Daily Digest: March 16th, 2020

ARAMCO PROFITS DOWN ON WEAK PRICES, OUTPUT CUTS

Saudi oil giant Saudi Aramco has reported a 21% decline in net profits for 2019, owing to weaker prices and output restrictions.

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The Big Picture:

• Aramco restricted its hydrocarbon production to 13.2mn barrels of oil equivalent/day last year, compared with 13.6mn boe/day in 2018, because of Saudi Arabia's Opec+ commitments. The alliance of oil producers was unable to prop up oil prices last year, however, with Brent falling 10% to $64.3/barrel.

• Despite the weaker performance, the national producer said it intended to declare cash dividends of at least $75bn in 2020, up from $73.2bn in 2019. The firm is 98% owned by the Saudi state.

• However, Aramco said it would cap capital spending at $25-30bn in 2020, down from $32.8bn in 2019 and $35.1bn in 2018, "in light of current market conditions and recent commodity price volatility."

OZ LNG EXPORTS UP IN FEB: ENERGYQUEST

Australian LNG exports in February were up year-on-year but saw a sharp drop in comparison to January, energy consultancy EnergyQuest said in its February report.

The Big Picture:

• Australian LNG shipments totalled 6.1mn metric tons (90 cargoes) last month, significantly lower than the 7mn mt (103 cargoes) in January, although higher than the 5.6mn mt (82 cargoes) in February 2019.

• “The disruption to trade with China and Japan from the coronavirus is starting to become evident in cargoes, not yet substantial but most pronounced in shipments from Gladstone, which supplies Chinese customers CNOOC and Sinopec,” the report said.

CANADIAN GAS CAPEX CUTS NEARING C$2BN

Some Canadian natural gas producers have cut planned 2020 capital spending by nearly C$2bn (US$1.4bn) as they seek to strengthen their balance sheets in the face of a global oversupply of oil and natural gas and demand destruction stemming from the Covid-19 pandemic.

The Big Picture:

• A review of capital expenditure cuts showed reductions ranging from 18% to as high as 45%.

• The cuts were led by Husky Energy, which has major natural gas operations in the Asia-Pacific region and Ovintiv, a significant producer in Canada’s Montney play and in the Permian and Anadarko basins in the US.

COVID-19 SCARE AT GORGON LNG FACILITY

Chevron Australia confirmed that a worker at Gorgon LNG export project on Barrow Island who had been overseas subsequently developed symptoms of coronavirus (Covid-19) while on site and was presented to the medical team.

The Big Picture:

• The medical team immediately followed public health guidelines and isolated the individual and identified all close contacts, who are now also in isolation.

• Chevron Australia continues to produce natural gas from its Gorgon and Wheatstone facilities, a company official told NGW via e-mail.

• The Gorgon project is a joint venture between the Australian subsidiaries of Chevron (operator), ExxonMobil and Shell, as well three Japanese utilities Osaka Gas, Tokyo Gas and Chubu Electric Power.

BALTIC EXCHANGE SECURES EU BENCHMARK STATUS

Baltic Exchange (BE) subsidiary Baltic Exchange Information Services has been authorised by the UK's Financial Conduct Authority (FCA) as a benchmark administrator under EU Benchmark Regulation, the UK company said.

The Big Picture:

• This means that the Baltic Exchange's daily dry bulk, tanker and gas freight indices are regulated by an EU national competent authority.

• This status ensures that financial institutions, including freight derivative traders using European clearing houses, will be able to continue using Baltic Exchange data for settlement purposes.

TECHNIPFMC PUTS PLANNED SPLIT ON HOLD

UK-registered TechnipFMC’s plan to separate into two independent and publicly traded companies has been put on hold due to uncertain market conditions linked to Covid-19 outbreak, it said March 15 in a statement.

The Big Picture:

• Oil prices have dropped sharply this month due to a global outbreak of Covid-19, which is expected to cut demand. Prices have also been impacted by Saudi Arabia's decision to hike output and go for market share. 

• The decision to split was announced in August last year, three years after the merger of Technip and FMC Technologies, which established TechnipFMC as the only fully-integrated subsea provider.

• One entity, RemainCo, will function as a fully-integrated technology and services provider while the other, SpinCo, will function as an engineering and construction player.

FINNISH FORTUM CLEARED TO CONTROL UNIPER

Finnish state utility Fortum has been cleared to take control of German utility Uniper, following notice from the Russian antitrust service March 13 (FAS) that it does not need a merger clearance decision.

The Big Picture:

• Uniper had fiercely resisted the takeover for some time, and in the process several key executives left the company.

• Uniper plans to invest over €1.2bn between now and 2022 in projects that accelerate the transition to a lower-carbon world. Because gas plays a pivotal role in decarbonisation as well as energy security, it will be a key focus of Uniper’s future strategy.

• Fortum said it shares Uniper’s view on the importance of natural gas as an enabler for coal closures and thereby emission reductions while maintaining security of supply. The company is investigating the possibility of carbon capture and storage (CCS) plants under a broad co-operation agreement with Norwegian engineering firm Kvaerner, the Finnish state entity said March 2. 

CITI BANK BLOCKED FROM DELEK SHARE SALE

US Citi Bank has been blocked from selling 12% of Delek Drilling shares, in the wake of their dramatic fall in value in the last few weeks. It has stake as security for a $57mn loan, and can sell it if the borrower cannot repay on demand when the price falls below a certain level.

The Big Picture:

• Through Delek Drilling, Delek Group is part of the monopoly in Israel's natural gas market, where prices remain high despite the crisis in the world's energy markets. However, Delek Group's shares and bonds have fallen with the oil price.

• Its share price has fallen 84% in the last month as the group market cap fell to about NIS 824 ($220mn).

• Citi Bank is keen to sell the Delek Drilling shares for $57mn, which implies a value for Delek Drilling of about NIS 1.7bn ($450 mn).

• Delek Group's partner in the natural gas monopoly in Israel, the American company Noble Energy, is also in trouble, since its main source of revenues is US shale oil.