Category Archives: Offshore

The offshore sector needs to have fewer and bigger companies in order to get out of the current crisis. And the costs must be reduced even further.

This is the mantra at one of the world's biggest shipping and offshore banks, Norway's DNB, which on the one hand still has significant involvement in the maritime sector, but which has also reduced and is continuing to scale down its exposure to the sector.

Lending to shipping has been reduced by 40 percent over the past five years, while loans to offshore-related businesses have been scaled down 14 percent since the crisis in offshore began in the late summer 2014.

According to DNB's Head of Shipping, Offshore, and Logistics, Kristin Holth, who oversees a portfolio of close to USD 22 billion, the bank will continue this development in 2017 as part of its policy aimed at reducing its exposure to capital-heavy sectors, though the bank has no plans to take more drastic steps as, for instance, the German banks, which are divesting massive loans or are planning to withdraw from shipping entirely.

The sector will remain important to DNB, she stresses.

"We are focusing on the long term. But there's no doubt that this is a very trying time, especially for the offshore sector. 2017 will also be difficult for the sector, which is going through a challenging transition. But it will be necessary to create bigger and fewer companies while also reducing costs," says Holth in a comment to ShippingWatch following publication of the banks annual report.

In the past year the bank made impairments totaling NOK 7.4 billion, around USD 888.1 million, which was significantly more than 2015's NOK 2.3 billion. A considerable part of the increased impairments relate to shipping, oil, and logistics, where the bank had to impair NOK 2.9 billion, corresponding to 41 percent of the combined impairments for the year.

This also marks a major increase compared to 2015 when impairments on loans to shipping, oil, and logistics totaled NOK 1.3 billion. But this is not surprising, in light of how the markets developed last year, says Holth.

"It's a tough period for the maritime segments, so it's only natural that this results in larger impairments," she says, maintaining the bank's confidence that there will be a need for oil for "decades into the future."

The costs of producing oil on the Norwegian shelf have dropped significantly within just a few years. For the two major fields, Johan Castberg and Johan Sverdrup, break-even prices in terms of when oil extraction is profitable are significantly lower today.

According to DNB's own estimates, break-even for Johan Castberg now hovers at USD 45 per barrel, while break-even for Johan Sverdrup has dropped to USD 30 per barrel. But the levels could turn out to be even lower. It recently emerged that the break-even price for Sverdrup, according to Aker BP, is down at less than USD 20 per barrel in phase one, less than USD 30 per barrel in phase two, and below USD 25 per barrel for the final phase in which the field will be fully developed.

Holth has been pleased to see how a large consolidation in Norwegian offshore is emerging and picking up speed. She points to the latest example of Farstad and Solstad with the two Norwegian shipping icons Fredriksen and Rkke as masterminds, an example which more will hopefully follow.

"One of the problems is that there are still too many vessels on the water. It is therefore positive when we see the industry consolidate, as is the case now," she says.

The plan is for the coming company "Solstad Farstad" to have a fleet of 154 vessels, while also achieving annual synergies of NOK 400-600 million.

The strained oil price and low employment for offshore carriers have sent Farstad Shipping and the carrier's fleet of 55 vessels into a financial crisis, just as virtually all players in Norwegian offshore are hit by developments in the sector. Add to this the fact that the sector has invested too much in building its fleet when the oil price was high, which resulted in massive debt stakes for many of the companies. As such, close to one fourth of the entire Norwegian offshore fleet was stacked at the turn of the year.

There have also been signs of consolidation in Norwegian shipping. Last year Stolt-Nielsen acquired similarly Norwegian Jo Tankers ahead of Odfjell, a carrier which is calling for consolidation in the sector.

In recent months, well-known Norwegian shipping people have spearheaded two new banking and financing initiatives aimed specifically at the shipping sector, and which are not least motivated by the fact that the traditional banks are gradually withdrawing from the sector.

English Edit: Daniel Logan Berg-Munch

Supply carriers face a bitter North Sea winter

Danske Bank and DNB hit by oil slump in 2016

DNB scaling down exposure to shipping and offshore

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DNB: Bigger companies and lower prices are the way forward for offshore - ShippingWatch UK (subscription)

Teekay Offshore Partners L.P. (NYSE:TOO)

Q4 2016 Earnings Conference Call

February 23, 2017 12:00 ET

Executives

Ryan Hamilton - IR

Ingvild Sther - Teekay Offshore Group's President & Chief Executive Officer

David Wong - Teekay Offshore Group's CFO

Kenneth Hvid - Teekay Corporation's President & CEO

Vince Lok - Teekay Corporation's CFO

Analysts

Michael Webber - Wells Fargo

Spiro Dounis - UBS Security

Fotis Giannakoulis - Morgan Stanley

Espen Landmark - Fearnley

Ben Brownlow - Raymond James

Operator

Welcome to Teekay Offshore Partner's Fourth Quarter 2016 Earnings Results Conference Call. During the call, all participants will be in a listen-only mode. Afterwards you will be invited to participate in a question-and-answer session. [Operator Instructions] As a reminder this call is being recorded.

Now for opening remarks and introductions I would like to turn the call over to Ingvild Sther, Teekay Offshore Group's President and Chief Executive Officer. Please go ahead.

Ryan Hamilton

Before Ms. Sther begins, I would like to direct all participants to our website at http://www.teekayoffshore.com, where you will find a copy of the fourth quarter of 2016 earnings presentation. Ms. Sther will review this presentation during today's conference call.

Please allow me to remind you that our discussion today contains forward-looking statements. Actual results may differ materially from results projected by those forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the fourth quarter 2016 earnings release and earnings presentation available on our website.

I will now turn the call over to Ms. Sther to begin.

Ingvild Sther

Thank you, Ryan. Hello, everyone, and thank you for joining us on our Fourth Quarter 2016 Investor Conference Call. I'm joined today by David Wong, the CFO at Teekay Offshore Group; as well as Kenneth Hvid, Teekay Corporation's President and CEO; and Vince Lok, Teekay Corporation's CFO. During our call today, I will be walking through the earnings presentation which can be found on our website.

Turning to Slide 3 of the presentation. I will briefly review some of Teekay Offshore's recent highlights. In the fourth quarter of 2016, the partnership generated the distributable cash flow or DCF of $21.6 million, resulting in a full-year DCF of $161.3 million. On a per unit basis, the partnership generated DCF of $0.15 per unit for the fourth quarter and $1.28 per unit for fiscal 2016. The partnership generated cash flow from vessel operations or CFVO of $135 million and $584 million in the fourth quarter and fiscal 2016 respectively.

Although we had anticipated better results in Q4, some key factors negatively impacted our results including a temporary suspension of operations for the Arendal Spirit UMS, which I will discuss further in the moment and higher operating cost in the shuttle fleets mainly to further upgrade the Naviod Anglia portrayed in the North Sea, off to returning her from a charter in Brazil earlier this year.

While Q4 was a challenging quarter, we have made good progress on initiatives to further reduce cost from our operations. In early January, we completed the sale of the 1995-built shuttle tanker Navion Europa for net proceeds of approximately $40 million and recorded a gain of approximately $7 million.

I'm also pleased to report that after having secured a three-year CoA contract for the Glen Lyon project in September 2016, we are now close to finalizing in new five-year plus extension option shuttle tank a contract of affreightment in the North Sea. This CoA is expected to commence during the first quarter of 2018 and because the contract will be serviced by the partnership's existing CoA shuttle tanker fleet, it will further increase our fleet utilization and enhance the partnership's cash flow without the need for incremental capital expenditures. We are encouraged by the continued strong fundamental in our shuttle tanker business where we are a market leader.

Turning to Slide 4, the shuttle tanker market continues to tighten with both charter rates and utilization increasing driven by strong underlying fundamentals. You can see this in the graph on the right side of the slide which compares North Sea shuttle tanker contract of affreightment or CoA rates, with North Sea anchor handler rates [ph]. All rates in other offshore services have weakened due to the low oil price environment and reduced ENP spending.

Shuttle tanker rates have been increasing due to both demand and supply factors. Demand for shuttle tanker capacity has continued to grow due to a combination of more listing points and newbuilds coming on stream. And at the same time, the supply of available shuttle tanker capacity fleet continues to strength with no uncommitted new buildings and order and an aging global fleet that will see several investors' retirement before the year 2020.

As a result, North Sea shuttle tanker CoA rates have increased by approximately 40% over the last two years, given the limited available capacity in the shuttle tanker markets, which Teekay Offshore has benefited from.

Turning to Slide 5, as noted in my opening remarks, we continue to work hard at reducing cost. In a shuttle tanker business, we have seen a steady decline in our North Sea shuttle tanker operating expenses since 2008 primarily driven by a shift in our manning model to employ more ratings and officer from the Philippines as well as a strong focus on reducing our supply chain cost.

Through our 2016, our FPSO business underwent a significant initiative to reduce operating expenses, which resulted in reduced supply chain cost and changes on board our FPSOs to reduce crude cost. During 2016, the partnership also took measure to reduce costs in its onshore organization. Through these initiatives, we have reduced our onshore headcount by approximately 75 employees which will result in run rate G&A savings in future quarters.

Turning to Slide 6, I would like to update you on the status of the Arendal Spirit UMS. In November 2016, the Arendal Spirit UMS experienced an operational incident related to its dynamic positioning system. We also had an April 2016 incident which resulted in the replacement of the unit's gangway. Following the DP incident, the charterer Petrobras initiated an operational review. While the operational review is underway, Petrobras has to spend the charter high payments to the partnership. Throughout this period, we have maintained an ongoing dialog with Petrobras and our main priority is to address their concerns and return the unit to full operation as soon as possible.

Turning to Slide 7. We continue to push forward to deliver on our pipeline on our committed growth project. This is a slide we have shown you in previous quarters, updated to reflect the latest remaining CapEx and financing figures as of December 31, 2016. As a reminder, once all of these projects have delivered, they are projected to contribute an additional $200 million per year of run rate CFVO. Over the next several slides, I will provide a brief update on each of these projects.

Turning to Slide 8. As noted during our third quarter earnings in November 2016, the Petrojarl I FPSO upgrade project has experienced delay an additional cost and is now scheduled to be on the field in late 2017. The main causes for delay include a more challenging top side upgrade than originally anticipated; a condition of the units following a cold layer prior to the project and scope changes. Despite these setbacks, progress is being made on the units which is now approximately 85% complete and we continue to increase resources at the yard to ensure work continues to progress according to the revised delivery schedule.

We have been in close dialog with the charterer QGEP [ph], and are close to reaching a commercial agreement on a revised delivery date. Given the commercial sensitivity of these negotiations, I can't provide additional details at the moment, but I look forward to offsetting you further once these negotiations have concluded.

Turning to Slide 9; progress on Gina Korg FSO conversion project, continues and as of today, the unit is approximately 98% complete. We have experienced a slight delay in the project as we come down the home stretch. However, we expect to commence the charter within mid-2017. The converted FSO unit [indiscernible] is expected to have a fully-built up cost of approximately $280 million. The unit will operate under a three-year term period contract, plus 12 additional one year extension auctions on the Gina Korg field in the in the North Sea.

Turning to Slide 10. The Libra FSO conversion project at the Jurong shipyard in Singapore remains on schedule and was 98% complete as of the end of January 2017. As you can see in the naming ceremony photo at the bottom right of this slide, we were very close to sail away. This has been a well-run project for Teekay Offshore and our joint venture partner, and we remain on-track to complete the project both on schedule and within the project's $1 billion budget.

This unit is expected to achieve first oil by Q3 2017 and we will operate on the Libra field [indiscernible] offshore per sale under 12-year charter for a consortium of oil major as shown at the bottom of the slide.

Turning to Slide 11; our three East Coast Canada shuttle tanker newbuildings are also on schedule and on budget. Construction on all three vessels has commenced with the first vessel now 65% complete and construction on the third vessel just under way. You can see on the total at the top right of this slide, one of the massive whole sections being lowered into place at the Samsung yard in Korea. These three vessels which have a total cost of approximately $375 million are scheduled to deliver during the second half of 2017 and first half of 2018. They will replace two end charters and one owned vessel, currently servicing this 15-year plus extension options, contract with the consortium of nine oil companies. The vessels are fully financed with a $250 million long-term debt facility secured in June 2016.

Turning to Slide 12; I will conclude the review of our projects with an offset on our towage newbuildings. Our towage business ALP currently has a fleet of 10 long-haul towage vessels consisting of seven underwater vessels and three remaining newbuilding vessels which are scheduled to deliver during 2017. The ALP phase is the most technologically advanced and youngest towage fleet in the market and we will be the only owner of 300 tons volatile vessels capable of the largest FPSO and FLNG tows.

In January 2017, we completed a successful tow of the Kraken FPSO from the Keppel yard in Singapore to the Kraken oil field in the UK sector of the North Sea, which you can see in the photo at the bottom of the slide. Although the long-haul towage market currently remains challenging. We have been maintaining fleet utilization by booking short-term contracts, which include drilling rig repositionings and scrapping, mooring and hook-up installations and ad-hoc emergency tows.

Turning to Slide 13. I would like to wrap up my first quarterly conference call by reviewing our top priorities for 2017. Foremost, we will remain focused on striving for high standards for safety and operational excellence. There is compromise here. This is what our customers expect from Teekay Offshore and this is vital both for retaining their trust and winning new business.

Teekay Offshore has 53 underwater assets of which 50 are on contract. Unlike many others in the offshore sector, our assets are producing cash flow. Although we have done a lot, I still see a great opportunity for us to continue to improve both our operations and bottom line performance through better decision-making at every level of the organization.

Second, as highlighted by the time on today's call devoted to our committed growth projects during 2017, we will be keenly focused on execution and delivering these projects for contract start up. Some of these projects are more challenging than others, but delivering on all of these projects will be essential for growing the partnership's operating cash flow.

Third, we have three FPSO charters which are coming up for renewal in 2018 and 2019, which we're working diligently to extend or secure new contracts. Extending these cash flow is a top priority and we are in active discussions with all of the current quarters. I hope to be able to provide further updates on these efforts in the coming quarters.

Fourth, as we mentioned previously, we also plan to focus on optimizing our asset portfolio which may include certain asset sales and/or seeking joint venture partners. This will help further strengthening our balance sheet and liquidity position. In this phase of a challenging offshore market, we remain focused on strengthening Teekay Offshore's financial position and financial flexibility so that we can take advantage of opportunities as the offshore markets recovers.

Thank you, all, for listening. Operator, we are now available to take questions.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] At this time, we'll go first to Michael Webber with Wells Fargo.

Michael Webber

Hey, good morning, guys. How are you?

Ingvild Sther

Good. Thank you.

Michael Webber

Good. Ingvild, congrats on your first call and it's good to be speaking with you again this morning. I wanted to start off with actually some business to get done at the parent level, some FPSO, FPSO extension. It looks like an amendment to the best but the implications for the FPSO space for the relet market for TOO's assets, it seems like they're in place. It was a nice surprise. I'm just curious, how should we think about the rechartering, the relet market, or the employment outlook for assets like the Voyager in a few years? Has it changed significantly? And I guess what are the successful extension in amendments to the parent level say about the assets of TOO and the FPSO market in general?

Ingvild Sther

Yes. I guess you would be hearing more about the Teekay FPSOs on the call tomorrow. But generally, we can say that the psychology of the market is different when the oil price is around $55 region than last year when it was around $30. It's obviously the focus of our customers to extract as much value as they can out of the field that we are on and that's a combination of how much oil we are producing, the oil price and the cost of the fuel. So we are working very closely with all the customers on the [indiscernible] contract will come off contract the next year to find the sweet spot where they can extract maximum value out of the field.

Michael Webber

Got you. That's helpful. You mentioned in your prepared remarks and the release as well, there's kind of an ongoing opportunity set within the shuttle tanker market. Can you talk to how deep you think that is? How much of an opportunity are there on a dollar basis or in terms of number of assets you really see out there for TOO for the next couple of years? It's been a bit surprising that you guys have been able to steadily add business specially over the past two years in this environment.

Ingvild Sther

Yes. There are two markets in the shuttle tanker business one is the time charter market where you are a charter for longer periods of time and the other one is the CoA market where the customers take at heart a fraction of a vessel. So more like it's actually service. And those are quite different. We know that there's a lot of vessels that will retire in the next two to three years in the North Sea. That will provide opportunities both for the time charter market where we see [indiscernible] is out with requirement for vessels right now and also for the CoA market. What's special about the COA market is that you have to have a combination of contracts and vessels to make it work. You need to have a certain size and that makes it more difficult to start from scratch to build up a position in this market.

Michael Webber

Got you. All right, that's helpful. A couple more and I'll turn it over. I do want to touch on the Arendal Spirit second issue there. I know it's under operational review. You probably can't get into too many details about the outcome, but I'm curious, what options does Petrobras have legally within the operational review? I guess what's the spectrum of outcomes here? They can pursue once that operational review is triggered. Can they renegotiate the contract? Can they walk away from it? Do we even kind of set the landscape for us maybe without getting into specifics about how the actual outcome and the booking like?

Ingvild Sther

I was on Brazil three weeks ago and that's what relevant people in Petrobras and the focus is for them to complete the operational review; and for us it's to provide them with the information they need to complete that operational review and to get the unit back in total operation.

Michael Webber

Got you. But does going into operational review trigger any potential rights for Petrobras within the contract that investors should be aware of in terms of spectrum of outcome?

Ingvild Sther

No. Our focus is really just to get the Petrobras comfortable with the operation and the safety of the unit and I think that is the focus of Petrobras as well. So, it is an operational review.

Michael Webber

Okay. Like in the follow up before. One more and I'll turn it over. The Gina Krog and I might have missed this did you guys give a reason for the slight delay there and is there any incoming adjustment to the charter contract or anything along those lines for the delay? I'm not entirely sure what the rational is behind it.

Ingvild Sther

We are working hard to complete the final stage of the project down in Singapore and have a focus on getting that completed. It's just taking a bit longer time at the home stretch of the project here. We have a very good and open dialog with charter and we expect that there won't be any...

Michael Webber

No changes to the charter?

Ingvild Sther

No.

Michael Webber

Okay. That's helpful. I'll turn it over, but thanks for the time.

Ingvild Sther

Thank you.

Operator

We'll go next to Spiro Dounis with UBS Security.

Spiro Dounis

Thanks, Ingvild. I just wanted to start off on the Varg. Sorry if I missed any update there. But just wondering if you could update us, just around timing of when you think that you could get rechartered and maybe what the cost parameters could be if it does actually need being worked on to a new field. I think historically, you guys have given a range anywhere between 2018 and 2020. is that still the case? Or have you been able to refine that at all?

Ingvild Sther

For Varg, we have been working and we are working on several opportunities. One of the opportunities we worked on was the winter [ph] that announced a couple of weeks ago that they will go with the tie back option. So we are now working on one specific project but we also see that there are still other inbound requirements for this unit. And as we know, it's a quite flexible unit that has -- meet the Norsok [ph] requirement. We are quite confident that we will find work for and I think the time line is same as what we said last quarter.

Spiro Dounis

Okay, that's helpful. And just as we think about the EBITDA uplift, I guess from these new shuttle tanker, the new CoAs that you signed, I was wondering if you could provide a number on that and maybe just had to think about how many shuttle tankers do you have right now that you feel are under-utilized and what are the uplifts that we can expect there for the ones that go into that CoA?

Ingvild Sther

It will really be to optimize the fleet and get the maximum utilization out of the fleet that we have and we are basically sold out for 2017 and we are getting a good utilizationals for 2018. What we will look at is how can we optimize the fleets even more to get more utilization out of it. So for instance, if some of the peers require storage to set the water for 10 days, can we free up some of the shuttle capacity by using ordinary tanker and then get some more utilization out on our fleet. Those are the things we are looking after to really get the maximum benefit out of our shuttle fleet the next couple of years.

Spiro Dounis

Got it. And then last one for me, just around funding projects and repaying debt over the next two years. Could you just maybe walk us through some of the big sources and uses of cash as we think about that going forward? From a vessel sale perspective or a sale lease back perspective, do you feel like you've done everything you can there? Could we expect more of that down the road? Thanks.

Ingvild Sther

Yes. I will redirect that question to Vince.

Vince Lok

Sure. As Ingvild mentioned and as what we mentioned last year, we've always contemplated further strengthening of TOO's balance sheet by I guess what we call it asset portfolio optimization, which is really looking at some asset sales and bringing some joint venture partners as we've done a little bit in TOO, but for more extensively in TGP. And that gives us additional source of capital as well to not only delever our balance sheet, but also provide another source of growth capital going forward. In terms of the major uses of capital, of course it's really to fund the equity portion of our remaining CapEx program. We have all the debt facilities in place, but there is some remaining equity that's still needed to fund those and we can use a lot of the existing liquidity to fund that, of course. But as you know, we do have some bond maturities that are coming up in late 2018, particularly these two knock [ph] bonds at the end of 2018. They do have a requirement that requires us to issue equity to offset any dividend. So it would be nice to start chipping away at some of those maturities and sort of remove the diluted effect of those bonds. So that's another thing we're considering as we're looking at asset sales.

Read the original here:

Teekay Offshore Partners' (TOO) CEO Ingvild Sther on Q4 2016 Results - Earnings Call Transcript - Seeking Alpha

Houston-based Noble Energy Inc. on Thursday sanctioned the initial phase of the mammoth Leviathan natural gas project offshore Israel with first gas from the development targeted for the end of 2019.

The first phase of the estimated 22 Tcf development is to include four subsea wells, each capable of flowing more than 300 MMcf/d. Proved reserves currently are 3.3 Tcf net (9.4 Tcf gross), or 550 million boe net. Noble plans to record the reserves bookings of the aptly-named project this year, which would represent a 35%-plus increase to its total reserves base.

Leviathan marks our third major natural gas development offshore Israel, CEO David Stover said. Bringing Leviathan online will expand Israels supply of natural gas, further support the states commitment to convert coal-fired power generation facilities to cleaner burning gas, and provide affordable energy resources to Israeli citizens and neighboring countries in the undersupplied region. Leviathan, he said, would provide a second source of gas for Israel through a separate tie-in location in northern Israel. Noble has to date discovered about 40 Tcf gross recoverable resource offshore Israel.

Production from Leviathan would be gathered at the field and delivered via two 73-mile flowlines to a fixed platform, with full processing capabilities, about six miles offshore. The platform would have an initial deck weight of 22,000 tons.

Processed gas would connect to the Israel Natural Gas Lines Ltd. onshore transportation grid in the northern part of the country and to regional markets via onshore export pipelines. The approved development plan allows for future expansion from initial 1.2 Bcf/d capacity to 2.1 Bcf/d.

The super independent, which also is a big producer in the Gulf of Mexico deepwater, of late has been directing more of its capital to the U.S.onshore, and in particular the Denver-Julesburg and Permian basins. However, the Leviathan project, which drives its Eastern Mediterranean program, has remained a priority, even through the downturn.

Three years ago Noble, which operates and owns almost 40% of Leviathan, agreed to supply gas from the project to liquefaction facilities in Egypt, which at the time were owned by BG International Ltd. and are now owned by Royal Dutch Shell plc. Noble executed the nonbinding letter of intent with its partners to supply gross sales to BG of up to 3.75 Tcf, or about 700 Mcf/d over 15 years.

For the first phase of Leviathan, Noble expects to spend about $1.5 billion net ($3.75 billion gross). Of the total, Noble already spent $100 million in 2016 and has spent $200 million pre-investment for future platform expansion. Front-end engineering and design are complete, and major project contracts are being finalized. Noble also is working on long lead materials procurement.

One to two development wells are planned this year, while completion activity for all four producer wells, including two previously drilled, is expected in 2018. Project installation and commissioning should be completed by late 2019, followed by first gas delivery.

Marketing progress has resulted in total volumes under firm gas sales agreements to date of up to 525 MMcf/d, Noble management said. Combined gross revenues for these contracts are estimated to be in excess of $15 billion over the life of the agreements. Total quantities of the executed gas sales agreements, together with domestic and regional volumes under negotiation, now exceed 1 Bcf/d gross.

According to Noble, Leviathan blended sales price realizations for the domestic and regional markets are estimated at $5.50-6.00/Mcf based on current Brent oil pricing.

Read the original here:

Noble Energy Pulls Trigger on Phase One of Leviathan NatGas Project Offshore Israel - Natural Gas Intelligence

US grid can handle more offshore wind power, cutting pollution and power costs Science Daily Injecting large amounts of offshore wind power into the U.S. electrical grid is manageable, will cut electricity costs, and will reduce pollution compared to current fossil fuel sources, according to researchers from the University of Delaware and ... and more »

Originally posted here:

US grid can handle more offshore wind power, cutting pollution and power costs - Science Daily

A little more than a month after seismic blast testing for oil and natural gas was stopped offshore of South Carolina, exploration companies are gearing up for a new try.

Conservation groups are gearing up to fight again. This time, the battle will focus on jobs and the economy, they say.

A dozen anti-drilling advocates met Tuesday in Charleston to discuss expanding the opposition. They may look inland for more support in the vein of the massive coastal protest that in 2016 helped derail plans for testing and drilling.

Frank Knapp, founder of the anti-drilling Business Alliance for Protecting the Atlantic Coast, said he has heard the exploration industry is planning to approach the federal Bureau of Ocean Energy Management about reversing a testing permit denial adopted during the last days of the Obama administration.

Asked about that, the pro-drilling exploration National Ocean Industries Association president Randall Luthi said, "Industry continues to have interest in updating grossly outdated offshore resource estimates so that future decisions are based on sound science rather than political hyperbole."

In seismic testing, powerfully loud air guns are fired underwater every 16 seconds to read echoes from the bottom geology. Conservationists oppose them because of the potential to disorient and injure marine animals. Business groups have joined the conservationists out of concern for the industry's impact on multi-million dollar coastal tourism revenue.

Luthi and other industry representatives say advances in drilling technology have made the operations safer, and that seismic surveys have taken place for a half-century with no direct evidence it harms sea animals, commercial fishing or tourism. They tout the economic benefit and potential job creation of the work.

Drill or don't drill cuts to the heart of coastal life, where interests are divided between exploring for potential economic benefit or restricting exploration to protect marine life and a billion-dollar tourism economy. Residents widely oppose both testing and drilling as a quality-of-life issue.

The conservation groups that met Tuesday came from Florida to New Jersey, and included local groups such as Stop Offshore Drilling in the Atlantic. They reflected an opposition that grew to include thousands of residents and nine of every 10 coastal municipalities in those states 23 in South Carolina alone.

Knapp's group represents more than 35,000 businesses and 500,000 commercial fishing families from Maine to Florida.

Former Gov. Nikki Haley was part of a coalition of governors who worked largely behind the scenes with industry lobbyists to urge federal officials to open the Southeast coast to oil and gas exploration. Gov. Henry McMaster has said he opposes it. State governors are given a say in BOEM decision-making.

The battle could be the first of any number the conservation groups expect as administration and congressional efforts are made to rescind laws and restrictions set by the Obama administration battles they expect will come down to legal challenges.

The groups "are more fired up than they were a year ago," said Samantha Siegel of Oceana.

"I think the business voice becomes even more important" in the current political environment in Washington, D.C., said Knapp, who did not take part in the Tuesday meeting but said the effort is valuable. "This is not something that you can say, 'We'll fight them next time.' There will be no 'next time.' "

Reach Bo Petersen Reporter at Facebook, @bopete on Twitter or 1-843-937-5744.

See the article here:

Offshore drilling opponents re-gear for new round of battles | News ... - Charleston Post Courier

Published on February 21st, 2017 | by Joshua S Hill

February 21st, 2017 by Joshua S Hill

Spanish electric utility Iberdrola announced it has completed the installation of the first of 70 5-megawatt wind turbines at the 350 megawatt (MW) Wikinger offshore wind farm off the coast of Germany.

Iberdrola announced on Monday the completed installation of the first wind turbine, the first of 70 5-MW Adwen wind turbines known as WK16. The turbines are being installed by Fred OlsensBrave Tern, one of two self-elevating, self-propelled jack-up vessels dedicated to installing offshore wind turbines.

Upon completion, the Wikinger offshore wind farm will have benefited from investments totaling around 1.4 billion, and is expected to generate enough clean electricity to power more than 350,000 households.

We are delighted to reach yet another key stage of Wikingers construction programme which is testament to the hard work and dedication of the entire project team, said Jrgen Blume, Head of Iberdrola in Germany. Our Wikinger project is progressing well, and we are on target with our plans for full export at the site later this year.

While this is something of a small project, in the grander scheme of things, the involvement of theBrave Tern was enough to capture my interest. TheBrave Tern is one of two vessels (along with theBold Tern) that are able to elevate themselves off the surface of the water, stabilizing themselves off massive jacks from the ocean floor. The vessels are able to work in water depths ranging from 5.5 meters to more than 60 meters, and are able to manage a typical payload of up to 7,600 tonnes.

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Tags: Brave Tern, Fred Olsen, Iberdrola, Wikinger, Wikinger offshore wind farm

Joshua S Hill I'm a Christian, a nerd, a geek, and I believe that we're pretty quickly directing planet-Earth into hell in a handbasket! I also write for Fantasy Book Review (.co.uk), and can be found writing articles for a variety of other sites. Check me out at about.me for more.

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Iberdrola Completes Installation Of First Turbine At 350 Megawatt ... - CleanTechnica

Hornbeck Offshore (NYSE:HOS) shares tanked following the company's recent quarterly report. The numbers themselves were not surprising given the horrible market environment - the company reported a net loss of $0.53 per share on revenues of $41.9 million.

To get a quick picture of how bad things are, revenues declined by 52.8% since the fourth quarter of 2015 and by 19.3% since the third quarter of 2016. As a result of poor market conditions, the company had to stack 25 more vessels.

As I stated above, the results themselves are not a surprise at all. Perhaps, seeing actual numbers was a pain for Hornbeck Offshore investors, and this partially caused the post-earnings sell-off.

Also, the stock was elevated after the post-OPEC deal rally, although the deal changed nothing yet for the offshore drilling industry as was highlighted many times during this earnings season (read here, here and here).

However, the most important factor for any company is the outlook, and the outlook presented by Hornbeck Offshore management was just horrific.

Here's what Hornbeck Offshore had to say:

"We project that even with the current depressed operating levels, cash generated from operations, together with cash on hand, should be sufficient to fund our operations and commitments at least through to our current guidance period ending December 31, 2018.

However, absent improved market conditions, we do not currently expect to have sufficient liquidity to repay our three tranches of funded unsecured debt outstanding that mature in fiscal years 2019, 2020 and 2021, respectively, as they come due, unless such debt is refinanced or restructured.

Refinancing in the current climate may not be achievable on terms that are in line with our historic cost of debt capital. We are fully aware of the challenges of current market conditions are presenting to all offshore oil and gas industry and continue to actively review our capital structure and assess our strategic options, as we consider plans to ensure the long-term viability of Hornbeck Offshore".

In the previous report, the company warned investors that it was going to assess strategic options, but the language was softer. Now Hornbeck Offshore presented the big picture to investors - the company will have no money to pay debt in 2019 and will have to restructure its debt.

I would like to highlight that it does not even matter for Hornbeck Offshore if the industry rebounds by 2019 or not. The rationale for this statement is that Hornbeck Offshore management believes that it will be necessary to address the capital structure long before 2019. As always, concessions from lenders mean big concessions from shareholders.

Judging by Hornbeck Offshore comments, the company will try to push maturities as far as possible as it does not see any recovery coming soon:

"Earlier in this cycle, the industry mantra was lower for longer. The message we have recently been hearing from our customers, almost uniformly, is that they now see oil prices as lower forever. They no longer view this as a U-shape recovery, but an L-shaped recovery, or so we're told []

Our customers are telling us, they're not going to FID or sanction projects in deepwater. I mean, this is what they're telling us, $40 a barrel. They're going to have to justify $40 a barrel, not $50, but $40".

Here's what we see from this and what the market has so far failed to appreciate in both OSV and OSD stocks.

No matter what the current oil price is, the breakeven bar for projects is set low because oil producers don't want to be trapped in capital-intensive endeavors if oil goes below $50.

Once again, I remind that it does not matter now if they are right or wrong in their evaluation, because they will act upon their views and this means little demand for OSD and OSV industries.

The year 2017 is going to be bad for the industry and for Hornbeck Offshore. The company will likely see its revolving credit line go from $200 million to $75 million as it plans to elect interest coverage holiday at some point during this year.

There is no cash crunch as the company had $217 million at the end of 2016, but this number will trend down as the year progresses.

The deal with creditors won't be easy to reach as highlighted by the problems of Hornbeck Offshore's peer, Tidewater (NYSE:TDW).

Tidewater's shareholders are already on the verge of a wipeout. The situation for Hornbeck Offshore shareholders is better, as the company did not ran into any covenant and does not depend on lenders' good will.

Anyway, proactive attempts to deal with debt mean nothing good for shareholders unless the company can suddenly gain access to capital markets.

At the end of 2016 - beginning of 2017, a group of offshore drillers, namely Transocean (NYSE:RIG), Rowan (NYSE:RDC), Noble Corp. (NYSE:NE), Ensco (NYSE:ESV) and Atwood Oceanics (NYSE:ATW) were able to raise money through debt and equity.

The window of opportunity was opened by the OPEC/non-OPEC deal, but I believe that it has already shut down as no tangible evidence of any improvements on the offshore drilling front materialized after the deal.

Also, players with financial problems like Seadrill (NYSE:SDRL) or Ocean Rig (NASDAQ:ORIG) were not able to raise money during this fortunate period. Yes, Seadrill is in restructuring negotiations right now, but even its founder is not willing to inject money via equity. So, for weaker industry players like Hornbeck Offshore or Tidewater the market was never really opened.

All in all, Hornbeck Offshore still has time to review its strategic options and I expect that the company will not hurry.

Any negotiations with creditors will take long as evidenced by Tidewater and Seadrill restructuring negotiations. Given the uncertainty, the stock will be highly volatile and present trading opportunities on both long and short sides.

However, the general direction will be to the downside as the OSV industry is the last one in the supply chain to benefit from rising oil prices, and current oil prices are not sufficient enough to bail out the OSD industry, the client of the OSV industry.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a short position in HOS over the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

Originally posted here:

Hornbeck Offshore Services: Too Many Problems Will Drag The Stock Further Down - Seeking Alpha

Children detained on Nauru hold up signs in April 2016 protesting Australias offshore immigration detention system.

The royal commission into child sexual abuse is to hold limited public hearings on Australias immigration detention regime on Nauru and Manus Island.

The royal commission had initially declined to conduct investigations into Manus and Nauru because of jurisdictional concerns about the scope of the inquirys powers. Legal groups had urged the royal commission to examine Australias offshore immigration detention regime, outlining legal advice that Australias institutional response to allegations of abuse were within its power and terms of reference.

The commission appears to have partially adopted this approach, announcing the limited public hearing into the Australian governments response to report of a child protection panel convened by the immigration minister, Peter Dutton.

In a statement issued on Tuesday, the royal commission said its final scheduled public hearing in March would examine the Australian governments response to the report.

On 14 November 2016 the royal commission announced a series of public hearings to be held in Sydney to inquire into the current policies and procedures relating to child protection and child safety of various institutions, the statement said.

It said the hearings would include: The response of the commonwealth government to the recommendations of the child protection panel in its report dated 11 May 2016, Making Children Safer the wellbeing and protection of children in immigration detention and regional processing centres.

The child protection panel identified serious inadequacies in Australias child protection framework in the immigration detention system on Manus and Nauru. It found almost half of the responses to reported incidents of child abuse were inadequate and the immigration department was unsure of the number, nature and severity of incidents.

The panel made a series of recommendations including to improve categorisation of incidents, to require service providers to deliver accurate and complete incident reports, and to ensure inquiries were not finalised without all available facts and an effective response.

There has been renewed focus on the asylum seekers and refugees held on Nauru by Australia after the Guardians publication of the Nauru files, which detailed thousands of incident reports from the islands detention facility until October 2015.

A Senate inquiry is also under way into serious allegations of abuse and assault on Nauru and the department is facing increasing pressure to release information about incident reports, as well as healthcare information for asylum seekers and refugees on the island.

The royal commissions limited hearings will still not fully examine the detention regime on Manus Island and Nauru. They will occur as part of a set of hearings into other areas of government responses, including the defence department and the management of working with childrens checks.

The commission has made substantial inquiries into the onshore immigration detention regime, but declined to hold public hearings.

The hearings will begin in March.

Contact Paul Farrell at paul.farrell@theguardian.com or via the secure messaging app Signal on +61 457 262 172

See original here:

Child abuse inquiry to hold limited public hearings into offshore ... - The Guardian

Amnesty International has heavily criticised the federal government's policy of offshore detention of asylum seekers in a report released Wednesday which analysed human rights abuses in 159 countries.

In the report, the activist group claimed that Australia "maintained its abusive offshore immigration processing regime" on Nauru and Manus Island in Papua New Guinea.

It also highlighted what it called the government's "refusal" to honour an offer with New Zealand to annually resettle 150 refugees from Nauru and Manus Island.

"The Australian government's policy of 'processing' refugees and asylum seekers on Nauru involved a deliberate and systematic regime of neglect and cruelty, designed to inflict suffering: the system amounted to torture under international law," the report said.

"It minimised protection and maximised harm and was constructed to prevent some of the world's most vulnerable people from seeking safety in Australia."

The report marked the second consecutive year the activist group had criticised the federal government on this issue.

The same report released in 2016 labelled the practice of offshore processing as "shameful" and "one of the worst in the world".

Tim O'Connor, spokesperson for the Refugee Council of Australia, said it was alarming the way the Australian government was treating people seeking asylum.

"It's an enormous concern to Australia, it's costing tax payers billions of dollars and it's destroying the futures of many innocent people."

Mr O'Connor said Australia's current policies were undermining an effective global approach to managing human displacement.

"We're wasting billions of dollars harming people, locking them up on Nauru and Manus, locking them up in Australia's detention centres, keeping people here in limbo in temporary protection.

"Meanwhile that money should be utilised to support countries of first asylum so that when people flee from Syria or the Rohingya flee from Burma - because of extreme violence in those countries that's being perpetuated against those people - that they can live with dignity."

The report also accused the justice system of continuing to fail Indigenous people, particularly children, with high rates of incarceration, reports of abuse and deaths in custody.

It said Indigenous children were 24 times more likely to be detained than non-Indigenous children.

Amnesty's national director Claire Mallinson said "that's an issue the whole of Australia should be shocked about".

The report found that despite the recommendation by the UN Committee on the Rights of the Child that the international minimum age of criminal responsibility should be 12, the age was 10 throughout Australia.

Mrs Mallinson said nearly three quarters of them were Indigenous children.

"So we're calling on the Australian government, the Prime Minister in particular, to make this a priority area."

The report referenced leaked footage last year that exposed abuse and other ill-treatment of children in juvenile detention in the Northern Territory.

"And we are calling on the government that when the royal commission into the horrors that we saw at Don Dale is finally released in August, that that will be the springboard to a national plan," Mrs Mallinson said.

On a global scale, the Amnesty report painted 2016 as a year in which "unrelenting misery and fear" was brought down on innocents by governments and armed groups.

"Large parts of Syria's most populous city, Aleppo, were pounded to dust by air strikes and street battles, while the cruel onslaught against civilians in Yemen continued," it said.

"From the worsening plight of the Rohingya people in Myanmar to mass unlawful killings in South Sudan, from the vicious crackdowns on dissenting voices in Turkey and Bahrain, to the rise of hate speech across large parts of Europe and the USA, the world in 2016 became a darker and more unstable place."

Amnesty also chastised UN member states over what it called their failure at September's summit for refugees and migrants.

"While world leaders failed to rise to the challenge, 75,000 refugees remained trapped in a desert no man's land between Syria and Jordan."

The report also panned US President Donald Trump, claiming his rhetoric during last year's election campaign was "divisive" and "poisonous".

"His election followed a campaign during which he frequently made deeply divisive statements marked by misogyny and xenophobia, and pledged to roll back established civil liberties and introduce policies which would be profoundly inimical to human rights," the report said.

The report also accused former US President Barack Obama of leaving a legacy of "grievous failures to uphold human rights".

Continued here:

Amnesty pans Australia over offshore detention, Indigenous incarceration - SBS

Courtesy: Maersk Drilling.

Investment thesis:

A fierce debate is raging over which oil production sector should be chosen for investment first. The investing community is deeply divided about what to consider when it comes to evaluate the US shale versus Offshore drilling production in terms of real numbers and efficiency. Particularly when it comes to "oil service" and less relevant to the oil majors whose are often invested in both segments.

Some extreme views, frequently driven by inexperience and lack of understanding, are totally discounting offshore drilling as something obsolete and expensive, which is due to disappear into oblivion, as soon as tomorrow.

On the other hand, others think that the US Shale will become a white elephant after a few years of intensive drilling, atypical depletion and hidden costs.

In fact, both are merely wrong by touting one oil production sector against another. We need both and probably more if we look at the next 25 years. Therefore, if we need both oil sources of supply, we should invest in both as well. Simple logic, right?

It is interesting to see that US Shale (tight oil) production in the USA represents less than 50% of the US total oil production now or approximately 9 MBOEPD, and will be approximately 60% of the 10+ MBOEPD expected in 2040 according to EIA.

The recurring fundamental question is to adapt a trading strategy that can fit perfectly to each segment without using anachronism or caricature in the process of selection.

To use a very simple image to illustrate this futile misconception. How can one walk without the use of his two legs functioning adequately?

The concept of walking is based on the use of two legs, period. It is a basic principle -- one leg equal falling -- Same as the concept of smooth oil consumption which is based on a balanced worldwide production, wherever oil can be found and be delivered at a profit. Profit not limited to "operating profit" by the way, but "net profit" when all expenses have been subtracted.

What is the breakeven price really?

The charts below from Rystad Energy/WoodMcKenzie are a good indicator of the US Shale recent success and its limitation as well.

Another well-known research firm called WoodMcKenzie in the US is indicating the "point break" for both the onshore and offshore in the USA which shows how important a $60 per barrel can be for the all oil industry.

However, it can also be used to express how difficult it will be for oil prices to trade well above this significant level and at least for a long period of time.

We see that we have now a pretty similar value if we compare onshore and offshore in the USA. Furthermore, the offshore industry achieved significant reduction as the chart below is showing:

Commentary:

Today, I would like to share with you my thoughts about an article from Offshore Magazine published on February 17, 2017.

The article referred to Rystad Energy, which is a well-known independent oil and gas consulting services and business intelligence data firm offering global databases, strategy advisory and research.

Rystad Energy believes that after two years of cost cutting programs in the offshore service, 2016 and 2017 are showing "full competitiveness within these two sources of supply".

For every dollar that is invested into the North American shale market in 2017, the analyst firm says, a dollar is also earmarked for the development of new offshore resources. Both sources of future production, shale and offshore, will receive around $70 billion each of planned capex.

Audun Martinsen, VP Oilfield Research at Rystad Energy, said:

E&P and oilfield service companies have worked intensively on methods to reduce costs. However, these improvements are also a result of a portfolio effect. By focusing on the areas with the highest potential within their portfolios, E&P companies naturally gained the most from these newfound efficiencies by high-grading their undeveloped fields. Non-sanctioned offshore developments can expect an improvement of 15-30% in their breakeven prices.

As we can see, the CapEx repartition between the US Shale and offshore is nearly equal in value. Another chart from Rystad is also very telling:

Rystad Energy is arguing that the US Shale and the offshore drilling segment are difficult to differentiate in terms of breakeven price and in terms of capital expenditure.

One of the reasons for offshore projects starting to become competitive again is the strong deflation of unit prices which is actually higher for offshore than onshore. In 2016, unit prices for offshore developments have been reduced 27% from the peak in 2014 for awarded contracts.

One of the key segments, which have helped the offshore cost to come down, is related to the immense pressure on day rates for drilling rigs. Here, prices have come down more than 50%. For other segments, the cost is down more in the range of 20-30%, where subsea is on the upper end.

However, due to oil prices increase and a surge in activity overall, inflation will have a negative effect going forward. The process has already started with the US Shale (see breakeven price chart).

Rystad Energy says the time window of low service prices has started to shrink, whereas it will stay open longer for offshore activity due the longer contract durations and lead times. This will impact even more the 2018 volumes of activity and also benefit service companies on their top and bottom line.

Important note: Do not forget to follow me on the oil sector. Thank you for your support.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Rystad Energy Believes That Offshore Projects Are Becoming ... - Seeking Alpha