Why the World Needs the US Economy to Struggle

By John Mauldin

The headlines this morning talk about the US dollar hitting an 11-year high. I have been saying for years that the dollar is going to go higher than anyone can imagine. This trade is just in the early innings. And the repercussions will be dramatic, not only for emerging markets that have financed projects in dollars, but also for commodities and energy, gold, and a variety of other investments. The world is at the doorstep of a new era of volatility and currency wars.

In this week’s letter, my associate Worth Wray explores what a rising dollar means for emerging markets and what central banks are likely to do in response. Can they smooth the ride, or will it be the world’s scariest roller coaster? This letter will print long because of the number of fabulous charts Worth provides. I might make a brief comment or two at the end. Here’s Worth.

On the Verge of a Disaster… or a Miracle

By Worth Wray
Twenty years after the first divergence induced currency crisis of the 1990s, commodity prices are tumbling, the US dollar is rallying, and externally fragile emerging markets are reliving the horrors of their not so distant past. Except, this time, major economies like the United States, the United Kingdom, the Eurozone, Japan, and the People’s Republic of China may not be able to side step the ensuing contagion.

With 2014 now behind us, I want to focus this week's letter on what may prove to be the most important global macro pressure points in the coming year(s):

• The growing divergence among the world’s most important central banks
• The ongoing collapse in oil and other commodity prices as a function of excess supply and/or weakening global demand
• The rise of the US dollar, driven by divergence and risk aversion… and the squeeze it’s putting on the multi-trillion-dollar carry trade into emerging markets
• The vicious slide in emerging-market currencies
• The rising risk of 1990s style contagion and financial shocks
• And what, if anything, can avert the next global financial crisis

But first, let me tell you a story.

As some of you already know, I was born and raised in Baton Rouge, Louisiana – an old Southern city built on a bluff above the Mississippi River. It’s about an hour northwest of New Orleans – you can see it circled on the map below.

Given its inland position, Baton Rouge is fairly insulated from the fiercest impact of coastal storms; but hurricane season still tends to be the most stressful time of year. Our oak-covered neighborhoods and low-lying swamplands are vulnerable to the high winds and flood rains that can accompany a direct hit – not to mention the violent tornadoes that occasionally occur in the unpredictable northeastern quadrant of the tropical cyclone zone.

These storms don’t hit us often, but locals recall a handful of hurricanes that dealt heavy blows to the area over the years. And it goes without saying that the damage from any storm gets dramatically worse the closer you get to the Gulf of Mexico. Entire towns along the Gulf Coast have been swallowed up and swept away over the years by catastrophic storms like Camille (1969), Andrew (1994), and more recently Katrina (2005).

Twelve years ago, my father and I found ourselves in the path of such a storm.

According to the National Hurricane Center, Hurricane Lili was “supposed” to make landfall as a relatively weak storm. Just another named hurricane for the record books that would soon fade from our collective memory… or so we thought.

At 10:00 PM on Tuesday, October 1, 2002, Lili was a Category 2 hurricane with maximum sustained winds of 105 mph. Routine hurricane season stuff.



I went to sleep that night expecting a little rain and few uneventful days home from school; but when I woke up on Wednesday, October 2, I was shocked to see Lili develop an incredibly well articulated eye wall and grow more powerful by the hour – from 110 mph at 7:00 AM that morning to 135 mph at 1:00 PM and finally to 145 mph at 10 PM that night.

I remember the nervous look on my dad’s face that night as the two of us boarded up our doors and windows. A little earlier that evening, one of his local government contacts shared that, behind closed doors, state and local officials were expecting “mass casualties” from Morgan City (on the coast) to Baton Rouge… but it was already too late to order an evacuation so far inland. Given the mild forecasts, few were prepared for a major hurricane; and at that point in the day, making a public announcement would do little more than spark a panic. The best we could do was hunker down and pray.

This was the last advisory I saw before my head hit the pillow that night: Lili had strengthened to a strong Category 4 hurricane with maximum sustained winds around 145 mph, reported gusts above 210 mph, and the very real possibility of making landfall as a merciless Category 5. If you look at the Saffir Simpson hurricane scale, there’s a reason the first word you see next to Category 4 and 5 storms is catastrophic.

These storms are real killers.



Expecting to wake up early the next morning to sounds of thunder, pounding rain, and the eerie whistle of gale-force winds – or worse, I went to sleep Wednesday night with this image swirling through my mind:



But when I woke, I was shocked once more to learn that Lili – for reasons no one had anticipated – had all but died in the night and made landfall that morning as a small Category 1 hurricane with maximum sustained winds of only 90 miles per hour. In less than twelve hours, it had sharply decelerated from what could easily have been one of the most catastrophic storms on record to an inconvenience for most inland communities. Sure, it inflicted some damage along the coast – tearing up marshlands, knocking down power lines, blowing over trees, and flooding homes – but a Category 4 or 5 storm would have swallowed those areas whole.

As far as I know, there was no precedent in the Gulf of Mexico – or anywhere in the world – for Lili’s sudden death. It baffled even the most experienced meteorologists and left us all scratching our heads. Some people talked of miracles; others insisted there had to be a logical explanation. I imagine there’s some truth to both ideas.

While the press coverage surrounding Lili’s remarkable weakening has largely faded into obscurity, I was able to find one surviving article from USA Today that captures the confusion in the storm’s aftermath:

“Scientists Don’t Know Yet Why Lili Suddenly Collapsed.”

Hurricane Lili showed forecasters there is still a lot they don't know about hurricane intensity. Lili weakened in the hours before landfall Thursday as rapidly as it had strengthened into a ferocious storm the day before. Forecasters with the National Hurricane Center in Miami had hinted as early as Monday that Lili could rev up into a dangerous hurricane over the extraordinarily warm Gulf of Mexico, though they were surprised to see it grow so strong so quickly. But Lili's quick demise … had them admitting they didn't know what had happened…. National Hurricane Center Director Max Mayfield agrees. At a loss to explain Lili's fluctuations, he says, “A lot of Ph.D.s will be written about this.”

We still don’t have a definitive answer, but three theories emerged in the immediate aftermath:

1) Dry air was pulled into the storm and ate away at its moisture sucking core;

2) Winds aloft increased across the storm, creating wind shear and tipping the delicate balance that keeps intense storms going;

3) Water cooler than the 80° necessary to sustain a hurricane sapped Lili's strength when it moved over the same part of the north central Gulf of Mexico that had been churned up by a smaller hurricane, Isadore, a week earlier.

Regardless of why it happened, I learned something that day that will stay with me for the rest of my life: Even when a disastrous course of events is set in motion, disaster does not always strike. Surprises happen. Even miracles. Forecasts are often wrong – but it always pays to prepare.

Let me explain…..

Boom & Gloom

Just before Halloween, I wrote a letter (“A Scary Story for Emerging Markets”) explaining that the widening gap in economic activity among the United States, Japan, and the Eurozone was starting to demand a dangerous divergence in monetary policy.

Within a matter of days, the FOMC announced the end of its QE3 program... and then the Bank of Japan shocked the world, announcing a massive expansion in its own asset purchases timed to coincide with the government pension fund’s announcement that it was getting out of JGBs and into global equities.



Just as I had feared, the US dollar and Japanese yen were breaking out in opposite directions on real policy action, as Mario Draghi meanwhile continued to talk the euro down with the threat of future action. This may seem like a trivial shift in global FX markets, but it may have been the most important development we have seen since the global crisis peaked in 2008.



Since then, global economics has been a story of boom, gloom, and doom, as Marc Faber likes to say. We’re seeing a boom in US economic activity (or as much of a boom as you can expect with a massive debt overhang); a gloomy slowdown and slide toward deflation across Europe and China, along with the still-likely failure of Abenomics in Japan and renewed signs of FX contagion in emerging markets; and doom in commodities markets, particularly oil.

I’ve shared this next chart before, but it’s worth an update. Those of us who watch the US dollar were not surprised by the collapse in oil prices, because the dollar’s surge was already telling us something about global demand.



What did surprise a lot of economists (myself included) was the breakdown within OPEC, particularly Saudi Arabia’s willingness to accept whatever price the market offered in order to protect its market share.

Conspiracy theories aside as to whether OPEC’s move constitutes an anti-American trade war against US shale producers or a pro-American squeeze on Russia, Iran, and Venezuela, it’s already putting a serious squeeze on Texas oil men, Russian “oiligarchs,” and oilexporting emerging markets.

We’ll revisit the oil shock in a bit, but for now let’s get back to the US dollar.

To continue reading this article from Thoughts from the Frontline – a free weekly publication by John Mauldin, renowned financial expert, best-selling author, and Chairman of Mauldin Economics – please click here.

The article Why the World Needs the US Economy to Struggle was originally published at mauldin economics

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Is an oil glut on the way in 2014? Raymond James Analyst's makes contrarian forecast

One of our favorite analyst in the oil patch is Andrew Coleman of Raymond James Equity Research. Coleman is making news this week as he is making a contrarian forecast with his call for an oil glut in 2014. Shale oil production is on the ascent, with the United States joining Saudi Arabia on the supply side, while China’s hunger for oil may be sliding and demand in developed countries remains in decline.

In this interview with The Energy Report, Coleman explains his thinking and names the producers best positioned to capitalize on the turbulence ahead.

The Energy Report: Why are you expecting an oil glut in 2014?

Andrew Coleman: Because of the evolution of North American shale oil plays, we are on track to add about 3 million barrels (3 MMbbl) of new supply over the next five years. Yet we know oil demand has been falling across the developed nations and is still weak coming out of the global financial crisis. Those developments point toward a glut.

TER: Saudi Arabia surprised you last year by cutting production when oil was more than $110 per barrel ($110/bbl). Why would Saudi or other suppliers not do that again?

AC: What hurt production outside the U.S. last year and helped keep the demand side a little more in balance was that Saudi cut 800,000 barrels a day (800 Mbbl/d) in Q4/12, sanctions in Iran reduced exports by about 800 Mbbl/d as well, conflict in Sudan took 300 Mbbl/d offline and the North Sea average was lower by about 130 Mbbl/d. These reductions kept last year's supply more balanced than we thought it would be. Going forward, Saudi's ability or willingness to cut is certainly going to be tested, because by our model the country may need to cut 1.5 million barrels a day (1.5 MMbbl/d), about double what it cut last year. It would have to do that for a longer period of time, given the amount of excess storage that could show up on the global markets.

TER: But, as you just pointed out, Saudi Arabia's cut came in the context of actions by other players. The other players are going to be as unpredictable as they were last year, aren't they?

AC: Certainly. That's a big risk to our call. The other players are very unpredictable as well. I think Saudi has two years of foreign currency reserves at its current spending level. The country doesn't have a deficit right now, so the question is, would it be willing to tolerate a deficit? Most other countries have deficits, but that doesn't mean Saudi will. It is hard to predict because we're dealing with personalities and governments, as opposed to hard numbers. We're going to keep watching, and we'll adjust our forecast if some of those scenarios play out.

TER: Was Saudi Arabia's production cut driven by a policy change?

AC: Saudi Arabia cited internal demand issues in its production cut. The cut may also reflect an adjustment to offset the start-up of Manifa, which occurred last month.

TER: If the glut does occur, which benchmark crudes will be most affected, whether by going up or going down?

AC: In the U.S., production of light oil will dramatically increase due to the shales. Without the ability to export, we are already seeing prices of West Texas Intermediate (WTI) reflecting that "stranded" lighter barrel. We see light imports being backed out of the U.S. as early as this summer as well. Finally, as infrastructure bottlenecks are removed onshore, we see risk to Gulf Coast prices (e.g., Light Louisiana Sweet). With much of the U.S. refinery infrastructure having been geared to process heavier barrels, the large growth in light barrels has already driven WTI prices to a discount with Brent. Risks to Brent could come down the road if European and Chinese demand remains tepid.

TER: Will Venezuela's production decline continue?

AC: With Nicolas Maduro running things down there now, we see Venezuelan production remaining flat for the next couple of years. Volumes declined each of the past four years.

TER: What role will other players in the oil space have in either creating or preventing the glut?

AC: Prior to about 2009, we were in a world where there was one marginal producer of oil (Saudi), and one marginal buyer of oil (China). Now we're in a world that has two marginal suppliers of oil, those being the U.S. and Saudi. We have not added any new marginal buyers of oil. The question remains, is that marginal buyer of oilChinaas hungry for oil as it has been in the past? We also know that as economies develop, they become less energy intensive. And, factoring in the potential growth of natural gas consumption, that drives our caution.

TER: Denbury Resources Inc. (DNR:NYSE) depends heavily on CO2 flood for its production. Will that be economically feasible if a glut occurs?

AC: Yes. Denbury is profitable in the $50 per barrel ($50/bbl) range. Most of its current production comes from older oilfields that it owns on the Gulf Coast. The company's CO2 is also on the Gulf Coastin fact, the company has the only naturally occurring CO2 source outside the Rocky Mountains. And it has the advantage of a pipeline that ties those CO2 assets to its producing fields on the coast. Because the oil is produced next to the infrastructure used to refine it, Denbury doesn't have to spend a lot of money on transportation, which helps the economics.

"The evolution of North American shale oil plays has us on track to add 3 MMbbl of new supply over the next five years."

I'm not worried about Denbury being able to economically produce oil because it is cycling CO2, an injection process by which the company puts CO2 in the ground, displacing (and producing) oil as it goes. The company doesn't have to drill hundreds of wells every year to increase production. All it has to do is get the facilities working and then maintain them, versus continually deploying a lot of new capital in the ground each year.

TER: CO2 flooding is not necessarily more expensive than drilling brand new wells, is that correct?

AC: Correct. The two processes present different sets of challenges. If you are going to drill new wells, you need to come up with the drilling rig, well tubulars, hydraulic fracturing fluids and frack sand, and you must build roads and pipelines to connect those wells. If you are going to do a CO2 project, you've got to get the CO2, which costs a little bit of money, and you need injection pumps. Much of the initial infrastructure (roads, wells, etc.) is already in place.

It is a slightly different business model but is still based on extracting additional barrels from historically large accumulations. Finding risk is very low, leaving the bulk of the costs as development in nature only. It's a business model that you don't see a lot in the exploration and production (EP) space. Most players with CO2 assets the ExxonMobils (XOM:NYSE), the Chevrons (CVX:NYSE), the ConocoPhillips (COP:NYSE) of the world have those assets embedded in much larger organizations, as part of their core businesses. Most of the EPs that we focus on, because of their growth nature, are drilling wells on a continual basis to replenish and add to production.

TER: With rare exceptions, Denbury has been stalled below $20/share for more than four years. You bumped your target price from $23 to $24 based on your pricing model. If the model says Denbury can reach that level, why hasn't it done so before?

AC: A few years ago, the company was bringing on one of its biggest fields, Tinsley. It was the largest project the company had undertaken up to that point and some operational hiccups caused it to miss some production targets. As a result, management initiated a stock buyback program, and added to the technical team by bringing in Craig McPherson from ConocoPhillips.

"With much of the U.S. refinery infrastructure geared to process heavier barrels, the large growth in light barrels has already driven WTI prices to a discount with Brent."

Over the last couple of years the company has put more process in place and structured its operations and technical teams to manage its multiple large-scale CO2 floods (aptly titled "Operations Excellence"). Over the last 18 months, management has slowly inched up its tertiary production outlook and now is saying it's going to come in at the high end of guidance. The guidance has slowly trended up as the company has been able to get more control on the operational side. That is why the stock has risen from where it was a couple of years ago, from $1112/share to where it is now ($18). To get into the twenties, it would be helpful to have a little bit of oil price support. It would also be helpful to see production growth expectations pick up as the company brings on more of its large-scale fields.

Management has also been discussing ways of accelerating cash flows from the build-out of its tertiary oil business. The creation of a master limited partnership (MLP) is one way, though management hasn't decided yet. If you look at how some EP MLPs are structured, you could make a case in which Denbury would trade from the mid twenties to the low thirties. My price target reflects continued execution as well as the potential of a little more color on how an MLP might work for the company.

TER: Do you think converting to an MLP would increase the value of the stock?

AC: Potentially. Assets with low maintenance capital do well in an MLP. Maintenance capital is the money needed to keep production flat. If you think about the CO2 floods, they might fit nicely because drilling capex is low. Once you get those facilities up and running, then incremental costs involve getting more CO2, as opposed to getting rigs and steel and frack sand, etc.

While Denbury may not, at this point, grow 4050% like some of the premier shale players, growing in the 1015% or maybe 1520% range could be attractive for an EP MLP. Investors would have long-term visibility on production growth and the company would be relatively stable, so it could then project the cash flow stream that could be dividended out to investors.

TER: Energy XXI (EXXI:NASDAQ) has posted disappointing results recently and management has announced a $250 million ($250M) buyback program. What does management hope to accomplish?

AC: Management is trying to draw attention to the fact that it expects to have free cash from the asset that it produces from, which is not something we've seen a lot of companies focus on historically in the EP business. Most EP companies are growth companies, with historically high levels of reinvestment of cash flows to fund future growth.

With Energy XXI recently taking production guidance down to 10% for the next 12 months, it's going to have a little more capital available to buy back shares. By my model, assuming the oil price is around $95/bbl net, the value of the company's proved reserves alone is somewhere in the $30/share range. If the company buys back shares for $25/share, that is 1520% cheaper than what the assets are worth. That gives the company no credit for any future drilling potential, too. Gulf Coast players tend to trade at some of the most conservative multiples in the EP peer group, but that doesn't reflect the fact that they generate a lot of cash flow.

TER: What's behind the disappointing results?

AC: The company had some exploration wells that didn't pan out. That happens when you drill wells with chances of success that are 30% or lower. The offset is when a high potential well of that magnitude works; it covers the cost of the past unsuccessful tries and then some! If you look at Energy XXI's capital budget, it has roughly $500600M of base capital for its base assets. It is going to spend $100200M on higher-risk, higher potential exploration stuff. So 15% of its annual program is directed at these high-risk/high-potential wells.

"Most EP companies are growth companies, with historically high levels of reinvestment of cash flows to fund future growth."

Over the last two or three years, management spent a lot of money on the Ultra-Deep Shelf (UDS),and it has recently started to balance that by adding exploration drilling around its existing fields. It signed joint ventures with Apache Corp. (APA:NYSE) and ExxonMobil and will test some play concepts that were generated in house, as well as working with its partners, McMoRan (MMR:NYSE) and Plains Exploration Production (PXP:NYSE) on the UDS. Freeport McMoRan Copper and Gold Inc. (FCX:NYSE) recently completed its acquisitions of McMoRan Exploration and Plains Exploration.

The reason Energy XXI missed production numbers was also partly due to lingering weather impacts from last fall's storm season.

TER: Energy XXI's initial strategy was to grow through acquisition, and it did have five large acquisitions, the last one completed in 2010. How well has it performed with the acquired assets?

AC: The acquired assets are probably 6070% of the inventory the company can drill now. Getting assets from Exxon, and a couple of years before that from Mit Energy Upstream, Energy XXI was able to high-grade and increase its inventory. Hopefully the company is done integrating the assets, but it's a continuous process to high-grade a portfolio, drill your best projects and optimize those projects as you go. I look to see that continue. In fact, Energy XXI recently brought its reserve engineering in house.

Over the last few years, partly because the company was smaller, it let third party engineers handle 100% of its reserves for year-end reporting. Most larger companies do that in house, and then use reserve engineers to audit the process for consistency. By bringing the engineering in house, Energy XXI is trying to show the market that it has a bigger organization that it has the bigger skill set and it wants to be more in tune with taking prospect sizes and prospect targets that match its capital program with expectations.

TER: What is the company's strategy now? Is it still planning acquisitions or it is going in new directions?

AC: The strategy continues essentially unchanged. First, it wants to invest in as many high IRR capital projects as it can. The CEO has said that for every dollar invested in the current year, he expects to get $1.502.00 in cash flow out of the ground. From that standpoint, the company can continue to spend money to get more returns, but it must balance that with trying to find the next company makers those bigger projects that support multiple well developments and new platforms.

For the organic portfolio, the company also has to manage whether it can buy assets that would consolidate parts of its fields in the Gulf of Mexico and do that at an attractive price. Energy XXI is always looking at acquisitions. It's always looking at optimizing the drilling program. With the share buyback, the company has tried to put a little more emphasis on the fact that it recognizes the value of cash flow to investors beyond the growth side of the EP business.

TER: Bonanza Creek Energy Inc. (BCEI:NYSE) has been a strong performer for you, but its recent earnings report was a miss right across the board. You've cut its target price from $41 to $40. What caused that miss?

AC: Coming out of last year and into Q1/13, Bonanza Creek had a slowdown in activity due to its rig schedule and winter weather. The company is in the right play in the Niobrara oil shale formation, where it is a small-cap player surrounded by Noble Energy Inc. (NBL:NYSE) and Anadarko Petroleum Corp. (APC:NYSE). It was getting its program ramped up in earnest, but the slowdown caused it to come in below expectations for the quarter. In all fairness, at Bonanza's analyst meeting in April, management discussed the slower start to the year.

"If the price spread between oil and natural gas remains wide, we'll see continued evolution toward natural gas use across our economy."

Fundamentally, Bonanza stock still is under leveraged. Its debt is less than current cash flow; it's going to grow north of 60% this year; it continues to have access to inventory; and it is testing multiple zones to increase its inventory potential. From that standpoint, the stock still looks compelling and still has lots of growth in front of it. That is why I only took the target down by a dollar.

TER: You make it sound like growth is simply built into the company's current direction. Does Bonanza not need to improve something in operations to get results?

AC: Not really. Bonanza Creek's going to drill 70+ wells this year in the Niobrara. It is testing 5-acre downspacing in the Cotton Valley, it is testing long laterals in the Niobrara B bench and it is testing the Codell zone for the Niobrara as well as the C bench in the Niobrara.

It doesn't need to do anything more than continue drilling and hit its targets in terms of ramping the rig count. With four operated rigs presently, the company is doing everything that management said it would do and that allows Bonanza, based on my bottom-up activity model, to hit my $40/share target.

Additionally, across the play you've got the LaSalle Plant, which DCP Midstream Partners, L.P. (DPM:NYSE) is building. The plant should come on line at the end of the summer. That provides additional capacity to enhance volume growth for players in the basin. The Niobrara is a play that works. You've got sufficiently large companies in the play to keep capital and facilities growing. Bonanza Creek is falling right in line there, and keeping up with its peers.

TER: What other companies are you excited about right now?

AC: My favorite stock is Anadarko. The biggest story for Anadarko will be the resolution of the Tronox Inc. bankruptcy case. After that, the company has numerous operational catalysts on the horizon, including 1) an ongoing process to partially monetize some of its Mozambique gas assets; 2) its Yucatan exploration well (operated by Royal Dutch Shell Plc (RDS.A:NYSE; RDS.B:NYSE) in the deepwater Gulf of Mexico; 3) the sale of its Brazilian assets; and 4) ongoing drilling/testing of its extensive onshore shale inventory (e.g. Niobrara, Eagle Ford, Marcellus and Utica).

The company has established itself as a premier explorer, and with the Tronox case resolved, Anadarko is also an attractive takeout candidate. In our net asset value (NAV) model, I see its shares as worth up to $130 each, but have assigned a $105 price target given visibility on near-term cash flows.

TER: Do you have any parting thoughts on the oil and/or gas markets that you'd like to share?

AC: Yes. From our macro view, we're cautious about the oil outlook. We've got a lot of production, and we're unclear about the strength of demand on the oil side in the next 618 months, going through 2014. On the gas side, after bottoming last year, gas looks like it is poised to be higher down the road, which makes us more constructive there. We have to see more evolution on the demand side, be it in the short term with power plant construction or in the longer term with the quest for use of compressed natural gas as a transportation fuel.

If the price spread between oil and natural gas remains wide, we'll see continued evolution toward natural gas use across our economy. That will be good for everybody. It should help unlock value for the manufacturing space. It should also unlock value for consumers, who won't have to spend quite so much to heat their homes and fuel their cars. It would ultimately kick-start the next big wave of economic expansion on the back of affordable natural gas in the U.S.

TER: Andrew, thank you for your time.

AC: My pleasure.

Andrew Coleman joined Raymond James Equity Research in July 2011 and co-heads the exploration and production team. Since 2004, he has covered the EP sector for Madison Williams, UBS and FBR Capital Markets. Coleman has also worked for BP Exploration and Unocal in a variety of global roles in petroleum and reservoir engineering, operations, business development and strategy. Coleman holds a bachelor's degree in petroleum engineering from Texas AM University and a master's degree in business administration (finance and accounting) with a specialization in energy finance from the University of Texas at Austin. He is a director for the National Association of Petroleum Investment Analysts and a member of the Texas AM Petroleum Engineering Industry Board, the Independent Petroleum Association of America's (IPAA) Capital Markets committee and the Society of Petroleum Engineers (SPE).

Posted courtesy of The Energy Report and our trading partners at INO.com


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BP Announces Second Quarter 2012 Results

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BP today reported its quarterly results for the second quarter of 2012. Underlying replacement cost profit for the quarter, adjusted for non operating items and fair value accounting effects, was $3.7 billion, compared with $5.7 billion for the same period in 2011 and $4.8 billion for the first quarter of 2012.

Compared to the previous quarter, the underlying results were depressed by weaker oil and US gas prices together with reductions in output due to extensive planned maintenance, particularly affecting high margin production from the Gulf of Mexico, and lower net income from TNK-BP. This was partly offset by a beneficial consolidation adjustment to unrealised profit in inventory.

BP’s share of net income from TNK-BP was $700 million lower than the first quarter, driven by the impact of the rapid fall in oil prices amplified by the lag in Russian oil export duty, which is based on earlier higher oil prices. At current Urals prices, net income in the third quarter is expected to show some positive reversal of the duty lag.

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Bob Dudley, BP group chief executive, said: “We recognise this was a weak earnings quarter, driven by a combination of factors affecting both the sector and BP specifically. “The effects of price movements have impacted our earnings in the quarter. Our extensive turnaround and maintenance programme, which will continue into the third quarter, is also affecting some aspects of our near term results. All of this will take time, but it is important investment that will enhance safety and reliability for the long term.

As we deliver this major transformation, we are also committed to generating sustainable efficiencies in our operations. “Rebuilding trust with our shareholders and other stakeholders is vitally important. We are making progress against the critical strategic and operational targets we have set ourselves and are confident that this will deliver long term, sustainable value.”

Read the entire earnings report

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Still Doubting COT Favorite SeaDrill? SDRL

If you are still doubting the crew at Seadrill's (SDRL) ability to keep up with the current dividend this may be yet another reason to....think again. The latest news of a $4 billion commitment for the use of three offshore rigs in the Gulf of Mexico should assuage concerns about the company's ability to contract out all the rigs it has ordered as speculation rigs. Calculating the contract works out to $576,800 per rig per day over six plus years and increases SDRL's contract revenue backlog by nearly a third.

Here is your free trend analysis for SDRL

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Sharon Epperson: Where is Commodities Headed on Friday?

With a new storm brewing in the Gulf of Mexico being front and center in traders minds going into Friday trading, Sharon Epperson discusses the today's activity in the commodities markets and looks at where crude oil and precious metals are likely headed tomorrow.

Commodity Corner: Crude Oil Edges Lower on Government Data

Crude oil futures reversed yesterday's upward move on government reports indicating a rise in oil stockpiles. Light, sweet crude ended a four day winning streak Wednesday, settling 9 cents lower at $88.81 a barrel. Meanwhile, its European counterpart gained 83 cents to settle at $114.85 a barrel.

The U.S. Department of Energy reported an increase in oil inventories by 5.3 million barrels and a 2.8 million barrel drop in gasoline stockpiles. The build in oil inventories was outweighed by the draw in gasoline stockpiles, stifling the drop in crude prices.

In a choppy trading session, crude traded within a range of $87.67 to $89.54 while Brent crude fluctuated between $113.68 and $115.14. Traders remain wary of Tropical Storm Katia, located in the Caribbean Sea. The National Hurricane Center said Katia has a 30 percent chance of becoming a hurricane later Wednesday.

Front month natural gas passed the $4 mark for the first time Wednesday since Aug. 15. Natural gas advanced 14.5 cents to end the trading session at $4.05 per thousand cubic feet. Prices received a boost Wednesday as the Destin Pipeline, a major pipeline that transports gas from offshore wells in the Gulf of Mexico to processing facilities in Mississippi, was shut down. Owner BP did not say how long the pipeline would remain offline.

September gasoline gained 4 cents, or 1.2 percent, settling at $3.03 a gallon at expiration. The intraday range for gasoline prices was $3.002 to $3.057.

Posted courtesy of  Rigzone.Com

Ken Salazar in Alaska....President Obama Backs Additional Oil Drilling in Alaska

Interior Secretary Ken Salazar came to Anchorage on Monday and said the Obama administration supports more oil drilling in Alaska, potentially including offshore Arctic development.

Salazar joined Alaska Sen. Mark Begich and Rhode Island Sen. Jack Reed, both Democrats, for a meeting with Alaska businesspeople and said the president's feeling toward Arctic offshore drilling is "Let's take a look at what's up there and see what it is we can develop." But any Arctic oil development must be done carefully, he said. Salazar said the Arctic lacks needed infrastructure for responding to potential offshore oil spills and cited painful lessons from the Deepwater Horizon spill in the Gulf of Mexico last year.

"Not the mightiest companies with multibillion dollar pockets were able to do what needed to be done in a timely basis, and the representations of preparation simply turned out not to be true from the oil companies that had a legal obligation to shut down that kind of an oil spill. ...

When you look at the Arctic itself, we recognize that there are different realities - the ocean is a much shallower ocean, conditions are very different than we had in the Gulf of Mexico. (But) there are challenges that are unique to the Arctic," Salazar told Alaska reporters......Read the entire article.

Rigzone: Obama Orders Expansion of Oil Drilling

Nine months after the end of the nation's worst oil spill, President Obama is ordering the Interior Department to expand drilling in the Gulf of Mexico, hold annual lease sales in Alaska's National Petroleum Reserve and speed up geological research of exploration prospects off the south and mid Atlantic coasts.

The moves, announced in the president's Saturday radio address, are not so much a reversal as a return to the policy stance Obama adopted in March 2010, shortly before the Deepwater Horizon drilling rig exploded in flames and BP's Macondo well began gushing millions of barrels of oil into the Gulf of Mexico.

In his four minute address, Obama touched on the hardship caused by $4 a gallon gasoline, but made no mention of last year's spill, an environmental disaster that temporarily derailed new wells and set off political sparring over drilling permits that Republicans and oil executives say have been needlessly delayed.

Instead, the president said he would increase access to the Alaskan reserve, an area four times the size of New Jersey. He said that he was also ordering Interior to hold a Gulf of Mexico lease sale this year and two in 2012, thus completing the department's five year plan for the area. And he said that seismic work off the Atlantic coast would map out new areas for future lease sales.....Read the entire article.


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Toby Shute: 3 Oil Deals Shaking the Market

This week, I've spotted at least three billion dollar oil deals that should be of interest to investors (all this as of Tuesday!). Combined with other activity in recent weeks, this suggests that there's plenty more M&A mayhem to come as we approach the end of the year.

A big splash in the Gulf
First off, Energy XXI (Nasdaq: EXXI) agreed to pick up a bunch of ExxonMobil's (XOM) shallow water Gulf of Mexico properties for $1 billion. This follows similar moves by Apache (APA), which grabbed Devon Energy's (DVN) shallow Gulf assets for an identical sum, and McMoRan Exploration (NYSE: MMR), which picked up the pieces from Gulf dropout Plains Exploration & Production (PXP).

Energy XXI is picking up 66 million barrels of oil equivalent (Boe) of proved and probable reserves, and 20,000 Boe per day of production. The cash flow multiple paid is 3.2. Apache got more reserves with its purchase (83 million boe), slightly less production (19,000 boe/d), and paid 3.7 times estimated cash flow. In both cases, oil and natural gas production is split roughly 50/50, so I assume the lower Energy XXI cash flow multiple is largely a reflection of higher oil prices. Any way you slice it, the purchase price looks reasonable.

With this purchase, Energy XXI becomes the third largest oil producer on the Gulf of Mexico shelf, leapfrogging W&T Offshore (WTI) in terms of reserves, and both McMoRan and Stone Energy (SGY) in terms of production. The assets acquired have the potential to deliver around 720 million Boe at a development cost of around $15 per barrel.

That would be a really compelling figure, if a large component of that total resource potential was oil. The potential oil mix, surprisingly, is only around 10%, however, alongside 3.9 trillion cubic feet of gas. So the big upside appears to be in deep and ultradeep gas prospects, such as the ones Energy XXI is exploring in partnership with McMoRan elsewhere on the Gulf of Mexico shelf.

Incidentally, Exxon walked away from one of these ultradeep drilling projects a few years ago. This week's sale confirms that the company lacks an appetite for this activity. Given the likely difficulties in securing future permits to drill these extremely high-pressure wells, I can't really blame it. I'm a decided fan of wildcat drilling in the Gulf, but my preference is for companies sizing their bets more conservatively.

Yet another Bakken buy
Last week we saw Williams (WMB) make a $925 million purchase in prime Bakken territory up in North Dakota. This week, Hess (HES) edges it out with a $1.05 billion buy of privately held TRZ Energy. This follows closely on the heels of the company's acquisition of American Oil & Gas (AEZ) earlier this year.

The 167,000 acres acquired in this latest deal bring 4,400 barrels of daily production to the table. That's a pretty massive $238,600 per flowing barrel purchase price. At under $6,300 per acre, though, this purchase comes at a discount to those executed by Williams and Enerplus Resources Fund (NYSE: ERF). From what I can piece together, TRZ is active in Dunn and Williams County. You may recall that Dunn County is the location of Kodiak Oil & Gas' (AMEX: KOG) core development area. This should be very prospective acreage, suggesting that Hess may have gotten a great deal here.

Another Asian oil sands suitor
Over the past year or two, one of the most active players in the Canadian oil sands has been China. PetroChina (PTR) took a big stake in a pair of Athabasca Oil Sands' projects last September. More recently, Sinopec (SHI) snapped up ConocoPhillips' (COP) 9% stake in Syncrude, and a Chinese sovereign wealth fund snapped up a stake in some Penn West Energy Trust (NYSE: PWE) properties.

Showing that China isn't the only one salivating over the security of long term oil sands supply, Thai energy company PTTEP has also stepped forward. The company is picking up 40% of Statoil's (STO) Kai Kos Dehseh oil sands project for $2.3 billion. The entry looks low-risk, as first production is slated for early 2011.

Thanks to heady oil prices, the oil sands have made a roaring comeback since the dark days of 2008. As long as you believe that the world economy will continue to support $70 plus oil prices, the oil sands are indeed an interesting place for your money. Cenovus Energy (CVE) continues to be my favorite operator in that realm.


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White House Signals Deepwater Drilling Ban to End Soon

Top Obama administration officials signaled Tuesday that a moratorium on deepwater oil drilling could end "very soon," but it's unclear how quickly idled oil rigs could go back to work in the Gulf of Mexico. The Interior Department scheduled a 1 p.m. EDT news conference to discuss what it said would be an announcement on "the current suspensions on deepwater drilling." White House Press Secretary Robert Gibbs told reporters Tuesday that the Interior Department will lift its moratorium on deep water oil drilling in the Gulf of Mexico "very soon," likely this week. Asked if he was saying the ban will be lifted this week, Gibbs said: "I do."

But the government's top offshore drilling regulator, Michael Bromwich, separately told reporters during an event across town that it is unlikely companies could resume drilling immediately, even when the moratorium is lifted. Bromwich, director of the Bureau of Ocean Energy Management, Regulation and Enforcement, said his agency will need to time to carefully vet companies' applications to ensure they comply with new safety and environmental regulations established since the April 20 explosion of the Deepwater Horizon oil rig and the subsequent oil spill in the Gulf of Mexico. He emphasized that the pace of approvals will depend on......Read the entire article.


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Disaster in The Gulf....Government Gives Notice on Abandoned Platforms

The Obama administration on Wednesday launched plans to clean up "idle iron" in the Gulf of Mexico, requiring companies to dismantle deserted platforms and permanently plug thousands of abandoned oil and gas wells, including some that are decades old. The mandate will affect nearly 3,500 nonproducing wells and require the decommissioning of about 650 unused oil and gas production platforms.

Interior Secretary Ken Salazar said the move is part of a broader push to boost environmental protections and the safety of offshore energy production. "We have placed the industry on notice that they will be held to the highest standards of planning and operations in developing leases," Salazar added.

For years, environmentalists and industry analysts have been highlighting the problem of "idle iron", the glut of abandoned rigs, platforms and wells in the Gulf that are no longer in use. And the new rule was in the works long before the April 20 explosion of the Deepwater Horizon rig.

But the disaster inspired fresh scrutiny of the problem and spurred concerns that the aging infrastructure poses environmental risks, especially during hurricanes. Michael Bromwich, the director of the new Bureau of Ocean Energy Management, Regulation and Enforcement, said the rule responds to that threat.

"This initiative is the product of careful thought and analysis," he said, "and requires that these wells, platforms and pipelines are plugged and dismantled correctly and in a timely manner to substantially reduce such hazards." The mandate, set to go into effect Oct. 15, represents a change in the government's handling of abandoned platforms and wells. Until now, federal decommissioning requirements forced companies to remove infrastructure and plug wells within a year after their individual offshore.....Read the entire article.

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Crude Oil Rises, Snapping Two Days of Declines as Dollar Weakens

Crude oil headed for a monthly increase, before a report forecast to show crude inventories declined in the U.S., the world’s largest energy user. Hurricane Alex has halted about 25 percent of crude production in the Gulf of Mexico and 9 percent of natural-gas output, the U.S. government said. U.S. crude stockpiles probably dropped 1 million barrels in the week ended June 25 from 365.1 million the prior week, according to a Bloomberg News survey before today’s Energy Department report. Crude was still heading for its first quarterly decline since 2008.

“Today’s Energy Department data may help prices,” said Hannes Loacker, an analyst at Raiffeisen Zentralbank Oesterreich in Vienna. “While the supply picture does not support crude in the short term, demand is becoming a bit better. Much depends on risk aversion, so if equity markets recover, crude will go up.” Oil for August delivery traded for $75.96 a barrel, 2 cents higher on the New York Mercantile Exchange as of 1:35 p.m. London time. Brent crude for August delivery was up 2 cents at $75.46 a barrel on the ICE Futures Europe exchange in London.

Crude has lost 9.3 percent in New York since the end of March and 4.3 percent this year. The commodity pared earlier gains of as much as 1.2 percent after data from ADP Employer Services showed the U.S. added fewer jobs than economists estimated in June. The contract has advanced 2.8 percent in June. The Dollar Index, which measures the U.S. currency against those of six major trading partners, fell for the first time in three days, losing 0.3 percent on concern economic growth may falter, stoking demand for commodities as an alternative investment.....Read the entire article.

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Crude Oil Rises for a Second Day on Signs of Improving Fuel Demand in U.S.

Crude oil rose for a second day in New York amid signs of increased fuel demand in the U.S., the biggest energy consuming nation. Oil for July delivery gained 74 cents, or 1 percent, to $77.92 a barrel on the New York Mercantile Exchange at 9:03 a.m. Sydney time. Prices increased 4.6 percent last week, advancing for a second week, along with equities.

Oil may rise this week after U.S. gasoline demand climbed 1.6 percent to 9.34 million barrels a day, the highest level since August, according to a Bloomberg News survey. Eleven of 21 analysts, or 52 percent, predicted crude will increase. On June 18, oil gained 39 cents, or 0.5 percent, to settle at $77.18 a barrel in New York. The Standard & Poor’s 500 Index rose to the highest level in a month.

Brent crude for August settlement gained 84 cents, or 1.1 percent, to $79.06 a barrel on the ICE Futures Europe exchange in London. It dropped 46 cents, or 0.6 percent, to $78.22 a barrel on June 18.

Tighter regulation after the BP Plc oil spill in the Gulf of Mexico may delay exploration projects and cut global output by as much as 900,000 barrels a day if a moratorium on deep water drilling spreads beyond the U.S., Nobuo Tanaka, executive director of the International Energy Agency, said June 18.


Via Bloomberg News

Reporter James Paton can be reached at jpaton4@bloomberg.net.


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What Hurricane Season Forecast Means for Natural Gas ETFs

The numbers are out: an active storm season is predicted for the Atlantic, and natural gas related ETFs are already gearing up and moving on the news. More storms than “normal”, about 16, are anticipated to hit the Atlantic coast of the United States this season. Of these, eight are expected to become hurricanes and about four of them are going to be intense, according to the Tropical Storm Risk.

Alex Morales and Brian K. Sullivan for Bloomerg BusinessWeek reports that the forecast joins a growing number of predictions that the 2010 Atlantic hurricane season, which starts June 1, will be among the most active on record. As the number of hurricanes rises, so do the chances of one striking the oil rich Gulf of Mexico or Florida’s crop areas.

The Gulf is home to about 30% of U.S. oil and 12 % of U.S. natural gas production, the U.S. Energy Department says. It also has seven of the 10 busiest U.S. ports, according to the Army Corps of Engineers. Meanwhile, BP is still trying to cap a leaking offshore oil well that has created a devastating slick that is washing up in Louisiana. Attempts to stop the oil will be hampered if and when a tropical storm or hurricane passes through the Gulf of Mexico.....Let's go to the charts!

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Latest Deepwater Horizon Headlines

Market Loss from Event Could Be $3.5B

Cofferdam Arrives at Leak Site

Hayward: 'Top Kill' Might Seal Leaking Well Sooner

Exxon Valdez? Call it Apollo 13



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Phil Flynn: Deepwater Horizon Triumph and Tragedy

The more you read about the tragedy that is unfolding in the Gulf of Mexico surrounding the Deepwater Horizon oil rig fire the more you realize the magnitude and the symbolism of what is happening. Obviously the loss of life is a reminder of the risks that those in the oil industry take on a daily basis to bring us products that we take for granted. To a larger extent the history of this rig is a reminder of the type of entrepreneurial spirit that has made this country great. It represent the same type of spirit that Horatio Alger captured in his stories of America the land of opportunity or the call from Horace Greeley and John B. L. Soule that urged Americans to go West young man can grow up with the country. This accident is a loss that should be felt by us all.

The Deepwater Horizon was a marvel of modern technology. It was what they call an ultra deepwater dynamic position semi submersible oil rig. It was the size of two foot ball fields and was like a ship that used a computer controlled system to automatically maintain its position and heading. It was a rig that could reach the bottom of the ocean and the Gulf of Mexico to depths many had even imagined. In September of last year Deepwater Horizon made history by drilling the deepest oil well in history. This was an achievement not unlike landing a man on the moon or a successful space shuttle. An achievement that in another era would have inspired the passion and imagine of the nation in a nation that has become accustomed to great achievements.

Think about the implications of drilling for oil in an area of the ocean where no man dared drill before. Think of the impact it can have on a world that is not satisfied with surrendering to the sentence of peak oil but to expand our imagination and our desires to overcome the status but to do what those who think small said was impossible. Instead of surrendering to the prospect that world and the economy was doomed because of Peak Oil to those that said we have not even begun to tap the earth’s possibilities.

There are other concerns of course like fears that this accident will be used by drilling opponents as an example why we should not drill and extend the benefits that off shore drilling to the economy and the health and well being of the human race at large. In fact there was word that BP was about to announce another major discovery at the sight that would have added tens of millions of barrels of oil to the marketplace. In many ways the Deepwater Horizon was a vessel that deserved the same type to of reverence that is given to the Spirit of St. Louis or Space Shuttle Challenger. It loss is a national tragedy.

Speaking of tragedy let us talk Greece, again. MarketWatch reports that” The Greek government surrendered to the credit markets Friday, formally requesting the activation of a joint European Union International Monetary Fund rescue plan after soaring borrowing costs were seen making it virtually impossible for the debt strapped nation to meet its funding needs on the open market. The Greek government surrendered to the credit markets Friday, formally requesting the activation of a joint European Union International Monetary Fund rescue plan after soaring borrowing costs were seen making it virtually impossible for the debt strapped nation to meet its funding needs on the open market. This can impact oil yet oil seems to be less sensitive to the dollar.

Perhaps oil is focusing more on the upcoming summer driving season and the upcoming showdown with Iran. Iran had war games in the straits of Hormuz and Iran’s supreme Leader is t is lashing out as the possibilities of sanctions against his country are looking exceedingly likely. Iran's Supreme Leader Ayatollah Ali Khamenei said that it is impossible to break the will of the Iranian people by threatening with nuclear weapons, and this is a shameful paper in the U.S. political history and a black spot on the U.S. government. Hey who is threatening who? Iranian war premium seems to be creeping back into oil.

Phil can be reached at pflynn@pfgbest.com Have a great weekend!




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Gas Prices Reflect Little Worry over Hurricane Forecast

Last week's price action of natural gas futures suggested there is little concern among buyers about the potential for a more active hurricane season disrupting available gas supply from the Gulf of Mexico. Gas prices bounced around the $4 per Mcf level most of the week, responding to news about the upcoming revision to the EIA's 914 survey of domestic gas production and gas storage inventory data rather than recognition that the latest Colorado State University (CSU) hurricane forecasting team had boosted their estimate of the number of tropical storms, hurricanes and major hurricanes.

There is little concern among gas buyers about the potential for a more active hurricane season disrupting available gas supply from the Gulf of Mexico. In its traditional early spring forecast revision, the hurricane forecasting team, led by Professors Philip Klotzbach and William Gray of the Department of Atmospheric Science at CSU, lifted its forecast for the number of tropical storms, hurricanes, major hurricanes and storm days in each category that can be expected this hurricane season into the upper end of its earlier December 9th forecasted ranges.

The forecasting team now expects 15 named storms, eight hurricanes and four major hurricanes. If the forecast materializes, this year's storm season will resemble the hurricane seasons of 2003, 2004, 2005 and 2008. As we know, those years included some of the worst hurricanes to hit the Gulf Coast and Southeast United States in recent years, Katrina, Rita, Ike, Ivan and Isabelle to name a few.



To reinforce the potential for a significantly more active and potentially destructive storm season, the CSU team provided its estimates for hurricane landfalls. The CSU team predicts that a major hurricane has a 45% chance of hitting somewhere along the U.S. East Coast including the Florida peninsula, which compares to a 31% average for the last century. The probability of a major hurricane landing somewhere along the Gulf Coast extending from the Florida Panhandle westward to Brownsville.....Read the entire article.


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Oil Extends Drop After Report Shows Increase in U.S. Gasoline Inventories

Crude oil fell to a four week low after a U.S. Energy Department report showed that refineries slashed operating rates as fuel demand declined. Plants ran at 78.4 percent of capacity last week, the lowest rate since September 2008 when hurricanes struck the Gulf of Mexico. Gasoline supplies surged to the highest level since March 2008. Fuel use in the past four weeks fell 1.8 percent from a year earlier. Oil also dropped as the dollar strengthened and stocks declined. “Refineries aren’t running and we still got a big build in gasoline inventories,” said Phil Flynn, vice president of research at PFGBest in Chicago. “This is a signal that demand is very weak in the U.S., and there is no sign that it will increase anytime soon.”

Crude oil for March delivery fell $1.22, or 1.6 percent, to $76.52 a barrel at 11:57 a.m. on the New York Mercantile Exchange. Futures touched $76.02, the lowest level since Dec. 23. Oil traded at $77.41 before the release of the report at 11 a.m. in Washington. The greenback strengthened after a report said the European Union was preparing a loan for Greece, which Finance Minister George Papaconstantinou denied.
The U.S. currency traded at $1.4095 per euro, from $1.4106 yesterday. The greenback touched $1.4029, the highest level since July 30. The Standard & Poor’s 500 Index slipped 1.5 percent to 1,121.37 and the Dow Jones Industrial Average declined 1.8 percent to 10,416.79.....Read the entire article.

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U.S. Crude Oil Production Poised for Biggest Jump Since 1970

United States crude oil production for 2009 is on target to have its biggest one year jump since 1970, according to a Platts analysis of industry data. With U.S. oil production averaging 5.268 million barrels per day (b/d) through October, the gain in U.S. output will be the most since the country produced 9.637 million b/d in 1970, which turned out to be the peak year of U.S. crude output, according to Platts' analysis of data published by the U.S. Energy Information Administration (EIA). If that 5.268 million b/d figure holds through December, this year would show a 6.4% boost from the 4.95 million b/d average of 2008 and rank as the best U.S. oil production year since 2004, when output averaged 5.419 million b/d.

For comparison, in the 40 years since U.S. oil production peaked annual output has jumped only eight times. Seven of those increases were minimal; only in 1978 was there a jump of significant magnitude, an increase of 5.6%, to 8.7 million b/d. Last year's hurricane curtailments distorted the production numbers somewhat for the 2008 comparison, given that 183,000 b/d of Gulf of Mexico output was still offline at the end of that year. However, 2009 is still expected to post increases of 3% and 4% from the relatively storm free years of 2006 and 2007, respectively.

Projections from the U.S. Minerals Management Service (MMS) indicate that the primary driver for this year's U.S. oil production resurgence is actually just getting started. That driver is the Gulf of Mexico, where operators have begun launching a group of new fields, fulfilling what has been a decade long focus on unlocking the promise of deepwater exploration there.....Read the entire article.

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Natural Gas Drops to Seven Year Low on Slow Rebound in Demand

Natural gas futures fell for an eighth day, touching the lowest price in almost seven years, on concern that fuel demand will be slow to strengthen because of a sluggish economic recovery. Gas dropped along with energy markets and equities after Japan’s economy expanded less than economists estimated. The threat of disruption to oil and gas output in the Gulf of Mexico receded as Tropical Storm Claudette went ashore in Florida and Ana was downgraded as its winds weakened. “The biggest pusher for the energy sector is watching the economy,” said Scott Hanold, an analyst at RBC Capital Markets in Minneapolis. “The way to look at things is that they are getting less bad. It’s not like we’re seeing up-ticks” in demand.....Complete Story