Category Archives: Offshore

More than 100 people attended a public hearing in Wilmington to voice opinions on the 2019-2024 national outer continental shelf oil and gas leasing program (Photo: Sarah Johnson/WWAY)

WILMINGTON, NC (WWAY) State environmental officials are looking for public input about the potential impact of oil and gas exploration and development off our coast.

President Trump signed an executive order in April that could expand drilling in the Arctic and Atlantic Oceans.

I have friends on all sides of that issue, Congressman David Rouzer said.

Offshore drilling is a hot topic on our coast. The North Carolina Department of Environmental Quality held a public hearing to gather feedback and to see what people think about the proposed oil and gas leasing program, along with seismic surveying proposed by the Trump Administration. Many say they worry drilling could hurt marine life.

Im a charter boat captain and I depend a lot on the habitat off shore, one oil spill would destroy all that habitat, Captain Dave Timpy said. The damages would be tremendous.

More than 100 came out to the New Hanover County Government Complex, many said they oppose offshore drilling, but US Congressman David Rouzer, who met with local leaders in Wilmington earlier Monday disagrees.

I think its important for job creation, particularly if you go to our inner counties like Bladen County, Columbus County, that are in such dire straights, Rouzer said. I think energy production could be a big boost in many ways, particularly for our beaches. As far as renourishment efforts and dredging of our inlets and our waterways, if structured the right way.

Governor Roy Cooper has stated he is opposed to offshore drilling.

So I think a very strong no from Governor Cooper, were hoping carries a lot of weight, as well as governors up and down the coast, who will say that the people of their states do not want this off the coast and dont need this, Andy McGlinn with the Cape Fear Sierra Club said.

While some said we do not need this, others said it will bring more opportunities to the area.

We believe that North Carolina has a tremendous opportunity from an economic perspective, from a national security perspective and even from an environmental perspective, to pursue clean burning natural gas off our coast, and do so in a way that creates jobs and stimulates economic development here in North Carolina, Executive Director of the North Carolina Petroleum Council David McGowan said.

North Carolina Environmental Quality Public Information Officer Bridget Munger said 162 people attended Monday nights public hearing in Wilmington, with 37 of those people signing up to speak and voice their opinions.

If you would like to voice your opinions, you have until August 15, 2017 to submit comments by regular mail to:

Timothy Webster 217 West Jones St. 1601 Mail Service Center Raleigh, NC 27699-1601

or by e-mail to timothy.webster@ncdenr.gov.

There will also be public hearings on August 9 at the Crystal Coast Civic Center in Morehead City and August 10 at the Dare County Government Complex in Manteo.

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Dozens weigh in on offshore drilling - WWAY NewsChannel 3

Information from the front lines of the offshore market drilling company marketing departments suggest that contracting activity is improving. We were treated to various drilling company CEO commentary about the market outlook, along with explanations about adjusting corporate strategies, during their recent earnings conference calls. Some comments were directed to strategy shift updates already underway, while other comments focused on the need for companies to rationalize rig fleets in order to be positioned for the upcoming industry recovery.

So when is the market recovery coming? According to Diamond Offshore Drilling Inc. CEO Marc Edwards, Were looking at a recovery that is probably the back-end of 2019, in terms of not only utilization ticking back up but also looking at a time when pricing power might return in our space.

This view was essentially echoed by Ensco PLCs CEO Carl Trowell, when he told analysts. We expect that the recovery in the offshore sector will be prolonged and paced. While less defined than Edwards timetable, Trowell also pointed out that More projects have reached final investment decision sanction this year than we did for all of 2016, providing a pipeline of future offshore work in the years ahead.

Those observations are consistent with a slow and steady recovery from the worst industry depression in history. This downturn, combined with its slow recovery, has forced every energy company to reassess, and in most cases, adjust its corporate strategy. Both Diamond Offshore and Ensco have acted, and plan further steps to position themselves for maximum returns as the industry recovery unfolds.

A frank assessment of the need for offshore companies to adjust their strategies was offered by Trowell. Acknowledging that the downturn will reconfigure the offshore drilling industry, he suggested successful drilling contractors must be well capitalized as well as possessing the technology, systems, scale, and diversification to help customers lower their development costs.

Ultimately, lower offshore costs is the key condition to be achieved by the industry before a healthy recovery can be sustained. A recent study by Wood Mackenzie pointed out that the offshore well breakeven prices are now down to $50 a barrel, meaning that at current oil prices, producers are essentially trading dollars, but banking on higher prices or lower costs in the future. That scenario, however, is better than past conditions when producers would have been losing $20-$30 a barrel.

Lower drilling rig, supply vessel and service company prices have been part of the equation for lower breakeven prices, but technology is another significant contributor, and one that has greater sustainability. Edwards, of Diamond Offshore, pointed to the early success of his companys partnership with General Electric to deliver pressure control by the hour service. He highlighted that this unique contract helped boost the revenue efficiency of Diamond Offshores black rigs by over 300 basis points quarter over quarter. As evidence, he cited drilling a well in the Gulf of Mexico to 31,000, 30% faster than planned, which contributed to better returns for his customer.

Offshore companies are making significant progress in reducing costs, shrinking fleets and promoting new technologies that will contribute to improved returns for their customers. It should also be rewarding for the service companies, too. As we near a market tipping point, the recovery will begin accelerating. The leading drilling contractors may be sensing the tipping point drawing near.

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Emerging signs of offshore market improvement - WorkBoat (blog)

A 12,000-tonne mobile offshore production unit constructed by Topaz Energy and Marine. The company will work with Dragon Oil in Turkmenistan. Courtesy Topaz Energy and Marine

Dubai-based Topaz Energy and Marine will supply vessels to Dragon Oil, the upstream unit of Emirates National Oil Company (Enoc), for the development of Turkmenistans offshore hydrocarbon resources.

The Turkmenistan area, which is Dragon Oils principal producing asset, is in the eastern section of the Caspian Sea with the extracted oil and gas heading to Azerbaijan and Russia. The company has drilled more than a hundred new wells since the start of its production sharing agreement in 2000, and will maintain its control until 2025, from which time Dragon Oil will have the option to negotiate an extension of at least 10 years or more.

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Enoc to expand with exploration and production unit

Enoc names former Adnoc offshore chief as head of its Dragon Oil unit

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The US$100 million contract is for six vessels, including an emergency recovery and response boat, is for five years with a two-year option. The oil services company said that it had already started preparing the vessels for deployment to the Cheleken contract area.

Ren Kofod-Olsen, the chief executive of Topaz, said that the project increased the firms revenue backlog above $1.5 billion which it said was the highest in the industry.

Our solid funding also means that we are able to structure long-term commercial terms which offer predictability and value to our clients at very low counterparty risk, he said.

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Rebound foreseen for oilfield services companies

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Topaz, like many oil services companies, felt the pressure of sustained low oil prices, swinging to a loss of $2.4m last year with a fleet utilisation rate of 60 per cent. Mr Kofod-Olsen said in March that he expected this year to be challenging with a pick up in the second half.

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Topaz to help Dragon Oil develop Turkmenistan's offshore oil and gas - The National

Wall Street Journal (subscription)

Energy Suppliers Find Fresh Lift From Offshore Wind Wall Street Journal (subscription) For more than three decades, Gulf Island Fabrication Inc. has built foundations to anchor offshore-oil platforms to the ocean floor. Now, as lower oil prices take a bite out of that business, it is trying to turn that expertise into an edge in a new ...

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Energy Suppliers Find Fresh Lift From Offshore Wind - Wall Street Journal (subscription)

W&T Offshore, Inc. (NYSE:WTI)

Q2 2017 Earnings Conference Call

August 4, 2017, 10:00 AM ET

Executives

Lisa Elliott - IR

Tracy Krohn - Chairman and Chief Executive Officer

Thomas Murphy - Senior Vice President and Chief Operations Officer.

Daniel Gibbons - Senior Vice President and Chief Financial Officer

Stephen Schroeder - Senior Vice President and Chief Technical Officer

Analysts

Richard Tullis - Capital One Southcoast

Aloke Agarwal - Phoenix

Operator

Greetings and welcome to W&T Offshore Incorporated Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host for todays call, Lisa Elliott. Thank you. You may begin.

Lisa Elliott

Thank you, operator and good morning, everyone. We are glad to have you join us for W&T Offshore's conference call to review the financial and operational results for the second quarter of 2017.

Before I turn the call over to the Company, I would like to remind you that information recorded on this call speaks only as of today, August 4, 2017 and therefore, time-sensitive information may no longer be accurate as of the date of any replay. Also, please refer to the Companys second quarter of 2017 financial and operational results announcement that WT released yesterday for a disclosure on forward-looking statements and reconciliations of non-GAAP measures.

At this time, I'd like to turn the call over to Mr. Tracy Krohn, W&T's Chairman and CEO.

Tracy Krohn

Thanks, Lisa. So, good morning, everyone and thanks for joining us today. With me this morning is, Tom Murphy, our Chief Operations Officer, Danny Gibbons, our Chief Financial Officer and Stephen Schroeder, our Chief Technical Officer as they will be available to answer questions later on during the call.

So, before we review our second quarter results, Id first like to update you on the Ocean Energy Management issue which we expect to have completely resolved in a few weeks. On June 28, the BOEM filed a Motion with the Department of the Interior to rescind its four orders issued in 2016 that instructed us to provide additional supplemental bonding of $260.8 million. And on June 31 excuse me July 31, the DOI demanded the orders back or excuse me remanded the orders back to BOEM which is the first important step to the BOEM reversing or rescinding the bonding requirements.

So we anticipate that sometime this month necessary steps will have been taken to allow the BOEM to rescind the orders. When this does occur, we will make an announcement accordingly and hopefully put this behind us. So we are very pleased with both our financial and operational results in the second quarter. Production was in line with our expectations and was up modestly from last years second quarter and from the first quarter of this year.

We produced 3.9 million barrels of oil equivalent or 43,848 Boe per day. Oil and liquids represented about 58% of production which was also up slightly. Undoubtedly, weve continued to drive down our lease operating expense, or LOE rather which declined $5.1 million or 14% compared to last year and down $8.6 million or 22%, compared to the first quarter of this year.

Weve been very successful at reducing our base LOE for the last two years. So our base LOE which does not include variable operating cost such as insurance premiums workovers cost and facilities maintenance costs was $26.7 million in Q2 2017 compared to $30.7 million in Q2 of last year and $34.5 million in Q2 2015.

By driving down base LOE, weve greatly improved our operating margins. So in addition to managing our base LOE down, which weve also been able to significantly reduce our insurance premiums. Most variable element of our operating cost is our workover faculties and maintenance expenses which were much lower in the second quarter.

As a result, our LOE was well below our guidance for Q2. We may see an increase in this cost during the third quarter, but this will be somewhat weather and storm dependent because absence storm downtime weather is normally pretty good in the third quarter. So the better the weather offshore, the more work we can get done.

Regardless, we are projecting a very good operating expense outcome for the full year with the midpoint of our guidance at a $157 million for 2017, which is down a full $12 million from our expectations in guidance at the beginning of the year.

Our estimated production volumes for the third quarter include an allowance for unexpected storm and weather-related downtime of about 3,000 Boe per day. Additionally, we had anticipated that 12 million cubic feet per day recompletion of higher than 22, and oil is only generated at a rate of 2600 Mcf per day.

Third quarter production is predicted is projected to be somewhat lower than our second quarter volumes before ramping back up. In the fourth quarter, with the 87 wells behind of these other wells, will have an impact on our production. We believe this to be a conservative estimate of our production for the rest of the year.

The combination of slightly higher production volumes in Q2 along with a much reduced LOE resulting in EBITDA margins that we havent seen since oil prices were more than twice what they are now. In the second quarter, we generated adjusted EBITDA of $72.6 million, up 31.8 million over the same period in 2016, and an adjusted EBITDA margin of 59%, up from 41% in the same period last year.

So excluding special items, our adjusted net income was $31.1 million, and our earnings per share were $0.22 per share. We have clearly turned the corner this year and are generating solid bottom-line results. Our mid-year 2017 SEC proved reserves or 1P was 74.4 million barrels oil equivalent of which 56% was liquids, up slightly from the year end 2016.

The increase in proved reserves is more than sufficient to replace production proved developed producing reserves increased almost 6 million barrels oil equivalent or 13% compared to year end 2016. The present value of our reported SEC proved reserves discount at a 10% was $955 million or a 27% increase from $754.9 million at year end 2016 and thats due to upward revisions of previous estimates and higher average prices.

We continue to offset most of the natural production declines or asset base, so a substantial portion of this comes from our Mahogany Fields. In April at Mahogany we placed the A-16 well on production which reached a peak production rate of 1625 barrels of oil equivalent per day, thats about 83% oil.

At the end of the second quarter, we completed the A-8 well which is still on completion full back and we expect to in a position next quarter to talk about the A-8 well reserves.

Most of the excuse me both of these test wells were lower cost and low risk wells drilled to more fully exploit the T-sand. That continues to be an amazing another source and the main producer of Mahogany. To-date, the T-sand has contributed approximately 75% of Mahogany Field Q production of almost 45 million barrels of oil equivalent.

So our next Mahogany well, the A-17 is targeting the deeper T-sands for testing and hopefully expanding the further limits of that sand in the field. Operations have recently commenced on the oil and we are looking forward to seeing these well results which we expect in the fourth quarter.

So in addition to the primary T-sand to our A-17 holds additional opportunities with some other interesting potential for stacked pay above the deeper T-sand. The A-17 could be a high impact well for the company with the potential to materially expand the Mahogany field volumes and value. It is possible that the P-sand could prove to be an even larger and more liquid reducer than the T-sand.

So assuming success, the A-17 well could be on production during November and we expect it to make a meaningful contribution to our year-end production exit rates. So as a reminder, our A-18 well at Mahogany was completed in the T-sand and placed on production in mid-January of 2017.

So that well reached the peak initial production of around 5100 barrels of oil equivalent per day and cumulative production so far has already exceeded three quarters of a million barrels of oil equivalent production since it came on line.

The Mahogany Field 2 reservoir was the primary contributor to the meaningful increase in our mid-year 3P reserves with a 48% increase in volumes or 80 million barrels oil equivalent and a 73% increase in value or $1.3 billion from year end 2016. This significant appreciation of 3P reserves is an indication of upside potential if the nominal values exists for this field.

From the Ship Shoal area, we have mobilized the platform linked to our Ship Shoal 300 Field to commence drilling the B-5 well. This seismic led us to map some strong amplitude features in multiple stacked pay intervals in an undrilled fault block, very close to some excellent offset production wells in the field.

Assuming the B-5 well is successful, wed expect to have it on production in the October, November timeframe. W&T operates this well with a 79% working interest and we expect wells with cost of about $8.4 million to drill and complete. So in line with our project selection and hydrating criteria, we expect this well to provide fast payback of under a year and a half.

The well holds the potential for a significant stacked pay with upside cases realized and can trigger a follow-up of the further increase reserves and value. And, we assume we would in that case, we will drill the next well. So we recently added two relatively low risk exploration wells for 2017 drilling program with one at South Timbalier 224 and another at Main Pass 286.

The well at South Timbalier 224 is a shelf-exploratory opportunity located in 170 feet of water near existing infrastructure which is expected to spud in the fourth quarter. W&T operates and holds a 39% working interest, if successful, the South Timbalier 224 well can be tied back to any number of by existing production platforms and placed on production quickly and hopefully cost-effectively and they also spur additional follow-up drilling opportunities on our acreage.

The well at Main Pass 286 is also an excellent exploratory shelf. This is an open water location. It wont be drilled off with the platform. So its 300 feet of water that is near existing infrastructure owned and operated by W&T. Again the prospect exhibits strong seismic amplitude features helping to derisk the opportunity. Drilling will likely begin in the fourth quarter of 2017 and W&T holds a 100% working interest in the prospect.

So, as we previously mentioned, weve planned to commence our Phase 2 drilling program in our Ewing Banks 910 Field area which follows our very successful Phase 1 drilling program when we drilled and completed two successful wells about a year ago from our Ewing Banks 910 platform.

Phase 1 wells have contributed to the increase in production in the field. Phase 2 is scheduled to begin in the fourth quarter. We will include two new low risk exploration wells which are planned to be drilled and produce in the South Timbalier 311 platform.

These are both low-risk, stacked pay prospects that can be put on production quickly reducing cycle time and advancing project economics. The Viosca Knoll 823 "Virgo" Field, we have a two to three well program planned to commence later this year with production contributions expected in 2018.

So these low-risk exploitation wells with strong risk reducing seismic attributes coupled with nearby well control and logs, especially essentially have good adding place. These wells can be drilled from the existing platform and can be brought online again relatively quickly.

Weve made great progress and our amendment program over the last few years is assumingly complete all the projects planned for 2017. ARO expenses next year could drop to around the $10 million mark from around $80 million this year. So our total liquidity was $255 million on July of 26, 2017, that included a cash balance of $105 million.

So as we indicated in the last quarter, compared with the quality of solid growth opportunities in the Gulf of Mexico right now we will review in a number of strategies to find opportunities to enhance our growth prospects.

As we mentioned previously that we have engaged agency folks to help us create a drilling and acquisition fund. We are gaining traction in this process and expect that positive news in the not too distant future.

So with that, operator, we can open up the lines for questions.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Our first question comes from Richard Tullis with Capital One. Please proceed with your question.

Richard Tullis

Hey, thanks, good morning everyone.

Tracy Krohn

Good morning, Richard.

Richard Tullis

Tracy, it sounds like good news potentially on the way from the BOEM. Once that order would be rescinded regarding the supplemental bonding, where do you expect total bonding cost, say in 2018 to be versus what it is currently? Any change there?

Tracy Krohn

No, no change. We might actually see a reduction in it.

Richard Tullis

Okay, good, good. From a follow-up, WT has done a good job over the years of drilling the sub-salt wells at Ship Shoal, do you see the opportunity to kind of transfer that success and knowledge to other fields where you have sub-salt prospects?

Tracy Krohn

Absolutely.

Richard Tullis

Could you elaborate a little bit? Do you expect to start drilling some of those, say, in 2018? And where might those be?

Tracy Krohn

We are a little bit variable on the timing right now as we get a little bit close to that, I will be able to reveal that to you. We are keeping that a little closer to this right now.

Richard Tullis

All right. Thanks a bunch.

Tracy Krohn

Thank you, Richard.

Operator

Our next comes from Aloke Agarwal with Phoenix. Please proceed with your question.

Aloke Agarwal

Tracy, Danny, great quarter all around. Now that, now levels are back up, how are you guys thinking about the capital structure? You have these 2019 bonds coming due and in the past, you had talked about an exchange. I was just curious what you think here?

Tracy Krohn

I dont know exactly. I dont recall exactly what I talked about in regard to an exchange on the 2019 bonds, I believe thats exactly correct. I expect to generate enough cash to paying off.

Aloke Agarwal

Excellent. Thats good news and just as a quick follow-up, on the last call, I believe you had talked about 2017 plugging an abandonment coming in a little bit lower. Its not still the case?

Tracy Krohn

Yes, I think so. Hopefully, we dont have too many storms out here and we should be pretty close to our estimate if we have some more storm activity then naturally that will get - that will be a little bit volatile, it will be deferred into the following year.

Aloke Agarwal

And my last question is, just on the tax refund, the $69 million, is that expected to come in next year?

Tracy Krohn

Yes.

Aloke Agarwal

Thanks for taking all the questions. Good luck

Tracy Krohn

Good.

Operator

We do have another question. Its from Richard Tullis with Capital One. Please proceed with your question.

Richard Tullis

Yes, Tracy, I thought I jump back in.

Tracy Krohn

Sure.

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W&T Offshore's (WTI) CEO Tracy Krohn on Q2 2017 Results - Earnings Call Transcript - Seeking Alpha

The fight over offshore drilling is heating up again in South Carolina.

A committee of lawmakers researching the state's prospects meets Aug. 22, the group's first attempt to tackle the contentious issue.

After the Trump administration re-opened the leasing process last spring, S.C. House members introduced warring bills: onerequiring state agencies to approve the onshore infrastructure needed to support oil and natural gas drilling, and the other blocking them.

Faced with those bills, House officials formed a subcommittee last spring the Off-shore Drilling Ad Hoc Committee. Only one of its nine members, though, represents the coast.

The subcommittee's chairman, Rep. Bill Hixon, R-Aiken, called it an exploratory group to advise the House on an issue that few representatives who live away from the coast are aware of.

"We want to see what the benefits or harm to our state would be," Hixon said. "Georgia and North Carolina are looking at the same thing. We don't want to do anything to harm South Carolina but we don't want to be sitting on our hands while North Carolina and Georgia bring in the royalties."

Shortly after the subcommittee was formed, Hixon invited federal Energy Secretary Rick Perry, who strongly supports opening the offshore waters to drilling, to speak at the meeting. Hixon has not heard back.

Not waiting for the meeting, which has two pro-drilling group representatives on the agenda, Coastal Conservation League and Conservation Voters of South Carolina staffers met this week to voice their drilling opposition to Hixon and Rep. David Hiott, R-Pickens, chairman of the Agricultural, Natural Resources and Environmental Affairs committee.

The conservationists' fight is about to get much tougher.

A natural gas pipeline pumping 1.5 billion cubic feet per day is in the works to run from from West Virginia to the North Carolina-South Carolina border near Interstate 95. It's among a web of other gas pipeline expansions plotted through or near the Palmetto State.

After decades of running natural gas out of the Gulf of Mexico to feed the country, fuel companies are now running natural gas and crude oil fracked from shale supplies in the Midwest and Northeast. The surplus is getting exported out of the Gulf of Mexico.

That's partly why groups opposed to offshore drilling are slowly turning their concern from the potential for spills and wildlife harm in the ocean to the possibility of the "green" South Carolina coast becoming industrialized. A fear is the new push to open the Atlantic offshore of South Carolina to oil and natural gas exploration and drilling has less to do with what could be found, and more to do with getting the onshore industry in place to export from those pipelines to Europe.

That means ports such as Charleston and possibly even Georgetown. And that means money for local and state governments.

"The (pipe) lines are all heading our way. There's something afoot," said Peg Howell of Stop Oil Drilling in the Atlantic, a Pawleys Island-based grassroots group. Howell is a former petroleum engineer.

"The real urgent need for this country is to export," she said.

The export factor so far has not been as prevalent in the discussion as the drill-or-don't drill controversy that cuts to the heart of coastal life. But interests already are divided between exploring for the potential economic benefit of fossil fuels to restricting exploration to protect marine life and a billion-dollar tourism economy.

State legislators who were asked including members of the newly formed House subcommittee said they were unaware of the export potential. But a first-ever state energy plan focuses in part on the natural gas pipeline expansion and mentions several times the moves to exporting the supply.

"With the shale gas growth that has occurred over the last several years, natural gas supply sources and traditional pipeline flows across the nation are in the process of changing," reads a draft of the plan. "There are currently multiple projects underway to build out current (natural gas) export capability, especially in the Gulf Coast," it reads at another point.

Drilling proponents argue the country needs to supplement the oil fields already in place. The United States exports more than 5 million barrels per day, according to the U.S. Energy Information Administration.

The country also is poised to become to third largest natural gas supplier in the world by 2020. It's competing with Russia for the European market, according toJ.D. Supra, a business analyst. The ports that move the fuels now are in the Gulf of Mexico a farther, more expensive transport than from the Southeast Coast.

The infrastructure would be the industry needed to ship the product.

State legislators who live along the coast are aware of the concern for the potential impact of an oil industry on the tourism economy.

"Obviously, the state relies on tourism," said Rep. Lee Hewitt, R-Murrells Inlet, who is on the nine member subcommittee."I find it interesting that I'm the only member who represents the coast. My question is, just what is this committee trying to get to?"

Though not on the committee, Sen. Chip Campsen, R-Isle of Palms, has told people in his district of the threats that industrializing the coast would bring to its tourism economic engine. He and U.S. Rep. Mark Sanford, R-S.C., have pointed to the large-scale industrial footprint the industry has on Port Fourchon, Louisiana, a town the size of Sullivan's Island, Campsen said.

"Is this push to drill actually a push to export? I don't know the answer to that," he said. "But I do know it's not about drilling for oil offshore," he said, pointing to the economics of low prices brought by the shale industry making it unprofitable to build or maintain offshore rigs here.

"The notion that you're really going to have offshore oil platforms, I think is pretty remote," he said.

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New fight over drilling offshore South Carolina could be about exports - Charleston Post Courier

For a corporation with deeply American roots, Microsoft seems remarkably unable to turn a profit here. Against all odds, the Redmond, Washington-based company continues to claim that virtually all its earnings are in foreign countries. Microsofts latest annual report, released earlier this week, shows that over the past two years, the company enjoyed worldwide income of almost $43 billion. It claims to have earned just 0.3 percent of that$128 millionin the United States.

The most obvious explanation for Microsofts comparatively small U.S. profits is that it can avoid virtually all U.S. income taxes by pretending its profits are being earned in tax havens. The company now discloses a total of $142 billion in permanently reinvested foreign earningsan increase of $18 billion in the last yearand reports it would pay a tax rate of 31.7 percent if these profits were repatriated. This means that the company is currently avoiding a stunning $45 billion in taxes by holding its money offshore.

The tax rate that the company reports it would pay on repatriation is what makes its claim that it is earning virtually all of its money offshore suspicious. Foreign profits are subject to the 35 percent federal corporate tax rate minus any taxes paid to foreign governments. This means Microsoft has paid a foreign tax rate of just over 3 percent on these offshore earnings.

Countries in which corporate tax rates are in the low single digits tend to be Caribbean beach islands with small populations that are notably devoid of Microsoft manufacturing facilities. The idea that Microsoft would be earning larger profits in these small nations than in the United States is far-fetched, to say the least. Its far more likely that these allegedly-offshore cash hoards, on which they have paid little or no tax to any government, likely never left U.S. shores to begin with.

What to do about Microsoft and other corporations offshore cash is becoming a flashpoint as congressional leaders pivot from health care to tax reform. Collectively, corporations have at least $2.6 trillion stashed offshore. If these profits were repatriated under current tax rules, it could mean $700 billion in tax revenue. GOP leaders, however, tend to describe the situation as a case of corporate leaders desperate to reinvest their foreign earnings domestically (and therefore in need of a special low-tax holiday to encourage them to do so). Others argue that much of these offshore profits are properly attributable to the United States and are being shifted offshore purely to avoid taxation, and argue that a tax holiday would reward this bad behavior.

Microsofts latest earnings announcement offers strong circumstantial evidence in favor of the tax avoidance view.

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How to Think About the Problem of Corporate Offshore Cash: Lessons from Microsoft - Just Taxes Blog (blog)

Donald Trump said allowing some refugees currently held on Manus island and Nauru would kill him politically. Photograph: Jonathan Ernst/Reuters

Donald Trump told the Australian prime minister, Malcolm Turnbull, that a deal to admit to the US refugees currently held on Manus island and Nauru was stupid and would kill him politically, given his status as the worlds greatest person that does not want to let people into the country.

A White House transcript of the contentious 28 January phone call was published by the Washington Post on Thursday. The Post also published a transcript of a 27 January conversation with the Mexican president, Enrique Pea Nieto, in which Trump seems to dismiss his much-vaunted border wall as a political ploy and asks Pea Nieto not to state publicly that he will not pay for it.

The published transcript showed that in the Turnbull call, which was previously reported to have become angry in tone, Trump complained about the domestic political consequences of the Obama-era Nauru agreement.

Referring to the first iteration of his controversial travel ban on seven Muslim-majority countries, Trump said: I just called for a total ban on Syria and from many different countries from where there is terror, and extreme vetting for everyone else and somebody told me yesterday that close to 2,000 people are coming [from Manus island and Nauru] who are really probably troublesome.

And I am saying, Boy, that will make us look awfully bad. Here I am calling for a ban where I am not letting anybody in and we take 2,000 people. Really, it looks like 2,000 people that Australia does not want, and I do not blame you, by the way, but the United States has become like a dumping ground.

Turnbull explained, repeatedly, that the US was only obligated to look at taking 1,250-2,000 basically economic refugees from Iran, Pakistan, and Afghanistan, and that Australia had committed to actions in return.

I think we should respect deals, he said.

Why havent you let them out? Trump asked. Why have you not let them into your society?

OK, said Turnbull, I will explain why. It is not because they are bad people. It is because in order to stop people smugglers, we had to deprive them of the product. So we said if you try to come to Australia by boat, even if we think you are the best person in the world, even if you are a Noble [sic] Prize-winning genius, we will not let you in. Because the problem with the people

Trump interjected, to say: That is a good idea. We should do that too. You are worse than I am.

OK, this shows me to be a dope. I am not like this but if I have to do it I will do it but I do not like this at all

The US president continued however to complain and to misstate the terms of the deal as stated by Turnbull, saying: This is going to kill me. I am the worlds greatest person that does not want to let people into the country. And now I am agreeing to take 2,000 people and I agree I can vet them, but that puts me in a bad position. It makes me look so bad and I have only been here a week.

The president even linked the agreement to his election win, saying: Look, I do not know how you got them to sign a deal like this, but that is how they lost the election. They said I had no way to 270 [electoral college votes] and I got 306.

Hillary Clinton won the popular vote by more than 2.5m ballots.

That is why [the Democrats] lost the election, Trump repeated, because of stupid deals like this. You have brokered many a stupid deal in business and I respect you, but I guarantee that you broke many a stupid deal. This is a stupid deal. This deal will make me look terrible.

Turnbull insisted on the importance of the US honoring its commitments and said the deal was consistent with the principles set out in the Trump travel ban.

The president yielded, if grudgingly. OK, he said, this shows me to be a dope. I am not like this but if I have to do it I will do it but I do not like this at all.

Trump then complained again and asked Turnbull for a guarantee that anyone admitted would not become the Boston bomber in five years.

Before ending the call, he said: I have had it. I have been making these calls all day and this is the most unpleasant call all day. [Russian president Vladimir] Putin was a pleasant call. This is ridiculous.

The conversation had begun pleasantly enough, with small talk about the Australian golfer Greg Norman, a mutual friend who had given Trumps number to Turnbull.

In subsequent days, Trump returned to the subject. On 2 February, for example, he tweeted: Do you believe it? The Obama Administration agreed to take thousands of illegal immigrants from Australia. Why? I will study this dumb deal!

The US commitment to take the refugees remains unclear.

At the end of the call, Turnbull asked Trump: Do you want to talk about Syria and [North Korea]?

Trump answered with a remark transcribed as inaudible and said: This is crazy.

Thank you for your commitment, said Turnbull. It is very important to us.

It is important to you and it is embarrassing to me, Trump said. It is an embarrassment to me, but at least I got you off the hook. So you put me back on the hook.

You can count on me, said Turnbull. I will be there again and again.

In February Trump tweeted that reports that the conversation had been anything but civil were fake news.

He repeated the claim when Turnbull went to New York in May. In a joint media appearance, Turnbull agreed after Trump said: We had a good call. You guys exaggerated that call, that was a big exaggeration. We had a great call. I mean, were not babies, but we had a great call. That was a bit of fake news.

See the original post here:

'You are worse than I am': Trump told Turnbull he admired offshore detention - The Guardian

By David Wethe on 8/3/2017

HOUSTON (Bloomberg) -- The magic of $50 oil is now in the sights of deep-sea drillers as they try to lure customer spending from shale wells on land.

And after more than three years of pain, that prospect has some investors excited. Transocean Ltd. rose the most in more than eight months after the worlds biggest provider of offshore rigs predicted explorers could soon shift their spending from land to sea as crude futures inch closer to the key level. Shares of other deepwater service providers like Diamond Offshore Drilling Inc. and Noble Corp Plc also surged on the heels of Transoceans rally.

"Break-even costs in multiple deep-water basins around the world are consistently coming in below $50 and are now often around, if not below, $40," CEO Jeremy Thigpen told analysts and investors Thursday on a conference call. "Deepwater break-evens are starting to compare favorably with onshore, which by the way is now experiencing some fairly significant price inflation across most products and services."

The global oil downturn hit offshore drillers with the double whammy of a drop in customer demand for their services and a glut of new rigs rolling out of shipyards. More than three quarters of Transoceans sales have been carved away since hitting a peak of $3.3 billion at the end of 2008, according to data compiled by Bloomberg.

A little more than half of the oil industrys 817 offshore rigs were working in the second quarter, down from the 92% utilization rate for global rigs in 2008, Jud Bailey, an analyst at Wells Fargo, wrote last month in a note to investors.

New contracts

The Vernier, Switzerland-based owner of deepwater rigs said its signed a dozen new drilling contracts or extensions to pacts so far this year, adding $221 million in future work. The entire offshore industry has announced almost as much new work this year as it had in the past two years combined, Terry Bonno, the companys senior vice president of industry and community relations, said on the call.

"It is beginning to feel a lot like we are moving off bottom," she said. Explorers are expected to sanction more deepwater projects next year if oil holds above "the magic $50-level," Bonno said. But if oil falls below that mark, those projects could be re-evaluated and delayed.

Transocean rose 7.7% to $9.30 at 1:38 p.m. in New York, after earlier climbing as much as 11% for the biggest intraday rise since Nov. 30. Transoceans comments were enough to boost shares for its six closest offshore peers, which all climbed at least 5% on Thursday.

While the development costs for deepwater projects have fallen below $50 in many cases, the time to bring offshore projects to production is still several years, compared to a matter of months for shale work, J. David Anderson, an analyst at Barclays, said Thursday in a phone interview.

"Shale wins in every race," Anderson said. "As oil starts to move up above $50, shale will come on much faster."

Longer-term

But shale wells can fade in a matter of months, too, while offshore wells can gush oil for decades after theyve been developed. Average hydraulic fracturing prices for onshore work are up 50% to 100% from the lowest point in the downturn, Brad Handler, an analyst at Jefferies, wrote last month in a note to investors.

About an hour after Transoceans comments on the $50 oil outlook for offshore, land-rigs provider Nabors Industries Ltd. said prices in the high-$40s mark works for many explorers in the U.S. The worlds biggest land driller forecast that the industry would add another 30 to 40 rigs by now and the end of the year in the lower-48 U.S. states.

To be sure, Thigpen conceded hes not ready to declare victory yet.

"Were not saying this is a start of a great upturn thats going to last three to four years," he said. "What were saying is today looks better than yesterday."

Read this article:

$50 oil "magic" boosts offshore drillers' hopes of competing with shale - WorldOil (subscription)

Are there over $4 trillion of untaxed corporate earnings offshore, as Donald Trump said?

President Donald Trump said U.S. companies have anywhere from $4 trillion to $5 trillion in offshore accounts a substantial increase from just last year.

Trump blamed the large sum of money on what he (inaccurately) considers the highest tax rate in the world in a July 25 Wall Street Journal interview obtained by Politico.

"Were the highest-taxed nation in the world, essentially, you know, of the size," Trump said. "But were the highest-taxed nation in the world. We have nobody knows what the number is. I mean, it used to be, when we talked during the debate, $2.5 trillion I guess its $5 trillion now. Whatever it is, its a lot more. So we have anywhere from 4 (trillion) to 5 or even more trillions of dollars sitting offshore."

Weve already rated Trumps previous claims that were the highest-taxed nation in the world False.

This time we took a look at the amount of U.S. money sitting in offshore accounts. How much untaxed foreign revenue is out there, and could the figure have doubled since Trump cited the $2.5 trillion figure during the 2016 campaign?

The White House did not provide information for this fact-check.

Well start off by saying there is no public estimate on untaxed earnings overseas, as there is no law requiring they be reported.

Researchers can instead look at the indefinitely reinvested earnings on financial statements of publicly traded companies.

Indefinitely invested earnings arent making their way back to the United States anytime soon, which lets them off the hook for taxes and thus fatten after-tax profits. They might go to overseas factories, prospective acquisitions or other investments. Other companies may instead take on a deferred liability, which entails a future tax bill -- but while currently untaxed, most go undisclosed, so they arent counted in the researchers figures.

The nonpartisan Joint Committee on Taxation can provide a fuller picture, because the committee has access to total untaxed foreign earnings. However, that information is only turned over to members of Congress.

The last time the committee made its findings public was in an August 2016 memo to two congressmen. In 2012, the committee said, $2.3 trillion of foreign earnings went untaxed.

Using predictive models, they estimated the number at $2.6 trillion for 2015.

The committee cited Audit Analytics, a third-party research service, to corroborate these findings. Audit Analytics found $2.4 trillion in indefinitely reinvested earnings. There was a $200 billion difference between the JCTs estimate of untaxed foreign earnings and Audit Analytics calculation of indefinitely reinvested ones, which is what experts estimate the current discrepancy to be.

Audit Analytics ran its latest numbers for us. The company found $2.8 trillion of indefinitely reinvested earnings are sitting overseas, as of July 2017 far short of what Trump described.

"It is possible that analysts are still working on entering information from small companies, but it would not change the number from the rounded-off figure of 2.8 trillion," Audit Analytics research director Don Whalen said.

We also turned to the Institute on Taxation and Economic Policy, which found that Fortune 500 companies a slightly smaller pool report $2.6 trillion offshore.

ITEP included total untaxed earnings, not just indefinitely reinvested ones, in their studies of Apple and Pfizer, as these companies provide a disclosure allowing for a fuller estimate of their untaxed offshore income and generate a significant amount of earnings through this mechanism.

"There is no reason to believe that this figure is substantially higher than what companies report and certainly not double the reported amount as President Donald Trump has contended without citing any source," said Taxation and Economic Policy senior policy analyst Richard Phillips.

So what else could cause the discrepancy?

Edward Kleinbard, the Robert C. Packard Trustee Chair in Law at the USC's Gould School of Law, said that firms double down their offshore tax planning when they expect a tax holiday, which is when they get to bring back offshore earnings while paying little to no taxes on them.

"Its plausible that people have accelerated their gamesmanship in the anticipation that in tax reform there will be another tax holiday," Kleinbard said. "But its not plausible to think the number could be as high as the 2 trillion-dollar difference between the data and what the president said."

Another possibility is for Trump to have counted tax inversions, which is when a small foreign company in a lower taxed country acquires a larger U.S. company and thus reduces their taxes. But that would entail a change in the definition of untaxed revenue. And even if we were to make that calculation, Kleinbard said the number wouldnt expand by so much in such a short time span.

Our ruling

Trump described untaxed corporate earnings in overseas accounts as growing monumentally, from around $2.5 trillion to "anywhere from 4 (trillion) to 5 or even more trillions of dollars sitting offshore."

The highest reported number of offshore earnings is $2.8 trillion. That could be off by a couple hundred billion dollars due to undisclosed untaxed earnings. But experts agreed the discrepancy could not add up to Trumps $4 trillion or $5 trillion estimate.

Business optimism and altered definitions of untaxed revenue couldnt bridge that gap either.

We rate this statement False.

Share the Facts

2017-08-03 21:47:53 UTC

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False

Untaxed corporate earnings used to be "$2.5 trillion I guess its $5 trillion now. Whatever it is, its a lot more. So we have anywhere from 4 (trillion) to 5 or even more trillions of dollars sitting offshore."

Donald Trump

President of the United States

in an interview

Tuesday, July 25, 2017

2017-07-25

Originally posted here:

Are there over $4 trillion of untaxed corporate earnings offshore, as Donald Trump said? - PolitiFact