Rig Count

U.S. Oil & Gas Rig Count Falls by 4 as Crude Breaks $60

Oil and gas rigs in the United States fell for yet another week, according to Baker Hughes, dipping 4 rigs. as Saudi’s comments regarding the OPEC extension send the Brent Crude benchmark over $60 in mid-day trading for the first time in more than two years.

The total oil and gas rig count in the United States now stands at 909 rigs, up 352 rigs from the year prior, with the number of oil rigs in the United States increasing by 1 this week and the number of natural gas rigs decreasing by 5. Canada saw a decline of 11 in the number of active oil and gas rigs. The US oil rig count now stands at 737.

For the month, the rig count fell by 13, the biggest decline since May 2016. It was also the first time since May 2016 that the number of rigs dropped for a third month in a row.

The rig count, an early indicator of future output, is still much higher than a year ago when only 441 rigs were active after energy companies boosted spending plans in the second half of 2016 as crude recovered from a two-year price crash.

The recovery in drilling lasted 14 months before stalling in August, September and October after some producers started trimming spending plans when prices turned softer over the summer.

The spot price for WTI is also trading up to its highest level in six months, up 2.07% on the day at $53.73 at 12:30pm EST. Brent crude was trading up 1.61% at $59.99 at that time—more than $2 over last week’s close.

At 20 minutes after the hour, WTI was trading at $53.77, with Brent crude trading at $60.02.

US crude oil production was up for the week ending October 20, after falling by almost a million barrels daily for the week prior. Oil production for the week ending October 20 was 9.507 million barrels per day, as things return to normal post-hurricane. U.S. production is expected to rise to 9.2 million barrels per day (bpd) in 2017 and a record 9.9 million bpd in 2018 from 8.9 million bpd in 2016, according to federal energy projections this month.

Article

Airbus Helicopters Welcomes ‘Open, Informed’ Talks on Helicopter Safety

Super puma manufacturer Airbus Helicopters has told Rigzone that it welcomes any open and informed discussion on the safety of offshore helicopters, following a debate in Scottish parliament over the security of super puma aircraft operating in the North Sea.

Following a fatal super puma helicopter accident offshore Norway in April 2016, operating restrictions were imposed by UK and Norwegian aviation authorities on H225LP and AS332L2 super puma aircraft. In July, the UK and Norwegian aviation authorities set out plans to lift these restrictions.

“This is clearly a topic of great importance to MSPs [members of Scottish parliament],” an Airbus Helicopters spokesperson said.

“Airbus Helicopters understands the importance of restoring confidence in the aircraft ahead of any return to service. We are now at the beginning of a process of informing the workforce and wider community of the updates‎ to the aircraft,” the spokesperson added.

During the debate, which took place on October 24, Lewis Macdonald MSP remarked that super puma helicopters “do not feel safe to many of those who may be asked to step on board”.

Fellow MSP Alexander Burnett said “there is no doubt that super puma helicopters have brought concerns for both oil companies and workers alike”.

After plans were announced to lift the ban on super puma H225LP and AS332 L2 helicopters, UK union Unite set up a petition to stop all commercial flights from the aircraft.

Unite’s officer for the North Sea, Tommy Campbell, told Rigzone that the union would not stop its campaign “until it’s certain that there will be not be a comeback for the super puma”.

“The Scottish parliament debate has put the issue back on the political agenda…We’re going to see the Scottish transport minister soon to convince him that the North Sea should remain Puma free and that his government has to support the workers on that”.

Africa

SDX Energy Spuds KSR-15 Development Well in Sebou Morocco

SDX Energy Inc., the North Africa focused oil and gas company, is pleased to announce the spud of its KSR-15 well on the area in Morocco.

The well is anticipated to take 21-30 days to drill and complete. If successful the well will be completed, flow tested and connected to the existing infrastructure. We expect these activities to be carried out within 30 days of the drilling rig departing the location.

This is the second of a nine-well drilling program on the Company’s Sebou, Gharb Centre and Lalla Mimouna permits in Morocco.

As per the announcement on Oct. 11, 2017, SDX can confirm that its KSR-14 well will be put on test production within the next 10 days.

Crude Oil

Global Oil and Gas Market Shrinks by 13.6% as Low Crude Prices Rush Revenues Downward

MarketLine’s latest market report: ‘Global Oil & Gas’ reveals a declining market trend in 2016 as the price of crude oil pushed down profits of the major players.

Overall the global oil & gas market saw its value fall from $1,395.7 billion in 2015, to $1,205.6 billion in 2016.

Commenting on the value decline in the oil & gas market, MarketLine analyst Mohammad Hamza Iqbal said, “There is a clear correlation between the decline in the price of crude oil and the decline in the value of the oil & gas market generally, especially taking into consideration the fact that volume consumption levels globally actually increased rather than decreased in 2016. Whilst demand for oil and gas remains strong, low crude oil prices have hit profitability.’’

The company’s latest forecasts predict a market value of $1,624.7 billion over the period 2016-2021, a healthy Compound Annual Growth Rate (CAGR) of 6.1%. Volume growth during the same period is forecast at 1.6% reaching a total consumption of 52,619.8 MMboe.

Growth is however expected to fall behind the total market in Europe with an expected CAGR of 3.4% to 2021. This is largely due to European market maturity, coupled with low population growth and a shift towards renewable energy. As a result only marginal growth in European volume consumption can be expected.

The company’s report also highlights that the US oil & gas market is the largest domestic oil & gas market in the world, with a total value of $286 billion in 2016.

This means that the U.S. market, alone, accounts for almost 24% of the global oil & gas market. The second and third largest national oil & gas markets are China and Russia, respectively. Chinese market value stood at $161.9 billion and Russia’s at $63.5 billion in 2016. The crude oil segment was the largest in 2016, accounting for 96.4% followed by natural gas at 3.6%.

Asia

Indian Oil Consumption to Increase in 2018, says ESAI Energy

India’s consumption of oil products will accelerate in 2018 after unusually slow growth in 2017, according to ESAI Energy’s newly published Asia Watch Products.

The report explains that, due to a faltering economy, demand growth slowed for almost every fuel in 2017, with kerosene, naphtha, and fuel oil use all declining. Petroleum coke demand was stagnant this year after booming in 2016. Consumption of all petroleum products, except kerosene, will return to faster growth in 2018.

After total oil demand growth slowed to just 60,000 bpd in 2017, consumption should accelerate to 200,000 bpd in 2018 as the economy recovers from multiple disruptions this year. Petroleum coke contributed most to the slowdown in oil demand in 2017.

After growing by 140,000 bpd in 2016, petcoke consumption stayed flat this year due to higher prices and a sharp decline in cement manufacturing. Next year, petcoke demand should return to growth of 40,000 bpd. Among oil products, only kerosene use will decline again next year amid a government push to switch households that use kerosene for cooking to LPG.

“Reforms to the Indian economy negatively impacted growth in 2017,” said ESAI Energy Analyst Amrit Naresh. “Demonetization removed 86% of the country’s currency from circulation at the end of last year, and nationwide tax reforms were implemented in the middle of 2017. “Together, these reforms disrupted industries and businesses across the economy, said Mr. Naresh. “Economic conditions should improve in 2018, fostering industrial activity and allowing oil demand growth to strengthen.”

South America

ExxonMobil Completes Purchase of 50% of Statoil’s Interests in Brazil’s Pre-salt Carcara Oil Field

  • Agreement to add interest in resource with approximately 2 billion barrels of high-quality oil
  • ExxonMobil and partners high bidders in adjacent and other blocks in recent bid rounds
  • ExxonMobil adds more than 1.25 million net acres to deepwater portfolio offshore Brazil

ExxonMobil announced that it has completed an agreement to purchase half of Statoil’s interest in the BM-S-8 block offshore Brazil, which contains part of the pre-salt Carcara oil field.

The Carcara field contains an estimated recoverable resource of 2 billion barrels of high-quality oil. The block is located approximately 200 miles offshore Rio de Janeiro.

Statoil currently holds a 66 percent interest in the block, which contains about half the Carcara field. The other part of the field is in the adjacent North Carcara block, where ExxonMobil, Statoil and Petrogal Brasil were high bidders in a bid round held today. Statoil will continue to operate the Carcara development and hold 33 percent interest.

Over the last month, through bid rounds and announced farm-in agreements, ExxonMobil has added 14 blocks comprising more than 1.25 million net acres offshore Brazil to its portfolio, bringing its total acreage in the country to more than 1.4 million net acres.

“These agreements and recent bid round results mark ExxonMobil’s entry into a world-class resource and prospective exploration acreage in Brazil,” said Darren Woods, chairman and chief executive officer of ExxonMobil. “ExxonMobil has a long history in the country and we’re confident our deepwater technology and project expertise can help to further grow the value of Brazil’s energy resources. We look forward to working with Petrobras and all our partners to begin to explore and develop this high quality acreage.”

Separately, ExxonMobil recently added highly prospective acreage to the company’s portfolio after completing a farm-in agreement with Queiroz Galvão Exploração e Produção (QGEP).

ExxonMobil will make an upfront cash payment of approximately $800 million for the interest in BM-S-8 block, and an additional contingent cash payment for a potential total of approximately $1.3 billion. The transaction is subject to government approvals and is expected to close in 2018.

Following the close of the transaction, partner interests in the BM-S-8 block will be 33 percent for Statoil, 33 percent for ExxonMobil, 14 percent for Petrogal Brasil, a subsidiary of Galp, and 10 percent each for QGEP and Barra.

Rig Count

Baker Hughes Rig Count Falls by 4, Offshore Count Flat

Oil rigs were up by one, but gas rigs dropped by five as natural gas prices hit new lows due to unseasonably warm weather in the Northeast and elsewhere.

U.S. oil and natural gas producers’ drilling activity continues to drop even as oil hovers above $53 per barrel, with Baker Hughes (BHGE) reporting Friday, Oct. 27, the rig count fell by four this past week to 909 overall.

Oil rigs were up one to 737 week over week, while gas rigs dropped by five to 172 as natural gas prices hit new lows due to unseasonably warm weather in recent weeks.

Last week, oilfield services behemoth Schlumberger Ltd. (SLB – Get Report) said North American shale drilling is still strong, but warned that investment in the U.S. region is moderating. Meanwhile, the world’s largest energy companies Exxon Mobil Corp. (XOM – Get Report) and Chevron Corp. (CVX – Get Report) both suffered on the stock market Friday despite reporting earnings that beat expectations.

Compared to this time last year when it stood at 557, the U.S. rig count is up 352 units, as oil rigs are up by 296, gas rigs are up 58 and miscellaneous rigs are down two to zero, Baker Hughes reported.

Meanwhile, the U.S. offshore rig count held steady at 20 last week and is down two rigs year over year.

Rig Count

Baker Hughes Reports a Slight Rise in U.S. Oil Rig Count

Baker Hughes BHGE, on Friday reported that the number of active U.S. rigs drilling for oil edged up by 1 to 737 this week.

The modest figure marked the first weekly rise in four weeks. However, the total active U.S. rig count, which includes oil and natural-gas rigs, fell by 4 to 909, according to Baker Hughes.

December West Texas Intermediate crude CLZ7, +1.99% rose $1.06, or 2%, from Thursday, to $53.70 a barrel. It was below the $53.80 it traded at shortly before the rig data.

Rig Count

U.S. oil rig count rises this week but falls for a third month: Baker Hughes

The U.S. rig count fell for a third month in a row even as drillers added a rig this week for the first time in October, extending the drilling decline that started after crude prices fell below $50 a barrel this summer.

Drillers added one oil rig in the week to Oct. 27, bringing the total count up to 737, General Electric Co’s Baker Hughes energy services firm said in its closely followed report on Friday.

For the month, the rig count fell by 13, the biggest decline since May 2016. It was also the first time since May 2016 that the number of rigs dropped for a third month in a row.

The rig count, an early indicator of future output, is still much higher than a year ago when only 441 rigs were active after energy companies boosted spending plans in the second half of 2016 as crude recovered from a two-year price crash.

The recovery in drilling lasted 14 months before stalling in August, September and October after some producers started trimming spending plans when prices turned softer over the summer.

ConocoPhillips this week lowered the amount of capital it expects to spend in 2017 by about 10 percent to $4.5 billion. In 2016, the company’s capital expenditures were $4.9 billion.

Despite plans to cut spending by some exploration and production (E&P) companies, U.S. financial services firm Cowen & Co’s capital expenditure tracking increased this week. The 64 E&Ps it tracks planned to increase drilling and completion spending by an average of 50 percent in 2017 from 2016. That was up from 49 percent in the prior report.

That expected 2017 spending increase followed an estimated 48 percent decline in 2016 and a 34 percent decline in 2015, Cowen said.

U.S. crude futures have averaged almost $50 a barrel so far in 2017, easily topping last year’s $43.47 average. Looking ahead, futures were trading above $53 for the balance of the year and calendar 2018.

Exxon Mobil Corp said on Friday it will grow its Permian rig count from 20 currently to 30 by end of 2018 as it aims to boost output 45 percent a year through 2020.

Analysts at Simmons & Co, energy specialists at U.S. investment bank Piper Jaffray, this week revised slightly downward their forecast for the total oil and natural gas rig count, now expecting it to average 874 in 2017, 923 in 2018 and 1,072 in 2019. Last week, it forecast 877 in 2017, 939 in 2018 and 1,087 in 2019.

That compares with an average of 867 oil and gas rigs so far in 2017, 509 in 2016 and 978 in 2015. Most rigs produce both oil and gas.

With 909 total oil and gas rigs in operation now, that means Simmons analysts expect the number of rigs will decline through the balance of this year before rising next year.

U.S. production is expected to rise to 9.2 million barrels per day (bpd) in 2017 and a record 9.9 million bpd in 2018 from 8.9 million bpd in 2016, according to federal energy projections this month. [EIA/M]

Rig Count

Oil rig count breaks three-week losing streak

U.S. drillers added a single oil rig this week, ending a three consecutive weeks of declines in the oil rig count.

The number of rigs seeking oil rose to 737 from 736 last week, the Houston oilfield services company Baker Hughes reported. That’s still about 30 fewer than the recent peak in August, when 768 oil rigs were operating in the United States.

Texas added a net five oil rigs, including one in booming Permian Basin and one in the Barnett Shale.

Drilling has have slowed as prices have stagnated around $50 a barrel recently. But prices this week have begun to climb on hopes of extended OPEC production cuts and falling petroleum inventories.

Crude was up more than 2 percent in New York around midday, approaching $54 a barrel.

The overall rig count, however, slipped by four as 5 gas drilling rigs were pulled from operation.

The rig count is down to 909 from 913 last week and 958 from its recent peak in July, oilfield Baker Hughes said.

Article

Total and ENI Report Increased Profits in 3Q 2017

European oil firms Total S.A and Eni SpA revealed that their profits rose significantly in the third quarter of 2017, compared to the same period last year.

Total’s adjusted net profit was $2.7 billion in 3Q, an increase of 29 percent, and Eni’s reached $266 million (EUR 229 million), up from a loss of $562 million (EUR 484 million) in 3Q 2016.

Both companies ramped up hydrocarbon production during the period, with Total’s rising by almost six percent from last year to 2.58 million, largely due to project ramp ups from the Kashagan, Moho Nord, Surmont, Incahuasi, Angola LNG and Edradour-Glenlivet projects.

Eni produced an average of 1.8 million barrels of oil equivalent per day (boepd) in the third quarter, an increase of 5.4 percent. The company’s output is expected to ramp up further in the fourth quarter, reaching approximately 1.9 million boepd on average in the period, according to Eni, which would be firm’s highest level in seven years.

Commenting on its latest financial report, Total’s chairman and CEO, Patrick Pouyanne, described the firm’s performance during the quarter as “solid”. This view was echoed by oil and gas analysts at global investment banking firm Jefferies.

“The group took full advantage of the favourable environment thanks to the performance of its integrated model and its strategy to reduce its breakeven point,” Pouyanne said.

“The group continues to strengthen its balance sheet…this allows the implementation of the strategy for profitable growth, taking advantage of the low cost environment, notably by launching high return projects.”

Operations

Employment report shows signs of returning confidence in oil, gas market

After a tough four years new research shows that for the first time since 2014 the oil and gas industry expects more new jobs to be created than lost over the next 12 months.

Since the price of oil crashed in 2014 it is estimated that more than 440,000 jobs have been cut in the sector worldwide. However, with the price of oil having stabilized since July this year, new research by recruiter NES Global Talent and oilandgasjobsearch.com shows that almost 90% of employers expect staffing levels to either increase or remain the same in 2018.

The survey shows that in total almost 60% of employers expect to recruit significantly over the next 12 months. Of those almost a quarter (23%) of employers expect to increase their workforce by 5%; almost a fifth, (19%) expect to increase staffing by between 5% and 10%; and more than a sixth (17%) by more than 10%.

Almost a third (30%) of employers expect staffing levels to remain the same and just 11% of employers expect to cut jobs.

In total NES Global Talent and oilandgasjobsearch.com surveyed more than 3,000 employers and almost 7,000 workers as part of their Oil and Gas Outlook 2017 report.

Tig Gilliam, CEO of NES Global Talent, said: “Globally we are now increasingly confident that the market supports increased investment in the energy sector. Energy companies with the support of their partners have right-sized their organizations for the current levels of activity. With a stabilized price environment and lower cost profile more and more assets offer attractive returns on investment and operations. This increasing activity is leading the higher performing companies to refocus on recruiting quality people to lead and deliver value.”

“While this activity is being led by a sharp increase in investment in U.S. shale, there has also been an uptick in capital projects being approved which will positively impact the industry across all regions. With our own staff operating in over 60 countries, the increasingly positive tone of our clients and contractors is a welcome signal of the turnaround in the market and the participants in this survey echo that sentiment.”

Alex Fourlis, managing director of oilandgasjobsearch.com, said: “There is a sense of positivity throughout the guide the likes of which we haven’t seen since 2013 and can be read as an indication of a potential stabilization of the oil market. This is key to kick-start projects that haven’t been viable for a while and will have a positive effect on job volume and salaries across the industry. Comparing the number of jobs posted throughout the industry YTD to the end of July vs. the same period in 2016, there has been a 2% increase year on year with jobs from corporates up by 8%.”

Operations

ExxonMobil Reports 50 percent Increase in Earnings for Q3 2017

  • Cash flow from operations and asset sales exceeds dividends and net investments1 for the fourth-consecutive quarter
  • Company makes fifth Guyana discovery; captures 12 high-potential blocks offshore Brazil
  • Hurricane Harvey reduces earnings by an estimated $160 million, or 4 cents per share

Exxon Mobil Corporation announced estimated third quarter 2017 earnings of $4 billion, or $0.93 per diluted share, compared with $2.7 billion a year earlier as commodity prices improved and performance in the Upstream and Downstream strengthened.

Impacts related to Hurricane Harvey reduced earnings by an estimated 4 cents per share.

“A 50 percent increase in earnings through solid business performance and higher commodity prices is a step forward in our plan to grow profitability,” said Darren Woods, chairman and chief executive officer. “For the fourth-consecutive quarter, we generated cash flow from operations and asset sales that more than covered our dividends and net investments in the business.”

Upstream earnings rose to $1.6 billion as commodity prices increased. Building on its recent success in deepwater exploration, such as the Turbot discovery in Guyana, ExxonMobil added 12 offshore blocks in Brazil, capturing acreage with high resource potential and competitive fiscal terms.

Downstream results increased to $1.5 billion, despite Hurricane Harvey impacts and the absence of favorable asset management gains of $380 million in the prior year from the sale of Canadian retail assets. These results were achieved as the company worked quickly to safely bring refineries back online following the storm and to restore product supplies.

Chemical earnings were $1.1 billion, down slightly from a year ago on lower commodity margins and hurricane impacts, partially offset by volume growth. During the quarter the company enhanced its position to capture growing demand in Asia by completing the purchase of an aromatics plant in Singapore.

1 Includes additions to property, plant and equipment and net investments / advances

Third Quarter 2017 Highlights

  • Earnings of $4 billion increased 50 percent from the third quarter of 2016.
  • Earnings per share assuming dilution were $0.93.
  • Cash flow from operations and asset sales increased 33 percent to $8.4 billion, including proceeds associated with asset sales of $854 million.
  • Capital and exploration expenditures were $6 billion, including an aromatics plant acquisition in Singapore.
  • Oil-equivalent production was 3.9 million barrels per day, up 2 percent from the prior year. Excluding entitlement effects and divestments, oil-equivalent production remained at 2 percent higher than the prior year.
  • The corporation distributed $3.3 billion in dividends to shareholders.
  • Dividends per share of $0.77 increased 2.7 percent compared to the third quarter of 2016.
  • The company acquired an interest in 12 blocks offshore Brazil during the last bid round completed during the quarter. The bid resulted in the addition of 2 million high-potential acres with competitive fiscal terms.
  • The company completed the Turbot-1 exploration well offshore Guyana. The well encountered 75 feet (23 meters) of high-quality, oil-bearing sandstone, and represents ExxonMobil’s fifth discovery to date in the country.
  • ExxonMobil signed a production sharing contract for Block 59 located 190 miles (305 kilometers) offshore Suriname. The deepwater block has an area of 2.8 million acres and significantly expands the corporation’s operated acreage in the Guyana-Suriname basin.
  • During the quarter, ExxonMobil announced it added 22,000 acres since May to its Permian Basin portfolio through a series of acquisitions and acreage trades. Located in the Delaware and Midland Basins, the new acreage adds over 400 million oil-equivalent barrels to the company’s existing Permian Basin resource base of 6 billion oil-equivalent barrels.
  • ExxonMobil completed the acquisition of one of the world’s largest aromatics facilities, located in Singapore, from Jurong Aromatics Corporation Pte Ltd. The acquisition will provide operational and logistical synergies between the plant and ExxonMobil’s integrated refining and petrochemical complex, as well as increase ExxonMobil Singapore’s aromatics production to over 3.5 million metric tons per year.

Third Quarter 2017 vs. Third Quarter 2016

Upstream earnings were $1.6 billion in the third quarter of 2017, up $947 million from the third quarter of 2016. Higher liquids and gas realizations increased earnings by $860 million. Higher volume and mix effects increased earnings by $20 million. All other items increased earnings by $70 million as lower expenses were partly offset by unfavorable foreign exchange effects.

On an oil-equivalent basis, production increased 2 percent from the third quarter of 2016. Liquids production totaled 2.3 million barrels per day, up 69,000 barrels per day as lower downtime and higher project volumes were partly offset by field decline. Natural gas production was 9.6 billion cubic feet per day, down 16 million cubic feet per day from 2016 as field decline and lower demand were partly offset by project ramp-up, primarily in Australia, and work programs.

U.S. Upstream results were a loss of $238 million in the third quarter of 2017, compared to a loss of $477 million in the third quarter of 2016. Non-U.S. Upstream earnings were $1.8 billion, up $708 million from the prior year.

Downstream earnings were $1.5 billion, up $303 million from the third quarter of 2016. Higher refining margins increased earnings by $1 billion. Volume and mix effects decreased earnings by $160 million. All other items decreased earnings by $550 million, reflecting the absence of favorable asset management gains of $380 million in the prior year from the sale of Canadian retail assets and higher expenses related to Hurricane Harvey. Petroleum product sales of 5.5 million barrels per day were 43,000 barrels per day lower than last year’s third quarter.

Earnings from the U.S. Downstream were $391 million, up $166 million from the third quarter of 2016. Non-U.S. Downstream earnings of $1.1 billion were $137 million higher than prior year.

Chemical earnings of $1.1 billion were $79 million lower than the third quarter of 2016. Weaker margins decreased earnings by $200 million. Volume and mix effects increased earnings by $120 million. Third quarter prime product sales of 6.4 million metric tons were 313,000 metric tons or 5 percent higher than the prior year, despite Hurricane Harvey impacts.

U.S. Chemical earnings of $403 million were $31 million lower than the third quarter of 2016. Non-U.S. Chemical earnings of $689 million were $48 million lower than prior year.

Corporate and financing expenses were $221 million for the third quarter of 2017, down $149 million from the third quarter of 2016 mainly due to favorable impacts from the resolution of long-standing tax items.

First Nine Months 2017 Highlights

  • Earnings of $11.3 billion increased 84 percent from $6.2 billion in 2016.
  • Earnings per share assuming dilution were $2.66.
  • Cash flow from operations and asset sales was $24.4 billion, including proceeds associated with asset sales of $1.7 billion.
  • Capital and exploration expenditures were $14.1 billion, down 3 percent from 2016.
  • Oil-equivalent production was 4 million barrels per day, down 1 percent from the prior year. Excluding entitlement effects and divestments, oil-equivalent production was up 1 percent from the prior year.
  • The corporation distributed $9.7 billion in dividends to shareholders.

First Nine Months 2017 vs. First Nine Months 2016

Upstream earnings were $5 billion, up $4.2 billion from 2016. Higher realizations increased earnings by $4.1 billion. Unfavorable volume and mix effects decreased earnings by $300 million. All other items increased earnings by $380 million, primarily due to lower expenses partly offset by unfavorable tax items in the current year.

On an oil-equivalent basis, production of 4 million barrels per day was down 1 percent compared to 2016. Liquids production of 2.3 million barrels per day decreased 65,000 barrels per day as field decline and lower entitlements were partly offset by increased project volumes and work programs. Natural gas production of 10.1 billion cubic feet per day increased 106 million cubic feet per day from 2016 as project ramp-up, primarily in Australia, was partly offset by field decline.

U.S. Upstream results were a loss of $439 million in 2017, compared to a loss of $1.8 billion in 2016. Earnings outside the U.S. were $5.4 billion, up $2.8 billion from the prior year.

Downstream earnings of $4 billion increased $1.1 billion from 2016. Stronger refining and marketing margins increased earnings by $1.3 billion, while volume and mix effects increased earnings by $110 million. All other items decreased earnings by $290 million, mainly reflecting the absence of the Canadian retail assets sale. Petroleum product sales of 5.5 million barrels per day were 26,000 barrels per day higher than 2016.

U.S. Downstream earnings were $1 billion, an increase of $206 million from 2016. Non-U.S. Downstream earnings were $3 billion, up $867 million from the prior year.

Chemical earnings of $3.2 billion decreased $495 million from 2016. Weaker margins decreased earnings by $320 million. Volume and mix effects increased earnings by $70 million. All other items decreased earnings by $250 million, primarily due to higher expenses from increased turnaround activity and new business growth. Prime product sales of 18.6 million metric tons were up 22,000 metric tons from the first nine months of 2016.

U.S. Chemical earnings were $1.4 billion, down $111 million from 2016. Non-U.S. Chemical earnings of $1.8 billion were $384 million lower than prior year.

Corporate and financing expenses were $954 million in 2017 compared to $1.4 billion in 2016, with the decrease mainly due to favorable impacts from the resolution of long-standing tax items.

During the first nine months of 2017, Exxon Mobil Corporation purchased 6 million shares of its common stock for the treasury at a gross cost of $496 million. These shares were acquired to offset dilution in conjunction with the company’s benefit plans and programs. The corporation will continue to acquire shares to offset dilution in conjunction with its benefit plans and programs, but does not currently plan on making purchases to reduce shares outstanding. The company also issued a combined 96 million shares of common stock during the first quarter to complete the acquisition of InterOil Corporation and the acquisition of entities that own oil and gas properties located primarily in the Permian Basin.


 

Rig Count

U.S. Oil & Gas Rig Count Falls As Brent Breaks $60

As Saudi’s comments regarding the OPEC extension send the Brent Crude benchmark over $60 in mid-day trading for the first time in more than two years, oil and gas rigs in the United States fell for yet another week, according to Baker Hughes, dipping 4 rigs.

The total oil and gas rig count in the United States now stands at 909 rigs, up 352 rigs from the year prior, with the number of oil rigs in the United States increasing by 1 this week and the number of natural gas rigs decreasing by 5. Canada saw a decline of 11 in the number of active oil and gas rigs. The US oil rig count now stands at 737.

The spot price for WTI is also trading up to its highest level in six months, up 2.07% on the day at $53.73 at 12:30pm EST. Brent crude was trading up 1.61% at $59.99 at that time—more than $2 over last week’s close.

The price increase is largely thanks to Saudi Crown Prince Mohammed bin Salman’s non-specific backing of an extended OPEC deal, reassurances that the Aramco IPO is still on track, and his commitment to move the country beyond fossil fuels. Fears that the Iraqi vs. Kurd conflict may not find a quick end also lent support to prices.

US crude oil production was up for the week ending October 20, after falling by almost a million barrels daily for the week prior. Oil production for the week ending October 20 was 9.507 million barrels per day, as things return to normal post-hurricane.

At 20 minutes after the hour, WTI was trading at $53.77, with Brent crude trading at $60.02.

Operations

Exxon Mobil Corporation Declares Fourth Quarter Dividend

The Board of Directors of Exxon Mobil Corporation (NYSE:XOM) today declared a cash dividend of $0.77 per share on the Common Stock, payable on December 11, 2017 to shareholders of record of Common Stock at the close of business on November 13, 2017.

This fourth quarter dividend is at the same level as the dividend paid in the third quarter of 2017.

Through its dividends, the corporation has shared its success with its shareholders for more than 100 years and has increased its annual dividend payment to shareholders for 35 consecutive years.

South America

Neuquén Province government Approves Exxon Plans for Unconventional Exploration in Los Toldos

  • 35-year unconventional exploitation concession approved by provincial government
  • Initial project investment approximately $200 million
  • Builds on ExxonMobil’s extensive operations in the Vaca Muerta with interests in six unconventional and one conventional block

ExxonMobil announced that the Neuquén Province government has approved the investment plan for the development of a 35-year unconventional exploitation concession in the Los Toldos I South block.

The initial investment of about $200 million calls for a pilot project that brings up to seven wells to production, the construction of production facilities and development of export infrastructure.

“We are very optimistic about this resource and the provincial government’s approval enables us to do the necessary work to continue expanding our operations,” said Sara Ortwein, president of ExxonMobil’s XTO Energy. “We look forward to continuing to work with the government and our partners to develop the country’s energy resources.”

ExxonMobil and its partners, Gas y Petroleo del Neuquén and Americas Petrogas Argentina S.A (APASA), are looking for opportunities to further develop this block and bring wells into production.

If the pilot project is successful, it could lead to a staged development of approximately 300 horizontal wells of up to 3,000 meters in length. The block could have estimated production of 11 million cubic meters per day of gas when at full production.

Los Toldos I South is located 85 kilometers (52 miles) northwest of Añelo and 175 kilometers (108 miles) northwest of Neuquén city.

ExxonMobil Exploration Argentina S.R.L (EMEA) is the operator and holds 80 percent interest in partnership with Gas y Petroleo del Neuquén, which holds 10 percent interest, and APASA (Tecpetrol), which has 10 percent.

To date, ExxonMobil’s investment in exploration and early development of its Vaca Muerta operations has exceeded $500 million since it began exploration and early development in the area.

“ExxonMobil has been in Argentina for more than 100 years, and an active player in the Neuquén basin since 2010,” said Daniel De Nigris, Argentina general manager. “We are actively analyzing additional opportunities to accelerate gas production in other blocks and look forward to making further progress.”

North America

EPA Abandons Changes To US Biofuel Program After Lawmaker Pressure

The U.S. Environmental Protection Agency has backed off a series of proposed changes to the nation’s biofuels policy after a massive backlash from corn-state lawmakers worried the moves would undercut ethanol demand, according to a letter from the agency to lawmakers seen by Reuters.

EPA Administrator Scott Pruitt said in the letter dated Oct. 19 that the agency will keep renewable fuel volume mandates for next year at or above proposed levels, reversing a previous move to open the door to cuts.

The move marks a big win for the biofuels industry and lawmakers from corn-states like Iowa, Nebraska and Illinois, while dealing a blow to merchant refiners like PBF Energy Inc and Valero Energy Corp who hoped the administration of President Donald Trump would help provide regulatory relief.

The White House issued a statement hours after the Pruitt letter was delivered to lawmakers expressing the president’s support for maintaining the renewable fuel plan.

“President Donald J. Trump promised rural America that he would protect the Renewable Fuel Standard (RFS), and has never wavered from that promise,” the White House statement said.

Trump’s second-place finish in the Iowa caucuses in early 2016 gave credibility to his candidacy and he defeated Democrat Hillary Clinton in the state in the Nov. 8 election. It was the first time a Republican had won Iowa since George W. Bush in 2004 and provided Trump a key takeaway.

The letter could end uncertainty about the future of the U.S. Renewable Fuel Standard that has roiled commodity and energy markets for months. The program, which requires refineries to blend increasing amounts of ethanol and other biofuels into the nation’s fuel supply or buy credits from those who do, appeared on the verge of a massive overhaul.

The most popular form of program credits hit two-month highs on Friday on the EPA news, traders said..

The so-called D6 credits sunk to 68 cents last month as EPA considered cost-cutting measures, but prices have rebounded in recent weeks and approached 90 cents on Friday, traders said.

Pruitt said the EPA would not pursue another idea floated by EPA leadership that would have allowed exported ethanol to be counted toward those volume quotas.

Pruitt also said the EPA did not believe a proposal to shift the biofuels blending obligation away from refiners was appropriate. That plan is backed by representatives of a handful of independent refining companies who have warned the cost of the program will bankrupt plants and cost thousands of jobs.

Those ideas would have eased the burden on some in the refining industry, who have argued that biofuels compete with petroleum, and that the blending responsibility costs them hundreds of millions of dollars a year.

But Midwestern lawmakers, including Republicans Charles Grassley and Joni Ernst, had vocally opposed all those ideas, calling them a betrayal of the administration’s promises to support the corn belt. They were concerned the moves would undercut domestic demand for ethanol, a key industry in the region that has supported corn growers.

“It’s a great day for Iowa and a great day for rural America. Administrator Pruitt should be commended for following through on President Trump’s commitment to biofuels,” Grassley said in a statement.

North America

Oil Barge Explosion Off Texas Kills One, Fire Now Out

 At least one person was killed and another was missing on Friday after an oil barge being pulled by a tug boat caught fire and exploded in the Gulf of Mexico off Texas, officials said.

The barge was carrying some 133,000 barrels of crude oil to a refinery in Corpus Christi when the explosion occurred at 4:30 a.m., they said.

The dead person had not yet been identified and the fire was allowed to burn itself out before being extinguished, said Rick Adams, Emergency Management Coordinator for the City of Port Aransas.

Six of the eight crew members were rescued and did not suffer any serious injuries, Adams added.

“There are initial reports of some oil in the water,” the Coast Guard said in a statement, adding a safety zone had established around the area.

Bouchard Transportation, which owns the barge and the tug boat, did not immediately respond to a request for comment.

Technology

Expro Launches TCP Gun System For Extreme High Pressure Applications

Leading international oilfield services company, Expro, has launched a new extreme high pressure tubing conveyed perforating (TCP) gun system, delivering the largest perforation hole area available for frac and gravel pack completions.

Designed specifically for challenging deep water environments in the Gulf of Mexico (GoM), the Extreme Pressure Series 30,000 PSI TCP gun system utilises super big hole charge technology, providing best-in-class area-open-to-flow (AOF) to support frac-and gravel-pack operations. Delivering 18-22 shots per foot using steel HMX charges, standard casing sizes of 7” through 7-3/4”, in combination with the 4 3/4” OD system, will achieve 6-7” AOF. However larger casing sizes of 9-5/8 through 10-3/4”, utilising the 6 5/8” OD system, will deliver a market-leading 13-15” AOF.

Developed in collaboration with high performance gun system provider, GEODynamics, the system is complemented by Expro’s fully rated dual hydraulic firing heads and drill stem testing (DST) tools for underbalanced perforating applications. These systems offer cutting edge technology to deliver efficient completions, alongside optimal well performance.

Expro’s DST/TCP Product Line Director, Ron Fordyce said:

“Expro has built a strong reputation as a leading TCP provider in the GoM, working with a range of major clients over the past 30 years. Following a growth in activity associated with deep wells in deeper waters, we knew it was important to deliver the right technology solution for this environment.

“GEODynamics has an unsurpassed reputation for their gun systems and associated products. Alongside our reputation for safety and service quality, the new Extreme Pressure Series, provided exclusively by Expro, can now deliver similar performance for extreme high pressure as it would for lower pressure wells.”

Expro’s DST/TCP Global Business Development Manager, Kerry Daly added:

“The 30,000 PSI TCP guns and associated equipment were specifically designed for the deep water environment, where operators typically frac or gravel pack wells after perforating and require the most AOF possible. Now fully field tested, they can deliver an industry leading perforating hole size for achieving optimal completions and subsequent performance from the well.

“It allows us to bring a key piece of technology to the market place, to support a range of clients due to spud their wells in 2018 – a key driver of this partnership from the outset.”

Expro’s TCP operations are supported from its service centre in Broussard, Louisiana, alongside the Company’s broader suite of subsea, well test, well intervention and fluid product lines across North and Latin America (NLA).

Operations

Fracking Isn’t Looking So Great For Halliburton, CEO Says He Can Pull Some Levers

Fracking isn’t looking so great for the world’s biggest fracker, but the CEO of Halliburton Co. says he can pull some levers to improve profits.

After lackluster margins for the company’s main business sent shares tumbling, casting a cloud over third-quarter earnings that otherwise beat estimates, Chief Executive Officer Jeff Miller said there are three things he plans to do to improve fracking profits: raise prices, maximize the use of machinery and cut costs.

“Increasing pricing is important, but it’s just one component we can leverage to reach our goal,” Miller told analysts and investors Monday on a conference call. “Ultimately we will utilize a combination of all three levers to return to normalized margins.”

In his first full quarter as CEO, Miller has sought to reassure investors that Halliburton is well-positioned to rebound from the worst oil-market collapse in a generation. A plunge in oil exploration exacted $5.76 billion in losses last year, the Houston-based company’s darkest year since at least 1987.

Halliburton shares tumbled as much as 2.2 percent, and were 1 percent lower at $42.90 as of 11:37 a.m. in New York. The stock had climbed as high as $45 before the opening of regular U.S. trading.

Investors are “curious” about the margins with demand seemingly on the rise, Kurt Hallead, an analyst at RBC Capital Markets, said in a note to clients.

“I think the market is getting a little anxious why pricing isn’t moving up higher,” J. David Anderson, an analyst at Barclays, said Monday in a phone interview. “It was a bit of a disappointment, but it was far from any disaster.”

Sales in North America, the world’s busiest drilling region, nearly doubled during the third quarter to $3.2 billion, bucking the pessimistic outlook of rival fracking companies who last week predicted slower growth from the U.S. and Canada. Excluding one-time items, Halliburton’s worldwide third-quarter profit of 42 cents a share exceeded every one of the 34 estimates from analysts in a Bloomberg survey.

“The important thing here is that they did have a beat,” Luke Lemoine, an analyst at Capital One Securities in New Orleans who rates the shares a buy and owns none, said in a phone interview. “When you have other companies coming in inline or with slight misses and estimates are being lowered, I don’t see a real risk of 2018 being lowered for Halliburton.”

The company earned $365 million during the period, compared with $6 million a year earlier, according to the statement. Total revenue of $5.4 billion was $101 million higher than the average estimate from analysts.

Halliburton is the largest provider of fracking, the well-completion technique that blasts water, sand and chemicals underground to release trapped hydrocarbons. When combined with other services such as drilling and cementing wells, the company is the world’s No. 3 oilfield contractor.

“Our North American business is hitting on all cylinders and our international business proved resilient in a challenging environment,” Miller said Monday in a statement announcing third-quarter financial results.

Schlumberger Ltd. and Baker Hughes, the world’s biggest oilfield service companies, said last week that North America’s growth engine is slowing.

The investment appetite by U.S. and Canadian explorers “seems to be moderating,” with the top priority now being cash preservation rather than production growth, Schlumberger said in an earnings statement on Friday.

U.S. explorers last week curbed the number of rigs drilling for crude for a third straight week amid the growing realization that more sophisticated and powerful equipment means less than half as many rigs are required to meet growth targets as would have been needed during the pre-2014 boom years.

Crude Oil

Oil Edges Higher as OPEC Reports Record Compliance

Oil edged higher as OPEC reported record compliance with pledged production cuts while reduced oil export flows from Iraq also supported prices.

Futures traded in a 56-cent range in New York. OPEC and its allies achieved a record-high level of compliance to production curbs during September, according to a statement on Saturday. In northern Iraq, oil exports via pipeline to Ceyhan remain below normal levels.

The OPEC report is “a reminder to the market that there is commitment by several of the largest players — Saudi Arabia, Russia — to try and balance this market and they continue to talk up the prices on their success,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund, said in a telephone interview. Meanwhile, the situation in northern Iraq has led to “what appears to be a decent size outage in terms of production. That is helping to support the price modestly.”

Oil has climbed for two straight weeks, hovering above the $51 a barrel level in New York. The Organization of Petroleum Exporting Countries and its non-OPEC partners reiterated that all options to rebalance the market “are left open,” according to the Joint Ministerial Monitoring Committee.

Meanwhile, U.S. shale explorers reduced the oil rig count for a third week to the lowest since June, according to Baker Hughes data Friday.

West Texas Intermediate for December delivery advanced 33 cents to $52.17 a barrel at 10:01 a.m. on the New York Mercantile Exchange. Total volume traded was about 22 percent below the 100-day average.

Brent for December settlement rose 18 cents to $57.93 a barrel on the London-based ICE Futures Europe exchange. Prices rose 1 percent last week, a second weekly gain. The global benchmark crude traded at a premium of $5.70 to WTI.

Compliance with the OPEC-led cuts was 120 percent last month, according to the JMMC. Commercial oil stocks in members of the Organization for Economic Cooperation and Development dropped further in the month and now stand at 159 million barrels above the five-year average, the JMMC said.

“The lower U.S. rig count number, the OPEC compliance number and the geopolitical headlines from northern Iraq and Iran on sanctions have helped futures higher,” Ole Hansen, head of commodity strategy at Saxo Bank A/S said. “But there are signs the market could be weakening with the seasonal refinery demand slowdown.”

Oil-market news:

  • Noble Group Ltd. agreed to sell most of its oil business to Vitol Group, the independent trading house.
  • Halliburton Co. outperformed all analysts’ expectations thanks in part to rising orders for oilfield crews in the U.S. Gulf Coast to the Canadian Rockies
  • Iraq’s Oil Minister Jabbar al-Luaibi said Iraq hopes to “soon” reach agreement with BP on the development of Kirkuk oil fields, according to a statement from the oil ministry.
Operations

Vitol Buys Oil Trading Unit, Noble Warns of Loss Topping USD 1 Billion

Noble Group Ltd. warned of a more than $1 billion third-quarter net loss as it agreed to sell most of its oil business to Vitol Group, prolonging the embattled commodity trader’s survival while highlighting the challenges ahead.

Details of the sale failed to give much clarity on how much Hong Kong-based Noble Group would ultimately receive from Vitol for its prized oil-trading unit, while the likely third-quarter results highlighted the company’s struggle to return to profitability as it offloads assets to repay debt.

“They’re still fighting to survive,” Nicholas Teo, a trading strategist at KGI Securities (Singapore) Pte, said by phone.

The company agreed to extend a covenant waiver on a $1.1 billion revolving credit facility until just Dec. 20, highlighting how lenders are keeping Noble on a tight leash as analysts say a debt restructuring looks likely. At the same time, its continuing business — largely coal and iron-ore trading in Asia — is likely to report a net loss of up to $100 million for the third quarter.

While Noble’s stock slumped as much as 12 percent in Singapore, extending a more than 90 percent retreat since questions over its financial reporting emerged in early 2015, debt investors reacted more positively.

Bonds due in 2020 rose 4.2 percent to 39.6 cents on the dollar. Prices had fallen last week after Vitol Chief Executive Officer Ian Taylor had said that the deal was “very complicated,” raising the prospect that the two sides wouldn’t reach deal.

S&P Global Ratings said the deal with Vitol didn’t change the risk of Noble defaulting.

Distressed Levels

While the company has defended its accounting, its bonds have tumbled to distressed levels as it has written down the value of its long-term commodity contracts, ousted senior managers and reported a string of trading losses.

Read more: Bloomberg Gadfly’s take on the Noble announcements

Noble Group said that based on its end-June accounts it would have received net proceeds of $582 million from the oil unit deal after paying back borrowings under a secured credit facility.

But that figure included proceeds from the earlier sale of its gas-and-power unit, the company said, and was prior to a third quarter in which the business was “adversely impacted” by “capital constraints.” Based on the end-June number, the company would report a $525 million loss on the sale.

Complex Deal

What’s more, the deal is complex: Vitol will pay $174 million of the closing price into three separate escrow accounts, Noble Group will carve out some oil deals and wind them down separately, and the final price is contingent on several side deals.

Vitol said it had taken advice from three different law firms. Highlighting the risk that the deal could fall through before a final agreement is signed, Noble Group agreed to pay a break fee of $40 million in case the sale was scrapped for reasons including its bankruptcy.

The deal for the oil business, one of Noble’s most valuable remaining assets, follows the sale of a smaller gas-and-power trading unit to Mercuria Energy Group Ltd., which was completed last month.

“The operating environment continues to be challenging,” Noble said. “Conservative liquidity management and constraints placed on the Group’s access to trade finance lines led to disruption costs and prevented the Group from taking advantage of profitable trading opportunities.”

Here are some additional details from the company’s two statements on Monday:

  • A total net loss of $1.1 billion to $1.25 billion expected in the third quarter
    Those figures include an adjusted net loss from continuing operations of $50 million to $100 million, as well as exceptional losses including non-cash items of $1.05 billion to $1.15 billion
  • Exceptional losses include a change in how Noble accounts for its stake in Yancoal following the latter’s equity raising in August. Noble had valued the stake at $180 million at the end of 2016, but its market value on Monday was just $12 million
  • Lenders agreed to a two-month extension of a waiver related to a revolving-credit facility to Dec. 20
  • Proceeds from the oil sale and earlier gas-unit sale are expected to be enough to retire the Noble Americas Corp. borrowing base revolving facility, and the Noble Clean Fuels Ltd. borrowing base revolving facility
Europe

Premier Oil Reports BW Catcher FPSO Vessel Arrival at the Catcher Field

The BW Catcher Floating Production Storage and Offloading (“FPSO”) vessel arrived at the Catcher field at 23:00 on Wednesday 18th October.

The hook up of the Submerged Turret Production (“STP”) buoy mooring system was completed on the 19th October with the vessel successfully completing a rotation test around the buoy on the 20th October. The final pull-in of the risers and umbilicals is now underway and commissioning activities have also commenced in parallel. Delivery of first oil remains on schedule by the end of the year.

A short presentation setting out the key milestones in the hook up and commissioning programme to be carried out in advance of first oil and the plans to ramp up to plateau production levels, is available on the Premier Oil’s website.

Asia

China May Be Consuming More Oil Than Officially Reported Data

The crude market may be underestimating China’s oil demand.

Storage data gathered by satellite implies the amount of crude China is putting into storage is below what can be extrapolated from the nation’s customs and production data, Barclays Plc analysts wrote in an Oct. 23 note. That means it may be consuming more oil than official data indicate and that the global supply-demand balance is tighter than estimated.

“If satellite data are accurate and reflective of broader activity in the Chinese oil sector, this is bullish for oil fundamentals,” New York-based analysts Michael Cohen and Warren Russell wrote in the report. “It implies that China’s refinery runs and end-use consumption may be understated, and that global balances are tighter than consensus and our own forecasts.”

Data from Ursa Space Systems Inc. implies inventories in the world’s largest importer expanded by about 360,000 barrels a day from April through August, equating to a year-to-date stockpile build of 87 million barrels, according to the note.

That’s about two-thirds lower than the 1 million barrel-a-day rise government data suggests for the period, the bank said.

China’s overseas crude purchases jumped to the second-highest on record last month, rising 13 percent to 9.04 million barrels a day, as new refining units starting up boosted demand. Imports from January to September gained 12.2 percent over the same period last year to about 318 million tons.

The global crude market’s deficit is expected to average about 300,000 barrels a day this year, before switching to a surplus next year of similar quantity, according to the Barclays.

The bank estimates Chinese oil demand growth of 600,000 barrels a day this year and 500,000 a day next year.

Crude Oil

Compliance at Record Level, ‘All Options are Open’ says OPEC

OPEC and its non-OPEC allies reiterated that all options to rebalance the oil market “are left open” as the producers announced the highest level of compliance with their agreement to curtail production.

The joint ministerial committee responsible for monitoring the agreement, known as JMMC, said on Saturday that producing countries achieved a record-high conformity level on their voluntary production adjustments at 120% in September, according to a statement on the website of the Organization of Petroleum Exporting Countries.

“The JMMC will continue to monitor other factors in the oil market and their influence on the ongoing market rebalancing process,” it said. “All options are left open to ensure that every effort is made to rebalance the market for the benefit of all.”

The 24 oil-producing nations that agreed in December to cut 1.8 million barrels a day of their production, initially for a six-month period, have already extended their deal once — by nine months until the end of March 2018 — in an effort to lower crude inventories.

The JMMC said in the statement that commercial oil stocks in the OECD countries fell further in September and now stand at 159 million barrels above their latest five-year average. The stocks have been reduced by 178 million barrels since the beginning of this year, JMMC said.

OPEC and its allies are scheduled to meet in Vienna on November 30, while JMMC said in the statement its next meeting is scheduled for the preceding day.

Crude Oil

Investors Urge Profits Over Boom, Want Oil Explorers To Focus Less on Funding New Wells

U.S. shale drillers are tapping on the brakes in the wake of a growing investor revolt that’s held down company values, even as they’ve scored historic production numbers.

The evidence is stacking up: The latest rig count showed the biggest one-week drop in the Permian Basin in 19 months, while Schlumberger Ltd. and Baker Hughes, the two largest oil service companies, blamed lackluster earnings on the reluctance of North American explorers to boost their spending. At the same time, a Bloomberg Intelligence index of shale explorers showed shares have plunged 22 percent so far this year.

Producers from Exxon Mobil Corp. to ConocoPhillips are expected to post improved earnings next week. That’s not so much because things are looking up, but because they’ve learned how to do more with less, boosting well output with better technology and smarter planning. Investors now want to see it translated into better returns for them.

“It’s a conversation that management teams are hearing from all of their investors,” according to John Dowd, a portfolio manager at Fidelity Management & Research Co. The message: “It can’t be all about production growth,” he said.

For investors, the new mantra is returns, returns, returns. They want oil explorers to focus less on funding new wells and instead boost value for shareholders, Phillips Johnston, a Capital One Securities analyst, said in a note Friday.

It’s a slogan management teams are paying attention to. Some are exploring ways to change executive pay incentives that often reward growing oil production over profitability, said Dowd, who oversees funds worth $20.5 billion, including the $1.9 billion Fidelity Select Energy Portfolio.

The change is starting to show up on the oil fields, as well.

More than 30 rigs across American shale plays have been idled since mid-August, including six this week in the Permian Basin in West Texas and New Mexico. That was the biggest one-week drop in America’s busiest oil field since March 2016.

As exploration and production companies report earnings in the next few weeks, investors should “expect heavy religion around capital discipline and focus on returns, with investors trying to gauge who is genuine vs paying lip service,” Johnston wrote.

For a story on how the offshore drilling industry is also suffering.

A rise in oil prices should also help producers show shareholders they can profit more while spending less. The West Texas Intermediate crude benchmark averaged 7.3 percent more in the third-quarter than over the same period last year. That will probably be enough to offset lost output in the Gulf of Mexico and Eagle Ford shale in South Texas during Hurricane Harvey.

Skeptics remain, however. Hedge fund manager Jim Chanos, who’s shorting shale driller Continental Resources Inc., said independent explorers have been a bad deal for shareholders because they rely on quickly depleting assets.

“Because the wells deplete so quickly, they constantly need to raise money to replace the assets,” he said in an interview last month. And Moody’s Investors Service, in a study of 37 drillers in the U.S. and Canada, found it will take oil consistently above $50 a barrel for their investments to pay off in the long run.

Baker Hughes and Schlumberger both saw their shares fall on Friday after they reported earnings. Lorenzo Simonelli, the Baker Hughes chairman and CEO, said in a statement that his company saw no meaningful increase in driller spending in the third quarter.

“We have seen some improvement in activity but we have not seen meaningful increases in customer capital commitments,” Simonelli said. “Our customers remain cautious.”

The oilfield services sector was the worst hit in the three-year crude-market crash. Contractors complained last year that prices for fracking were at unsustainably low levels, and vowed to raise them this year as oil prices inched upward. But investor dissatisfaction with explorer returns, despite the rise in production, has put a new spin on their priorities.

This was the first quarter in which Baker Hughes reported combined earnings with GE Oil & Gas since they were combined by General Electric Co. in July, a move creating the world’s second-largest servicer. The marriage, though, has gotten off to a rocky start, with Baker Hughes reporting results on Friday that missed analyst estimates.

The newly-formed company reported a net loss of $104 million or 24 cents a share. Excluding certain items, profit was 5 cents a share, worse than the 11-cent gain in an average of 23 analysts’ estimates compiled by Bloomberg. Revenue was $5.4 billion compared with the $5.5 billion average estimate.

Number one Schlumberger reported earnings Friday that were in line with analyst estimates. The company’s adjusted profit was 42 cents a share, in line with the average of 33 analysts’ estimates compiled by Bloomberg. Revenue was $7.9 billion, matching the average estimate, according to its statement.

Schlumberger is expected to boost earnings in the fourth quarter to 48 cents a share, excluding certain items, according to the average of 33 analysts’ estimates compiled by Bloomberg. However, CEO Paal Kibsgaard told analysts and investors on the company’s conference call Friday that the consensus estimate could be a bit on the high end.

Independent exploration and production companies began trimming their budgets in the second quarter and through the half way point in the year had only spent 43 percent of their 2017 budgets, analysts at JPMorgan Chase & Co. wrote last month.

Crude Oil

Oil investors are back in the ring

Hedge funds are finding betting on West Texas Intermediate crude more attractive again, with total positioning on the U.S. benchmark increasing to the highest in almost a year. The surge comes as oil prices have held steady above $50 a barrel — a key psychological level — for about two weeks.

“In general, people are more willing to get into oil right now,” said Ashley Petersen, lead oil analyst at Stratas Advisors in New York, in a telephone interview. “Overall there’s been a real belief that the industry has sort of stabilized the boat and is on the upswing.”

Many investors left the oil market after prices crashed three years ago. Then, “it was just a little too hot for some. Risk profiles at different funds just didn’t really encourage taking on crude when there were other better options out there,” Petersen said.

Now, she added, “the overall picture is more stable.”

While the number of bets overall are on the rise, investors remain cautious on committing too quickly to an increase in the U.S. benchmark, WTI crude. Hedge funds reduced bets on rising WTI prices for a third week, with short-sellers boosting positions by the most since late August.

The oil rig count has declined for three straight weeks, and the world’s two biggest oilfield service companies said North America’s growth engine is slowing, signaling the market may be on the right path.

Yet the rebalancing process aimed at deflating stockpiles and boosting prices is taking a lot longer than what was expected, according to Mark Watkins, a Park City, Utah-based regional investment manager at U.S. Bank Wealth Management.

“We’re in the seventh-inning stretch of a baseball game,” Watkins, who oversees $142 billion in assets, said by telephone. “It’s that seventh inning, but we probably have those extra innings that pop up.”

Investors will be keeping their eyes on the Baker Hughes rig count to see whether or not the recent oil price rise will spur more drilling activity, according to Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts.

Hedge funds reduced their WTI net-long position — the difference between bets on a price increase and wagers on a drop — by 8.2 percent to 219,077 futures and options in the week ended Oct. 17, the largest reduction since August, the CFTC data showed. Shorts jumped 18 percent, while longs increased 0.8 percent.

Different levers are moving Brent bets. Tensions between Iraqi forces and Kurdish fighters led the net-bullish position to rise, Lynch said.

The net-long position on Brent crude rose 1.2 percent to 494,139 contracts, according to data from ICE Futures Europe. Longs increased by 0.2 percent, while shorts dipped 7.2 percent to the lowest level in 10 weeks. Producer shorts on Brent, a measure of hedging activity, rose to a record.

In the fuel market, money managers boosted their net-long position on benchmark U.S. gasoline by 2.6 percent. Meanwhile, the net-bullish position on diesel increased 4.1 percent.

Over the long run, Watkins expressed optimism about where the market may be headed.

“We are seeing synchronized global economic strength that continues to surface and it’s really going to start to increase the demand for oil,” he said.

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