Posts Tagged ‘Chevron’

The Motley Fool

By David Lee Smith
March 18, 2010

In the hierarchy of Big Oil, I don’t have to work up a sweat to place ExxonMobil (NYSE: XOM) overall in first place — both qualitatively and quantitatively — while for several years now, Royal Dutch Shell (NYSE: RDS-A) has brought up the rear.

BP leads the way
That’s not to say, however, that the companies can’t change positions, much like NASCAR participants, passing one another when things are going especially well, or falling behind when bad luck hinders them. Take BP (NYSE: BP) for instance. It wasn’t long ago that the company was simultaneously trying to fend off the ramifications of a lethal explosion at a Texas refinery that killed 15 and injured scores of others, all while dealing with leaks in its Alaska pipelines. At about the same time its Indiana refinery was shut down by a fire, and an abrupt top management change all seemed to leave the company even further behind the eight-ball.

But in just the past couple of years, CEO Tony Hayward and the team he’s assembled have BP roaring back. In fact, the company is as clear-cut a demonstration as I can conjure up of the real value of quality management to corporate success. And now it appears that Shell, which until recently couldn’t find oil in a Jiffy Lube, may be following in the footsteps of its European rival.

And here comes Shell
If, as this week’s version of the company’s annual strategy session appeared to indicate, Shell is shedding its ineptitude, still new CEO Peter Voser will have performed a miraculous feat. After all, this is the same company that in 2004 admitted to overstating its reserves by 20%, or about 3.9 billion barrels. The result for the company was a fine of more than $350 million, plus administrative costs and other charges, along with the termination of several top executives.

And then there’s been the company’s geologic incompetence. As you know, one of the keys to judging an oil and gas producer involves the percentage of its production it’s able to replace each year. For instance, Exxon replaced 133% of its production in 2009, departing the year with more reserves than it started off with. From Shell’s perspective, as recently as 2007, the company replaced a shameful 17% of its production. In 2008, it replaced just 98% of its output.

Like a new company
Then came 2009 and surprise stardom for Shell. Believe it or not the company’s reserve-replacement ratio reached a whopping 288%, the highest in the industry. And while that ratio hasn’t yet manifested itself in Shell’s financials, in my opinion, Mr. Voser and his team have set the stage for some solid results going forward. For instance, next year two huge projects in Qatar — the Pearl Gas-to-Liquids project and Qatargas 4, a massive liquefied natural gas project — will come on stream. Also an expansion of the Canadian oil sands project that it shares with Chevron (NYSE: CVX) and Marathon (NYSE: MRO) will likely start up in the next couple of years. As Mr. Voser told the assembled analysts, the result could be an impressive 11% increase in barrels of oil equivalent production by 2012.

And it wasn’t just the discovery of 2.4 billion barrels of oil equivalent, its top performance of the past decade, that made 2009 the company’s turnaround story so strong. In addition, cost cutting received plenty of attention. By laying off 5,000, or 5%, of its employees, along with taking other measures, Shell was able to save $2 billion in expenses during the year. Further, it appears that the company is far from through in the fat-trimming department. Indeed, Mr. Voser stated during the session that another 2,000 Shell hands will be laid off by the end of next year.

Wanna buy a refinery?
Beyond that, there obviously will be asset sales as well. A month ago, rumors were rampant that the company was looking to dispose of about $10 billion worth of its properties, potentially including oilfields in the North Sea, three refineries in Europe, onshore acreage in Nigeria, and retail outlets in Africa. Whether or not that target number is accurate, the company made it clear on Tuesday that there will be refineries and retail facilities on the block.

Clearly this is not the ideal time to be in the refinery business, and, with margins having withered in that sector, all the integrated companies, from ExxonMobil on down, are struggling with their downstream operations. In fact, companies like France’s Total (NYSE: TOT), along with several other members of the Big Oil fraternity appear intent on cutting refinery capacity, and ConocoPhillips (NYSE: COP) may sell some small units.

So all in all, it’s not solely because spring is arriving that I recommend that Fools do some “Shelling.” There could be some money to be made in this clear-cut turnaround situation.

SOURCE ARTICLE

Shell’s oil facilities in the Niger Delta have suffered from a number of criminal and militant attacks, leading Peter Voser, chief executive officer, to declare that the country is no longer a key area for growth.

Royal Dutch Shell said it was reviewing its refinery operations with the idea of keeping only those with the best growth potential.

REUTERS

Shell oil sands costs rise again, partner says

* Athabasca oil sands expansion’s costs rise to $14.3 bln

CALGARY, Alberta, Feb 25 (Reuters) – The cost of a 100,000-barrel-per-day expansion of Royal Dutch Shell Plc’s (RDSa.L) Athabasca oil sands project has climbed to $14.3 billion, Chevron Corp (CVX.N), one of its partners, said in a filing.

The new estimate amounts to $600 million more than the estimate provided by Chevron a year earlier.

Chevron, which hold a 20 percent stake in the oil sands mining and upgrading project, said the expansion will boost output to 255,000 barrels per day.

The cost of completing the project has steadily climbed well beyond Shell 2006 estimate of between C$10 billion and C$12.8 billion ($9.4 billion to $12 billion). Just a year ago, Chevron pegged the cost of the project at $13.7 billion.

A spokesman for Shell declined to confirm Chevron’s estimate.

Over the years, cost overruns have been widespread for the massive projects needed to tap the oil sands, the largest crude reserves outside the Middle East.

However, rival producers in the region said costs have fallen during the past year, mostly because of reduced labor costs. As most projects were rejigged, delayed or canceled because of the financial crisis, the squeeze on a limited pool of skilled labor has eased.

Chevron’s filing did not say why it had boosted its cost estimate for the project.

Shell owns 60 percent of Athabasca, with Chevron and Marathon Oil Corp (MRO.N) each holding 20 percent. The project includes an oil sands mine near Fort McMurray, Alberta, and an upgrading refinery near Edmonton. ($1=$1.06 Canadian)

(Reporting by Scott Haggett)

REUTERS ARTICLE

ABUJA, Nigeria — Nigeria’s acting president on Monday called for the passage of a bill that analysts say would sharply reduce the profits of foreign oil companies.Acting President Goodluck Jonathan said the Petroleum Industry Bill before lawmakers would allow more oil money to return to Nigeria’s people. The bill would also require the government-run Nigerian National Petroleum Corp., to seek profits like a private business and not rely on government subsidies.

When the recession hit, the major companies streamlined, cut costs and became more efficient, giving them a shot at a profit comeback

By BRETT CLANTON
HOUSTON CHRONICLE

Feb. 21, 2010, 4:32PM

Big Oil has had a little less swagger in its step of late, humbled by a global recession that halted a multi-year run of soaring profits and exposed weaknesses that had been less acute when times were good.

International giants like Exxon Mobil and BP have suffered the effects of the economic downturn, which brought the first significant decrease in global energy demand in nearly three decades, created wild gyrations in oil and natural gas prices and wreaked particular havoc on the oil refining business.

But they responded in different ways. Some took a hard look at organizational structures and cut thousands of jobs. Others pared portfolios to pay debts and refocus on core businesses, while at least one took advantage of the depressed climate to boost spending and make a major acquisition, even as profits tumbled.

“The majors weathered the storm in 2009, but I would also say it made them more efficient, more focused,” said Gary Adams, vice chairman of Deloitte’s oil and gas practice in Houston.

The biggest international oil companies will likely continue to face tough conditions in oil refining this year, amid still-weak demand for gasoline and other fuels, rising crude prices and surplus plant capacity.

The natural gas business also remains challenging in the short term, as does the task of trying to lure back investors who recently have been more enamored of shares in smaller, faster-growing oil and gas firms.

Add broader concerns about the slow pace of economic recovery, the increasing difficulty in accessing new oil and gas resources and the possibility of new, costly regulations on the industry, and the outlook grows cloudier still.

Majors have advantage

Yet, the oil majors — with their diverse integrated business models, big balance sheets and cautious approach to investing — still may be among the best equipped in the industry to ride out what’s ahead.

“That’s partly why they’ve gotten to be as big as they are,” said Ken Medlock, a fellow in energy studies at Rice University’s Baker Institute.

Or, as Kenneth Cohen, Exxon Mobil’s vice president for public and government affairs, put it recently, “It’s really these times that our company and our business model are designed to handle.”

In recent years, rising oil and gas prices drove profits of the five biggest Western oil companies — Exxon Mobil, Royal Dutch Shell, BP, Chevron Corp. and ConocoPhillips — to new heights.

In 2008, when crude oil reached nearly $150 a barrel and retail gasoline topped $4 a gallon nationwide, the companies made a combined profit of $100 billion. That’s the second-highest on record from the group, exceeded only by the 2007 combined total of $123 billion. But the global economic crisis changed all that and in 2009 slashed the group’s combined haul to $61 billion.

In response, the majors have taken steps to cut costs and streamline operations.

• • Shell, under a sweeping reorganization launched in July by new CEO Peter Voser, cut 5,000 jobs last year, including hundreds in Houston, and aims to eliminate an additional 1,000 positions this year. It’s also reviewing 15 percent of its non-U.S. refining capacity for possible sale.

• • BP has shed 7,500 employees since late December 2007 under an ongoing turnaround program led by CEO Tony Hayward, who said this month the British oil giant still has a way to go in becoming more competitive.

• • ConocoPhillips, Houston’s largest public company, plans to sell $10 billion in assets over the next two years to help pay debts and improve financial flexibility. Separately, the company recently said it may consider closing refineries that can’t cover their costs.

• • Exxon Mobil, the biggest U.S. oil company, has shed global refining assets in recent years, and officials said it will continue to “optimize” its downstream portfolio, but it doesn’t see any need for a major restructuring.

• • Chevron Corp., after cutting expenses 15 percent in 2009, is planning a reorganization of its global refining business, which will result in an unspecified number of job losses. It has also cut its 2010 capital spending budget by 5 percent.

‘Becoming leaner’

Many of the moves were tied directly to the global collapse in refining, but the poor economic environment also gave some companies cover to take an ax to organizations that had grown too big or complex.

“A lot of this is eliminating redundancy, becoming leaner, and that’s important, particularly in an environment where costs are as high as they are,” Medlock said.

Recently, however, stabilizing global economic conditions and higher oil prices have helped stoke investment and are buoying hope of a recovery.

Spending on exploration and production, excluding acquisitions, is expected to rise by 7 percent to $326 billion in 2010 among more than 65 of the largest publicly traded oil and gas companies, according to a recent report by Norwalk, Conn.-based energy research firm IHS Herold. That compares with a 23 percent decline in upstream spending in 2009.

Also this year, majors likely will be on the hunt for acquisitions, particularly those that expand their holdings in North American natural gas shale plays, like Exxon Mobil’s recent deal to purchase Fort Worth’s XTO Energy for $41 billion.

“Unconventional gas is still where a lot of the action is going to be,” said Daniel Yergin, chairman of IHS Cambridge Energy Research Associates in Cambridge, Mass.

Not only are such deals a strategic bet the world will move toward cleaner fuels, they could help majors regain the attention of investors who have recently rewarded independent oil and gas producers for leading the way in shale and other unconventional gas plays.

In 2009, Standard & Poor’s Oil and Gas Exploration index — a basket of stocks that includes names such as Anadarko Petroleum, Apache Corp. Devon Energy and Southwestern Energy — grew 41 percent. By contrast, a Standard & Poor’s index that tracks the majors fell 4 percent.

But there is another possible explanation for the majors’ renewed interest in North American gas plays. With access increasingly limited to new oil and gas reserves around the globe, they’re simply running out of places to invest.

“All of the sudden, North America looks very attractive relative to other opportunities out there,” said Fadel Gheit, industry analyst with Oppenheimer & Co. in New York.

“It’s the devil you know versus the devil you don’t know,” Gheit said, “and they know this devil pretty well.”

brett.clanton@chron.com

SOURCE ARTICLE

“Risk Awareness has gone up; risk tolerance has gone down,” said Jon Unwin, vice president of safety, environment and sustainable development for Shell Upstream Americas’ deep-water unit. Today, Shell, Chevron and others talk about cutting offshore incidents to zero.

By John Donovan

If anyone would like a free copy of the Shell database containing the names, location, phone numbers etc of over 100,000 Shell employees/contractors, please feel free to apply via john@shellnews.net

The information would only be provided if we are convinced that it would be used for legitimate purposes e.g. poaching Shell employees (and without putting any Shell employee at risk).

For example, Exxon, BP, Chevron, ConocoPhillips or Total might each like a copy of this commercially valuable information? Prime up to date intelligence.

Don’t worry Mr Wiseman. We are only having some more fun at Shell’s expense.

The serious point is that the information is in circulation. We are not the only party with a copy of the Directory. There are many and other parties may not be as responsible as we are.

Shell has stated that its employees are at risk. If this is correct (and we accept that it is) then this is a potentially dangerous situation for which Shell as a company is ultimately responsible. The Directory could spread around the Internet in a matter of hours.

The genie is out of the bottle.

Houston, we have a problem.

“Negotiations are going on with Shell,” Shashi Ruia, chairman of the diversified Indian conglomerate, said Thursday on the sidelines of a conference, declining to indicate when the talks would be completed. Essar Group, which controls Essar Oil Ltd. (500134.BY), is in talks to acquire Shell’s Stanlow refinery in the U.K. and the Anglo-Dutch company’s Heide and Harburg plants in Germany.

Bloomberg February 04, 2010, 03:40 AM EST

By Fred Pals

Feb. 4 (Bloomberg) — Royal Dutch Shell Plc, which vies with BP Plc as Europe’s biggest oil company, laid out plans for 1,000 extra job cuts and savings of $1 billion this year because of a “challenging” outlook for refining.

Earnings excluding one-time items and gains or losses from inventories fell 28 percent in the fourth quarter to $2.8 billion from the year-earlier period. They matched the $2.88 billion median estimate of 14 analysts surveyed by Bloomberg.

Chief Executive Officer Peter Voser, who has placed 15 percent of Shell’s refining capacity up for review, said he isn’t betting on a “quick” recovery and the outlook for 2010 is “uncertain.” Oil prices had their biggest annual gain since 1999 last year, keeping refining margins under pressure as the recession weighed on fuel demand.

“Refining is struggling a lot and it is worse than we had expected,” Gudmund Halle Isfeldt, an Oslo-based analyst at DnB Nor Markets, said in a telephone interview.

Net income of $1.96 billion in the fourth quarter compared with a loss of $2.81 billion a year ago, The Hague-based Shell said in a statement today.

BP, which warned earlier this week that the recovery will be “slow and gradual,” posted net income of $4.3 billion in the final quarter of 2009. Exxon Mobil Corp., the largest U.S. company, posted a fifth straight drop in quarterly profit earlier this week to $6.05 billion.

‘Significant Overhang’

Shell cut 5,000 jobs last year and reduced costs by $2 billion, of which $1 billion came from in the last quarter. There is a “significant overhang” of industry refining capacity and about 560,000 barrels a day of capacity is under review, the company said.

“Downstream is facing some tough times,” Voser said in the statement. “Cost-focus is now embedded in our-day-to-day operations.”

Voser is seeking to revive production growth with new projects in Qatar, Malaysia and Brazil after output fell for a seventh year in 2009.

Shell’s class-A shares fell 1.9 percent in London trading to 1,741 pence as of 8:20 a.m. local time. The stock is up 0.6 percent in the past year, compared with a 15 percent advance for London-based BP.

Swiss-born Voser, who inherited the industry’s biggest spending program last year after taking over from Jeroen van der Veer as CEO, is no longer pinning his hopes on Nigeria, where Shell’s operations were plagued by militant attacks in recent years. Shell halted some flow stations in Nigeria earlier this week after sabotage caused a pipeline leak.

Lower Production

Production fell 3 percent to 3.152 million barrels of oil equivalent a day in 2009, from 3.248 million barrels a day in 2008. Fourth-quarter production fell 2.5 percent to 3.331 million barrels of oil equivalent a day.

Voser expects natural gas to make up more than half of Shell’s production by 2012. Gas must get “much more on the agenda as its potential role is underestimated,” Voser said in Davos last week.

Shell in December produced its first million barrels of oil from the Parque das Conchas project off the coast in Brazil. It also exceeded targets for the shipments of liquefied natural gas and crude oil from its Sakhalin-2 venture in Russia’s Far East.

Shell on Feb. 1 announced an ethanol venture with Cosan SA Industria & Comercio in Brazil. Shell will contribute assets including 2,740 service stations and as much as $1.93 billion to the 50-50 venture.

–With assistance by Eduard Gismatullin and Brian Swint in London. Editors: Stephen Cunningham, Will Kennedy.

To contact the reporter on this story: Fred Pals in Amsterdam at +31-20-589-8563 or fpals@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at +44-20-7073-3603 or wkennedy3@bloomberg.net.

SOURCE ARTICLE