Commodity Corner: Oil Rallies on Fed Report
Friday, April 15, 2011
Rigzone Staff
by Matthew V. Veazey
Crude oil futures gained $1.55 Friday on news that U.S. industrial production grew last month.
May crude oil settled at $109.66 after the Federal Reserve reported that industrial production increased 0.8 percent in March, compared to just 0.1 percent in both January and February. Year-on-year, total industrial production for March reportedly increased by 5.9 percent.
The Fed also noted that manufacturing output increased by 0.7 percent last month while factory production rose to an annual rate of 9.1 percent during the first quarter. In addition, the central bank noted that total industry capacity utilization climbed by 0.5 percentage point to 77.4 percent.
Oil futures traded within a range from $107.21 to $110.10 Friday. Compared to last Friday's settlement price, oil is down 2.8 percent for the week.
Front-month natural gas lost a penny Friday to settle at $4.20 per thousand cubic feet. The dip followed predictions of above-normal temperatures throughout the eastern U.S. during the next two weeks.
May natural gas peaked at $4.24 and bottomed out at $4.17 during Friday's session. Week-on-week, natural gas is up nearly four percent.
Gasoline for May delivery gained six cents to end the day at $3.29 a gallon. It fluctuated between $3.23 and $3.30 during end-of-week trading. For the week, gasoline is up 0.9 percent.
Friday, April 15, 2011
Honda Extends North American Factory Slowdown By 2 Weeks
Honda Extends North American Factory Slowdown By 2 Weeks
Apr 15, 2011
Honda Motor Co (NYSE:HMC) said it will slow down production at its 11 North American factories into at least early May because of the ongoing parts shortage from Japanese earthquake-damaged factories.
The company said Friday it is extending the production cuts through at least May 6th, and it expects more disruptions beyond that.
The slowdowns could reduce output in the period by as much as 50%, and are likely to cause a shortage of Honda vehicles in a matter of weeks.
Honda's Japanese factories are running at half capacity, and the President of the company said it could take months to return to full production.
The company said none of its 21,000 North American factory workers would be laid off.
Shares of Honda Motor are trading up 1.73% at $35.87.
Apr 15, 2011
Honda Motor Co (NYSE:HMC) said it will slow down production at its 11 North American factories into at least early May because of the ongoing parts shortage from Japanese earthquake-damaged factories.
The company said Friday it is extending the production cuts through at least May 6th, and it expects more disruptions beyond that.
The slowdowns could reduce output in the period by as much as 50%, and are likely to cause a shortage of Honda vehicles in a matter of weeks.
Honda's Japanese factories are running at half capacity, and the President of the company said it could take months to return to full production.
The company said none of its 21,000 North American factory workers would be laid off.
Shares of Honda Motor are trading up 1.73% at $35.87.
Analysis: Hercules Flexes Its Muscles
Analysis: Hercules Flexes Its Muscles
Friday, April 15, 2011
Rigzone Staff
by Jaime Kammerzell
Hercules Offshore won bankruptcy court approval on April 4th to buy Seahawk Drilling, which filed for Chapter 11 in February.
Seahawk, which owns and operates 20 mat-supported jackups in the US and Mexican Gulf of Mexico, was created as a spin-off from Pride International in August 2009. Pride divested of its shallow water fleet in an effort to concentrate its business in the deepwater markets.
Seahawk never had a profitable quarter once it split from Pride, due largely to the global financial crisis that hit the market during that time. In addition, Seahawk CEO, Randy Stilley, blames the Bureau of Ocean Energy Management (BOEM) for "arbitrarily constructing unnecessary barriers to obtaining permits they had traditionally authorized" following the Macondo blowout in April 2010.
Shallow water drilling in the GOM wasn't under the drilling moratorium that followed the Macondo blowout, but the drilling permit process slowed significantly. Commenting on its Q2 2010 earnings report, Stilley said, "new drilling permit requirements … have caused delays for permit approvals, as our customers and regulators work to understand the new regulations. We continue to work with our customers and the BOEM on improving the efficiency of the permitting process. I am optimistic that the BOEM will be able to more quickly process the backlog of drilling permit applications so that current applications will be reviewed and approved allowing us to put our idle rigs back to work, as well as enter into new contracts for our rigs that are currently working and keep our personnel employed."
However, in March 2011 Stilley said, "in the 11 months after the Deepwater Horizon accident, it became clear that Seahawk's greatest rival was no longer an industry competitor but the US government."
Seahawk is not the only shallow water driller affected by the slowed permitting process. Companies like Hercules have been hit hard, but have rigs contracted outside of the US GOM that draw in revenue to help the company stay in the game.
Hercules purchased Seahawk's fleet for about $176.8 million. The agreement was based on $25 million in cash and 22.3 million of its shares, which closed at $6.80 a share on Monday, April 4, the day a judge approved the sale.
Back in February when Hercules agreed to purchase Seahawk's rigs, John T. Rynd, president and CEO of Hercules Offshore said, "We believe that the strategic rationale and value proposition of this transaction are very compelling for our shareholders. This is a unique opportunity to acquire assets at an attractive price, and we expect significant synergies once they are added to our rig fleet. Furthermore, the structure and terms by which we are acquiring these assets will provide benefits to our shareholders, allowing us to fully dedicate our time to operate these assets to their maximum potential. We will have the ability to operate a significantly larger fleet of rigs for our customers, with a small amount of incremental cost."
While court approval to buy Seahawk was positive news for Hercules last week, the company ended the week on a sour note. On April 7, Hercules announced that the company is being investigated by the Securities and Exchange Commission and the Department of Justice. The SEC has requested documents associated with the possible violations of securities laws, including possible violations by its international operations of anti-bribery laws.
In regards to the filing, Hercules said, "At this time, it is not possible to predict the outcome of the investigations, the expenses we will incur associated with these matters, or the impact on the price of our common stock or other securities if the SEC or DOJ takes any actions regarding these investigations."
As a result, shares of Hercules fell 65 cents (10.2%) to $5.73 in aftermarket trading. Shares ended the regular session up 15 cents (2.4%) to $6.38.
Hercules has 16 active jackups. These rigs are capable of operating in water depths from nine to 350 ft. According to Hercules, the majority of its fleet is capable of drilling as deep as 20,000 ft, and the Hercules 350 can drill up to 25,000 ft.
Comparatively, only seven of Seahawk's rigs are contracted. These jackups are capable of operating in water depths from 200 to 300 ft and drilling as deep as 25,000 ft, except for the Seahawk 2602, which can drill down to 20,000 ft.
Hercules points to its diverse geographic footprint as a key to its business strategy. According to Riglogix, the rig manager currently has 10 jackups in the GOM, two jackups in both the Middle East and South Asia and one jackup in Southeast Asia and West Africa. All of Seahawk's rigs that Hercules has acquired are in the Gulf of Mexico.
If we look at the other jackup players, Ensco has 31 active jackups in its fleet. Of Ensco's jackup fleet, 10 are in Southeast Asia, eight are in the North Sea, another eight are in the GOM, four are working off Mexico, three are in the Persian Gulf, and one is off Australia. Rowan's active fleet includes 25 jackups contracted world-wide. Ten jackups are in the GOM, seven are in the Persian Gulf, five are in the North Sea, and one each are working off Southeast Asia, South America, and Mexico.
Worldwide, the average fleet age is about 21 years old with an average dayrate in the low $100s. Ensco's fleet is right on target with an average age of 21 years old and an average dayrate of $95k/day. However, Hercules' fleet is 32 years old and commands a dayrate in the mid-$50k range, while Seahawk complements it with a 31 year old fleet, which commands a dayrate in the low $40k range. Rowan's fleet is the youngest by far at an average of 13 years old and has the highest earning jackup fleet with average dayrates in the $130s.
Worldwide, 320 of 488 jackups are currently contracted, which puts worldwide utilization at about 66%. Hercules' fleet is below the utilization average at 52% and Seahawk is reporting a 35% utilization rate. Combined, the new Hercules fleet is averaging 45% utilization. However, both Ensco and Rowan's utilization rates are above the worldwide average at 76% and 71%, respectively.
Despite the coalition's efforts, Seahawk could not survive the post-Deepwater Horizon GOM regulations. Though the BOEMRE has started granting permits to drill in the deepwater GOM again, the shallow water and deepwater permitting process remains slow. Unless things change soon, Seahawk Drilling won't be alone.
Follow Hercules and its projects worldwide by visiting SubseaIQ, or follow the developments, contracts and initiatives of the rigs through RigLogix.
Friday, April 15, 2011
Rigzone Staff
by Jaime Kammerzell
Hercules Offshore won bankruptcy court approval on April 4th to buy Seahawk Drilling, which filed for Chapter 11 in February.
Seahawk, which owns and operates 20 mat-supported jackups in the US and Mexican Gulf of Mexico, was created as a spin-off from Pride International in August 2009. Pride divested of its shallow water fleet in an effort to concentrate its business in the deepwater markets.
Seahawk never had a profitable quarter once it split from Pride, due largely to the global financial crisis that hit the market during that time. In addition, Seahawk CEO, Randy Stilley, blames the Bureau of Ocean Energy Management (BOEM) for "arbitrarily constructing unnecessary barriers to obtaining permits they had traditionally authorized" following the Macondo blowout in April 2010.
Shallow water drilling in the GOM wasn't under the drilling moratorium that followed the Macondo blowout, but the drilling permit process slowed significantly. Commenting on its Q2 2010 earnings report, Stilley said, "new drilling permit requirements … have caused delays for permit approvals, as our customers and regulators work to understand the new regulations. We continue to work with our customers and the BOEM on improving the efficiency of the permitting process. I am optimistic that the BOEM will be able to more quickly process the backlog of drilling permit applications so that current applications will be reviewed and approved allowing us to put our idle rigs back to work, as well as enter into new contracts for our rigs that are currently working and keep our personnel employed."
However, in March 2011 Stilley said, "in the 11 months after the Deepwater Horizon accident, it became clear that Seahawk's greatest rival was no longer an industry competitor but the US government."
Seahawk is not the only shallow water driller affected by the slowed permitting process. Companies like Hercules have been hit hard, but have rigs contracted outside of the US GOM that draw in revenue to help the company stay in the game.
Hercules purchased Seahawk's fleet for about $176.8 million. The agreement was based on $25 million in cash and 22.3 million of its shares, which closed at $6.80 a share on Monday, April 4, the day a judge approved the sale.
Back in February when Hercules agreed to purchase Seahawk's rigs, John T. Rynd, president and CEO of Hercules Offshore said, "We believe that the strategic rationale and value proposition of this transaction are very compelling for our shareholders. This is a unique opportunity to acquire assets at an attractive price, and we expect significant synergies once they are added to our rig fleet. Furthermore, the structure and terms by which we are acquiring these assets will provide benefits to our shareholders, allowing us to fully dedicate our time to operate these assets to their maximum potential. We will have the ability to operate a significantly larger fleet of rigs for our customers, with a small amount of incremental cost."
While court approval to buy Seahawk was positive news for Hercules last week, the company ended the week on a sour note. On April 7, Hercules announced that the company is being investigated by the Securities and Exchange Commission and the Department of Justice. The SEC has requested documents associated with the possible violations of securities laws, including possible violations by its international operations of anti-bribery laws.
In regards to the filing, Hercules said, "At this time, it is not possible to predict the outcome of the investigations, the expenses we will incur associated with these matters, or the impact on the price of our common stock or other securities if the SEC or DOJ takes any actions regarding these investigations."
As a result, shares of Hercules fell 65 cents (10.2%) to $5.73 in aftermarket trading. Shares ended the regular session up 15 cents (2.4%) to $6.38.
Fleet
Hercules has added Seahawk's 20 jackups to its original fleet of 33 jackups, two of which are under construction.Hercules has 16 active jackups. These rigs are capable of operating in water depths from nine to 350 ft. According to Hercules, the majority of its fleet is capable of drilling as deep as 20,000 ft, and the Hercules 350 can drill up to 25,000 ft.
Comparatively, only seven of Seahawk's rigs are contracted. These jackups are capable of operating in water depths from 200 to 300 ft and drilling as deep as 25,000 ft, except for the Seahawk 2602, which can drill down to 20,000 ft.
Hercules points to its diverse geographic footprint as a key to its business strategy. According to Riglogix, the rig manager currently has 10 jackups in the GOM, two jackups in both the Middle East and South Asia and one jackup in Southeast Asia and West Africa. All of Seahawk's rigs that Hercules has acquired are in the Gulf of Mexico.
If we look at the other jackup players, Ensco has 31 active jackups in its fleet. Of Ensco's jackup fleet, 10 are in Southeast Asia, eight are in the North Sea, another eight are in the GOM, four are working off Mexico, three are in the Persian Gulf, and one is off Australia. Rowan's active fleet includes 25 jackups contracted world-wide. Ten jackups are in the GOM, seven are in the Persian Gulf, five are in the North Sea, and one each are working off Southeast Asia, South America, and Mexico.
Worldwide, the average fleet age is about 21 years old with an average dayrate in the low $100s. Ensco's fleet is right on target with an average age of 21 years old and an average dayrate of $95k/day. However, Hercules' fleet is 32 years old and commands a dayrate in the mid-$50k range, while Seahawk complements it with a 31 year old fleet, which commands a dayrate in the low $40k range. Rowan's fleet is the youngest by far at an average of 13 years old and has the highest earning jackup fleet with average dayrates in the $130s.
Worldwide, 320 of 488 jackups are currently contracted, which puts worldwide utilization at about 66%. Hercules' fleet is below the utilization average at 52% and Seahawk is reporting a 35% utilization rate. Combined, the new Hercules fleet is averaging 45% utilization. However, both Ensco and Rowan's utilization rates are above the worldwide average at 76% and 71%, respectively.
Protecting the future
Hercules Offshore along with Apache Corp., Arena Offshore, Chevron, Delta Towing, Dynamic Offshore Resources, Energy XXI, Ensco, Hall-Houston Exploration, Helis Oil and Gas, Phoenix Exploration, Rowan Companies, Seahawk, W&T Offshore, and Walter Oil & Gas formed the Shallow Water Energy Security Coalition shortly after the administration declared a moratorium on offshore drilling. According to the coalition, its goal "is to educate policymakers and the general public about our business, including the industry's impressive record of safety and environmental responsibility, as well as the importance of drilling in shallow water to the economy and the security of US energy."
Despite the coalition's efforts, Seahawk could not survive the post-Deepwater Horizon GOM regulations. Though the BOEMRE has started granting permits to drill in the deepwater GOM again, the shallow water and deepwater permitting process remains slow. Unless things change soon, Seahawk Drilling won't be alone.
Follow Hercules and its projects worldwide by visiting SubseaIQ, or follow the developments, contracts and initiatives of the rigs through RigLogix.
Shell Expects to Drill in Alaska's Arctic in 2012
Shell Expects to Drill in Alaska's Arctic in 2012
Friday, April 15, 2011
Dow Jones Newswires
by Isabel Ordonez
Shell expects to start drilling in Alaska's Arctic waters in the summer of next year and have in place an oil-containment system specifically designed for the area ready at the same time, the head of the company's U.S. operations said Friday.
"Our aspiration is to drill in the 2012 season," Marvin Odum, president of Shell Oil Co., the U.S. unit of the Anglo-Dutch giant, told Dow Jones Newswires in a interview. "We are hopeful, but also cautions."
Shell still has to obtain a number of permits from the federal government in order to go ahead with its $3.5 billion investment to drill in the state's Beaufort and Chukchi seas. Shell's plans have been delayed by environmental lawsuits and permit issues on top of calls for better spill prevention and containment capabilities following BP's oil spill disaster in the Gulf of Mexico last year.
Odum said the company will wait until about September to see the amount of progress in the permitting process before making a final decision to start deploying the system needed to drilling next summer. "It takes about six months to build up the capacity you need to start the program," Odum said. "This is a very significant resource for the country, which is worth pursuing, and we are focused on getting it done."
Shell is planning to have in place an oil-containment system specifically designed to work in the cold-climate conditions of the Arctic by the time drilling starts, Odum said.
Shell said it has a three-tier, Arctic oil-spill response system consisting of an on-site oil-spill response fleet, near-shore barges and oil-spill response vessels, and onshore oil-spill response teams staged across the North Slope of Alaska that in the event of a blowout or spill could be ready to respond within one hour.
Separately, Odum said he believes it could take a year until the level of drilling activity in the Gulf of Mexico's deep water returns to normal levels, but that it could take longer if the federal government doesn't speed up the permitting process.
The Obama administration imposed a drilling moratorium in the area after BP's oil spill. The ban was lifted in October, but permits started to be issued only in late February.
Shell last month received the first authorization since the spill to drill a new well that complied with new regulations from the government. The company started drilling last week. However, Shell's production in the area will be about 50,000 barrels of oil equivalent a day lower this year due to the impact of the moratorium, Odum said.
The executive said the company is following closely the oil-shale acquisitions some of its U.S. rivals have recently made in the U.S. and that it is working on developing its oil-shale portfolio.
Odum said the world's oil markets are well supplied and that current high oil prices reflect the risk traders are seeing in short-term supply. He added that the ongoing oil glut at the Nymex delivery point of Cushing, Okla., could be solved in 2012 or 2013.
Friday, April 15, 2011
Dow Jones Newswires
by Isabel Ordonez
Shell expects to start drilling in Alaska's Arctic waters in the summer of next year and have in place an oil-containment system specifically designed for the area ready at the same time, the head of the company's U.S. operations said Friday.
"Our aspiration is to drill in the 2012 season," Marvin Odum, president of Shell Oil Co., the U.S. unit of the Anglo-Dutch giant, told Dow Jones Newswires in a interview. "We are hopeful, but also cautions."
Shell still has to obtain a number of permits from the federal government in order to go ahead with its $3.5 billion investment to drill in the state's Beaufort and Chukchi seas. Shell's plans have been delayed by environmental lawsuits and permit issues on top of calls for better spill prevention and containment capabilities following BP's oil spill disaster in the Gulf of Mexico last year.
Odum said the company will wait until about September to see the amount of progress in the permitting process before making a final decision to start deploying the system needed to drilling next summer. "It takes about six months to build up the capacity you need to start the program," Odum said. "This is a very significant resource for the country, which is worth pursuing, and we are focused on getting it done."
Shell is planning to have in place an oil-containment system specifically designed to work in the cold-climate conditions of the Arctic by the time drilling starts, Odum said.
Shell said it has a three-tier, Arctic oil-spill response system consisting of an on-site oil-spill response fleet, near-shore barges and oil-spill response vessels, and onshore oil-spill response teams staged across the North Slope of Alaska that in the event of a blowout or spill could be ready to respond within one hour.
Separately, Odum said he believes it could take a year until the level of drilling activity in the Gulf of Mexico's deep water returns to normal levels, but that it could take longer if the federal government doesn't speed up the permitting process.
The Obama administration imposed a drilling moratorium in the area after BP's oil spill. The ban was lifted in October, but permits started to be issued only in late February.
Shell last month received the first authorization since the spill to drill a new well that complied with new regulations from the government. The company started drilling last week. However, Shell's production in the area will be about 50,000 barrels of oil equivalent a day lower this year due to the impact of the moratorium, Odum said.
The executive said the company is following closely the oil-shale acquisitions some of its U.S. rivals have recently made in the U.S. and that it is working on developing its oil-shale portfolio.
Odum said the world's oil markets are well supplied and that current high oil prices reflect the risk traders are seeing in short-term supply. He added that the ongoing oil glut at the Nymex delivery point of Cushing, Okla., could be solved in 2012 or 2013.
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