Global Marine is a leading provider of engineering and underwater services, responding to the subsea cable installation, maintenance and burial requirements of its customers around the world. With a fleet of vessels and specialised subsea trenching and burial equipment, the company brings a 160 year legacy in deep and shallow water cable operations. The company's main operating offices are in Chelmsford, UK and Singapore.
Philip Falcone, HC2's Chairman, President and Chief Executive Officer, stated, "We are acquiring the world's most experienced undersea cable installation and maintenance services provider at a time when significant opportunities exist globally in terms of Telecoms, Oil & Gas and Offshore Power requirements for subsea cabling expertise. This investment in a truly global industry leader gives us the opportunity to support the growth plans of a proven management team."
"I am delighted that our ambitions for Global Marine have the support of an investor that has the vision necessary to enable us to realize the substantial growth potential in the coming years," said Ian Douglas, Chief Executive Officer of Global Marine. "Together we will have the opportunity to develop the services we offer our existing customers and to bring our leading capability and expertise to customers and markets around the world."
The Board of Global Marine will be strengthened with the addition of Dick Fagerstal as Executive Chairman. Mr. Fagerstal brings a wealth of industry-relevant experience to the Board alongside current directors, Ian Douglas and Global Marine's Chief Financial Officer Bill Donaldson.
HC2 acquired Bridgehouse pursuant to a Sale and Purchase Agreement between Global Marine Holdings, LLC, a subsidiary of HC2, and the stockholders of Bridgehouse. The purchase price reflects an enterprise value of approximately $260 million, including assumed indebtedness of Global Marine, and was funded through a new senior secured credit facility provided by Jefferies Finance LLC and a sale of convertible preferred stock to DG Capital Management, LLC and another investor. The sale of preferred stock will also provide HC2 with additional working capital for general corporate purposes.
Keith Hladek, HC2's Chief Operating Officer, commented, "We are pleased with the response to our capital raise. This new capital raise will also allow HC2 to complete the tender for the remaining 30% that is outstanding of Schuff International, Inc. that the company does not already own."
Please refer to HC2's Current Report on Form 8-K to be filed with the Securities and Exchange Commission for a more complete description of the terms of the issuance of preferred stock and the terms of the Credit Agreement.
This press release is not an offer to sell or a solicitation of offers to buy preferred stock. The preferred stock has not been registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States absent an effective registration statement
First orders for Semco Maritime Rig Projects at Invergordon, UK: Orders for equipment and upgrading of two Prospector Drilling jack-up rigs and Norwegian operated semisubmersible rig Songa Dee.
At the beginning of the year Semco Maritime entered into a strategic partnership with the Port of Cromarty Firth to establish a center for rig upgrades at Invergordon in UK. The first solid orders have now been awarded: In the course of the next months, Semco Maritime will complete various scopes of work on two Prospector Drilling jack-up rigs and the semisubmersible rig Songa Dee.
Two Prospector Drilling rigs
Rig operator Prospector Drilling has chosen Semco Maritime to complete final installations at Prospector 5, a new state-of-the-art jack-up drilling rig. Prospector 5 will see follow-up installation of client supplied equipment for the rig's first assignment. Moreover, minor installation work is to be performed on another Prospector Drilling rig, Prospector 1.
Songa Dee (photo)
The 112 by 80 meters wide Norwegian operated semisubmersible rig Songa Dee is now moored at the Invergordon facilities deep water quay Queens Dock, with various electrical, structural, mechanical and pipe-work scopes to be performed over the next 60 days.
Frank Hall, General Manager Semco Maritime UK:
"Songa Dee is a good example of the type of large rigs that Semco Maritime is able to handle at the deep water facilities at Invergordon. The three orders bode well for our ambition to be the preferred leading provider of rig upgrades in the North Sea region."
As well as Songa Dee, the two Prospector Drilling rigs have arrived at Invergordon, and the Semco Maritime crew of approximately 60 rig upgrade specialists has commenced the work simultaneously at all three rigs.
Center for rig upgrades
The promising start for the newly established Semco Maritime rig yard facility is, not least, a result of a successful and seamless cooperation with the Port of Cromarty Firth.
Bob Buskie, Chief Executive of the Port of Cromarty Firth:
"We are pleased to support Semco Maritime's activities in Invergordon. The Port of Cromarty Firth is transforming, expanding and investing in facilities at Invergordon, particularly within logistics and agency services as well as new warehousing facilities, office buildings and expansion of laydown and storage areas."
For more than 40 years, the Invergordon area in Northern Scotland has delivered engineering work and support for the North Sea's energy sector. With its strategically important location and its position as Scotland's deepest harbor, the port has handled more than 650 rigs through the years.
Modeled After Innovative Gulf of Mexico Terminal Hub, C-Port
Oﬃcials representing the Edison Chouest Oﬀshore family of companies are announcing that construction has begun on a massive logistics support base and naval repair shipyard for its own vessels at the Port of Açu, located in São João da Barra in northern Rio de Janeiro-RJ, Brazil.
Ten Covered Slips
Nine 25.2 m wide regular slips, each with two 25-ton overhead cranes; one 38.4 m wide heavy lift slip with two 100-ton overhead cranes
574,200 m2 Total Area
In addition to the covered slips, the straight docks provide more than 525 linear meters, which can easily accommodate five large platform supply vessels (PSVs)
Located in the south breakwater of Açu Port's Terminal 2, B-Port will feature a floating dry dock with a lifting capacity of 13,700 MT
B-Port is located near the growing Campos Basin
Inside and out, B-Port can fully support 15 vessels simultaneously
Chouest Signs Agreement with Prumo Logistica!
In April 2014, the two companies signed the initial lease for the port property, recently amending the agreement to include a total area of 574,200 square meters, if all future contract options are exercised. "We are already investing to meet the current demand of our international customers and new bids in the industry, and our unit at the Port of Açu is essential for such," said Chouest Brazilian Director Ricardo Chagas. Construction work has been underway for several months, and the expected start of
operations will take place during the first half of 2015.
During Rio Oil & Gas, which took place September 15-18 in Rio de Janeiro, GE Oil & Gas (NYSE: GE) presented solutions for the Latin American oil and gas industry that focused on meeting customer needs. Today, companies face challenges to develop ways to remain competitive and to position for growth in a challenging environment with increasing production costs and a dwindling workforce pool. GE Oil & Gas is developing and implementing Industrial Internet solutions that will transform the work process, using data insights combined with significant industry knowledge.
GE Oil & Gas' intelligent technologies support its customers to maximize production, extend important operational asset lifetime and reduce operating costs. Some of these Industrial Internet solutions help facilitate faster and more reliable decision making, including: Sealytics BOP Advisor, Field Vantage, LNG Max Reliability, Naxys A10 and System 1 Fleet Management.
The Naxys A10 is an integrated acoustic solution for monitoring equipment and its surrounding environment. The sensor released at the event uses acoustic sensing to identify potential problems related to subsea operations and to find any leaks that may be harmful to the environment. Qualified according to the ISO 13628-6, the system is capable of processing resident data, analyzing results and sending the information to the surface in real time. The use of this solution allows the operator to make faster and reliable decisions, increasing the operational efficiency of their equipment.
Reducing operating costs and CAPEX, increasing efficiency, operating in hostile environments, and workforce planning will all be part of the discussion at Rio Oil & Gas. GE's Power Conversion business will present their electrifying processes and systems across offshore oil and gas exploration and production that will help the industry overcome some of these challenges, and in particular, enable new deepwater and ultra-deepwater reserves to be explored.
Research to Face Local Challenges
Brazil was chosen from more than 160 countries where GE is present to be the home to the company's fifth Global Research Center (GRC). The Center's first unit in Latin America—an investment of more than $250 million—will develop new technologies mainly to serve the growing infrastructure demands in Brazil and the region.
The operational model for GE's Research Center in Brazil was structured to meet the specific needs of local customers and partners, considering the various segments the company operates in and each one's priorities. Approximately 50 to 60 percent of the Center's research will focus on developing oil and gas technologies to face industry challenges, a highly strategic market for the country and a primary reason a specific area at the Center has been dedicated to the segment.
The Subsea Laboratory received an investment of $20 million, which is part of the GRC investment, and will focus on developing advanced technology for ultra-deep water, pre-salt and offshore oil exploration to bring innovative solutions to the industry in order to fuel the future.
Danish product tanker carrier TORM A/S and UAE-based Albwardy Marine Engineering (AME) an Albwardy-Damen JV, have signed a Service Level Agreement for diving services in the UAE region. The purpose is to further strengthen their relations and respective commercial reliability. The diving services will be handled from AME's facilities in Fujairah and include full hull cleanings and propeller polishing.
Marcel van de Kreke, AME's Head of Sales & Marketing comments: "This agreement is a sign that reputed companies like TORM - a leading global player within the tanker segment- find confidence in our professional services."
Allan Rasmussen, Head of TORM's Energy Efficiency & Innovation team comments: "This agreement signifies TORM's continued commitment to operating our vessels in the most efficient and safe manner. In line with our business principles, we believe that efficiency and quality assurance is key to maintaining our strong market position."
TORM is one of the world's leading carriers of refined oil products as well as a player in the dry bulk market. The Company operates a large and modern fleet with a strong commitment to Safety, Environmental Responsibility and Customer Service.
Albwardy Marine Engineering (joint venture partner of Damen Shipyards group) provides a complete package of professional ship repairs, shipbuilding, diving services in addition to offshore rig repairs & conversions from their bases in Dubai, Fujairah and Sharjah.
CSA Ocean Sciences Inc. (CSA) and Seiche Measurements are offering a 5-day Protected Species Observer (PSO) and Passive Acoustic Monitoring (PAM) course for individuals seeking professional certification and training for visual and acoustic monitoring of protected species. The course offered by the Seiche/CSA team adheres to current Bureau of Ocean Energy Management/Bureau of Safety and Environmental Enforcement (BOEM/BSEE) mitigation requirements and standards.
Day 1 (classroom)
Introduction to Marine Mammals & Sea Turtles
Legislation within the Gulf of Mexico & Global Oceans
Introduction to Seismic Surveys
Role of the PSO
Data Collection & Reporting
Day 2 (classroom)
Clues & Search Methods for Marine Mammals & Sea Turtles
Testing & Certification
Day 3 (classroom)
Sound In Water
Anthropogenic Noise in the Sea
Effects of Anthropogenic Noise on Marine Mammals
Local Mitigation Guidelines
PAM Principles and the Role of the PAM Operator
Day 4 (classroom)
PAM Hardware & Operations
Day 5 (on a vessel)
Set up and deployment of PAM systems and visual observer stations
Real-time mitigation and reporting
For more details, please contact Sarah Hancock at .
The new compressor in operation on the Kvitebjørn field in the North Sea from 17 September will increase production there by 220 million barrels of oil equivalent and extend the field's lifetime with eight years.
The compressor will help boost recovery rate and accelerate production on the Kvitebjørn field. (Photos: Harald Pettersen)
The new compressor contributes to an increase in the recovery rate at the Kvitebjørn field from 55% to 70%. "These are very profitable barrels, which make a considerable contribution to wealth creation on the Norwegian continental shelf.
Increased production and extended lifetime for the field also provides increased ripple effects across the entire value chain," says Kjetil Hove, senior vice president for operations in Development and Production Norway in Statoil.
The compressor project is making a substantial contribution to the increased recovery of gas resources from the field, which has increased its reserves by 50% since the plan for development and operation was submitted in 2000.
The extra barrels from the compressor are equivalent to a medium-sized, separately developed field.
"Many people don't realize that these relatively small modules are able to contribute as much or more value as new fields and that they cost much less to develop because the platform is already in place," explains Statoil brownfield projects senior vice president Terese Kvinge.
The reason why the new compressor is being installed on a field that has been in production for some years is that pressure in the reservoir has gradually fallen as the oil and gas has been produced. By lowering the pressure on the platform, more can be produced.
The compressor module was built by Bergen Group Rosenberg (now Rosenberg Worley Parson Group) in Stavanger. The 1000-ton module was lifted into position during the summer of 2013.
This is the first phase of pre-compression on Kvitebjørn, but space has been left in the new module for a potential second pre-compression phase as well.
Kvitebjørn value chain
Rich gas and condensate (light oil) from Kvitebjørn are piped to Kollsnes near Bergen and Mongstad further north respectively.
After processing at Kollsnes, the dry gas is piped to continental Europe. The separated NGL is transported by pipeline to the Vestprosess plant at Mongstad for fractionation into propane, butanes and naphtha.
Condensate travels through the Kvitebjørn Oil Pipeline, which ties into the Troll Oil Pipeline II to Mongstad.
Global energy company Repsol has selected Deep Sea Mooring (DSM) to provide a range of mooring services for their drilling operations on the Norwegian Continental Shelf.
DSM will be responsible for marine engineering and supplying the mooring equipment. The company will also assist in offshore operations, including both pre-lay and rig move.
Åge Straume, CEO of Deep Sea Mooring said: "Winning this contract further proves that major energy companies appreciate our experience, robust technology and competence in delivering complete mooring systems for the harsh environment of the North Sea."
He added that this was the first time the two companies have worked together: "It's always exciting to showcase our expertise with a new client and we look forward to developing a solid and long-term partnership with Repsol."
The framework agreement is set to commence immediately and last four years including options. Deep Sea Mooring will manage the contract from its headquarters in Bergen.
Damen Shipyards and SeaZip Offshore Service have strengthened their working relationship by signing another contract for two Damen Fast Crew Suppliers (FCS) 2610 at Wind Energy in Hamburg. The two new vessels, to be named SeaZip 3 and SeaZip 4, will be mobilized in transporting personnel and small quantities of freight to North Sea offshore wind farms.
The new orders follow the delivery last year of two FCS 2610 – named SeaZip 1 and SeaZip 2 – that have been performing successfully at the Nordsee Ost and DanTysk offshore wind farms in the German Bight. "The vessels are great performers ideal for operations and maintenance work," says SeaZip Offshore Services Managing Director Jan Reier Arends. "They are both under contract until mid-2015 showing how happy our customers are with them." The two new vessels will display certain changes to the design: "By listening to feedback from our customers, we have come up with a few innovations," explains Mr. Arends.
Although fundamentally of the same design, Damen has implemented the modifications to the already successful FCS 2610 formula. "We have made a number of improvements to these two vessels," informs Damen Sales Manager Roel van Eijle. "Mainly in the superstructure and a better accommodation for the passengers." Both vessels will be built at Damen Shipyards Singapore and delivered to SeaZip Offshore Service, a sister company of the JR Shipping Group, by March 2015.
With the FCS 2610 - with its Twin Axe Bow design - Damen has created a new standard in the market for offshore service vessels. The vessel offers reduced peak accelerations of up to 75%, reduced added resistance in waves of up to 60% and has already transferred maintenance crew to turbines in wave heights of 1.9 meters.
Wild Well Control, Inc., a Superior Energy Services company and a global leader in firefighting and well control, has unveiled its new subsea capping stack for response to a global deepwater well control incident.
The subsea capping stack, located in Singapore, is a part of Wild Well's comprehensive emergency response system, WellCONTAINED™, which provides experienced personnel and equipment to plan, prepare and respond to global subsea well control events. Based on nearly four decades of conventional and subsea well control experience, the WellCONTAINED system not only includes the physical capping stack and equipment but also technical planning, advanced engineering and response training.
The Singapore capping stack is Wild Well's second unit; the first capping stack unit is located in Aberdeen. The full intervention system at each location includes a capping stack, debris removal shears, hardware kits for the subsea application of dispersant and inhibition fluids at a wellhead and ancillary equipment.
The new 18-3/4" 15K capping stack is available for a variety of offshore conditions and designed for subsea use up to 10,000 feet. The system is maintained in a state of readiness and can quickly be transported by sea or air.
"Since we now have two capping stacks geographically located in the northern and southern hemispheres, our team at Wild Well can provide an enhanced level of response to a client's well site," said Freddy Gebhardt, president at Wild Well. "Our flexibility to deploy from two strategic locations now mitigates any potential delays due to deployment constraints and adds another level of assurance to the operators' drilling programs while positioning Wild Well as the global leader in subsea well control."
Wild Well responds to 80 percent of international well control incidents and is a key resource for many of the world's largest oil and gas operators, assisting not only during emergency events, but also in the planning and preparedness of drilling programs.
Three tugs of Fairmount Marine have towed the brand new FPSO Petrojarl Knarr from South Korea to Norway in just 61 days. Petrojarl Knarr, one of world's largest floating production and storage units (FPSO) for harsh environments, was delivered in the port of Haugesund, Norway, September 16 2014.
The entire voyage was under command of lead tug master Kees de Graaff on board of the leading tug Fairmount Sherpa.
The newly delivered FPSO Petrojarl Knarr is 256.4 meters long and 48 meters wide with a dwt of 135,000 tons. The vessel is owned by Teekay Corporation and is build by Samsung Heavy Industries in Geoje, South Korea. Petrojarl Knarr will be deployed later in the Knarr oil and gas field offshore Norway.
On her way to Norway the convoy has made stops in Singapore, PortLouis (Mauritius) and Las Palmas (Canary Islands) to take bunkers and for replenishments. For the last leg of the voyage the convoy sailed west of Ireland via Fair Isle (just south of the Shetland Isles) towards Norway. Offshore the port of Haugesund the Petrojarl Knarr was delivered ahead of schedule.
Greene's Energy Group, LLC (GEG), a leading provider of integrated testing, rentals and specialty services, has introduced Mission Zero as a company-wide safety process with a key focus of eliminating at-risk behaviors.
Encompassing office and field personnel, Mission Zero engages the company's workforce to embrace a culture of safety that achieves zero incidents and benefits customers, the company and employees.
Not only does Mission Zero demonstrate GEG's efforts toward a zero incident rate, but it includes measureable and practical checkpoints for employees to keep safety at the forefront such as recognition and awards, a mentoring program, posted safety data, sub-contractor management, accurate reporting and drug and alcohol testing.
GEG will engage the Zero Injury Institute® (ZII), to conduct internal evaluations of the safety program content, process and culture. ZII's team will also visit various operating areas and conduct confidential interviews to target topics for discussion at an upcoming Mission Zero workshop.
"Mission Zero changes our safety value forever – we are a zero injury company with the core value of 'Safety First and Foremost'," said Robert Vilyus, CEO of GEG. "As a whole, we pledge to stop at risk behavior through involvement, recognition, appreciation and mentoring. Management is committed to the success of this continual process, and worker participation is crucial. We've already seen an overwhelmingly positive response, and we look forward Greene's Energy Group becoming the safest company in the industry."
The Ocean News and Technology Young Professional's Award recognizes a member of our next generation who has already demonstrated excellence in their profession and made significant contributions to MTS. This year, the award was presented to Michael Lombardi at the MTS annual meeting held during OCEANS '14 in St. John's, Newfoundland and Labrador.
Michael works in the Diving Division, Special Projects at JF White Contracting Company. He is a social entrepreneur, literary artist, technologist, ocean/environmental advocate, and explorer. Michael is proficient with all modes of diving and has participated in more than 200 field operations from the shallows to the margins of the continental shelf, accounting for more than 6,000 hours personally spent underwater.
Leading oil and gas experts are lined up to present at the 20th SPE ICoTA European Well Intervention Conference which will, once again, bring industry professionals together to discuss current trends and new technologies within well intervention and completion.
Taking place on 12/13 November at Aberdeen Exhibition and Conference Centre, the annual conference is hosted by the Society of Petroleum Engineers (SPE) Aberdeen Section and the Intervention and Coiled Tubing Association (ICoTA) European Chapter. The conference will feature over twenty presentations from a variety of major oil and gas operators, including BP, Shell, ConocoPhillips and Statoil and specialists from the coiled tubing sector, including AnTech.
An extensive range of topics will be covered over the course of the two day conference, including the world's first deepwater propellant perforation for a depleted carbonate subsea gas well. Oil & Gas UK will also present the conference with the findings of the 4th Well Intervention Excellence Network.
Michael Taggart, Chairman of the conference committee, is looking forward to welcoming delegates to the event: "Sharing skills, knowledge and experience for the benefit of the oil and gas industry is high on the agenda for both SPE and ICoTA. We are therefore delighted that this conference has come to be regarded as Europe's premier forum for exchange and discussion of the latest developments in well intervention and completion techniques.
"Now in its 20th year, the conference has matured into an influential event where well intervention professionals attend to share knowledge, learn and do business. By imparting our knowledge and experiences from the North Sea and beyond, we can push the boundaries of well intervention and ensure a healthy oil and gas industry for the future."
A pre-conference short course on 11 November entitled, 'An introduction to well intervention', is aimed at those who have an interest in the topic but are new to the subject or are looking for a refresher and will appeal to those looking to gain a basic understanding of well intervention operations.
An Excerpt from 'Musing from the Oil Patch' September 23, 2014
By Allen Brooks, Managing Director, PPHB
The domestic natural gas market "just keeps on rollin' along." Last week's storage injection of 90 billion cubic feet (Bcf) essentially matched the guestimates of the experts (91 Bcf) and brings the total volume of gas in storage to 2,891 Bcf. The gas injection rate continues to closely follow our forecasting model that is based on the weekly injections during 2003. If this season continues to track 2003's pattern, the industry should reach 3,427 Bcf of storage – a very comfortable level heading into the 2014-15 winter. As we have pointed out before, barring a repeat of the severe winter of 2013-14 with its several polar vortex extreme Arctic temperature events, virtually any other winter experienced during the past 20 years would leave the industry with close to 1,000 Bcf of gas in storage at the end of the heating season.
What is quite interesting is that based on either the weekly storage injections of last year or the 2003 season the industry will wind up with virtually the same volume of gas in storage. The difference between the two outcomes is that by following the 2003 pattern, the industry would wind up 21 Bcf ahead of merely matching last year's remaining weekly injection volumes.
So far this year, the industry has injected 2,069 Bcf of gas into storage reservoirs, which is within 100-150 Bcf of the total injected during most of the "large" storage- build years. Importantly, the industry is within 350-425 Bcf of matching the record injection volumes achieved during the past 20 years - those years being 2001 and 2003. As there are seven weeks still left in the injection season, surpassing the vast majority of the large injection years would seem to be a reasonable goal.
Depending on the early fall weather, it is quite possible that 2014 might attain the crown for being the largest seasonal storage injection since 1994.
Given the high level of concern existing at the end of last winter questioning the ability of the gas industry to rebuild storage, what the industry has accomplished so far this year has been remarkable.
We attribute the industry's success rebuilding gas storage volumes to a combination of a cool summer throughout most of the populous regions of the country and the continued high growth in natural gas production as a result of the shale revolution.
The key to where the industry ultimately winds up on storage volumes will depend on how it does compared to the weekly injections of either 2003 or 2013. When we compare the weekly injections against our favorite 2003 bogey, we notice that in recent weeks, despite very strong injections that have actually matched or even outperformed the analysts' consensus estimates, 2014 has trailed slightly. The next two weekly injection results will be comparing against 100 Bcf injection weeks in 2003, a level we have not witnessed since early in this injection season. Therefore, for 2014 to outperform our model, it will take stronger weekly injections during the latter few weeks of the injection season.
Exhibit 9. Comfortable Storage Depends On Heat
Source: EIA, PPHB
If the remainder of the injection season tracks either 2013 or 2003, we can see that this year will have made a significant gain in closing the gap between where storage volumes started and the average of the past five years. While the industry won't meet that average, it is noticeable how the 5-year average is fairly close to the 20-year maximum, demonstrating the impact of the warm winters during the past few years that have significantly skewed the short-term average. If 2014's gas storage volume attains our target, it will wind up slightly above the mid-point of the 20-year minimum and maximum range, a significant accomplishment given that it started at almost exactly the 20-year minimum volume.
Exhibit 10. Gas Storage Headed Toward Comfortable Level
Source: EIA, PPHB
Natural gas prices continue to bounce around between $3.75 and $4.00 per thousand cubic feet based on the latest projections for weekly weather and temperatures. This price range reflects the market's comfort that there will be adequate supply heading into winter, which has negated the need for high prices to shed gas demand. The key questions for the gas market moving forward are what sort of winter we will experience and if we will have an early and severe cold wave. After that, gas price questions quickly become ones about the longer term outlook for natural gas supply and demand, and in particular, how much liquefied natural gas (LNG) export will occur, what happens to the fuel mix for powering the nation's electricity, will the anticipated industrial revival tied to using natural gas actually materialize and, importantly, what is the gas supply outlook. Over the next few issues of the Musings we plan to examine these longer term questions.
Note: Musings from the Oil Patch reflects an eclectic collection of stories and analyses dealing with issues and developments within the energy industry that I feel have potentially significant implications for executives operating and planning for the future. The newsletter is published every two weeks, but periodically events and travel may alter that schedule. As always, I welcome your comments and observations. Allen Brooks
1900 St. James Place, Suite 125
Houston, Texas 77056
Main Tel: (713) 621-8100
Main Fax: (713) 621-8166 www.pphb.com
PPHB is an independent investment banking firm providing financial advisory services, including merger and acquisition and capital raising assistance, exclusively to clients in the energy service industry.
At present we are seeing lower oil prices as a function of softer demand growth in both Europe and China combined with recent output increases from OPEC, particularly Libya, together with the ongoing surge in US production.
In the short-term, supply could start to be taken out of the market quite quickly if lower price levels are sustained – we have earlier noted that returns for most E&P companies have been eroded by rapidly-rising costs. This has pushed hurdle rates for new projects higher often to around $80/bbl, indeed many are described by our E&P clients as 'marginal' at $100/bbl, which means that we could start to see a major shift in oil company strategy if prices fall much further. This is likely to manifest itself in terms of pressure on the supply chain to cut costs, delays in project sanctioning and in major modification projects. So below $85 we are likely going to see investment levels materially impacted.
Further supply-side pressure may well be seen in Russia, albeit in the longer term. There are reports that western activity with 'sanctioned companies' (includes Rosneft, Lukoil, Surgutneftegaz) will have to stop in the coming weeks which could halt the likes of Exxon working with Rosneft in the Arctic and have wider implications for the oil field service community (e.g. Seadrill's provision of rigs for Rosneft). However, in reality, Artic joint ventures such as these are long-term in nature and any impact on the oil supply is most likely to be seen over a 2-5 year period.
Without political interference markets eventually self-correct. Much of the additional production capacity added in recent years is high cost US unconventional oil – and these wells peak early and decline rapidly. So if drilling stops, over-production capacity will quickly evaporate which could bring global oil supply down materially, and as we have stated so often in the past, if investment slows significantly we will be short on oil supply and there will again be upward pressure on oil prices.
NYC-based PIRA Energy Group reports that accounting for the strength of U.S. jet fuel demand this summer. In the U.S., stock excess accelerates. In Japan, stocks draw, but finished product stocks continue to rise. Specifically, PIRA's analysis of the oil market fundamentals has revealed the following:
Accounting for the Strength of U.S. Jet Fuel Demand this Summer
Jet fuel demand spiked in June, July and early August. Because the economy's fundamentals do not support such a high level of domestic demand, we suspect that higher than currently assumed exports will result in a revision downward of the final demand numbers. There is already data from the Bureau of the Census that suggests that July exports will be revised up by 100 MB/D, which will put July demand back to levels more consistent with the underlying fundamentals.
U.S. Stock Excess Accelerates
The year-on-year stock excess widened this past week to the highest this year. The inventory increase was mostly in crude oil as weekly imports jumped to the second highest level this year. The recent relative weakness in dated Brent to U.S. crude prices is encouraging more imports to the United States. The product inventory increase was the smallest in several weeks as reported product demand increased compared to the week before and product imports remained quite low, eliminating most of the huge excess in products the week earlier. The entire excess in inventory over last year is outside of crude oil and the four major products, being mostly in NGLs, where production is soaring.
Japanese Crude Stocks Draw, but Finished Product Stocks Continue to Rise
Crude runs fell back and crude imports declined which drew crude stocks. Finished product stocks continued to rise. Demand impacts from the Respect for the Aged holiday, directionally came in as expected, with gasoline demand higher and gasoil demand lower, but the impacts were muted. Gasoline and gasoil stocks rose modestly, while the kerosene stock build rate came in slightly above seasonal norms. Refining margins improved slightly, but remain soft. Gasoline and fuel oil cracks improved, while middle distillate cracks were little changed.
Freight Market Outlook
A glut of crude oil in the Atlantic Basin has driven the flat price of dated Brent crude below $100 per barrel to its lowest level in over two years and shifted the market structure into contango, encouraging storage. These developments have conjured up memories of the large buildup of crude in floating storage in 2008-2009, when the unfolding financial crisis plunged the global economy into the great recession. At the peak in 2009, over 100 million barrels of crude were placed into floating offshore storage on VLCCs and Suezmax tonnage. Vessel operators are also benefitting from the lowest bunker prices since June 2012 as these have plunged along with the flat price of crude oil.
Inexpensive Naphtha to Check Further Asian LPG Price Gains
Propane contango in Asia widened $14/MT with the FEI curve catching up to consistently steeper Saudi CP structure. Reports of recently lowered Saudi crude production would lead to a corresponding drop in LPG exports. Spot large cargoes jumped 3%, being called at $857/MT for late October and 1st half November arrival. Butane followed, up $15/MT to $886. Naphtha held steady. Steepening Saudi CP structure and stronger seasonal Asian demand should support prices next week while increasingly inexpensive naphtha should limit upside in the region. European prices will trend with Asian and American markets.
Biofuel Demand is Slowing Down in the U.S., Europe and Brazil; Growing Elsewhere
Biofuels programs continue to proceed actively in many countries. Canada will need about 2.2 billon liters (580 million gallons) of ethanol this year to satisfy its 5% ethanol mandate.
The information above is part of PIRA Energy Group's weekly Energy Market Recap, which alerts readers to PIRA's current analysis of energy markets around the world as well as the key economic and political factors driving those markets.
The Bureau of Safety and Environmental Enforcement (BSEE) published an Advanced Notice of Proposed Rulemaking today in the Federal Register Reading Room soliciting public comments on improving the safety of helideck and aviation fuel operations on fixed offshore facilities. This notice is the most recent step in BSEE's continued efforts to strengthen safety on the Outer Continental Shelf (OCS).
"We know that transportation accidents account for the majority of fatalities on the OCS, and that helicopter-related accidents are a significant concern" said BSEE Director Brian Salerno. "We are looking at our regulations to ensure that the aviation related areas over which we have jurisdiction have the benefit of rigorous safety standards."
Specifically, BSEE is seeking comments on whether to incorporate in its regulations certain industry and international standards for the design, construction and maintenance of offshore helidecks, as well as standards for aviation fuel quality, storage and handling. The bureau is also soliciting information on past accidents or other incidents involving helidecks, helicopters or aviation fuel on or near fixed OCS facilities.
BSEE is responsible for the regulation of offshore facilities engaged in oil and gas operations, including the safety of helidecks and aviation fuel storage and handling on fixed offshore facilities. This notice begins the process of addressing any additional safety issues through new regulations.
The Advanced Notice of Proposed Rulemaking can be viewed hereThe public is invited to submit comments starting tomorrow. Comments can be submitted by any of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov. In the entry titled Enter Keyword or ID, enter BSEE-2014-0001, then click search.
Mail or hand-carry comments to the Department of the Interior; Bureau of Safety and Environmental Enforcement; Attention: Regulations Development Branch; 381 Elden Street, HE3313; Herndon, Virginia 20170-4817
Jee Ltd, a leading independent multi-discipline subsea engineering and training firm, has been awarded a three-year contract renewal from BP with potential value in excess of £4.5 million.
Trevor Jee, Managing Director of Jee
The two companies have had a support contract in place for 10 years, with Jee providing global operations and project support to BP in locations including Aberdeen, Grangemouth and London in the UK and Angola, Azerbaijan, Norway and Trinidad. The contract extension will continue this work, with the annual value ranging from £1 million to £2 million, depending on the level of activity.
The ongoing scope of work has included corrosion management, span assessment and intelligent and operational pigging support of BP's pipelines. Jee has also assisted in third party verification and ad-hoc technical support including data management, involving the collation, management and production of documentation such as preparedness response schemes for BP's assets.
Jee is also assisting BP in decommissioning operations. Recently, Jee worked with BP on the North West Hutton decommissioning project, which included client representation during the decommissioning, as well as facilitating the close-out and handover process following the project.
Trevor Jee, Managing Director of Jee, said: "This contract extension is a testament to our relationship with BP as well as the quality of our engineering work. We have developed a strong reputation at Jee for our expertise and are proud to provide our whole life-of-field capabilities to support the company across such a wide international scope."
Paul Benstead, Pipeline Engineering Manager of Subsea Operations at BP, said: "Jee has provided an exemplary service throughout the duration of the contract. The renewal is a result of the flexibility and reactive service provided, coupled with the range of engineering capabilities available. We look forward to continuing this successful relationship."