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Oil Industry Executive Stole £1.3m from North Sea Firm

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May 9, 2016

Oil Industry Executive Stole £1.3m from North Sea Firm

An oil industry executive with a previous conviction for embezzlement stole more than £1.3m from her employers.

Jacqueline McPhie, 46, pocketed the money while working as vice-president for finance at Altus Intervention in Aberdeen between March 2013 and April 2014.

The High Court in Edinburgh heard on Tuesday how McPhie earned £146,848 a year from the firm, which supplies equipment for north sea projects.

Prosecution lawyer Alison Di Rollo told the court that McPhie spent £80,000 buying a Range Rover sports car, between £60,000 and £70,000 on a new garage and driveway, £52,000 on a new kitchen and £30,000 on a summer house in her garden.

She was given 300 hours’ community service 16 years ago for stealing £250,000 from previous employers and now faces proceeds of crime action and the possibility of a jail sentence.

McPhie pleaded guilty to a charge of embezzlement before judge Lady Wise.

Deferring sentence for the court to obtain reports, the judge said: “You have pleaded guilty to extremely serious offences.”

The court heard McPhie’s husband was the sole director of a company called Craigie Knowe Ltd, a contracting firm which was registered to the family’s home in Great Western Road, Aberdeen.

Ms Di Rollo said McPhie had “full access” to the company’s bank accounts and was a signatory to them.

Her husband had nothing to do with his wife’s activities, the court heard.

Ms Di Rollo said: “In the spring of 2013, not long after she had started to work for Altus, one of the finance managers noticed high-value payments being made into the Craigie Knowe account. She questioned the accused about them.

“The accused told her the payments related to the creation of a branch of Altus in Cyprus and the sums involved where high because of the involvement of solicitors in Dubai.

“Being relatively new to the business but knowing it was expanding to branches outwith the UK, she accepted the explanation without further question.

The accused told her that she – the accused – would take care of all the invoicing for the project.

“On May 19, 2014, the police service of Scotland received intelligence that the accused had purchased two heritable properties in quick succession, for cash, without the legitimate means to do so and that there had been a series of suspicious transactions through her personal bank account.

She added:”Staff confirmed that Altus Intervention had not contracted with or otherwise engaged in any legitimate business with Craigie Knowe and that all of these payments were fraudulent.

“Police then launched an urgent investigation into McPhie’s scam. Detectives discovered she had faked invoices and had also faked emails from senior Altus Intervention staff which authorised payments to McPhie.

The court heardofficers then detained McPhie on June 2, 2014. She confessed to what she had done on her way to the police station in Aberdeen.

Ms Di Rollo added: “Whilst en route to Aberdeen Police divisional headquarters, she stated ‘I’ll tell you everything, it’s got nothing to do with my husband’.”

The court also heard Altus had managed to recover £238,701.90 from McPhie.

Defence advocate Tony Lenehan told the court his client was involved in a “bitter” divorce from her husband and that she was now living in a caravan in Arbroath.

Mr Lenehan also told the court he would receive his plea of mitigation until McPhie’s next court appearance. McPhie will be sentenced at the High Court in Edinburgh on May 31.

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DNV GL Initiates Seven New Subsea JIPs in North America

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May 9, 2016

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DNV GL Initiates Seven New Subsea JIPs in North America

DNV GL is leading seven new joint industry projects (JIP) in the North American region in 2016 to find solutions to safely reduce complexities and cost in the oil and gas industry.

The initiatives will support overall efficiency efforts in the pipelines, wells and subsea, umbilicals, risers, and flowlines (SURF) sectors.

Key focus areas for DNV GL in 2016 will be centered around solving challenges around standardization, operations (OPEX services), safety, environment, regulations, and performance.

“Our collaborative projects are pivotal in strengthening the industry throughout the Americas and helping it move forward and out of the difficulties we are currently facing,” said Peter Bjerager, executive vice president, Oil & Gas – DNV GL Region Americas. “As an independent third party we are uniquely positioned to provide a neutral ground for collaboration.”

DNV GL is inviting industry players to take part in the following JIPs:

– Extended application of corrosion resistant alloys;

– Guidance for qualifying materials in compliance with API 17TR8 HPHT design guidelines for subsea equipment;

– Increased consistency for sour service testing and assessment;

– Sour HPHT fatigue testing for clad subsea components;

– Prediction of internal flow induced vibration of complex subsea pipework;

– Jumper VIV instrumentation and field measurements – expanding ongoing JIP;

– Safe assessment of embedded flaws in sour pipelines.

According to a recent research report published by DNV GL1, one-third of North American respondents are concerned that they do not have a strategy in place to maintain innovation in a declined market. However, 31% see greater involvement in JIPs as a priority over the next 12 months, while four in ten want to increase collaboration with other industry players (40%).

The report also found that six out of ten (60%) respondents agreed that operators will increasingly push to standardize their approach globally – up from 42% in 2015. Only 9% expect an increase in spending in R&D and innovation, a figure that has been cut by more than half in two years, from 20% in 2014.

“Like the global oil and gas industry, companies in North America are braced for an extended period of lower oil prices, which is leading to continued pressure on cost management. However, it is encouraging that there is still enthusiasm to work together and drive greater standardization and reduce inefficiencies. The success of our collaborative approach has seen the introduction of new industry standards and practices which help advance innovation and reduce complexity,” continued Peter Bjerager.

In total, 43 DNV GL-led JIPs have been initiated globally this year, in addition to the launch of a new Step Change innovation program to help customers leverage opportunities from digitalization.

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Brexit: What Could it Mean for the North Sea’s Oil

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May 9, 2016

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Brexit: What Could it Mean for the North Sea’s Oil

In less than two months UK citizens will make one of their biggest political decisions in more than 40 years: whether to remain or leave the EU trading bloc they have been part of since 1973.

While an exit from the EU could mark a major milestone for the UK economy — the government fears GDP could suffer by over 6% after 15 years — a leave vote is seen having a limited impact on the UK upstream sector. For a start, North Sea oil has been regulated by London since before the UK joined the EU. Offshore safety laws were tweaked by Brussels in the wake of the 2010 US Gulf of Mexico spill, but their scope is limited.

In the short term at least, it is seen as unlikely that there would be any back-peddling on EU legislation which has already been implemented into domestic law. Existing rules, whether originating in Brussels or not, would not fall away on Brexit (British exit from the EU) and it is unlikely that they would simply be repealed.

Further down the road the UK would be free set its own offshore rules, which could diverge with EU legislation. In upstream oil and gas, Brexit would not change the key fiscal regime for the North Sea. London already has sovereignty over corporation tax, licensing and other regulations would not be affected in the short term.

There is also little sense of urgency over an exit vote in the industry. Any changes to the operating environment would be years down the line. Some predict it would take a decade or more for the UK to fully disengage from the EU.

“Is Brexit at the forefront of people’s minds right now as they are doing (North Sea related) deals? No is the answer,” said Julian Nichol, a lawyer at Bracewell which advises energy companies on legal issues. “From a legal perceptive, there is going to be a minimum impact on existing contracts. Brexit per se is not likely to trigger defaults.”

Most multi-national firms support the UK remaining in the EU and Big Oil is also in favor of the status quo. BP’s boss Bob Dudley has said Britain’s role would be “much diminished” if it exits while Shell’s CEO has signed a pro-EU letter saying leaving “would deter investment and threaten jobs.”

Some have suggested that a UK decision to leave could trigger a new vote for Scottish independence, with Scots likely plump for alliance to Brussels rather than London. If Scotland decides to break ties with the UK to keep access to EU markets, uncertainties may resurface over the progress of reforms needed streamline offshore rules.

Labor mobility concerns

Operators could also be forced to comply with two sets of regulations, some suggest.

Ahead of the Scotland’s vote to remain part of the UK in late 2014, industry group Oil & Gas UK flagged implications for the North Sea industry on costs and red tape should London and Edinburgh part ways. North Sea producers, it said, were also vexed over attracting skilled workers to the UK’s highly mobile offshore workforce should Scotland leave. Those same concerns are likely to hold sway for producers in the UK’s current choice over Europe.

The UK would be quick to sidestep any labor supply hiccups, many believe, forging labor migration deals with EU members to replace the bloc’s core free movement of workers principle. One risk of a UK exit is currency depreciation.

The pound could plummet in value, the theory goes, dragged down by uncertainties over the fate of the British economy.

“If that were to happen, upstream operators may benefit from a lower cost base relative to the dollar denominated oil and gas prices,” energy research group Wood Mackenzie said.

On the flip side, companies with US dollar debt will see their repayments rise if their revenue is in sterling and some will need to hedge against this effect, according to Bracewell.

The answers to many of the questions over a Brexit depend on the nature of the UK’s post-EU relationship with Brussels and the level of participation in the EU’s single market.

A withdrawal deal must be negotiated with the EU after two years or when such an agreement would come into force—which could take much longer. Non-EU members Norway and Switzerland both hold trade agreements with the EU. The Norwegian model would guarantee UK access to the single market, including free movement of workers. It would also mean the UK is bound by most EU legislation.

“The devil is in the detail,” said Nichol. “Brexit will be whatever the trade deal is negotiated by ‘UK PLC’ and the European Commission, and that will take a very long time.”

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Shell Hints at Further North Sea Job Cuts as Profits Plunge

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May 9, 2016

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Shell has admitted it could make even deeper cuts to its North Sea workforce as part of a drive to slash spending and sell off assets after its £37bn takeover of BG Group earlier this year.

The group has already axed 750 jobs from its North Sea business, of which two thirds were UK jobs, and has called for voluntary redundancies from the former BG Group head office at Thames Valley Park in Reading.

But Shell’s chief financial officer, Simon Henry, has not ruled out further North Sea job cuts as the group reorganises its global portfolio against a backdrop of low oil prices.

“Costs must come down – this may or may not mean a reduction in jobs. I can’t promise no further reductions,” he said.

It came as Shell posted a sharp fall in profits in its first set of results since merging with global gas giant BG Group, but nevertheless beat expectations.

The oil major reported first quarter profits of $455m, less than half the $942m it posted in the previous quarter and a fraction of the $4.5bn of profit it made in the same period last year.

The company is slashing costs and aims to sell off assets totalling $30bn over the next three years in a bid to protect its dividend.

Chief executive Ben van Beurden revealed plans to cut investment by a further 10pc to $30bn this year. That would be 36pc lower than Shell and BG’s combined investment in 2014. In addition, the group’s operating costs for the year will fall to $40bn compared with a combined spend of around $53bn in 2014.

Mr Henry said the group had made “a good start from the downstream” asset sales. These would play a “larger role” in Shell’s assets sales than its upstream exploration interests, he said. In the first quarter Shell sold $500m from its downstream operations, he added.

Shell’s oil and gas production climbed 16pc compared to the same quarter last year, but that was largely due growth from BG’s gas projects in Brazil and Australia.

“The combination with BG is off to a strong start,” Mr Van Beurden said, adding that the benefits from the merger would come through at a lower cost than originally expected.

“The completion of the BG deal has reinforced our strategy and strength against the backdrop of hugely challenging times for our industry. For Shell and our shareholders, this is a unique opportunity to reshape and simplify the company,” he said.

Biraj Borkhataria, an analyst at RBC Capital, said the group’s maiden set of results as a combined entity might raise questions among investors, but that Shell would be given time to show it could make the merger work.

“It would be a faux pas to read too much into one quarter’s headline numbers, so to that end, we think investors will look through any uncertainty and focus on the longer term story,” he said.

The mega-merger was backed by a strong majority of shareholders who shrugged off concerns that Shell was paying over the odds for BG Group and approved the deal in January this year.

Shell has consistently countered fears that it overpaid for BG Group, a market leader in liquified natural gas, saying that the deal was based on a long-term view of the sector and would provide a “springboard” back to profitability.

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Why This Year’s Oil Rally Might Be For Real

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May 9, 2016

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Why This Year’s Oil Rally Might Be For Real

At first blush, the rally in oil to start 2016 bears some resemblance to the rally at the start of last year, which ultimately ended in tears. This time, though, analysts at Citigroup Inc. led by Seth Kleinman say the rally has legs. “The extra year of low prices has finally derailed the supply resilience that defined markets last year,” writes Kleinman. A big factor differentiating this year from last year is what the markets are expecting a few months from now. Kleinman and his team point out that 24-month West Texas Intermediate (WTI) futures are currently around $49 a barrel, versus the $65 a barrel seen in the second quarter of 2015. If the futures market doesn’t expect the price to rise, producers can’t lock in a profit like they might have at $65. If you can’t lock in a profit, you can’t produce as much and thus the supply should theoretically fall. This has led some analysts and economists to say the futures price is far more important than the current or spot price. “To keep all capital sidelined and curtail investment in shale until the market has rebalanced, we believe prices need to stay lower for longer,” Jeff Currie, head of commodities research at Goldman Sachs Group Inc., wrote in early 2015. “As short cycle shale production is a 12-month investment proposition, producers typically hedge out 9 to 12 months…As a result, the market anchor is shifting to this ‘one-year-ahead’ swap which creates the level of investment to balance future physical markets. It is therefore this forward price that needs to remain below full-cycle costs to curtail investment, not the spot price.” While U.S. supply was a big driver last year, it’s time to look at supply outside of America. The analysts note that U.S. production peaked last April, and supply outside the country is now significantly impacted by low prices. This is important because it’s much harder for other countries to get drills back online than in the U.S. Due to the nature of shale, once oil prices start to rise, U.S. producers can quickly ramp up production while other countries can’t. “[T]he list of countries with declining supplies has grown rapidly: Brazil, Mexico, Colombia, China, Azerbaijan and others. Total non-OPEC oil production (excluding the U.S.) fell year over year in February and March (-105,000 barrels/day and -142,000 barrels/day, respectively) after rising for the prior 33 months,” Kleinman and his team wrote. “This dynamic is particularly important, because unlike shale, these supply declines are much harder to reverse in the short- or even medium-term.” To be sure, the team at Citigroup doesn’t expect a massive rebound in oil prices either, due to risks such as Saudi Arabia’s continued unwillingness to budge on production: “Saudis are not looking to reduce oil production under the current market conditions and if anything are likelier to be putting more barrels on the market. This is probably the biggest bear risk to oil markets right now.”

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Noble Energy May Lift US Shale Spend if Oil Breaches $50 Per Barrel

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May 9, 2016

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Noble Energy May Lift US Shale Spend if Oil Breaches $50 Per Barrel

U.S. oil and gas producer Noble Energy Inc said it expects to spend less than the $1.5 billion it had budgeted for the year, but would consider spending more on U.S. shale assets if crude oil prices moved and stayed above $50 per barrel. The company also reported a smaller-than-expected loss for the first quarter and raised its 2016 sales volume forecast, helping send its shares up as much as 6 percent on Wednesday. U.S. oil companies are gearing up for new drilling projects, buoyed by a 50 percent increase in crude prices since February. Last week, Pioneer Natural Resources said it would add rigs if oil stayed near or rose above $50 per barrel. U.S. crude was up 1 percent at $44.10 at 1500 GMT. “As commodity prices move and sustain above $50 per barrel we will begin to consider additional capital allocation to the U.S. unconventional business, with initial focus on our low-cost and liquid-rich assets in the DJ Basin in Texas,” Noble Chief Executive David Stover said on a post-earnings call. The company said on Tuesday it would sell about 33,100 undeveloped net acres in the DJ Basin in Colorado to Synergy Resources Corp for $505 million. Noble, which has generated total proceeds of over $775 million through asset sales so far in 2016, plans to sell 11 percent of its stake in Israel’s Tamar natural gas field, and indicated it may also look at monetizing its midstream business. The company in November shelved the IPO of a master limited partnership holding midstream assets located primarily in Colorado. Noble said it now expects 2016 sales volumes of 405,000 barrels of oil equivalent per day (boe/d), higher than its earlier forecast of 390,000 boe/d. A 31 percent rise sales volumes, to 416,000 boe/d, as well as lower costs helped the company beat analysts’ expectations in the first quarter ended March 31. Lease operating expenses fell 34 percent to average $3.63 per barrel of oil equivalent, excluding certain workover costs in the Gulf of Mexico. Noble’s net loss widened to $287 million from $22 million. Excluding one-time items, its adjusted loss was 53 cents per share, smaller than analysts average estimate of 57 cents, according to Thomson Reuters I/B/E/S. The company’s shares rose 6.3 percent to a high of $37.34 in early trading, before giving up almost all the gains by late morning.

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Diana Shipping Inc. announces time charter contract for m/v Alcyon with Norden

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May 9, 2016

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Diana Shipping Inc. announces time charter contract for m/v Alcyon with Norden

Diana Shipping Inc. (NYSE: DSX), (the “Company”), a global shipping company specializing in the ownership of dry bulk vessels, today announced that, through a separate wholly-owned subsidiary, it entered into a time charter contract with Dampskibsselskabet Norden A/S, Copenhagen, for one of its Panamax dry bulk vessels, the m/v Alcyon. The gross charter rate is US$5,000 per day, minus a 5% commission paid to third parties, for a period of minimum twelve (12) months to maximum sixteen (16) months. The charter commenced earlier today.

The “ Alcyon” is a 75,247 dwt Panamax dry bulk vessel built in 2001.

This employment is anticipated to generate approximately US$1.8 million of gross revenue for the minimum scheduled period of the time charter.

Diana Shipping Inc.’s fleet currently consists of 45 dry bulk vessels (2 Newcastlemax, 14 Capesize, 3 Post-Panamax, 4 Kamsarmax and 22 Panamax). The Company also expects to take delivery of one Panamax dry bulk vessel by the beginning of May 2016, one new-building Newcastlemax dry bulk vessel during the third quarter of 2016, as well as one new-building Newcastlemax dry bulk vessel and one new-building Kamsarmax dry bulk vessel during the fourth quarter of 2016. As of today, the combined carrying capacity of the Company’s fleet, excluding the four vessels not yet delivered, is approximately 5.2 million dwt with a weighted average age of 7.6 years.

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Libyan Crude Output at Risk as East and West Tussle for Control

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May 8, 2016

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Libyan Crude Output at Risk as East and West Tussle for Control

Libya’s crippled oil production appeared at risk of further decline on Wednesday after an escalating stand-off between rival eastern and western political factions prevented a cargo belonging to trading giant Glencore from loading. A Tripoli oil official warned the country’s oil output could fall by 120,000 barrels-per-day (bpd) if the Benghazi-based National Oil Corporation (NOC), set up by the eastern government, continues to block tankers loading for Tripoli from the eastern Marsa el-Hariga port. The Seachance tanker left the port on Wednesday of its own accord and without loading any of its planned 600,000 barrel crude cargo for Glencore, a port official said. Reuters ship tracking showed the tanker was still waiting outside the port. The Seachance was originally expected to load on April 26-28. The stand-off at Hariga, part of a broader political struggle between factions in eastern and western Libya, threatens to further reduce oil output which has fallen to less than a quarter of its 2011 high of 1.6 million bpd. Exports from the port are usually divided between allocations to Glencore, as part of an oil export deal the trader struck with the rival Tripoli NOC last year, and cargoes to the 120,000 bpd Zawia refinery in western Libya. Glencore declined to comment. Much of Libya’s oil production is concentrated in the east. The NOC in Tripoli has ambitious plans to revive output but those have been put in jeopardy by continuing political conflict and repeated attacks on eastern oil facilities by Islamic State militants. The NOC in Benghazi ordered port workers not to load the Seachance after seeing a tanker carrying its first attempted oil export shipment blacklisted by the United Nations, and returned to be unloaded in western Libya. The Tripoli NOC and its western backers warn that efforts by the eastern NOC to sell oil independently risk dragging the country further into crisis. But eastern politicians, who have not formally endorsed a U.N.-backed unity government trying to establish itself from the capital, insist that the Benghazi company is the country’s legitimate NOC. On Wednesday the head of the Benghazi NOC, Nagi al-Maghrabi, said there was no plan by the company’s board to close Hariga, and suggested the refusal to load the Seachance was made for bureaucratic reasons. There is “no plan to shut down the port, the revenue is for all Libyans,” Maghrabi told Reuters. “We just ask to have the document for any shipment in advance … otherwise it will not be allowed to load. We still respect all contracts.” While any losses in Libyan exports could have myriad implications for the country itself, oil traders said the past years of chaos were limiting the immediate impact on oil prices.

“Most of the doubt from North Africa is built in to the price… because it’s been so choppy in terms of what’s coming out of Libya,” a trader said. Brent crude futures were trading 55 cents higher at $45.52 a barrel at 14.14 GMT. No-one at the Tripoli NOC could immediately be reached for comment.

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OPEC Said to Head to June Talks Without Plan for Supply Cap

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May 8, 2016

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OPEC Said to Head to June Talks Without Plan for Supply Cap

There are currently no proposals on the table for OPEC to revive limits on crude output at its June meeting after the failure of talks to freeze production last month, according to six delegates from the group.

A meeting of representatives from the Organization of Petroleum Exporting Countries in Vienna Wednesday discussed how the fundamentals of oil supply and demand are improving, according to two delegates, who asked not to be named because the talks were private. The proposal to freeze output has been overtaken by changes in the market and may no longer be necessary, said two delegates from nations that had supported the idea last month.

Oil has rebounded after slumping to the lowest since 2003 earlier this year on signs the global glut is easing as U.S. output declines. Prices gained even though OPEC itself has been without a production target since December, and talks with other producers to freeze output fell apart last month after Saudi Arabia refused to join without Iran. While the recovery has relieved some pressure on producers, signs of discord persisted within the oil-exporters group.

Improving Market

Brent crude, the international benchmark, has continued to advance since the failure of the Doha talks, rising to $48.50 a barrel last week, the highest level since November. Global supply and demand will move close to balance in the second half of the year as lower prices take their toll on production outside OPEC, the International Energy Agency said last month. U.S. crude output fell to 8.83 million barrels a day last week, the eighth consecutive weekly decline, according to Energy Information Administration data.

There were indications the freeze proposal could be revived at OPEC’s bi-annual meeting in June. While Venezuela — one of the architects of the freeze plan — requested that non-members that participated in the Doha talks should be invited to the June meeting, OPEC nations have yet to respond to the request, said two delegates.

In a sign of continuing discord within OPEC, members of the group were unable to finish their long-term strategy report at the meeting in Vienna Tuesday because of differences over the wording of the document, according to two delegates. The plan was already delayed in November because of disagreements over clauses suggested by some members about curtailing output, setting production quotas and finding ways to maximize OPEC profit.

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Devon Ready to Boost Drilling, Spending If Oil Prices Keep Climbing

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May 8, 2016

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Devon Ready to Boost Drilling, Spending If Oil Prices Keep Climbing

Devon Energy Corp will ramp up drilling and spending if oil prices continue to recover, executives said on Wednesday, joining a growing list of companies expecting an increase in activity as the commodity price picture improves. The Oklahoma City-based oil and gas driller could start adding incremental drilling activity if oil prices hit $50 a barrel and could double capital spending if they reach $60, Chief Executive Officer Dave Hager told investors on a conference call to discuss first-quarter results. It would “probably take $60 oil or more to really get back to a capital spend level of close to $2 billion versus a $1 billion, where we’re at now,” Hager said. His comments come after rival producers Pioneer Natural Resources Co and Whiting Petroleum Corp said they could see a ramp-up of drilling and fracking, contributing to a growing consensus that a price rise above $50 could fuel a resurgence in the U.S. shale industry. U.S. oil prices have rebounded since hitting a trough just above $26 per barrel in February, and traded above $43 on Wednesday. Devon shares slid 7 percent to $30.47. Devon had said it expected its 2016 oil output to exceed expectations by as much as 3 percent, even without additional capital spending. The company has also taken advantage of the recent price spike to hedge 25 percent of its expected 2016 oil output, using a “collar” strategy to guarantee a price floor of $39 a barrel and see benefits from spikes above $44 a barrel. Hager said the company had recently changed its hedging strategy, hedging some output each quarter on a “consistent programmatic basis” as far forward as six quarters, rather than relying solely on “opportunistic” hedges as it has historically. Devon, which is active in the oil sands of Alberta, Canada, said operations were unaffected by the wildfires that swept the Fort McMurray area on Tuesday and Wednesday, prompting the evacuation of 88,000 people. The company posted a loss of 53 cents per share, excluding items, in the first quarter, less than analysts’ consensus estimate of 64 cents. Revenue of $2.1 billion was below expectations of $2.6 billion.

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