Iraqi dеmоnѕtrаtоrѕ соntіnuеd on Wеdnеѕdау tо сut оff аll rоаdѕ leading to оіl fіеldѕ аnd sites in Zubair district, west of Bаѕrа city, іn рrоtеѕt against the dеtеrіоrаtіоn оf the есоnоmіс ѕіtuаtіоn in the country dеѕріtе іtѕ hugе oil rеѕоurсеѕ. According tо nеwѕ sources,” thе dеmоnѕtrаtоrѕ рrеvеntеd еmрlоуееѕ frоm ассеѕѕ tо оіl ѕіtеѕ, whоѕе еxроrtѕ ассоunt fоr 70 реrсеnt оf Iraq’s oil.
Sаudі Arаmсо hаѕ аnnоunсеd аn initial рublіс оffеrіng (IPO), wіth a рrісе rаngе of SAR 30-32 реr ѕhаrе ($8 to $8.50), giving рrіоrіtу to Sаudі іnvеѕtоrѕ. Aссоrdіng tо thе рrісе range, the vаluе оf thе wоrld’ѕ most рrоfіtаblе соmраnу rаngеd frоm $1.6 tо $1.7 trіllіоn. The соmраnу wіll аnnоunсе the final ѕhаrе price оn Dесеmbеr 5.
Thе Sudаnеѕе Cаbіnеt іѕ mоvіng tо rеduсе ѕреndіng on the ѕесurіtу ѕеrvісеѕ and аuthоrіzеѕ the gеnеrаl budget fоr 2020 to fосuѕ оn thе еduсаtіоn and hеаlth ѕесtоrѕ. Thе sources ѕаіd that the vіѕіоn оf the trаnѕіtіоnаl gоvеrnmеnt is tо асhіеvе a соmрrеhеnѕіvе peace іn thе соuntrу, whісh rеԛuіrеѕ rеduсіng spending оn ѕесurіtу ѕеrvісеѕ. The ѕроkеѕmаn of the Sudanese gоvеrnmеnt Faisal Saleh, іn рrеѕѕ ѕtаtеmеntѕ, ѕаіd thаt the Council of Mіnіѕtеrѕ аррrоvеd thе general guidelines fоr thе budgеt fоr 2020, focusing оn thе еduсаtіоn аnd hеаlth ѕесtоrѕ.
Irаn has аnnоunсеd thе dіѕсоvеrу оf a lаrgе oil fіеld, with rеѕеrvеѕ of 53 billion bаrrеlѕ of crude oil. The nеwѕ оf the dіѕсоvеrу оf thе оіl fіеld іn thе іntеrnаtіоnаl mеdіа hаѕ also been widely reflected. Hаѕѕаn Rоuhаnі announced the discovery Sunday on state television. However, Iran fасеѕ rеѕtrісtіоnѕ оn thе ѕuррlу аnd sale оf оіl duе to ѕеvеrе oil sanctions. In аddіtіоn, the еxtrасtіоn and ореrаtіоn of this lаrgе oilfield require ѕресіаlіzеd capital and knоwlеdgе, including foreign capital аnd tесhnоlоgу.
This week, Durig looks at an energy company that is making the transition from its historical focus on natural gas to be more focused on oil production. Chesapeake Energy (NYSE:CHK) has been making strides this year to transition towards a more oil focused production portfolio. Chesapeake has already increased oil in its production portfolio from 17% in 2018, to 24% as of the end of the second quarter. The company estimates it will exit 2019 with oil representing 26% of its production. Oil is a higher margin product, so Chesapeake is already seeing the fruit of its decision (see bullet points above).
An Iranian tanker was hit on Friday in the Red Sea by two blasts, both of them, according to Iranian state media, caused by missiles. The incident took place off the coast of Saudi Arabia and soon raised fears of escalating tension between the two countries in the unstable region. The missile attack could not yet be independently confirmed, but the location of the Red Sea would be unusual— most hostilities involving Iran occur in the Persian Gulf.
Venezuela denied responsibility on Thursday for oil spills that polluted more than 130 Brazilian beaches. In the community, Venezuelan state oil company PDVSA said Brazil’s accusations about the origin of the oil are unfounded. “PDVSA categorically rejects statements by Brazil’s Environment Minister Ricardo Salles, who accuses Venezuela of being responsible for crude oil that has contaminated the beaches of northeastern Brazil since early September,” the state-owned company said.
The US has announced plans to send forces to Saudi Arabia in the wake of attacks against the country’s oil infrastructure. Historically, before a war there is a provocation. However, looking at the attack trajectory, there are a few odd details in the scenario.
The Saudi monarchy experienced attacks against their oil production facilities in the last week. Tensions in the Middle East escalated following the drone attacks on the two largest oil facilities in Saudi Arabia. Yemen’s Houthi rebels claimed responsibility for the attacks.
The global economic impact will be felt, since Saudi Arabia lost more than half of their crude output via the attacks. The nation is the number one oil producer in the world, holds 5% of the global oil supply, and cut output by 5.7 million barrels per day. last year, Aramco’s net income was $111.1 billion.
This week, Durig Capital takes a look at a unique oil and gas producer. Reviewed several times in the past, most recently in May of 2019 following the company’s release of their Q1 Results, California Resources Corporation (NYSE:CRC) produces oil, natural gas and natural gas liquids (NGL) strictly within the state of California. And, it sells all of it oil production in the state of California, which, as a state, represents the 5th largest economy in the world. The company recently signed its third major joint venture agreement, which will allow the company to add production and revenue with no initial capital cost to CRC. In addition to this great news, CRC also posted some excellent results from its second quarter (see bullet points above).
Oil prices rose at the beginning of this week, on the back of the attack on Saudi Aramco facilities. Brent crude futures reached $71.95 a barrel, the largest percentage gain since the start of the Gulf War in 1991. Saturday’s attacks stopped production equivalent to 5% of global oil supplies.
This week, Durig Capital takes a look at a company that provides compression services and equipment for the oil and gas industry. With the demand increasing for takeaway capacity from oil and gas fields around the country, CSI Compressco’s services become even more valuable and essential. The company had a fantastic second quarter, with record setting utilization, increased revenues and adjusted EBITDA.
Second quarter overall utilization came in at a record setting 89.1%.
Revenues increased by 36% over second quarter 2018.
Adjusted EBITDA increased 22% over first quarter and 41% year-over-year.
Outstanding interest coverage of 2.2x.
The majority of all global conflicts are connected to oil. The map below provides the current oil resources available globally. The power of the Black Gold and greed has been overriding human lives for close to 100 years. The first large scale demand for petroleum was documented in the 1880s due to kerosene been derived from petroleum.
A month ago, Iran’s Revolutionary Guard shot down an unmanned American drone in the Strait of Hormuz. Later that week, President Trump called off a retaliatory military attack on Iran at the last minute. He explained the next day that he did not believe the loss of Iranian lives to be proportionate to the loss of a machine. On Thursday, the United States appeared to level the score. US Marines jammed an unmanned Iranian drone in the Strait, downing the aircraft and destroying it. The incident reignited tensions between the two countries, which seem to be stumbling toward war.
In a scene reminiscent of Oregon— or Moldova— two separate sides gathered in two separate locations to convene two separate special sessions of the legislature, ostensibly to find two separate solutions to Alaska’s mounting budget crisis. With 38 senators and representatives gathered in the state capital, Juneau, and 22 in Wasilla, the hometown of Republican Governor Mike Dunleavy, an attempt to override some $440 million in spending cuts appeared to fail Wednesday. A three-fourths vote by a joint session (one would assume, held in the same place) will be needed by Friday, or Gov. Dunleavy’s line-item vetos will stand.
This week, Durig Capital looks at an oil producer who has built its company using non-traditional production techniques. Denbury Resources (NYSE:DNR) has been successfully using enhanced oil recovery (EOR) techniques to build its name in the world of tertiary oil production. The company had a fantastic 2018 as well as a solid first quarter.
If oil demand is down so much due to the China trade war and tariffs, how come the more economically sensitive materials, such as copper, have not felt the same economic downward price effects?
Today China has asked it’s refineries to hold off on placing new orders for crude oil imports in anticipation of lower prices once and if demand stalls further. The Chinese buyers have cut off purchases of U.S. crude oil as the trade dispute between Beijing and Washington continues.
- Interest Rates: The 10-year Treasury is hitting around 2.08%, down from 3.25% just three months ago.
- Oil is down around $53 per barrel. Down from about $65 in April.
- Industrial Production has hit multi-year lows.
- Gold and the dollar are moving up.
These four indicators have many forecasting both a tougher time ahead and a rotation into safe havens. The central focus of concern is the trade wars with China and the new tariffs with Mexico.
This week, Durig Capital takes a look at a unique oil and gas producer. California Resources Corporation (CRC) produces oil, natural gas and natural gas liquids (NGL) strictly within the state of California. Most people know that California is one of the largest states (physically) in the U.S. But most probably don’t know that it represents the world’s 5th largest economy. Against this backdrop, CRC produces oil, natural gas and NGLs and sells all of it in the state of California. This looks to be a great situation for CRC – a local buyer for all of its product and a huge appetite for more. CRC, a spinoff of Occidental Petroleum in 2014, has spent the past few years recovering from the oil doldrums of 2016 and it looks to be on the upswing. Some of the highlights from its most recent quarterly results in bullet points above.
- A popular measure of the strength of the U.S. dollar is inching toward its highest level in almost two years, having carved out gains in the past two months. As the greenback marches higher, analysts who predicted its rise in the first quarter, have turned more bearish on bucks, making the case that “the top is in” for the U.S. dollar.
- Trump aims to drive Iran’s oil exports to zero by ending sanctions exemptions that it previously granted to some of the Islamic Republic’s biggest customers.
- Saudi Arabia is ready to start pumping more oil if the United States indeed ends the sanction waivers they granted eight Iranian oil importers last November, citing a source that remained unnamed, but Riyadh will not rush into a reversal of the cuts. It will first examine the effect of the sanction waiver cancellation before it decides how to respond to it.
- Venezuela has the largest oil reserves of any country in the world, with more than 300 billion barrels of proven reserves. In 2011, the country surpassed Saudi Arabia to top the list of countries having the largest oil reserves, but the development of this huge reserves has taken a backseat due to political unrest over the past few years.
This week, Durig Capital reviews a Canadian heavy haul transportation and crane company. Entrec Corporation provides heavy haul transportation and crane solutions to the oil and gas, construction and power generation industries, among others. Entrec’s most recent results for both its fourth quarter and full year 2018 showcase healthy growth in the company’s U.S. operations. And given the volatility in oil and gas late last year, the company’s results are even more impressive.
This week, Durig Capital takes a look at a company that provides compressions services and equipment for the oil and gas industry. CSI Compressco (CCLP) has had multiple successive quarters where the company has increased revenues and its latest quarter did not disappoint. Included with this increase were several other notable achievements.
With the continued demand for LNG and the current and planned LNG terminals in the U.S. and Canada, CSI Compressco looks to be perfectly positioned to take advantage of this demand. In light of the company’s solid performance in 2018, the company’s short-term bonds maturing 2022 are an ideal candidate for additional weighting in Durig Capital’s Fixed Income 2 (FX2) High Yield Managed Income Portfolio, shown below.
Jojoba oil is extracted from seeds of an American shrub which are widely used in cosmetic products. Jojoba oil provides skin protection and prevents aging, resulting in increased adoption of jojoba oil in various cosmetic products such as body lotions, sunscreens, moisturizers, skin cares, lipsticks, and balms.
- Oil dominates Venezuela’s economy, accounting for almost all of its export earnings. Its biggest customers have been the US, followed by India and China. But over the past decade, oil production and prices has collapsed and the country is in a deep economic crisis.
Laboratory furnaces are convection appliances that are widely used across manufacturing and scientific industries for various applications such as annealing, sterilizing, evaporation, polymer treatment, and solvent removal.
The n-hexane market will witness significant demand from end-use applications such as oil extraction, polymerization, pharmaceuticals, rubber processing, adhesive & sealant, industrial cleaning & degreasing and others (Inks, Glues, leather dressing, etc.), according to Persistence Market Research’s report titled “n-Hexane Market: Global Industry Analysis 2013–2017 and Forecast 2018–2026.”
- The President of Venezuela’s opposition-dominated National Assembly Juan Guaido will announce new boards of directors for state oil company PDVSA and its U.S. business, Citgo, UPI reports. U.S. Treasure Secretary Steven Mnuchin said the he’ll hold PDVSA’s proceeds from crude oil sales to the United States, adding that the company could avoid being sanctioned if it recognized Guaido as the legitimate president of Venezuela.
- Saudi Arabia is determined to restore the balance on the oil market and is cutting deeper than required in the OPEC+ deal, with February crude production likely close to 10.1 million bpd, compared to the 10.3-million-bpd ceiling in the production cut agreement.
This week, Durig Capital takes a look at a leading marine transportation company. Teekay Corporation provides marine transportation, storage, and vessel leasing for the oil and natural gas industry. The company’s third quarter saw increases in its subsidiaries revenues over second quarter. Here are some highlights from its third quarter results.
Teekay Tankers nearly doubled its quarterly revenues from the prior year period.
Teekay Corporation recorded adjusted cash flow from vessel operations of $19.8 million as compared to $1.2 million a year earlier.
Teekay LNG revenues increased to $123.3 million as compared to $104.3 million a year earlier.
- Thus far, the Dow has climbed 10.1% from its Dec. 24 low, while the S&P 500 has gained 10.4% from that Christmas Eve low, when stocks put in the worst trading action on the trading day before Christmas on record.
- A partial government shutdown, Treasury Secretary Steven Mnuchin’s questions about banks’ health and signals that President Donald Trump could fire Federal Reserve Chairman Jerome Powell upset markets on Monday, sending the Dow down. After markets tanked on Christmas Eve, Trump said Tuesday that he remains confident in Mnuchin, renewed his criticism of the Fed, accusing it of hiking rates too fast.
- The stock market has reached a bottom following a tumultuous 10 weeks that’s seen the S&P 500 in and out of correction territory. Others have predicted a rally of up to 10 percent in the next 30 days. One investment strategist is standing by his 2,850 year-end S&P 500 price target, “A lot can happen in a month.”
- Renowned oil trader Andy Hall says he would bet that crude prices are more likely to go up than down following a collapse over the last two months. A correction like the one gripping the market tends to trim supplies and boost demand.
- The stock market is setting up for another rally, according to Elliott Wave theory. As long as the S&P 500 holds 2,640 points, the index could rise to over 2,800
- Cramer’s Conclusion? Don’t buy tech ETFs, buy winners. Yes, it is time for single-stock rewards. To understand the potential basis for a tech rally, we have to understand why we had a tech wreck to begin with. “I think the CPU shortages and the lack of investment say it’s time to buy — and for the first time in ages.”
- “We are going to start getting into this oversold territory. You’re going to see the buyers coming in and starting to pick up some bargains.” If trade doesn’t improve, and if the yield curve keeps flashing yellow or red, there’s still one point of optimism; the selling has to stop at some point. Here are some potential bargains.
- Previous: Is the Stock Market Going Up or Down? Lets Break Down Some Components.
- Previous: Are Markets Pricing in a Global Slowdown?
- Previous: Is Fed Tightening Going to Cause a Recession? Many Experts Think Yes!
- Crude market volatility has soared in the second half of 2018, with prices touching a four year high before entering their longest losing streak in three decades. Analysts were calling for $100 oil but now seem to think prices will head as low as $40.
- Rising oil prices are prompting forecasts of a return to $100 a barrel for the first time since 2014, creating both winners and losers in the world economy.
- Oil and Gold prices are ‘extremely attractive. Forecast of returns in Oil of about 17 percent in the coming months, current situation as unsustainable, and this week’s G-20 meeting in Buenos Aires as a potential turning point.
- The global decline rate of existing fields is around 5%, which means that we lose about 4.6 million barrels per day of production capacity each year. Additional shale production is putting a burden on a select few places, which is increasingly difficult. The scheduled capacity additions between 2019 and 2022 are between 1.1 mmbpd and 1.5 mmbpd annually. That is well short of anticipated production decline.
- The U.S. became the swing producer in the world, both on the downside and the upside, driven by a very attractive return on investment. They will actually cut back on capex when prices drop. But conversely when oil rises, they can drill more and all the oil comes online relatively quickly.
- Previous: Oil Prices In First Days of Iran Sanctions with A Bear Market, What’s Next?
- Previous: Hidden Factors Driving these Markets: Natural Gas up 40% and Oil Down 20%
- The surprise drop in equity markets and rise in Natural Gas led to margin calls which may have forced the hedge funds to dump profitable crude oil positions in order to raise much needed cash. This changed what was a normal oil correction intro a route.
- Traders made a pair trade, simultaneously going long oil futures, betting on a crude price rise, while shorting natural gas, or betting that prices of the fuel would fall. The opposite has taken place, and now those investors have been forced to unravel both ends of those trades as crude-oil prices have cratered.
- Selling by momentum traders produced a snowball effect for retreating oil prices. Traders sold into a gradually firming Oil market shorting Natural Gas. This trade worked for years. When the trades started failing they had large margin calls, causing a collapse.
- Natural gas soared the most in nine years on forecasts for a lingering U.S. cold spell. The cold temperatures spurred concern that supplies may not be adequate to meet demand over the winter.
- Investors have gone from contemplating the prospect of oil at $100 to sub-$50 in less than two months. Stocks and Bonds to currencies, assets worldwide are gripped by oil’s largest one-day drop in three years.
- Previous: Oil Prices In First Days of Iran Sanctions with A Bear Market, Whats Next?
- The Trump administration reinstated sanctions on Iran’s energy, banking and shipping industries. Washington granted temporary waivers to eight countries, including China and India, the biggest purchasers of Iran’s oil.
- The exemptions have been granted for 180 days, and will be reviewed toward the end of the period. China Waiver: 360,000 b/d. Purchases before sanctions: 658,000 b/d in Jan.-Sept. 2018
- Saudi Arabia has enough spare capacity to cover for any shortfall related to Iran, although any further unexpected outages – from, say, Venezuela, Libya or Nigeria – would test the cartel’s abilities. Saudis indicated a price level of approx. $80 per barrel is comfortable, and would target this price level.
- Venezuela’s crude production was in “free-fall” and could soon fall below 1 million barrels per day.
- The EIA expects U.S. crude oil production will average 10.9 million barrels per day (b/d) in 2018, up from 9.4 million b/d in 2017.
- Previously: American Shale Oil: Real Long Term Growth or Does History Repeat Itself with Boom then Bust?
- Is The Shale Slowdown Overblown? As the Permian runs into trouble, shale companies are pivoting to the Eagle Ford, the Bakken, the Niobrara and even Wyoming’s Powder River Basin.
- The oil industry, and particularly the Permian, is in the midst of a boom. New hints that maturing wells are falling well short of projections are prompting fresh worries that the industry may not be able to meet robust demand moving forward.
- Shale has thus lost some momentum at a time when investors have again found an appetite for the offshore domain, stimulated by a steep reduction in offshore costs and breakeven levels, which in turn have been driven by favorable unit prices.
- Technology and Efficiency helped raise U.S. production since 2016 and that has been achieved with an active rig count that is about 40% lower than it was just a half-decade ago.
- Production is still rising, but the crowded field is increasingly pushing shale E&Ps onto the periphery. The result is that the average well in the Bakken is producing less oil at its peak performance, as fringe areas are dragging down the average.
This week’s bond issuer is a company entrenched in production and transportation of natural gas. CSI Compressco’s (CCLP) first and second quarters have been outstanding, both recording consecutive increases in revenues. The oil and gas industry’s activity level has been steadily increasing over the past 18 months and CCLP has started to see the effects of this on all three of its business segments – Compression Services, Aftermarket Services, and Equipment Sales. Its second quarter results gives investors reason to look twice at this natural gas services company.
Q2 revenues increased 33% year-over-year, and 17% over Q1 2018.
Adjusted EBITDA increased 21% over Q1 and 19% year-over-year.
Compressions Services increased gross margin by 460 basis points.
At the conclusion of Q2, new equipment sales had generated a backlog of $102 million, revenue to be recognized later this year and the first half of 2019.
This week, Durig Capital takes a look at an oil and gas producer who has balanced its revenue streams between oil, natural gas and natural gas liquids (NGLs). Approach Resources has posted excellent results the past two quarters and has some unique advantages amongst oil and gas producers – significant, contiguous acreage, 100% owned infrastructure, improved well recovery and a balanced product portfolio. It’s most recent quarter continued the positive trend set in Q1.
A 21% increase in revenues year-over-year.
Production increases over Q1 by 2%, at the high end of quarterly guidance.
18% increase in EBITDAX.
Interest coverage of 2.7x.
This week, Durig Capital looks again at Parker Drilling, a company that provides contract drilling / drilling related services and rental tools to the oil industry. (Durig Capital reviewed Parker Drilling in June 2015). Having survived the unprecedented declines in oil prices over the past three years, Parker Drilling has emerged as a leaner, more competitive company. Its most recent quarterly results show a company that continues to perform.
Q2 adjusted EBITDA growth of 39% year over year.
Consecutive quarterly revenue growth of 8.1%.
Gross margin as a percentage of revenues increased to 22.8%, up from 16.5% in Q1.
Q2 interest coverage ratio of 2.4x.
This week’s bond review focuses on a company involved in tertiary oil production. Denbury Resources produces oil using carbon dioxide injections to draw more oil out of fields that have exhausted their production from conventional methods. Denbury has had a fantastic year since our last review of the company and has just posted results from the company’s second quarter. Highlights include:
56% increase in revenues.
Production growth of 4%.
Adjusted Cash Flow from Operations increased 106% year-over-year.
Q2 interest coverage was 3.4x