Oilexco unit seeks bankruptcy protection
Wednesday, December 31, 2008
CALGARY — International oil producer Oilexco Inc. disclosed Wednesday that its main subsidiary is insolvent.
Oilexco shares fell 64 cents to 25 cents on the Toronto Stock Exchange, down from a high of $19.50 in June.
The company, focused on the British central North Sea, said wholly owned Oilexco North Sea Ltd. — which accounts for substantially all of the Calgary-based parent company's assets — would file for administration, a form of bankruptcy protection, with the British high court as soon as practicable, likely next week.
Oilexco said the decision came after a syndicate of lenders, headed by hard-pressed Royal Bank of Scotland, declined to provide more funding less than two weeks after approving $47.5-million in bridge financing.
The company had indicated it would need a further boost to stay afloat.
“Oilexco does not have any other source of funding at this time and has therefore concluded that an administration must be pursued,” it stated.
In the meantime, “all parties expect that safe and orderly operations will continue.”
The parent company “is considering its options in light of this development but at this time remains solvent and committed to the strategic review process that was previously announced.”
Oilexco hired Morgan Stanley and Merrill Lynch in mid-December to investigate strategic options, and it said Wednesday that “several parties have indicated significant interest” in possibilities which could include a sale of the company or some of its assets.
Oilexco said it “understands that it is the intention of the proposed administrators to continue this process, with the intention of selling Oilexco North Sea Ltd. or all or substantially all of its assets in such a way as to maximize the value of the assets for all stakeholders, and maintain the business, its employees and systems as a going concern.”
However, “there can be no certainty that any binding offers will be received or accepted or that any transaction will be completed or, if it is completed, that there will be any equity value for Oilexco shareholders.”
Oilexco tapped the financial market in October 2007 when it secured a $500-million loan from a syndicate of banks.
That financing was used to develop the Ptarmigan, Shelly and Huntington fields, for the completion of its acquisition of the Balmoral production vessel and for general corporate purposes.
Oilexco's producing properties, exploration and development activities are located in the North Sea, specifically the Outer Moray Firth and Central Graben areas off eastern Scotland.
It has been struggling with financing problems since October, when it announced the closing of a planned financing had been delayed by the credit crisis. It also cut its production target amid falling oil prices.
- With files from Reuters
© Copyright The Globe and Mail
TP2
Phantom Alert For Your GPS In Canada and USA
Wednesday, December 31, 2008
Oilexco unit seeks bankruptcy protection
Tuesday, December 30, 2008
Friday, December 26, 2008
Doom and Gloom Media Contribute To Fear and Recession
Modern Parable
Japanese co (Toyota) and US co (Ford Motors) decide to have a canoe race on a River Both teams practiced to reach their peak performance. On the big day, Japanese won by a mile. USA,discouraged ,investigate the reason for the defeat.Senior management was formed to recommend action. Conclusion was the Japanese had 8 people rowing and 1 person steering, while the American team had 7 people steering and 2 people rowing.
Ford spent the last 30 yrs moving its factories out of US, claiming they can't make money paying US wages. TOYOTA spent last 30 yrs building plants inside the US. Last quarter's results: TOYOTA - 4 billion profits , Ford 9 billion in losses. Ford folks are still scratching their heads, and collecting bonuses... and now wants the Government to 'bail them out'.
Submitted by shleprock at 9:41 PM Tuesday, December 23 2008
Think 2008 was bad? Just wait, economists say
TheStar.com - Canada -
December 24, 2008
Julian Beltrame
THE CANADIAN PRESS
OTTAWA–It's going to get worse. As bad as the past few months were, even the rosiest of economic forecasts shows on average that Canadians will get poorer in 2009 and many – perhaps as many as 200,000 additional workers – will lose their jobs as the economic recession deepens.
The economic tsunami that was well below the surface as 2008 began hit Canada's shores with a crash in the fall and is only now washing deeper inshore, swallowing an economy that once appeared impregnable – having withstood both the Asian financial crisis a decade ago and the 9/11 fallout in the United States.
Prime Minister Stephen Harper described it best in a recent television interview in which he perhaps tellingly did not reject out of hand the possibility of a depression – a deep economic downturn in which output shrinks by 10 per cent or more.
"I've never seen such uncertainty ... I'm very worried about the Canadian economy," he said, before explaining that governments had learned survival lessons from the 1930s depression that they are applying to the current situation.
But as Merrill Lynch's Canadian chief economist David Wolf put it: "Given the events of the past few months how can you rule anything out? Even us bears have been surprised at just how aggressively things have unravelled."
A key lesson of the Great Depression – and a reason economists believe the damage can be contained shy of D-terrain – is that governments must not sit idly by as the cancer spreads.
The U.S., Europe, China and others have already stepped to the plate with Ruthian stimulus packages worth trillions of dollars in total, and Harper has suggested spending measures in the $20-billion range are being prepared for the Jan. 27 budget, at a price of a huge deficit.
As well, Ottawa and Ontario announced last Saturday that $4 billion will go into jump-starting the battered Canadian auto sector, with more likely to come as part of a North American industry restructuring.
The measures aren't necessarily going to be popular with Canadians, although they are likely a minimum condition for preventing a Liberal-NDP coalition, with the backing of the Bloc Quebecois, from seeking to dump the government once Parliament resumes in late January.
A Canadian Press Harris/Decima poll conducted in mid-month found only 39 per cent support for stimulus spending if it means Ottawa will go into deficit.
For policy makers, the deficit ship has long since sailed.
Even sober-minded economists don't see much to shout about in keeping government books in the black if it means the rest of the country sinks. If everyone else is too scared to spend their last dime, governments had better, they reason.
"Unfortunately it's necessary. Things could be very ugly if policy makers don't step in to support the economy, in certain cases specific industries," said Bank of Montreal deputy chief economist Douglas Porter.
"It still going to be the weakest year since `91," agreed Dale Orr, managing director of IHS Global Insight. "The second half will be better than the first, thank goodness, but we'll need another year after that before we're back to the economy returning to potential."
Orr's analysis is shared almost universally among private sector economists, who have been busily revising even their bleakest forecasts in the past few weeks.
Last week, the Bank of Nova Scotia set the standard for low with a projection that the economy would shrink 1.2 per cent in 2009. A day later the Bank of Montreal did it one notch better at minus 1.3 per cent.
The shocker, however, is that most expect a seldom considered statistic called nominal gross domestic product – which measures the value of what the country produces – to become headline news next year as the wealth-effect of high commodity prices over the last six years gets reversed big time with oil in the tank and prices of minerals, grains, coal and other commodities also in decline.
Many are expecting nominal GDP to shrink by as much as three per cent in 2009, bringing lower corporate profits, lower government revenues and most importantly, lower wages for Canadians.
"That's a shrinking of the economic pie the likes of which we really haven't seen for generations," said Wolf.
The latest projections also predict Canada's unemployment rate will rise to about eight per cent, from the current 6.3 per cent, resulting in something Canadians also haven't seen in a generation, outright job losses of 200,000 from the recession's peak to trough.
While the jobless rise in 2009 will hurt, it's still a far cry from the last two recessions. Unemployment hit 13 per cent in the 1980-81 decline, when industrial North America – mainly the steel and auto sectors – went through a painful restructuring. In the early 1990s the recession hurt real estate and retail sectors and pushed the jobless rate to 10 per cent.
How do we get ourselves out of this mess?
A recovery is coming, economists say, and it's likely from a combination of several factors.
Surely some good must come from the trillions of dollars being poured into the economy from governments around the world, they figure.
The other bright spot – although it's cold comfort to Canada's oilpatch – comes from cheap oil, which will cut business costs and leave more money in the pockets of consumers around the world.
And then there's that fickle measure called consumer confidence, which has been dining on despair for months and sits at its lowest level in more than a quarter century.
Orr believes much of the loss of trust and confidence among investors and consumers stems from global markets' stomach-churning bungee jump since mid-September.
In Canada, the stock market has lost more than 40 per cent of its value since a mid-June record high, wiping out hundreds of billions of dollars of stock value and squeezing the investments of Canadians held in pension plans, stocks and mutual funds. That has made people feel poorer and tighten their wallets and companies from cutting investments and expansion plans.
"Everybody is gloom and doom now, but things could turn around quickly," Orr says. "Everybody is now waiting for conformation we're at the bottom and if you can get a week or two of really strong markets, there will be a piling on phenomenon and people won't be able to wait to get back in."
But he hurries to add, it might not be wise to bank on it happening in 2009.
Tuesday, December 23, 2008
I agree with Pescod, Regroup for 2009
S&P/TSX COMPOSITE
8309.76 +60.23
SHANGHAI COMPOSITE
1897.22 -90.53
CRUDE OIL
$39.03 -0.88
To say that we are currently going through historical
times is an understatement and everyone is aware of it.
All of a sudden people are watching BNN and CNN like
crazy for hints of what next on the economy and how
ugly it’s going to get.
We’ve already had one of the biggest crashes in his-
tory and some indexes plunged more in the past year
than they did in 1929. So you have blue-chip stocks get-
ting absolutely beaten up, which means for those in the
speculative market such as we like in the resources, it
has been a total bloodbath.
The concern is that hundreds of junior miners will not
be able to get financed in this market, at a time when
roughly 80 to 85 producing mines are being shut down
and in the oil and gas market, there’s not a lot of folks
that make money at $38.00 oil.
Who it is that survives
this time may well thrive when things do get better. Of
course the big question these days is how far away is
that? Is it a mere six months down the road after a mas-
sive stimulus by countries around the world? Or is one
going to have be much more patient? For sure in the
short-term though, there will be casualties.
These have been absolutely brutal days for many in
the market, but over the next few days, it’s time to get
priorities straight and remember that friends and family
are what makes things go.
We, like everyone else, will be re-grouping over the
holidays hoping to battle on through what could be a
very challenging year next year.
Merry Christmas and all the best to everyone!
The House 80 MM ran ahead of the news and killed HOU in Less then 1 week
I exited the stock with a huge loss, but it would have been even larger if I waited till today...
The National Bank MM House 80 Knew this was coming and HOU is NOT moving up responding to the correction in Oil from Jan to Feb futures contracts which went from 33.000 to 44.00 overnight.
In December 2008 the MM sold of 41 Million shares more then he bought, and when you have millions more taking out every bid the stock has no where to go but down. We have been robbed by House 80. Compare this to the increase in the short action, which has increased to well over 6 Million. Its pure manipulation at the expense of HOU long shareholders and money is being made as HOU falls on the short side. Get away from this highly manipulated Horizon Beta ETF. The market maker is capitalzing on this fall, you can count on it.
12:45PM
80 National Bank 1,323,715 2,799,336 2.11 3,135,732 6,560,129 2.09 -1,812,017 3,760,793
Add QEC-T at 1.85 partners include Talisman and Forest Oil, 750,000 acres of Quebec shale gas.
The MM knew this was coming and shorted the stock into the millions...
Horizons BetaPro ETFs to split, consolidate
2008-12-22 17:15 ET - News Release
See News Release (C-HOD) Horizons BetaPro NYMEX Crude Oil Bear Plus ETF
Mr. Howard Atkinson reports
BETAPRO MANAGEMENT INC. ANNOUNCES UNIT SPLIT AND CONSOLIDATIONS
BetaPro Management Inc., the trustee and manager of the exchange traded funds listed in the tables, intends to split or consolidate the units of Horizons BetaPro NYMEX Crude Oil Bear Plus ETF, Horizons BetaPro NYMEX Crude Oil Bull Plus ETF and Horizons BetaPro S&P/TSX Global Gold Bear Plus ETF, as indicated.
SPLIT
ETF Ticker Split ratio
Horizons BetaPro NYMEX Crude Oil Bear Plus ETF HOD 2:1
After the Toronto Stock Exchange has closed for trading on Dec. 31, 2008, the units of Horizons BetaPro NYMEX Crude Oil Bear Plus ETF will be split on the basis of the ratio of 2:1, and will begin trading on a split-adjusted basis on Jan. 2, 2009, and the split will become effective on Jan. 6, 2009, for unitholders of record on that day.
CONSOLIDATIONS
ETF Ticker Consolidation
ratio
Horizons BetaPro NYMEX Crude Oil Bull Plus ETF HOU 1:5
Horizons BetaPro S&P/TSX Global Gold Bear Plus
ETF HGD 1:5
After the TSX has closed for trading on Dec. 31, 2008, the units of the ETFs in the table, "Consolidations," will be consolidated on the basis of the ratio of 1:5, and will begin trading on a consolidated basis on Jan. 2, 2009, the effective date of the consolidations.
Recession mindset takes toll on retail sales
Recession mindset takes toll on retail sales
VIRGINIA GALT AND MARINA STRAUSS
With files from reporter Matt Hartley and The Canadian Press
December 23, 2008
TORONTO -- Fear of job loss is ushering in a new era of frugality, as some retailers saw a sharp decline in pre-Christmas sales and consumer confidence plunged to its lowest level in 26 years.
The monthly consumer confidence index by the Conference Board of Canada fell for a third month in a row to its lowest level since the deep recession of 1982, with half of respondents saying they expect there will be fewer jobs in their communities six months from now, and more than a quarter saying their families are worse off than they were six months ago.
Consumers are caught in a "very negative downward cycle of a psychology of recession," Glen Hodgson, the Ottawa think tank's chief economist, told a news conference yesterday.
After months of hearing about the deteriorating global economy, "that loss of confidence has become very personal. People are now worried about their financial circumstances and about their job," he added.
Their worries are showing up at the mall. Amid the crucial holiday shopping season, same-store sales saw their steepest decline, plummeting an average of 10.2 per cent the week ended Dec. 13, according to a survey of 27 retail chains by RSM Richter.
Same-store sales measure those at outlets open a year or more, and are considered a crucial retail barometer. Sales have been dropping over the past several weeks, RSM retail consultant Lynn Bevan said.
And Boxing Week business may not be nearly as strong as it has been in past years, Ms. Bevan said. Retailers have already been slashing prices to lure customers, leaving fewer attractive deals for the post-Christmas period, she said.
"People are just worried about keeping their jobs," she said. "Until that really stabilizes, I think people are just going to conserve cash. People are very nervous about what 2009 has to bring. There is so much media about the economy and how it's going to get worse in 2009."
At electronics giant Best Buy Canada, customers are snapping up less expensive items, such as video games, MP3 players and digital cameras, Best Buy spokesman Scott Morris said. But shoppers are deferring their bigger-ticket purchases of products such as flat-panel televisions until Boxing Day, he said.
"We've been through it before and people are gun-shy," said Richard Talbot at retail specialist Talbot Consultants International. "The steady stream of bad news in the U.S. and Europe has a ripple effect."
Likely victims: Big-ticket items and luxury goods, Mr. Talbot said. "Furniture, I suspect, will take a big hit. I went through and looked at the Brick and Sears the other day. You could have fired a cannon through there."
At the Eaton Centre in downtown Toronto yesterday, shoppers went shoulder to shoulder in search of the final items on their holiday shopping lists. But some shoppers, worried about the prospect of rising unemployment, were tightening their purse strings.
"I'm spending less, significantly," said Michael Leahy. "We all know people who have concerns about their jobs and I'd be crazy if I said that wasn't a concern."
It's little wonder Canadian consumers are feeling spooked, economist Dale Orr, managing director of Global Insight Canada, said in an interview yesterday. "Canadians have been faced with unrelenting bad news on the economics front in recent months," Mr. Orr said. "The stock market is down 40 per cent this year, house prices are down, and unemployment is rising."
Still, the picture is nowhere near as dire in terms of job losses as the recession of the early 1980s, when unemployment spiked at 13 per cent, or the recession of the early 1990s, when unemployment rose to 10 per cent.
Now, unemployment is at 6.3 per cent, although it is expected to rise above 7 per cent next year, the Conference Board of Canada's Mr. Hodgson said.
The Conference Board survey found Canadians' confidence about the economy declined 3.3 points to 67.7 in December. That's the lowest since 1982, when the index fell to 63.
One bright spot in the consumer confidence survey: Some shoppers are taking advantage of price cuts on TV sets, fridges, stoves and washing machines, Mr. Hodgson said. "And automobiles, of course, are going to be at rock-bottom prices for some time to come," he added.
The outlook for 2009 consumer confidence depends on what the federal government comes up with in the way of a stimulus package and what happens to the overall unemployment rate, he said.
Confidence will start to return as the majority of Canadians realize that they are keeping their jobs. "When that starts to happen, you'll see a change in attitude," Mr. Hodgson said.
Friday, December 19, 2008
President George W. Bush outlined his plan to funnel a total of $17.4-billion (U.S.) towards General Motors Corp. and Chrysler LLC
Bailout fatigue
RTGAM
Investors appear to be getting used to big bailouts, judging from the ho-hum response to the White House's plan to rescue struggling U.S. auto makers.
On Friday, about a half-hour before markets opened for trading, President George W. Bush outlined his plan to funnel a total of $17.4-billion (U.S.) towards General Motors Corp. and Chrysler LLC, in an effort to keep them out of bankruptcy in the near term and prevent a wave of auto-related layoffs. (The longer-term fix is for the next administration.)
That pretty much exhausted the first half of the $700-billion rescue fund approved by Congress earlier this year - so Henry Paulson, the U.S. Treasury Secretary, said that Congress should approve the release of the next half of the fund.
And in Canada, Prime Minister Stephen Harper said that a federal stimulus package could total as much as $30-billion (Canadian) in an effort to prevent the deteriorating economy from spinning out of control.
There was a time when three packages of this size would mean something to investors. Not on Friday.
The Dow Jones industrial average closed at 8579.11, down 25.88 points, or 0.3 per cent. The broader S&P 500 closed at 887.60, down 2.32 points, or 0.3 per cent.
To be sure, General Motors did just fine, rising 22.7 per cent. However, the price of the stock is still mired at just $4.49 (U.S.), suggesting that investors still don't have a whole lot of faith in its ability to survive. Ford Motor Co., which is not part of the bailout deal, rose 3.9 per cent.
Financials, however, did poorly, with Citigroup Inc. falling 5.5 per cent and Bank of America Corp. falling 1.6 per cent. Energy stocks were also down, with Chevron Corp. down 3 per cent and Exxon Mobil Corp. down 2.6 per cent.
In Canada, the S&P/TSX composite index closed at 8552, up 126.65, or 1.5 per cent. Research In Motion Ltd. was the big reason, with the BlackBerry maker surging 14.1 per cent after it released a fourth-quarter earnings forecast that topped analysts' expectations. As well, Royal Bank of Canada rose 0.7 per cent and Canadian Imperial Bank of Commerce rose 2 per cent in a late-day rebound.
And This:
TIP SHEET
David Berman
00:00 EST Friday, December 19, 2008
In an uncertain environment for oil and gas producers, few stocks have suffered as much as Oilexco Inc. - down more than 94 per cent from its high at the end of June, when the price of crude oil was also near its high point. Since then, oil has fallen about 74 per cent and Oilexco shares have plummeted to $1.10 from $19.46, which includes yesterday's 42-per-cent drop.
Yes, there's a connection here to the price of oil. But Oilexco is also suffering from cash issues. On Wednesday, the Royal Bank of Scotland and its banking syndicate cut a deal with Oilexco, which will provide the struggling company with a $47.5-million bridge loan. As part of that deal, the banks get 55.5 million shares of Oilexco - or almost 25 per cent - in the event that the company gets sold.
"This bridge loan makes up the company's cash shortfall that it must be experiencing as a result of current oil prices," Frederick Kozak, an analyst at Canaccord Adams, said in a note.
However, he noted that the loan is a short-term solution, and comes at the expense of diluting the holdings of existing shareholders. He has a "speculative buy" recommendation on the stock, with a 12-month price target of $5.
See David Berman's Market Blog at ReportonBusiness.com
Copyright 2001 The Globe and Mail
When All Else Fails -Drink LOL
'Sometimes when I reflect back on all the wine I drink I feel shame . Then I look into the glass and think about the workers in the vineyards and all of their hopes and dreams ..
If I didn't drink this wine, they might be out of work and their dreams would be shattered. Then I say to myself, 'It is better that I drink this wine and let their dreams come true than be selfish and worry about my liver.'
~ Jack Handy
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
'I feel sorry for people who don't drink. When they wake up in the morning, that's as good as they're going to feel all day. '
~Frank Sinatra
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
'When I read about the evils of drinking, I gave up reading.'
~ Henny Youngman
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
'24 hours in a day, 24 beers in a case. Coincidence? I think not.'
~ Stephen Wright
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
'When we drink, we get drunk. When we get drunk, we fall asleep. When we fall asleep, we commit no sin. When we commit no sin, we go to heaven. So, let's all get drunk and go to heaven!'
~ Brian O'Rourke
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
'Beer is proof that God loves us and wants us to be happy.'
~ Benjamin Franklin
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
'Without question, the greatest invention in the history of mankind is beer. Oh, I grant you that the wheel was also a fine invention, but the wheel does not go nearly as well with pizza.'
~ Dave Barry
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
To some it's a six-pack, to me it's a Support Group. Salvation in a can!
~ Dave Howell
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
And saving the best for last, as explained by Cliff Clavin, of Cheers. One afternoon at Cheers, Cliff Clavin was explaining the 'Buffalo Theory' to his buddy Norm.
Here's how it went:
'Well ya see, Norm, it's like this...
A herd of buffalo can only move as fast as the slowest buffalo. And when the herd is hunted, it is the slowest and weakest ones at the back that are killed first. This natural selection is good for the herd as a whole, because the general speed and health of the whole group keeps improving by the regular killing of the weakest members.
In much the same way, the human brain can only operate as fast as the slowest brain cells. Excessive intake of alcohol, as we know, kills brain cells. But naturally, it attacks the slowest and weakest brain cells first. In this way, regular consumption of beer eliminates the weaker brain cells, making the brain a faster and more efficient machine.
That's why you always feel smarter after a few beers.'
Questerre Energy Corporation: Beaver River A-5 Shale Gas Well On-Stream
Questerre Energy Corporation: Beaver River A-5 Shale Gas Well On-Stream
00:15 EST Friday, December 19, 2008
CALGARY, ALBERTA--(Marketwire - Dec. 19, 2008) -
NOT FOR DISTRIBUTION ON U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES
Questerre Energy Corporation (TSX:QEC)(OSLO:QEC) ("Questerre" or the "Company") reported today that the A-5 shale gas well began a long-term production test at the Beaver River Field in British Columbia.
Michael Binnion, President and Chief Executive Officer of Questerre, commented, "This well was an unexpected success and we look forward to long-term production results to confirm the viability of shale production. The existing infrastructure puts us in the enviable position of making positive cash flow from an early-stage shale pilot project."
The tie-in of this well was completed in late November following receipt of regulatory approval. Current production is at a facility constrained rate of 5.0 mmcf/d (833 boe/d) with an initial flowing tubing pressure of 25 mpa (3700 psi). Overall production increases at Beaver River will likely be limited as the existing shale wells, A-2 and A-7, produce at a significantly lower flowing pressure and short-term production declines from A-5 are expected.
A-5 is currently producing from a carbonate-rich sequence in the shale zones at Beaver River. Questerre believes this sequence could provide a pathway for gas from a deeper organic-rich shale interval. Based on final results, Questerre will evaluate two additional re-completion candidates to further pilot test this new shale play. Questerre and its partner hold a joint interest in over 23,000 acres prospective for this play.
With regard to recent announcements by its partner regarding their financial situation, the Company believes the ongoing production and resulting revenue from Beaver River will be sufficient to repay any outstanding amounts and finance their ongoing obligations under the operating agreement which are secured by an operator's lien.
Questerre is a Calgary-based independent resource company actively engaged in the exploration, development and acquisition of high-impact exploration and development oil and gas projects in Canada.
This news release contains forward-looking information. Implicit in this information are assumptions regarding commodity pricing, production, royalties and expenses, that, although considered reasonable by the Company at the time of preparation, may prove to be incorrect. These forward-looking statements are based on certain assumptions that involve a number of risks and uncertainties and are not guarantees of future performance. Actual results could differ materially as a result of changes in the Company's plans, commodity prices, equipment availability, general economic, market, regulatory and business conditions as well as production, development and operating performance and other risks associated with oil and gas operations. There is no guarantee made by the Company that the actual results achieved will be the same as those forecasted herein.
Barrel of oil equivalent ("boe") amounts may be misleading, particularly if used in isolation. A boe conversion ratio has been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil and is based on an energy equivalent conversion method application at the burner tip and does not necessarily represent an economic value equivalent at the wellhead.
This news release does not constitute an offer of securities for sale in the United States. These securities may not be offered or sold in the United States absent registration or an available exemption from registration under the United States Securities Act of 1933, as amended.
FOR FURTHER INFORMATION PLEASE CONTACT:
Questerre Energy Corporation
Anela Dido
Investor Relations
(403) 777-1185
(403) 777-1578 (FAX)
Email: info@questerre.com
Website: www.questerre.com
Thursday, December 18, 2008
Oil markets brush off OPEC's big cut
Oil markets brush off OPEC's big cut
Investors are unimpressed despite cartel's massive production cuts, sending oil below $40 (U.S.) for first time in five years
SHAWN MCCARTHY
GLOBAL ENERGY REPORTER
December 18, 2008
OTTAWA -- Oil markets gave a sharply negative review yesterday to OPEC's decision to slash production by a further 2.2 million barrels a day, as crude prices fell below $40 (U.S.) a barrel for the first time in more than five years.
At a meeting in Algeria, ministers from the Organization of Petroleum Exporting Countries agreed to cut supplies by a total of 4.2 million barrels a day below September levels. The cartel had already agreed to rein in production by two million barrels at two separate meetings this fall.
However, traders responded to the largest OPEC cut yet by driving down the price of crude, and analysts said the action was too little, too late to prevent a further erosion in oil prices early next year.
"Markets are saying, it's not enough, it's insufficient" said Dina Cover, commodity economist with the Toronto-Dominion Bank.
Pointing to the prospect of an actual drop in oil demand next year, Ms. Cover recently forecast oil prices to slump to as low as $25 (U.S.) a barrel, and to average $30 (U.S.) in the second quarter of next year.
And OPEC's new production targets don't change that view, she said yesterday.
"We expect demand to fall a lot further and OPEC will probably have to cut again."
In New York yesterday, the price of light, sweet crude fell 8 per cent or $3.54 (U.S.) a barrel to $40.06, after trading as low as $39.88.
In their communiqué, OPEC ministers said that, "if unchecked, prices could fall to levels which would place at jeopardy the investments required to guarantee adequate energy supplies in the medium-to-long term."
Traders remain skeptical that OPEC will actually meet its targeted, 4.2-million-barrel reduction, said David Kirsch, energy analyst with PFC Energy.
The cartel has not fully implemented the two-million-barrel cut announced in two stages this fall, and gave little indication of how individual members are expected to comply with the latest round.
"OPEC has got its work cut out for it, and there is very much a question of OPEC's ability to carry through on its agreement," Mr. Kirsch said.
The cartel called on non-OPEC producers to help maintain the stability of global oil markets by reining in production. Several countries, including Russia, Azerbaijan and Syria sent observers to the meeting, but made no commitment to impose cuts.
Russian Deputy Prime Minister Igor Sechin instead told the meeting that Russian producers had already cut production this fall and would do so again if market conditions warranted.
It would have been helpful in the communiqué if Russia had come out and indicated it would cut production," Mr. Kirsch said.
"But [Mr.] Sechin's statement merely reflected what the markets already knew," he said. "If oil prices remain at low levels - and more importantly, if the financial straits that a lot of Russian oil companies find themselves don't ease soon - Russian output is going to fall a further 300,000 to 500,000 barrels a day."
Saudi Arabia has once again emerged as the key producer that must adjust its volumes to market conditions. Last spring, when prices were climbing to record levels, the Saudis faced considerable pressure from oil-consuming nations to boost production.
And now, it will be up to the world's largest exporter to absorb much of the production cuts. The alternative is to allow prices to slump even further than currently projected, forcing higher-cost producers, including those in Canada's oil sands, to reduce output and scale back investment.
OPEC OUTPUT CUT
OPEC oil ministers agreed yesterday to remove a record 2.2-million barrels per day from oil markets in a race to balance supply with the world's rapidly crumbling demand for fuel.
OPEC OUTPUT
Million barrels per day (mb/d)
Jan. '07 26.92
Jan. '08 29.89
Aug. '08 30.4
Nov.*'08 28.07
Note: OPEC 12 includes Angola and Ecuador.
* Indonesia leaves OPEC at the end of 2008 and is excluded from quota from Nov. 2008.
BRENT CRUDE PRICE
Weekly close, $U.S.
Jan. 7/07 $55.64
Jan. 6/07 $96.79
Jul. 13/08 $144.49
Dec. 17/08 $47.90
REUTERS/THE GLOBE AND MAIL66 SOURCE: THOMSON REUTERS
Wednesday, December 17, 2008
The Fed Bank Conspiracy Explained On You-Tube?
And for those that feel that this we are just pawns in a worldwide chess game this is an interesting conspiracy theory...
USA Expects Crude To Shoot Back Up!
NEW YORK (CNNMoney.com) -- Despite the recent rout in oil prices, the government expects crude to shoot back up over the long term. That is expected to result in a drastic drop in oil imports and a greater use of renewable energy.
U.S. expects big drop in oil imports
Despite the recent drop in crude prices, the rising cost of a barrel of oil will boost the use of renewable energy and help slow greenhouse gas emissions.
By Steve Hargreaves, CNNMoney.com staff writer
Last Updated: December 17, 2008: 4:32 PM ET
NEW YORK (CNNMoney.com) -- Despite the recent rout in oil prices, the government expects crude to shoot back up over the long term. That is expected to result in a drastic drop in oil imports and a greater use of renewable energy.
Oil imports - which currently make up 60% of all the oil consumed in the U.S. - should drop to about 40%, the Energy Information Administration said in its long-term energy outlook on Tuesday.
The drop will largely be the result of higher oil prices encouraging conservation and an expanded use of home-grown biofuels.
In making its predictions, EIA used an average crude price of $130 a barrel in 2030. That price is nearly double the projections for 2030 made last year - $70 a barrel.
Although the report was not meant to predict oil prices, EIA analysts say increased demand and limited access to new supplies will push crude prices up in the long term, despite crude's recent plunge.
The upward revision in price is a major shift in the government's long-term views on oil supply and demand. Limited access to new oil sources - particularly in OPEC countries - is a major reason why prices should increase.
Renewables on the rise
"People are becoming aware of the fact that conventional supplies of oil outside of OPEC are quite limited," said Robert Kaufmann, director of Boston University's Center for Energy & Environmental Studies. "It's getting harder and harder to tell the story that oil prices will remain low forever."
EIA's higher price estimate could give ammunition to policymakers seeking a big push into alternative fuels, or those seeking a more hawkish foreign policy, or both, said Kaufmann.
He said non-OPEC production peaked in 2004, and OPEC countries are expected to provide a greater share of the world's oil going forward.
But OPEC has little incentive to increase its ability to pump oil. The cartel has seen the world is willing and able to pay over $100 for oil, and many OPEC countries have become accustomed to revenues generated from those high prices. For them, the higher the price the better - so long as it doesn't kill the global economy or spur a mass shift away from oil.
EIA's price revision is in-line with predictions made earlier this year by the International Energy Agency (IEA), a similar group to EIA that has a more global focus.
The IEA drastically lowered its long-term world oil supply forecast this spring -from nearly 120 million barrels a day to maybe 100 million per day by 2030 - citing access to resources as a major concern.
In making its predictions, EIA does factor in the growth of supplies from "nonconventional" oil, like oil from tar sands or biofuels made from plants. It also makes its projections based on current policy, which does not include things like laws restricting greenhouse gas emissions, which could potentially drive up the cost of fossil fuels.
Higher oil prices, combined with some government mandates, are expected to yield a boost in renewable energy use as well.
Renewables should account for 21% of all energy used in the U.S. by 2030, the agency said, up from about 15% currently. Last year EIA said renewable use would remain flat at 15% in 2030.
Under current policies, EIA predicts energy-related carbon dioxide emissions will slow in the years ahead, but will increase about 7% by 2030. Last year the agency said carbon dioxide emissions should grow by 15% by 2030.
Most climate scientists say the world needs to cut its carbon dioxide emissions by about 80% by 2050 if it is to avoid the worst effects of global warming. During the presidential campaign, President-elect Barack Obama pledged to cut U.S. emissions by that amount.
The EIA estimates that if the country were to cut its greenhouse gas emissions by 40% in 2030, electricity prices would rise by about 10% due to the costs of switching from cheap coal to more expensive wind or natural gas sources to produce electricity. The agency does not have projections for an 80% reduction by 2050. To top of page
First Published: December 17, 2008: 2:28 PM ET
TSX Data Transmission Halts Trading
Dec 17, 2008 12:52 PM
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Malcolm Morrison
THE CANADIAN PRESS
The Toronto stock exchange is down – meaning today that its computers are not conducting trades, and have not been all morning.
"We've halted the Toronto stock exchange and TSX Venture Exchange and we will update you as soon as we are able," said Caroline Quick, director of communications at market operator TMX Group Inc. (TSX: X).
"It's a technical issue", she added, declining to elaborate.
Judging by the performance of Canadian bellwether stocks in New York, financials are a weight while energy stocks advanced.
Royal Bank was down 77 cents to US$28.33 while EnCana Corp. was ahead 37 cents to US$48.18 as the January crude contract on the New York Mercantile Exchange was off 70 cents at US$42.90.
The slippage in crude prices came even as the Organization of Petroleum Exporting Countries cut its output quotas by 2.2 million barrels a day. It's the largest-ever one-time reduction as the cartel struggles to support prices that have fallen from a peak of US$147 a barrel in July.
The Canadian dollar moved down 0.17 of a cent to 83.04 cents US after gaining two cents Tuesday.
New York stock markets moved lower, giving back a chunk of the previous day's gains that followed the U.S. Federal Reserve's cut in its key interest rate to between zero and 0.25 per cent to deal with a rapidly worsening economy.
The Dow Jones industrial average declined 108.2 points to 8,816 following a 359-point jump.
The Nasdaq composite index lost 19.63 points to 1,570.26 while the S&P 500 index declined 10.55 points to 902.65.
Traders digested much worse than expected results from Morgan Stanley, which lost US$2.37 billion as it endured a wide range of setbacks in one of the roughest quarters ever for investment banks. The loss of $2.34 per share was far below analyst expectations of a loss of 34 cents a share.
The February bullion contract in New York rose $27.50 to US$870.20 an ounce.
In corporate news, the Globe and Mail reported that Canadian Pacific Railway Co. (TSX: CP) plans to cut 600 union jobs and reduce other spending in tough times.
And insurer Kingsway Financial Services Inc. (TSX: KFS), under pressure from a major shareholder, says it is cutting costs by US$20 million next year.
Quebecor World Inc. (TSX: IQW) says Pierre Karl Peladeau and Erik Peladeau, heirs of founder Pierre Peladeau, have resigned from the commercial printer's board. This comes as former parent company Quebecor Inc., headed by the Peladeaus, sues Quebecor World, which is restructuring under bankruptcy protection.
On the earnings front, pharmaceutical company MDS Inc. (TSX: MDS) reported a fourth-quarter loss of US$255 million on a big after-tax writedown related to the troubled Maple medical-isotope reactor project. The results are preliminary and do not include another writedown of between $270 million and $370 million related to goodwill at its MDS Pharma Services division.
Transat AT Inc. (TSX: TRZ) said non-cash and non-operating items drove the travel operator into the red for its 2008 financial year, with a net loss of $50 million. Transat took a $45.7-million writedown on asset-backed commercial paper and a $2.3-million foreign exchange hit.
In the United States, Securities and Exchange Commission chairman Christopher Cox blamed regulators for a decade-long failure to investigate Wall Street money manager Bernard Madoff, now accused of a US$50-billion Ponzi scheme.
Markets overseas were mixed.
Japan's Nikkei stock average rose 0.5 per cent, while Hong Kong's Hang Seng index closed with a gain of 2.2 per cent.
The FTSE 100 declined 0.6 per cent in afternoon trading in London, while Germany's DAX index was off 0.5 per cent and France's CAC-40 was down 0.95 per cent.
Shares of BNP Paribas plunged 16 per cent after the French bank said extreme market volatility triggered a loss of US$972 million over the first 11 months of the year due to carnage in investment banking over the last two months.
OPEC Shocks with 4.2 Million bpd Oil Output Cut
OPEC Shocks with 4.2 Million bpd Oil Output Cut
OPEC, MIDDLE EAST, SAUDI ARABIA, IRAN, OIL, ENERGY, COMMODITIES
Reuters
17 Dec 2008 10:59 AM ET
The Organization of the Petroleum Exporting Countries agreed on Wednesday to make its deepest output cut ever to counter slumping demand and falling oil prices, said the group's Secretary-General Abdullah al-Badri.
OPEC has agreed to cut 4.2 million barrels per day from September actual production of 29.045 million bpd, according to OPEC's post meeting communique. That would imply a new OPEC output target of 24.845 million bpd.
The 12 members of the Organization of the Petroleum Exporting Countries were also aiming to build a floor under prices that have dropped more than $100 from a July peak above $147 a barrel.
As the ministers convened a meeting which was expected to proceed smoothly, oil was trading just above $44 a barrel.
Saudi Arabia, the world's biggest oil exporter, has led by example—reducing supplies to customers even before a cut has been agreed to help push prices back towards the $75 level Saudi King Abdullah has identified as "fair".
Ali al-Naimi, the kingdom's oil minister, was first to publicly call for curbs of 2 million bpd ahead of the meeting.
"The purpose of the cut is to bring the market into balance and avoid the gyrations of the price," he said. "The cut may lead to higher prices or may not."
Others in the group that pumps more than a third of the world's oil said at least two million barrels needed to go from daily output to prevent a massive build in inventories.
"A minimum of two million we think needs to be cut so we can balance the market," Iraqi Oil Minister Hussain al-Shahristani told Reuters.
The expected cut, the third this year, would bring a total reduction in OPEC supply to four million bpd, nearly a five percent cut in world oil supplies.
OPEC has encouraged other producers to cut back too.
Russia and Azerbaijan are attending the Oran meeting as observers and have said they could rein in exports in future, but stopped short of am immediate pledge.
Leading a high level delegation, Russia's Deputy Prime Minister Igor Sechin said in a speech to OPEC that Moscow did not plan to join in coordinated output cuts and did not want to join the group.
Oil below $50 is uncomfortable for all producing nations, but especially for OPEC members Venezuela and Iran which are dependent on higher prices to fund ambitious domestic programs.
Noble Cause
It is hoped that a sharp supply cut will put oil on the path towards $75.
"You must understand the purpose of the $75 price is for a much more noble cause," the Saudi Oil Minister said. "You need every producer to produce and marginal producers cannot produce at $40 a barrel."
(See what analysts are saying about OPEC's supply cuts in the accompanying video...)
"Therefore we believe that $75 is probably more conducive to marginal producers to continue so we don't have a shortage in the market and we avoid the future sky-rocketing of prices," he said.
Analysts said a limited recovery in prices would put a bit more strain on a recessionary global economy, but it may help pull the world back from the brink of deflation—a growing source of concern.
The influential Saudi Oil Minister clearly outlined the kingdom's route to lower production. It is pumping 8.2 million bpd against 9.7 million bpd in August.
"The difference is 1.5 million barrels per day—that is what we've done," Naimi said.
Saudi Arabia's implied output target is about 8.477 million bpd under existing OPEC curbs.
To have a lasting price impact, any OPEC deal must to be strictly observed.
According to independent observers cited in OPEC's monthly report on Tuesday, the group's compliance in November to existing cuts was only just over 50 percent.
Analysts said deeper cuts would further test discipline in the group.
That restraint would be needed to slim down growing world oil stockpiles.
A slump in consumption has lifted oil inventories in OECD industrialized nations to the equivalent of nearly 57 days of forward demand, a measure OPEC closely monitors. The industry norm for this time of year is about 52.
Copyright 2008 Reuters. Click for restrictions.
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OPEC says it will cut output by 2 million barrels
GEORGE JAHN
Associated Press
December 17, 2008 at 6:00 AM EST
ORAN, ALGERIA — Saudi Arabia, OPEC's de-facto leader, said Wednesday the group will slash a record 2 million barrels from its daily production, while Russia and other countries said they would join in the effort by removing hundreds of thousands more barrels from the market.
Saudi Oil Minister Ali Naimi said there was an OPEC consensus ahead of a formal agreement later in the day for the cut.
An official decision to cut 2 million barrels from output all at once would be a first for the organization. OPEC had cut that amount from its output four years ago, but that was done in two stages.
Also significant would be formal support from Russia, Azerbaijan and other non-OPEC producers. Mexico, Norway and Russia slashed production in the late 1990s, at a time oil was selling for about $10 (U.S.) a barrel.
Saudi Oil Minister Ali Naimi speaks to reporters at the OPEC meeting in Oran, Algeria. Ouahab Hebbat/AP
Enlarge Image
Saudi Oil Minister Ali Naimi speaks to reporters at the OPEC meeting in Oran, Algeria. (Ouahab Hebbat/AP)
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The Globe and Mail
Russian Deputy Premier Igor Sechin and Azeri Energy Minister Natik Aliev said separately their countries would reduce output by a total of more than 600,000 barrels a day.
Mr. Naimi first mentioned the 2 million figure in Oran on Tuesday, the eve of the oil ministers' decision making meeting. Asked Wednesday if he stood by that figure, he told reporters “that's the correct number.” Later, he said the cut would take effect Jan. 1, pending formal approval by the ministers.
Mr. Sechin, in comments to The Associated Press, said “Russian oil companies have already made a decision to cut deliveries to the market ... approximately equivalent to 350,000 barrels per day.”
“As soon as OPEC makes the decision, Russian companies will immediately follow,” he said.
Mr. Aliev said his country, too “will support the OPEC cuts,” slashing up to 300,000 barrels a day from Azerbaijan's output. That would be more than a third of total production for the country on the oil-rich Caspian Sea.
Mr. Aliev said his government had calculated the 2009 budget based on an oil price of $70 a barrel, and would have to compensate for the loss of money by tapping into a strategic government oil fund. Oil prices have plunged stunningly in recent months to less than $50 a barrel from $147 a barrel in July.
That might be good for consumers already straining from the financial crisis. But — like Azerbaijan — OPEC and non-OPEC producers are hurting from levels that are in some cases now below what's needed to balance their budgets or earn a profit.
Oil producers fear a drawn-out lull in prices could hurt investment and lay the groundwork for another sharp price spike when the world's economy rebounds.
“There's always been some finger-pointing at OPEC, but now even some (rich consuming nations) are saying maybe prices have gone too far,” Olivier Jakob of energy analysis firm Petromatrix in Switzerland said ahead of the meeting. “In terms of security of supply, you are much worse at $40 a barrel than at $75.”
OPEC gave ministers ammunition to justify cuts in its latest monthly market report, released Tuesday. The bloc predicted demand for its crude oil will have fallen by 700,000 barrels per day this year, and will drop by at least twice that amount in 2009 as the worsening global economy “is expected to have a strong impact on oil demand.”
Ahead of a formal decision, other OPEC ministers also expressed sentiment for a large cut to shock the market and put a floor under prices.
Shokri Ghanem, Libya's delegate to OPEC, said that “we should make a substantial cut” and that 2 million barrels was “a very good number.”
Venezuelan Energy Minister Rafael Ramirez used similar language: “What is important is that there should be a consensus to cut production. A significant cut,” he said. Mr. Ramirez added that Venezuela, a traditional price hawk, favors a cut of between 1 million to 2 million barrels per day.
Iranian Petroleum Minister Gholamhossein Nozari did not give a number, but said that Iran would support a reduction of 2 million barrels per day.
Still, while eager to push prices higher, OPEC must weigh production cuts against the risk of driving the economies of its top customers deeper into recession.
A senior OPEC official, who spoke on condition of anonymity because he was not authorized to comment publicly, said “reasonable” OPEC nations would accept prices around $50 a barrel in the short term so as not to contribute to the world economic downturn.
Tuesday, December 16, 2008
Late Day Volatility=The leveraged and inverse ETFs have to go out and buy or short stock each day based on the demand for the shares
Late-day volatility explained
Tuesday, December 16, 2008
You may have noticed a trading trend in the past few months: All to frequently, the final hour of the trading day coincided with a big jump in volatility, with major indexes either plunging or soaring between 3 p.m. and 4 p.m.
You're not alone. The Wall Street Journal recently covered this topic, and Bespoke Investment Group actually crunched some numbers and came up with a theory about why this is occurring right now.
The numbers go like this: If the S[amp]amp;P 500 has been in positive territory for more than half of the day, the average gain in the final hour has been 1.04 per cent. That's quite a spike for one hour of trading. At the same time, if the S[amp]amp;P 500 has been in positive territory for less than 50 per cent of the day, the opposite occurs: The index has plunged by an average of 1.2 per cent in the final hour.
This is a fairly recent development. The average high-low spread of the S[amp]amp;P 500 – or the percentage difference between its high point and low point – between 3 p.m. and 4 p.m. was 1.8 per cent between June and December. But for November alone the spread was an amazing 3 per cent.
Bespoke believes the reason for this surge in volatility is the popularity of leveraged and inverse exchange traded funds – baskets of stocks that will deliver two- or even three-times the moves in their underlying indexes.
“The leveraged and inverse ETFs have to go out and buy or short stock each day based on the demand for the shares,” Bespoke said.
“If the market is trading lower for most of the day, the inverse ETFs are most likely having to short stock at the end of the day to match demand – hence lower prices from 3 to 4. If the market is trading positive for the majority of the day, the ultra long ETFs may be buying shares or the inverse ones are covering at the end of the day.”
© Copyright The Globe and Mail
Monday, December 15, 2008
"Does that mean that the stock market is gonna continue plunging as we've seen the last several months?" Pelley asks.
"Does that mean that the stock market is gonna continue plunging as we've seen the last several months?" Pelley asks. "Actually we're the most bullish we've been in 10 years of managing money. And the reason is because the stock market, for the first time I can say this, in years, has finally figured out how bad things are going to be. And the stock market is forward looking. And with U.S. stocks down nearly 50 percent from their highs, we're actually finding bargains galore. We think corporate America's on sale," Tilson says.
Second Mortgage Disaster On The Horizon?
Dec. 14, 2008(CBS) When it comes to bailouts of American business, Barney Frank and the Congress may be just getting started. Nearly two trillion tax dollars have been shoveled into the hole that Wall Street dug and people wonder where the bottom is.
As correspondent Scott Pelley reports, it turns out the abyss is deeper than most people think because there is a second mortgage shock heading for the economy. In the executive suites of Wall Street and Washington, you're beginning to hear alarm about a new wave of mortgages with strange names that are about to become all too familiar. If you thought sub-primes were insanely reckless wait until you hear what's coming.
One of the best guides to the danger ahead is Whitney Tilson. He's an investment fund manager who has made such a name for himself recently that investors, who manage about $10 billion, gathered to hear him last week. Tilson saw, a year ago, that sub-prime mortgages were just the start.
"We had the greatest asset bubble in history and now that bubble is bursting. The single biggest piece of the bubble is the U.S. mortgage market and we're probably about halfway through the unwinding and bursting of the bubble," Tilson explains. "It may seem like all the carnage out there, we must be almost finished. But there's still a lot of pain to come in terms of write-downs and losses that have yet to be recognized."
In 2007, Tilson teamed up with Amherst Securities, an investment firm that specializes in mortgages. Amherst had done some financial detective work, analyzing the millions of mortgages that were bundled into those mortgage-backed securities that Wall Street was peddling. It found that the sub-primes, loans to the least credit-worthy borrowers, were defaulting. But Amherst also ran the numbers on what were supposed to be higher quality mortgages.
"It was data we'd never seen before and that's what made us realize, 'Holy cow, things are gonna be much worse than anyone anticipates,'" Tilson says.
The trouble now is that the insanity didn't end with sub-primes. There were two other kinds of exotic mortgages that became popular, called "Alt-A" and "option ARM." The option ARMs, in particular, lured borrowers in with low initial interest rates - so-called teaser rates - sometimes as low as one percent. But after two, three or five years those rates "reset." They went up. And so did the monthly payment. A mortgage of $800 dollars a month could easily jump to $1,500.
Now the Alt-A and option ARM loans made back in the heyday are starting to reset, causing the mortgage payments to go up and homeowners to default.
"The defaults right now are incredibly high. At unprecedented levels. And there’s no evidence that the default rate is tapering off. Those defaults almost inevitably are leading to foreclosures, and homes being auctioned, and home prices continuing to fall," Tilson explains.
"What you seem to be saying is that there is a very predictable time bomb effect here?" Pelley asks.
"Exactly. I mean, you can look back at what was written in '05 and '07. You can look at the reset dates. You can look at the current default rates, and it's really very clear and predictable what's gonna happen here," Tilson says.
Just look at a projection from the investment bank of Credit Suisse: there are the billions of dollars in sub-prime mortgages that reset last year and this year. But what hasn't hit yet are Alt-A and option ARM resets, when homeowners will pay higher interest rates in the next three years. We're at the beginning of a second wave.
"How big is the potential damage from the Alt As compared to what we just saw in the sub-primes?" Pelley asks.
"Well, the sub-prime is, was approaching $1 trillion, the Alt-A is about $1 trillion. And then you have option ARMs on top of that. That's probably another $500 billion to $600 billion on top of that," Tilson says.
Asked how many of these option ARMs he imagines are going to fail, Tilson says, "Well north of 50 percent. My gut would be 70 percent of these option ARMs will default."
"How do you know that?" Pelley asks.
"Well we know it based on current default rates. And this is before the reset. So people are defaulting even on the little three percent teaser interest-only rates they're being asked to pay today," Tilson says.
That second wave is coming ashore at a place you might call the "Repo Riviera" - Miami Dade County. Oscar Munoz used to sell real estate; now his company clears out foreclosed homes.
"Business is just going through the roof for us. Fortunately for us, unfortunately for the poor families who are going through this," Munoz explains.
"I wonder do you ever come to houses where the people are still here?" Pelley asks.
"Absolutely," Munoz says. "That's really a sad situation. I'd rather not meet the people."
Asked why not, Munoz says, "It’s not easy to come in and move a family out. It's just our job to do it for the bank. It's just the nature of what's going in the market right now."
Munoz says his company alone gets about 20 to 30 assignments per day. "And we're one of the few companies right now who are hiring. We have to hire people because the demand is so high," he tells Pelley.
People who've been evicted tend to leave stuff behind. The next house is usually much smaller. Banks hire Munoz to move the possessions out where, by law, they remain for 24 hours. Often the neighbors pick through the remains.
Once the homes are empty the hard part starts - trying to find buyers in a free-fall market.
Miami real estate broker Peter Zalewski talks like a man with a lot of real estate to move. "We have 110,000 properties for sale in South Florida today, 55,000 foreclosures, 19,000 bank owned properties. Sixty-eight percent of the available inventory is in some form of distress. They need someone to clean it up."
Asked what the name of his company is, Zalewski says, "It's called Condo Vultures Realty."
What does that mean?
"That in times of distress, and in times of downturn, there's opportunity. And you know, vultures clean up the mess. A lot of people seem to think they kill, but they don't actually kill, they clean," he says.
The killing, in Miami, was done by the developers back when it seemed that the party would never end. They sold hyper-inflated condos at what amounted to real estate orgies-sales parties for invited guests who were armed with option ARM and Alt-A loans. "There were red ropes outside. They had hired cameramen, and they had hired photographers to almost set the scene of a paparazzi," Zalewski remembers.
"They were hiring fake paparazzi? To make the customers feel like they were special?" Pelley asks.
"You were selling a lifestyle," Zalewski says.
Asked what roles these exotic mortgages played, Zalewski says, "They were essential. They were necessary. Without the Alt A or option ARM mortgage, this boom never would've occurred."
It never would have occurred because without the Alt As and the option ARMs, many buyers never would have qualified for a loan. The banks and brokers were getting their money up front in fees, so the more they wrote, the more they made.
"They stopped checking whether the income was even real. They turned to low and no-doc loans, so-called 'liar's loans' and jokingly referred to as 'ninja loans.' No income, no job, no assets. And they were still willing to lend," Tilson says.
"But help me out here. How does that make sense for the lender? It would seem to be reckless, in the extreme," Pelley remarks.
"It was," Tilson agrees. "But the key assumption underlying, the willingness to do this was that home prices would keep going up forever. And in fact, home prices nationwide had never declined since the Great Depression."
On the way up, everyone wanted in. No one expected to feel any pain. People like acupuncturist Rula Giosmas became real estate speculators.
Giosmas says she bought about six properties in this last five-year period as investments. She says she put 20 percent down on each. Now they're all financed with option ARM loans.
Asked what she understood about the loans, Giosmas says, "Well, unfortunately, I didn't ask too many questions. I mean in the old days, I would shop around. But because of the frenzy, and I was so busy looking to buy other properties, I didn't really focus on shopping around for mortgage brokers."
"But if you're investing in real estate, you're buying multiple properties, you should be asking a lot of questions," Pelley remarks. "Why didn't you ask?"
"I was busy. I was really busy looking at property all the time, all day long," she replies.
She also acknowledges that she didn't read the paperwork. Now she’s losing money on every property.
"You know that there are people watching this interview who are saying, 'You know, she was just foolish. She was greedy and foolish. She was buying small apartment buildings and wasn't paying enough attention to how they were financed,'" Pelley points out.
"My full-time job is I'm an acupuncturist. So, this was just a side thing," she says.
Giosmas says she was misled and she hopes to renegotiate her loans. But many other buyers have simply walked away from their properties. One Miami luxury building was a sellout, but when 60 Minutes visited, a quarter of the condos were in foreclosure.
Zalewski says one of those condos was originally purchased in October 2006 for $2.4 million. Now he says the asking price from the lender is $939,000.
And there are tough years to come because, just like the sub-primes, the Alt-A and option ARM mortgages were bundled into Wall Street securities and sold to investors.
Sean Egan, who runs a credit rating firm that analyzes corporate debt, says he expects 2009 to be miserable and 2010 also miserable and even worse.
Fortune Magazine cited Egan as one of six Wall Street pros who predicted the fall of the financial giants.
"This next wave of defaults, which everyone agrees is inevitably going to happen, how central is that to what happens to the rest of the economy?" Pelley asks.
"It's core. It's core, because housing is such an important part. We're not going to get the housing industry back on track until we clear out this garbage that's in there," Egan explains.
"That hasn't cleared out yet. We haven't seen the bottom," Pelley remarks.
"It's getting worse," Egan says. "There are some statistics from the National Association of Realtors, and they track the supply of housing units on the market. And that's grown from 2.2 million units about three years ago, up to 4.5 million units earlier this year. So you have the massive supply out there of units that need to be sold."
"What with the housing supply increasing that much, what does it mean?" Pelley asks.
"It means that this problem, the economic difficulties, are not going to be resolved in a short period of time. It's not gonna take six months, it's not gonna 12 months, we're looking at probably about three, four, five years, before this overhang, this supply overhang is worked through," Egan says.
In the next four years, eight million American families are expected to lose their homes. But even after the residential meltdown, Whitney Tilson says blows to the financial system will keep coming.
"The same craziness that occurred in the mortgage market occurred in the commercial real estate markets. And that's taking a little longer to show. But there are gonna be big losses there. Credit cars, auto loans. You name it. So, we're still, you know, we're maybe halfway through the mortgage bubble. But we may only be in the third inning of the overall bursting of this asset bubble," Tilson says.
"Does that mean that the stock market is gonna continue plunging as we've seen the last several months?" Pelley asks.
"Actually we're the most bullish we've been in 10 years of managing money. And the reason is because the stock market, for the first time I can say this, in years, has finally figured out how bad things are going to be. And the stock market is forward looking. And with U.S. stocks down nearly 50 percent from their highs, we're actually finding bargains galore. We think corporate America's on sale," Tilson says.
The stock market will still have a lot of figuring to do with more troubling news on the horizon. The mortgage bankers association says one out of 10 Americans is now behind on their mortgage. That's the most since they started keeping records in 1979.
Produced by David Gelber and Joel Bach
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Kingdom's Oil Minister Tells 60 Minutes U.S. Oil Addiction Is Here To Stay Due To Lack Of Alternatives
Saudi Arabia Bullish On Oil's Future
Dec. 7, 2008(CBS) The good news is that the price of oil is falling - a lot; it's also the bad news if you're determined that the U.S. should kick its addiction to foreign oil. President-elect Barack Obama says now is the time to do that, even with the economy in recession.
But Saudi Arabia, the world's largest oil supplier - with the U.S. as its number one customer - is pulling all the levers and spending billions to keep the oil age going.
60 Minutes correspondent Lesley Stahl went to Saudi Arabia a few weeks ago to meet one of the most powerful men in the world, Ali Al-Naimi, the Saudi oil minister and de facto head of the OPEC oil cartel.
"If most Americans had an opportunity to sit down with the oil minister of Saudi Arabia, the thing they would like to know is where you think the price of oil's gonna be, say, in about six months. Is it gonna be up or down?" Stahl asked.
"You want my classic answer?" Al-Naimi replied.
"No. I want your honest appraisal…and your judgment," Stahl asked.
"My honest judgment is if I were to know what the price of oil six months from now, I would be in Las Vegas. Okay?" Al-Naimi said, smiling.
He may be smiling, but this is a man with serious heartburn and vertigo. The price of oil has been soaring and sinking up and down uncontrollably. Asked why oil prices spiked to $147 a barrel in July, Al-Naimi told Stahl, "Basically, there was what's called a 'fear premium.'"
"And the fear was that Saudi Arabia itself had peaked out. That you'd reached your ceiling of how much available oil is left in your overall reserve. So, what's the truth?" Stahl asked.
"The truth is here is the kingdom with more than 260 billion barrels. And I firmly believe that the potential to add another 200 billion barrels of oil are there to be found," Al-Naimi said.
If the oil minister of Saudi Arabia had one message, it was that there is no need for those fears.
And to make the point, the Saudis let 60 Minutes see facilities that will increase the country's capacity from about 10 million barrels a day to more than 12 million. And they're going to the ends of the Earth to do it.
One of those desolate places is Shaybah, a desert wilderness where temperatures can reach 135 degrees. The Saudis say that 18 billion barrels of oil lie beneath the red sand dunes, more than four times the proven reserves of Alaska.
To tap into it, the kingdom's national oil company, Saudi Aramco, had to build an oasis there. Awayyid Al-Shammari oversees the mega-project at Shaybah, an area of the kingdom known as the "Empty Quarter."
"We're on soft sand. We're not talking about a hard surface here," Stahl remarked.
"Yeah," Al-Shammari acknowledged. "The logistics are impossible. The first thing we had to do is build our own road in order to access this field."
"Once that was done, we had to remove one hundred million cubic feet of sand just to make the runway that we are currently using," he explained. "We had to remove a sand dune in order to connect two flat areas to do that."
Al-Shammari said they also had to build a pipeline 400 miles in length. "And you can imagine the challenge of building that pipeline in a topography like this."
But it was nothing compared to accessing the oil at Shaybah itself, which was discovered in 1968. For 30 years, it was considered too hard to extract. "Now with sand dunes this high, it's almost impossible. And the economics just didn't make it at the time until the development of the horizontal drilling," Al-Shammari explained.
Horizontal drilling is where you place a derrick on firm ground and then dig down with a drill bit that snakes horizontally under the sand dunes, with branching tentacles like a fish bone. The drill bits can travel out for as much as five miles.
The Shaybah facility is now being expanded to extract a total of 750,000 barrels a day of high-grade, Arab extra-light crude.
Al-Shammari says the facility is almost done and should go online early next year.
On the other side of the kingdom, there's an even bigger mega project at a field known as Khurais. It is also scheduled to go online next year.
"This is the biggest oil project in history," project manager Khalid Abdulqader said.
He told 60 Minutes 1.2 million barrels a day will be tapped from that field, more than the entire daily production of some OPEC countries like Qatar and Indonesia.
The oil will be stored in massive tanks, some seven stories high. One of those large tanks is 300 feet across and the length of a football field. And like just about everything at Khurais, even the tanks have the latest bells and whistles.
"This is a floating roof. So, when oil comes in, the whole roof will go up," Abdulqader explained. "And the stair also will rise up with it."
There's more oil in the Khurais field than in the entire United States. It's the largest oil facility to come online anywhere in the world in nearly three decades with, the Saudis say, 27 billion barrels of oil.
Abdulqader said it will take more than 50 years to deplete the field.
Khurais, like the sand dunes, presented a technological challenge. The field has very little natural pressure, which is necessary to bring the oil to the surface. So to force the oil up, they're injecting seawater down deep underground.
"We will inject about 84 million gallon per day of seawater," Abdulqader said.
They built a pipeline from the sea to the field to deliver the water - a distance of about 150 miles.
The complexity and vastness of the project is staggering, with 26 contractors, 106 subcontractors and 22,000 workers from around the world, who have laid thousands of miles of pipeline and cables.
These two mega projects, plus three others are costing Saudi Arabia a total of $60 billion over five years and they're not borrowing any of it - it’s all being paid for in cash.
Still, Saudi costs for producing oil are the lowest in the world: according to Ali Al-Naimi, the cost to produce one barrel is less than $2.
Saudi Arabia reportedly needs to sell oil for at least $55 dollars a barrel to cover the cost of running the country. Fossil fuels finance 75 percent of the country's entire domestic spending budget, but oil is selling for below that breakeven price.
Asked if this drop in price worries him, Al-Naimi said, "Oh, I am not a worrier. I get concerned. But I don't worry."
"The concern is this: any price must be good for the producer, for the consumer, for the investor, the oil companies," he told Stahl.
"So, you're saying if the price goes too low then production will fall. And in the end, we'll be squeezed. We won't have enough oil…to run our country," Stahl remarked.
"Price will skyrocket," Al-Naimi predicted.
What he wants is an end to the wild swings in price, which is why - to keep the price from further plummeting - he agreed to a cut of 1.5 million barrels a day in the October meeting of OPEC.
"The point is that Saudi Arabia wanted the 1.5 [cut of million barrels]. This was not something jammed down your throat?" Stahl asked.
"No, no, no. By the way, nothing gets jammed down our throats," Al-Naimi replied.
"But Iran wanted more?" Stahl asked.
"Well, I mean, different countries want different levels, different cuts. But in the final analysis, reason prevails," Al-Naimi said. "This is Saudi Arabia's influence on OPEC."
It's an influence so strong now that he was able to quash Iran's attempt to double the price of oil, which Tehran needs to support its budget, including its nuclear program and the bankrolling of militias like Hezbollah and Hamas. Still, Al-Naimi says oil is no longer used as weapon.
"Iran tries to keep the price way up; and Venezuela's trying to keep the price way up. You don't consider that oil as a weapon?" Stahl asked.
"If you looked at these countries you just named, every one of them would like to sell every barrel they can," Al-Naimi commented.
"At as high a price as they can get away with," Stahl remarked.
"Right," Al-Naimi said.
"The sense out of the OPEC meeting to a lot of people was by cutting production your purpose was to get the price up again. And that would hurt the world which is suffering an economic crisis. And the world means everywhere," Stahl said.
"I can assure you that price was the least on our mind. I say that in all honesty," Al-Naimi replied.
"But the sense is you were oblivious to the concerns of the world facing this economic crisis. You didn’t care about the recession, the credit problems or anything like that," Stahl said.
"That is really a very unfair criticism. What did governments do when the financial crisis happened? They took measures to bring stability back to the financial market. And we see, because of our responsibility, a future crisis in the oil market. Should we not take preemptive measures to prevent it? And I think the answer is yes, we should. It's incumbent on us not to see the oil market destroyed," Al-Naimi said.
The Saudis recently announced the price they would like to see oil selling for, $75 a barrel. That's about 50 percent higher than the current price.
Saudi Aramco was originally an American company. It goes way back to the 1930s when two American geologists from Standard Oil of California discovered oil in the Saudi desert.
Standard Oil formed a consortium with Texaco, Exxon and Mobil, which became Aramco. It wasn't until the 1980s that Saudi Arabia bought them out and nationalized the company. Today, Saudi Aramco is the custodian of the country's sole source of wealth and power.
Over 16,000 people work at the company's massive compound, which is like a little country with its own security force, schools, hospitals, and even its own airline.
According to Abdallah Jum’ah, Saudi Aramco's president and CEO, Aramco is the world’s largest oil producing company.
And it's the richest company in the world, worth, according to the latest estimate, $781 billion.
Jum'ah gave 60 Minutes a tour of the company's command center, where engineers scrutinize and analyze every aspect of the company's operations on a 220-foot digital screen.
"Every facility in the kingdom, every drop of oil that comes from the ground is monitored in real time in this room," Jum'ah explained. "And we have control of each and every facility, each and every pipeline, each and every valve on the pipeline. And therefore, we know exactly what is happening in the system from A to Z."
A large map shows all the oil fields in Saudi Arabia, including Ghawar, the largest on-shore oil field in the world, and Safaniya, the largest off-shore oil field in the world; green squares on the map monitor supertankers on the high seas in real time.
"What you see today is a company that is as professionally sound as any international oil company," Al-Naimi told Stahl.
Before he became oil minister, Al-Naimi ran Saudi Aramco for 11 years. He was the first Saudi president and CEO.
"You have, as you just said, one of the most efficient, cutting-edge 21st century companies in the world…within one of the most religious conservative countries in the world. It’s almost a paradox. We were surprised by this?" Stahl asked.
"I don't think there's any real surprise," Al-Naimi replied. "Many people have images of Saudi Arabia, but they really change their views and images when they come and visit Saudi Arabia."
But to western eyes, it is a paradox. Skyscrapers, traffic jams and shopping malls co-exist with ancient tribal customs. The king - and the Koran - reign supreme, and women everywhere are required to cover themselves in black from head to toe; even Stahl had to wear an abaya, a women's garment worn in parts of the Islamic world.
The rules apply everywhere it seems, except for the women at Saudi Aramco. When the U.S. oil companies came to Saudi Arabia in the 1940s and 50s, the Americans moved into the area with their families and developed neighborhoods to suit their tastes and their way of life. They created a replica of American suburbia; you could be in the outskirts of Houston or Los Angeles.
"It's almost like it's an enclave within Saudi Arabia. It's different from the rest of the country," Stahl remarked. "Very different. It kept a lot of the American ways, right?"
"Yes, of course. They are good ways. There is nothing wrong with…these are excellent ways," he replied.
"But, I was so surprised to see the culture there. Because for instance, I saw men and women working side by side. I saw women driving cars there, which you don't see," Stahl pointed out.
Al-Naimi says it's not strange to him: he's a product of that culture, having risen through the ranks. He started out as a 12-year-old office boy in 1947, when it was said that to get oil all you needed to do was ladle it out of the sand.
It was never that easy, according to Aramco CEO Jum’ah. "It takes a lot of effort. The oil is a gift from God. The recovery of oil is really the work of men. And this is part of it here."
Aramco engineers are making sure that not one drop of oil is overlooked: computers are receiving data, via satellite, from sensors mounted on drill bits that are burrowing deep into the oil fields all over Saudi Arabia. Engineers are sending instant messages that actually guide the drill bits.
"He is now directing that drill bit to go into the best areas of the reservoirs. And suck that oil from it, and not leave any oil behind," Jum'ah explained.
He says the drill bit is a bit like a snake, going down and following where the oil is. "And mind you, this is happening 400 to 500 miles from here geographically. And we are sending that drill bit also two or three miles in the ground."
Jum'ah says that with this technology, they're able to recover ten times more oil than before. But global demand is dwindling, and even Americans, the world's leading gas guzzlers, are buying less.
"In the last ten months American droves 78 billion fewer miles than they did in the 10 months last year, same ten months. This is a quite a dramatic decrease in driving," Stahl remarked.
"Well, to put it in better numbers, I think your consumption dropped by a million barrels," Al-Naimi replied.
He told Stahl he doesn't think this decrease in demand is permanent.
Al-Naimi says the U.S. is Saudi Arabia's number one customer. And the question is: what will Aramco do to keep it that way? One thing is discourage the move toward electric cars by trying to alleviate our concerns about the environment.
They showed 60 Minutes their new $4 million experimental combustion engine they hope will increase gas mileage while it lowers CO-2 emissions.
"What we want to see is that there is an emphasis on also making this oil greener, and making the fossil fuels in general greener, because they're going to be with us for the long haul," Jum'ah said.
"Let me be blunt, okay? And ask you to be candid: is it Aramco’s hope to prevent a switch away from oil? Somebody said, 'The country is the oil business.' You absolutely need to do this for your own survival," Stahl remarked.
But Jum'ah asked what was wrong with that.
"I didn't say anything’s wrong with it. But it’s a fact. You'd admit it's a fact," Stahl asked.
"Yeah, we admit a fact that yes, we depend on the oil industry. We want it to help us, you know, to develop our economy and develop the economy of the world. So what is good for the wellbeing of Saudi Arabia should be good for the wellbeing of the world, too. So there's nothing wrong with that," he said.
"So what do you say to people out there, like Al Gore and now Mr. Obama, that say we have to devote ourselves, devote ourselves, to reducing our dependence on oil?" Stahl asked.
"My answer to this is we have to be realistic. We don't have the alternatives today," Jum'ah said.
"If there are alternatives, be my guest and come and bring them in. They are not there."
"You're saying whatever the world does in terms of wind, nuclear, coal, we're still going to need oil, and a lot of it?" Stahl asked.
"You're still going to need oil, and…a lot of it," he replied.
"Politicians use this all the time that. We're addicted, addicted to foreign oil. And addiction has a dark connotation, because if you’re addicted, there’s a suggestion that there’s a drug dealer who’s trying to keep you hooked. And it’s in the air that you want to keep us hooked," Stahl said to Minister Al-Naimi.
"There is nothing addictive about oil. If you look back 100 years, what would the world be without it?" he asked.
"Even President Bush, who's an oilman, even he has said we're addicted to this, and we have to get off this oil," Stahl pointed out.
"But listen to what the professionals say and what do they advise: it’s not going to happen today. It’s not going to happen ten years from now. It’s probably not going to happen 20 years from now. It’s not going to happen 30 years from now. Okay?" Because you are still going to be using fossil fuels," Al-Naimi predicted.
Rather than oil pushers, the Saudis see themselves as good global citizens who are trying to save the world from a catastrophic oil shortage. But, as Al-Naimi told 60 Minutes, the kingdom is hedging its bets.
He told Stahl the kingdom is doing research on solar energy, as sunshine is more than abundant in Saudi Arabia.
And he says it won't hurt their oil industry, but supplement it. "Our vision is that we will be exporters of gigawatts of electricity. We will be exporting both: barrels of oil and gigawatts of power."
And so, he says, the kingdom will still be in the energy business long after the sun sets on the age of oil.
Produced by Richard Bonin and Kathy Liu
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(CBS) But it was nothing compared to accessing the oil at Shaybah itself, which was discovered in 1968. For 30 years, it was considered too hard to extract. "Now with sand dunes this high, it's almost impossible. And the economics just didn't make it at the time until the development of the horizontal drilling," Al-Shammari explained.
Horizontal drilling is where you place a derrick on firm ground and then dig down with a drill bit that snakes horizontally under the sand dunes, with branching tentacles like a fish bone. The drill bits can travel out for as much as five miles.
The Shaybah facility is now being expanded to extract a total of 750,000 barrels a day of high-grade, Arab extra-light crude.
Al-Shammari says the facility is almost done and should go online early next year.
On the other side of the kingdom, there's an even bigger mega project at a field known as Khurais. It is also scheduled to go online next year.
"This is the biggest oil project in history," project manager Khalid Abdulqader said.
He told 60 Minutes 1.2 million barrels a day will be tapped from that field, more than the entire daily production of some OPEC countries like Qatar and Indonesia.
The oil will be stored in massive tanks, some seven stories high. One of those large tanks is 300 feet across and the length of a football field. And like just about everything at Khurais, even the tanks have the latest bells and whistles.
"This is a floating roof. So, when oil comes in, the whole roof will go up," Abdulqader explained. "And the stair also will rise up with it."
There's more oil in the Khurais field than in the entire United States. It's the largest oil facility to come online anywhere in the world in nearly three decades with, the Saudis say, 27 billion barrels of oil.
Abdulqader said it will take more than 50 years to deplete the field.
Khurais, like the sand dunes, presented a technological challenge. The field has very little natural pressure, which is necessary to bring the oil to the surface. So to force the oil up, they're injecting seawater down deep underground.
"We will inject about 84 million gallon per day of seawater," Abdulqader said.
They built a pipeline from the sea to the field to deliver the water - a distance of about 150 miles.
The complexity and vastness of the project is staggering, with 26 contractors, 106 subcontractors and 22,000 workers from around the world, who have laid thousands of miles of pipeline and cables.
These two mega projects, plus three others are costing Saudi Arabia a total of $60 billion over five years and they're not borrowing any of it - it’s all being paid for in cash.
Still, Saudi costs for producing oil are the lowest in the world: according to Ali Al-Naimi, the cost to produce one barrel is less than $2.
(CBS) Saudi Arabia reportedly needs to sell oil for at least $55 dollars a barrel to cover the cost of running the country. Fossil fuels finance 75 percent of the country's entire domestic spending budget, but oil is selling for below that breakeven price.
Asked if this drop in price worries him, Al-Naimi said, "Oh, I am not a worrier. I get concerned. But I don't worry."
"The concern is this: any price must be good for the producer, for the consumer, for the investor, the oil companies," he told Stahl.
"So, you're saying if the price goes too low then production will fall. And in the end, we'll be squeezed. We won't have enough oil…to run our country," Stahl remarked.
"Price will skyrocket," Al-Naimi predicted.
What he wants is an end to the wild swings in price, which is why - to keep the price from further plummeting - he agreed to a cut of 1.5 million barrels a day in the October meeting of OPEC.
"The point is that Saudi Arabia wanted the 1.5 [cut of million barrels]. This was not something jammed down your throat?" Stahl asked.
"No, no, no. By the way, nothing gets jammed down our throats," Al-Naimi replied.
"But Iran wanted more?" Stahl asked.
"Well, I mean, different countries want different levels, different cuts. But in the final analysis, reason prevails," Al-Naimi said. "This is Saudi Arabia's influence on OPEC."
It's an influence so strong now that he was able to quash Iran's attempt to double the price of oil, which Tehran needs to support its budget, including its nuclear program and the bankrolling of militias like Hezbollah and Hamas. Still, Al-Naimi says oil is no longer used as weapon.
"Iran tries to keep the price way up; and Venezuela's trying to keep the price way up. You don't consider that oil as a weapon?" Stahl asked.
"If you looked at these countries you just named, every one of them would like to sell every barrel they can," Al-Naimi commented.
"At as high a price as they can get away with," Stahl remarked.
"Right," Al-Naimi said.
"The sense out of the OPEC meeting to a lot of people was by cutting production your purpose was to get the price up again. And that would hurt the world which is suffering an economic crisis. And the world means everywhere," Stahl said.
"I can assure you that price was the least on our mind. I say that in all honesty," Al-Naimi replied.
"But the sense is you were oblivious to the concerns of the world facing this economic crisis. You didn’t care about the recession, the credit problems or anything like that," Stahl said.
"That is really a very unfair criticism. What did governments do when the financial crisis happened? They took measures to bring stability back to the financial market. And we see, because of our responsibility, a future crisis in the oil market. Should we not take preemptive measures to prevent it? And I think the answer is yes, we should. It's incumbent on us not to see the oil market destroyed," Al-Naimi said.
The Saudis recently announced the price they would like to see oil selling for, $75 a barrel. That's about 50 percent higher than the current price.
(CBS) Saudi Aramco was originally an American company. It goes way back to the 1930s when two American geologists from Standard Oil of California discovered oil in the Saudi desert.
Standard Oil formed a consortium with Texaco, Exxon and Mobil, which became Aramco. It wasn't until the 1980s that Saudi Arabia bought them out and nationalized the company. Today, Saudi Aramco is the custodian of the country's sole source of wealth and power.
Over 16,000 people work at the company's massive compound, which is like a little country with its own security force, schools, hospitals, and even its own airline.
According to Abdallah Jum’ah, Saudi Aramco's president and CEO, Aramco is the world’s largest oil producing company.
And it's the richest company in the world, worth, according to the latest estimate, $781 billion.
Jum'ah gave 60 Minutes a tour of the company's command center, where engineers scrutinize and analyze every aspect of the company's operations on a 220-foot digital screen.
"Every facility in the kingdom, every drop of oil that comes from the ground is monitored in real time in this room," Jum'ah explained. "And we have control of each and every facility, each and every pipeline, each and every valve on the pipeline. And therefore, we know exactly what is happening in the system from A to Z."
A large map shows all the oil fields in Saudi Arabia, including Ghawar, the largest on-shore oil field in the world, and Safaniya, the largest off-shore oil field in the world; green squares on the map monitor supertankers on the high seas in real time.
"What you see today is a company that is as professionally sound as any international oil company," Al-Naimi told Stahl.
Before he became oil minister, Al-Naimi ran Saudi Aramco for 11 years. He was the first Saudi president and CEO.
"You have, as you just said, one of the most efficient, cutting-edge 21st century companies in the world…within one of the most religious conservative countries in the world. It’s almost a paradox. We were surprised by this?" Stahl asked.
"I don't think there's any real surprise," Al-Naimi replied. "Many people have images of Saudi Arabia, but they really change their views and images when they come and visit Saudi Arabia."
But to western eyes, it is a paradox. Skyscrapers, traffic jams and shopping malls co-exist with ancient tribal customs. The king - and the Koran - reign supreme, and women everywhere are required to cover themselves in black from head to toe; even Stahl had to wear an abaya, a women's garment worn in parts of the Islamic world.
The rules apply everywhere it seems, except for the women at Saudi Aramco. When the U.S. oil companies came to Saudi Arabia in the 1940s and 50s, the Americans moved into the area with their families and developed neighborhoods to suit their tastes and their way of life. They created a replica of American suburbia; you could be in the outskirts of Houston or Los Angeles.
"It's almost like it's an enclave within Saudi Arabia. It's different from the rest of the country," Stahl remarked. "Very different. It kept a lot of the American ways, right?"
"Yes, of course. They are good ways. There is nothing wrong with…these are excellent ways," he replied.
"But, I was so surprised to see the culture there. Because for instance, I saw men and women working side by side. I saw women driving cars there, which you don't see," Stahl pointed out.
Al-Naimi says it's not strange to him: he's a product of that culture, having risen through the ranks. He started out as a 12-year-old office boy in 1947, when it was said that to get oil all you needed to do was ladle it out of the sand.
(CBS) It was never that easy, according to Aramco CEO Jum’ah. "It takes a lot of effort. The oil is a gift from God. The recovery of oil is really the work of men. And this is part of it here."
Aramco engineers are making sure that not one drop of oil is overlooked: computers are receiving data, via satellite, from sensors mounted on drill bits that are burrowing deep into the oil fields all over Saudi Arabia. Engineers are sending instant messages that actually guide the drill bits.
"He is now directing that drill bit to go into the best areas of the reservoirs. And suck that oil from it, and not leave any oil behind," Jum'ah explained.
He says the drill bit is a bit like a snake, going down and following where the oil is. "And mind you, this is happening 400 to 500 miles from here geographically. And we are sending that drill bit also two or three miles in the ground."
Jum'ah says that with this technology, they're able to recover ten times more oil than before. But global demand is dwindling, and even Americans, the world's leading gas guzzlers, are buying less.
"In the last ten months American droves 78 billion fewer miles than they did in the 10 months last year, same ten months. This is a quite a dramatic decrease in driving," Stahl remarked.
"Well, to put it in better numbers, I think your consumption dropped by a million barrels," Al-Naimi replied.
He told Stahl he doesn't think this decrease in demand is permanent.
Al-Naimi says the U.S. is Saudi Arabia's number one customer. And the question is: what will Aramco do to keep it that way? One thing is discourage the move toward electric cars by trying to alleviate our concerns about the environment.
They showed 60 Minutes their new $4 million experimental combustion engine they hope will increase gas mileage while it lowers CO-2 emissions.
"What we want to see is that there is an emphasis on also making this oil greener, and making the fossil fuels in general greener, because they're going to be with us for the long haul," Jum'ah said.
(CBS) "Let me be blunt, okay? And ask you to be candid: is it Aramco’s hope to prevent a switch away from oil? Somebody said, 'The country is the oil business.' You absolutely need to do this for your own survival," Stahl remarked.
But Jum'ah asked what was wrong with that.
"I didn't say anything’s wrong with it. But it’s a fact. You'd admit it's a fact," Stahl asked.
"Yeah, we admit a fact that yes, we depend on the oil industry. We want it to help us, you know, to develop our economy and develop the economy of the world. So what is good for the wellbeing of Saudi Arabia should be good for the wellbeing of the world, too. So there's nothing wrong with that," he said.
"So what do you say to people out there, like Al Gore and now Mr. Obama, that say we have to devote ourselves, devote ourselves, to reducing our dependence on oil?" Stahl asked.
"My answer to this is we have to be realistic. We don't have the alternatives today," Jum'ah said.
"If there are alternatives, be my guest and come and bring them in. They are not there."
"You're saying whatever the world does in terms of wind, nuclear, coal, we're still going to need oil, and a lot of it?" Stahl asked.
"You're still going to need oil, and…a lot of it," he replied.
"Politicians use this all the time that. We're addicted, addicted to foreign oil. And addiction has a dark connotation, because if you’re addicted, there’s a suggestion that there’s a drug dealer who’s trying to keep you hooked. And it’s in the air that you want to keep us hooked," Stahl said to Minister Al-Naimi.
"There is nothing addictive about oil. If you look back 100 years, what would the world be without it?" he asked.
"Even President Bush, who's an oilman, even he has said we're addicted to this, and we have to get off this oil," Stahl pointed out.
"But listen to what the professionals say and what do they advise: it’s not going to happen today. It’s not going to happen ten years from now. It’s probably not going to happen 20 years from now. It’s not going to happen 30 years from now. Okay?" Because you are still going to be using fossil fuels," Al-Naimi predicted.
Rather than oil pushers, the Saudis see themselves as good global citizens who are trying to save the world from a catastrophic oil shortage. But, as Al-Naimi told 60 Minutes, the kingdom is hedging its bets.
He told Stahl the kingdom is doing research on solar energy, as sunshine is more than abundant in Saudi Arabia.
And he says it won't hurt their oil industry, but supplement it. "Our vision is that we will be exporters of gigawatts of electricity. We will be exporting both: barrels of oil and gigawatts of power."
And so, he says, the kingdom will still be in the energy business long after the sun sets on the age of oil.
QEC+TLM =Shale Gas Bonanza
HOW TO GET THINGS MOVING
Slash taxes and interest rates, spend on infrastructure and training, feel free to run a deficit - and do it quickly. That's what Canada's pessimistic business leaders are telling Ottawa
RICHARD BLACKWELL
rblackwell@globeandmail.com
December 15, 2008
One company in that boat is Questerre Energy Corp., a Calgary oil and gas exploration firm that was fortunate to have completed a $75-million financing just before the market turned down. It now has no debt and positive cash flow, plus excess cash in the bank, said CEO Michael Binnion, so it is in a position to go shopping.
"We're actively thinking, analyzing and looking at ... where we would want to buy, and what we could buy," he said.
The problem, he said, is that Questerre will likely be spending its money on assets that are already drilled, rather than doing new drilling itself. "That doesn't create any employment, does it?"
Over the long term, Mr. Binnion hopes any weaker company his absorbs will eventually grow and contribute to job creation when the economy recovers.
Many companies are not in same enviable position as Questerre. Almost all executives surveyed said it is harder to get financing now than it was two years ago, and more than two-thirds said it was "significantly" harder.
...Recessions, he said, "happen because people think they're going to happen."
Natural Gas
December, 2008
Source: OIL & GAS INQUIRER
Shale Gas
Michael Binnion: Wildcatting in Quebec's St. Lawrence Lowlands
By Mike Byfield
[Figure 1]
Among Calgary's oil and gas professionals, Michael Binnion sees himself as an outsider. Maybe that's why the president and CEO of Questerre Energy Corp. moved before any of his rivals on a shale gas prospect in Quebec. "I'm a chartered accountant, not an engineer or geologist," he says. "Also, most junior producers here move step by step, looking for fairly safe base hits. Questerre is trying to bat the ball right out of the park." In other words, Binnion is a high-risk player whose speculative ventures have taken him as far afield as Georgia, a former Soviet republic.
In 1998-99, when natural gas production was starting to ramp up in the Barnett Shale of Texas, Binnion staked close to two million acres in Quebec's Utica and Lorraine Shales. Questerre's cheaply acquired acreage has attracted a pair of heavyweight partners, Talisman Energy Inc. and Forest Oil Corp. In fact, the St. Lawrence Lowlands is now Canada's most exciting shale gas prospect outside of British Columbia's Montney and Horn River Basin plays.
The Questerre CEO, 48, is a fifth-generation Albertan. His father Larry, also an accountant, worked in Imperial Oil's first computer data centre, then launched a software company that sold licence administration packages to American state governments. His equally entrepreneurial son came to the oil patch by an exceptionally roundabout route involving golf and movable office walls.
After graduating (B.Comm-University of Alberta), Binnion spent seven years as a Toronto-based specialist in tax-assisted corporate financings with a major accounting firm since. He then worked for Bruce Strongman, founder of the paint store chain Color Your World. "After Bruce semi-retired, he stayed active by buying Nevada Bob's and I managed it under his direction," Binnion says. "From 1988 to 1992, I looked after golf stores and strip plazas, and oversaw development of a couple golf courses. I sold franchises, handled import and export, dealt with warehousing-it was an amazing apprenticeship."
Coming to Calgary, Binnion began reorganizing publicly traded shell companies for sale to junior capital pools and other firms eager to raise funds on the stock market. He invested in one of those firms, LifeSpace Environmental Walls, which manufactured movable office walls. Cash-fuelled by its success, the entrepreneur gambled on CanArgo Energy Corp., a junior operating in Georgia.
CanArgo is an integrated company with drilling rigs, oilfields, a small refinery, service stations, and natural gas distribution. For investors, its major upside potential has always been a major success with the drill bit. Unfortunately, that discovery has yet to materialize. Through 1997-98, the firm's shares crashed from nearly US$15 each to as little as $0.25.
Binnion became CanArgo's president and CFO between 1998 and 2000 "because we couldn't afford anyone else." A global oil price collapse in 1999 didn't help. "We sold one cargo of crude for $9.60 [per barrel]," the Calgarian says. The company has continued to lose money year after year in Georgia. Last summer, Russia invaded the small mountainous nation on its southern flank. CanArgo reports that its operations have survived intact; its current share price is less than $0.15.
From 1996 to 2001, Binnion served as president of Flowing Energy Corp., which built up 2,100 bbl/d of heavy oil production in the Lloydminster area. Daylight Energy Trust purchased the Calgary-based junior in 2005. The accountant says his years under Strongman have served him well in the patch. "This industry doesn't have enough engineers with practical field experience," he comments. "No university can teach you how to recover some of your money when a service company is late in doing its job."
Questerre's Quebec initiative dates back to drilling spearheaded by Michael Pick, CEO of Terrenex. The Calgary geologist persuaded two majors, Bow Valley and Amerada Hess, to help pay for deep natural gas tests, in 1989 and 1993. The first wildcat hit CO2; the second found gas in tight reservoir rock. After the second attempt, Binnion acquired Terrenex as a shell company. "Although Pick failed to find a geological trap, his work showed that Quebec has a large volume of gas in place," he says.
Harvesting that gas may now prove economic thanks to modern horizontal drilling and hydraulic fracturing technology. On Sept. 2, Talisman Energy Inc. announced test results from its Gentilly #1 well. The probe sits about 100 kilometres south of Quebec City. The vertical well reportedly flowed at 800 Mcf/d from one completed interval on a sustained basis during the 18-day test period.
"We are encouraged by the initial results," says Talisman president John Manzoni. "We have additional testing to do on the well, including zones within the Basal Lorraine and Lorraine shale formation, but this is a very promising start to our unconventional program in Quebec." The Lorraine shale sits on top of the Utica and can be up to 6,500 ft thick. The Utica shale ranges between 300 and 1,000 ft. Early indications show that both the Lorraine and Utica rocks are thick, porous, and appear brittle and over pressured, all of which are considered conducive to fracture stimulation.
Its deal with Questerre gives Talisman the option to earn 760,000 net acres through drilling in Quebec. Talisman, a Calgary-based company, says it's still is in the early stage of evaluating rock properties and reservoirs. Its Quebec plans call for testing three to four more pilot areas over the next 18 months, including up to four more wells prior to year-end.
Meanwhile Forest Oil Corp. through its Canadian subsidiary has farmed into another block of Questerre's land. In April, the Denver-based unconventional gas company revealed results from two vertical pilot wells that had been drilled to a total depth of 4,800 ft in 2007. Production rates from the Utica Shale reportedly tested up to one MMcf/d. Forest can earn a 60 per cent WI in this project, with the remainder divided between Questerre and Gastem Inc., a Montreal junior.
Questerre has also farmed out 600,000 acres in the Gaspe Peninsula to another Quebec junior, Junex Inc., retaining a five per cent royalty interest in any future production. Junex now holds a total of six million shale-prospective acres in the province. Forest is in the process of drilling three more Utica wells in Quebec, two on the Questerre-Gastem block, and another on the Junex acreage, with results expected before year-end. Although Binnion is happy with results so far, the speculative oilman cautions, "We're still at a very early stage of development."
The risk-return receipts off unconventional [gas resources] are actually very compelling."
Globe says Manzoni takes the Buckee out of Talisman
2008-12-15 06:57 ET - In the News
The Globe and Mail reports in its Saturday edition that Talisman Energy today is not Jim Buckee's Talisman. The Globe's Norval Scott quotes John Manzoni, the former BP PLC executive who took the helm in September, 2007, as saying: "There is quite a lot of change in how we run the company. My style is quite different from Jim's."
Oil spikes as OPEC readies cut
Oil spikes as OPEC readies cut
PABLO GORONDI
Monday, December 15, 2008
Oil prices were up sharply near $49 (U.S._ a barrel Monday as investors anticipated OPEC will announce a large production cut at its meeting this week.
By midday in Europe, light, sweet crude for January delivery was up $2.47 to $48.75 a barrel in electronic trading on the New York Mercantile Exchange. On Friday, the contract fell $1.70 to settle at $46.28.
In London, January Brent crude rose $2.06 to $48.47 on the ICE Futures exchange.
The Organization of Petroleum Exporting Countries, which accounts for 40 per cent of global supply, has signalled it plans to announce a substantial reduction of output quotas at its meeting Wednesday in Algeria.
“The extent of such cuts is still unclear and this uncertainty has been a source of continuing volatility in futures markets,” said a report by analysts at KBC Market Services in Great Britain.
On Monday, the Nymex contract was trading in a relatively wide range between $45.92 and $49.00.
Olivier Jakob of Petromatrix in Switzerland noted that trading volumes last week showed a “sharp rebound” for Nymex crude, “close to double the volume seen in the two previous weeks” and near the highest levels seen this year, above 700,000 contracts a day.
Iranian Oil Minister Gholam Hossein Nozari was quoted Sunday on his ministry's web site saying that Iran would push for a production cut of 1.5 to 2 million barrels per day.
Analysts have questioned whether OPEC members will follow through with any announced cut.
“They're talking about a severe cut, but the question is their discipline,” said Christoffer Moltke-Leth, head of sales trading at investment firm Saxo Capital Markets in Singapore. “Unless they really surprise the market, this cut may not support the price much.”
Oil has jumped from a four-year low earlier this month of $40.50 a barrel on expectations that an OPEC output reduction could be the catalyst to stabilize the oil price, which has fallen 65 per cent since July.
“For the first time in several weeks, there are signs that crude prices might have bottomed out and could be heading upward again,” KBC Market Services said.
Investors largely ignored OPEC's 1.5 million barrels a day output cut in October, focusing instead on a slowing global economy that's hurt crude demand.
More bad macro-economic and company news from the U.S. and Europe over the coming weeks will likely push oil prices lower, Mr. Moltke-Leth said.
“I expect crude to continue its slide and I don't think OPEC is going to prevent that,” he said. “Demand destruction in the major economies will still very much be on the agenda. We could go as low as $30 a barrel.”
Petromatrix's Mr. Jakob said that while no new data was expected this week to show a global rise in appetite for crude, the impact of the OPEC meeting on the supply side likely would be considerable.
“There is no data available to point to an improving demand, but this week will be focused on the supply side and the global supply and demand for the first half of 2009 will need to be rewritten on Thursday after the OPEC decision,” he said.
In other Nymex trading, gasoline futures rose 5.40 cents to $1.1317. Heating oil gained 7.48 cents to $1.5682 a gallon while natural gas for January delivery jumped 9.7 cents to 5.585 per 1,000 cubic feet.
© Copyright The Globe and Mail
Friday, December 12, 2008
Markets love the White House
Markets love the White House
RTGAM
If you were sitting on the edge of your seat on Friday morning, with visions of double-digit percentage losses at major stock market indexes, you weren't alone. The vote in the U.S. Senate on Thursday night against the $14-billion (U.S.) bailout for the Big Three auto makers triggered scenarios of massive corporate failures and millions of additional job losses - not to mention the potential loss of more U.S. pride and another U.S. city (Detroit).
However, just as the $700-billion rescue plan took a couple of attempts to succeed, investors clued in pretty fast that the auto bailout plan was not about to be shelved without another push. Soon after markets opened with steep, though hardly disastrous, losses, the White House said it would consider helping the auto makers with a slice of the $700-billion rescue plan that was originally earmarked for financial firms.
The markets loved the idea - and were even willing to ignore the other bad news for the day: Bernard Madoff, a former Wall Street icon, had been charged in connection to a $50-billion Ponzi scheme. The Dow Jones industrial average closed at 8629.68, up 64.59 points or 0.8 per cent. The broader S&P 500 closed at 879.74, up 6.15 points or 0.7 per cent.
Although General Motors Corp. shares ended the day down 4.4 per cent, that was a marked recovery from the start of trading, when the shares had been down more than 30 per cent. Ford Motor Co. did even better, rising 4.8 per cent.
In other moves, Intel Corp. rose 5.3 per cent, JPMorgan Chase & Co. rose 3.3 per cent and Citigroup Inc. rose 1.7 per cent.
In Canada, the S&P/TSX composite index closed at 8515.45, up 123.55 or 1.5 per cent. This was an even bigger rebound than in the United States, given that the index began the day down more than 3 per cent. Auto parts manufacturer Magna International Inc. fell a mere 0.2 per cent after being down nearly 12 per cent at the start of trading.
Financials were generally strong, with Royal Bank of Canada up 2.5 per cent and Bank of Nova Scotia up 2.1 per cent. Energy stocks were mixed, after the price of crude oil plunged, then recovered slightly and ended at $46.28 a barrel, down $1.70. Suncor Energy Inc. fell 3.5 per cent and EnCana Corp. fell 0.5 per cent, but Canadian Natural Resources Ltd. rose 2.7 per cent.
Copyright 2001 The Globe and Mail
I'm back from Vegas-and Stocks Ready To Plunge
Greenback a cure for commodities?
Thursday, December 11, 2008
Here's Allan Robinson's At The Bell which you'll find in Friday's newspaper:The U.S. dollar tumbled yesterday between 1 and 4.7 per cent against the world's major currencies and that could be good for U.S.-dollar-denominated commodity prices.
The main beneficiary of the swing during the past few days has been gold, which is once again trading above $800 (U.S.) an ounce. Oil prices have also shown some signs of strength.WHAT ARE THE EXPECTATIONS?But the question shell-shocked investors in commodities must be asking is whether the flight to safety that has pushed the U.S. dollar higher, and commodities lower, over the past few months is over?
“This has been the sharpest and steepest downturn in aggregate in commodity and energy prices ever,” said Bart Melek, global commodity strategist for BMO Nesbitt Burns Inc. “In terms of magnitude it's not much different; it's the speed of it.”Much of the pullback is a result of the trade finance cutbacks and de-leveraging by banks and hedge funds as a result of the credit crisis because the commodity price declines are far in excess of the supply and demand fundamentals, he said.
“We still have more pain coming, but I don't see a lot of downside remaining.”However, base metals and bulk commodities could remain under pressure for much of 2009 with only a modest turnaround expected in the latter part of the year, according to BMO Nesbitt Burns. Large segments of the nickel, zinc, aluminum and copper markets are operating below their cost of production, it said.
The rise in oil during the past few days is a result of the stronger dollar and talk of production cuts by the Organization of Petroleum Exporting Countries, said Robert Tebbutt, vice-president of Peregrine Financial Group Canada Inc.As far as the equity markets' ability to look ahead goes, the only major index up strongly during the past month is China's CSI 300 index, which has climbed 13.6 per cent.
That could bode well for commodities.So it looks like the beleaguered manufacturing sector at least can expect continued relief from declining costs. The producer price index scheduled for release today is forecast to have declined 2 per cent in November, compared with a 2.8-per-cent drop in October, according to a survey of economists by Bloomberg.
That would mark the fourth consecutive monthly decline.
Wall Street poised to plunge
SARA LEPRO
Friday, December 12, 2008
NEW YORK — A dejected stock market headed for a plunge at the opening of trading Friday as the Senate's rejection of a $14-billion (U.S.) lifeline for the auto industry intensified investors' concerns about a deepening recession.
The defeat of the bailout bill late Thursday has prompted calls from lawmakers for the Bush administration to use a portion of the $700-billion financial rescue package to prop up the struggling companies. The bill failed after the United Auto Workers refused to meet Republican demands for big wage cuts.
General Motors Corp. and Chrysler LLC have said they could run out of cash within weeks without government help. Ford Motor Co., which would also be eligible for aid under the bill, has said it has enough cash to make it through next year.
The failure of the bill is feeding investors' concerns about job losses. More evidence of the ravaged labour market came late Thursday, as Bank of America Corp. said it expected to cut as many as 35,000 jobs over the next three years, including some from investment bank Merrill Lynch & Co., which it agreed to buy in September.
Dow Jones industrial average futures dropped 310, or 3.61 per cent, to 8,287. Standard & Poor's 500 index futures fell 40.40, or 4.62 per cent, to 834.10, while Nasdaq 100 index futures fell 45.00, or 3.78 per cent, to 1,145.00.
Meanwhile, more glum economic data is expected Friday. The Commerce Department will release its retail sales report for November at 8:30 a.m. (ET). The Labour Department is expected to release the producer price index for November at the same time. Later Friday morning, the Commerce Department will issue its report on business inventories for October.
The Commerce Department is expected to report that retail sales fell in November for a fifth straight month despite a surge of shoppers over the Thanksgiving weekend. The report is a closely watched gauge considering that consumer spending drives more than two-thirds of the U.S. economy.
The reports will follow a bleak report from the Labour Department Thursday that said initial jobless claims rose to the highest level in 26 years last week.
Job losses have become investors' primary concern in recent weeks, as companies across many sectors, including AT&T Inc., DuPont, Dow Chemical Co., and Freeport-McMoRan Copper & Gold Inc., have announced thousands of layoffs. Analysts don't expect the announcements to end any time soon.
If one of the automakers declared bankruptcy, some estimate as many as 3 million U.S. jobs could be lost next year.
In premarket trading, Ford shares dropped 44 cents, or 15 per cent, to $2.46, while GM plummeted $1.31, or 32 per cent, to $2.81.
Bond prices were mixed Friday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.51 per cent from 2.63 per cent late Thursday. The yield on the three-month T-bill was unchanged from late Thursday at 0.02 per cent. The bill has been in great demand because of the safety it offers investors.
The U.S. dollar rose against other major currencies, while gold prices fell.
Light, sweet crude fell $2.58 to $45.40 in electronic premarket trading on the New York Mercantile Exchange.
Overseas, Japan's Nikkei stock average plunged 5.56 per cent. In afternoon trading, Britain's FTSE 100 was down 3.92 per cent, Germany's DAX index was down 4.80 per cent, and France's CAC-40 was down 5.35 per cent.
© Copyright The Globe and Mail
Friday, December 5, 2008
Talisman Energy Announces First Oil From the Song Doc Field in Vietnam
18:46 EST Thursday, December 04, 2008
CALGARY, ALBERTA--(Marketwire - Dec. 4, 2008) - Talisman (Vietnam 46/02) Ltd. ("Talisman"), a wholly owned subsidiary of Talisman Energy Inc. (TSX:TLM) (NYSE:TLM), has announced first oil production from the Song Doc field in Block 46/02 offshore Vietnam.
Gross production from five pre-drilled wells is expected to reach approximately 25,000 bbls/d by early 2009. An additional three development wells are currently being drilled. Talisman's share of proved and probable reserves in the Song Doc field is estimated at six mmbbls, with proved reserves of three mmbbls.
Talisman has a 30% interest in Block 46/02 and in the Truong Son Joint Operating Company, which operates the Block. Co-venturers are PetroVietnam Exploration and Production Company at 40% and Petronas Carigali Overseas Sdn Bhd with the remaining 30%. The Song Doc field facilities comprise a Floating Production Storage and Offloading (FPSO) vessel and wellhead platform.
The FPSO is a tanker conversion carried out by MODEC at the COSCO yard in Dalian, China. The Song Doc wellhead platform was fabricated by Petroleum Technical Services Company in Vung Tau, Vietnam.
Talisman Energy Inc. is an independent upstream oil and gas company headquartered in Calgary, Alberta, Canada. The Company and its subsidiaries have operations in North America, the North Sea, Southeast Asia and North Africa. Talisman's subsidiaries are also active in a number of other international areas. Talisman is committed to conducting its business in an ethically, socially and environmentally responsible manner. The Company is a participant in the United Nations Global Compact and included in the Dow Jones Sustainability (North America) Index. Talisman's shares are listed on the Toronto Stock Exchange in Canada and the New York Stock Exchange in the United States under the symbol TLM.
Advisories
This press release contains statements that constitute "forward-looking information" or "forward-looking statements" (collectively "forward-looking information") within the meaning of applicable securities legislation. This forward-looking information includes, among others, statements regarding:
- estimated production and timing;
- business plans for drilling, exploration, development and estimated timing;
- business strategy and plans; and
- other expectations, beliefs, plans, goals, objectives, assumptions, information and statements about possible future events, conditions, results of operations or performance.
Often, but not always, forward-looking information uses words or phrases such as: "expects", "does not expect" or "is expected", "anticipates" or "does not anticipate", "plans" or "planned", "estimates" or "estimated", "projects" or "projected", "forecasts" or "forecasted", "believes", "intends", "likely", "possible", "probable", "scheduled", "positioned", "goal", "objective" or states that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved.
The following assumptions were used in drawing the conclusions or making the forecasts and projections contained in the forward-looking information contained in this press release. Information regarding business plans for drilling and exploration assumes that the extraction of crude oil, natural gas and natural gas liquids remains economic.
Undue reliance should not be placed on forward-looking information. Forward-looking information is based on current expectations, estimates and projections that involve a number of risks, which could cause actual results to vary and in some instances to differ materially from those anticipated by Talisman and described in the forward-looking information contained in this press release. The material risk factors include, but are not limited to:
- the risks of the oil and gas industry, such as operational risks in exploring for, developing and producing crude oil and natural gas, market demand and unpredictable facilities outages;
- risks and uncertainties involving geology of oil and gas deposits;
- potential delays or changes in plans with respect to exploration or development projects or capital expenditures;
- fluctuations in oil and gas prices, foreign currency exchange rates and interest rates;
- risks in conducting foreign operations (for example, political and fiscal instability or the possibility of civil unrest or military action);
- changes in general economic and business conditions;
- the possibility that government policies or laws may change or governmental approvals may be delayed or withheld; and
- uncertainties as to the availability and cost of financing and changes in capital markets.
Readers are cautioned that the foregoing list of risks and uncertainties is not exhaustive. Additional information on these and other factors which could affect the Company's operations or financial results are included in the Company's most recent Annual Information Form and Annual Financial Report. In addition, information is available in the Company's other reports on file with Canadian securities regulatory authorities and the United States Securities and Exchange Commission.
Forward-looking information is based on the estimates and opinions of the Company's management at the time the information is released. The Company assumes no obligation to update forward-looking information should circumstances or management's estimates or opinions change, except as required by law.
Reserves Data and Other Oil and Gas Information
Talisman's disclosure of reserves data and other oil and gas information is made in reliance on an exemption granted to Talisman by Canadian securities regulatory authorities, which permits Talisman to provide certain disclosure in accordance with U.S. disclosure requirements. The information provided by Talisman in this press release may differ from the corresponding information prepared in accordance with Canadian disclosure standards under National Instrument 51-101 ("NI 51-101"). Information on the differences between the U.S. requirements and the NI 51-101 requirements is set forth under the heading "Note Regarding Reserves Data and Other Oil and Gas Information" in Talisman's Annual Information Form.
Talisman's proved reserves have been estimated using the standards contained in Regulation S-X of the U.S. Securities and Exchange Commission ("SEC"). U.S. practice is to disclose net proved reserves after the deduction of estimated royalty burdens, including net profit interests. Talisman makes additional voluntary disclosure of gross proved reserves.
Talisman also makes voluntary disclosure of probable reserves which have been estimated using the definition set out by the Society of Petroleum Engineers/World Petroleum Congress ("SPE/WPC"). Talisman believes that there is no material difference between the SPE/WPC definition for probable reserves and the Canadian Oil and Gas Handbook definition for probable reserves.
The SEC normally permits oil and gas companies to disclose in their filings with the SEC only proved reserves that have been demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic conditions and operating conditions. Any probable reserves and the calculations with respect thereto included in this press release do not meet the SEC's standards for inclusion in documents filed with the SEC.
The exemption granted to Talisman also permits it to disclose internally evaluated reserves data. Any reserves data contained in press release reflects Talisman's estimates of its reserves. While Talisman annually obtains an independent audit of a portion of its proved and probable reserves, no independent qualified reserves evaluator or auditor was involved in the preparation of the reserves data disclosed in this press release.
In this press release, Talisman makes reference to proved and probable reserves for the Song Doc field. As at year end 2007, Talisman had 43.7 mmboe of proved reserves and 67.6 mmboe of probable reserves in Southeast Asia. The estimates of reserves for individual properties may not reflect the same confidence levels as estimates of reserves for all properties due to the effects of aggregation.
Gross Production
In this press release, Talisman makes reference to production volumes. Such production volumes are stated on a gross basis, which means they are stated prior to the deduction of royalties and similar payments. In the U.S., net production volumes are reported after the deduction of these amounts. U.S. readers may refer to the table headed "Continuity of Proved Net Reserves" in Talisman's most recent Annual Information Form for a statement of Talisman's net production volumes by reporting segment that are comparable to those made by U.S. companies subject to SEC reporting and disclosure requirements.
Boe conversion
In this press release, the calculation of barrels of oil equivalent (boe) is calculated at a conversion rate of six thousand cubic feet (mcf) of natural gas for one barrel of oil and is based on an energy equivalence conversion method. Boes may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf:1 bbl is based on an energy equivalence conversion method primarily applicable at the burner tip and does not represent a value equivalence at the wellhead.
FOR FURTHER INFORMATION PLEASE CONTACT:
Talisman Energy Inc. - Media and General Inquiries
David Mann, Vice-President,
Corporate & Investor Communications
(403) 237-1196
(403) 237-1210 (FAX)
Email: tlm@talisman-energy.com
Website: www.talisman-energy.com
or
Talisman Energy Inc. - Shareholder and Investor Inquiries
Christopher J. LeGallais, Vice-President,
Investor Relations
(403) 237-1957
(403) 237-1210 (FAX)
Email: tlm@talisman-energy.com
Website: www.talisman-energy.com
QEC At Bargain Basement Prices?
From Canaccord Report (2 Dec. 2008),
Potential Utica Valuation Potential Utica
$/share Leverage as % per s/price
Gastem GMR $ 2.12 311%
Junex JNX $11.38 749%
Questerre QEC $6.33 335%
"Best leverage to the upside on the play remains with these small-cap players (GMR-V,
JNX-V and QEC-T)"
Note: no time frame in that report.
December 4, 2008-La Visitation #1 Successfully Cased as Shale Gas Well
00:15 EST Thursday, December 04, 2008
CALGARY, ALBERTA--(Marketwire - Dec. 4, 2008) -
NOT FOR DISTRIBUTION ON U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES
Questerre Energy Corporation ("Questerre" or the "Company") (TSX:QEC)(OSLO:QEC) announced today that the operator has completed drilling of the La Visitation #1 well in the St. Lawrence Lowlands, Quebec.
The well was drilled to target depth of 2770m and logged to evaluate the Utica and Lorraine shale/siltstone zones as well as the carbonates of the Trenton Black-River Group. Based on an analysis of the logs, the well has been cased for shale gas testing, which will be undertaken when equipment is available.
Michael Binnion, President and Chief Executive Officer of Questerre, commented, "Drilling results were encouraging as we encountered several naturally fractured intervals in the Lorraine and Utica and promising gas shows."
Drilling operations on the next well, St. David, are expected to commence later this month.
Questerre also reported on the status of re-completion operations on the Gentilly #1 vertical well. Following the stimulation and 800 mcf/d test from the Utica, two intervals in the shallower Lorraine horizon were also fracture stimulated.
Questerre is a Calgary-based independent resource company actively engaged in the exploration, development and acquisition of high-impact exploration and development oil and gas projects in Canada.
This news release contains forward-looking information. Implicit in this information are assumptions regarding commodity pricing, production, royalties and expenses, that, although considered reasonable by the Company at the time of preparation, may prove to be incorrect. These forward-looking statements are based on certain assumptions that involve a number of risks and uncertainties and are not guarantees of future performance.
Barrel of oil equivalent ("boe") amounts may be misleading, particularly if used in isolation. A boe conversion ratio has been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil and is based on an energy equivalent conversion method application at the burner tip and does not necessarily represent an economic value equivalent at the wellhead.
This news release does not constitute an offer of securities for sale in the United States. These securities may not be offered or sold in the United States absent registration or an available exemption from registration under the United States Securities Act of 1933, as amended.
FOR FURTHER INFORMATION PLEASE CONTACT:Questerre Energy Corporation
Anela Dido
Investor Relations
(403) 777-1185
(403) 777-1578 (FAX)
Email: info@questerre.com
Website: www.questerre.com
THE MAN WHO SOLD HOT DOGS
Many years ago there was a man who lived by the side of the road and sold HOT DOGS.
He was hard of hearing so he had no radio.
He had trouble with his eyes so he read no newspaper.
But he sold HOT DOGS
He put up signs on the highway telling how good they were.
He stood on the side of the road and cried: "BUY A HOT DOG, MISTER ?"
And people bought, because he was so enthusiastic.
He increased his meat and bun orders.
He bought a bigger stove to take care of his growing trade.
He was so happy selling Hot Dogs, and people enjoyed doing business with him.
One day his son came home from college to help him out.
And something happened.
His son said, "Father, haven’t you been listening to the radio.? Haven’t you been reading the newspaper.?
The situation in Europe is terrible. The Domestic situation is worse."
Whereupon the father thought,"Well, my son’s been to college, he reads the newspaper, he listens to the radio, and he ought to know."
So the father cut down on his meat and bun orders, he took down all his advertising signs, and no longer bothered to stand on the highway to sell his hot dogs.
And his HOT DOG sales fell, ALMOST OVERNIGHT.
"You’re right, son," the father said to the boy.
"WE CERTAINLY ARE IN THE MIDDLE OF A GREAT DEPRESSION."
Crisis? What crisis?
Madelaine Drohan
Thursday, December 04, 2008
OTTAWA — Canada may be in a political crisis, but it is not in an economic one. Why do so many people prefer to believe that we are?
In the rancorous debate in the House of Commons last Tuesday, the words “economic crisis” were uttered 51 times by members of all political stripes as they wrestled for control of the country. On Bay Street and Main Street there is constant talk of economic meltdown and frequent references to the Great Depression as if we are poised on the brink of a similar precipice.
The facts don't back this up. There are trouble spots, certainly, especially in the North American auto industry and the forestry sector, both of which were already in decline long before banks started toppling on Wall Street. And there is no denying that the U.S. economy is in bad shape, which will eventually have some as yet undefined impact here.
But the latest figures show the Canadian economy was still growing through the end of September, unemployment remains low and most forecasters are calling for a modest contraction next year, which while unpleasant is hardly a nightmare scenario.
Clearly there is something to be gained from saying we are in a crisis, even if we aren't.
The political motivation is easiest to identify. The Liberals, New Democrats and Bloc Québécois could hardly say they wanted to topple the Harper government because it intended to cut their funding. That would look too self-serving to voters. Blaming the government for not reacting to a non-existent crisis is a much easier sell.
The Conservatives, meanwhile, started out dealing with the facts, insisting that the current situation did not call for extraordinary measures. This message was somewhat spoiled when they also tried to argue that hard times called for partisan cuts. By mid-week they'd given up all pretence of defending reality and were invoking the non-existent crisis as a reason that the country needed the stability only they could provide.
The only consensus among the warring politicians was on the supposedly dire state of the economy. There was a competition to outdo each other in misleading and irresponsible statements about where the economy was heading.
John F. Kennedy, the late U.S. president, once said that the Chinese character for crisis had two elements – danger and opportunity. It is the latter that explains why many companies and indeed whole sectors are backing the crisis theory now.
The banks were in there early, calling for extraordinary government aid because of the impact on Canada of the global economic crisis. The Harper government is in the process of borrowing $75-billion dollars, ratcheting up interest-bearing debt in the process, in order to buy mortgages from the banks. Somehow this generous gesture on the part of Canadian taxpayers, who might well have wanted to spend the borrowed money on other things, has slipped below the radar.
The North American car makers also have their hands out, claiming they need help to survive the crisis, even though it has been clear for some time that they were in deep trouble of their own making. “Help us out of the hole we dug,” is not a winning argument when it comes to prying loose government money. So the crisis is invoked yet again, in both the U.S. and Canada.
The car makers are far from the only ones who gain from a crisis atmosphere.
All those infrastructure projects that the federal and provincial governments have vowed to speed up mean extra work for engineering firms, designers, suppliers and builders. Who among them would dare mention at this delicate juncture that things really aren't that bad?
Then there are the media. Alarmist headlines and stories are so much more fun to publish or broadcast, regardless whether they reflect the facts. Bad news sells, is the maxim. Journalists don't like to think that they are selling a product, but their corporate owners are keenly focused on the bottom line.
That may not mean there is overt pressure to consciously slant coverage towards the negative. But every journalist worth his or her salt knows subconsciously that a crisis story is more likely to hit the front page or lead the broadcast than some namby-pamby item about things going better than expected.
This deluge of bad news and catastrophic predictions eventually seeps into the public consciousness, frightening people into spending less and saving more, thus helping to create a real crisis. That said, it was heartening to see an Ipsos-Reid poll this week in which 56 per cent of respondents said they thought doomsday predictions of severe recession in Canada were exaggerations.
There is still common sense to be found in Canada, just not among our political, business or opinion leaders.
© Copyright The Globe and Mail
Thursday, December 4, 2008
Canadian Arrow Mines receives road permit for Kenbridge Nickel Project
Canadian Arrow Mines receives road permit for Kenbridge Nickel Project
08:30 EST Thursday, December 04, 2008
SUDBURY, ON, Dec. 4 /CNW/ - Canadian Arrow Mines, Ltd. (CRO: TSX-V) (the "Company"), reports that it has received a work permit from the Ontario Ministry of Natural Resources for the construction of an all-weather road into the Kenbridge Nickel Project site. The 10km construction will involve the widening and surfacing of an existing trail that provides seasonal access to the project site from the Maybrun road. A single, temporary bridge crossing is already in place over the Atikwa River.
Mr. Kim Tyler, President of Canadian Arrow, adds "Receiving this permit is an important step for the Kenbridge Nickel Project. Once constructed, the road will provide year round access to nearby communities and supply centres via Highway 71. It will greatly increase the flexibility of supporting ongoing exploration efforts at the site including our planned advanced exploration program. Discussions with the Grand Council of Treaty No.3 and local First Nations communities are well under way regarding authorization under the Great Earth Law of Treaty No.3, (Manito Aki Inakonigaawin)."
Investors are invited to visit Canadian Arrow's IR hub at http://www.agoracom.com/IR/CanadianArrow where they can post questions and receive answers within the same day, or simply review questions and answers posted by other investors. Alternately, investors are able to e-mail all questions and correspondence to CRO@agoracom.com where they can also request addition to the investor e-mail list to receive future press releases and updates in real time.
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please contact: Mirna@chfir.com.
Oil tumbles below $44 a barrel
Oil tumbles below $44 a barrel
Edward McAllister
Thursday, December 04, 2008
NEW YORK — Oil fell more than 6 per cent on Thursday to its lowest level in nearly four years in response to further bleak economic data that could spell a deeper decline in global energy demand.
The number of U.S. workers on jobless rolls hit a 26-year high last month, the government said, while another report showed U.S. factory orders fell sharply for the third month in a row.
U.S. light crude dropped $2.86 (U.S.) to $43.93 a barrel by early afternoon EST after slipping as low as $43.77 – the lowest since January, 2005. London Brent crude fell $2.87 to $42.57.
Oil prices have dropped more than $100 a barrel from record highs over $147 in July, as the global credit crunch has eaten into demand in large consumer nations.
“Relentless negativity is pressuring the oil complex,” said Mike Fitzpatrick, vice-president at MF Global.
U.S. stocks fell on Thursday as the continued fall in oil prices pushed down shares in energy companies including Exxon Mobil.
A Commerce Department report showed that factory orders in October plunged 5.1 per cent, the biggest drop since July, 2000, and a Labour Department report showed that the number of U.S. workers on jobless benefits rolls was the highest since December, 1982.
AT&T Inc. and DuPont Co. on Thursday led the list of blue-chip U.S. companies laying off workers in the weeks before the Christmas holidays.
European central banks cut interest rates on Thursday to try to restore some vitality to their feeble economies, many of which are already in recession.
Sweden's central bank cut by a record 175 basis points, the European Central Bank cut by 75 points and the Bank of England cut by 100 points.
Oil producer group the Organization of the Petroleum Exporting Countries will consider another round of output curbs to try to defend prices when it next meets on Dec. 17 in Algeria.
“It is obvious that the market is oversupplied,” said Iran's OPEC governor Mohammad Ali Khatibi. “If you remove oversupply and produce exactly what the market needs, it would be good for everybody.”
Oil rose briefly on Wednesday when U.S. Energy Information Administration data revealed an unexpected fall in fuel inventories last week in the world's top energy consumer.
But U.S. refinery utilization fell 1.9 percentage points to 84.3 per cent of capacity against a predicted rise of 0.2 percentage point, pointing to weak demand.
© Copyright The Globe and Mail
QEC News:La Visitation #1 Successfully Cased as Shale Gas Well
December 4, 2008-La Visitation #1 Successfully Cased as Shale Gas Well
00:15 EST Thursday, December 04, 2008
CALGARY, ALBERTA--(Marketwire - Dec. 4, 2008) -
NOT FOR DISTRIBUTION ON U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES
Questerre Energy Corporation ("Questerre" or the "Company") (TSX:QEC)(OSLO:QEC) announced today that the operator has completed drilling of the La Visitation #1 well in the St. Lawrence Lowlands, Quebec.
The well was drilled to target depth of 2770m and logged to evaluate the Utica and Lorraine shale/siltstone zones as well as the carbonates of the Trenton Black-River Group. Based on an analysis of the logs, the well has been cased for shale gas testing, which will be undertaken when equipment is available.
Michael Binnion, President and Chief Executive Officer of Questerre, commented, "Drilling results were encouraging as we encountered several naturally fractured intervals in the Lorraine and Utica and promising gas shows."
Drilling operations on the next well, St. David, are expected to commence later this month.
Questerre also reported on the status of re-completion operations on the Gentilly #1 vertical well. Following the stimulation and 800 mcf/d test from the Utica, two intervals in the shallower Lorraine horizon were also fracture stimulated. The clean up and flow-back of these intervals has been delayed due to operational issues with a packer. The preliminary results from this well are expected in early 2009. Results from the two stimulated horizontal wells on the Yamaska permits are on schedule for release by year-end.
Questerre is a Calgary-based independent resource company actively engaged in the exploration, development and acquisition of high-impact exploration and development oil and gas projects in Canada.
This news release contains forward-looking information. Implicit in this information are assumptions regarding commodity pricing, production, royalties and expenses, that, although considered reasonable by the Company at the time of preparation, may prove to be incorrect. These forward-looking statements are based on certain assumptions that involve a number of risks and uncertainties and are not guarantees of future performance. Actual results could differ materially as a result of changes in the Company's plans, commodity prices, equipment availability, general economic, market, regulatory and business conditions as well as production, development and operating performance and other risks associated with oil and gas operations. There is no guarantee made by the Company that the actual results achieved will be the same as those forecasted herein.
Barrel of oil equivalent ("boe") amounts may be misleading, particularly if used in isolation. A boe conversion ratio has been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil and is based on an energy equivalent conversion method application at the burner tip and does not necessarily represent an economic value equivalent at the wellhead.
This news release does not constitute an offer of securities for sale in the United States. These securities may not be offered or sold in the United States absent registration or an available exemption from registration under the United States Securities Act of 1933, as amended.
FOR FURTHER INFORMATION PLEASE CONTACT:
Questerre Energy Corporation
Anela Dido
Investor Relations
(403) 777-1185
(403) 777-1578 (FAX)
Email: info@questerre.com
Website: www.questerre.com
Wednesday, December 3, 2008
Nexen Tumbles on Report Total Ditches Takeover Offer
Nexen Tumbles on Report Total Ditches Takeover Offer
By Joe Carroll and Tara Patel
Dec. 3 (Bloomberg) -- Nexen Inc., operator of the North Sea’s Buzzard oil field and Canada’s Long Lake tar-sands project, fell the most in 21 years after The Times of London reported Total SA abandoned plans to acquire the Calgary-based company.
Nexen fell C$2.51, or 10 percent, to C$21.75 on the Toronto Stock Exchange after earlier today dropping as much as 25 percent. The decline wiped out yesterday’s 11 percent gain following an FT Alphaville Web site report that Total was preparing a C$19.7 billion ($15.7 billion) bid for Nexen.
“Although a Total offer for Nexen is within the realms of possibility, we feel it is unlikely,” David Thomas, a London- based analyst at Citigroup Inc., said in a report today. “Hostile approaches have not been in Total’s style and it is our belief that the company would be unlikely to enter into a potential bidding war.”
Paris-based Total dropped 1.5 percent to 38.72 euros. The shares have lost 32 percent this year. The cost of protecting bonds sold by Total from default jumped to a record.
The Times didn’t say where it got its information. Total spokesman Paul Floren declined to comment on the reports.
Total has spent C$1.69 billion in the past three years amassing Canadian oil-sands assets, most recently with the purchase of Synenco Energy Inc. in August.
Indonesia to Brazil
Nexen pumps oil and natural gas from Indonesia to Brazil, and also makes chemicals. The company pumped the equivalent of about 207,000 barrels of crude a day in 2007, about one-twelfth of Total’s output.
Credit-default swaps on Total climbed 47 basis points to 153, according to CMA Datavision prices at 9:15 a.m. in London.
Credit-default swaps, contracts conceived to protect bondholders against default, pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. An increase indicates a deterioration in the perception of credit quality; a decline, the opposite.
A basis point on a credit-default swap contract protecting 10 million euros ($12.6 million) of debt from default for five years is equivalent to 1,000 euros a year.
To contact the reporter on this story: Joe Carroll in Chicago at jcarroll8@bloomberg.net
Last Updated: December 3, 2008 16:10 EST
TLM Houses Anonymous Still Exiting The Stock
U.S. stock index futures were down with about an hour before markets open
Jobs, ouch
RTGAM
Global stock market indexes on Wednesday were unable to follow through on widespread gains on Tuesday, falling after investors were hit will more gloomy economic news.
U.S. stock index futures were down with about an hour before markets open, suggesting that stocks will fall at the start of trading. Futures for the Dow Jones industrial average fell 155 points, to 8,277. Futures for the S&P 500 fell 18 points, to 831.
In Europe, the U.K.'s FTSE 100 was down 0.9 per cent and Germany's DAX index was down 1.8 per cent in afternoon trading. In Asia, Japan's Nikkei 225 rose 1.8 per cent in overnight trading.
Research In Motion Ltd. said on Tuesday that its third-quarter earnings will come in at a high of 83 cents (U.S.) a share, far below the 97 cents that analysts have been expecting. The BlackBerry maker also reported on Wednesday morning that it is making a hostile bid for Certicom Corp., valued at $1.50 a share. RIM shares fell $3.02, to $34.30, in premarket activity in New York.
Meanwhile, the employment picture in the United States is turning gloomier. The ADO Employer Services estimated that U.S. companies shed 250,000 jobs in November - the biggest monthly decline since 2001 and far more than the 205,000 lost jobs that economists had been expecting. As well, the job losses in October were revised upward to 179,000 from 157,000.
"The details show job losses accelerating at small and medium-sized firms, with bigger employers no worse than October - which was bad enough," said Ian Shepherdson, chief U.S. economist at High Frequency Economics, in a note. "The sector data show accelerating payroll declines in both manufacturing and services; there is nowhere to hide."
Tuesday, December 2, 2008
Nexen is unaware of any potential offer
Hard-hit Nexen shares soar on Total bid rumours
NORVAL SCOTT
Tuesday, December 02, 2008
CALGARY — Investors bid up Nexen Inc. by $1.25-billion Tuesday in anticipation that a rumoured takeover bid by French giant Total SA could mark the next wave of oil sands acquisitions.
Nexen's stock price surged more than 10 per cent on a European report that Total may be poised to bid for Nexen, but sources said the Nexen board has heard nothing from its French rival.
Nexen is unaware of any potential offer and has not hired advisers to evaluate a bid, investment banking sources said after London's Financial Times reported online that the Total board was meeting.
Nexen, the market value of which has plunged by more than half since June, has long insisted it's not for sale.
Total has secured a €7.5-billion ($11.9-billion) financing package from five banks and its board was deciding whether to proceed with an offer for Nexen, the report said.
It added that Total had been considering the sale of its 13-per-cent stake in pharmaceutical company Sanofi-Aventis to help finance a deal.
“The rumours are too specific not to be taken seriously,” said one investment banker who has worked closely with Nexen. “But Nexen has heard nothing, absolutely nothing, about an offer.”
Nexen said in a statement that it was not aware of any corporate developments that would account for the stock price movement. Total didn't return phone calls seeking comment.
Total, along with other global energy players, is expected to use the economic downturn to acquire reserve-rich companies whose share prices have been depressed.
Nexen has a high-quality asset base, but lower oil and gas prices have forced its market capitalization down from $24-billion in June to $11.5-billion today.
Nexen is also seen as a good fit for Total as its foreign assets – in Yemen, the Gulf of Mexico, the North Sea and Nigeria – are in countries where Total already operates.
Total has been looking to expand its position in the oil sands, and may be keen to acquire Nexen's new Long Lake upgrader in order to process bitumen from the projects it's already developing.
Nexen chief executive officer Charlie Fischer has repeatedly said it makes no sense to sell the company today, given the depressed state of the market.
Last month, he said that if a hostile takeover bid was launched, management and its board would initiate an auction process to secure the highest price for shareholders.
As well as Total, BP PLC and Royal Dutch Shell PLC have previously been linked to Nexen, while any auction could reignite the interest of national Chinese and Indian oil companies in acquiring a stake in the oil sands.
The European report said Total could offer $38 (Canadian) a share, or almost $20-billion.
Nexen's management and shareholders probably wouldn't sell for less than $40 a share, said BMO Nesbitt Burns Inc. analyst Randy Ollenberger.
Nexen (NXY)
Close: $23.88, up $2.03
© Copyright The Globe and Mail
TLM and QEC Houses Anonymous Dumping
Globe/wire say Talisman studies floating LNG plant
Globe/wire say Talisman studies floating LNG plant
2008-12-02 08:04 ET - In the News
The Globe and Mail reports in a Bloomberg dispatch Tuesday that Talisman Energy, an oil and gas producer with interests in Papua New Guinea, says it is studying the use of a floating liquefied natural gas plant for its Pandora discovery in the Gulf of Papua. The unbylined item says the company believes the technology, which has yet to be used in a commercial project, may be suitable for developing the field, which is estimated to hold at least 1.5 trillion cubic feet of gas.
Terry Buchy, Talisman's manager of engineering business development, made the comments Monday in Sydney. Rising energy demand and advances in technology are spurring gas producers to consider tapping fields that were previously considered either too small or too far from coastlines to be profitably developed. Pandora, which is about 280 kilometres from an existing processing plant, lies in "benign" seas in the Gulf of Papua that would be suitable for a floating LNG plant, Mr. Buchy said.
Talisman plans to drill appraisal wells at the field in the second half of 2010 as well as potential exploration wells nearby, said Lawrence Bernstein, responsible for the company's exploration in PNG. Talisman shares fell $2.14 to $10.27.
Monday, December 1, 2008
Oil's unlikely alliances likely unnecessary
ERIC REGULY
From Monday's Globe and Mail
E-mail Eric Reguly
Read Bio
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December 1, 2008
ROME — When the Russians are ready to hop into bed with OPEC, you know the world's oil exporters are in a panic about prices.
Russian President Dmitry Medvedev last week said his country is ready to "co-ordinate" but not "collude" with OPEC as the cartel considers more production cuts to end the price slide.
At a weekend OPEC meeting in Cairo, Saudi Arabia said $75 (U.S.) a barrel represented a "fair price" for oil. A decision on new OPEC production levels is to be made in two weeks.
Since July, oil has gone from a record $147 a barrel to the low $50s. Unless the price reverses direction, the Russian economy, and the ruble, are in trouble. Like Canada, Russia fancies itself a diversified economy; in reality, the C-buck and the ruble trade as petrocurrencies.
While the difference between "co-ordinate" and "collude" is one for linguists with international law degrees to figure out, the point is clear: Russia will do whatever it takes to get oil prices back up to repair its battered economy, even if it means joining forces with its main energy rival.
But you have to wonder why the Russians (and OPEC and the non-OPEC exporters, like Norway) are getting their oily shorts in a knot. Prices overshot on the way up. In the spring, they were tacking on about $10 a month. Now it looks like they're overshooting on the way down. The case for sustained $50 oil is just as hard to make as the case for sustained $150 oil.
Oil prices could keep sliding. Institutional investors obviously helped to propel the price of oil and virtually every other commodity, from copper to wheat, on the way up.
Now the institutions are getting out and they haven't finished unloading their positions. In jittery markets, even relatively small sales can knock prices down hard. The institutional purge could easily push oil down to $40, perhaps lower (just before the Thanksgiving holiday in the United States, January crude futures were trading at just under $54).
In market selloffs, the bearish news can easily overwhelm the bullish news. For example, in September, year-on-year U.S. oil demand was down by 2.6 million barrels a day, or 13 per cent. It was a big number and the market apparently took this as a sign that the Americans' love affair with petroleum was over and that minor amounts of whale oil could meet their energy needs.
Largely ignored was the offsetting dose of bullish news. OPEC, which is responsible for some 40 per cent of global oil production, has reduced output by about two million barrels a day in recent months, and is almost certain to cut again in December.
Here's another data tidbit: In October, China's year-on-year oil imports were up 28 per cent. It was ignored because the world is fixated on China's expected 2009 GDP growth rate of about 8.5 per cent, down from double-digit growth rates as long as anyone can remember.
With China still expanding at a speed Western economies can only dream about, you can bet it will keep sucking up every drop of available oil. But never mind; the market apparently considers China's downgrade from a white-hot, to a hot, economy means it, like the U.S., no longer considers oil essential.
The market is shrugging off even more compelling data that $50 oil is unrealistically low.
At the current price, oil developments everywhere are being curtailed or shut down. Royal Dutch Shell last week announced it's yanking its application to build the 100,000-barrel-a-day Carmon Creek oil sands project in northwestern Alberta. At the same time, Irving Oil said it is in no hurry to build the $8-billion (Canadian) Eider Rock oil refinery in Saint John. Construction will be stretched out over eight years instead of four.
And so on, around the planet.
As new developments are being sent to the morgue, old developments are entering retirement homes. The International Energy Agency produced this sobering fact a couple of weeks ago: Production at 800 of the world's biggest oil fields is declining by 6.7 per cent a year, a rate that is accelerating.
The falloff means that about 45 million barrels a day of new production in the next 22 years would be needed just to meet current world demand of about 87 million barrels a day. Filling the gap would get harder every year because the IEA expects demand to rise to 106 million barrels a day by 2030.
If these findings alone were not enough to get you excited about oil again, nothing will. Bearish sentiment still rules, as Russia's unlikely alliance with OPEC shows.
But a few bullish souls are starting to break from the pack. Barclays Capital has expanded its commodities team this year by almost 50 per cent, taking it to 300 employees, even as prices plunge. It considers the downturn a blip in a long-term commodities upswing. In a year or so, Barclays' move might look inspired.
TLM and QEC Houses
Investors look down
RTGAM
If the stock market roared back to life last week on relatively little good news, it may seem fitting to some investors that the market fell back into the sick ward on Monday on relatively little bad news.
But what a fall it was: Canada's S&P/TSX composite index closed at 8406.09, down 864.41, points or 9.3 per cent - the most severe one-day downturn this year in percentage terms, and the worst since the crash of 1987. In the United States, the Dow Jones industrial average closed at 8149.09, down 679.95 points, or 7.7 per cent. The broader S&P 500 closed at 816.21, down 80.03 points, or 8.9 per cent.
The U.S. indexes had been down throughout the day, but were able to contain their losses at relatively modest levels (emphasis on "relatively") soon after the National Bureau of Economic Research declared that the U.S. economy had fallen into a recession in December, 2007.
Investors were also treated to another bad reading on manufacturing activity from the Institute for Supply Management, but one that was not widely out of whack with economists' expectations or with the previous month.
Meanwhile, the far harsher Canadian selloff occurred even after Statistics Canada reported that the economy expanded at an annualized rate of 1.3 per cent in the third quarter - a better clip than economists had expected.
In all probability, the reports probably had little bearing on investors, since they all look backward. If investors were going to do any backward gazing, it was to look at the heady gains of the previous week, when markets enjoyed their best rallies since the 1930s.
Now, Monday's losses have erased all of the Dow's gains over the previous four trading days. In a single day, Citigroup Inc. fell 22.2 per cent, Bank of America Corp. fell 20.9 per cent, General Electric Co. fell 9.7 per cent and Microsoft Corp. fell 8 per cent. All 30 stocks in the Dow fell. At the S&P 500, an amazing 498 stocks fell. (The two winners: Rohm and Haas Co. rose 3.5 per cent and Autonation Inc. rose 0.1 per cent.)
Monday also erased all of last week's gains for the S&P/TSX composite index, which was hit particularly hard by declining commodity prices. Among financials, Royal Bank of Canada fell 8.7 per cent and Manulife Financial Corp. fell 14.8 per cent. Among energy stocks, Suncor Energy Inc. fell 16.4 per cent and EnCana Corp. fell 12.8 per cent after crude oil tumbled to $49.28 (U.S.) a barrel, down $5.15.
Gold stocks were no help, after the price of gold fell to $776.80 an ounce, down $42.20. Goldcorp Inc. fell 16.7 per cent and Barrick Gold Corp. fell 13.4 per cent.
Copyright 2001 The Globe and Mail
Oil falls below $50.00
Oil drops below $50 a barrel
MARK WILLIAMS
Monday, December 01, 2008
COLUMBUS, Ohio — Oil prices tumbled below $50 (U.S.) a barrel Monday as manufacturing activity in the U.S. hit a 26-year low, a showing that was much worse than expected.
The price drop also comes two days after OPEC said it would not cut production of crude before its regularly scheduled meeting in three weeks.
Manufacturing and consumer spending has eroded quickly and lowered demand for energy. That has erased nearly 66 per cent of crude's market value since July when it peaked near $150 per barrel.
Light, sweet crude for January delivery fell 9 per cent, or $5.15 to $49.28 a barrel on the New York Mercantile Exchange. The contract had settled down a penny at $54.43 on Friday.
Analyst Phil Flynn with Alaron Trading Corp. said the $50 price remains significant psychologically for traders.
“It opens up the possibility of further declines,” he said.
In a note to investors Monday, Raymond James Equity Research slashed its oil price forecast from $90 per barrel to $60 per barrel.
In London, January Brent crude fell 9 per cent, $4.85 to $48.64 on the ICE Futures exchange.
On Saturday, Saudi Oil Minister Ali Naimi said that Organization of Petroleum Exporting Countries will do what needs to be done to shore up falling oil prices when the group meets Dec. 17 in Algeria, but for now it was too early to make another cut.
Prices continued to slide despite a separate report by Iranian state TV in which OPEC Secretary-General Abdullah El-Badri said that a daily oil production cut of between 1 million and 1.5 million barrels was likely in December.
OPEC, which accounts for about 40 per cent of global supply, cut output by 1.5 million barrels a day in October, bringing total quota cuts to around 2 million barrels a day this year.
OPEC's actions have had no discernible effects on oil prices, which have fallen another 26 per cent since the last round of production cuts.
“The OPEC meeting from their viewpoint was a disaster,” Mr. Flynn said.
Internal divisions within OPEC are reminiscent of the 1990s when an oil glut forced prices down and OPEC states routinely cheated on production quotas.
In an environment of falling demand, Mr. Flynn said oil traders were also selling off as the Dow Jones industrial average gave up 400 points Monday and because of the bad manufacturing figures.
The U.S. Institute for Supply Management said its gauge of manufacturing activity fell to a reading of 36.2 in November. That was a steeper-than-expected drop from the October reading of 38.9 and underscored that the hard economic times were beginning to have a major effect on manufacturing. A reading below 50 indicates the sector is contracting.
The U.S. Commerce Department reported that construction spending dropped by 1.2 per cent in October, much bigger than the 0.9 per cent decline many analysts expected.
The decline in the stock market follows the first five-day string of gains for both the Dow and the Standard & Poor's 500 since July, 2007, and the largest five-day percentage gain in at least 75 years. The Dow has gained 16.9 per cent and the S&P 500 index 19.1 per cent since a rally that began Nov. 21.
“The explosive rally we saw last week seems like a memory today,” Mr. Flynn said.
A survey of manufacturing activity in the euro zone and Britain also points to sharper-than-expected contraction in output. In China, an equivalent survey of its manufacturing sector also made for grim reading, generating fears that one of the main engines of global growth over the last few years is slowing sharply.
Sucden Research in London cited data from the United Nations, which now expects the global economy to grow by just 1 per cent in 2009, compared with an earlier forecast expecting growth of 2.5 per cent.
Meanwhile, Saudi King Abdullah told the Kuwaiti newspaper Al-Seyassah in an interview published Saturday that oil should be priced at $75 a barrel.
Iranian Oil Minister Gholam Hossein Nozari was quoted as saying Sunday that the market was oversupplied by around 2 million barrels per day and that production should be cut by that amount.
Meanwhile, U.S. prices at the pump continued to fall, but at a slower rate. The price fell half a cent overnight to $1.82 per gallon, according to auto club AAA, the Oil Price Information Service and Wright Express. That is 64.3 cents lower than a month ago and $1.248 lower than a year ago.
In other Nymex trading, gasoline futures tumbled 9 cents to $1.1185 a gallon. Heating oil dropped 10 cents to $1.6257 a gallon. Natural gas for January delivery, however, rose $6.619 per 1,000 cubic feet.
© Copyright The Globe and Mail
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