CERAWeek Day II: OPEC ministerial no shows & more

The Oilholic writes this blog well towards the end of the second day of CERAWeek with no sign of any OPEC ministers or the Secretary General of the producers' group. This is in stark contrast to previous years. 

However, many of the bosses of their state-owned oil and gas companies are here in fine voice, most notably, Amin Nasser, CEO of Aramco, Nawaf Al-Sabah, CEO of Kuwait Petroleum Corporation, and Mele Kyari, CEO of Nigerian National Petroleum Company. 

One notable absentee among their ranks was Sultan Al Jaber - the President of COP28, UAE Special Envoy for Climate Change and Minister of Industry and Advanced Technology and Managing Director and - Group CEO of ADNOC.

However, he did appear virtually to receive the CERAWeek Leadership Award recognizing his leadership at COP28 to deliver the UAE Consensus for a global agreement on a sustainable energy future.

"I am deeply honored to accept the CERAWeek Leadership Award for the UAE Consensus," Al Jaber said upon receiving the award. "In a world too often held back by conflict, the UAE Consensus brought nations together to take a giant step forward for climate progress. 

"Multilateralism overcame geopolitics to produce an unprecedented agreement to produce a fair, orderly and responsible energy transition. In short, COP28 was a success because of its full inclusivity. Everyone had a seat at the table, everyone was invited to contribute, and everyone did contribute."

Meanwhile, Mike Wirth, CEO of Chevron, appeared at CERAWeek to express his "surprise" when ExxonMobil moved to arbitration over Guyana. Wirth also flagged his company's ongoing geothermal pilot program. Murray Auchincloss, CEO of BP, chose to big up his upstream business, while Ryan Lance, CEO of ConocoPhilips, said the wave of upstream oil and gas M&A "is not done yet". 

That wave saw $234 billion worth of deals in 2023. Additionally, and quite interestingly, Lance seemed to suggest that US oil production will likely rise from its current level of 13 million barrels per day to 14 million bpd before it plateaus. 

Well that's a wrap for day for the second day of CERAWeek. The Oilholic leaves you with a glimpse above of a scramble for the escalators for a break after the plenaries conclude. Now these ones are to the right of the ballroom exit. If only some good folks had gone far left they'd find the escalators there quite empty and reach their lunches and coffees a tad quicker :) Keep reading, keep it here, keep it 'crude'! 

To follow The Oilholic on Twitter click here.

To follow The Oilholic on Forbes click here.

To follow The Oilholic on Motley Fool click here.

To email: journalist_gsharma@yahoo.co.uk  

© Gaurav Sharma 2024. Photo I: CERAWeek 2024 logo in Houston, US. Photo II: Crowded escalators at CERAWeek 2024 © Gaurav Sharma, March 2024. 

On Guyana & other 'crude' musings

As the month of July comes to a close, it seems the Saudis have indeed achieved near-term success with global oil benchmarks - Brent and WTI - now above $80 per barrel. It's a price level that Riyadh can live with. Although it is worth wondering at what cost (i.e. the good old debate about losing market share vs propping up the market without the help of friends / foes)? 

On a related note, while for much of OPEC+ the recent uptick in crude prices may come as a relief, for one new non-OPEC kid on the crude exploration block it has the makings of a spectacular boost in fortunes - Guyana. Here are the Oilholic's thoughts via Forbes on this micro-state in Latin America, with a population of less than a million people, and its full-blown oil boom. 

Guyana's headline crude production which came in at less than 100,000 barrels per day (bpd) as recently as 2020 has grown nearly four-fold to just shy of 383,000 bpd in 2023, and is still growing, according to the country's Ministry of Natural Resources. That said all the market chatter of it either joining or being asked to join OPEC is a load of nonsense that been denied by the oil producers' organization itself.

Elsewhere in the Oilholic's world, yours truly offered his perspective market perspectives on CGTN and Asharq Business News following the conclusion of the OPEC International Seminar earlier this month, and noted OMV's potential recoverable natural gas find of approximately 48 TWh, or 28 million barrels of oil equivalent. This discovery carries the potential to alter the natural gas market in Central Europe, and is Austria's largest gas discovery in the last 40 years. So watch this space! That's all for the moment folks! Keep reading, keep it 'crude'!

To follow The Oilholic on Twitter click here. 

To follow The Oilholic on Forbes click here. 

To follow The Oilholic on Rigzone click here. 

To email: journalist_gsharma@yahoo.co.uk

© Gaurav Sharma 2023. Photo © Image by Omni Matryx from Pixabay. 

Big Oil quarterly earnings in the Covid-19 age

The first Big Oil quarterly earnings season in the age of the coronavirus or Covid-19 global pandemic has gone revealing profit slumps, capex and opex cuts, job losses and much upheaval. Selected reports on the financials by the Oilholic are listed below, with links:

• Profits Slump 67% At BP But Oil Major Maintains Dividend Despite Coronavirus Downturn, Apr 28
• ExxonMobil Follows BP In Maintaining Dividend But Shell Cuts As Oil Crash Bites, Apr 30
• Shell Cuts Dividend By 65% On ‘Prolonged’ Oil Market Uncertainty, Apr 30 
• Oil Giant Total Maintains Dividend Despite ‘Exceptional’ 35% Plunge In Profits, May 5
• Oil Major Equinor Suspends 2020 Guidance Following 51% Slump In Earnings, May 7
• Saudi Aramco Keeps Record $18.75 Billion Dividend Payment Intact Despite Profits Slump, May 12

Some key themes to emerge were: 

(1) Universal profit slumps, excepting Chevron which bucked wider quarterly trends, 

(2) Around $60 billion in cost cuts instituted by the biggest 20 IOCs, and 

(3) Shell's first dividend cut since the Second World War. 

A more detailed summary for Forbes on what we can learn from Q1 2020 figures for is here. But that's all for the moment folks. Keep reading, keep it 'crude'!

To follow The Oilholic on Twitter click here.

To follow The Oilholic on Forbes click here.

To email: gaurav.sharma@oilholicssynonymous.com

© Gaurav Sharma 2020.

Thoughts From Baker McKenzie’s Oil & Gas Institute 2018

Earlier today, the Oilholic was delighted to attend the Baker McKenzie 2018 Oil & Gas Institute; an event that grows bigger by the year, and has become a true 'crude' fixture in Houston.

From Big Oil getting to grips with Big Data to capital raisings in mature jurisdictions, emerging market legal considerations to mergers and acquisitions - there was plenty on the agenda to for everyone. Of course lurking in the background to it all is the direction of the oil price and US President Donald Trump's re-imposition of sanctions on Iran, the Israeli-Iranian tussle in Syria, OPEC and all the rest. It's pushed Brent crude above $77 per barrel and WTI above $71. 

While every US shale player would gladly accept the current prices; quite like the Oilholic, few at the Institute felt the elevated prices would last. Given there are several variables in the equation - including, but not limited to, what OPEC would do next month, what sort of levels US producers are likely to record, how many Iranian barrels are likely to be knocked off the market, etc. - getting carried away by the bulls would not be a good idea. 

To quote, Jim O'Brien, Chair of Baker McKenzie's Global Energy, Mining & Infrastructure Practice Group and one of the architects of the Institute, the US oil patch is "feeling good" about itself at the moment, but at the same time there is a fair degree of realism that a return to $100 prices is unlikely.

In fact, one of the key takeaways from the Institute was how oil and gas players, both large and small, were aiming to achieve breakeven at prices as low as $30. 

Underpinning that drive would be digitisation across the board enabled by big data, AI, automation and robotics coming together to bring about the kind of process efficiencies capable of making a tangible difference to the operating expenditure of oil and gas companies. Touching on this very subject was a keynote speech by Paulo Ruiz Sternadt, boss of Siemens-owned Dresser-Rand. (Full Forbes report here)

Representatives of Baker McKenzie, BP, Accenture, Shell and many others also touched on the topic. LNG, employment diversity and private equity in the business were other subjects under discussion, as was the topic of investing in Mexico (Forbes post here) and the latest developments in Saudi Arabia. All in all, another interesting afternoon of deliberations. But that's all for the moment from Houston folks. Keep reading, keep it 'crude'!

To follow The Oilholic on Twitter click here.

To follow The Oilholic on Google+ click here.

To follow The Oilholic on Forbes click here.

To email: gaurav.sharma@oilholicssynonymous.com 

© Gaurav Sharma 2018. Photo: Delegates at the Baker McKenzie 2018 Oil & Gas Institute in Houston, Texas, USA © Gaurav Sharma 10 May, 2018.

Crude price fluctuation versus ‘Big Oil’ dividends

It has been another crazy fortnight in the crude markets, with Brent not only having retreated from $70 per barrel, but trading below $65, as the Oilholic pens his thoughts.

In any case, having a $70-plus six-month price target is increasingly odd, given the current set of circumstances, let alone a projection by Goldman Sachs of $82.5 per barrel, as one recently wrote on Forbes.

That said, a possible Saudi-Russian, or should we call it a R-OPEC, reaffirmation of keeping oil production down, accompanied by constantly rising Indian oil imports and stabilising OECD inventories, should give the bulls plenty of comfort. Let’s also not forget the global economy is growing at a steady pace across all regions for the first time since the global financial crisis.

The aforementioned do count as unquestionable upsides for the oil price. But here’s the thing – should you believe in average global demand growth projections in the optimistic range of 1.5 to 1.7 million barrels per day (bpd); such growth levels could be comfortably met by growth in non-OPEC production alone.

For the moment, there’s little afoot to convince the Oilholic to change his view of a $65 per barrel average Brent price, and $60 per barrel average WTI price for 2018. So what impact would this have on ‘Big Oil’.

Interestingly enough, Morgan Stanley flagged up the 'curious case' of Big Oil dividend growth in a recent note to clients, pointing out that despite recent share price declines influenced by crude market volatility, unexpected dividend growth is still being achieved by European oil majors thanks to rapidly improving financial performance.

According to the global investment bank, in 2017, Royal Dutch Shell, BP, Total and Statoil generated $29.6 billion in organic free cash flow; the highest level since 2009. Return on average capital employed is also improving and balance sheet gearing is falling as well.

“Several management teams were willing to translate stronger cash generation in dividend increases", Morgan Stanley added.

The investment bank opined that Statoil’s cash flow and dividend growth remain impressive, so do BP’s, but noted that the latter will not be able keep up with Total and, ultimately, Shell on dividend growth.

Hard to keep up with Shell in any case; the Anglo-Dutch giant has a sterling record of regularly and dutifully paying dividends dating all the way back to the Second World War. That’s all for the moment folks! Keep reading, keep it ‘crude’!

To follow The Oilholic on Twitter click here.

To follow The Oilholic on Google+ click here.

To follow The Oilholic on Forbes click here.

To email: gaurav.sharma@oilholicssynonymous.com

© Gaurav Sharma 2018. Photo: Oil well in Oman © Royal Dutch Shell.

Upstream woes denting midstream prospects

In wake of weak oil prices, the upstream side of this ‘crude’ world is going through the worst cyclical downturn in years. The Oilholic’s most conservative of estimates sees the situation staying the way it is, if not worsening, for at least another 15 months.

In fact, one feels fresh investment towards exploration and production (E&P) could remain depressed for as much as 18 to 24 months. Both Fitch Ratings and Moody’s have negative outlooks on the upstream industry, as 2015 looks set to end as the year with the lowest average Brent price since 2005.

National Oil Companies (NOCs), bleeding cash reserves in order to stay in the game and put rivals out of it, are maximising existing onstream capabilities. Meanwhile, International Oil Companies (IOCs) looking to cut costs, are delaying final investment decisions on E&P projects at the moment.

As one wrote on Forbes, Big Oil is gearing up for a $60 breakeven oil price for the next three years and capital expenditure cuts of 10%-15% in 2016 with far reaching consequences. Of course, the pain will extend well beyond the obvious linear connection with oilfield services (OFS) and drilling companies.

Global midstream growth is getting hammered by E&P cuts too, according anecdotal evidence from reliable contacts at advisory firms either side of the pond. Most point to a Moody’s subscriber note issued on November 6, that set out the ratings agency’s stable outlook on the US midstream sector, but also suggested that industry EBITDA [Earnings before interest, taxes, depreciation, and amortisation] growth will struggle to cap 5% in 2016.

Andrew Brooks, Senior Analyst at Moody’s, noted: "For the past five years, the midstream industry has rapidly ramped up investment in infrastructure projects to serve the E&P industry's extensive investment in US oil and gas shale resource plays. 

"But now deep cuts in the E&P sector and continued low oil and natural gas prices will limit midstream spending through at least early 2017."

There was a sense in Houston, Texas, US when the Oilholic last went calling in February and again in May this year that midstream companies have already built much, if not most, of the infrastructure required for US shale production. Therefore it is only logical for ratings agencies and analysts to suggest incremental EBITDA growth will slow as fewer new shale and tight oil assets go into service. 

Only thing in midstream players' favour over the next, or quite possibly two, lean fiscal year(s) is the linkage they provide between producers and downstream markets. In Moody’s view this need would mitigate some of the risk of slower growth, even if gathering and processing margins remain at cyclical lows.

"And the midstream sector should be more insulated from contract renegotiation risk with upstream operators having less flexibility to force price concessions on midstream services companies than they have had with OFS firms and drillers," Brooks concluded.

So all things considered, midstream is perhaps not as deeply impacted as E&P, OFS segments of the oil and gas business, but suffering it most certainly is. That’s all for the moment folks! Keep reading, keep it ‘crude’!

To follow The Oilholic on Twitter click here.
To follow The Oilholic on Google+ click here.
To follow The Oilholic on Forbes click here.
To email: gaurav.sharma@oilholicssynonymous.com

© Gaurav Sharma 2015. Photo: Pipeline signage, Fairfax, Virginia, USA © O. Louis Mazzatenta / National Geographic

Streamlining ‘crude’ corporations in tough times

In tougher times, operational efficiencies - often brought about by digital streamlining - do matter and the oil and gas business is most certainly going through a rough patch. Yet, despite living in an increasingly digital world, most in the business view IT through a prism of functionality rather than one of enablement and efficiencies. 

Afterall, when you think of the energy business in general and big oil in particular, it is all about physical assets, drilling and generating not servers and computers. Sometimes, a change of circumstances provides the necessary jolt and that circumstance has been the oil price decline. 

As every oil and gas and oilfield services company, large or small, listed or independent is scrambling around to save costs; suddenly many are meaningfully warming up to the premise of IT services management [or ITSM] - a concept that has been around for a while, but has not tickled the fancy of big oil to the same extent as big banking or big pharma.

With IT driven processes streamlining and merging functions ranging from human resource management to data management, organising emergency response to a centralised incident logging platform - the idea is has savings at its core. The Oilholic went exploring its potential at the recently concluded Knowledge 15 Convention in Las Vegas, Nevada; an event put together by ServiceNow (NYSE:NOW), one of the market leaders in the sphere. 

 

The company has been notching up the concept with each passing year. From giving the corporate world its Platform as a Service (PaaS) offering to Software as a service (SaaS), to IT and infrastructure as service, ServiceNow simply defines what it brings to the solutions table these days as “Everything as a Service”.

Banners proudly proclaiming the strategy were all around the Mandalay Bay Convention Centre; venue of the event (see photo above). Everything is indeed in play - name a process optimisation slant, and a solution could be conjured up, as ServiceNow CEO Frank Slootman told this blogger in an exclusive Forbes interview.

And while the oil and gas sector remains behind the curve, attitudes are changing according to Slootman. Most in big oil are keenly observing how alternative energy and utilities companies are adopting ITSM to improve procedures and save costs, as the Oilholic noted in another Forbes article. 

Furthermore, KPMG’s IT advisory partner Phil Crozier opines that a wave of mergers and acquisitions within the sector could further the drive. “Hypothetically speaking, let’s look at Shell’s bid for BG Group. The person who is in-charge of IT operations in that sort of a setting does not get told how to bring two organisations together, merely a percentage of some sorts – say 20% – to take off the cost base.

“Now, the only way you can efficiently achieve those sorts of savings would be via process efficiencies and simplification in the approach taken by the two firms. That’s where digital process optimisation comes in.”

That drive is gathering momentum. The Oilholic found several energy sector executives around the convention floor eagerly exploring ITSM avenues. ServiceNow already counts the likes of Valero, Statoil, GDF Suez, GE Energy and several others among its growing client portfolio in the sector.

However, there is still a long way to go before ServiceNow or its bitter rival BMC can put the sector at par with ITSM adoption at big pharma, big finance or big tech. Anecdotal evidence suggests 2015-16 could see many big oil sceptics recognise the potential, even if under financial duress.

Of course, for the moment, you’ll just have to take the Oilholic’s word for it. One found it very difficult to get sector executives to talk about their potential plans on record. The topic is a sensitive one and outsourcing – which forms a component of all this – has been a political hot potato for better parts of a decade.

Here at Knowledge 15, some delegates even claimed to have reduced their headline back-office costs by as much as 50% over a period of 5 to 8 years. The potential for savings and efficiencies is almost, always accompanied by a reduction in headcount. As for the oil and gas sector, forget the back office - currently its shedding employees back, front and centre.

While it’s hard to be dispassionate about job losses, this is about something deeper. To quote one energy sector executive: “A dollar saved elsewhere in the organisation via effective ITSM solutions deployment for procedural matters, could be spent in upstream operations which is what every oil and gas exploration company is really about.”

IT driven streamlining seems to be finally bringing about that belated realisation for some. That’s all for the moment folks! Keep reading, keep it ‘crude’! 

To follow The Oilholic on Twitter click here.
To follow The Oilholic on Google+ click here.
To follow The Oilholic on Forbes click here.
To email: gaurav.sharma@oilholicssynonymous.com

© Gaurav Sharma 2015. Photo: ServiceNow’s ‘Everything as a service’ banner at Knowledge 15, Las Vegas, Nevada, USA © Gaurav Sharma, April 2015.

The difficult art of marketing ‘Big Oil’

Given the historical and perhaps customary negativity surrounding oil and gas majors in the best of times, working on their marketing pitches and brand equity enhancement is not for the faint hearted.

Environmental disasters and subsequent public relations fiascos in wake of incidents such as Exxon Valdez and BP’s Gulf of Mexico oil spill have only reinforced negative perceptions about ‘Big Oil’ in the minds of many. 

It all dates way back to Standard Oil, a company often castigated for its practices in the last century, writes Mark Robinson, professor of marketing at Virginia International University, in his recent work Marketing Big Oil published by Palgrave Pivot.

With pitfalls aplenty for oil and gas marketing professionals, the author has attempted to offer guidance on the arduous task by going well beyond the mundane 'do’s' and 'don’ts' in a book of just under 160 pages, split into five parts and 17 splendidly sequenced chapters. As it happens, Robinson knows more than a thing or two about marketing Big Oil, having been an industry executive at Deloitte’s Global Energy & Resources Group and ExxonMobil.

His book provides adequate subjective treatment, lessons from history and what approaches to adopt if marketing Big Oil is what you do or intend to do. Starting with the historical context provided by Standard Oil, the author leads readers on to present day challenges faced by oil and gas companies as we’ve come to know them.

The Oilholic really liked Robinson’s no holds barred analysis of marketing and branding exercises undertaken by industry participants and his detailed examination of what worked and what tanked given the millions that were spent. The author says throwing money at a campaign is no guarantor of success as many companies within the sector have found out to their cost.

Managing pitfalls forms an integral part of Robinson’s message; just ask BP with its ‘Beyond Petroleum’ slogan. Perceived disconnect between the slogan, what the company was up to, and subsequent events made it sound farcical. The saga, what went wrong with the campaign and lessons in its wake are described in some detail by the author.

Additionally, a part of the book is dedicated to managing a brand crisis. The entire text is well referenced and accompanied by 14 brand lessons treating various crucial marketing facets. Analysis of the industry's use of social media, e-commerce, mobile apps and digital advertising is fascinating too.

Overall, Robinson’s engaging and timely book on a complex marketing arena brings forth some 'crude' home truths, backed up by historical context and lessons from the corporate world, all weaved into a balanced industry perspective on the state of affairs in a digitally savvy world.

Budding marketing professionals as well as industry veterans, and those interested in how some of world’s biggest oil and gas companies succeed (or fail) in etching their global brand equity would find this book to be a thoroughly good read.

To follow The Oilholic on Twitter click here.
To follow The Oilholic on Google+ click here.
To follow The Oilholic on Forbes click here.
To email: gaurav.sharma@oilholicssynonymous.com

© Gaurav Sharma 2014. Photo: Front Cover – Marketing Big Oil: Brand Lessons from the World's Largest Companies © Palgrave Macmillan, July 2014.