Tellurian-Vitol LNG deal signals shifting balance of power

The preliminary LNG offtake agreement announced on December 6 between export developer Tellurian and trader Vitol, marks a conspicuous shift in the balance of power in LNG contract markets.

The memorandum of understanding calls for Vitol to lift 1.5 million mt/yr, equivalent to nearly 70.1 Bcf/yr of gas, on an FOB basis from Tellurian’s Driftwood LNG-export terminal over a 15-year term.

What makes the otherwise routine supply agreement so consequential is that Vitol’s purchase price is actually linked to a destination market price in northeast Asia—the Platts JKM.

It is among the first, if not the only such agreement in the global LNG market.

For the buyer Vitol, the deal dramatically reduces market risk since its contracted LNG-purchase price effectively includes a built-in margin for profit.

While Vitol pays more for LNG as the JKM rises, it also pays less as the benchmark index declines.

If that destination-market linkage wasn’t compelling enough, the agreement also includes a shipping component, further reducing the risk imposed by fluctuating charter rates in the global freight market.

Export margin

In recent weeks, volatility in LNG-import and shipping markets, and even in the US onshore gas market, brings some perspective to those contract terms.

In Northeast Asia, flagging demand for winter LNG supply has seen the JKM tumble. On December 8, the index sank to just $8.75/MMBtu, down from a multi-year high at over $12/MMBtu in September.

At the same time, shipping rates have skyrocketed, recently hitting their highest on record $190,000/d in the Asia Pacific Basin. While prices have since declined modestly, a US Gulf Coast LNG offtaker is still paying nearly $3.60/MMBtu to reach Japan/Korea, and about $4.30/MMBtu to South China or Taiwan.

Meanwhile, the feedstock cost for US LNG exporters has climbed sharply in recent weeks, tracking the upward trend in NYMEX prompt-month futures, which were trading Friday at close to $4.50/MMBtu.

Under more typical, existing LNG-offtake contracts, recent market volatility has crushed the margin on US LNG delivered to northeast Asia.

LNG netbacks to Sabine Pass shrink in 2018

After paying gas feedstock and onshore transport costs, equal to 115% of the NYMEX Henry Hub, plus shipping, Panama Canal and related freight fees, the profit margin on US LNG delivered to Japan/Korea is actually negative, according to Platts Analytics.

What’s more, that calculation actually excludes the liquefaction fee, ranging from $2.25/MMBtu to $3.50/MMBtu since it’s typically considered by the industry to be a “sunk cost”.

Second-wave exports

In an interview Thursday, Tellurian CEO Meg Gentle said that the exact details of the offtake agreement with Vitol were still being ironed out, so it remains unclear what export-price floor Vitol might face, or whether a liquefaction take-or-pay fee or some more flexible option fee would apply for the buyer.

Regardless of the agreement’s exact terms, the announcement was likely unnerving to the US’ second wave of LNG export developers that are now in contentious pursuit of offtake contracts, particularly from buyers in Asia’s growing import market.

Go deeper: S&P Global Platts special report on LNG financing

While the offtake agreement was Tellurian’s first, making them more likely to accept contract terms generous to the buyer, it still speaks volumes about the shifting balance of power in LNG contracting markets.

If Gentle’s prediction is correct that the Platts JKM could become an index price for US LNG exports, the move implies much stiffer competition ahead for second-wave projects developers.

The US’ largest LNG exporter, Cheniere Energy, currently holds contracts linked to the NYMEX Henry Hub price, effectively shielding the producer from fluctuations in the cost of feedstock gas.

For second-wave producers, though, the ability to delink their feedstock gas cost from Henry Hub—and potentially source gas at a fraction of the benchmark price thanks to new investments—might be their best way to compete heading into the 2020s.

The post Tellurian-Vitol LNG deal signals shifting balance of power appeared first on The Barrel Blog.

Source: Platts - The Barrel Blog News Feed

EQT Postpones Conference Call to Discuss 2019 Guidance and Updated Analyst Presentation

PITTSBURGH–(BUSINESS WIRE)–EQT Corporation’s (NYSE: EQT) conference call to discuss the company’s 2019 capital program and updated analyst presentation that was previously scheduled for December 13, 2018, has been postponed in light of scheduling conflicts resulting from the passing of a family member of EQT’s CEO, Robert McNally. EQT expects to announce a new date and [Read more]

Source: BOE Report

Cenovus cuts 2019 capital budget by 4 percent

Canada's Cenovus Energy Inc said on Tuesday it would reduce its capital spending for 2019 by 4 percent amidst a broader turnaround plan following its highly criticized deal with ConocoPhillips . The company said it plans to invest between C$1.2 billion ($901.1 million) and C$1.4 billion in 2019, with the majority of the budget going [Read more]

Source: BOE Report

Cenovus’s 2019 budget demonstrates cost leadership and capital discipline

CALGARY, Alberta, Dec. 11, 2018 (GLOBE NEWSWIRE) — Cenovus Energy Inc. (TSX: CVE) (NYSE: CVE) remains committed to increasing shareholder value through cost leadership, capital discipline and safe and reliable operations. These commitments, in combination with the company’s high-quality upstream assets and joint ownership in strong refining assets, are expected to further strengthen Cenovus’s ability [Read more]

Source: BOE Report

Berry Petroleum Announces Filing of Shelf Registration Statement

DALLAS, Dec. 11, 2018 (GLOBE NEWSWIRE) — Berry Petroleum Corporation (NASDAQ: BRY) (“Berry” or the “Company”) announced today that, pursuant to its obligations under the amended and restated registration rights agreement, dated June 28, 2018, by and among the Company and certain of its stockholders, the Company has filed a selling stockholder shelf registration statement [Read more]

Source: BOE Report

KBRwyle Awarded $114M in U.S. Army LOGCAP IV Task Order Mods to Aid Military Readiness Overseas

HOUSTON, Dec. 11, 2018 /PRNewswire/ — KBR, Inc. (NYSE: KBR) announced today that its global government services business, KBRwyle, was awarded two task order modifications totaling $114 million to provide logistics support services to the U.S. Army in Europe and the Arabian Peninsula. The Army Contracting Command awarded these modifications under the Logistics Civil Augmentation Program [Read more]

Source: BOE Report

In the LOOP: Three VLCCs depart LOOP for India, South Korea

Three VLCCs departed the Louisiana Offshore Oil Port over the week ended December 8, with the crude cargoes on board bound for India and South Korea.

LOOP did not release the names of the vessels that were loaded and it was unclear exactly which VLCCs departed the port for export. However, cFlow, Platts’ trade flow software, reported that three laden or partially laden VLCCs exited LOOP last week.

The Khurais set sail from LOOP on December 5 and is bound for Kochi, India, according to cFlow. It is expected to arrive at the west coast of India on January 12. Another vessel, Lulu, left LOOP on December 7 and is expected to arrive at India’s east coast port of Paradip on January 19. The third VLCC, Maharah, was loaded at LOOP and set sail December 2. It is expected in Daesan, South Korea, on January 23.

The three VLCCs were loaded with crude sourced from LOOP’s Clovelly Hub, including a light sweet crude grade, most likely either LLS or WTI MEH, according to industry sources. The remaining two cargoes could contain Mars, Poseidon or LOOP Sour crude. The three VLCCs were loaded one after the other, representing a reduced overall load time at the port, according to LOOP.

Both sweet and sour grades have made their way to India and South Korea in recent months, including WTI MEH, Mars and Poseidon grades. The month two Dubai and month one WTI swap spread, has widened 41 cents/b to $6.75/b since the start of the fourth quarter. As Dubai’s premium over WTI increases, WTI-based grades become more competitive with comparable Dubai-based grades in export markets.

On Monday, S&P Global Platts assessed LOOP Sour CFR North Asia at $60.76/b, falling below the comparable values for competing grades Dubai, assessed at $62.33/b, and Basrah Light, at $61.88/b. The assessed WTI MEH CFR North Asia value of $63.93/b, while higher than competing grade Murban at $63.35/b, was still slightly lower than the CFR value of Forties at $64.01/b.

US crude oil exports surged to reach a new all-time high of 3.2 million b/d for the week ending November 30, according to data released last Thursday by the Energy Information Administration. The total surpassed the previous record of 3 million b/d, which occurred the week of June 22. The record exports helped create a draw on crude oil inventories, which came after 10 weeks of builds.

The post In the LOOP: Three VLCCs depart LOOP for India, South Korea appeared first on The Barrel Blog.

Source: Platts - The Barrel Blog News Feed

BOURBON: Monthly information relating to the total number of shares and voting rights comprising the share capital

Monthly information relating to the total number of shares and voting rights comprising the share capital Article L 233-8-II of the Commercial Code and Article 223-16 of the General Regulations of the Autorité des Marchés Financiers (AMF)   Total number of outstanding shares Theoretical total number of voting rights* Net total number of voting rights   [Read more]

Source: BOE Report

Tailpipes through the bend of a horizontal well improve production and are becoming a standard practice for unconventional horizontal wells

Artificial lift systems under-perform when faced with unstable slug flows from a horizontal wellbore. Slug flows bring solids issues and pump gas interference which increases operating expenses from poor runtime, excessive workover costs, and inadequate production drawdown. Five years ago, the HEAL System was developed by a producer to address slug flow challenges. Its capability [Read more]

Source: BOE Report

TransGlobe Energy Corporation Announces Director/PDMR Shareholding

CALGARY, Alberta, Dec. 11, 2018 (GLOBE NEWSWIRE) — TransGlobe Energy Corporation (AIM & TSX:  “TGL” & NASDAQ:  “TGA”) (“TransGlobe” or the “Company”) announces that it was notified on December 7, 2018 that on the same day G. R. (Bob) MacDougall acquired common shares as follows: PDMR Number of Common Shares Acquired Price ($CDN) Number of Common Shares [Read more]

Source: BOE Report

Equinor ASA: Notifiable trading

On behalf of Equinor (OSE: EQNR, NYSE: EQNR), DNB has on 10 December 2018 purchased 482,585 shares for use in the group’s Share saving plan. The shares have been acquired at a price of NOK 196.51 per share. Before distribution to the employees, the Share saving plan has 10,612,979 shares. This information is subject to [Read more]

Source: BOE Report

Notifiable trading

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The shares have been acquired at a price of NOK 196.51 per share.

Before distribution to the employees, the Share saving plan has 10,612,979 shares.

This information is subject to the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.

Source: Equinor - Notifiable trading

Changes in coal sector led to less SO2 and NOx emissions from electric power industry

(Tue, 11 Dec 2018) Annual U.S. electric power industry emissions of sulfur dioxide (SO2) and nitrogen oxides (NOx) have declined by 88% and 76%, respectively, between their peaks in 1997 and 2017. During this period, coal-fired generation was responsible for 90% of SO2 emissions and 76% of NOx emissions from the U.S. electric power industry. Among other factors, declining coal-fired generation and implementation of environmental regulations under the Clean Air Act Amendments (CAAA) of 1990 have both contributed to the decrease in electric power industry SO2 and NOx emissions.

Athabasca Oil Corporation Announces $265 Million Leismer Infrastructure Transaction, Preliminary 2019 Capital Guidance of $95 – $110 Million and Streamlined Cost Structure

CALGARY, Alberta, Dec. 10, 2018 (GLOBE NEWSWIRE) — Athabasca Oil Corporation (TSX: ATH) (“Athabasca” or the “Company”) is pleased to provide an update on its midstream process, preliminary 2019 capital guidance expectations and its recent reductions in corporate costs. Strategic Infrastructure Transaction Athabasca has entered into an agreement with Enbridge Inc. (“Enbridge”) for the sale [Read more]

Source: BOE Report

PG&E Announces Enhanced Wildfire Prevention and Safety Efforts Including Expanded Inspections; Additional Support for Camp Fire Victims and Their Families

SAN FRANCISCO–(BUSINESS WIRE)–Pacific Gas and Electric Company (PG&E) today announced that it will be implementing a series of additional precautionary measures intended to further decrease wildfire threats in communities that are at higher risk of wildfires, as well as additional support for its customers and their families impacted by the Camp Fire in Butte County. [Read more]

Source: BOE Report

Solar Alliance extends Warrant Expiry Date

VANCOUVER, British Columbia, Dec. 10, 2018 (GLOBE NEWSWIRE) — Solar Alliance Energy Inc. (‘Solar Alliance’ or the ‘Company’) (TSX-V: SOLR) has applied to the TSX Venture Exchange (the ‘Exchange’) to amend the expiry date of the balance of a total of 2,858,999 outstanding common share purchase warrants issued pursuant to a private placement that closed [Read more]

Source: BOE Report