News Article | February 22, 2017
NYC-based PIRA Energy Group reports that Asian demand growth accelerates further. In the U.S., commercial inventories built last week, substantially widening the year-on-year stock excess. In Japan, crude runs rose to cyclical highs, imports rose and stocks built. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following: Commercial inventories built 11.1 million barrels last week, substantially widening the year-on-year stock excess to 50 million barrels or 3.8%. Crude stocks built 9.5 million barrels to a new record high of 518 million barrels, 45 million barrels higher than the year before and 187 million barrels higher than the same week in 2014. Cushing crude stocks drew 0.7 million barrels. Another large overall crude stock build is forecast for this week’s data, although stocks at Cushing are set to fall. Also expect large major light product stock declines as crude runs fall to their seasonal lows and demand rebounds, helped by the three day weekend. Call on U.S. Gas Here to Stay Net shipments to Mexico are on track to modestly increase month-on-month, with volumes inching ~0.1 BCF/D higher. Looking ahead this year, exports will continue to showcase growing strength, as large scale cross-border projects commence service. All told, 2017 balances suggest U.S. exports will increase by an impressive ~0.7 BCF/D year-on-year. Likewise, despite escalating trade rhetoric from both governments, fundamentals continue to foreshadow robust cross-border flows over the medium term. Price Strength to Continue, as Hydro Reserves below Normal in Southern Europe Prices are expected to remain supported for March and 2Q, as widely below normal hydro levels across Continental and Southern Europe will spur additional thermal dispatching. While a wider spark spread is the most likely outcome in Italy, we see upsides for the German dark spread – through higher electricity flows to Switzerland/France. U.S. ethanol prices rebounded to a six-week high the week ending February 13. Manufacturing margins increased from a very low base for the second straight week. D6 RIN prices rose. Only 12 plants were operating in Brazil’s South-Central region and production plummeted. European ethanol prices soared to a 14-month high. Unseasonably warm temperatures last week brought predictable results as the first social media pictures of farmers planting corn in places as far north as central Illinois were published. More of stunt than substantive given whatever is planted in those areas currently is not insurable; it does speak to a certain anxiousness being displayed by some U.S. producers. Whether that’s just a bit of Spring Fever, a wary eye on current prices, or a combination of the two, the only real work being done at the moment is the laying down of nitrogen in preparation for planting corn later down the road. U.S. Economy Is Picking Up Pace, but Should Be Doing Better Since the November election, key U.S. confidence indicators have surged higher, and this has been very positive for the growth outlook. But the key issue now is whether activity data will track stronger confidence. So far, available data were somewhat disappointing for consumer spending and housing; and we are still waiting for relevant activity data to be released for manufacturing output and business investment. Available data suggested that Chinese people’s spending spirits remained strong in January. In Japan, the latest GDP data contained both positives and negatives. The Feb 15th full EU Parliament vote on post-2020 EU ETS market reforms was a key long-term policy signal, with focus now shifting to talks in the EU Council. Near-term power sector EU Allowance (EUA) demand has been strong, with coal-fired generation supported by colder weather, declining non-thermal generation, and a widening spread to gas prices. However, this has mostly kept EUA prices stable. PIRA expects EUA prices to stay flat prior to a compliance-related rise in April. EUAs could move lower as higher power sector EUA demand winds down, but productive post-2020 reform talks in the EU Council remains a key bullish wildcard. Despite a downward drift in the first half of the week, seaborne coal prices closed on Friday modestly above prior-week levels. The upward momentum seems to have been spawned by an impending meeting between China’s major coal producers and industry groups. The market seems to have been taken somewhat off guard by the impending return of the working day cap at Chinese coal mines on April 1, although PIRA has consistently stated the cap would go back into force on that date for several months. The market still is on a structurally downward trend, with the end of peak seasonal demand closing in. However, PIRA believes that pockets of strength remain, particularly as the European gas market is looking to have less coal-to-gas substitution, and Chinese imports could experience significant upside after 1Q17. Japanese crude runs again moved higher and set a new cyclical high. Crude imports increased and more than covered the run rise, thus building crude stocks 1.8 million barrels. Finished product demand fell back and major product stocks built about 0.5 million barrels. Gasoline demand rose but higher yield and lower exports helped stocks build. Gasoil demand was lower. Yield rose and refinery output was higher, and stocks built. Kerosene demand fell back and seen as within seasonal norms. The inventory draw rate slowed further from 148 MB/D to 95 MB/D. Refining margins were again higher on the week. Levels remain healthy. All the available trade data for last year has finally arrived and a clear and interesting interplay in European supplies nicely shows just how much relying on spot LNG supplies can increase volatility and make Europe vulnerable during periods of high global demand. As a measure of this vulnerability, we take a look at how pipeline supply prices compared against LNG and hub pricing – as well as how individual suppliers compared. From digging into the numbers, the most interesting takeaway is how pipeline supplies became such a crucial source of affordable gas by the end of the year, especially as LNG supplies quickly dwindled. Additionally, despite headlines talking about gas convergence, there is still an incredible range of pricing just within Europe alone. The week ending February 13, U.S. ethanol inventories built for the sixth straight week, increasing by 415 thousand barrels to a 46-week high 22.5 million barrels. Nearly all of the build occurred in the Gulf Coast region, which is the primary hub for U.S. exports. Domestic ethanol production dropped 15 MB/D to a still-high 1,040 MB/D. Ethanol-blended gasoline manufacture tumbled to 8,462 MB/D from 8,685 MB/D, erasing most of the gain from the prior week. The USDA long-term projections (LTP), released on Feb 16 in anticipation of the Outlook Forum, offered little to no change from the so-called “early release” around the election. Corn acreage for 2017 remained at 90.0 million acres, soybeans at 85.5 million, while wheat came in at 48.5 million. Total acreage for all major field crops is expected to reach 248.9 million acres, down 5.2 million from 2016. Total acreage, including CRP, which is down 300K in 2017 to 23.5 million, came in at 272.4 million, down 5.5 million from last year. Another bout of large downward revisions to load forecasts has wiped out any optimism we had with the move to 100% Capacity Performance (CP) construct for the forthcoming 2020/2021 capacity auction. That, combined with continued expectation of new entry, leads PIRA to expect the RTO auction to clear at $90-$100/MW-day for the CP product (weaker year-on-year). The EMAAC and COMED LDAs should continue to clear higher than the RTO, though EMAAC could be under pressure too. DAYTON LDA could also clear higher if the proposed retirements go through. These weaker RTO level results could continue in the subsequent auction (2021/2022) as there looks to be room for another downward load forecast revision. The S&P 500 set another record this past week. Other indicators were more mixed. Volatility increased slightly, while emerging market debt (EMB) was slightly lower. High yield debt, however, posted solid gains with the overall market. Despite weakening energy prices, currencies of many of the commodity producers still appear to be strengthening. On the commodity front, total, energy, and ex-energy all fell, but precious metals gained. PIRA's latest update of major country Asian product demand indicates that year-on-year growth continues to accelerate. Data actuals cover the three-month period Nov-Jan. for China and India, while Japan, Taiwan, and Korea pick up data Oct-Dec. Versus the assessment last month, stronger growth in China, along with minor improvement in Japan and Taiwan, more than offset a slowdown in India’s demand growth. Chinese economic data continues to show renewed acceleration on a host of fronts, with trade data for January picking up notably, particularly on the import front. Loan issuance for January was also recently reported as strong. The February gas-weighted heating degree day (GWHDD) tally has been slashed once more — a seemingly daily occurrence. Now, the projected monthly GWHDD total stands at ~595, or ~25% milder than normal. Understandably, such a degree-day meltdown has been influencing the market’s expectations for March. Recent price action suggests that some players have already thrown in the towel on winter with Henry Hub cash prices trading below the psychological $3/MMBtu mark since last Friday, and brushing against $2.80/MMBtu yesterday. PIRA’s forthcoming Gas Forecast Monthly, to be released next week, will highlight the range of possibilities on demand/storage if such a mild pattern extends into next month, or if there is one last bout of chill. As noted in last week’s edition, the less constructive fundamentals at play already caused us to downwardly adjust our price outlook for March and April. The extension of such loose fundamentals to close the heating season could cause an additional reassessment for 2Q17 prices. More record highs were set this past week. The U.S. market moved to new record highs with the strongest performing sectors being banking, industrials, and technology. Energy was a poor performer, down -1.8%. Internationally, many of the tracking indices moved higher, but lagged the performance in the U.S. Doing the best internationally were Latin America and Europe, while Japan was down modestly. Canadian propane inventories declined 3.2 MMB in January to a low 4.3 million barrels. Stocks were 1.2 MMB below where they began February in 2016. As essentially all US imports originate in Canada, low stocks there indicate that the current high rate of imports is not sustainable. Meanwhile Canadian butane stocks fell 1 MMB to 2.8 million barrels, near last year’s levels. At mid-month, February looks to be 7% warmer than the 10-year normal for the three major OECD markets with oil-heat demand weaker than normal by 365 MB/D. The three major regions are roughly 13% warmer on a 30-year-normal basis. Will Japan’s Losing Streak on Demand Continue as LNG Contracts Build? Coming off of a second consecutive year of demand losses, Japan is set for a massive influx in newly contracted LNG over the coming two years. By PIRA estimates, the volume will far exceed Japanese demand and buyers will be pushing unwanted volume back in the market or not lift it at all. Will the U.S. Continue to Dominate Global Shale Oil Production? In spite of significant shale oil resources outside the U.S., the U.S. is likely to continue to dominate production for the next 20 years, even if conditions for successful shale oil development significantly improve abroad. Non-U.S. shale represents 78% of global resources but accounts for only 10% of current global shale liquids production. As conditions to develop shale resources outside the U.S. improve over time, PIRA forecasts a significant increase in non-U.S. shale production by 2035. Faster improvement in conditions abroad (e.g. fiscal terms, equipment to drill/frack, regulatory process, access to technology, etc.) is possible but the U.S. with its vast resources and very favorable conditions is likely to continue to dominate shale production for the next 20 years. India’s domestic natural gas price is set to rise by 8% for the six months period beginning April 2017, in line with the trends in the global benchmark prices. The increase in gas price will push up prices of automobile fuel compressed natural gas (CNG), cooking fuel piped natural gas (PNG), prices of power produced from gas-based plants and bring relief for upstream companies including the state run explorer Oil and Natural Gas Corp. (ONGC) as well as gas distributers like Indraprastha Gas Limited (IGL). The Dakota Access pipeline (DAPL) received final approval from the U.S. Army Corps of Engineers. The 470 MB/D pipeline running from North Dakota to Patoka, Illinois, is expected to be completed in the next few weeks, with line fill occurring in April and May, and full start-up likely in late May or June. At Patoka, the DAPL line will connect to ETP’s Energy Transfer Crude Oil (ETCO) pipeline, which terminates in Nederland, Texas. The combined system, known as the Bakken pipeline, will supply light sweet Bakken crude from North Dakota to Midwest refineries with connections to Patoka, as well as to Gulf Coast refineries connected to Nederland. Pearl GTL down Most of 1Q2017? The Shell-operated Pear GTL (gas to liquids) complex in Qatar could be offline for approximately two months in 1Q2017, perhaps longer, as mechanical problems with the plant are repaired. The problem started in late December 2016 when Shell announced the plant was being operated at 50% of capacity. The plant is currently shut in. The GTL project has a capacity of 260 MB/D (120 MB/D gas liquids and 140 MB/D GTL). However, due to lack of a market for ethane, the effective capacity is 230 MB/D since 30 MB/D of ethane extraction is not being utilized. The information above is part of PIRA Energy Group's weekly Energy Market Recap - which alerts readers to PIRA’s current analysis of energy markets around the world as well as the key economic and political factors driving those markets. Click here for additional information on PIRA’s global energy commodity market research services.
News Article | November 28, 2016
Cipla, Asian Paints, Hero MotoCorp, Wipro and Adani Ports are best gainers while SBI, Axis Bank, ICICI Bank, ONGC and GAIL are failures in the Sensex.
News Article | February 21, 2017
Fourth Quarter Order Intake Maintains Leading Position in Middle East with 2016 Book-to-Bill of 1.0x $4.3B in Backlog and Schedule Responsiveness and Flexibility Drive Higher Guidance Profitable Full-Year 2016 Result of Strong Execution and Focus on Cost Management Proven Success of One McDermott Way Company to Host Conference Call and Webcast Today at 7:30 a.m. Central Time HOUSTON, Feb. 21, 2017 (GLOBE NEWSWIRE) -- McDermott International, Inc. (NYSE:MDR) (“McDermott,” the “Company,” “we” or “us”) today announced financial and operational results for the fourth quarter and full-year ended December 31, 2016. 1 Adjusted Operating Income includes the following adjustments to GAAP Operating Income: 2 Adjusted Net Income includes the adjustments to GAAP Operating Income mentioned above and the following adjustment for non-operating activity: 3 Tax effects of Non-GAAP adjustments represent the tax impacts of the adjustments during the period. The Non-GAAP adjusting items are primarily attributable to tax jurisdictions in which we currently do not pay taxes and, therefore, no tax impact is applied to them. For the Non-GAAP adjusting items in jurisdictions where taxes are paid, the tax impacts on those adjustments are computed, individually, using the statutory tax rate in effect in each applicable taxable jurisdiction. 4 The calculations of total and per share adjusted net income and adjusted operating income and margins are shown in the appendix entitled “Reconciliation of Non-GAAP to GAAP Financial Measures.” The appendix also includes additional information related to the adjustments mentioned above. “I am extremely pleased to report a profitable full-year 2016, despite the prolonged downturn. Our 2016 operational and financial performance is a direct reflection of the changes made over the past three years. The fourth quarter was an excellent quarter operationally, with strong order intake of $1 billion and ending backlog of $4.3 billion. Unfortunately, net income ended in a slight loss due to an increase in the estimated costs on our INPEX Ichthys project in Australia. This increase represents costs to replace failed subsea-pipe connector components which were a standard design and supplied by a reputable supplier. Despite the increased costs, the project remains in a profitable position. Our top priority is collaborating with the customer and supplier to replace the failed components and maintaining the agreed project schedule,” said David Dickson, President and Chief Executive Officer of McDermott. “2016 has proven to be a pivotal year for McDermott, as we turned the corner from stabilizing and optimizing the business to focusing on growth and building a sustainable, profitable business for the future. Our strategic initiatives such as One McDermott Way and Taking the Lead have made great strides this year, as seen through a Middle East customer approving work share with fabrication in our Batam fabrication yard and our Middle East Area reaching an impressive 48 million man-hours LTI free. Looking forward to 2017, we plan to build upon the successes of 2016, and we began the year by enhancing our current fleet through the strategic purchase and subsequent sale leaseback of the Amazon. In 2017, we will continue to build upon our strengthened relationships by providing customer-driven solutions centered on our engineering expertise, vertically integrated capabilities and in-market presence, while we also increase our focus on technology and grow in our key markets as we prepare for the upturn,” Dickson said. Fourth quarter 2016 earnings attributable to McDermott stockholders, in accordance with U.S. generally accepted accounting principles (“GAAP”) were a net loss of $0.5 million, or $0.00 per fully diluted share, compared to a net loss of $18.7 million, or $0.08 per fully diluted share, for the prior-year fourth quarter. We generated fourth quarter 2016 adjusted net income of $5.6 million, or $0.02 per adjusted fully diluted share, excluding restructuring charges of $0.6 million, an impairment loss of $10.9 million related to a marine asset and the year-end non-cash MTM pension gain of $5.4 million, compared to an adjusted net income of $15.3 million, or $0.05 per adjusted fully diluted share, excluding restructuring charges of $8.7 million and the year-end non-cash MTM pension loss of $26.0 million, in the prior-year fourth quarter. This quarter, we recognized a reduction of $13.0 million in income tax expense as a result of a change in valuation allowances associated with deferred tax assets recognized due to improving results in Saudi Arabia and Mexico. Additionally, we now operate under a tax holiday in Malaysia which further reduced income taxes in the fourth quarter and will also benefit future periods. The Company reported fourth quarter 2016 revenues of $641.8 million, a decrease of $25.6 million, compared to revenues of $667.4 million for the prior-year fourth quarter. The key projects driving revenue for the fourth quarter of 2016 were the INPEX Ichthys, Saudi Aramco Long Term Agreement II (LTA II), KJO Hout and ONGC Vashishta projects. The decrease from the prior-year fourth quarter is primarily due to Pemex PB Litoral project and the additional costs on the INPEX Ichthys project caused by the failed subsea-pipe connector components, partially offset by increased activity on the Saudi Aramco LTA II Lump Sum projects. Our operating income for the fourth quarter of 2016 was $6.3 million, or an operating margin of 1.0%, compared to $16.3 million, or an operating margin of 2.4%, for the fourth quarter of 2015. Our adjusted operating income for the fourth quarter of 2016 was $12.3 million, or an adjusted operating margin of 1.9%, excluding the restructuring charges, impairment loss and MTM pension adjustment mentioned above, compared to $51.0 million, or an adjusted operating margin of 7.6%, for the fourth quarter of 2015, excluding the restructuring charges and pension losses mentioned above. Operating income for the fourth quarter of 2016 was primarily driven by marine activity on the INPEX Ichthys, Saudi Aramco LTA II and Pemex Ayatsil-C projects and offset by the increase in estimated costs at completion on our INPEX Ichthys project in Australia. During January 2017, we identified failures in supplier-provided, subsea-pipe connector components previously installed on the INPEX Ichthys project. These failed components were a standard design provided by a reputable supplier. As a result, we have determined that our estimated costs at completion for the project, as a whole, will increase by $34 million due to costs attributable to replacing the failed components. These increased costs reduced fourth quarter operating income by $31 million, and net income by $25 million after taxes. Cash provided by operating activities in the fourth quarter of 2016 was $52.6 million, a decrease compared to the $60.6 million of cash provided in the fourth quarter of 2015. This was primarily driven by lower collections on the INPEX Ichthys project compared to the fourth quarter of 2015. Net income attributable to McDermott stockholders, in accordance with GAAP, for the full-year of 2016 was $34.1 million, or $0.12 per fully diluted share, compared to a net loss of $18.0 million, or $0.08 per fully diluted share, for the full-year of 2015. For the full-year 2016, adjusted net income was $89.4 million, or $0.31 per fully diluted share, excluding restructuring charges of $11.3 million, impairment charges of $55.0 million, a gain of $5.0 million on the exit from our joint venture with THHE and a gain of $5.4 million non-cash MTM pension adjustment, compared to adjusted net income of $71.2 million, or $0.25 per adjusted fully diluted share, excluding restructuring charges of $40.8 million, impairment charges of $6.8 million, a legal settlement of $16.7 million and non-cash MTM pension loss of $26.0 million during the full-year of 2015. Our income tax provision for the full-year of 2016 included approximately $13.0 million of tax adjustments recorded during the fourth quarter of 2016 as a result of a change in valuation allowances associated with deferred tax assets recognized due to improving results in Saudi Arabia and Mexico. Additionally, we now operate under a tax holiday in Malaysia which further reduced income taxes in 2016 and will also benefit future years. The Company reported revenues of $2,636.0 million for the full-year of 2016, a decrease of $434.3 million, compared to $3,070.3 million of 2015 revenues. The decrease was primarily due to lower activity on our INPEX Ichthys project and completion of the 2015 campaign of the Brunei Shell Pipeline Replacement project. Revenue for the full-year of 2016 was primarily driven by the INPEX Ichthys, Saudi Aramco LTA II and Marjan power system replacement, and the RasGas Flow Assurance and Looping projects. Our operating income for the full-year of 2016 was $142.3 million, or an operating margin of 5.4%, compared to $112.7 million, or an operating margin of 3.7%, for the comparable 2015 period. Our adjusted operating income for the full-year of 2016 was $203.1 million, or an adjusted operating margin of 7.7%, excluding the restructuring charges, impairment charges and pension MTM gain mentioned above, compared to $203.0 million, or an adjusted operating margin of 6.6%, for the full-year 2015, excluding the restructuring charges, impairment loss, legal settlement and pension MTM loss mentioned above. Operating income for the full-year of 2016 was primarily driven by marine activity on the INPEX Ichthys, Saudi Aramco’s LTA II, Marjan power system replacement, and 12 Jackets projects, as well as a pipeline repair project in the Middle East region. Our operating margin for the full-year of 2016 was higher due to project execution driven improvements, final closeouts, change orders driven by alignment with customer needs and the full impact of our cost restructuring programs. Cash provided by operating activities in the full-year of 2016 was $178.2 million, an increase compared to the $55.3 million of cash provided in 2015. Overdue payments received from Pemex during the first quarter, as well as steady collections in the Middle East, positively impacted cash provided by operating activities for 2016. 1 The calculations of segment adjusted operating income and margins are shown in the appendix entitled “Reconciliation of Non-GAAP to GAAP Financial Measures.” As of December 31, 2016, the Company’s backlog was $4.3 billion, compared to $3.9 billion at September 30, 2016. Of the December 31, 2016 backlog, approximately 84% was related to offshore operations and approximately 16% was related to subsea operations. Order intake in the fourth quarter of 2016 totaled $1.0 billion, resulting in a book-to-bill ratio of 1.7x, with order intake of $2.7 billion and a book-to-bill ratio of 1.0x for the year ended December 31, 2016. At December 31, 2016, the Company had bids outstanding and target projects of approximately $2.2 billion and $14.4 billion, respectively, in its pipeline that it expects will be awarded in the market through March 31, 2018. In total, the Company’s potential revenue pipeline, including backlog, was $20.9 billion as of December 31, 2016. The Americas, Europe and Africa (“AEA”) Area, during the fourth quarter of 2016, completed the successful installation of the Pemex Ayatsil-C 7,500 ton jacket in the Bay of Campeche, Mexico, demonstrating customer alignment and proven execution. The Ayatsil-C jacket was launched off the McDermott I-600 barge and installed by the DB50. Also in Mexico, fabrication of the compression platform on the Abkatun A-2 project commenced in October and is proceeding ahead of plan. The project remains on track to meet the 900-day execution schedule. Strategically focusing on our engineering expertise as an enabler and building our in-market capabilities, we expanded our Mexico City office by hiring 80 engineers and support resources working to the One McDermott Way. In our Altamira fabrication yard, upgrades commenced to increase skidway and loadout capabilities and provide covered blast and paint facilities and are expected to be completed in April 2017. Front-end engineering and design (“FEED”) and early detailed engineering for a Caribbean gas development has continued throughout the quarter and remains on track to meet the agreed deliverables; and a FEED project for a SURF facility off the coast of East Africa was substantially completed by year-end and is in the final stages of closeout. In the Middle East (“MEA”) Area, fabrication activity in the fourth quarter was driven by Saudi Aramco projects and the KJO Hout jacket and deck structures. Marine operations continued in both Saudi Arabia and Qatar. Execution of the Saudi Aramco Lump Sum LTA II project, awarded in 2015, is progressing according to schedule, and is in the fabrication phase, with work being shared between the Jebel Ali and Dammam fabrication facilities. Cooperation and consistency between all facilities is driven by our One McDermott Way and as a result, a Middle East customer approved work share on a specific project for the fabrication of jackets in our Batam yard. The KJO Hout Jacket and topside will be installed and pre-commissioned in the first quarter of 2017; the project is more than 55% complete and is expected to be fully complete in the second quarter of 2017. The Marjan power systems project continued to meet key milestones in line with client requirements, as did the three Saudi Aramco jobs awarded in the second quarter of 2016. The three jobs awarded in the second quarter are in the preliminary stages of fabrication, with activity expected during 2017. Fabrication and installation of the Bul Hanine jackets is complete, with minor closeout work remaining. In Qatar, we focused on offshore work for the RasGas Flow Assurance and Looping project, which remains on schedule. The MEA area also continued to demonstrate McDermott’s Taking the Lead initiative, reaching an impressive 48-million man-hours lost time incident (“LTI”) free. In the Asia (“ASA”) Area, the INPEX Ichthys project continues to progress as we work collaboratively with the customer and supplier to rectify the subsea connector component issue and expect to keep in line with the overall project schedule. The DLV 2000 completed her second campaign on the project alongside the CSV 108. During the fourth quarter, the DLV 2000 installed infield umbilicals, subsea structures and subsea spools. The Woodside Greater Western Flank Phase 2 pipeline project continues with the engineering, procurement and preparations for the start of fabrication in the first quarter of 2017. The Vashishta project for ONGC continues to achieve significant progress, commencing the offshore phase of the project with the mobilization of the DB30 and supporting fleet. Fabrication of the subsea structures continues in line with the project schedule at Larsen & Toubro, our consortium partner’s, fabrication yard in Kattupalli. The mobilization of McDermott’s mobile spoolbase was completed, and production of the pipeline stalks has progressed well in preparation for the arrival of the NO 105 in the first quarter of 2017 when she is scheduled to install the deepwater pipeline sections. On the Brunei Shell Petroleum transportation and installation project, pre-installation survey for the pipelines was completed in the fourth quarter of 2016. The project continues to prepare for the offshore campaign scheduled to commence in the second quarter of 2017. Fabrication of the Yamal LNG modules in our Batam yard is progressing well, with 89% progress achieved. Also in Batam, fabrication and loadout of the subsea modules for the TechnipFMC Jangkrik project was completed in the fourth quarter with a total weight of approximately 3,100 tonnes. Early in 2017, we completed the purchase of a newly built deepwater pipelay and construction vessel named the Amazon. The vessel is equipped with 49,514 square feet (4,600 square meters) of deck space complete with two 440-ton (400-tonne) cranes, a service speed of 12 knots and accommodation for up to 200 crew and service staff. We plan to upgrade the vessel to address the ultradeepwater market with a state-of-the-art J-lay system and the latest vessel technology. In the near term, we plan to make minor capital expenditure investments to bring the vessel up to Company standards and use the vessel on existing construction and pipelay projects. In February of 2017, funding for the vessel acquisition was secured through a sale and leaseback arrangement under which we have control of the vessel in exchange for a daily charter-hire rate. The planned upgrade to the state-of-the-art J-lay system and related financing are expected to be considered in line with market conditions. All remaining activities for the McDermott Profitability Initiative (“MPI”) were completed in the third quarter of 2016. MPI resulted in annualized cash savings of $150 million. All remaining activities for the Additional Overhead Reduction (“AOR”) program, which was initiated in the fourth quarter of 2015, were completed in the fourth quarter of 2016 and achieved in-year cash savings of $46 million and annualized cash savings of $51 million. Our restructuring costs for the fourth quarter of 2016 were $0.6 million and $11.3 million for the full-year of 2016. ~ = approximately 1 Our forecasted U.S. GAAP net income attributable to the Company does not include any amount representing forecasted pension actuarial gain or loss, because we have no basis to estimate pension actuarial gain or loss amounts for the forecast period and cannot estimate such amount without unreasonable effort. 2 Net Interest Expense is gross interest expense less capitalized interest and interest income. 3 The calculations of EBITDA, Free Cash Flow and Adjusted Free Cash Flow, which are Non-GAAP measures, are shown in the appendix entitled “Reconciliation of Forecast Non-GAAP Financial Measures to GAAP Financial Measures.” 4 Ending Gross Debt does not include any reduction related to debt issuance costs. In 2017, we expect higher revenue and margins driven by order intake as well as our responsiveness and flexibility in meeting customer drivers with associated rescheduling of work from 2018 into 2017. Our expectations for capex were increased due to the purchase of the Amazon. The Amazon purchase capex outflow will be offset by a sale and leaseback arrangement. Our guidance for 2017 ending cash, cash from operating activities and free cash flow was negatively impacted by the additional costs associated with the failed, supplier-provided, subsea-pipe connector components on the INPEX Ichthys project. Additionally, we are expecting negative free cash flow, primarily driven by a large use of working capital attributable to the ramp-up of the Pemex Abkatun Project and other projects in Asia and the Middle East. The use of working capital for Abkatun is expected to be partially offset by specific project related financing. It is reasonably possible that costs on the INPEX Ichthys project could increase by an additional $10 million due to the failed subsea-pipe connector components on the Ichthys project; however, that is not reflected in guidance at this time. Weighted average common shares outstanding on a fully diluted basis were approximately 241.3 million and 238.7 million for the quarters ended December 31, 2016 and 2015, respectively, and 284.2 million and 238.2 million for the years ended December 31, 2016 and 2015, respectively. Common shares for the settlement of the common stock purchase contracts related to the Tangible Equity Units (“TEUs”) representing 40.8 million additional shares, as well as other potentially dilutive shares, were included on an adjusted and unadjusted basis for the year ended December 31, 2016. McDermott has scheduled a conference call and webcast related to its fourth quarter and full-year 2016 results today at 7:30 a.m. U.S. Central Time. Interested parties may listen over the Internet through a link posted in the Investor Relations section of McDermott’s website. A replay of the webcast will be available for seven days after the call and may be accessed by dialing (855) 859-2056, Passcode 46148001. In addition, a presentation will be available on the Investor Relations section of McDermott’s website that contains supplemental information on McDermott’s financials, operations and 2017 Guidance. McDermott is a leading provider of integrated engineering, procurement, construction and installation (“EPCI”), front-end engineering and design (“FEED”) and module fabrication services for upstream field developments worldwide. McDermott delivers fixed and floating production facilities, pipelines, installations and subsea systems from concept to commissioning for complex Offshore and Subsea oil and gas projects to help oil companies safely produce and transport hydrocarbons. Our customers include national and major energy companies. Operating in approximately 20 countries across the world, our locally focused and globally integrated resources include approximately 12,400 employees, a diversified fleet of specialty marine construction vessels, fabrication facilities and engineering offices. We are renowned for our extensive knowledge and experience, technological advancements, performance records, superior safety and commitment to deliver. McDermott has served the energy industry since 1923, and shares of its common stock are listed on the New York Stock Exchange. To learn more, please visit our website at www.mcdermott.com This press release includes several “non-GAAP” financial measures as defined under Regulation G of the U.S. Securities Exchange Act of 1934, as amended. We report our financial results in accordance with U.S. generally accepted accounting principles, but believe that certain non-GAAP financial measures provide useful supplemental information to investors regarding the underlying business trends and performance of our ongoing operations and are useful for period-over-period comparisons of those operations. Non-GAAP measures are comprised of the total and diluted per share amounts of adjusted net income (loss) attributable to the Company and adjusted operating income and operating income margin for the Company as a whole and each of its segments, in each case excluding the impact of certain identified items. The excluded items represent items that our management does not consider to be representative of our normal operations. We believe that total and diluted per share adjusted net income (loss) and adjusted operating income and operating margin are useful measures for investors to review because they provide a consistent measure of the underlying financial results of our ongoing business and, in our management’s view, allows for a supplemental comparison against historical results and expectations for future performance. Furthermore, our management uses adjusted net income (loss) and adjusted operating income as a measure of the performance of our operations for budgeting and forecasting, as well as employee incentive compensation. However, Non-GAAP measures should not considered as substitutes for operating income, net income or other data prepared and reported in accordance with GAAP and should be viewed in addition to the Company’s reported results prepared in accordance with GAAP. The Forecast non-GAAP measures we have presented in this press release include forecast free cash flow, adjusted free cash flow and EBITDA, in each case excluding the impact of certain identified items. We believe these forward-looking financial measures are within reasonable measure. We define “free cash flow” as cash flows from operations less capital expenditures. We believe investors consider free cash flow as an important measure, because it generally represents funds available to pursue opportunities that may enhance shareholder value, such as making acquisitions or other investments. Our management uses free cash flow for that reason. Additionally, adjusted free cash flow represents free cash flow plus cash expected as a result of the sale leaseback arrangement for the acquisition of the Amazon vessel. We define EBITDA as net income plus depreciation and amortization, interest expense, net, and provision for income taxes. We have included EBITDA disclosures in this press release because EBITDA is widely used by investors for valuation and comparing our financial performance with the performance of other companies in our industry. Our management also uses EBITDA to monitor and compare the financial performance of our operations. EBITDA does not give effect to the cash that we must use to service our debt or pay our income taxes, and thus does reflect the funds actually available for capital expenditures, dividends or various other purposes. In addition, our presentation of EBITDA may not be comparable to similarly titled measures in other companies’ reports. You should not consider EBITDA in isolation from, or as a substitute for, net income or cash flow measures prepared in accordance with U.S. GAAP. Reconciliations of these non-GAAP financial measures and forecast non-GAAP financial measures to the most comparable GAAP measures are provided in the tables set forth at the end of this press release. In accordance with the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, McDermott cautions that statements in this press release which are forward-looking, and provide other than historical information, involve risks, contingencies and uncertainties that may impact McDermott's actual results of operations. These forward-looking statements include, among other things, statements about backlog, bids and change orders outstanding, target projects and revenue pipeline, to the extent these may be viewed as indicators of future revenues or profitability, expectations and plans for 2017, the expected timing and specifications of upgrades to our Altamira fabrication yard, the expected scope, execution and timing associated with the projects discussed, the expected utilization of McDermott’s vessels and McDermott’s earnings and other guidance for 2017 and expectations related thereto. Although we believe that the expectations reflected in those forward-looking statements are reasonable, we can give no assurance that those expectations will prove to have been correct. Those statements are made by using various underlying assumptions and are subject to numerous risks, contingencies and uncertainties, including, among others: adverse changes in the markets in which we operate or credit markets, our inability to successfully execute on contracts in backlog, changes in project design or schedules, the availability of qualified personnel, changes in the terms, scope or timing of contracts, contract cancellations, change orders and other modifications and actions by our customers and other business counterparties, changes in industry norms and adverse outcomes in legal or other dispute resolution proceedings. If one or more of these risks materialize, or if underlying assumptions prove incorrect, actual results may vary materially from those expected. You should not place undue reliance on forward looking statements. For a more complete discussion of these and other risk factors, please see McDermott's annual and quarterly filings with the Securities and Exchange Commission, including its annual report on Form 10-K for the year ended December 31, 2016. This press release reflects management's views as of the date hereof. Except to the extent required by applicable law, McDermott undertakes no obligation to update or revise any forward-looking statement. McDERMOTT INTERNATIONAL, INC. RECONCILIATION OF NON-GAAP TO GAAP FINANCIAL MEASURES McDermott reports its financial results in accordance with the U.S. generally accepted accounting principles (“GAAP”). This press release also includes several Non-GAAP financial measures as defined under the SEC’s Regulation G. The following tables reconcile Non-GAAP financial measures to comparable GAAP financial measures: 1 Restructuring charges were primarily associated with personnel reductions, facility closures, consultant fees, lease terminations and asset impairments. 2 Impairment Charges: 3 During the third quarter of 2016, we mutually and amicably exited our joint venture with THF, a subsidiary of THHE, in Malaysia. We sold our THF interest to THHE and recognized a $5.0 million gain is recorded in Other income (expense), net. This gain is not expected to be repeated in the future. 4 Costs related to a legal settlement of $16.7 million were recorded during the third quarter of 2015 5 Our Non-GAAP measures exclude 100% of pension actuarial loss (gain) included in our Consolidated Financial Statements. The $5.4 million gain from year-end MTM pension adjustments for the quarter and year ended December 31, 2016, and $26.0 million loss from year-end MTM pension adjustments for the quarter and year ended December 31, 2015. These adjustments are recorded in selling, general and administrative expenses in the fourth quarter of each respective year in accordance with our pension accounting policy. Actuarial gains and losses are primarily driven by changes in the actuarial assumptions, discount rates and actual return on pension assets. The $5.4 million 2016 MTM adjustment was comprised of a $4.5 million gain on our pension plan assets and $0.9 million of lower actuarial pension liabilities. The $4.5 million of MTM adjustment is the difference between $21.6 million of expected return on pension plan assets recognized during 2016 and a $26.1 million actual gain on plan assets as of December 31, 2016. The $26.0 million of 2015 MTM adjustment for actuarial loss was comprised of a $52.0 million actuarial loss on our pension plan assets, partially offset by a $26.0 million gain due to an increase in discount rates. The $52.0 million actuarial loss on our pension plan assets is the difference between $29.5 million of expected return on pension plan assets recognized during 2015 and $22.5 million of actuarial loss on plan assets as of December 31, 2015. Our non-GAAP pension adjustment does not include $1.0 million and $6.2 million of net pension benefit recognized during 2016 and 2015, respectively, related to expected return on plan assets net of interest costs for our non-contributory defined benefit pension plans. 6 Represents tax effects of Non-GAAP adjustments. The Non-GAAP adjusting items are primarily attributable to tax jurisdictions in which we currently do not pay taxes and, therefore, no tax impact is applied to them. For the Non-GAAP adjusting items in jurisdictions where taxes are paid, the tax impacts on those adjustments are computed, individually, using the statutory tax rate in effect in each applicable taxable jurisdiction. 7 Includes the Non-GAAP adjustments described in footnotes 1, 2, 4, and 5 above. The $5.0 million adjustment described in footnote 3 above was excluded as the gain was reflected in Other Income (expense), net in our Consolidated Statement of Operations and thus was excluded from operating income. 8 Diluted EPS is calculated using a share count determined by whether the period has a net income or a net loss. In the event of net income, Diluted EPS uses the fully diluted share count; however, in the event of a net loss, the potentially dilutive shares are excluded from the share count as they are anti-dilutive. 1 Segment restructuring charges excludes Corporate and other restructuring charges 2 Restructuring charges were primarily associated with personnel reductions, facility closures, consultant fees, lease terminations and asset impairments. 3 Impairment: 4 $5.4 million in gain was recorded in the quarter ended December 31, 2016, as a result of non-cash actuarial MTM adjustments related to pension plans.
News Article | November 18, 2016
According to Stratistics MRC, the Oil & Gas exploration and production market accounted for $4.12 trillion in 2015 and is expected to grow at a CAGR of 6.29% to reach $5.56 trillion by 2022. The factors such as increasing population growth, usage of oil & gas in transportation industry, high standard of living, energy competence for industries and housing, modern technological developments of oil & gas exploration and production are some of the factors driving the market growth. However, high cost of crude oil is hindering the oil & gas exploration & production market. Moreover, Expansion of Gas to liquids (GTL) and increasing biofuels production growth rate are the challenging factors involved. North America dominated the global oil & gas exploration due to its strong production level in the US and separated export limitations could further support upstream companies to produce at strong levels in this region. Moreover, Asia pacific is anticipated to be the fastest growing market in terms of revenue during the forecast period driven by the growing demand for petroleum products in emerging countries such as China and India. Some of the key players in global oil & gas exploration and production market include Inpex Corporation, Marathon Oil Corporation, CNOOC Ltd, Azerbaijan International Operating Company (AIOC), ONGC - Oil and Natural Gas Corp Ltd, Apache Corporation, Egyptian Natural Gas Holding Company, Nexen Inc., Devon Energy, Talisman Energy Inc., Canadian Natural Resources, BP, Woodside Petroleum and Saudi Aramco and ConocoPhillips. Regions Covered: • North America o US o Canada o Mexico • Europe o Germany o France o Italy o UK o Spain o Rest of Europe • Asia Pacific o Japan o China o India o Australia o New Zealand o Rest of Asia Pacific • Rest of the World o Middle East o Brazil o Argentina o South Africa o Egypt What our report offers: - Market share assessments for the regional and country level segments - Market share analysis of the top industry players - Strategic recommendations for the new entrants - Market forecasts for a minimum of 8 years of all the mentioned segments, sub segments and the regional markets - Market Trends (Drivers, Constraints, Opportunities, Threats, Challenges, Investment Opportunities, and recommendations) - Strategic recommendations in key business segments based on the market estimations - Competitive landscaping mapping the key common trends - Company profiling with detailed strategies, financials, and recent developments - Supply chain trends mapping the latest technological advancements
News Article | February 24, 2017
Volume Forecasts (MCM) by Type of Storage (Above Ground Storage and Underground Storage Facilities) by Technology (LNG Tankers, Salt Caverns, Aquifers, Depleted Oil and Gas Reservoirs & Rock Caverns) by Countries (United States, Canada, Russia, Ukraine, Germany, Italy, China, Japan, Iran, Argentina) The latest research report from business intelligence provider visiongain offers comprehensive analysis of the global natural gas storage market. Visiongain assesses that this market will generate volumes of 406,682 MCM in 2017. The Natural Gas Storage Market Report 2017-2027 responds to your need for definitive market data: Read on to discover how you can exploit the future business opportunities emerging in this sector. Visiongain's new study tells you and tells you NOW. In this brand new report you find 133 in-depth tables, charts and graphs all unavailable elsewhere. The 195 page report provides clear detailed insight into the global natural gas storage market. Discover the key drivers and challenges affecting the market. By ordering and reading our brand new report today you stay better informed and ready to act. Report Scope The report delivers considerable added value by revealing: • How is the natural gas storage market evolving? • What is driving and restraining natural gas storage market dynamics? • How will each natural gas storage submarket by type of storage grow over the forecast period ? see Volume Forecasts (MCM) for - Above Ground Storage - Underground Storage Facilities • Which individual natural gas technologies will prevail and how will these shifts be responded to? - LNG Tankers - Salt Caverns - Aquifers - Depleted Oil and Gas Reservoirs & Rock Caverns To see a report overview please email Sara Peerun on firstname.lastname@example.org • How will political and regulatory factors influence regional natural gas storage markets and submarkets? • Will leading national natural gas storage market broadly follow macroeconomic dynamics, or will individual country sectors outperform the rest of the economy? - United States - Canada - Russia - Ukraine - Germany - Italy - China - Japan - Iran - Argentina • Who are the leading players and what are their prospects over the forecast period? - Cardinal Gas Storage Partners LLC - Centrica Storage Ltd. - Chiyoda Corporation - Enbridge Gas Distribution Inc. - Engie S.A. - Gazprom - NAFTA A.S - Niska Gas Storage Partners LLC - Spectra Energy Corporation - TransCanada Corporation • PESTLE analysis of the major strengths and weaknesses of the natural gas storage market, together with the opportunities available and the key threats faced. • An exclusive interview with a leading natural gas storage company. - Oil and Natural Gas Corporation Limited (ONGC), India • Conclusions and recommendations which will aid decision-making Who should read this report? • Anyone within the natural gas storage market. • Oil & gas companies • Engineering companies • Head of policy • Head of strategic development • Research analysts • Investment analysts • Economists • Procurement officers • Commodity traders • Business operations managers • Vice presidents (VP) • CEOs • COOs • Commercial managers • Asset managers • Business development managers • Marketing managers • Technologists • Suppliers • Investors • Banks • Government agencies • Contractor Visiongain's study is intended for anyone requiring commercial analyses for the natural gas storage market and leading companies. You find data, trends and predictions. Buy our report today Natural Gas Storage Market Report 2017-2027: Volume Forecasts (MCM) by Type of Storage (Above Ground Storage and Underground Storage Facilities) by Technology (LNG Tankers, Salt Caverns, Aquifers, Depleted Oil and Gas Reservoirs & Rock Caverns) by Countries (United States, Canada, Russia, Ukraine, Germany, Italy, China, Japan, Iran, Argentina). Avoid missing out by staying informed - get our report now. To request a report overview of this report please emails Sara Peerun at email@example.com or call Tel: +44-(0)20-7336-6100 To see a report overview please email Sara Peerun on firstname.lastname@example.org
News Article | December 6, 2016
The logo of Exxon Mobil Corporation is shown on a monitor above the floor of the New York Stock Exchange in New York, December 30, 2015. Standard & Poor's Ratings Services said on April 26, 2016, it had cut Exxon Mobil Corp's corporate credit rating to "AA+" from "AAA," citing the impact of low oil prices. REUTERS/Lucas Jackson/File Photo TPX IMAGES OF THE DAY NEW DELHI (Reuters) - Chad's government is negotiating with Exxon Mobil Corp over a massive fine which a court has ordered an Exxon-led consortium to pay and hopes to reach an "amicable" solution, Bechir Madet, Chad's minister of petroleum and energy, told Reuters on Tuesday. A court in October fined the consortium 44 trillion CFA francs ($71.65 billion) - nearly four times BP's record Deepwater Horizon settlement - over unpaid royalties. "The government is trying to find an amicable solution acceptable to both parties and looking for a future with the company," Madet told Reuters in an interview at the Petrotech conference in New Delhi. Madet also said Indian companies ONGC Videsh and Adani Enterprises had shown interest in buying oil blocks in Chad.
News Article | September 15, 2016
India’s ONGC Videsh Ltd. has signed definitive agreements with OJSC Rosneft to acquire an additional 11% interest in CJSC Vankorneft and therefore interest in Vankor oil and gas condensate field in East Siberia. The acquisition is expected to close by yearend.
News Article | February 16, 2017
JRE Private Limited, a prolific manufacturer and supplier of flexible hose assemblies, is providing a cost effective access to top class Kompaflex customized expansion joints. In its glorious journey spread across three decades, JRE Private Limited has set precedents in designing, manufacturing, and supplying flexible hose assembly that may be hard to emulate. A sister concern of JR Group of Companies, JRE is a winning move for acquiring corrugated SS flexible hoses, PTFE, bore flexible hose, thermoplastic composite hose, cryogenic hose, dry break coupling, break away coupling, PVC hose, ducting, metal and rubber bellows, marine loading arms, quick release hose connections. What endears its products to a global clientele is the sheer performance, durability and cost effectiveness they bring to the table. Replying to a query related to JRE Private Limited, one of its executives recently stated, “JRE’s edifice rests on two constituent vectors, each of which is progressive and expert in its respective domain. While one is consistently churning out top quality yet reasonably priced flexible hose assemblies, the other focuses on representing globally acclaimed brands, such as Wiese Europe, Ditec, Kompaflex, CavMac, Subitec, AKVOLA Technologies, Sopat, and TODO. Passion for quality, focus on research and development, resource productivity, and team work are few mutual elements across both vectors.” As a pioneer in the field of flexible hose assemblies, JRE has what it takes to deliver products consistent on quality and reliable on performance. It has access to state of the art technology, well-equipped manufacturing facilities, qualified workforce, and knowledge of proven manufacturing techniques. The flexible hose assembly manufacturer’s quality Management system is compliant with ISO 9001, ISO 14001, ISO 8001, CE, and ATEX. Not surprisingly, JRE is the top choice for the likes of Indian Oil, Reliance Industries limited, Hindustan Petroleum, ONGC, Jacobs, Bharat Petroleum, GNFC, Shell, Adani, Larsen & Toubro, BHEL, IFFCO, Samsung Engineering, Hindalco and ESSAR. Offering insight into Kompaflex metallic bellows on offer, the executive further stated, “JRE pride in representing Kompaflex – a globally acclaimed, specialized metallic bellows manufacturer based in Switzerland. We carry a vast selection of Kompaflex metallic bellows to cater to specific application needs across industries. Our selection comes inclusive of customized expansion joints, multiply expansion joints, weld-less cornered rectangular multiply expansion joints, large diameters bellows and fabric expansion joints. Additionally, we make bellows in Nickel, Titanium, Inconel, Hastellow, and Monel available on request. Given the manufacturer’s credentials, each of the products deliver on quality, performance, and longevity.” JRE reaches out to buyers in India and beyond with Kompaflex customized expansion joints. The coveted products manifests the manufacturer’s passion for bespoke solutions, quality and cost effectiveness. The customized expansion joints on offer come in varied shapes - circular, oval and elliptical, conical and rectangular – to address specific application requirements. The material used for production is high on performance. Hence, the expansion joints are ideal for handling ultra-high vacuum and high pressure. Moreover, the customized expansion joints are available in large diameters. Apparently, JRE Private Limited is the preferred destination for those seeking bellow manufacturer in India or a dry break coupling supplier. About JRE Private Limited: In the business for over 3 decades, JRE Private Limited is a leading flexible hose assembly manufacturer and supplier. Based in Mumbai, India, the flexible hose assembly manufacturer offers a superior yet cost effective range of corrugated SS flexible hoses, PTFE, bore flexible hose, thermoplastic composite hose, cryogenic hose, dry break coupling, break away coupling, PVC hose, ducting, metal and rubber bellows, marine loading arms, quick release hose connections. Of late, JRE has emerged as the best rubber hose manufacturer.
News Article | November 23, 2016
Russia’s long planned pivot east found itself unexpectedly wrong-footed in early 2014, following the Crimean referendum and subsequent western rebuke. The global collapse of oil prices – and that of the ruble – later that same year further eroded Russia’s leverage in Asia. Fast forward to the present and we’ve seen substantially more bark than bite. That said, the fundamentals have not changed, and – with increasing uncertainty in the U.S. – Russian sights are still firmly set on the east as it seeks long-term energy investment and political relevance. The post, Russia Is Finally Making Headway In Its Pivot East, was first published on OilPrice.com. Previously, those goals largely started and ended with China, and in that regard the pivot has been a marginal success to date, though hamstrung by substantial reluctance on both sides. The much heralded $400 billion gas deal between the two countries is still on, but Gazprom has cut spending on the Power of Siberia pipeline and initial deliveries are expected to be lower than originally planned. China’s commitment to Russia’s Yamal LNG is promising and will allow the project to move forward fully financed, but Russian companies have not seen the show of solidarity that was anticipated amid western sanctions. In fact, no Russian company has raised debt or equity on Chinese capital markets in the last two years. Further – and perhaps with the realization that oil and gas from Russia’s Far East has nowhere else to go – Chinese equity investments in upstream oil and gas activities in those critical regions has been slow to develop. As the pivot evolves however, China’s position – while still central – gives way to the field. Indeed, India and Southeast Asia are rapidly growing, hydrocarbon poor, and politically receptive to Russia’s advances. Russia and India in particular have had a constructive arms relationship for several decades, but Moscow has yet to leverage that into a significant energy bond, until recently. With energy currently at the forefront of strategic talks between the two nations, a Russia-India “energy bridge” is gaining traction. Early discussions for the “bridge” have been far from humble, and include piped gas trade and substantial nuclear expansion. Related: Putin Is Ready To Join An OPEC Freeze To be clear, any pipeline between the two nations is as unlikely as it would be long. Gazprom and Russia frankly aren’t in a position to overinvest in land-based transport infrastructure, whether that’s through the resurrection and extension of the Altai pipeline, or via an extension of the Power of Siberia project. Still, other avenues for cooperation are quite viable, and have been prosperous in the early stages. Capitalizing on already strong nuclear ties, Russia’s Rosatom State Nuclear Energy Corporation recently opened a regional office in Mumbai to facilitate project expansion in India and Southeast Asia. At Kudankulam nuclear power plant, Russia and India’s largest energy project, construction is ready to begin on the third and fourth reactors and an agreement is nearing completion on an additional two units. New sites for as many as six reactors across the country are forthcoming. Within Russia’s borders, India remains active as an upstream investor. In October, India’s ONGC Videsh purchased an additional 11 percent stake in Russia’s Vankor oil fields, bringing their share up to 26 percent. Indian companies have now invested $5.5 billion in Russia’s east Siberian fields. Rosneft’s purchase of Essar Oil’s Vadinar refinery and roughly 2,700 filling stations in cooperation with Transfigura and United Capital Partners is the clear highlight of Russia’s push into emerging markets. The move challenges Middle Eastern exporters, secures Russia’s equity crude supply in Venezuela, and provides significant inroads for further market penetration in what is forecast to be the fastest-growing oil consuming nation in the world. As the pivot develops, the number of interesting subplots in the Asia Pacific region and at home have grown too great to count. Russia’s nuclear and LNG courtships of the likes of Vietnam, Cambodia, and Thailand to name a few are something to watch. As is Russia and Japan’s ongoing territorial dispute over the Kuril Islands. Relations between the two countries are warming and a resolution may only be an energy deal or two away. And back in Russia, the partial privatization of Rosneft – and the Asian buyers that it hopes to attract – deserves more scrutiny following the detainment of Russia’s Minister of Economic Development Alexey Ulyukaev on allegations of corruption in Rosneft’s acquisition of Bashneft, which itself was seized by the state from oligarch Vladimir Yevtushenko in late 2014. As China demonstrates its willingness to wait, Russia is still seeking to define what has been a meandering, hardly predictable, though moderately successful path east.
News Article | January 18, 2016
The PDVSA logo is seen at a gas station in Caracas, December 21, 2015. REUTERS/Marco Bello More
(Reuters) - Venezuela's state-run company PDVSA has requested its partners in at least a half dozen joint ventures pay for naphtha imported to produce exportable crudes amid a punishing oil price crash, according to sources and a company letter seen by Reuters.
With at least some partners likely to balk at the request, PDVSA [PDVSA.UL] could face even bigger obstacles to import diluents and, in consequence, to keep barrels flowing from the Orinoco belt, its main producing region.
PDVSA is responsible for providing the naphtha, or light crude, needed to dilute the extra heavy oil produced at the Orinoco Belt, according to contracts signed with foreign partners including Chevron