Thursday, August 2, 2012

Possible US Energy Crisis Looming ? (oil, distillate inventories, oil company production, Exxon Mobil XOM)


    In 2012 57 coal generators representing 2.8% of America's coal fired energy capacity will be shut down with another 118 shutdowns slated for retirement in the years to come. In November 2011 coal's contribution to energy generation dipped below 40% for the first time since the 1970's. A big reason for the shutdowns is the costs associated with making them more eco-friendly (costly carbon emission credits in addition to new federal laws requiring that all be fitted with new emission reducing technology such as nitrogen scrubers). In California, coal utility plants face even more obstacles; Some of the newest energy laws in California literally make it impossible for utility companies to continue using coal to generate electricity by disallowing the renewing of contracts (Edison International is one of many victims).
Keep in mind that all this is happening despite the fact that the United States is home to 28% of the world's coal reserves and that China is building dozens of new plants each year.

Note: In the March 2012 quarter, US carbon emissions were at a 20-year low of 1.340 billion metric tonnes. Coal-sourced carbon emissions dipped below 400 million metric tons for the first time since the mid 1980's (387 Mt down -18%).

Petroleum - Oil - Natural Gas



On August 1, 2012 the US Energy Administration reported that oil stockpiles were down on the week by the largest margin in over half a year; US stockpiles of crude oil fell -6.5M barrels to 373.6M barrels (however vs this time last year crude oil stockpiles are up +18.6M barrels). More disturbing though is the long term downward trend in US stockpiles of distillate (usable gas for fuel); Distillate stockpiles are 28 million barrels lower than they were at this time last year (152.3M --> 124.3M) after declining by another million barrels last week (week to week, finishing at 124.3M barrels).

The US still imports almost 45% of the oil it consumes and its domestic reserves rank next to China's (19 billion vs 14 billion barrels) so maybe it's time American oil companies do what Chinese companies are already doing, which is acquire foreign assets ! (CNOOC takeover of Nexen, Talisman sells $1.5B worth of assets in the UK). Note: Nexen's proved oil reserves are similar to Anadarko's (2-2.5 billion boe).

According to the EIA on July 30, 2012 American gas pump prices were lowest in the Gulf Coast ($3.31 per gallon) and highest on the West Coast ($3.71 per gallon).
June 2012 breakdown of US gas price: taxes 12%, distribution and marketing 14%, refining 12%, crude oil 62%.
Regular gasoline average price: $3.54/gallon, diesel $3.76/gallon; US gas prices today are about 50c/gallon lower vs the 6-month high.

Oil Companies

Companies are looking for oil in new places: Anadarko Petroleum is beginning exploratory drilling in New Zealand in 2014. Corridor Resources wants to set up a deep water oil well in the Gulf of St Lawrence (being considered July 2012) but that project is facing a lot of opposition.

As shown in the graph, America's 3 biggest oil companies are producing less while the relatively smaller companies are the ones adding to output. Furthermore, Anadarko Petroleum, considered by many to be the fourth largest US-based oil company, is suffering from assets writedowns (could cause the company to devalue which would make it a takeover target, bad news considering US companies need to be more aggresive with regards to foreign takeovers).

Quarter ended June 2012

Of the six regions that Exxon operates in only the Canada/South America region showed an increase in oil liquids production (240 --> 243 th boe/d). Exxon gets 37.6% of its natural gas output from Asia (ahead of the USA at 33.4%).

Occidental Petroleum net income down -27%
El Paso Corp: avg realized sales price up +18.0% for oil/condensate ($86.27 --> $101.81) but down 28.6% for natural gas ($4.06 --> $2.90) and down -18.7% for ngl's ($50.37 --> $40.96).
Anadarko reported a -$380M loss on $978M in writedowns of its coalbed-methane natural gas assets. Anadarko has interests in some of America's biggest shale resource plays including Marcellus and Eagle Ford but the writedown concerns other properties in Wyoming's Powder River Basin.

Unstable Natural Gas Prices Lead Companies To Abandon Shale Projects --> US Reserves Of Shale Go Down