US Atlantic Coast refiners face new threat in Buckeye proposal to reverse pipeline: Fuel for Thought

Storm clouds are gathering once again over US Atlantic Coast refineries, but unlike a few years ago when it was high oil prices causing a problem, this time the threat is coming from the Midwest.

Hemmed in by geography, Midwestern refiners are looking east as a logical place to sell their gasoline and diesel.

The proposed partial reversal of Buckeye’s Laurel Pipeline, a 350-mile line now carrying gasoline and diesel from Philadelphia-area refineries west to Pittsburgh, would offer Midwest refiners easier access to the East Coast market…


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Is There Still Hope For Higher Oil Prices?

Oil prices have cratered in recent weeks, dipping to their lowest levels in more than seven months and any sense of optimism has almost entirely disappeared. All signs point to a period of “lower for longer” for oil prices, a refrain that is all too familiar to those in the industry.

WTI dipped below $44 per barrel on Tuesday, and the bearish indicators are starting to pile up.

Libya’s production just topped 900,000 bpd, a new multi-year high that is up sharply even from just a few weeks ago. Libyan officials are hoping that they will hit many more milestones in the coming months. Next stop is 1 million barrels per day (mb/d), which Libya hopes to breach by the end of July…


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EQT’s acquisition of Rice Energy creates the leading US and Appalachian natural gas producer

On June 19, EQT Corporation (NYSE:EQT) entered into an agreement to acquire Rice Energy (NYSE:RICE) for 8.2 billion USD. In summary, EQT financing includes 5.4 billion USD in equity, 1.3 billion USD in cash and 1.5 billion USD assuming or refinancing of Rice net debt and preferred equity. According to Rystad Energy data, the deal creates a leading US and Appalachian natural gas producer with the estimated 2017 FY combined production of 3.17 BCF/d (Figure 1). After the merger, EQT will own 670 thousand core net Marcellus acres, 149 thousand core net Upper Devonian and 681 thousand core net Utica acres. The aggregation of acreage positions in Marcellus PA will allow for longer laterals and reduce per unit operational costs.

“Significant improvement is expected in the Green and Washington counties where Rice Energy has recently been able to achieve higher well productivity. Looking at both factors combined, we expect a higher return per well post acquisition. However, high investments from the EQT side may push back planned activity on its own acreage in 2017-2019. We expect a slowdown to kick off at the end of 2017 prior to the synergies realization in 2019,“ says Alisa Lukash, shale analyst at Rystad Energy.

Rystad Energy’s base case valuation shows Rice Energy valued at 8.48 BUSD, which is in line with the deal value. The base case scenario applies a 3.2 USD/kcf gas price, while in the low case, mid case and high case the gas price is 3 USD/kcf, 4 USD/kcf and 5 USD/kcf, for 2017 respectively (Figure 2). Even though the market considers the deal to be overpriced, which is shown by the jump of Rice stock and plummet of EQT, Rystad Energy believe that upstream valuation reflects underlying acreage and technology value of Rice’s assets. In the scenario of favorable post-merger conditions, EQT is expecting 2.5 billion USD in capital efficiencies and G&A synergies…


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Nipco the latest Nigerian home player to take a shot at the majors

For a while it was all Aiteo, Aiteo, Seplat, Seplat when it came to looking for home-grown Nigerian oil players with big ambitions. But there’s a new contender! Nigerian fuel retailer Nipco has launched a 4.84 billion naira ($16 mln) offer for the shares it needs to take bump up its stake in Mobil Oil to 70 percent.

Nipco’s investment subsidiary bought 60 percent of Mobil Oil Nigeria from Exxon Mobil Corp last year, when the U.S. oil giant back out of downstream fuel distribution in West Africa.

It is offering its minority shareholders 417.12 naira per share for the 3.23 percent of the capital it needs. This is the same price Nipco paid Exxon last year…


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Oil price, Echo Energy, Cairn/FAR, Sundry-Ophir-Faroe-Various broadcasts- And finally…

Momentum seems to be the watchword in what is a particularly lethargic market at the moment, general blaming of Opec and Non-Opec production from Nigeria, Libya and the US is deemed to cover the situation. Whilst on those organisations it seems that Opec compliance in May was 108% and Non-Opec 100% giving a record level of 106%. This is no time to panic unless your uncle is King of Saudi Arabia as he has just removed you from power as Crown Prince and replaced you with his son, thick blood being thicker than thin blood one might say…

API stats after the bell were better than expected but all eyes will be on the EIA release later particularly looking at product inventories as the API crude draw was better than forecast…


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Rystad Energy Annual Review of World Oil Recoverable Resources: Saudi Arabia adds oil resources ahead of IPO

In its annual account of global oil resources, Rystad Energy finds that Saudi Arabia has added enough recoverable oil resources to regain its top position ahead of the United States and Russia. The addition of 73 billion barrels of recoverable oil since the publication of Rystad Energy’s 2016 annual review comes as a result of lower tax rates for Saudi Aramco. The revised fiscal regime should incentivize more aggressive exploration and development drilling in the country, according to the oil and gas knowledge house.

Rystad Energy’s annual review provides a consistent split of recoverable oil resources into proved, probable and expected reserves, as well as contingent and prospective recoverable resources. “Proved reserves” refer to a conservative statistical estimate of oil from fields and wells already sanctioned by oil companies and approved by governments. “Contingent resources” encompass recoverable oil in unsanctioned projects, whereas “prospective resources” are risked estimates from undiscovered fields.

In the US, unconventional shale oil makes up more than 50% of the country’s total recoverable oil resources, which currently stand at 263 billion barrels. Texas alone accounts for more than 80 billion barrels of recoverable oil. Of these volumes, 90% is located in shale formations, with the revitalized Permian basin laying claim to more than 50 billion barrels. In the US, oil companies can typically “prove” less than 15% of their recoverable oil, since reserves may be reported as proved only after several wells have been drilled on corresponding unconventional acreage. However, if natural gas liquids (NGLs) were included in the review, the US would surpass Saudi Arabia by more than 50 billion barrels of recoverable oil and petroleum liquids…


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Energy Nonsense From the Wall Street Journal

The lead editorial in Friday’s Wall Street Journal was pure energy nonsense.

“Lessons of the Energy Export Boom” proclaimed that the United States is becoming the oil and gas superpower of the world. This despite the uncomfortable fact that it is also the world’s biggest importer of crude oil.

TheJournal uses statistical sleight-of-hand to argue that the U.S. only imports 25% of its oil but the average is 47% for 2017. Saudi Arabia and Russia–the real oil superpowers–import no oil…


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The Good, the Bad and the Ugly!

During my 20+ years at Beyond Prudence there were several people who helped me think about my career, what I wanted to do, what I wanted to achieve, how to do it. For example, I recall that Peter O’Brien, David Jenkins, Peter Hill, Chris Wright, John Browne, Rodney Chase, David Pritchard were all very helpful to me as I progressed through technical leadership and into management roles (so I think of them as The Good). I also remember that as I got to slightly more senior business unit leadership roles, folk became less helpful (The Bad) and some were downright unhelpful (The Ugly), giving the impression that they saw ‘climbing the greasy pole’ as some sort of competition or Darwinian exercise. More than two or three of those in the last two categories are still active, still working, and I have not named them as I don’t need corporate lawyers sending me e-mails!

But I guess if you recall the company from around the turn of the Millennium, you (and they) know who I mean!

I am talking here of coaching rather than mentoring, in my mind the latter being getting help from somebody who has faced a similar problem to the one you are facing…


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Energy, Made In America, Is The Key To Our Future

As the White House moves forward with workforce development week it’s important to remember what a gift the U.S. withdrawal from the Paris Climate Accords was. The rules were heavily slanted in favor of our economic competitors. While other nations prospered we would have struggled with handcuffed American industry, American manufacturing, and American energy production handcuffed by onerous regulation.

Executed properly, getting out of Paris will unleash the enormous potential for gains across all sectors of the economy. American capital has been given an incentive to remain here, investing in the future of the United States rather than fueling economic growth in China, India and elsewhere.

This is particularly true in the energy markets where, thanks to fracking and other new technologies, we’ve experienced a boom that may someday lead to energy independence. It’s helped free us from the clutches of the Saudis and other oil producers in politically unstable regions of the world who move the price of oil in world markets by increasing or cutting production…


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The next “Shale Gale”?

A few weeks ago I used my blog/Newsletter to quiz readers on what they regarded as the world’s great source rocks. And, by inference, where might the next “Shale Gale” be blowing, mimicking what has happened in the USA?

I’m glad to say I got an unusually large number of response which I’d summarise like this:

First of all, mentioned were shales offshore in the Gulf of Mexico; in Venezuela and Argentina; onshore in North Africa; offshore NW Europe and in Russia/the FSU; throughout the Middle East. SE Asia and Australasia did not feature but this almost certainly reflects our readership rather than petroleum geology…


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