Energy Watchblog: Investing

Trinity completes Galeota license upgrades

<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhI7Z0QP0zJtguyzglQu9bPxxFs5kIs9v3HXsRXLuHIJlGqwmoyvoJoEDiU3XLnHIXieLL1Jsnl9cQjqqW5hxHeCOyaFjJZ8XCk-aRm4nGPxWBpMRCocHiFwSDznFUOMf7si3JJZaG4smpn/s1600/EarthLights_660x450.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="218" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhI7Z0QP0zJtguyzglQu9bPxxFs5kIs9v3HXsRXLuHIJlGqwmoyvoJoEDiU3XLnHIXieLL1Jsnl9cQjqqW5hxHeCOyaFjJZ8XCk-aRm4nGPxWBpMRCocHiFwSDznFUOMf7si3JJZaG4smpn/s320/EarthLights_660x450.jpg" width="320" /></a></div>Trinidad and Tobago-focused E&P firm Trinity (AIM: TRIN) completed Rig 2 upgrades at its Galeota license offshore Trinidad, according to a release by the firm.<br /><br />The upgrades will improve drilling efficiency and reduce costs, said the firm.<br />Infill  drilling operations on the producing Trintes field have been delayed by  bad weather but will recommence shortly with the spudding of the B9  well, which is expected to take up to 45 days to complete, said Trinity.<br /><br />Additionally, Trinidad state oil company Petrotrin  converted its 35% interest in the Trintes field to an over-riding  royalty (ORR), upping Trinity's working interest in the field to 100%,  and adding an additional 13Mb in 2P reserves and 470b/d in production,  according to the release.<br />Trinity also recently  signed a new crude oil sales agreement with Petrotrin, harmonizing the  pricing of crude from the Trintes field with Trinity's other sales  agreements under which pricing is linked to WTI.

Trinity completes Galeota license upgrades

Trinidad and Tobago-focused E&P firm Trinity (AIM: TRIN) completed Rig 2 upgrades at its Galeota license offshore Trinidad, according to...

E&P companies in Neuquén to invest up to US$6bn in 2014

<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhaVDRJp4iG581JyIaH0zcTN26aEoFWujEt4fg2-PUMpBc-IHNDSXMq1ZEKbMr5LWnkNXIprXiAHM1zlU9qJ7ric_i9l2nPS02cxIx-SLkIlP0WUv_3ZV46glhXXfuufwwJjrtuHQGRLBbl/s1600/vaca_muerta_basin.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="237" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhaVDRJp4iG581JyIaH0zcTN26aEoFWujEt4fg2-PUMpBc-IHNDSXMq1ZEKbMr5LWnkNXIprXiAHM1zlU9qJ7ric_i9l2nPS02cxIx-SLkIlP0WUv_3ZV46glhXXfuufwwJjrtuHQGRLBbl/s320/vaca_muerta_basin.jpg" width="320" /></a></div>Oil and gas companies are expected to invest between US$5bn and US$6bn in 2014 in the Argentine province of Neuquén, according to local press, citing a report by the provincial government. The forecasted investment for next year represents a significant increase from the US$4.1bn invested in Neuquén E&P in 2013.<br /><br />Unconventional plays will receive the majority of the capital influx, with the Vaca Muerta shale play taking approximately 60% of the total. Of the 635 wells to be drilled next year, 323 will target shale and tight sand deposits as opposed to 195 of the 471 wells drilled in 2013.   Topping the list, national oil company YPF's (NYSE: YPF) investment in the province is expected to reach US$3bn. YPF will destine the funds primarily to its Loma La Lata shale, and its El Orejano and Rincón del Mangrullo tight gas pilot projects with Chevron (NYSE: CVX), Dow Chemical (NYSE: DOW) and Pampa Energía (NYSE: PAM) respectively.<br /><br />While other firms focus on exploration, France's Total (NYSE: TOT) will be the only one, apart from YPF, working on an unconventional pilot project in the province. Called Aguada Pichana, Total is expected to invest US$380mn on the 20-well Vaca Muerta pilot.     ExxonMobil (NYSE: XOM) plans to invest approximately US$250mn, according to the reports, followed by US$185mn from Pan American Energy, who will focus on exploration of the Lindero Atravesado formation.<br /><br />Petrobras (NYSE: PBR) will invest US$113mn, primarily on its Río Neuquén and El Mangrullo areas. O&G Developments, a subsidiary of Shell (NYSE: RDS.A) in Argentina, will invest at least US$90mn (max US$500mn) on its Sierras Blancas license.     Meanwhile, Wintershall is rumored to have signed a definitive partnership with provincial oil company GyP to drill a dozen wells on the Aguada Federal block.

E&P companies in Neuquén to invest up to US$6bn in 2014

Oil and gas companies are expected to invest between US$5bn and US$6bn in 2014 in the Argentine province of Neuquén, according to local pres...

Mexico's top energy stories of 2013

<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEje3VaNsaldPesHSt_gHPq8MsazdgV6MvQQxCEJa4NvrIQPA0_tw9V6WCdKu755YZLN0mZdTjYTgQrEQbJAYrNtRT6owX9xD5b34MEYquoySuMtx7SfVuboG8LXCrGadJ9ZD_4-Clr86O-w/s1600/la-afp-getty-mexico-reform-energy-pemex-pena-20130813.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEje3VaNsaldPesHSt_gHPq8MsazdgV6MvQQxCEJa4NvrIQPA0_tw9V6WCdKu755YZLN0mZdTjYTgQrEQbJAYrNtRT6owX9xD5b34MEYquoySuMtx7SfVuboG8LXCrGadJ9ZD_4-Clr86O-w/s320/la-afp-getty-mexico-reform-energy-pemex-pena-20130813.jpg" width="233" /></a></div><br /><span style="clear: left; float: left; font-size: small; margin-bottom: 1em; margin-right: 1em;"></span><br /><br /><div class="text-contenido" style="background-color: white; font-family: Arial, Helvetica, 'Helvetica Neue'; margin: 0px 10px 0px 0px;"><div style="line-height: 18px; margin-bottom: 20px;"></div><div style="line-height: 18px; margin-bottom: 20px;"><b>1) Congress passes landmark energy reform</b></div><div style="line-height: 18px; margin-bottom: 20px;">This one was big and may fit better into other categories like "Top Mexico stories of 2013" or "Top Mexico energy stories of the decade."</div><div style="line-height: 18px; margin-bottom: 20px;">After months of expectation, congress brought a bill forward December 7 and passed it within six days. The legislation brings unprecedented openness to both the oil and gas and electric power sectors.</div><div style="line-height: 18px; margin-bottom: 20px;">In oil, the Mexican state will be allowed to contract with private companies across the value chain, including production sharing and licensing agreements in E&P. National oil company Pemex is being transformed into a "productive public enterprise," whose first goal will be maximizing profit.</div><div style="line-height: 18px; margin-bottom: 20px;">In electric power, a competitive generation market will be created and administered by an ISO called Cenace. While transmission and distribution infrastructure remain property of the state, power retail will also be open to privates. Likewise, state-owned power utility CFE will become a "productive public enterprise" and seek profit first.</div><div style="line-height: 18px; margin-bottom: 20px;"><b>2) Pemex tenders integrated service contracts at Chicontepec</b></div><div style="line-height: 18px; margin-bottom: 20px;">Pemex's third round of integrated service contracting took place at the unconventional Chicontepec basin with surprising results.</div><div style="line-height: 18px; margin-bottom: 20px;">Three of the six blocks on offer were snatched up, with the other three blocks receiving no bids. Halliburton, Operadora de Campos DWF and Baker Hughes' Petrolite each won a block, but with surprisingly low bids of US$0.01/b, US$0.98/b and US$0.49/b, respectively.</div><div style="line-height: 18px; margin-bottom: 20px;">The services companies expect to have the cost recovery mechanism be profitable on its own. Pemex is retendering the three failed blocks, expected for awarding in January.</div><div style="line-height: 18px; margin-bottom: 20px;"><b>3) CFE blames losses on fuel costs</b></div><div style="line-height: 18px; margin-bottom: 20px;">CFE said its US$1.50bn net loss in 2012 could be attributed almost entirely to higher consumption of heavy fuel oil. The trend continued through 2013, with CFE saying its US$474mn loss in Q3 was also caused by fuel oil costs.</div><div style="line-height: 18px; margin-bottom: 20px;">While the continued losses for the firm are concerning in themselves, they were indicative of a larger problem in Mexico: the country does not have enough natural gas.</div><div style="line-height: 18px; margin-bottom: 20px;">CFE, which had to rely more heavily on old, fuel oil generators, is only one of the firms in Mexico to suffer from insufficient natural gas transportation capacity.</div><div style="line-height: 18px; margin-bottom: 20px;"><b>4) Pemex Los Ramones tender flops, takes control of project</b></div><div style="line-height: 18px; margin-bottom: 20px;">In 2013, Pemex issued a call for bidders on the 740km, 1.43Bf3/d (40.5Mm3/d) Los Ramones II pipeline, said to be the backbone of the natural gas transportation system.</div><div style="line-height: 18px; margin-bottom: 20px;">The long-awaited project is expected to guarantee long-term gas imports from the US. But when bids were due, only one group, a consortium between France's GDF Suez and Spain's Enagás, tabled a bid.</div><div style="line-height: 18px; margin-bottom: 20px;">Pemex rejected the bid and took control of the project, promptly announcing it would be forming JVs withSempra's Mexico unit IEnova and GDF Suez to build the project in two phases.</div><div style="line-height: 18px; margin-bottom: 20px;">Some experts say Pemex had always wanted to build the project on its own and had designed the tender fail.</div><div style="line-height: 18px; margin-bottom: 20px;"><b>5) Mexico launches first large-scale solar plant</b></div><div style="line-height: 18px; margin-bottom: 20px;">In September, Mexico's first large-scale solar PV plant, the 30MW Aura Solar I, started generating power and it was not CFE who built it.</div><div style="line-height: 18px; margin-bottom: 20px;">The 100 hectare project was built by Gauss Energía, with Martifer Solar on EPC and Suntech providing panels, and was financed by private capital and the International Finance Corporation (IFC).</div><div style="line-height: 18px; margin-bottom: 20px;">The project was a huge step forward for solar in Mexico as IFC saw profitability in Mexico's small producer private generation model.</div><div style="line-height: 18px; margin-bottom: 20px;">Gauss expects this to be the first of many stages at the Aura Solar complex.</div></div>

Mexico's top energy stories of 2013

1) Congress passes landmark energy reform This one was big and may fit better into other categories like "Top Mexico stories of 2013...

Mexico Earns Upgrade, Outlook Could Support Bonds

<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhYwLb_K26AmXNKcJtoyCbUfhUsgtn2Td-1HxmllGSuoRYLstROxefCE06vkgKtIaRrM9uAGO0YfoMb9A4yhgLE_IYgPC4NG6tc0IRg_J9hw2x54S9tYXukTjEuC0CfriQOAL7TR33Cjk_8/s1600/arrow-graph-by-flickr-user-ndeviltv-find-link-to-pic.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhYwLb_K26AmXNKcJtoyCbUfhUsgtn2Td-1HxmllGSuoRYLstROxefCE06vkgKtIaRrM9uAGO0YfoMb9A4yhgLE_IYgPC4NG6tc0IRg_J9hw2x54S9tYXukTjEuC0CfriQOAL7TR33Cjk_8/s320/arrow-graph-by-flickr-user-ndeviltv-find-link-to-pic.jpg" width="320" /></a></div><div><br /></div><span style="background-color: white;">Mexico earned a higher debt rating from Standard & Poor's on Thursday and expectations of more upgrades to come could help support Mexican assets in the coming months even as the government borrows more.</span><br /><div class="separator" style="clear: both; text-align: center;"><a href="http://s1.reutersmedia.net/resources/r/?m=02&d=20131220&t=2&i=822923868&w=580&fh=&fw=&ll=&pl=&r=CBRE9BJ06MF00" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="237" src="http://s1.reutersmedia.net/resources/r/?m=02&d=20131220&t=2&i=822923868&w=580&fh=&fw=&ll=&pl=&r=CBRE9BJ06MF00" width="320" /></a></div><span style="background-color: white;"><br /></span>Standard & Poor's raised its main credit rating for Mexico by one notch in the latest sign of growing confidence in this month's move by the government to open the state-run energy sector to private investment.<br /><br />S&P had lagged the other two main agencies, Moody's Investors Service and Fitch Ratings, which both have Mexico just one notch shy of an "A" rating. Chile is the only Latin American nation that has an "A."<br /><br />Analysts, fund managers and Mexico's government think the country could earn another upgrade by at least one of the agencies as soon as early next year.<br />"We are closer today than we have ever been to an 'A' category," Alejandro Diaz de Leon, head of Mexico's debt office, told Reuters in a telephone interview.<br /><br />"There is a lot of upside in the near future if the implementation of the energy reform continues as planned."<br /><br />The approval of President Enrique Pena Nieto's energy reform bill by a divided Congress this month caps a year of major economic legislation, including bills to boost lending, lower telecommunications costs and improve tax collection.<br />But lawmakers still need to flesh out the energy overhaul with legislation that will determine whether Mexico will offer tax rates that are lucrative enough to spur an investment boom.<br /><br /><b>MEXICO BONDS</b><br />S&P's upgrade was largely expected by the market, and the country's peso only briefly pared losses amid concerns that less U.S. monetary stimulus will sap demand for emerging market assets in the coming year.<br /><br />Expectations the U.S. Federal Reserve could keep cutting back its monthly bond purchases are seen driving yields on emerging market debt higher next year. But Mexico's peso and its local-currency bonds have already suffered less than other emerging markets and optimism about Mexico could help bond yields continue to perform better than other riskier assets.<br /><br />Analysts said strong progress once Mexican lawmakers resume work in February on the energy reform's secondary legislation could spur the next ratings upgrade.<br /><br />Alonso Cervera, an economist at Credit Suisse in Mexico City, said Moody's would likely put Mexico into the "A" category next year and that bond yields would likely fall.<br /><br />"I think the curve is way too steep and we are likely to see a flattening trend in the next few months, even if the Fed continues to taper," Cervera said in an emailed response to questions.<br /><br />The yield on Mexico's benchmark 10-year peso bond has spiked more than 80 basis points higher since late October to 6.40 on Thursday, near a three-month high.<br /><br />The flurry of reforms this year has made Mexico stand out from other emerging markets, such as Brazil, which have been raising concerns among investors for more interventionist and protectionist economic policies.<br />"It is very important that an economy like ours, which is a small open economy, does what we can to improve the perception about the resilience of the economy," Diaz de Leon said.<br /><br />Meanwhile, Pena Nieto's government is milking international optimism by boosting the amount of debt it will issue next year. On Thursday, the finance ministry released its latest capital market issuance plan, which foresees increasing shorter-term debt sales in the first quarter of next year.<br />After originally promising to stick to a balanced budget this year, the government got lawmakers to support a deficit of 0.4 percent of gross domestic product this year and an even wider 1.5 percent deficit next year.<br />The government is seeking more debt to help fuel stronger growth. Mexico's economy slumped this year to around a 1.3 percent annual expansion from a 3.8 percent rate in 2012.<br /><br />Analysts in a central bank poll issued on Thursday lifted their outlook for growth next year to 3.41 percent, up 7 basis points from a poll late last month before the energy reform bill was approved.<br /><br />In the latest sign of stronger growth, a separate report on Thursday showed Mexican retail sales rose in October at the fastest pace in nine months, following two months of declines.

Mexico Earns Upgrade, Outlook Could Support Bonds

Mexico earned a higher debt rating from Standard & Poor's on Thursday and expectations of more upgrades to come could help support M...

Historic energy reform to strengthen Mexico's credit profile - Moody's

<div class="separator" style="clear: both; text-align: center;"><br /></div><br /><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh2CeI59PU-Lp9M2cVOcWxlFXi-lBv04glUXlzMsQtruX0eQJ6b5NZeo-sz8CWR_phNX38oloXPtHgcoKbAdYbUi1n_FL3vI9xQlqvpOZhI2xS_puoMvYqI7YGdzNKdZtqt5CkrsbLLctrN/s1600/big-data2.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="145" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh2CeI59PU-Lp9M2cVOcWxlFXi-lBv04glUXlzMsQtruX0eQJ6b5NZeo-sz8CWR_phNX38oloXPtHgcoKbAdYbUi1n_FL3vI9xQlqvpOZhI2xS_puoMvYqI7YGdzNKdZtqt5CkrsbLLctrN/s320/big-data2.jpg" width="320" /></a></div>The congressional approval last week of a historic energy reform will strengthen Mexico's sovereign credit profile and could also help to boost its potential GDP growth rate, ratings agency Moody's said in a report.<br /><br /><br /><br />Moody's  said that it expects the comprehensive reform of the energy sector to  have a significant effect on state-owned oil company Pemex  and the oil industry, "attracting investment and enhancing Mexico's  growth prospects over the next three to five years, all credit positives  for the sovereign."<br /><br /><br /><br /><strong>RISKS</strong><br /><br /><br />Although  prospects appear encouraging, implementation risks will pose major  challenges to the energy reform, said Moody's. In addition, attempts to  mobilize public opinion by the left-of-center PRD party and other groups  opposed to the reform and a call for a constitutional referendum pose  further risks, the agency added.<br /><br /><br /><br /><strong>REWARDS</strong><br /><br /><br />The  extent to which the energy reform is successful will depend on how  effective it is in promoting increased private investment and oil  production, Moody's noted. "If the reform proves effective in this  respect, we expect it to lift Mexico's potential growth to 3%-4% from  its current 2%-3%, although the effect will become evident during  2016-19, the second half of President Enrique Peña Nieto's  administration."<br /><br /><br /><br />The reform of the energy sector was  the last component of the government's ambitious reform agenda. This  reform, together with other structural reforms that congress has already  passed including labor, telecommunications, fiscal, financial and  education reforms, should strengthen Mexico's sovereign credit profile,  said Moody's.

Historic energy reform to strengthen Mexico's credit profile - Moody's

The congressional approval last week of a historic energy reform will strengthen Mexico's sovereign credit profile and could also help t...

I’m Waiting For the Crude – Crude Price Differentials at The Gulf Coast

<br /><div class="tabs"></div><div class="meta submitted"><span content="2013-12-15T20:00:00-06:00"></span>The  bases are loaded for another 2 MMb/d of pipeline capacity to bring  additional crude supplies to the Texas Gulf Coast by the end of 2014.  The majority of that payload will likely be light sweet crude from tight  oil formations, a.k.a., shale. As the flood of crude headed to Texas  passed through the Midwest over the past two years, prices at Cushing  and points north were heavily discounted versus coastal markets. Now the  discount action has moved to the Gulf Coast where light sweet crude  imports have been pushed out. Today we look at the impact of the  changing supply position on crude price differentials.</div><br />This is Part 1 of a two-part review of Gulf  Coast crude price differentials that extends a series on the topic that  we started back in November (2013). The first episode in the series  described 4 MMb/d of current and planned expansions to crude  transportation capacity into the Texas Gulf Coast region (see Handling The Texas Gulf Coast Crude Flood).  Our analysis showed that the new incoming light crude capacity will  exceed Texas Gulf Coast demand by somewhere north of 0.5 MMb/d by the  end of 2015. In episode two we described how some of these excess crude  supplies would move east on the reversed Ho-Ho pipeline (see Gulf Coast Crude West to East Flows). In episode three we looked at how shippers could divert supplies away from Texas Gulf Coast congestion (see Texas Gulf Coast Bypass Options).  Episode four looked at progress bringing TransCanada’s Keystone XL Gulf  Coast extension (a.k.a, Cushing Marketlink Pipeline (CMP)) online (see Keystone Marketlink Comes to Texas).  Episode five looked at the impact of the twin Seaway Pipeline from  Cushing to Freeport expected online during the second quarter of 2014  (see Impact of the Seaway Expansion). Now we’ll get into what happens to price differentials as new crude supplies come flooding into Texas in the next six months.<br /><br />Forecasting prices for tomorrow is like gambling – only fun if you  don’t mind losing money. And the odds of being right get worse the  further out the predictions go. So our intent here is to concentrate on  price differentials – the spread between key crude benchmarks rather  than getting into absolute price levels. We start with a review of what  has happened since 2012 and then offer some scenarios for how things  might turn out next year (2014). Buckle up.<br /><br /><b>Recap 2012</b><br />Figure 1 below shows average differentials for key benchmark light  sweet crude grades at the Gulf Coast during 2012. The prices are  averages for the year versus the West Texas Intermediate (WTI) NYMEX  benchmark price at Cushing - set to $0/Bbl.  Recall that during 2012  surging crude production in North Dakota and Canada exceeded demand in  the Midwest and supplies started backing up at Cushing, OK because there  was very little pipeline capacity from the Midwest to the Gulf Coast  (where 50 percent of US refining capacity resides). Because of this  logjam a stockpile of crude built up at Cushing and inland domestic  prices based on WTI were discounted heavily versus Gulf Coast supplies  priced against the international benchmark Brent crude (see The Seven Gates of Hell for WTI Traders).  Domestic light sweet crude grades sold at the Gulf Coast – represented  by Light Louisiana Sweet (LLS) in our diagram - traded at the higher  international levels. In 2012 both Brent and LLS averaged $18/Bbl above  the discounted WTI “stranded” at Cushing. The dotted yellow line on the  chart indicates the pipeline ‘capacity constraint’ boundary that split  Cushing and Gulf Coast pricing markets at that time.  You can think of  that yellow line as separating zones of domestic and international  pricing along the Gulf Coast region.<br /><br /><div style="text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg-gV1vtrH7ax6BACQlmkOV1RnF0WCAUHabBRJd1W6Op7M5QK0IQ_Wa8ZXktaqVlEO8wCPbrl52dcYjuuhNaqGjbg1Xq4VJ3ViIt03GI3ISWHjB7kJTUjlRAKcmb8t62hB2fQTE4jQ_aHzd/s1600/figure1_5.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="267" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg-gV1vtrH7ax6BACQlmkOV1RnF0WCAUHabBRJd1W6Op7M5QK0IQ_Wa8ZXktaqVlEO8wCPbrl52dcYjuuhNaqGjbg1Xq4VJ3ViIt03GI3ISWHjB7kJTUjlRAKcmb8t62hB2fQTE4jQ_aHzd/s400/figure1_5.png" width="400" /></a></div><br /></div><div style="text-align: center;">Figure 1 - Source: RBN Energy</div><div style="text-align: left;">Prices for WTI are set both at Cushing, OK  – the gateway to Midwest refineries – as well as at Midland, TX, closer  to the Permian Basin production region. During 2012, Midland prices for  WTI were discounted by an average of $4/Bbl to WTI at Cushing because  of capacity constraints on the pipelines between Midland and Cushing  (caused by surging crude production in the Permian Basin). Until new  pipelines opened up from the Permian direct to Houston in 2013, WTI had  to travel to market from Midland to Cushing - into an already  oversupplied Midwest market (see New Adventures of Good Ole Boy Permian). </div><div style="text-align: left;"><br /></div>Next we move to Figure 2 below – which shows average price  differentials to WTI during the past three months – between September 20  and December 10, 2013.<br /><br />But before we get to those numbers we need to fill in the gap in our  analysis covering the first 9 months of 2013 – since Figure 1 only  covered 2012. That nine-months was a transition period during which new  pipeline capacity opened up between Cushing and Houston (Seaway Phase 2  expansion) and between the Permian Basin in West Texas and Houston  (Longhorn Reversal). Crude-by-rail shipments also increased the flow of  light sweet Bakken crude from North Dakota to the Gulf Coast during this  period (hence the rail track shown on Figure 2). As a result more light  sweet crude by-passed the Cushing logjam and reached Gulf Coast  refineries - reducing the need for waterborne imports. The crude  stockpile in Cushing declined from its record high levels and Gulf Coast  crude stocks began to increase. The net effect was that the Brent  premium to WTI, which reached $23/Bbl in February 2013 evaporated to  less than $1/Bbl by July (see Strangers in the Night).  Between July and September 2013, Brent, WTI and LLS traded in a narrow  range of about $5/Bbl with Brent “in the middle” at a discount to LLS  and a $3/Bbl premium to WTI.<br /><br />Since the middle of September, however, Brent prices have taken off  on their own track, leaving LLS trading at a narrow $3/Bbl premium over  WTI that is roughly equivalent to the pipeline tariff between Cushing  and the Gulf Coast (see Goodbye Stranger).  And that situation has prevailed ever since – as depicted in Figure 2  below. Over this period the Gulf Coast has been oversupplied with light  sweet crude, leaving no need for imports – allowing Brent prices to  effectively disconnect from LLS and take their own path – reaching as  high as a $17/Bbl premium over WTI but averaging $10/Bbl over the  period. The yellow dotted capacity constraint line separating  international and domestic markets at the Gulf Coast moved offshore.  Behind that imaginary yellow line, LLS prices tracked more closely with  WTI and traded at a discount to Brent that averaged $7/Bbl. Prices for  WTI in Houston and LLS in Louisiana tracked closely together –  indicating that both markets were equally well supplied. The WTI prices  at Midland continued to trade at a discount to Cushing over this past  three month period because although new capacity opened up from the  Permian to Houston, surging production in West Texas continues  to overwhelm pipeline capacity.<br /><br /><div style="text-align: center;"><img alt="" class="image-large" src="http://www.rbnenergy.com/sites/default/files/styles/large/public/field/image/figure2_7.png?itok=UY0CQejf" /></div><div style="text-align: center;">Figure 2 - Source: RBN Energy </div><div style="text-align: center;"><br /></div><div style="text-align: left;">And one argument for next year is that  price differential relationships at the Gulf Coast will stay basically  the same as they have been for the past three months. A December 11 “This Week in Petroleum”  report from the Energy Information Administration (EIA) notes that its  short term forecast for US domestic crude production - 7.5 MMb/d in 2013  rising to 8.5 MMb/d in 2014 will place continued downward pressure on  crude oil prices such as WTI and LLS.  EIA expects the WTI discount to  Brent to average $12/Bbl during the fourth quarter of 2013 and $9/Bbl  during 2014. EIA also expect the price for LLS to continue to move in  step with the WTI price plus the pipeline tariff.</div>So we will use that scenario as our base case – holding steady. In  the next episode in this series we will revisit the pipeline events that  will impact the differentials in 2014 and examine alternatives to our  base case price scenario for 2014.<br />------------ <br /><br /><table class="views-table sticky-enabled cols-4 tableheader-processed sticky-table"><tbody><tr class="even"><td class="views-field views-field-name"><a class="username" href="http://www.rbnenergy.com/user/28" title="View user profile.">Sandy Fielden</a>          </td>                  <td class="views-field views-field-picture"><div class="user-picture"><a href="http://www.rbnenergy.com/user/28" title="View user profile."><img alt="Sandy Fielden's picture" height="150" src="http://www.rbnenergy.com/sites/default/files/styles/user_profile/public/pictures/picture-28-1331334672.jpg?itok=cCGRUjKw" title="Sandy Fielden's picture" width="125" /></a>  </div></td>                  <td class="views-field views-field-field-expertise">Energy market pricing and fundamental data, Data Integration  with ETRM, writer on Energy Markets, Consultant, Conference Speaker           </td></tr></tbody></table>

I’m Waiting For the Crude – Crude Price Differentials at The Gulf Coast

The bases are loaded for another 2 MMb/d of pipeline capacity to bring additional crude supplies to the Texas Gulf Coast by the end of 201...

Private equity sees growing investment opportunities in oil and gas

In the post-financial crisis era, private equity firms are  once again looking for the most promising opportunities, and oil and gas  is proving to be fertile ground, according to a recent industry survey.<br /><br />Nearly two-thirds of global private equity executives responding to a  survey said they plan to actively raise funds aimed at specific oil and  gas subsectors next year, seeking to benefit from an industry ripe with  opportunity and hungry for capital. The survey results were released  Tuesday by EY, the international accounting and consulting firm.<br /><br /><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgeSuU-HiMjaRPnjx2xfTSkYQ73NNlHHikJS__ajfVBBu8Z9z7PJH2domFn2TH6DNwwG2x5HDr2rzjkyT1b5d5B5uLqwIDPlM3ANqQvY_eA5uMKdDpEpDe0He-UlJ6XDI8o3wX17nSdfuLw/s1600/6551534889_9c8ae52997_z-306x306.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgeSuU-HiMjaRPnjx2xfTSkYQ73NNlHHikJS__ajfVBBu8Z9z7PJH2domFn2TH6DNwwG2x5HDr2rzjkyT1b5d5B5uLqwIDPlM3ANqQvY_eA5uMKdDpEpDe0He-UlJ6XDI8o3wX17nSdfuLw/s1600/6551534889_9c8ae52997_z-306x306.jpg" /></a></div>The oil and gas industry is capital intensive, with projects that run  into the billions of dollars, making it an attractive investment for  private equity firms, EY noted.<br /><span style="font-size: 13px; line-height: 19px;">Mergermarket, a  national survey firm, conducted the survey on behalf of EY, interviewing  100 private equity leaders on the relationship between private equity  and the oil and gas industry.</span><br />“The easy or cheap barrels have been produced,” EY wrote in the  report. “There are now more players going after the more difficult areas  of oil production, creating opportunities for PE firms with different  risk appetites.”<br /><br /><br /><b>Energy executives: <a href="http://fuelfix.com/blog/2013/12/03/access-to-capital-funds-will-improve-in-2014-energy-execs-say/?cmpid=eefl" target="_blank" title="Access to capital will improve in 2014, energy execs say">Access to capital will improve in 2014</a></b><br />The survey provides an encouraging view of investment, <b><a href="http://fuelfix.com/blog/2013/07/29/deloitte-ma-energy-deals-down-30-percent-from-2012/?cmpid=eefl" target="_blank">even as deal making in the sector has slowed down</a></b>, with energy executives saying they want to focus on more efficient operations rather than expanding their reach.<br /><br />But private equity is bringing more than money to the table. The  firms increasingly are offering their expertise in oil and gas, combined  with financial discipline strategies, to increase returns, EY said in  the report.<br /><br />Nearly two-thirds of private equity leaders believe that the main way  they add value to oil and gas companies is by providing access to  growth capital. But nearly 20 percent noted that they increasingly are  allowing companies to expand geographically. And one in ten felt that  the operational expertise provided by private equity also added value.<br />Private equity firms continue to see North America as the most  attractive market for oil and gas investment, but expect investments in  Latin America and in Asia to increase in the next two years, especially  in China and Brazil.<br /><br />“We are seeing an influx of capital investment into the emerging  markets,” said Andy Brogan, EY’s Global Oil and Gas Transaction Advisory  Services Leader, in a written statement, explaining that the risk  profiles of emerging markets typically varies with that of developed  countries, allowing for investment diversification. “Companies are  exercising caution, but optimism around the potential returns from  acquisitions remains high.”

Private equity sees growing investment opportunities in oil and gas

In the post-financial crisis era, private equity firms are once again looking for the most promising opportunities, and oil and gas is pro...

STOCK: Ring Energy prices offering of common stock - OGFJ

<div class="separator" style="clear: both; text-align: left;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgTjBlY3S8ZTuZkdL_JU2-rFdWJj3d73KjqjAAZe_DR27uuVXHwRKK3es6w1BD27QY6uhezwiZVWm1dN5pgnuPiBJJXbBeyCSS9VvClO6QS91EU9EcFZx8iwftc0yx_JDaPhw9SC9T3X3fO/s1600/13354493263632.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="213" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgTjBlY3S8ZTuZkdL_JU2-rFdWJj3d73KjqjAAZe_DR27uuVXHwRKK3es6w1BD27QY6uhezwiZVWm1dN5pgnuPiBJJXbBeyCSS9VvClO6QS91EU9EcFZx8iwftc0yx_JDaPhw9SC9T3X3fO/s320/13354493263632.jpg" width="320" /></a></div><span style="font-family: inherit; font-size: 20px; font-style: inherit; font-weight: inherit; line-height: 25px;">Ring Energy prices offering of common stock</span><img alt="" class="cq-dd-image cq-image-placeholder" src="http://www.ogfj.com/etc/designs/default/0.gif" style="background-color: white; border: 0px; color: #37302b; display: block; font-family: inherit; font-size: 12px; font-style: inherit; font-weight: inherit; margin: 0px; outline: 0px; padding: 0px;" title="" /><br /><div class="compBody" style="background-color: white; border: 0px; color: #37302b; font-family: Arial, Helvetica, sans-serif; font-size: 12px; margin: 0px; outline: 0px; padding: 5px 0px;"><div class="article-content-wrapper" itemprop="articleBody" style="border: 0px; font-family: inherit; font-style: inherit; font-weight: inherit; margin: 0px; outline: 0px; padding: 0px;"><div id="ContentBody" style="border: 0px; font-family: inherit; font-style: inherit; font-weight: inherit; margin: 0px; outline: 0px; padding: 0px;"><div class="gigya-article-share-bar-right" id="gigya-article-share-bar" style="border: 0px; float: right; font-family: inherit; font-style: inherit; font-weight: inherit; margin: 0px; outline: 0px; padding: 0px;"><div class="sharebar gigyashare" style="border: 0px; font-family: inherit; font-style: inherit; font-weight: inherit; margin: 0px; outline: 0px; padding: 0px;"></div></div><div style="border: 0px; font-family: inherit; font-style: inherit; font-weight: inherit; outline: 0px; padding: 10px 0px;"><a adhocenable="false" href="http://www.ogfj.com/articles/2013/12/ring-energy-to-offer-shares-of-common-stock.html" style="border: 0px; color: #1370ac; font-style: inherit; font-weight: inherit; margin: 0px; outline: 0px; padding: 0px; text-decoration: none;">Ring Energy Inc.</a> (NYSE MKT: REI) has priced an underwritten public offering of 5 million shares of its common stock to the public at $10.00 per share. The company expects to close the sale of the shares of common stock on Dec. 11. The underwriters will have a 30-day option to purchase up to an additional 750,000 shares of common stock from the company at the offering price, less underwriting discounts and commissions, solely to cover over-allotments.</div><div style="border: 0px; font-family: inherit; font-style: inherit; font-weight: inherit; outline: 0px; padding: 10px 0px;">SunTrust Robinson Humphrey Inc. is acting as sole book-running manager, and Capital One Securities Inc., Global Hunter Securities LLC, Euro Pacific Capital Inc., IBERIA Capital Partners LLC, Noble Financial Capital Markets, Northland Capital Markets, and Roth Capital Partners LLC are acting as co-managers for the offering.</div><div style="border: 0px; font-family: inherit; font-style: inherit; font-weight: inherit; outline: 0px; padding: 10px 0px;">Ring Energy intends to use the net proceeds from the offering to fund drilling and development of its properties, to pay for additional leases of oil and gas properties, to pay down borrowings under its credit facility, and to pay for acquisitions of oil and gas properties in and around existing properties.</div><div style="border: 0px; font-family: inherit; font-style: inherit; font-weight: inherit; outline: 0px; padding: 10px 0px;"><a href="http://www.ogfj.com/articles/2013/12/ring-energy-prices-offering-of-common-stock.html" style="font-family: Times; font-size: medium; font-style: inherit; font-weight: inherit;">Ring Energy prices offering of common stock - Oil & Gas Financial Journal</a></div><div><br /></div></div></div></div>

STOCK: Ring Energy prices offering of common stock - OGFJ

Ring Energy prices offering of common stock Ring Energy Inc. (NYSE MKT: REI) has priced an underwritten public offering of 5 million shares...

Playing the Natural Gas Revolution with MLPs

<h2 style="background-color: #fcfcfc; color: #333333; font-family: 'Open Sans', Arial, Helvetica, sans-serif; font-size: 34px; line-height: 36px; margin: 20px 40px; text-rendering: optimizelegibility;"><span style="font-size: 16px; line-height: 21px;">Investors have different strategies and time horizons: While some are seeking stable dividend paying stocks, others enjoy the excitement of growth companies -- or perhaps something in between.</span></h2><div style="background-color: #fcfcfc; color: #333333; font-family: 'Open Sans', Arial, Helvetica, sans-serif; font-size: 16px; line-height: 21px; margin: 20px 40px;">If you fall in the latter category and are looking for a home-run hitter with a dependable batting average, <strong>Boardwalk Pipeline Partners</strong> (NYSE: BWP) could be a perfect fit. Here is a solid company that offers an outsized, stable distribution with the potential for stock appreciation as well. </div><div style="background-color: #fcfcfc; color: #333333; font-family: 'Open Sans', Arial, Helvetica, sans-serif; font-size: 16px; line-height: 21px; margin: 20px 40px;">As the natural gas production boom continues, Boardwalk, with enough natural gas pipelines to span the United States more than 5 times, is primed to take advantage of transporting the fuel.</div><div style="background-color: #fcfcfc; color: #333333; font-family: 'Open Sans', Arial, Helvetica, sans-serif; font-size: 16px; line-height: 21px; margin: 20px 40px;">In addition to owning natural gas pipelines in some of the top gas plays in North America, the company also controls underground storage caverns with approximately 201 billion cubic feet of working gas capacity and approximately 18 million barrels of liquids capacity.</div><div style="background-color: #fcfcfc; color: #333333; font-family: 'Open Sans', Arial, Helvetica, sans-serif; font-size: 16px; line-height: 21px; margin: 20px 40px;"></div><div style="background-color: #fcfcfc; color: #333333; font-family: 'Open Sans', Arial, Helvetica, sans-serif; font-size: 16px; line-height: 21px; margin: 20px 40px;">The real win for investors is the fact that over 80% of revenues are backed by long-term, fixed-fee contracts with creditworthy customers. This "tollbooth" style of contract (where customers pay regardless of use) protects Boardwalk's cash flows, while sheltering the company from fluctuations in commodity prices.</div><div style="background-color: #fcfcfc; color: #333333; font-family: 'Open Sans', Arial, Helvetica, sans-serif; font-size: 16px; line-height: 21px; margin: 20px 40px;">Which means investors can sleep soundly and count on receiving regular distributions every quarter. In fact, Boardwalk Pipeline Partners has consistently increased its dividend every year since its IPO.</div><div style="background-color: #fcfcfc; color: #333333; font-family: 'Open Sans', Arial, Helvetica, sans-serif; font-size: 16px; line-height: 21px; margin: 20px 40px;"><strong>Why buy into an MLP?</strong></div><div style="background-color: #fcfcfc; color: #333333; font-family: 'Open Sans', Arial, Helvetica, sans-serif; font-size: 16px; line-height: 21px; margin: 20px 40px;">Boardwalk Pipeline Partners is a master limited partnership (MLP) which means the company avoids paying taxes on its profits like a corporation, and instead distributes profits to unitholders who are then taxed on an individual basis. By skipping double taxation, MLPs offer a tax-advantaged income stream and are thus able to lower the cost of capital.</div><div style="background-color: #fcfcfc; color: #333333; font-family: 'Open Sans', Arial, Helvetica, sans-serif; font-size: 16px; line-height: 21px; margin: 20px 40px;">MLPs are strong investments, especially in low-interest-rate environments, due to the sturdy distribution yields they offer. However, expanding the business either organically or through acquisition is virtually the only way to increase yields. Having a lower cost of capital makes financing expansions possible without cutting distributions. With a suitable 5.5% cost of capital, Boardwalk has never decreased a quarterly distribution and most recently maintained a healthy distribution coverage ratio of 1.2 times.</div><div style="background-color: #fcfcfc; color: #333333; font-family: 'Open Sans', Arial, Helvetica, sans-serif; font-size: 16px; line-height: 21px; margin: 20px 40px;">Boardwalk's high yield is also insulated by a fortress-like competitive moat since constructing new pipelines is incredibly capital intensive and requires regulatory approval contingent on demand. Equally important, natural gas storage is located in underground caverns and naturally occurring salt domes which limit storage capacity.</div><div style="background-color: #fcfcfc; color: #333333; font-family: 'Open Sans', Arial, Helvetica, sans-serif; font-size: 16px; line-height: 21px; margin: 20px 40px;"><strong>Industry tailwinds</strong></div><div style="background-color: #fcfcfc; color: #333333; font-family: 'Open Sans', Arial, Helvetica, sans-serif; font-size: 16px; line-height: 21px; margin: 20px 40px;">Natural gas is a cleaner burning fuel than coal, emitting less than half as much carbon dioxide during combustion per unit of electricity output.  In addition, after natural gas prices reached record lows last spring, natural gas has been rapidly replacing coal-fired power generation. Since 2005, power generation from natural gas has increased more than 60%, supplying over 30% of all power generation in the United States in 2012.</div><div class="separator" style="clear: both; text-align: center;"><span style="background-color: #fcfcfc; color: #333333; font-family: 'Open Sans', Arial, Helvetica, sans-serif; font-size: 16px; line-height: 21px;"><br />In addition to power generation, natural gas usage could further benefit from LNG exportation. With an estimated 6.8 billion cubic feet per day of LNG exports expected in the next decade, Boardwalk, which controls 11% of the nation’s natural gas, stands to benefit. With natural gas expected to be the fastest growing fuel through 2040, investors interested in safe yields should benefit from Boardwalk gaining the upper hand when negotiating long-term, fixed-fee contracts. </span><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgIjPTpJWUHfuAQII5VhKHXISawKmVm8lvrFy3_dKBGMhIm0xy6Htdstn3K7s_dBJ8E9g9hlACE9ZTXGd-JuN7AYZdubSSyvc_yiCdDVc6JqABslOB0wP20f3bo6PZNo7G_R5-c9zAJhS6c/s1600/us-electricitybyfuel-graph-sfr-3.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="169" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgIjPTpJWUHfuAQII5VhKHXISawKmVm8lvrFy3_dKBGMhIm0xy6Htdstn3K7s_dBJ8E9g9hlACE9ZTXGd-JuN7AYZdubSSyvc_yiCdDVc6JqABslOB0wP20f3bo6PZNo7G_R5-c9zAJhS6c/s320/us-electricitybyfuel-graph-sfr-3.png" width="320" /></a></div><div style="background-color: #fcfcfc; color: #333333; font-family: 'Open Sans', Arial, Helvetica, sans-serif; font-size: 16px; line-height: 21px; margin: 20px 40px;"><strong>bottom line</strong></div><div style="background-color: #fcfcfc; color: #333333; font-family: 'Open Sans', Arial, Helvetica, sans-serif; font-size: 16px; line-height: 21px; margin: 20px 40px;">A rare gem in the investing universe, Boardwalk Pipeline Partners offers quality natural gas assets at an incredible price. With the United States gearing up to be a net natural gas exporter, Boardwalk Pipeline Partners is prepared for growth through continued asset add-ons organically as well as through value-adding acquisitions. Also, in an unusually low interest rate environment, investors should be able to collect a steady stream from this 7% yielding natural gas juggernaut.</div>

Playing the Natural Gas Revolution with MLPs

Investors have different strategies and time horizons: While some are seeking stable dividend paying stocks, others enjoy the excitement of ...