GENERAL INTEREST — Quick Takes
BP trims spending, plans to cut 7,000 jobs
BP PLC reported plans for organic capital expenditures of $17-19 billion for each of 2016 and 2017, with 2016 falling into the lower end of that range. The company spent $18.7 billion in 2015.
While targeting more capital discipline, the company expects to reduce the number of staff and contractor roles in its upstream segment by about 4,000 during 2016 and by as many as 3,000 from downstream by yearend 2017.
BP on Feb. 2 reported several executive changes that will include the elevation of Upstream Chief Executive Lamar McKay to the newly recreated position of group chief executive (OGJ Online, Feb. 2, 2016).
The company has taken about $1.5 billion in restructuring charges over the past five quarters. By yearend 2016, the total is expected to approach $2.5 billion.
For 2015, BP reported a loss of $6.5 billion, compared with earnings of $3.8 billion in 2014. During the fourth quarter, the company lost $3.3 billion, compared with $4.4 billion lost in the same period a year earlier.
A charge of $443 million related to the 2010 Gulf of Mexico oil spill was taken in the quarter—primarily reflecting additional business economic loss claims—taking the cumulative pretax charge for the incident to $55.5 billion.
A court hearing is scheduled for Mar. 23 to consider approval of the proposed consent decree in connection with the agreements in principle reached by BP Exploration & Production Inc. to settle all federal and state claims arising from the gulf spill.
The company also has completed the $10-billion divestment program announced in October 2013 and plans a further $3-5 billion during 2016.
"We will keep the capital frame under review as we move through 2016 and beyond," said Brian Gilvary, BP chief financial officer. "Should current conditions persist for longer than anticipated, we expect that all the actions we are taking will capture more deflation and so drive the point at which we balance our organic sources and uses of cash lower than the $60[/bbl] that we indicated at last quarter's results."
ExxonMobil cuts 2016 spending by 25%
ExxonMobil Corp. plans to reduce its capital and exploration expenditures in 2016 by 25% compared with that of 2015 to $23.2 billion.
The company's estimated earnings in 2015 totaled $16.2 billion, a 50% drop from the $32.5 billion earned in 2014. Capital and exploration expenditures were $31.1 billion, down 19% from the 2014 level.
Fourth-quarter earnings were $2.8 billion, down 58% from $6.6 billion in fourth-quarter 2014.
Full-year upstream earnings were $7.1 billion, down 75% from the $27.5 billion posted in 2014. ExxonMobil says lower realizations decreased earnings by $18.8 billion.
The US upstream segment in 2015 reported a $1.1-billion loss while upstream earnings outside the US were $8.2 billion.
Full-year production by the company totaled 4.1 million boe/d, up 3.2% year-over-year.
ExxonMobil's downstream earnings of $6.6 billion in 2015 more than doubled that of 2014 due in large part to stronger margins. Chemical earnings were up slightly at $4.4 billion.
Chevron posts $588 million fourth-quarter loss
Chevron Corp. ended 2015 with the company's first quarterly loss since 2002, posting full-year earnings of $4.6 billion, compared with earnings of $19.2 billion in 2014.
A fourth-quarter loss of $588 million was down sharply from earnings of $3.5 billion in fourth-quarter 2014, reflecting a $1.95-billion loss from its US upstream business, partially offset by international upstream earnings and downstream earnings in the US and abroad.
"We're taking significant action to improve earnings and cash flow in this low-price environment," said John Watson, Chevron chairman and chief executive officer. "Operating expenses and capital spending were reduced $9 billion in 2015 from 2014, and I expect similarly large reductions again in 2016. In addition, asset sales proceeds were $6 billion in 2015, with additional sales planned for 2016 and 2017."
Chevron last month reported a planned 24% reduction in 2016 capital and exploratory expenditures to $26.6 billion (OGJ Online, Dec. 20, 2015).
Net production for the company during 2015 totaled 2.62 million boe/d, an increase of 2% from the prior year and within the range of the year's production guidance. The company added 1.02 billion boe in proved reserves.
The largest additions were from production entitlement effects in several locations and drilling results for the Permian basin in the US and the Wheatstone project in Australia (OGJ Online, Dec. 22, 2015).
Anadarko to cut 2016 budget in half
Anadarko Petroleum Corp., The Woodlands, Tex., anticipates an initial 2016 budget of $2.8 billion, a reduction of 50% from the company's actual 2015 capital investments and almost 70% from the 2014 total.
The move follows a fourth-quarter 2015 net loss of $1.25 billion and full-year net loss of $6.692 billion.
Al Walker, Anadarko chairman, president, and chief executive officer, said the company "did not expect oil prices to recover in 2015 and believed it could take well into 2016 before markets would stabilize on a sustained basis, costs would become more aligned with the new operating environment, and investments in short-cycle assets would be more attractive."
The company estimates its proved reserves at yearend 2015 totaled 2.06 billion boe, comprising 52% liquids and 48% natural gas. Nearly 80% of its reserves are categorized as proved developed.
Shell, BG shareholders both approve merger
The shareholders of both Royal Dutch Shell PLC and BG Group PLC have approved the proposed merger of the two companies, and the deal is set to close on Feb. 15, some 10 months after it was first reported (OGJ Online, Apr. 8, 2015).
Shell said 83% of its shareholders voted in favor of the deal at the company's general meeting held on Jan. 27 at The Hague. More than 99% of BG's shareholders did the same on Jan. 28 in London. Now the deal awaits sanction from the High Court.
Shell, which saw its earnings decline by more than half in 2015 (OGJ Online, Jan. 20, 2016), said in December that it plans to reduce some 10,000 staff and direct contractor positions in 2015-16 across both companies (OGJ Online, Dec. 14, 2015).
Capital investment for Shell and BG together in 2016 is expected at $33 billion. In Shell's earnings announcement for 2015, Ben van Beurden, chief executive officer, said, "Preparations are well advanced for $30 billion of asset sales in 2016-18, assuming the successful completion of the combination."
Exploration & Development — Quick Takes
Statoil enters offshore Uruguay
Statoil Uruguay BV has agreed to acquire 15% working interest in exploration Block 14 offshore Uruguay from Total E&P Uruguay BV.
Block 14 covers 6,690 sq km and lies in 1,850-3,500 m of water in the Pelotas basin of the South Atlantic, 200 km offshore Uruguay.
Total says it has completed an extensive data collection program, including acquiring new 3D seismic data covering the block. The partnership is now preparing to drill the Raya prospect during this year's first half.
The deal is pending government approval. Total will retain 50% interest. The partnership also includes ExxonMobil Exploration & Production Uruguay BV with 35% interest.
Block 14 was awarded to Total in 2012 (OGJ Online, May 3, 2012). The partnership will determine further plans following the Raya well results.
Lundin begins drilling Maligan well off Malaysia
Lundin Malaysia BV, a wholly owned unit of Lundin Petroleum AB, Stockholm, has started to drill the Maligan exploration well on Block SB307/SB308 offshore East Malaysia.
The Maligan prospect is in shallow water and lies north of a major producing field offshore East Malaysia. The well will target hydrocarbons in Miocene aged sands.
Maligan will be drilled using Seadrill Ltd.'s West Prospero jack up rig to a total depth of 1,700 m below mean sea level. The well is expected to take 30 days to drill.
Lundin Malaysia holds 85% working interest in SB307/SB308. Partner Petronas Carigali Sdn. Bhd. holds the remaining interest.
Separately, Lundin Petroleum reported its 2016 development, appraisal, and exploration budget will reach $1.08 billion, which is 26% below its 2015 capital expenditures. The company's 2016 budgeted expenditures on exploration and appraisal activity will hit $145 million, which is a 64% decrease compared with exploration and appraisal spend in 2015.
Antelope-6 well intersects top reservoir as expected
The Antelope-6 appraisal well on PRL 15 in Papua New Guinea has intersected the top reservoir at 2,076 m true vertical depth subsea (TVDSS), within range of the expectations of operator Total E&P PNG Ltd.'s reference case, reported license partner InterOil Corp.
Preparations are now under way to run the 9 5/8-in. liner before drilling ahead into the reservoir section, InterOil said.
The Antelope-6 appraisal well was drilled 2 km east-southeast of the Antelope-3 well and is designed to provide structural control and reservoir definition on the eastern flank of Antelope field (OGJ Online, Nov. 11, 2015).
Antelope-6 spudded on Dec. 23, 2015, and has a proposed total depth of 2,464 m TVDSS.
Total holds 40.1% of PRL 15, with InterOil holding 36.5% and Oil Search Ltd. holding 22.8%.
Drilling & Production — Quick Takes
CNOOC starts flow from two more Beibu Gulf fields
CNOOC Ltd. has started oil production from the Weizhou 12-2 joint development project and Weizhou 11-4 North Phase II project in the Beibu Gulf basin of the South China Sea.
The Weizhou 12-2 project, which lies in 36 m of water, includes three oil fields: Weizhou 12-2, Weizhou 12-1 West, and north part of Weizhou 11-2.
Its main production facilities comprise three wellhead platforms and 18 wells that have all begun production, flowing 16,000 b/d of oil at peak output.
The Weizhou 11-4 North project, which lies in 40 m of water, shares existing facilities and comprises two wellhead platforms and 15 production wells.
One well is currently on production, flowing 500 bo/d. Weizhou 11-4 is expected to reach peak production of 8,000 b/d within the year.
The Weizhou 12-2 and Weizhou 11-4 North are both independent oil fields where CNOOC holds 100% interest as operator.
Production from Weizhou 11-1 began in 2007 (OGJ Online, May 18, 2007); Weizhou 11-1 East in 2010 (OGJ Online, Mar. 29, 2010); Weizhou 11-2 and 6-9/610 in 2012 (OGJ Online, Oct. 19, 2012); Weizhou 6-12 in 2013 (OGJ Online, Mar. 27, 2013); and Weizhou 12-8 West also in 2013 (OGJ Online, Oct. 17, 2013).
CNOOC in 2013 said it anticipated production from Weizhou 6-12 to reach its peak rate from 10 wells (OGJ Online, Apr. 22, 2013).
Athabasca Oil, Murphy form Alberta development JV
Athabasca Oil Corp. has agreed with the Canadian unit of Murphy Oil Corp. to jointly develop the Duvernay and Montney in the Kaybob area in west-central Alberta. The transaction is valued at $475 million (Can.)
Athabasca is selling 70% interest in production, acreage, and infrastructure in the Greater Kaybob area as Murphy will assume operatorship of about 200,000 acres of prospective Duvernay land. December gross production averaged 6,900 boe/d, of which 58% was liquids (OGJ Online, Nov. 28, 2012).
Nearby to the southwest, Athabasca is selling a 30% interest in production, acreage, and infrastructure in the Greater Placid area. Athabasca will be operator of the Montney in this area, which includes about 60,000 acres of prospective Montney land. Athabasca said it is establishing a core area at Placid where it has high-graded 25,000 acres in the Montney in two separate intervals. December gross production in this area averaged 900 boe/d, of which 44% was liquids.
Murphy will pay $250 million (Can.) at closing, which is expected late in the first quarter. An additional $225 million (Can.) is in the form of capital carry in the Duvernay with Murphy funding 75% of Athabasca's share of development capital for up to 5 years.
Athabasca will retain operatorship of the regional midstream infrastructure in the near term.
Separately, Athabasca said Tom Buchanan, Athabasca chairman, will step down upon closing of the Murphy transaction, and Ron Eckhardt, current lead director, will become chairman.
Statoil lets contracts for North Sea projects
Statoil ASA has let a combined $240 million in contracts covering work at Oseberg Vestflanken 2, Johan Sverdrup, and Gina Krog in the North Sea. These included:
• Technip Norway AS received $60 million in pipelay contracts for Johan Sverdrup and Oseberg Vestflanken 2.
• Ocean Installer Ltd. received $30 million in contracts for marine construction and installation at Oseberg Vestflanken 2, Johan Sverdrup, and Gina Krog.
• Hereema Fabrication Group SE received an engineering, procurement, and construction (EPC) contract for the unmanned wellhead platform at Oseberg Vestflanken 2. Heerema Marine Construction will be responsible for transport and installation of the platform. The combined value is $120 million.
• Aibel AS received a $30-million engineering, procurement, construction, and installation (EPCI) contract for the Oseberg field center, where the firm will prepare the platform to receive the well stream from Oseberg Vestflanken 2, which is 8 km northwest of Oseberg field's center in 100 m of water.
Late last year, FMC Technologies Inc. was awarded a $20-million contract for delivery of two subsea trees for the existing subsea template to be included at Oseberg Vestflanken 2.
Statoil operates Oseberg Vestflanken 2 with 49.3% interest. Partners are Petoro AS 33.6%, Total SA 14.7%, and ConocoPhillips 2.4%.
Johan Sverdrup, 155 km west of Stavanger on the Utsira High, is operated by Statoil with 40.0267% interest. Partners are Lundin Norway AS 22.6%, Petoro 17.36%, Det Norske Oljeselskap ASA 11.5733%, and Maersk Oil 8.44%.
The field will be developed in phases. Production start-up is scheduled for yearend 2019.
Gina Krog field, 30 km northwest of Sleipner and 230 km southwest of Stavanger, is operated by Statoil with 58.7% interest. Partners are Total E&P Norge AS 30%, PGNiG Upstream International AS 8%, and Det Norske Oljeselskap 3.3%.
PROCESSING — Quick Takes
Indian state-run refiners propose grassroots complex
Public-sector refining firms Indian Oil Corp. Ltd. (IOCL), Bharat Petroleum Corp. Ltd. (BPCL), and Hindustan Petroleum Corp. Ltd. (HPCL) are planning a joint investment for construction of a grassroots megarefinery to be built along the coast of India's Maharashtra state.
The proposed 60 million-tonne/year refinery would be built in two phases and, once completed, produce gasoline, diesel, LPG, and jet fuel, as well as other feedstock for Maharashtra's petrochemical industry, India's Minister of Petroleum and Natural Gas (MPNG) Shri Dharmendra Pradhan said in a series of posts to his official social media web sites.
Phase 1 of the refinery would include a crude processing capacity of 40 million tpy, with an additional 20 million tpy of capacity to be commissioned following completion of Phase 2.
To expedite the project, MPNG and the government of Maharashtra have agreed to work closely in early identification of land for the refinery, as well in finalizing other details of the project, Pradhan said.
IOCL, BPCL, HPCL, and project partner Engineers India Ltd., however, have yet to disclose full details regarding the overall estimated cost of the project or tentative timelines for its construction and startup.
Gunvor acquires Rotterdam refinery
Gunvor Group Ltd., Geneva, has completed a deal to take 100% ownership of Kuwait Petroleum International Ltd.'s (KPI) 88,000-b/d refinery and supporting product distribution network in Rotterdam, the Netherlands.
With the purchase now completed, KPI subsidiary and refinery operator Kuwait Petroleum Europoort BV will be renamed Gunvor Petroleum Rotterdam BV and integrated into Gunvor's existing European refinery network, which includes the 110,000-b/d refinery in Antwerp, Belgium, and the 107,500-b/d refinery in Ingolstadt, Germany, Gunvor said.
The acquisition comes as part of Gunvor's ongoing strategy to enhance its overall refining portfolio through integration and optimization of its refinery assets, according to the company.
The companies did not disclose financial details of the transaction.
Located at the Port of Rotterdam, the Europoort refinery includes several crude oil processing units, a gasoline production plant, a lube oil plant, and extensive distribution center and tank terminal which provide direct access to international waterways for the transport of finished and intermediate products to markets within and beyond Europe.
The sale follows KPI's search for a financially solid, experienced, and reliable buyer that would continue to operate the refinery after KPI decided in 2014 to cancel investments plans of more than $1 billion to upgrade the refining center as European overcapacity issues continued to weigh on margins, according to local media reports out of Kuwait.
Phillips 66 records sharp quarterly drop in earnings
Phillips 66 reported fourth-quarter 2015 earnings of $650 million, a steep decline from earnings of $1.58 billion in the third quarter due in large part to lower realized refining margins. Its adjusted earnings, excluding special items of $60 million, were $710 million.
Refining adjusted earnings were $376 million, down from $1.05 billion in the third quarter. The company largely attributed the drop to a 35% decline in global market cracks compared with the third quarter.
Chemicals adjusted earnings were $182 million, compared with $272 million in the third quarter. Chevron Phillips Chemical Co. LLC's olefins and polyolefins business contributed $181 million to Phillips 66's chemicals earnings, representing a decrease of $80 million compared with the prior quarter largely due to reduced margins, as well as decreased equity earnings.
The company also reported that overall progress on CPChem's US Gulf Coast Petrochemicals Project is now approaching 70% completion, with startup expected in mid-2017 (OGJ Online, June 18, 2014). The project consists of an ethane cracker and related polyethylene facilities that will increase CPChem's US ethylene and polyethylene capacity by more than 40%.
Phillips 66's midstream fourth-quarter adjusted earnings were $42 million, a decrease of $49 million from the third quarter. Marketing and specialties adjusted earnings were $227 million, compared with $344 million in the third quarter.
Phillips 66 in October reported a planned 2016 capital budget of $3.6 billion, excluding Phillips 66 Partners' capital program, representing a $1-billion reduction from the 2015 budget (OGJ Online, Oct. 12, 2015).
TRANSPORTATION — Quick Takes
Chevron's Wheatstone project faces 6-month delay
Chevron Australia Pty Ltd. has confirmed a major delay of 6 months to the start-up of its 8.9 million-tonne/year Wheatstone LNG project in Western Australia. The project is now expected on stream in mid-2017.
Chevron Chief Executive Officer John Watson blamed the delay on the slow schedule of construction of the LNG plant modules in Malaysia. Chevron still has an official cost of $29 billion for Wheatstone, but analysts now say the figure will be substantially more.
The ultimate cost of Chevron's other LNG project in Western Australia, Gorgon-Jansz, is also expected to be higher than the last estimate of $54 billion. Gorgon-Jansz is scheduled to come on stream late this month or in March.
Chevron says of Wheatstone that hook-up and commissioning of the offshore platform is progressing and the pipeline to shore is ready for service. Final tie-in work is ongoing.
Six of the nine wells have been drilled and completed and will provide sufficient gas for the project's Train 1.
At the plant site near Onslow, the operations center and LNG loading jetty are complete and tank hydrotesting is continuing.
Despite the modules in Malaysia falling behind the initial schedule, Chevron says it has mitigated further delays and all modules for Train 1 are at the plant site. Piping and cable work is continuing.
HoustonLink to build terminal line connection
Magellan Midstream Partners LP and TransCanada Corp. reported definitive plans to connect TransCanada's Houston tank terminal to Magellan's East Houston terminal.
HoustonLink Pipeline Co. LLC, a new company owned equally by Magellan and TransCanada, will construct, own, and operate a 9-mile, 24-in. crude oil pipeline connecting the terminals. The new pipeline will provide TransCanada's Keystone and Marketlink customers access to Magellan's Houston and Texas City crude oil distribution system.
The project, estimated to cost $50 million, is expected to be operational first-half 2017.
