Top 5 Upstream M&A Deals in Canada in 2016 So Far

Posted by Mark Young

Aug 16, 2016 7:24:48 AM

The opening seven months of 2016 have brought a revival in the Canadian E&P space following an extremely lacklustre end to 2015, when very few deals were agreed in light of an uncertain and inhibitive pricing environment.

In CanOils latest monthly review of deals in the Canadian E&P space, the largest single deal of the year so far is featured – the full report can be downloaded at this link.

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Source: CanOils Monthly M&A Review, July 2016

The deal saw Seven Generations Energy Ltd. (TSX:VII) agree to acquire Montney production and lands from Paramount Resources Ltd. (TSX:POU) for Cdn$1.9 billion. This consideration represents the biggest deal in Canada since Suncor Energy Inc.’s (TSX:SU) acquisition of Syncrude partner Canadian Oil Sands Ltd. in late 2015. The top 5 deals in the Canadian upstream space between January and July 2016 are briefly profiled below:

1 – Seven Generations Energy acquires Montney assets from Paramount Resources

The consideration of Cdn$1.9 billion will be made up of Cdn$475 million in cash, 33.5 million Seven Generation shares and the assumption of around Cdn$584 million of Paramount debt. By acquiring these assets, Seven Generations is boosting its portfolio with a further 199 million boe of 1P reserves, 30,000 boe/d of production in the company’s core Kakwa River area and 155 net sections of Montney land.

CanOils Assets map of the Kakwa River area as of June 30, 2016

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Source: CanOils Monthly M&A Review, July 2016 - Click Here for Map Legend of wells

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2 – Teine Energy acquires Penn West Petroleum’s Saskatchewan assets

Teine Energy Ltd., with funds from its own existing credit facilities and significant financial backing from the Canada Pension Plan Investment Board, acquired Penn West Petroleum Ltd.’s (TSX:PWT) Dodsland Viking assets in Saskatchewan for Cdn$975 million.

Since Q4 2014, when the price downturn really began, Penn West has sold assets in deals worth a total of Cdn$2.5 billion, all aimed at reducing total debt. This single Cdn$975 million asset sale results in a markedly improved capital structure; Penn West now says that the company is in the top tier of its peers in terms of all significant debt metrics.

3 – Suncor Energy buys Murphy Oil out of Syncrude

Suncor Energy Inc. (TSX:SU), following the Cdn$6.6 billion deal to acquire Canadian Oil Sands Ltd. at the start of 2016, increased its stake in Syncrude by a further 5% in June when it completed its Cdn$937 million deal with Murphy Oil Corp. (NYSE:MUR). This now means that Suncor’s stake in the Syncrude project is 53.74%. Murphy Oil had been a participant in the Syncrude project for over 22 years.

4 – Birchcliff Energy acquires Encana’s Gordondale assets in Alberta

Encana Corp. (TSX:ECA), after making two asset sales of over Cdn$1 billion in the United States in the latter half of 2015, has now completed a significant asset sale in Canada. Birchcliff Energy Ltd. (TSX:BIR) is the acquirer and has parted with Cdn$625 million for Encana’s wells and leases in the Gordondale area of Alberta. The assets (65% gas weighted) are located in the Peace River Arch region and the target formations are the Montney and Doig resource plays.

CanOils Assets map of operated BIR/ECA leases in Gordondale area

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Source: CanOils Monthly M&A Review, July 2016 - Click Here for Map Legend of wells - These leases are located just south of Pouce Coupe on the AB/BC Border.

5 – Whitecap Resources acquires southwest Saskatchewan assets from Husky Energy

Whitecap Resources Inc. (TSX:WCP) acquired assets in southeast Saskatchewan from Husky Energy Inc. (TSX:HSE) for Cdn$595 million. The deal increased Whitecap’s production by 11,600 boe/d and also increased the company’s oil weighting by 3% to 79%, as the assets being acquired produce 98% oil and NGLs.

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Do We Need to Re-think UK Energy Policy?

Posted by Paul Harris

Jul 26, 2016 3:30:00 AM

New inquiry to examine technologies and pricing

The future shape of the UK’s energy market – including sources of domestic supply and pricing strategies – is subject to a new inquiry launched last week.

Led by the House of Lords Economic Affairs Committee, the inquiry will assess whether a combination of policy and subsidies have led to failures in the energy market, and what new action may be needed.

“Coal power stations are being closed and old nuclear stations are coming towards the end of their life,” said committee chair Lord Hollick. “But it is not clear how they will be replaced and at what cost.”

The inquiry centres on the premise that UK energy policy over the last decade has focused on three objectives: maintaining supply and minimizing threats to energy security; keeping supply costs competitive for businesses and consumers users; and, de-carbonization, sought primarily by closing coal-fired plants and offering subsidies to renewable energy infrastructure.

According to a House of Lords release yesterday, a report by the committee two years ago into the economic impact on UK energy policy of shale gas and oil concluded that there had been a lack of clarity and consistency in energy policy over many years.

“This failure of policy had left the UK dangerously close to lacking sufficient electricity generating capacity,” said Lord Hollick. “Over two years later, little has changed.”

The UK, with its history of offshore production, was a net exporter of oil, natural gas liquids and gas until 2005. Since that time, the UK has been reliant on overseas imports to meet domestic demand.

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Data from our Evaluate Energy team confirms that in the past decade that disparity has been greatest in 2013, when the UK imported 1.2 million boe/d more than it exported. In 2015, that figure was 1.05 million boe/d.

UK oil/NGL/gas production has declined every year since 2000, when it stood at 4.45 million boe/d, to 1.44 million boe/d in 2014. It increased slightly in 2015, to 1.6 million boe/d.

The committee will seek to identify emerging technologies that could materially alter the UK energy market over the next decade and beyond.

This will likely include discussion over the role played by on-shore shale gas and other alternatives. Earlier this year, former UK energy minister Andrea Leadsom described shale gas as an effective potential “bridging fuel” amid goals to reduce reliance on coal while seeking alternative future power supplies. She viewed shale as a homegrown solution that could create thousands of jobs during development and production. 

Lord Hollick added: “The energy market involves an extraordinarily complicated mix of policy interventions and subsidies. Every investment in electricity generating supply is effectively determined by the government. This inquiry will seek to investigate whether current policy is delivering the best deal for energy users and whether it is striking the correct balance between private and public sector involvement."

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Brexit latest: Disentangling energy policy after UK votes to leave EU

Posted by Paul Harris

Jul 20, 2016 4:56:14 AM

UK energy policy has become rather entangled in the dramatic reorganization of government that has taken place since the nation opted out of the European Union.

It’s barely a week since Theresa May became the new leader of the Conservative party, and by extension the new Prime Minister.

By all accounts, she’s settled in quickly: a major cabinet reshuffle involving major (and controversial) new roles for Brexit campaigners, early talks with Scotland’s first minister in view of Scotland’s significant pro-EU support, and preparations for meetings with German and French leaders this week.

She’s also found time to replace the Department of Energy and Climate Change (DECC) with a larger, more extensive and over-arching Department for Business, Energy and Industrial Strategy (BEIS).

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There are two broad schools of thought about whether the switch is a good thing. One is that it is sensible to tie the energy needs of the country ever more tightly with business and industrial development. The flip side is concern that climate change – as an agenda issue – will slide down the priority list, subsumed by pressing business and industrial growth demands.

The creation of the new BEIS department has divided opinion between political groups and environmentalists.

Greg Clark will lead the new department. Under the reshuffle, government energy lead (and recent contender for Prime Minister) Andrea Leadsom becomes environment secretary.

Prime Minister May gave us some clues to her energy priorities at the launch of her national campaign to become Tory leader last week, where she spoke of the need for an energy policy “that emphasizes the reliability of supply and lower costs for users.”

The UK, with its history of offshore production, was a net exporter of oil, natural gas liquids and gas until 2005.

Since that time, however, the UK has been reliant on overseas imports to meet energy needs.

Data from our Evaluate Energy team confirms that in the past decade that disparity has been greatest in 2013, when the UK imported 1.2 million boe/d more than it exported. In 2015, that figure was down slightly, at 1.05 million boe/d.

Overall UK consumption of oil/NGL/gas peaked in 2005, at 3.5 million boe/d. It has declined virtually every year since, and stood at 2.6 million boe/d in 2015.

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Source: Evaluate Energy

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Source: Evaluate Energy

Meanwhile, our data confirms that UK oil/NGL/gas production has declined every year since 2000, when it stood at 4.45 million boe/d, to 1.44 million boe/d in 2014. It increased slightly in 2015, to 1.6 million boe/d.

Prime Minister May’s tone feels very much in tune with the former DECC list of energy priorities, where security of domestic energy supply ranked very high indeed.

Earlier this year, as energy minister, Leadsom reinforced the need for UK energy security. She was addressing the Shale World UK conference, which focused upon the potential for on-shore UK shale gas.

Leadsom positioned shale gas as an “effective low-carbon bridge” amid broader goals to reduce the nation’s reliance upon coal and secure alternative future power supplies. She viewed shale as a homegrown solution that would in turn create many thousands of jobs during development and ongoing production phases. 

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Canadian Upstream Oil & Gas M&A Finally Takes Off Again in June 2016

Posted by Mark Young

Jul 13, 2016 4:47:27 AM

In June 2016, the total value of announced M&A deals in the Canadian E&P sector totalled Cdn$2.7 billion, according to CanOils' new report that looks at all upstream deals involving Canadian E&P companies in June. This resurgence in value comes on the back of an upward trending WTI oil price that surpassed US$50 per barrel during the month. 

Despite the fact that June saw Canada's biggest upstream deal in the first six months of 2016, the overall deal value of Cdn$2.7 billion was widely dispersed; there were seven deals during the month for over Cdn$100 million in value. For context, the last time this number was reached during a calendar month was in September 2014, which was a time before OPEC stopped supporting the oil price and oil was trading for over US$90 per barrel.

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Source: CanOils Oil & Gas M&A Review June 2016

Top 5 Deals Announced in June 2016 in Canadian E&P Sector

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Source: CanOils Oil & Gas M&A Review June 2016 (Includes deals in Canada only)

Penn West Petroleum Ltd.'s (TSX:PWT) sale in Saskatchewan was the biggest deal to be agreed for Canadian assets in the first six months of 2016 and was a continuation of the trend of private equity backed companies making large acquisitions in recent times. Teine Energy Ltd, the acquirer in the deal, is funding the deal through its own credit facilities and also through significant backing from the Canada Pension Plan Investment Board. 

Encana's (TSX:ECA) deal to sell some northwestern Alberta assets follows two major asset sales by the company in the U.S. as the company looks to streamline its portfolio, while Athabasca Oil Corp. (TSX:ATH) fresh off closing its merger in the Duvernay and Montney shale plays with Murphy Oil Corp. (NYSE:MUR) last month, has become the latest of many Canadian E&P companies to make a royalty sale.

Full analysis of all the deals listed here and every other deal story involving a Canadian E&P company in June 2016 is available in the report, along with a detailed look at every asset put up for sale in a public listing. 

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Nigeria’s Oil Export Woes, Attacks on Majors and Why Merger Deals have Virtually Halted

Posted by Paul Harris

Jul 12, 2016 6:54:25 AM

Oil production has fallen dramatically and acquisition deals have ground to a virtual halt so far in 2016 in Nigeria, as the country continues to grapple with militant attacks on energy installations.

The concerns over export levels centre on oil installations in the Niger Delta that have been repeatedly targeted in recent months, creating significant unrest and threatening oil export volumes.

It hardly needs stating that energy production and exports are absolutely pivotal to the health of the economy of Nigeria, where several major international operators have significant stakes. Glacier Media’s Evaluate Energy data indicates that ExxonMobil produced 297,000 barrels a day (b/d), Royal Dutch Shell 275,000 b/d, Chevron 271,000 b/d, Total 228,000 b/d, and ENI SpA 132,000 b/d during 2015.

Crude oil production within the troubled West African state has plummeted during the first half of 2016. In May alone, output had fallen by 461,000 b/d when compared to fourth quarter averages in 2015, to 1.42 million b/d. May production was down 251,000 b/d compared to April as the slide continued, according to OPEC’s report on crude oil production from secondary sources.

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Source: OPEC Monthly Oil Market Report – June 2016 (Secondary sources)

Among Africa’s OPEC-member nations, the same OPEC data indicates Nigeria lagged behind Angola in terms of year-to-date crude oil production to May. Our Evaluate Energy data indicates that oil exports from Nigeria topped out in 2010 at 2.25 million b/d. With the exception of a small increase in 2014, exports have fallen every year since 2010, and stood at just over 2 million barrels in 2015.

As market uncertainty prevails in Nigeria, merger and acquisition activity has fallen dramatically. According to our 2016 data, so far this year just two deals have been announced. That compares to 13 deals announced in each of the two years prior.

The larger of the two deals in 2016 involved Canadian-listed Mart Resources Inc. (TSX: MMT), which agreed a Cdn$367 million deal (including debt) to be acquired by Midwestern Oil & Gas Company Ltd. and San Leon Energy Plc.

Midwestern had originally considered purchasing Mart in March 2015 – a deal that would have been worth around Cdn$524 million (including debt) at the time. Later that year, Mart was courted by Delta Oil Nigeria BV in a Cdn$394 million deal. That deal, however, was terminated due to deteriorating oil prices. Our Canoils Canadian asset team covered in-depth Mart’s various agreements to sell the company in our usual monthly M&A reviews: http://info.evaluateenergy.com/evaluate-energy-canoils-oil-gas-reports-studies-for-download

The second Nigerian M&A deal so far this year saw MX Oil plc acquired by GEC Petroleum Development Co. Ltd. for US$18 million.

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While M&A deal-flow has dried up, the activities of a militant group, known as the Niger Delta Avengers (NDA), have continued. The NDA’s demands are varied and are reported to include the ownership structure of oil blocks:  http://www.ibtimes.co.uk/who-are-niger-delta-avengers-nigerias-oil-gas-production-threatened-by-new-militants-1559022

Unrest naturally breeds uncertainty. Production continues, but disruption to operations has been painful: http://www.nytimes.com/aponline/2016/07/07/world/africa/ap-af-nigeria-oil-crisis.html?_r=0

In the past week, the militants struck again. According to reports, the NDA blew up three manifolds operated by Chevron Corp. The NDA claims to have also blown up a well and pipelines in the country’s southern oil hub: http://www.reuters.com/article/us-nigeria-delta-chevron-idUSKCN0ZM2O9

While efforts are made to tackle the disruption, markets will watch on in hope of a resolution. As a side note, a Nigerian, Dr. Mohammed Sanusi Barkindo, takes the helm as secretary general of OPEC next month: http://www.opec.org/opec_web/en/press_room/3529.htm. Dr. Barkindo is formerly a managing director of state enterprise the Nigerian National Petroleum Corp.

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Global Upstream Oil & Gas M&A Reaches $25.6 Billion in Q2 2016

Posted by Eoin Coyne

Jul 6, 2016 10:15:10 AM

Total global spend on upstream M&A deals rose an encouraging 38% in the second quarter, driven by improved oil prices and market confidence, according to Evaluate Energy's review of global upstream oil and gas M&A activity in Q2 2016, which can be downloaded now. 

Oil exceeded $50 a barrel during Q2 – the first time it has done so since July 2015. This is clearly a principal driver of M&A activity; should prices continue to rise, we would anticipate deals to follow.

Q2 upstream deals were worth a combined $25.6 billion, according to our latest data, compared to $18.5 billion in Q1. Yes, banks remain wary of over-committing on oil assets, but several companies are acting now rather than waiting for further rises in prices and asset values.

Download the full report here for details on all the major deals, the motivation behind them, exclusive analysis and a brief outlook for the rest of 2016.

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Source: Evaluate Energy Q2 2016 Upstream M&A Review

Top 10 upstream deals in Q2 2016

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Source: Evaluate Energy Q2 2016 Upstream M&A Review

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Why You Should Examine Debt Levels to Predict Next Oil & Gas M&A Mega Deal

Posted by Mark Young

Jul 5, 2016 5:25:02 AM

If I had to lay odds on which E&P powerhouse is going to secure the sector’s next major corporate acquisition I’d start by examining their ability to absorb substantial levels of debt while still keeping debt-to-capital ratios in balance.

Sightings of large corporate mergers have been rare during the commodity price downturn. During that time, the number of companies with high debt-to-capital ratios has soared. To help understand which oil giants have the financial clout to pull together a major M&A deal, we’ve shortlisted those with the greatest ability to assume debt and remain “healthy”. 

For More: JWN Webinar Series - Review of Recent Transactions: Where is Money Being Spent and Why

Companies with greatest debt capacity as of Q1 2016

By assigning an arbitrary debt-to-capital ratio of 35% as “healthy” you can see which companies are currently able to assume the most extra net debt for a corporate acquisition either in Canada or internationally, and still keep debt levels in check. For example, Tourmaline Oil Corp. (TSX:TOU) would be able to assume Cdn$799 million extra net debt in any acquisition in this model, based on its Q1 2016 balance sheet, before its debt-to-capital ratio exceeded 35%.

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Source: Evaluate Energy & CanOils, Q1 2016 Financial Data

Of course, this doesn’t necessarily mean these companies will seek a merger deal. But if they do, they’ll have plenty of capacity for additional debt assumption.

More details on this can be found in the webinar I delivered last week, which can be viewed here

Why is debt important to consider NOW?

It’s true that the general capital profile of an upstream oil and gas company has, on the whole, changed dramatically since the price downturn began. Looking at U.S. and international companies that report to the SEC as well as every TSX company, we can see a general increase in risk since last year by looking at those debt-to-capital ratios. The findings are intriguing:

Debt-to-Capital_Ratio_Q2_2016.jpg

Source: JWN Webinar Series - Review of Recent Transactions: Where is Money Being Spent and Why

In 2015, debt was a much greater proportion of their entire capital structure than 2014. That’s hardly a major surprise given the downturn. Some companies even moved into a negative equity position in 2015, as pressures from a longer period of low commodity prices mounted.

Analysis: Biggest corporate deals of the downturn

The highest profile global corporate merger during the downturn was undoubtedly Royal Dutch Shell’s (LSE:RDSA) acquisition of BG Group for around US$81 billion. In Canada, it was Suncor Energy’s (TSX:SU) Cdn$6.6 billion acquisition of Canadian Oil Sands Ltd. (COS) to become the largest stakeholder in the Syncrude project.

Both deals had a lot in common: a large issuance of stock in the acquiring company to the target, as well as the assumption of significant debt.

  • Royal Dutch Shell, as well as 383 UK pence per share, offered 0.4454 B shares in the company to BG, and took on just shy of US$10 billion in debt according to BG’s annual 2015 statements.
  • Suncor issued 0.28 shares in the company to COS in consideration for the acquisition and also assumed Cdn$2.4 billion in debt, according to press announcements.

June 2016 has also seen a couple more deals in Canada that follow this debt assumption pattern.

  • Raging River Exploration Inc. (TSX:RRX) has agreed to acquire Rock Energy Inc. (TSX:RE) in a deal where debt assumption of Cdn$67 million makes up 61% of the total deal consideration.
  • Gear Energy Ltd. (TSX:GXE) will be acquiring Striker Exploration Ltd. (TSX-V:SKX) in a deal worth around Cdn$66 million by issuing 2.325 Gear shares for every Striker share as well as assuming Striker’s Cdn$10 million in debt. (see note 1)

It’s this ability to assume debt and still remain healthy that we think is crucial in identifying those most likely to take on a big corporate merger in the near future.

Both Suncor and Royal Dutch Shell appear in our above list of companies with high debt capacity. Suncor has been linked to more acquisition activity in press reports, while Shell has not – having actually been linked with more asset sales than purchases. In fact, rumours came out of the company that Shell assets were going to hit the market in ten countries worldwide in the not-too-distant future.

Of the other companies listed with greatest debt capacity, many have been selling high-value royalty assets in Canada to bolster their activities with significant cash through the downturn, while the international list includes some of the world’s biggest and most powerful companies.

With companies also having put copious funding into cost controls in recent times and oil prices starting to trend upwards a bit, we might just be around the corner from one of the companies on this list making the world’s next big corporate merger in the E&P sector and we should expect it to include the significant assumption of debt.

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Notes:

1) To value all acquisitions where stock is used as part of the consideration, Evaluate Energy and CanOils always use the day prior share price. Sometimes companies use a deemed stock value or a weighted average price in their press announcements to value the stock, but for comparability reasons, we always use the same method for every deal. This may create some slight discrepancies between our data and announced deal values. Gear valued its acquisition of Striker based on its concurrent bought deal financing, rather than its trading share price, and reported a value of Cdn$63.7 million.

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New Deal for Oil Workers in Norway Averts Strike Action

Posted by Paul Harris

Jul 4, 2016 6:34:52 AM

Offshore oil production in Norway flowed as usual today after strike action by workers was averted.

Norway’s net oil exports in 2015 averaged 1.714 million barrels a day, an increase of 58,000 barrels compared to 2014, according to data from Evaluate Energy and the BP Statistical Review of 2015.

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The majority-state-owned Statoil (Oslo:STL) is by far the country’s biggest oil and gas producer, with 1.23 million boe/d. The second largest producer is ExxonMobil (NYSE:XOM) at 233,000 boe/d followed by Total (Paris:FP) at 227,000 boe/d. Royal Dutch Shell (LSE:RDSA), ConocoPhillips (NYSE:COP), ENI (Milan:ENI), ENGIE (Paris:ENGI), Centrica Plc (LSE:CNA), BP (LSE:BP) and Det Norske (Oslo:DETNOR) are also in the top 10.

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Source: Evaluate Energy

About 7,500 employees working in Norway’s offshore oil fields as either drilling personnel or in catering are covered by a new offshore pay settlement, according to the Norwegian Oil and Gas Association in a weekend statement. The Association said the deal was reached between the Norwegian Union of Industry and Energy Workers (Industry Energy), the Norwegian Union of Energy Workers (Safe) and the Norwegian Organization of Managers and Executives.

“These negotiations have been demanding, with a number of different issues which had to be resolved,” said Jan Hodneland, lead negotiator for Norwegian Oil and Gas.

“Given the demanding position which the industry currently finds itself in, it was nevertheless crucial for us to find a solution which ensured that a strike could be avoided.”

The agreement includes a decision to appoint one or more committees during the period covered by the 2016-2018 settlement, “to assess issues related to time spent offshore, as well as changes to the work plan, workplace and work periods.” This is intended to tackle cost challenges faced by companies covered by the offshore agreements, said the Association. “The expectation is that such mutually binding committee discussions will help to strengthen the competitiveness of the Norwegian continental shelf.”

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EU Shock Wave: The Latest from London as Market Upheaval Continues

Posted by Paul Harris

Jun 27, 2016 6:58:47 AM

Enormous political and economic upheaval continued this morning in the aftermath of the UK’s historic decision to leave the European Union.

Stock traders and commentators struggled to keep pace with changing events in London, amid political interventions to calm markets on the one hand, and talk of political coups on the other.

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At the start of Monday trading, chancellor George Osborne sought to reassure markets that had been sent into a tailspin on Friday after the shock EU referendum decision.

“The Bank of England stands ready to provide GBP250 billion of funds through its normal facilities to continue to support banks and the smooth functioning of markets,” said Osborne, himself under enormous pressure having been a key figure in the failed campaign to remain within the EU.

“It will not be plain sailing in the days ahead. But let me be clear. You should not underestimate our resolve. We were prepared for the unexpected and we are equipped for whatever happens.

“We are determined that unlike eight years ago Britain’s financial system will help our country deal with any shocks and dampen them, not contribute to those shocks and make them worse.”

As of 4am MDT, the pound continued to struggle against the U.S. dollar. It was down to GBP1.3221. Among the banks, shares in Barclays and RBS were also down significantly. Brent oil was up 5 cents, to US$48.46.

For the latest market update visit: http://www.bbc.co.uk/news/business-36636853

For an overview of the initial reactions to the UK Brexit vote, click here for Friday's article.

The UK also witnessed today tremendous upheaval within the Labour Party, the official opposition to outgoing Prime Minister David Cameron’s Conservative Party.

A fleet of Labour shadow cabinet and shadow ministers have resigned their positions in protest at the leadership of Jeremy Corbyn, in what has been described by many as an attempted “political coup” to oust the left-wing leader.  Corbyn announced this morning a new shadow cabinet. Further developments are anticipated within the next 48 hours.

And within the nation at large, there continues to be widespread dismay among the 48% of the UK that voted to remain within the EU. While London and Scotland voted resoundingly to remain, large parts of the rest of the UK voted to leave, a choice that has largely been characterized as a vote against immigration and a protest at governance from Brussels.

With Prime Minister Cameron announcing his decision last Friday to resign by the fall, debate is intensifying over who should take his place. Boris Johnson, the former Mayor of London and the chief figurehead of the successful “Leave” campaign, is the front-runner.

Before the vote took place last week, chief executives at three of the top four UK oil and gas producers publicly urged voters to remain within the European Union. Among them were CEOs at Anglo-Dutch Royal Dutch Shell, BP Plc. and France’s Total, who featured in media outlets in a list of prominent pro-EU business leaders, together with executives from Centrica plc and smaller producers active in the UK such as EnQuest plc, ENGIE, MOL and BHP Billiton.

According to data from Evaluate Energy, the energy executives who declared in favour of staying control approximately 510,000 boe/d of UK North Sea production.

BrexitChart.jpg

 Source: Evaluate Energy

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Oil Industry and Markets React to UK Vote to Leave European Union

Posted by Paul Harris

Jun 24, 2016 8:07:01 AM

Markets and the oil and gas industry reacted this morning after the United Kingdom voted to leave the European Union in a historic decision that triggered Prime Minister David Cameron to resign.

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“Leave” campaigners polled 52% in a vote that rebutted economic and political arguments for staying within the EU provided by Prime Minister Cameron and other prominent “Remain” supporters. Voting was heavily split regionally – with a majority of voters in London and Scotland expressing a desire to remain within Europe.

Canadian Mark Carney, governor of the Bank of England, said today the UK could expect market volatility as it begins the process of renegotiating trade agreements with the EU and wider world.

“The Treasury and the Bank of England have engaged in extensive contingency planning and the chancellor and I have been in close contact, including through the night and this morning,” he said in a statement.

“The Bank will not hesitate to take additional measures as required as those markets adjust and the UK economy moves forward. These adjustments will be supported by a resilient UK financial system - one that the Bank of England has consistently strengthened over the last seven years. The capital requirements of our largest banks are now ten times higher than before the crisis. The Bank of England has stress tested them against scenarios more severe than the country currently faces.”

Read Mark Carney’s full statement here: http://www.bbc.co.uk/news/business-36618560

The expected volatility was seen as markets opened this morning. The FTSE fell 8% and the value of the UK pound dropped while the price of Brent oil fell by 5.2%. Both the FTSE and Brent regained some ground in later morning UK trading.

Prime Minister Cameron had staked his political future on the outcome of the referendum. He announced his intention to resign in the hours that followed the “Brexit” result, as well as providing a sense of the timing for new leadership to take his place by this fall.

Oil & Gas UK, the leading representatives for the UK’s offshore oil and gas industry, this morning hoped that all those involved will now come together and “work constructively” to make the EU transition as smooth as possible.

“We ask that the UK Government clearly outlines the process which will follow to minimize any potential period of uncertainty. The UK oil and gas industry is at a critical juncture and we need to ensure the UK Continental Shelf continues to attract investment and be seen as a great place to do business.”

The UK Government identifies security of domestic energy supply as a key part of the UK’s energy plan. It has been exploring alternative sources of domestic energy, including the creation of a shale gas sector. The UK became a net importer of oil in 2006, of gas in 2004 and for a combination of oil and gas in BOE in 2005.

Earlier this week, chief executives at three of the top four UK oil and gas producers publicly urged voters to remain within the European Union. Among them were CEOs at Anglo-Dutch Royal Dutch Shell, BP Plc. and France’s Total, who featured in media outlets in a list of prominent pro-EU business leaders, together with executives from Centrica plc and smaller producers active in the UK such as EnQuest plc, ENGIE, MOL and BHP Billiton.

According to data from Evaluate Energy, the energy executives who declared in favour of staying control approximately 510,000 boe/d of UK North Sea production.

BrexitChart.jpg

 Source: Evaluate Energy

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