and facilities is ongoing. The impact of these improvements wi l l become more meaningful over the next few quarters, although it will be obscured by the fourth and first quarter seasonal weakness that characterizes these services, as well as the macro issues discussed below. As a first step in the formation of our NDRS business line, we recently began the consolidation of our US Offshore and Alaska operations into our US Lower 48 business group.
PEMBINA PIPELINE ANNOUNCESMEDIUM-TERM OFFERING
Pembina Pipeline Corporation has announced that it has agreed to offer $450 million of senior unsecured medium-term notes. The notes have a fixed interest rate of 3.77% per annum, paid semi-annually, and will mature on October 24, 2022. Closing of the offering is anticipated to occur on October 22, 2012 and the net proceeds will be used to repay a portion of Pembina's existing credit facility. Standard & Poor's Rating Services and DBRS Limited have each assigned preliminary credit ratings of BBB to the notes. The notes are being offered through a syndicate of agents under Pembina's short form base shelf prospectus dated November 12, 2010, a related prospectus supplement dated March 16, 2011 and a related pricing supplement to be dated October 17, 2012.
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