Crude Oil and Coal Market Updates 11042017

Highlights:

1. Russia and Iran Sign USD 30 Billion Energy Agreements
2. The Oil Company That Lost USD 800 Billion In Shareholder Value
3. Coal Company Armstrong Energy Files for Chapter 11 Bankruptcy Protection
4. Shell Completes USD 4.4 Billion in Sales A Day Before Earnings Report

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Russia and Iran sign $30bn energy agreement

Russia and Iran have signed agreements to collaborate on “strategic” energy deals worth up to $30bn that will involve energy groups such as Rosneft and Gazprom. Amir Hossein Zamaninia, Iran’s deputy oil minister for international affairs, said six provisional deals had been signed with Russian oil companies as part of a visit by President Vladimir Putin to Tehran on Wednesday. After years of sanctions, the government of Hassan Rouhani has sought to attract foreign companies to develop Iran’s energy sector.

The latest announcements come as Russia is building up its energy assets in the Middle East, as part of a wider diplomatic push to increase its economic and military clout in the region. Mr Zamaninia said the two countries agreed to “strategic co-operation in the energy sector”, ranging from development of Iran’s oil and gasfields to collaboration on research. Igor Sechin, chief executive of Russia’s state-controlled Rosneft, said its pact with the National Iranian Oil Company would be the first step before a “binding” deal to participate in Iran’s oil and gas projects over the next few years. “According to preliminary calculations, the overall amount of investments in the projects will total up to $30bn. When completed, the production plateau will reach 55m tonnes of oil per year,” Mr Sechin told journalists invited to the signing. Iran is particularly keen to strike deals with western players such Royal Dutch Shell to prove that the US’s hostility toward Iran has not scared off foreign investment.

However, oil experts say that, should the US re-impose crippling sanctions on Iran by the end of this year, Russian and Chinese firms could benefit from the lack of competition from western companies. Moscow has forged a close relationship with Saudi Arabia, Iran’s arch rival in the region, and has leveraged a supply curbs deal with OPEC to strengthen ties with the kingdom in the energy and military sectors. Rosneft has also become a major financial supporter of Kurdistan, by acquiring a majority stake in the main oil pipeline in the northern Iraqi autonomous region. Iran needs $200bn of investments for upstream and downstream projects by 2021. Since Iran struck a nuclear deal with major powers in 2015, enabling many sanctions to be lifted, it has only signed one notable contract — a deal with France’s Total in July worth $4.8bn. Mr Sechin, a close associate

The Oil Company That Lost $800 Billion In Shareholder Value
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China’s biggest oil and gas producer PetroChina debuted on the Shanghai stock exchange in November 2007, becoming the first $1-trillion company in the world.  

​Ten years later, almost to the date, PetroChina’s Shanghai-listed shares have dropped by a staggering 82 percent since the IPO, wiping out shareholder value of $800 billion, Bloomberg calculated. That’s more than the current market capitalization of Microsoft, or the value of the entire Italian stock market, or the combined net worth of the world’s 12 richest people, or Switzerland’s GDP—take your pick.
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Since the end of 2007, several factors—domestic and international—have combined to contribute to the biggest individual stock slump in history. And if that isn’t enough, analysts think that PetroChina’s rout on the Shanghai stock exchange is not at the bottom yet.

On PetroChina’s first day of trading on the Shanghai Stock Exchange on November 5, 2007, its share price almost tripled its IPO price and took its market value beyond the US$1-trillion mark, the first time a company had been valued at more than US$1 trillion.

But back then, cracks in the financial system had already started to emerge; the subprime mortgages market collapsed a few months later, Lehman Brothers filed for bankruptcy in September 2008, and the global financial crisis was in full swing.
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The markets hardly had time to recover before the oil price crash of 2014 hit, which has since wiped out a lot of profits and market capitalizations of all oil and gas companies around the world.

Apart from those international market events, PetroChina’s Shanghai-listed shares also suffered from the 2015 Chinese market collapse, when excessive speculation in stocks led to an unsustainable bubble, which the government then suppressed with extraordinary measures and intervention on the stock market. This also wiped out some of the market value of the Shanghai shares of China’s biggest oil producer (PetroChina is also listed in Hong Kong and New York).
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More recently, Chinese policies to boost electric vehicle (EV) use, turn to cleaner energy use, and prevent another stock market bubble from swelling by clamping down on speculative trades have further hurt PetroChina’s shares and made analysts even more bearish on the stock’s Shanghai market performance.

In addition, PetroChina’s stock is expensive in terms of forward price-to-earnings ratio—it trades at a much higher P/E ratio than its peers around the world.
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“Why would anyone want to buy the stock when it’s trading for more than 30 times earnings?” Toshihiko Takamoto, a Singapore-based money manager at Asset Management One, which oversees about $800 million in Asia, told Bloomberg.

PetroChina trades at a forward P/E ratio of 32, compared to Chevron’s 25, Exxon’s 22, BP’s 18, or Sinopec’s 13, for example.
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Analysts are also surprisingly pessimistic about the forward 12-month performance of PetroChina’s Shanghai shares, expecting a 16-percent downside, while they are typically bullish on large caps. To compare, analysts expect shares in the blue-chip CSI 300 Index to rise by some 10 percent one year from now, according to Bloomberg.

Not everything is bleak for PetroChina’s shares—the ones traded in Hong Kong have better prospects. The latest price target by Hong Kong-based analyst at Jefferies, Laban Yu, suggests that the stock may gain 31 percent in the next 12 months.
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Moreover, the Chinese government, via China National Petroleum Corporation (CNPC), holds the controlling stake in PetroChina and some 12 percent of its shares are listed, which means that the actual impact on minority shareholders may not be as big as the market value loss would suggest.     

Nevertheless, the Chinese policy to curb speculative trading and its aggressive push into EVs adoption don’t bode well for PetroChina’s chances to offset most of the market value loss that its Shanghai stock has sustained over the past decade.
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Coal Company Armstrong Energy Files for Chapter 11 Bankruptcy Protection, CN 1747541-659
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Company previously missed deadline to pay nearly $12 million to bondholders

Coal-mining company Armstrong Energy Inc. filed for bankruptcy on Wednesday with a plan to turn over ownership of its struggling operations to a competitor and its lender. The St. Louis company plans to use the chapter 11 process to transfer the ownership of its five mines and other operations to a new entity owned by Illinois coal company Knight Hawk Holdings LLC and some of Armstrong Energy’s noteholders. Nearly all of Armstrong Energy’s shares are now owned by energy investor Rhino Resources Partners Holdings LLC. The terms of the transaction weren’t immediately disclosed in documents filed in U.S. Bankruptcy Court in St. Louis. Armstrong Energy mines for coal in western Kentucky on land that is estimated to have 445 million tons of proven and probable coal reserves, according to a June 30 report. It also operates three coal processing plants and a river dock coal handling and railroad loading.
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List of Top 50 Unsecured Creditors


AMERICAN LAND HOLDINGS OF KENTUCKY LLC
TONY KAZDA
701 MARKET ST STE 775
ST LOUIS, MO 63101
ASSOCIATED ENGINEERS INC
DAVID LAMB
2740 NORTH MAIN ST
MADISONVILLE, KY 42431
BLAIR TIRE INC
SAM HARRIS
1300 HWY 15
ISOM, KY 41824
BRAKE SUPPLY CO INC
BARRY HEICHELBECH (CFO)
5501 FOUNDATION BLVD
EVANSVILLE, IN 47725
BRANDEIS MACHINERY AND SUPPLY CO
LYNETTE DRURY
1801 WATTERSON TRL
LOUISVILLE, KY 40232
BRIAN'S BATTERY LLC
BRIAN MASS (OWNER)
86 EPHIE DRIVE
COLDIRON, KY 40819
CONN-WELD INDUSTRIES INC
JAMES D CONNOLLY
PO BOX 5329
PRINCETON, WV 24740-5329
DOUGLAS SUMNER
12 RIVER HILL RD
LOUISVILLE, KY 40207
FIRST-LINE FIRE EXTINGUISHER CO
BARRY GRAZIANO
1333 N 8TH ST
PADUCAH, KY 42001-1032
HERITAGE PETROLEUM LLC
BRIAN SMITH
516 NORTH 7TH AVE
EVANSVILLE, IN 47719
INTERNAL REVENUE SVC
INTERNAL REVENUE SVC
CINCINNATI, OH 45999-0009
JENNMAR CORP
JEFF REEVES
271 GAWTHROP RD
WINCHESTER, KY 40391
JOY GLOBAL UNDERGROUND MINING LLC
JANET HOUSTON OR SHANNON KASH
1748 SOUTH MAIN ST
HENDERSON, KY 42420
KENERGY CORP
JULIE SCOTT
6402 OLD CORYDON RD
HENDERSON, KY 42419-0018
KENTUCKY DEPT OF REVENUE
KENTUCKY REVENUE CABINET
FRANKFORT, KY 40620
KENTUCKY STATE TREASURER
DANNY HALL
KENTUCKY DEPT OF REVENUE
FRANKFORT, KY 40620
KENTUCKY UTILITIES CORP
DOT O'BRIEN
PO BOX 9001954
LOUISVILLE, KY 40290-1954
KY WORKER'S COMP FUNDING COMMISSION
RENEE HADDIX
#42 MILLCREEK PK
FRANKFORT, KY 40602-1128
MADISONVILLE TIRE AND RETREADING INC
DEWAYNE BURNS
PO BOX 1593
MADISONVILLE, KY 42431
MINE EQUIPMENT AND MILL SUPPLY CO
ANDY KOORS
4 NW 2ND ST SECOND FL
EVANSVILLE, IN 47708
MUHLENBERG COUNTY SHERIFF
PO BOX 227
GREENVILLE, KY 42345
OFFICE OF SURFACE MINING
PO BOX 979068
ST LOUIS, MO 63197-9000
OHIO COUNTY SHERIFF
PO BOX 186
HARTFORD, KY 42347
OVERLAND CONVEYING SYSTEMS LLC
JERRY MARKHAM
PO BOX 434
MADISONVILLE, KY 42431
RAY JONES TRUCKING INC
RAY JONES
3296 SR 181 SOUTH
GREENVILLE, KY 42345
ROGERS FAMILY
JAMES L ROGERS III AND MARY M ROGERS
PO BOX 12969
FT PIERCE, FL 34979-2969
ROGERS GROUP INC
TISH KASBAUM
10234 HOPKINSVILLE RD
PRINCETON, KY 42445
ROYAL BRASS AND HOSE INC
KEVIN CLAYTON
2856 ANTON RD
MADISONVILLE, KY 42431
RUBY CONCRETE CO
STACEY WAIDE
134 NORTH DEMPSEY ST
MADISONVILLE, KY 42431
S AND L INDUSTRIES LLC
BOB SANDAIDGE
234 STATE ROUTE 109 NORTH
CLAY, KY 42404
SGS NORTH AMERICA INC
ELLIOT MYERS
618 BOB POSEY ST
HENDERSON, KY 42420
SMITH MANUS SURETY BONDS
BECKY REID
2307 RIVER RD STE 200
LOUISVILLE, KY 40206-5005
SOLENIS LLC
WILLIAM J LEVY (CFO)
BEAVER VALLEY RD STE 500
WILMINGTON, DE 19803
SPECIAL MINE SVC INC
ERNIE BULLOCK
2180 HWY 70 WEST
CENTRAL CITY, KY 42330
STAR MINE SVC INC
LEE BOWLES OR BO TAYLOR
PO BOX 571
MADISONVILLE, KY 42431
THE BRENNAN GROUP
JOHN STANDBROOK
12221 BIG BEND RD
ST LOUIS, MO 63112
THOMPSON AND KNIGHT LLP
ANN COWDREY
ONE ARRTS PLZ 1722 ROUTH ST
STE 1500
DALLAS, TX 75201-2533
THOROUGHBRED RESOURCES LP
CHARLES R WESLEY IV
3033 E 1ST ST STE 837
DENVER, CO 80206
UGM ADDCAR SYSTEMS LLC
PATRICIA CARTER
NO 1 HWM DR
ASHLAND, KY 41102
UNIFIRST CORP
MARYELLEN BUTCHER
68 JONSPIN RD
WILMINGTON, MA 1887
UNITED CENTRAL INDUSTRIAL SUPPLY CO
CHARLIE FULLER
1150 NATIONAL MINE DR
MADISONVILLE, KY 42431
US DEPT OF LABOR MSHA
PO BOX 790390
ST LOUIS, MO 63179-0390
WABASH MARINE INC
TOM MOOSEBERGER
PO BOX 287
STURGIS, KY 42459
WALLACE ELECTRICAL SYSTEMS LLC
DAVID WALLACE
2853 KEN GRAY BLVD STE 4
WEST FRANKFORT, IL 62896
WC HYDRAULICS LLC
MICHAEL SANDERS CFO
172 PHILPOT LN
BEAVER, WV 25813
WEST KENTUCKY PIPE AND VALVE INC
MISTY POLLARD
200 POND RIVER COLLIERS RD
MADISONVILLE, KY 42431
WESTERN KENTUCKY ROYALTY TRUST
SAM FRANCIS
PO BOX 2042
HENDERSON, KY 42419-2042
WHAYNE SUPPLY CO
J COOMES
2420 E LYNCH RD
EVANSVILLE, IN 47711-2953
WHITCO ENTERPRISES INC
JENI GARRETT
PO BOX 81
WHITE PLAINS, KY 42464
WOODRUFF SUPPLY CO INC
DANNY DUGGER
628 LINCOLN AVE
MADISONVILLE, KY 42431
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Shell completes $4.4 billion in sales a day before earnings report
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Royal Dutch Shell said Wednesday it made further progress in a major divestment plan by completing the sale of assets in Gabon and in the North Sea.

For $628 million, Shell said it completed the sale of its entire Gabonese oil and gas interests to a company controlled by The Carlyle Group. The transaction includes the sale of all of Shell's onshore oil and gas interests, which includes nine total fields, and the associated infrastructure, including pipelines and export terminals.
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Shell last year produced an average 41,000 barrels of oil equivalent per day from Gabon. When disclosing the intention of the sale earlier this year, Andy Brown, a director for Shell exploration and production programs, said the decision "was not taken lightly."

French energy major Total in February said it was taking advantage of improved market conditions by selling mature assets in Gabon to Anglo-French company Perenco for $350 million.
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In a separate statement, the Dutch supermajor said it completed the sale of North Sea holdings to Chrysaor for a total of up to $3.8 billion. The sale includes Shell's 21.7 percent interest in the legacy Buzzard field and the 10 percent stake in the Schiehallion field.

BP has produced nearly 400 million barrels of oil from Schiehallion since production started in the late 1990s and the company said redevelopment could yield another 450 million barrels and extend the field's life into the 2030s.
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Phil Kirk, the chief executive at Chrysaor, said in a statement the company is now a leading exploration and production company in the North Sea with the acquisition, which puts about 120,000 net barrels of oil equivalent per day in its pocket.

"With improving operating costs, competitive fiscal terms and a world class skills base, the North Sea is undergoing a period of rejuvenation," Chairperson Linda Cook added.

Shell said the sales show "clear momentum" behind the effort to shed $30 billion in assets and "re-shape the company into a world class investment." The company reports its third quarter earnings on Thursday. Net profit for the second quarter was $3.6 billion, up from the $1 billion reported for the second quarter 2016. From the first quarter, however, net profit is down about 4 percent.
 
 
Sources:  WSJ, UPI, Oil Price Energy, Financial Times
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