Hedging Helps Canadian Oil & Gas Companies in Low Price Climate

Posted by Mark Young

Apr 16, 2015 9:56:00 AM

Canadian oil and gas companies that hedged their oil production before the global oil price crash will be very relieved they did so. This CanOils study of 45 TSX-listed companies’ Q4 2014 results (see note 1) shows that many Canadian companies made large realized hedging gains as the oil price fell to around $50 by year-end 2014. This study agrees with a recent EIA article, written using Evaluate Energy data, showing the impact of hedging on U.S. companies during the same period.

Whilst hedging may have seemed over-cautious at the start of the year, with oil prices not having wavered from the $90-$100 mark for quite some time, hedging eventually proved to be a prudent strategy given the collapse of commodity prices by almost 50% towards the end of the year.

Hedging contracts (also known as derivative contracts) are a common risk management strategy for oil and gas producers. A producing company will agree with a buyer to sell future production at a certain price, thus potentially limiting revenues if prices climb, but simultaneously shielding the producer from excessive losses should commodity prices suddenly fall.

The chart below shows that the group of 45 TSX-listed companies, as a whole, experienced both sides of the hedging dynamic in 2014.


Source: CanOils (see note 2)

Whilst high prices were not realized by the 45 companies to their full potential in Q1 and Q2, hedging has clearly helped significantly lessen effects of the commodity price downturn in Canada towards the end of 2014. The graph is almost identical to that reported by the EIA for U.S. companies using Evaluate Energy data. The lines for pre- and post-hedging revenues are almost parallel in Q1 and Q2, begin to converge in Q3 and then switch over dramatically in Q4 as benchmark oil prices began to tumble.  

Of the companies involved in the report (see note 1), the following companies reported the biggest realized hedging gains per boe on their production in Q4 2014. 


Source: CanOils (Includes only companies that reported both a pre- and post-hedging price per boe produced, or whose data allowed both a pre- and post-hedging price per boe price to be calculated)

The biggest gains on hedging in Q4 were clearly made by oil producers rather than gas producers; with the exception of Enerplus, all of these companies’ production portfolios are made up of over 75% oil. Exall (97% oil) and Arsenal (78% oil) made extremely significant gains due to their hedging contracts, rescuing around $22 and $15 per boe respectively.

There is little to suggest the oil price will rebound any time soon, meaning that hedging positions will also play an important role in determining how successful a quarter Q1 2015 was for the 45 companies. The chart below shows the best hedged companies out of the 45 included in this study. The companies were identified as having the highest percentage of Q4 2014 oil and NGL production covered by hedging contracts that are valid in Q1 2015.


Source: CanOils

The CanOils database provides clients with efficient data solutions to oil and gas company analysis, with 10+ years financial and operating data for over 300 Canadian oil and gas companies - including all oil and gas hedging positions on a quarterly basis - as well as M&A deals, Financings, Company Forecasts, Guidance and an industry leading oil sands product.


1) The 45 selected companies from the CanOils database fit the following criteria:

a) TSX-Listed

b) Has Canadian oil and gas production

c) Had oil hedges in place at the end of Q3 2014 that would be valid in Q4

d) Reported realized hedging gains on their income statements from Q1-Q4 2014

e) Non-oil sands producer (i.e. less than 10% of production portfolio made up of oil sands)

For a full list of companies included in the report, click here

2) All data in this chart is taken or calculated using the respective companies’ income statements. Post-hedging revenues refers to all E&P revenues plus realized commodity hedging gains or losses.

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Q1 2015 Oil & Gas M&A Tumbles to $7.1 billion in E&P Sector

Posted by Eoin Coyne

Apr 8, 2015 11:54:00 AM

Buyers and Sellers Reach Impasse on the Value of Assets

The value of global upstream oil and gas M&A deals tumbled to $7.1 billion during Q1 2015, a drop of 79% compared to the value in Q1 2014 and a drop of 85% compared to the average value per quarter since the start of 2009. The oil price as per the WTI benchmark started the year at $52 and has moved little since. With Saudi supply policy showing no signs of shifting, large U.S. stock inventories persisting and further supply side pressure from a potential resolution to sanctions on Iranian exports, the chances of a sharp increase in oil price in the near future are slim.


Source: Evaluate Energy

In the medium-to-long term commodity prices will inevitably return to a semblance of levels seen in the past 5 years as cuts in exploration and development drilling translates into a restoration in the oil price, closer to the required break-even level to sanction new development projects. For any well-capitalized company, this quarter could have been seen as a rare opportunity to acquire oil assets at a steep discount to historical levels. However, with sellers seemingly of an opinion that the oil price is lower than fair value, an impasse has been reached, resulting in the lowest value quarter for oil and gas deals in the 7 years that Evaluate Energy has been tracking all global oil and gas transactions.

Private Companies Active Despite Price Downturn

In times such as these, when the outlook for earnings is poor, it is advantageous to be free from the burden of satisfying a large group of shareholders demanding quick fixes to what will very likely be a cyclical downturn requiring patience. For this reason, private companies have become relatively more prominent during this quarter in the M&A market. Over the past 5 years, private companies have accounted for 10% of the total publicly disclosed oil and gas deal value. In Q1 2015, however, private companies accounted for $4.1 billion of corporate and asset acquisitions, representing a significant 58% of the total global deal value.

In addition to the corporate and asset acquisitions, private equity companies also made inroads into the oil and gas sector via less traditional methods. The largest of these involved Quantum Energy Partners, who agreed a $1 billion deal with Linn Energy for a “Strategic Acquisition Alliance,” which will see Quantum initially committing up to $1 billion of capital to leverage Linn Energy’s experience in acquisitions whilst allowing Linn to maintain its momentum in what would have otherwise likely have been a time of cutbacks for the debt-laden company. EIG Global Energy Partners also invested $1 billion into the U.S. oil patch via the acquisition of $350 million worth of preferred units of Breitburn Energy Partners and the issuance of $650 million of senior secured notes.

Shale Suffers Worst Quarter for 5 Years

The shale industry in North America was strongly cited as one of the chief instigators of the falling oil price and now that the price has settled around $50 it has been one of the first sources of supply to be hit. The comparatively short life cycle of shale wells makes this industry sensitive to short term economics and dramatic changes are already being seen. Whereas 12 months ago oil and gas companies were clamouring to secure rigs to drill new wells in oil plays, many of those rigs are now sitting redundant. The oil rig count in the Bakken has dropped 51% from 185 in Q4 2014 to 91 in the first week of April 2015, likewise rigs in the Eagle Ford play have dropped 31% from 199 to 137 in the same time frame. The effect of the price downturn on M&A in the shale industry has been a quarter with the lowest amount of shale deals since Q1 2009 of $0.4 million, compared to an average quarterly value of $8.9 million over the past 5 years.

Nigeria Sees Surge in Deals

In contrast to the rest of the world, Nigeria experienced a surge in deals during the quarter with a total value encompassing 40% of the global value. With the Nigerian federal government pushing for an increase in ownership of the country’s resources for indigenous companies, three deals were announced by Nigeria-based companies for OML 29, OML 53 and OML 55 for a total of around $2.9 billion. Aiteo Ltd. acquired a 45% interest in OML 29 from Royal Dutch Shell, Total and ENI for $2.55 billion, while SEPLAT acquired a 40% interest in OML 53 from Chevron for $256 million and a 22.5% interest in OML 55 for $132 million from Belema Oil Producing Ltd. The long history of troubles for Western companies in Nigeria may have resulted in many of these assets being labeled as problem assets, but the fact that Shell, Total and ENI have received a consideration that was apparently unaffected by the fall in oil price will have gone some way to mitigate these past struggles. Lastly, Mart Resources Inc., a Canadian-listed company with assets in Nigeria was acquired by Midwestern Oil and Gas Company Ltd. for $365 million.

Whitecap Makes Largest Deal by a Public Company

The largest deal by a public company during the quarter came from Whitecap Resources Inc., who acquired Beaumont Energy Inc. for US$462 million. Whitecap had room to manoeuvre following US$500 million of equity issuances during early-mid 2014, a time when the share prices of oil and gas companies were still strong, leaving its debt-to-capital-employed at a healthy level of 23%. With this acquisition, Whitecap will be building on its existing operations in the Viking area of Saskatchewan at a price of sub-$15 per proved and probable barrel of oil equivalent. The deal structure was 70% weighted towards stock, meaning that Whitecap will still be in a position to consolidate its operations following closure should any further opportunities arise.


Even though the oil price is resting at attractive levels right now for buyers, it’s clear that this quarter has come too early for many to make opportunistic acquisitions. Companies will doubtless feel the squeeze as time goes by and Q2 2015 will inevitably be a time when we see an increase in distressed sales as debt-laden companies have their hands forced by the need to furnish debt.

Assuming that a debt-to-capital-employed level of 35% is still a healthy level to operate within, the table below shows the top ten global oil and gas companies that are in a position to make opportunistic acquisitions (data taken from Evaluate Energy’s financial and operating database as per year end 2014 financial accounts – click here to find out more).


Source: Evaluate Energy. NOTE: Since the time of writing this article the 2nd ranked company, Royal Dutch Shell, made an offer to acquire BG for $80 billion.

Top 10 Deals During Q1 2015


Source: Evaluate Energy


1) All $ values refer to US dollars

2) All data here is taken from the Evaluate Energy M&A database, which provides Evaluate Energy subscribers with coverage of all E&P asset, corporate and farm-in deals back to 2008, as well as refinery, LNG, midstream and oil service sector deals. 

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EIA: Hedging Helps US Producers Mitigate Effects of Falling Oil Prices

Posted by Mark Young

Apr 7, 2015 12:28:00 PM

In a new study of 32 US oil companies that uses data from Evaluate Energy, the US Energy Information Administration (EIA) has concluded that hedging contracts in place during Q4 2014 have helped significantly in mitigating the effects of the global fall in commodity prices.

Hedging isnt the only area where the price downturn had a major impact for U.S. companies, as Evaluate Energy's study into asset impairments in Q4 2014 proves.


For the full EIA study, please click here

This study from the EIA was completed using data from the Evaluate Energy database. Evaluate Energy provides clients with efficient data solutions for oil and gas company analysis. This includes over 25 years of financial and operating data for the world’s biggest and most significant oil and gas companies, M&A deals, a global E&P assets and LNG database and an emerging product that focuses on the North American shale industry. 

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Low Oil & Gas Prices Result in Major Asset Impairments Across the U.S.

Posted by Mark Young

Mar 24, 2015 8:37:00 AM

Large impairments rocked many U.S. companies’ income statements at year-end 2014. The major cause of most of these impairments was the fall in global commodity prices in the final quarter of the year. This is the conclusion of a study looking into asset impairments using the annual data of 72 U.S. oil and gas companies (see notes 1 and 2) available in the Evaluate Energy database.

All data included in this article is available for download at this link

Impairment expenses occur in the oil and gas industry when the current carrying value of a company’s oil and gas properties, for any given technical or economic reason, can no longer be recovered under present conditions.  Our data shows 49 of the 72 companies reported such impairment expenses in 2014, the total of which is around $45 billion. It is apparent that the global fall in commodity prices, while by no means being the only reason for 2014’s impairments, is the major cause for the widespread impairment expenses as a very large proportion of these $45 billion of impairment expenses occurred during Q4 and this is when the fall in prices began to take hold.


Source: Evaluate Energy: Download all data included in this article by clicking here.

Some companies have obviously been affected more than others by the price downturn. The chart below shows the top 10 companies whose Q4 impairment expenses make up the biggest proportion of their pre-impairment total assets at year end.


Source: Evaluate Energy (see note 3 for definition): Download all data included in this article by clicking here.

This chart shows that the impact of the fall in prices has not been limited to companies of a certain size, to predominantly oil or gas producers, or to companies focused in certain basins. The market capitalization values of the 10 companies in the chart shown above as of March 17, 2015, ranges from Swift Energy at just over $100 million up to Occidental Petroleum at over $56 billion. The companies also vary widely in their production mix: for Cabot, gas production is 95% of its total production, whereas Penn Virginia’s total production comprises 75% oil. In addition, these companies have operations focused in areas across the U.S., with nearly every major onshore U.S. producing basin represented:


For the full data set behind this article, please download our supplemental data booklet. In this booklet, the impairment expenses in Q4 and 2014 and the impact of these impairments on total assets for the year is provided for each of the 72 companies. The booklet also shows the impact the fall in prices has had on the market capitalization values of all 72 companies since Q3 2014.

Download Supplemental Data Booklet


1) The 72 companies included were selected because:

a) Their main production area is the United States;

b) They are based in the United States;

c) As of September 30, 2014, their market capitalization values did not exceed $80 billion; and

d) Their financial year end is December 31st.

2) The full list of companies included is available at this link

3) The percentage fall in total assets for Q4 2014 is calculated by comparing Q4 2014 impairments with the total assets figure for year end 2014 (pre-impairment charge). This gives an estimate of how big an impact the Q4 2014 impairments had on a company’s total assets at the end of the quarter, i.e. if it wasn’t for the Q4 impairments, Goodrich’s total assets figure would have been around 25% higher.

4) All impairment expenses in this report are taken from the companies’ income statements throughout 2014

Evaluate Energy provides clients with efficient data solutions for oil and gas company analysis. This includes over 25 years of financial and operating data for the world’s biggest and most significant oil and gas companies, M&A deals, a global E&P assets and LNG database and an emerging product that focuses on the North American shale industry. Find out more by downloading our brochure.

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Oil & Gas M&A in Upstream Sector Climbs to $37 Billion in Q4 2014

Posted by Mark Young

Jan 13, 2015 10:33:51 AM

The total value of upstream oil and gas m&a deals, according to data from the Evaluate Energy M&A database, reached $37 billion in Q4 2014, a slight increase from the $35 billion total of Q3. However, the falling oil price would have resulted in a sharp decline in total deal value this quarter, had it not been for Repsol agreeing to acquire Talisman Energy for $13 billion at the beginning of December. This one deal represented a significant 35% of Q4’s total deal value and was the biggest E&P deal of the year. 


Source: Evaluate Energy M&A Database

Demand for Oil Assets Predictably Cools

The oil and gas industry was shaken by the continuing fall in global oil prices throughout the quarter. In September 2014, the West Texas Intermediate (WTI) spot oil price was still above US$90 but by early January this had fallen to US$50; company values as well as the value of oil assets began to crash. 

See the impact of the falling oil price on Canadian oil and gas companies here.

The main impact on global E&P M&A of the falling oil price was that the demand for oil assets dropped significantly. For the first quarter in Evaluate Energy’s coverage of the upstream oil and gas M&A market, which began in 2008, there was not a single acquisition of an oil-weighted asset or company with a reported value of greater than $1 billion. Of course, with oil dropping below $50, a lot of discussion now surrounds deals for oil-weighted assets agreed before September that have not completed yet that could potentially be cancelled any time soon. This is all a major turnaround from a few months ago, when the focus was more on where the next “big” oil acquisitions would take place. Whiting Petroleum perhaps surprised some by completing its multi-billion dollar oil-focused acquisition of Bakken operator Kodiak Oil & Gas just before year end. However, as this deal was an all-stock transaction, the falling stock prices of both parties and the unchanged exchange ratio throughout the merger meant that Whiting and its shareholders were not really penalised for the timing of their acquisition, which was agreed when WTI was still above $90. Deals for oil assets that are heavily cash-weighted would be most likely to be cancelled or at least renegotiated if the oil price remains so low.

Gas Assets Take Centre Stage

This lack of oil-weighted deals of course means that gas-weighted deals were the headline-makers in Q4 2014. The biggest of these deals this quarter, in which Repsol agreed to acquire Talisman Energy, was in fact the biggest E&P deal of the year.

Repsol Agrees to Acquire Talisman Energy

In mid-December, Repsol agreed to acquire Canada-based Talisman Energy for a total value of $13 billion, which included $4.7 billion of debt. When the deal was agreed, the price of $8 per Talisman share represented around a 56% premium, a significant price to pay considering the oil prices had well and truly began to tumble at the time, even though Talisman did produce more gas than oil in Q3 2014.

Ever since Repsol was forced into returning its stake in YPF to the Argentine government, the Spanish company has had a rather large gap to fill in its portfolio. Repsol claims that acquiring Talisman is a good fit; it not only bolsters the South American portion of Repsol’s E&P business, but also has attractive asset holdings in North American shale and South-East Asia. Repsol will also be excited by the significant production level and high gas weighting that Talisman brings to the table, both of which will reduce Repsol’s dependency on the higher risk oil production areas of its portfolio, such as Libya, in this low price climate. Whilst many analysts have pointed out Talisman’s failing UK North Sea assets as a huge burden for Repsol to be taking on, the aforementioned positive attributes of Talisman Energy clearly outweigh this and any other negatives in Repsol’s opinion.

KUFPEC Joins Chevron in Duvernay Shale Joint Venture

In the quarter’s other +$1 billion deal in Canada, KUFPEC agreed to join Chevron in the prospective Duvernay shale by acquiring 30% of its assets for $1.5 billion in early October, which includes a cost carry going forward. The exploration wells already drilled on Chevron’s acreage, on which it will remain the operator with a 70% interest, have produced gas in the main, but also a significant level of condensate. Chevron has therefore managed to monetise a liquids-rich asset in a difficult period, while KUFPEC now owns a highly prospective asset that could pay major dividends in the future should prices rebound.

Southwestern Energy Acquires Marcellus Shale Assets

Southwestern Energy is one of the bigger US shale gas producers around, with operations focused in the Fayetteville shale of Arkansas as well as in the Appalachian basin in the north east. It is the company’s portfolio in the latter that was bolstered by acquisitions this quarter, as three deals were agreed for Marcellus shale assets for a combined $5.7 billion.

The first and largest of these deals was announced in October and closed just before year end, as Southwestern agreed to acquire Chesapeake Energy’s Southern Marcellus Assets and a portion of its Eastern Utica assets for just under $5 billion. In December, the company announced two further Marcellus acquisitions from WPX Energy and Statoil, for another $300 million and $394 million respectively. The deals represented an increase in Marcellus acreage holdings for Southwestern of 443,000 net acres, as well as 2.5 tcfe of proved reserves and around 70,000 boe/d of additional production (54% gas). The Marcellus shale has long been sought after, even when gas prices were lower than they are now, due to its close proximity to one of the North America’s main demand centres in the north east as well as the sheer amount of gas on offer for the right producer; Southwestern Energy seems intent on being a major player in the Marcellus for many years to come.

Linn Energy Sells Texas and Oklahoma Assets

In other US unconventional news, affiliates of Enervest Ltd agreed to acquire Linn Energy’s position in the certain tight gas plays, which included the Granite Wash and Cleveland areas, for $1.95 billion. The assets, which also included certain midstream interests, are located in the Texas panhandle and western Oklahoma in the Anadarko basin. The acquirers were intent on bolstering their own portfolios, which are already significantly focused on the areas in question. Linn’s motivation for selling the assets was to fund a $2.3 billion acquisition from Devon Energy that closed in August 2014. In this deal, Linn acquired gas-weighted assets in the Rockies, onshore Gulf Coast and Mid-Continent regions, proving that gas deals in North America for large prices are nothing particularly new this quarter, rather they just stand out more due to the lack of large price oil deals.

Petronas and Statoil agree Largest Deal Outside of North America

Away from North America, the largest deal was also gas-weighted. Malaysia’s Petronas acquired Statoil’s 15.5% stake in the Shah Deniz project of Azerbaijan for $2.25 billion; the assets produced 228 mmcfe/d net to Statoil’s interest in Q3 2014 (80% gas). This sale by Statoil, as well as the sale in the Marcellus this quarter, formed part of the Norwegian company’s plans to refocus its efforts on prioritising high potential future developments. Petronas was no doubt enticed by the high production, whilst the purchase price of around $60,000 per flowing barrel is very reasonable compared to other deals for such high volumes of liquids-rich gas production worldwide. Petronas has been very busy spreading itself around the world’s oil and gas map; in 2014 alone, the company signed co-operation agreements with the state-controlled entities in Mexico and Argentina, completed the acquisition of Talisman’s Montney assets in March to support its move into Canadian LNG and announced a small farm-in deal with Lansdowne Oil & Gas in the Republic of Ireland in November. 

Top 10 Deals of Q4 2014



1) All $ values refer to US dollars

2) All data here is taken from the Evaluate Energy M&A database, which provides Evaluate Energy subscribers with coverage of all E&P asset, corporate and farm-in deals back to 2008, as well as refinery, LNG, midstream and oil service sector deals. 

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How Sustainable is Canadian Oil & Gas at $50 Oil?

Posted by Mark Young

Jan 8, 2015 5:49:00 AM

The Canadian oil & gas industry, as in every other country in the world, has been shaken by the continuing sharp decline in global oil prices. Market capitalization values for nearly all oil and gas companies have fallen dramatically as benchmark prices have tumbled; the widely accepted benchmark spot oil price in North America, West Texas Intermediate (WTI) fell from over $90 in September 2014 to around US$50 in January 2015.

CanOils has released a new study looking at 50 of Canada’s biggest oil and gas companies that quantifies just how healthy the industry is in this climate of falling prices. The study takes into account break even costs for all 50 companies as well as current debt levels and hedging contracts.


The full study can be downloaded for free here.

Key Conclusions of this CanOils Study:

  • Less than 20% of leading Canadian oil and gas companies will be able to sustain their operations long-term in a prolonged period of low oil prices.
  • In the immediate future however, expect minimal change to existing operations; many companies should continue to generate positive cash flow even at US$50 oil, but this is only acceptable in the very short-term.
  • A significant number of companies with high-debt ratios are particularly vulnerable right now.
  • Natural gas-weighted producers’ profits should be protected from the falling oil price, assuming gas prices hold up.
  • Expect to see more M&A activity as companies with the most liquidity upgrade their portfolios.

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The CanOils database provides clients with efficient data solutions to oil and gas company analysis, with 10+ years financial and operating data for over 300 Canadian oil and gas companies, M&A deals, Financings, Company Forecasts and Guidance, as well as an industry leading oil sands product.


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US Refining Sector Sees a Boost in Quarterly Results

Posted by Ilda Sejdia

Nov 24, 2014 5:58:00 AM

Companies with an interest in the US downstream sector have seen a general, significant improvement in performance in Q3 2014 according to a new analysis from Evaluate Energy. The main players, which include super majors BP, Chevron (CVX), ExxonMobil (XOM), Royal Dutch Shell (RDS) and Total (TOT), as well as a handful of domestic players (see note 1), showed a combined increase in adjusted global downstream earnings (see note 2) this quarter.

The boosted earnings recorded by the US refiners in Q3 2014 is mainly attributable to the well-publicised fall in realised oil prices, which has resulted in lower operating costs and higher margin for companies in the downstream sector in general.

Super Majors


Source: Evaluate Energy (See note 2 for Adjusted Earnings Definition)

European oil majors, BP, Shell and Total, saw their downstream adjusted earnings more than double to US$1.783 billion, US$1.515 billion and US$1.162 billion respectively from Q2 2014. The US-based super majors, Chevron and ExxonMobil, followed a similar trend, also reporting strong increases in their adjusted downstream earnings to US$ 1.387 billion and US$1.384 billion respectively in Q3 2014. Year on year things look even more positive; the total pre-tax adjusted downstream earnings achieved by the super majors in Q3 2014 totalled nearly US$6.9 billion, whereas in Q3 2013 the total was only US$2.9 billion. The overall improvement in the super majors’ downstream performance stands in stark contrast to recent upstream results, which were conversely affected by lower oil prices.

Other US Refiners


Source: Evaluate Energy (See note 2 for Adjusted Earnings Definition)

Other US downstream companies such as Phillips 66 (PSX), Tesoro Petroleum Corp (TSX), Valero Energy (VLO) and Western Refining (WNR)) saw their pre-tax adjusted earnings rise by 61%, 50%, 54% and 25% respectively from Q2 2014. Also, smaller US refiners (not included in the above chart), Alon USA (ALJ), Calumet Specialty Products Partners (CLMT), Delek US Holdings (DK), saw their downstream earnings increase to US$ 142.8 million, US$ 135.9 million and US$157.0 million, respectively. It is also important to note that Q3 was not perfect for all US refiners; Hollyfrontier and Marathon Petroleum both reported declines in Q3 2014 of 7.66% and 15.08% from Q2 respectively – attributed to higher operating costs incurred during the quarter – despite an overall improvement in results since Q1. Another US-based downstream company that did not have a good third quarter was CVR Energy (CVI), who recorded a fall by 83% in its downstream adjusted earnings on a year to year basis. This fall was attributable to the disrupted operations in late July at the company’s Coffeyville refinery in Kansas.

But, overall, Q3 2014 was clearly a good one for US refiners. However, while these positive results for Q3 2014 are a good thing, uncertainty still remains in the downstream sector, not only due to the volatility of oil prices, but also due to a problem of over-supply. Refining companies worldwide have been vulnerable to over-capacity for quite a long time now and with new projects due to come onstream next year in the Middle Eastern and Asia Pacific regions, this pressure will only increase.


1) The US refining segment “domestic players” include Alon USA,  Calumet Specialty Products Partners, Delek US Holdings, HollyFrontier Corp, Marathon Petroleum Corporation, Phillips 66, Tesoro Petroleum Corp, Valero Energy and  Western Refining

2) “Adjusted earnings” as referred to in this report represent pre-tax earnings after the removal of the one-off effect of non-recurring items, which included items such as impairments, gains/losses on asset sales, legal costs, and unrealised gains/losses on hedging agreements. This measure is important for benchmarking, as each quarter is more comparable to previous or following quarters.

This report was created using the Evaluate Energy financial and operating database, which is currently being updated with Q3 2014 results for the world's biggest and most important oil and gas companies as the data is released. Evaluate Energy also provides clients with an extensive M&A database, which holds all E&P deals back to 2008 as well as midstream, downstream and service sector coverage, and a global E&P and LNG assets database. Evaluate Energy also has a global refinery database, which includes information and performance data for every operational refinery and refinery project worldwide.

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International Influence Growing in Canadian Oil Sands

Posted by Mark Young

Nov 20, 2014 7:09:00 AM

According to CanOils new report “The Canadian Oil Sands Outlook 2015” the Canadian Oil Sands industry looks set to have capacity to produce over 3 million barrels per day (bbl/d) by the end of 2015, with production likely to approach around 2.5 million bbl/d. Of these figures, a higher portion than ever will be controlled by non-Canadian operators (see note 1), with the trend of greater influence year-on-year by internationally-held companies continuing into 2015.


Source: CanOils – Shows gross production capacity controlled by Canadian and non-Canadian operators. This does not represent the working interest (i.e. net) positions of each company involved. Download full 2015 Outlook from CanOils here.

Assuming all scheduled new projects and expansions actually come onstream by December 31st, 2015 will see a 16.6% increase in overall year-end production capacity in the Canadian oil sands since 2014. 38.9% of this new total capacity will be operated by an entity that is owned (at least in the majority) by a non-Canadian company. This is the highest percentage by quite some margin since CanOils began tracking project capacities in 2008. This of course will be affected by delays and cancellations, so the full capacity will not be reached, but a significant increase will happen nonetheless.

The total has been growing steadily since 2012. In 2013, the increase can be attributed to two events. Firstly CNOOC’s acquisition of Nexen meant that the 72,000 bbl/d Long Lake in situ project shifted to international operatorship. Secondly, Imperial Oil’s Kearl Lake mine came onstream, adding another 110,000 bbl/d to the international contingent’s capacity total. 2014 saw OSUM Oil Sands taking the 10,000 bbl/d Orion project into Canadian hands by acquiring it from Shell for Cdn$325 million. But this dip was more than offset by major expansions at Shell’s Jackpine mine (expanded to 200,000 bbl/d, additional capacity of 100,000 bbl/d) and at Devon’s Jackfish in situ project (to 105,000 bbl/d, additional capacity of 35,000 bbl/d).


Source: CanOils – Shows gross production capacity controlled by each operator. Not necessarily the same in all cases as working interest capacity owned. Download full 2015 Outlook from CanOils here.

2015, again assuming all planned projects reach completion by year-end, will see Imperial take over as the largest internationally-backed company in the Canadian Oil Sands. This is because of a planned expansion at the Kearl Lake mine, which is to double capacity to 220,000 bbl/d. This project alone highlights the fragility of making forecasts in the oil sands industry however, as production at the existing mine has recently been halted for several weeks due to some mechanical issues, potentially casting some doubt on an expansion to the mine reaching completion on time. Imperial is also scheduled to make a major 40,000 bbl/d expansion at Cold Lake next year.

Other planned increases in internationally-held production capacity within the oil sands industry in 2015 include Harvest’s brand new 10,000 bbl/d BlackGold project and ConocoPhillips’ 122,000 bbl/d expansion at its Surmont project, which will see capacity increase to around 150,000 bbl/d.




1)      “Non-Canadian operators” refers to companies that operate an oil sands project (in situ or mining operation) that are held in the majority by a non-Canadian entity. Included in this group are a handful of companies that are headquartered in Canada, such as Imperial (ExxonMobil, US), Nexen (CNOOC, China) and Harvest (KNOC, South Korea), but the majority shareholder of the company is internationally-based.

CanOils provides efficient data solutions for oil and gas company analysis. The CanOils Oil Sands database is a comprehensive analysis tool for the oil sands industry in Canada, providing countless datasets for performance and benchmarking analysis, including production, capacities, environmental measures such as water use or greenhouse gas emission, onstream dates, all regulatory documents and much more.

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Oil & Gas Super Majors Struggle in Upstream Sector in Q3 2014

Posted by Mark Young

Nov 4, 2014 7:36:00 AM

The world’s oil and gas super majors, BP, Chevron, ConocoPhillips, ExxonMobil, Royal Dutch Shell and Total, have all seen their earnings in the upstream segment fall in Q3 2014 since Q2, according to a new Evaluate Energy analysis of the companies’ recently released quarterly results.

This drop is in no small part attributable to a fall in global realised prices for these companies, proving that it doesn’t matter how big an oil company you are, you are still susceptible to price changes.

In fact, this quarter has been amongst the worst for this group of companies as a whole in the upstream sector over the last 2 years. The chart below shows the companies’ quarterly adjusted upstream earnings (see note 1) in 2013 and 2014.  


Source: Evaluate Energy (See Notes 1 & 2)

This is a complete reversal of the trend over the past 6-9 months; the first and second quarters of 2014 both saw an increase on the previous quarterly earnings. Q3 2014 saw a fall in earnings for all 6 companies in the upstream segment since Q2. The biggest total drop was for ExxonMobil, whose adjusted earnings fell by $1.465 billion (19%) to $6.416 billion in Q3 2014. Percentage-wise, BP suffered the biggest fall, recording a 31% drop off on Q2 earnings.


Source: Evaluate Energy (See Notes 1 & 2)

Each company will have its own set of reasons for the fall, but one factor that has impacted the entire group is a fall in worldwide realised prices this quarter. The group’s realised oil prices fell on average by 7% from $97.59/bbl in Q2 to $90.72/bbl in Q3, whilst gas prices fell by 6% from $6.34/mcf to $5.93/mcf. The biggest fall in oil price was suffered by Total, whose price fell by $9.00/bbl (9%) in Q3 to $94.00. The biggest fall in gas price was suffered by ConocoPhillips, an 11% fall to $5.91/mcf from $6.66/mcf.



Source: Evaluate Energy


1)      “Adjusted earnings” as referred to in this report represent post-tax earnings after the removal of the one-off effect of non-recurring items, which included items such as impairments, gains/losses on asset sales, legal costs, and unrealised gains/losses on hedging agreements. This measure is important for benchmarking, as each quarter is more comparable to previous or following quarters.

2)      All of the companies report adjusted earnings on a post-tax basis, except for BP, whose post-tax position has been estimated using the reported pre-tax figures and the average effective tax rate over the past 3 years.

3)       Rosneft is also considered to be a Super Major by Evaluate Energy, and although it saw a 37% fall in overall upstream earnings in Q3 2014, it does not report post-tax earnings by segment, segmental earnings adjustments (see note 1), or realised prices, so had to be left out of this report.

This report was created using the Evaluate Energy financial and operating database, which is currently being updated with Q3 2014 results for the world's biggest and most important oil and gas companies as the data is released. Evaluate Energy also provides clients with an extensive M&A database, which holds all E&P deals back to 2008 as well as midstream, downsteam and service sector coverage, and a global E&P and LNG assets database.

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Lithuanian LNG – The Latest European Move Away from Gazprom and Russia

Posted by Mark Young

Oct 29, 2014 8:41:00 AM

Lithuania has historically imported its gas from Russia and Gazprom. This is about to change however, with the country’s first LNG Cargo being received at its brand new floating terminal. Analysis by Evaluate Energy shows that, by itself, the terminal represents just a small amount of gas that Gazprom needs to find a new market for, but Lithuania’s new found potential independence does form part of a major overall change in the European gas market. This change in Europe means Gazprom will have to adapt in order to remain a major player and to make sure Russia’s new Asian-focused enterprises represent a true success and sustained growth for the country, rather than just a way of filling a hole in the country’s finances that Europe leaves behind .

Lithuania’s First LNG Cargo Arrives

Lithuania’s four year project to introduce LNG imports to the country is complete. The country and the companies involved have been working hard to make this endeavour a reality and Monday 27th October 2014 saw the Baltic nation receive its first ever LNG cargo, around 100,000 cubic metres, or approximately 3.5 million cubic feet (mcf), from Statoil’s Snøhvit terminal in Norway, according to media reports.  

Lithuania’s new terminal is one of the world’s first import facilities to be located offshore on a floating vessel. The vessel, which is pointedly named Independence, was built by Höegh LNG and has an annual import and regasification capacity of 2.2 million tonnes per year (mtpa), or approximately 107 billion cubic feet (bcf).

This figure is very significant for Lithuania and could well prove significant for Gazprom. Russian supplies of gas to the Baltic state only amounted to 96 bcf in 2013 according to Gazprom’s annual report of the same year. This means that should Lithuania be able to source the entire capacity of its new import facility elsewhere each year, Gazprom would not be needed as a gas supplier any longer. This is very powerful leverage for the Baltic country; the supply contract between Lithuania and Gazprom is up for renewal next year according to media reports. Lithuania will not necessarily pull away from Gazprom completely of course; if the Russian giant’s notoriously expensive gas prices are lowered, to the point where Russian imports remain viable, due to Lithuania’s new found leverage, then why change? But the leverage is undoubtedly there. Norway’s Statoil will supply the Lithuanian facility from Snøhvit with 2.3 billion cubic metres (bcm) of gas per year, or 81 bcf, meaning around 76% of the Lithuanian facility’s capacity is taken up and 84% of Russian imports in 2013 have effectively been replaced already.

Death by a Thousand Cuts? – Europe Moving Away from Russian Supply


Source: Gazprom Annual Report 2013 (Other Europe represents a combination of gas supplied to all European countries that were each supplied with less than 5 bcm of gas by Gazprom in 2013, see note 3)

In reality, 96 bcf on its own is a very small figure as far as Gazprom in concerned – the company sold well over 8000 bcf to European and Central Asian countries in 2013. The potential complete loss of business in Lithuania will not, as a singular event, impact Gazprom’s financial position or its overall standing in Europe by too great a margin. But this new 96 bcf terminal is part of a desired general transition away from Russian supply by a large portion of Europe. Each move seems insignificant on its own, but together they could in fact end up having a substantial impact on Gazprom.

Starting locally, Lithuania’s terminal may provide gas in excess of what is actually required; after all, the 107 bcf capacity is over 10 bcf per year higher than Russian imports in 2013. Lithuania’s president Dalia Grybauskaite has been quoted by Argus as saying the terminal could meet 90% of the combined gas needs of Lithuania and its Baltic neighbours, Estonia and Latvia, which also have import contracts with Russia. Estonia and Latvia imported 25 and 39 bcf from Gazprom in 2013, respectively. If excess gas is marketed to these countries by Lithuania, it is another loss for Gazprom. Again, as the above chart shows, with all three countries 2013 imports combined, this amounts to another small total for Gazprom, but it is a potential loss of business nonetheless.

Poland is another country in the area with LNG plans on the verge of coming to fruition. Of course, Poland’s desire to break from Gazprom’s expensive gas prices has been well publicised over the past 5 years as its shale gas exploration plans have developed. As these plans began to falter however, LNG became another option. 2015 will see the first Polish LNG imports at the Świnoujście import facility, which will have an initial capacity of around 3.6 mtpa and plans for expansion are already underway. The initial import capacity represents around 39% of Russia’s sales to Poland in 2013. Expansion plans will further eat into this total and Poland still hopes that the country’s shale gas potential can still be realised before too long, despite the recent setbacks. All of these things will give the country its own leverage in price negotiations.

The Netherlands (part of “Other Europe” in the above chart) is one example of a country where evidence suggests that LNG has been used to move away from Russian gas. The Gate LNG terminal in Rotterdam came onstream during 2011 with annual regasification capacity of around 430 bcf; 2012 saw an approximate 37% reduction in Gazprom gas sales to the Netherlands, year-on-year.

All of these LNG imports still represent small numbers and it is a fact that Italy, France, Turkey and the UK all have LNG import facilities but still import a substantial portion of Gazprom’s total gas sales between them. So whilst LNG in Europe isn’t a major problem on its own to Gazprom or Russia, it is one alternative option and now undoubtedly a source of leverage for more European countries than before.

Other alternative options will present themselves to European gas importers in the coming years. The potential influx of gas from the giant fields in Azerbaijan to mainland Europe will provide at least the south eastern European countries on the above chart and a significant portion of the “Other Europe” contingent with a new option for gas imports. The potential arrival of LNG from North America could also play a very significant role in replacing Gazprom as a supplier or at the very least creating negotiation leverage as Gazprom’s long term contracts with the LNG-importing countries in the chart come up for renewal. The South Stream pipeline project, which is a highly controversial topic in most of mainland Europe, would bring more Russian gas into Europe if it is ever approved, but this is still highly uncertain; the conflict in the Ukraine caused the EU to adopt a resolution that opposed the South Stream pipeline and recommend the search for alternatives. If Gazprom wants to remain a major player it seems as though it will have no choice but to adapt to a new pricing structure before too long. The pressure from all these sources, as well as increased global sanctions against Russia in recent times, will create a hole in Gazprom’s and indeed Russia’s finances; retaining as much existing business as possible will be key in making sure that the hole isn’t too big.

Alternative Plans – Russia Switches Focus to Asia after Decades in Europe

After decades of focusing on supplying gas to domestic, European and central Asian markets, Gazprom and Russia are now moving into Asia with some very lucrative opportunities on the table. Just how lucrative these actually end up being and how much growth for Gazprom and Russia they create is, however, very much dependent on how much of a market the company can retain in Europe.

In June 2014, Russia signed a huge gas supply deal with neighbouring China. The deal was for around US$400 billion and 38 bcm (approximately 1340 bcf) of gas annually, ranking as the biggest gas supply deal in history. The gas will be supplied from Siberian gas fields through a new pipeline for 30 years starting in 2018. This supply of 38 bcm should more than make up for the potential loss in business as more of Europe finds alternative sources of energy and, of course, this deal would probably have been signed had Europe been moving away from Gazprom or not. However, the level of potential success for Russia in signing this deal is now mitigated; a large portion of anything made in the Chinese deal could simply just replace lost income from Europe. This would presumably not be ideal; Russia will want the deal to create growth.

LNG is also becoming an option for Russia to continue exporting high levels of gas and the country’s proximity to the premium Asian market makes the country very attractive as a supplier – transportation costs will be lower than from other burgeoning markets such as Australia, Canada and the US. Gazprom is building a 5 mtpa terminal in Vladivostok (due onstream in 2018) and already exports 9.6 mtpa (full capacity) from the Sakhalin project in the far east of the country. Total Russian capacity by the end of 2018 is due to hit around 50 mtpa if all terminals are completed on time, which is a very striking figure considering there was not a single operational terminal until 2009. Again, as Asia is the prime market for LNG, much of this will be headed in that direction and this could prove to be an extremely profitable venture for Russia.


Overall, the singular event of Lithuania’s first LNG cargo may seem an insignificant blot on Gazprom’s, and Russia’s, landscape, but in reality it is another important part of the quickly changing European gas market. Obviously, the move to Asia mitigates the potential loss of business, but to make this venture a true success, it surely cannot afford to lose all business in Europe, as it will be simply filling a hole in its finances with an alternative buyer rather than beginning any substantial growth.


1) All Gazprom historical supply figures were sourced from Gazprom’s Annual Report 2013.

2) All LNG terminal information was sourced from the Evaluate Energy LNG Database, which holds information on all operational, planned and possible import and export terminals worldwide, including details on annual capacity, onstream dates, news, ownership information and project costs.

3) “Other Europe” is made up of Gazprom supply to the following countries: Bulgaria, Bosnia & Herzegovina, Croatia, Denmark, Finland, Georgia, Greece, Ireland, Moldova, the Netherlands, Romania, Serbia, Slovenia and Switzerland.

Evaluate Energy provides efficient data solutions for oil and gas company analysis. As well as the comprehensive LNG database, Evaluate Energy offers 25+ years of financial and operating data for the world’s biggest and most important oil & gas companies worldwide, an M&A database, which has every E&P deal back to 2008, and a global E&P assets database, providing details on all exploration blocks, discoveries and producing fields outside of North America. Download our Brochure here.

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