02142016Sun
Last updateFri, 12 Feb 2016 5pm

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EPA Halts Implementation of Clean Power Plan

Earlier this week, in a 5-4 decision, the U.S. Supreme Court granted an industry motion to stay the EPA’s Clean Power Plan while the lower courts determine its legality. Last fall a lawsuit was filed on behalf of more than two dozen states, utilities and industry groups.

“States did not have to begin complying until 2022, but the rule did require them to submit plans by September for how they'd meet their emissions targets,” U.S. News and World Report writes.

“It was also instrumental in bringing other nations – especially heavy polluters like China and India – to agreement on an international accord on climate change in Paris in December.” 


IHS: North American Drillers Need Billions More in Cuts

The depressed oil price environment is painting a gloomy outlook for North American exploration and production (E&Ps) companies, and further, significant CAPEX cuts are needed in order for the group to demonstrate real financial discipline and align spending more closely with cash flow, according to new analysis from IHS.

According to the IHS Energy Comparative Peer Group Analysis of North American E&Ps, which assessed the impact of lower oil and gas prices on 2016 cash flow estimates for the North American E&P peer group, under the IHS low-case scenario, to maintain a capital spending-to-cash-flow ratio in the historical range of approximately 130%, spending for the E&Ps would need to be cut by a further $24 billion, or 30%, from the most recent estimates.

This would be a cut of almost 50% from 2015 spending levels. IHS reports the current capital spending estimate for the group totals more than $78 billion, which is 23% lower than an estimated $101 billion in 2015. 

Energy Sector Bracing for More Bankruptcy Filings in 2016

“In 2015, the energy sector accounted for more than one-half of all public company bankruptcy filings, including eight of the 10 largest filings. Current oil prices and bond values indicate that 2016 will be another active year,” according to McGuireWoods Consulting.

“To account for anticipated energy sector losses, many lenders have already increased loan loss reserves. These anticipated losses, while not crippling, are significant nonetheless, because the energy sector accounts for between 1-4% of outstanding loans issued by medium and large banks. Further, lenders are expected to significantly reduce borrowing bases during the upcoming reviews in April and October. The 2015 reviews did not produce drastic cuts to borrowing bases because lenders anticipated that oil prices would increase. Lenders may not be as sanguine in 2016.” 

OPEC Anticipates Rivals Producing Less Oil in 2016

OPEC projects world oil demand growth in 2015 increased by 1.54 mb/d, unchanged from the previous report, to average 92.96 mb/d. In 2016, world oil demand is expected to grow by 1.25 mb/d, representing a marginal lower adjustment of 10 tb/d from the previous forecast, to average 94.21 mb/d. Non-OECD countries will continue to contribute the bulk of oil demand growth this year.

Non-OPEC oil supply growth in 2015 has been revised up by 90 tb/d to 1.32 mb/d, mostly driven by higher-than-expected fourth quarter data. In 2016, non-OPEC oil supply is projected to decline by 0.70 mb/d, following a downward revision of 40 tb/d, mainly due to announced capex cuts by international oil companies, the fall in active drilling rigs in the U.S. and Canada, and a heavy annual decline in older fields. 

Marathon Petroleum Plans $2 Billion Refinery Expansion

Marathon Petroleum recently announced plans to invest $2 billion in the Galveston Bay refinery over the next five years, an investment program collectively referred to as the South Texas Asset Repositioning (STAR) program.

"The investments planned as part of the STAR program are intended to increase production of higher-value products and improve the facility's reliability, as well as increase processing capacity. These high-return investments will also fully integrate our Galveston Bay refinery with our Texas City refinery, making it the second-largest refinery in the U.S.," said Marathon President and CEO Gary R. Heminger. "We expect a rapid payback on the staged investments planned for the STAR program." 

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