It’s possible that I shall make an ass of myself. But in that case one can always get out of it with a little dialectic. I have, of course, so worded my proposition as to be right either way (K.Marx, Letter to F.Engels on the Indian Mutiny)
Centennial Resource Development and Colgate Energy Partners III, LLC have agreed to combine in a $7.0-billion merger of equals, creating the largest pure-play exploration and production (E&P) firm in the Delaware Basin in the Permian, the companies said on Thursday.
The combined firm will be the largest pure-play E&P company in the Delaware Basin, with around 180,000 net leasehold acres, 40,000 net royalty acres, and total current production of approximately 135,000 barrels of oil equivalent per day (Boe/d).
The $7.0 billion merger of equals values Colgate at approximately $3.9 billion and is comprised of 269.3 million shares of Centennial stock, $525 million of cash, and the assumption of approximately $1.4 billion of Colgate’s outstanding net debt.
The boards of directors of both companies have unanimously approved the deal, which is expected to close in the second half of this year.
The new firm aims to significantly increase cash returns to shareholders, with over $1 billion of expected free cash flow in 2023 at current strip prices, Centennial and Colgate said.
“We are excited to partner with Colgate as we share a common vision for the pro forma company that includes a strong balance sheet, a disciplined investment program to drive cash flow and a robust return-of-capital program,” said Sean Smith, Chief Executive Officer of Centennial.
The deal follows a strong start to 2022 upstream mergers and acquisitions in the U.S. oil and gas industry, although activity slowed down after early March when oil prices spiked following the Russian invasion of Ukraine.
A total of $14 billion in deals were announced during the first quarter of 2022, energy data analytics company Enverus said last month. The $6 billion in transactions in January 2022 was the strongest M&A market launch in five years. However, the last significant transaction in the first quarter occurred in early March before a spike in commodity prices temporarily halted activity, Enverus noted.
Shots Fired As Protesters Fail To Stop Oil Tanker From Loading In Libya
Protesters on Thursday fired shots outside Libya’s Hariga port in a failed attempt to stop the loading of 1 million barrels of crude oil bound for the UK, in an incident that comes just one day after Libyan prime minister-designate Fathi Bashagha entered Tripoli in a failed attempt to assume control of the government from his rival.
According to Hariga port authorities in Tobruk, cited by Libya Update, protesters fired shots after being prevented from entering the port after the docking of a tanker scheduled to be loaded with 1 million barrels of oil.
The tanker was not hit in the crossfire. No injuries were reported, and the tanker–the British Ridgebury–successfully departed the port on Thursday. Libya has been suffering from a loss of some 600,000 bpd of production and exports after protests led the National Oil Company (NOC) to declare force majeure on the Al-Sharara oilfield, the country’s largest, along with the El Feel oilfield and two key export terminals.
Hariga port has continued to operate normally.
Tensions rose on Wednesday when Bashagha entered Tripoli with his militia forces providing security, prompting an armed response from militias loyal to current interim prime minister Abdul Hamid Dbeibah, who has refused to step down and hand over power to his parliament-backed rival.
Bashagha retreated from Tripoli only hours after entering and said later on Wednesday that his new government would set up in Sirte, halfway between the powers in the east and the west. Sirte is also the gateway to the ‘Oil Crescent', and this move potentially represents a reminder by Bashagha that his militias control this region.
The rivalry is between two legislative branches of government in Libya, the Tobruk-based parliament in the east, which has appointed Bashagha the new prime minister, and the high council of state in the west, which supports Dbeibah. The east controls much of Libya’s ‘Oil Crescent’ and the west controls the Central Bank in Tripoli.
Libyan Oil Deadlocked As Clashes Force PM-Designate Out of Tripoli
Libyan prime minister-designate Fathi Bashagha was forced out of the capital Tripoli on Tuesday by armed militias backed by current interim Prime Minister Adbdul Hamid Dbeibah, who refuses to step down and cede power as a significant amount of the country’s oil production capacity remains shut-in. Armed clashes shook Tripoli on Tuesday as Bashagha, backed by the eastern-based parliament, entered the capital to assume power from Dbeibah, forcing the prime minister-designate to leave the city only hours after entering. Clashes erupted when Bashagha entered the city with militia forces, prompting a response from Dbeibah’s militias. One staff member of the Italian embassy was wounded during the clashes. The rival prime ministers blame each other for starting the clashes, with Bashagha calling the Dbeibah government “hysterical”. “Despite our peaceful entry to Tripoli, without use of violence and force of arms, and our reception by honorable people of Tripoli, we were surprised by dangerous military escalation carried out by armed groups affiliated with the outgoing government,” Bashagha tweeted. “We are not seeking authority, but rather determined to build democratic civil state with elected authority, state governed by law, not governed by logic of violence and chaos sponsored by the outgoing government,” the new Prime Minister added. The United Nations and the United States have urged calm. “We urge all armed groups to refrain from violence and for political leaders to recognize that seizing or retaining power through violence will only hurt the people of Libya,” the U.S. Embassy in Libya said in a statement.
Some 600,000 bpd of Libyan oil production remains shut-in due to rivalry between Bashagha and Dbeibah over the distribution of oil revenues. The Libyan National OIl Company (NOC) was forced in mid-April to declare force majeure on two oilfields, including its largest–Al Sharara–as well as on key export terminals. Libyan production is now hovering around 800,00 bpd. Bashagha holds the key to resuming oil production. However, with no agreements forthcoming over oil revenues, without taking Tripoli and controlling the central bank, the prime minister-designate cannot force a new revenue distribution setup.
How Allegations Of Bullying And Abuse Caused A Slump In Canadian Oil Trading
Trading activity on one Canadian heavy crude contract dropped significantly in mid-April when most brokers at Calgary-based NE2 Group resigned, and the firm is now being sued for alleged workplace harassment and bullying, Bloomberg reported on Thursday, citing sources with knowledge of the issue.
NE2 Group's trading activities have played a key role in the price-setting used to determine the benchmark prices of several crude grades from Canada as the firm handled enough volume of futures trades. After a mass exodus of employees around Easter weekend, when an estimated two-thirds of the company's brokers resigned, the number of open interest on Western Canadian Select (WCS) on CME Group slumped from around 10,000 contracts in the middle of April to around 7,000 contracts in early May and to 6,000 contracts on May 17, according to data compiled by Bloomberg.
After the resignations, traders were concerned that NE2 Group would not have the staff to ensure accurate prices. Some of those traders exited at least one CME contract, they told Bloomberg.
The resignations took place more or less around the time when the firm was paying out annual bonuses after a very profitable year, Bloomberg's sources said.
The reasons for the resignations are generally the same as the allegations that Mark Bennett, NE2's former vice-president of North American energy, details in a lawsuit against the firm. The lawsuit alleges that president and owner Timothy Gunn bullied staff and physically and verbally abused employees and clients.
Bennett, who declined to comment for Bloomberg, says he was wrongfully dismissed in February after raising concerns about the "toxic work environment" and "unilateral changes to employee compensation."
"As we explore the allegations made in this claim, we expect additional facts will be revealed. NE2 will openly and transparently address these allegations through the Court process," the company said in a statement carried by Bloomberg.
Refinery Explosion And Fire Threatens Supply In South Korea
At least eight people were injured in an explosion and a fire on Thursday at a major 580,000-bpd refinery in South Korea, local news agency Yonhap reports.
The fire and the possible shutdown of a large refinery come at a time when global refining margins are sky-high amid insufficient refinery capacity worldwide.
Refinery capacity globally is now lower than before the pandemic after some refineries closed permanently after COVID crippled fuel demand in early 2020.
Firefighters received a report of an explosion at the refinery in the Onsan Industrial Complex in Ulsan owned by S-Oil shortly before 9 p.m. local time on Thursday. The explosion took place during the processing of crude oil into petroleum, Yonhap quoted authorities as saying.
The Onsan refinery has three crude distillation units with a combined capacity of 580,000 barrels per day (bpd), according to Argus, which reports that market participants say a full shutdown of the refinery is likely.
Firefighters at the scene appeared to be having trouble controlling the fire, per local reports quoted by The Korea Herald.
The eight people who sustained injuries were rushed to hospital and are being treated for second-degree burns to the face and palms, authorities told The Korea Herald.
Globally, around 3 million bpd of refining capacity has been shut down since early 2020, according to estimates from Wood Mackenzie.
“For companies with aging refineries that required significant investment to remain viable, it has been difficult to justify the spending in the face of a weak demand outlook, particularly for gasoline as a result of increased fuel efficiency and the rise of electric vehicles,” Ed Crooks, Vice-Chair, Americas, at WoodMac wrote last week.
At the same time, new refining capacity in the Middle East and Asia is only now entering the market after being delayed, in part because of the pandemic and weak refining margins, Crooks noted.
Americans Drive More Than Pre-Covid Despite Record Gas Prices
Americans are driving more this year than in the same period in 2019, the last ‘normal’ year before COVID, despite the fact that U.S. gasoline prices have been soaring and hitting records every day in the past week, data from the Federal Highway Administration show.
Travel on all roads and streets rose to 277.4 billion vehicle miles, up by 2.9% in March 2022 compared with March 2021, according to the latest data. The Travel in Vehicle Miles in March was higher not only compared to 2021 and 2020, but also to 2019, meaning that Americans are driving more than before the pandemic, the data showed.
Year to date in March, cumulative travel for 2022 rose by 5.6% to 753.7 billion vehicle miles of travel, and this is also slightly higher than the 753.1 billion vehicle miles in the first quarter of 2019. The past 12 months of travel data also shows higher mileage than the 12-month period that ended in March 2019.
U.S. drivers are back on the roads and streets despite the fact that it was in March this year when gasoline prices started soaring after crude prices hit $100 per barrel following the Russian invasion of Ukraine.
These days, gasoline prices are beating all-time high records every day. On Friday, May 20, the average cost nationwide for a gallon of regular gasoline was $4.593—an all-time high and up from $4.589 on May 19, and up from $3.043 on this day last year, per AAA data.
Still, U.S. gasoline demand is not going down despite record-high gasoline prices, and signs point to further rising demand as the summer driving season begins with the Memorial Day weekend, despite what will be the most expensive holiday weekend at the pump ever.
GasBuddy released its annual summer travel survey on Thursday, suggesting that the percentage of Americans planning on road trips this summer has increased over last year, indicating that crude oil demand destruction—at least from the transportation sector—isn’t on the horizon even at today’s high gasoline prices.
More than two dozen banks and other financial firms have declared themselves as non-hostile to the Texas energy industry after the state went after the financial industry threatening to shut off its access to the Texas financial system.
In March, Texas Comptroller Glenn Hager asked 19 financial companies, including the world’s biggest asset manager and some of the top U.S. banks, whether they are boycotting the fossil fuel industry as America’s largest oil-producing state seeks to clarify the financial institutions’ fossil fuel investment policies and procedures.
“A company that fails to provide clarification 60 days after receiving this letter will be presumed to be boycotting energy companies,” Hager said.
It seems the financial firms have wasted no time in responding to the letter, with more than 20 of them doing so before the deadline given them by the Texas Comptroller, Bloomberg reported, citing their responses.
One small asset manager based in Dallas actually responded with “Hell no”, the report said.
The other companies targeted by the Texas authorities include BlackRock, JP Morgan, Wells Fargo, and HSBC.
“We would like to note at the outset that we provide financial products and services to many companies that engage in the exploration, production, utilization, transportation, sale, or manufacturing of fossil fuel-based energy (“energy companies”), and intend to do so in the future,” wrote JP Morgan executive vice president and general counsel Stacey Friedman, as quoted by Bloomberg.
HSBC wrote that it “does not consider itself to be a company which ‘boycotts’ financing of energy companies,” and proceeded to explain that “HSBC believes it can have the biggest impact on climate action by actively engaging with its clients on their transition, focusing on the need for robust and credible transition plans, and by providing the financing and advisory solutions that help unlock the investments needed.”
