OFFSHORE DRILLING MERGERS
REUTERS - Mergers among offshore oil drillers are raising hopes that consolidation could bring relief to a sector struggling to emerge from an industry downturn triggered by low crude prices.
Transocean Ltd, one of the world's largest offshore drilling contractors, on Tuesday agreed to buy Norwegian rival Songa Offshore SE for $1.1 billion. The deal follows Ensco Plc's pending purchase of Atwood Oceanics Inc in a transaction valued at $839 million.
The deals would bolster both companies' positions in major oil and gas-producing regions: Transocean in the North Sea and Ensco in offshore Australia. They come as oil prices remain below where they began the year, adding to worries about excess rig capacity continuing into the next year.
"I think everyone realizes that consolidation is important for the health of this market," Transocean Chief Executive Jeremy Thigpen said on a conference call on Tuesday.
Transocean's acquisition of Songa, which has a fleet of rigs designed for harsh drilling environments, also provides it with four advanced rigs contracted to Norwegian oil company Statoil.
Offshore drillers are leasing rigs at cash break-even prices and do not have much room to go lower, said Leslie Cook, an analyst with Wood Mackenzie.
"Although demand going forward is expected to be flat to moderate, one thing that may help in the North Sea is that some of those rigs are aging out," Cook said.
Despite the potential strategic benefits of the merger, U.S.-listed shares of Swiss-based Transocean touched a record low on Tuesday, following news of the deal, before closing down 5.7 percent at $7.91.
Not all offshore drillers are convinced consolidation is the right in the near term. Diamond Offshore said in July, when it released second-quarter earnings, that it was evaluating opportunities to acquire rigs and companies, but "deal economics simply don't work for us" at current prices. Noble Corp, during its earnings call in early August, also said it too soon to consider acquisitions.
Still, an increase in acquisitions may help offshore companies recover by allowing them to raise prices.
"As more assets are concentrated in fewer hands, the companies will try to move pricing higher," said James West, a senior managing director at investment bank Evercore ISI.
"I warmly welcome Schlumberger as our majority shareholder. It builds on our strategic alliance with Schlumberger since 2011 and our mutually beneficial business relationship since 2007. The combination of the technology knowhow and operational expertise of Schlumberger coupled to the financial strength of the Investment Funds, brings significant benefits to our customers and the Russian conventional land drilling market."
Royal Dutch Shell plc ("Shell") today announces the signing of binding definitive agreements between SOPC Holdings East LLC (a U.S. downstream subsidiary of Shell) and Saudi Refining Inc. ("SRI") (a wholly owned subsidiary of Saudi Arabian Oil Company (“Saudi Aramco”)) on the separation of assets, liabilities and businesses of Motiva Enterprises LLC (“Motiva”), a 50/50 refining and marketing joint venture.
With India's oil demand showing no signs of slowing, which in turn is attracting a lot of multinational firms to set up shop in the country, the government is stepping up efforts to ensure that state-run oil companies are on equal footing to compete, not just with domestic private players but also with global oil firms.
Rosneft Board of Directors has approved a strategic cooperation agreement with Qatar Investment Authority and Glencore, providing for further cooperation in upstream projects, logistics and global trading.
Shell’s net debt has more than doubled to $75bn since its £35bn takeover of BG Group was completed in February.
The deal was strongly appreciated by the investment community for the expansion of the Combined Company to the new crude oil and petroleum product production and supply areas, Rosneft adding 10% of liquid hydrocarbon production and 20% of refining throughput as well as for significant synergies arising from optimization of mutual oil supplies, transport and logistics costs, drilling cost reduction and joint use of production assets’ infrastructure, modern technologies and know-how.
Enbridge Inc. and Spectra Energy Corp. have entered into a definitive merger agreement under which the two companies will combine in a stock-for-stock merger transaction. The combination will create the largest energy infrastructure company in North America and one of the largest globally, the companies said, based on a pro-forma enterprise value of roughly $127 billion.
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GAZPROM - The parties discussed relevant issues related to bilateral cooperation, including the Baltic LNG project. Emphasis was placed on the priority measures aimed at developing a joint design concept (pre-FEED).
BHGE - U.S. Rig Count is up 11 rigs from last week to 1,063, with oil rigs up 8 to 869, gas rigs up 4 to 193, and miscellaneous rigs down 1 to 1. Canada Rig Count is up 13 rigs from last week to 195, with oil rigs up 8 to 127 and gas rigs up 5 to 68.
REUTERS - Brent crude futures had risen $1.02 cents, or 1.3 percent, to $81.28 a barrel by 0637 GMT. The contract dropped 3.4 percent on Thursday following sharp falls in equity markets and indications that supply concerns have been overblown. U.S. West Texas Intermediate (WTI) crude futures were up 80 cents, or 1.1 percent, at $71.77 a barrel, after a 3 percent fall in the previous session. WTI is on track for a 3.5 percent drop this week.
EIA - Brent crude oil spot prices averaged $79 per barrel (b) in September, up $6/b from August. EIA expects Brent spot prices will average $74/b in 2018 and $75/b in 2019. EIA expects West Texas Intermediate (WTI) crude oil prices will average about $6/b lower than Brent prices in 2018 and in 2019.