Patterson-UTI Energy Inc.

A glance at Patterson-UTI Energy Inc. (Nasdaq: PTEN), onshore driller operating 350 landrigs in the United States and Canada.

Business segments & share of revenue(2007): Contract drilling(83%), Pressure pumping(9%), Drilling and completion fluids(6%), Oil&gas e&p(2%)

Market value: 1.9 billion

Revenue(000's): 2008 YTD: $1,639,369 2007: $2,114,194 2006: $2,546,586 2005: $1,740,455 2004: $1,000,769 2003: $776,170

EBIT(000's): 2008 YTD: $411,575 2007: $670,276 2006: $1,039,164 2005: $581,296 2004: $148,467 2003: $66,282

EPS(diluted) 2008 YTD:$1.72 2007:$2.79 2006:$4.02 2005:$2.15 2004:$0.56 2003:$0.26

P/E: 5.41(ttm), 6.27(five-year average eps)

Yield: 5.20%

Peer valuation: Nabors Industries Ltd. (NBR)P/E 4.85, Precision Drilling Trust (PDS) P/E 4.18, Helmerich & Payne, Inc.(HP) P/E 5.84


Total assets(000's)(30/09/2008): $2,658,549

Total liabilities(000's): $299,373


Quotes from the 2007 Annual Report

"We own and invest in oil and natural gas assets as a working interest owner. Our oil and natural gas interests are located primarily in producing regions of West and
South Texas, Southeastern New Mexico, Utah and Mississippi."

"Most of our drilling contracts are with established customers on a competitive bid or negotiated basis. Typically, the contracts are short-term to drill a single well or a series of wells."

"We provide drilling fluids, completion fluids and related services to oil and natural gas operators offshore in the Gulf of Mexico and on land in Texas, Southeastern New Mexico, Oklahoma and the Gulf Coast region of Louisiana. We serve our offshore customers through six stockpoint facilities located along the Gulf of
Mexico in Texas and Louisiana and our land-based customers through fourteen stockpoint facilities in Texas, Louisiana, Oklahoma and New Mexico."

"The customers of each of our three oil service business segments are oil and natural gas operators. Our customer base includes both major and independent oil and natural gas operators. During 2007, no single customer accounted for 10% or more of our consolidated operating revenues."

Comments: Onshore drilling activity is dropping rapidly in North america and will probably continue to do so for at least a year as the economic activity decreases. PTEN's eps will probably bottom at around 50 cents and I would imagine that the stock price will fall in to the range of five to seven dollars.
However as the "easy" oil and gas are depleted we are left with the expensive and difficult, which requires e.g. deeper wells, greater number of wells and reservoir stimulation. Drillers and well service companies are already benefitting from this trend but in the near future it's effects on drillers revenues will be far greater.






Charts via Union Drilling & Schlumberger

Seadrill, Scorpion, Lewek evaluating Keppel contracts

Energy Current:

"SINGAPORE: Keppel Offshore & Marine Ltd. (Keppel O&M) received indications from Seadrill Ltd., Scorpion Offshore Ltd. and Lewek Shipping Pte Ltd. that they are reviewing their options on newbuilding contracts that were signed in the middle of this year. The contracts under review are for two jackups for Seadrill, a semisubmersible for Scorpion and a multi-functional support vessel for Lewek."

The fact that Scorpion is considering to cancel the semi order is some what surprising as the company allready has a six-year contract for it with Petrobras. Assuming that the contract with PBR is solid, Scorpion has to acquire a deep water vessel elsewhere by 2012. Seadrill's semi West Capricorn is scheduled for delivery in the fourth quarter of 2011 and the vessel doesn't have contract yet.One possibility is that SDRL and SCORE are getting closer to a merger.

UPDATE
It seems that SCORE simply can't get the funding for the rig.

Libya-focused Verenex Energy opens data rooms to potential buyers

The Canadian Press:

CALGARY — Verenex Energy Inc. (TSX:VNX) has opened data rooms in London "to facilitate a potential corporate sale as one of the strategic options currently under review."

The Calgary-headquartered company, focused on Libya, had announced in September it was considering options but had not specifically said it was for sale. Opening its proprietary information to possible buyers advances that process...

License to...

Drill, offshore Australia,Canada, Uruguay and Ireland:

Australia awards 13 offshore exploration permits

Oil firms awarded three blocks off Newfoundland

Uruguay to Offer Offshore Exploration Licenses in Upcoming Round

Ireland opens licensing round for Rockall Basin

Iraq agrees to connect Kurd fields

Upstream: "Iraq's oil minister and officials from its largely autonomous Kurdistan region agreed today to connect two Kurdish oil fields to the main northern export pipeline to the Turkish port of Ceyhan, the minister said."

As a result Norwegian DNO soars 18% to 4.85 NOK in Oslo.

Seadrill Q3

Revenue $566,2 million(+50%)

EBIT $173,6 million(+80%)

EPS $0.18(+125%)

Total assets $11 667,4 million(+46%)

Total liabilities $8314,8 million(+80%)


Some quotes from the report

"The remaining installments to be paid for the newbuilds amount to US$3,564 million
split on approximately US$1,420 million, US$830 million, US$1,000 million and US$314 million in 2008, 2009, 2010 and 2011, respectively."

"the deepwater floater market and tender rig market remain sound based on the long-term horizon for projects that require the services provided by such units. For jack-ups, the market outlook for the next one to two years is more uncertain."

"The Board has after a long discussion decided not to pay an additional dividend in the third quarter except for theUS$0.30 already paid"

"The operating cash flow in 2009 is expected to be more than twice the
projected capital expenditure. No dedicated financing has yet been arranged for the four jackups to be delivered in 2010. Due to the fact that these units have been ordered by Special Purpose Companies (SPC) various options are being considered to conclude the way forward for these newbuilding projects. So far the SPCs have invested approximately US$150 million in equity. Seadrill Limited has not given corporate guarantees for these projects. The major construction work on these units has not yet started and constructive dialog with the yards has started in order to find mutually acceptable arrangements."

"Seadrill has as of November 21, invested US$1,009 million in forward contracts and shares in Scorpion, Pride and Sapura Crest. In addition, the Company has a total return swap agreements exposure of 4.5 million shares in Seadrill. If Seadrill takes delivery of all the underlying shares and forward contracts, Seadrill’s total investment would be approximately US$1,045 million. As of September 30, the value of the same underlying shares would be approximately US$956 million, while the same value as of November 21 would be US$349 million."

No real surprises in the report. It's likely that some or all of the four jack-up orders will be cancelled. The heavy debt load isn't a problem (yet) considering the 12 billion dollar backlog and acquisition prices of Seadrills rigs(significantly below current market prices). I don't expect any dividends to paid for at least a year.
One problem with the investments made in Pride, Scorpion & Sapura Crest is that these companies don't provide SDRL with any cashflow as they do not pay dividends. Scorpion and SC are growing companies so it's understandable that they use their cashflow to develop the respective companies, but Pride could and should direct a portion of its profits to its owners, however as Pride's board sees Seadrill as a hostile shareholder it's unlikely that Pride's current dividend policy will be changed any time soon.

The Report(.pdf)

SCORE Q1 + Seadrill

Shallow water newcomer Scorpion Offshore (OSE:SCORE) reports Q1/09


Revenue 48,77 MUS(+950%)

EBIT 22,61 MUSD (-6,46 MUSD)

EPS $0.28($-0.15)

Total assets $1024 million (+18%)

Total Liabilities $590 million (-8%)

Average day rate for 1st quarter of $188,700

Average daily rig operating cost of $59,100

SCORE on current Outlook

"In spite of the recent fall in oil prices, most international markets remain active. Continued lower commodity prices may have an impact on both rig utilization and dayrates, although historically this effect lags by 3 to 6 months. Scorpion, with limited contract rollover risk in 2009 and operating in the ultra premium segment of the jack-up market should be well insulated in the event commodity prices continue to weaken."

Scorpions share price has plummeted 75 percentage from its high of 80 NOK to 12 NOK on friday. The board of SCORE recommended its shaholders to accept the 80 NOK offer by Fortune Super Equity Management in february. After the failure of that bid Seadrill made its own with same amount, which the board didn't support as it believed Fortune Super Equity Management would improve it's offer. Hower as the man behind FSEM Sheikh Al-Nasser was killed in a helicopter crash it is highly unlikely that there will be a new offer.
The board and management hold ~20% of SCORE's outstanding shares and FSEM had communicated that it intented to retain SCORE's current management. If Seadrill were to gain control of the company both the management & board would probably be booted out. It seems that FSEM offer didn't treat all sharehold equally.

In spite of the boards and management's resistance it's likely that Seadrill will eventually swallow SCORE as it's 36% holding will deter other possible buyers. The future bid will most definitely be higher than SCORE's share price on friday

Sasol finds Gas Offshore Mozambique

RIGZONE:

"Sasol Petroleum Sofala, a wholly owned subsidiary of Sasol Petroleum International, has completed its first exploration well, Njika-1, in Block 16/19 in Mozambique. The well is located in waters at a depth of 460 meters and was drilled to a total depth of 1,615 meters. The well accessed the predicted targets and measurements indicate the presence of gas. The well is currently being tested."

Wanted: Skilled Labour

Matt Simmons and Andrew Gould(CEO of Schlumberger) have spoken of the petroleum industry's (future)problem on a number occasions during the recent years. Now it seems that future problem has become a present problem, at least in the offshore drilling sector. As the number of drilling vessels in operation grows, the shortage of skilled labour becomes greater. It seems that the battle for skilled labour has begun: Seadrill is offering some of its Norwegian employees 500 000 crown($70 000) loyalty bonuses(officially retention bonus) if they agree to stay with the company for three years. According to the Aftenbladet article the bonus is available to personnel in positions of leadership e.g. platform managers, drilling managers and subsea engineers.
The shortage will affect drillers in mainly in two ways: labour costs will rise significantly and the number of accidents will most likely increase(due to the lack experienced personnel).

VET.UN salkuun

Vermillionia ostettu pieni erä. Lyhyt perustelu: yhtiön johdon mukaan tämän hetkinen rahan jako(>8% vuosituotto, C$0.19 kuukaudessa) on turvattu vuoden 2009 loppuun vaikka öljyn hinta putoasi alle 50 dollarin, johto pitää todennäköisenä että Verenexin omistus muutetaan rahaksi tulevien kuukausien aikana jolloin Vermillionista tulee käytännössä velaton. Yhtiön taloudellinen tilanne mahdollistaa rahoitusmarkkinoiden nyky tilassa vähintäänkin kohtuu hintaiset hankinnat, joita ilmeisesti on jo suunnitteilla.
VET:n vaihtoehtoina olivat Peyto ja Crescent Point. Peytolla plussina olivat pitkä RLI ja matalat tuotantokustannukset; miinuksina keskittyminen kaasuun, trendinomaisesti nouseva payout ratio ja laskeva tuotanto. Crescentillä plussina kasvava tuotanto, light sweetin suuri osuus tuotannosta ja todennäköinen reservien merkittävä lisääminen jo omistuksessa olevasta maasta; miinuksina suhteellisen suuri velka ja Bakkenin öljyyn liittyvät korkeammat tuotantokustannukset ja ehkä myös se että CPG:tä löytyy jo salkusta.

Petrobras Postpones 28 Rig Tenders to '09

"Brazilian state oil company Petrobras has postponed construction tenders for 28 deep-sea drilling rigs to 2009, the Estado News Agency reported Tuesday.

The rigs were to be tendered exclusively to Brazilian construction companies this year.

"There are no longer the conditions to issue the tender this year," said Jose Jorge de Moraes Jr., general manager for new business at the company's exploration and production department.

However, Moraes sees an upside to the current global economic crisis, in that it may lead to lower prices for rigs in the short term. This would allow Petrobras to cut its oil exploration and production costs in the sub-salt layer off Brazil's southeastern coast.

According to Moraes, the current price of oil at around $60 a barrel is an impediment to developing the sub-salt layer, and this area is one of Petrobras' priorities.

Moraes also said Tuesday that Petrobras plans to return to drilling in the Jupiter, Iara and Azulao (formerly Ogum) blocks in 2009. Azulao is operated by ExxonMobil near the Tupi block in the Santos Basin, off the coast of Sao Paulo state.

It was hoped to have 14 rigs drilling in the blocks in 2012 and produce 1 million barrels a day in 2015, said Moraes."
RIGZONE

I suppose this should be interpreted as good news as a significant addition to global ultra deep drilling capacity will be at least delayed. However a global or at least a semi global deppression isn't good news for anyone.
Seadrills drillship West Polaris is drilling in Azulao(BM-S-22) for Exxon.

Update
Petrobras clarifies revisions to business plan

"RIO DE JANEIRO: Brazilian state oil company Petrobras has issued a statement to clarify media reports regarding the revision of its business plan and the postponement of the hiring of drilling rigs.

Petrobras postponed the announcement of its business plan until the end of the year on Oct. 17, in order to complete project analyses because of new market conditions. The company stated that its business plan is still being prepared and it has no information to make any statement regarding the postponement or anticipation of its projects and the possible impact this may have on its estimated production curve for the upcoming years."

There's a lot conflicting information of the break-even level(s) for the pre-salt oil: A year ago some officials(Petrobras or Brazilian government) claimed that oil production from the Santon Basin was commercially viable at 20 dollars a barrel now estimates for the break-even level vary from 35 to 60 dollars per barrel.

Things that are new

Dahlman slashes rig dayrates

"Analysts at investment bank Dahlman & Rose today revised down rig dayrate forecasts in light of the economic slowdown which it expects to result in lower spending in the industry leading to project delays and cancellations.
"

"The jack-up market is expected to be the worst hit, with dayrates falling by third quarter of 2009."

"Meanwhile, the deep-water market is expected to remain tight with no softening in dayrates before 2011".

Swiber defers drilling plan, waits out financial crisis

So it seems that the outlook for deep water drilling and drillers still remains very positive. I bought some more Seadrill last week.

Peyto

Peyto Energy Trust (TSX: PEY.UN)



Market value(14/11/2008): C$1.21 billion

Yield:17%(C$0.15/month)

Production(YTD-08):19,930 boe/d(87% natural gas, 13% oil & NGL(mostly NGL))

RLI(P+P): 21 years

Total assets(000's):$1,250,973

Total liabilities(000's): $714,000


Three year figures
Production 2005: 22,219 boe/d 2006:22,873 boe/d 2007:20,669boe/d

Reserves(P+P):2005:153,448 mboe 2006:163,464 mboe 2007:164,759 mboe

Realized prices:
Natural gas(per mcf): 2005: $8.78 2006: $8.46 2007: $8.42
NGL & Oil(per bbl): 2005: $55.48 2006: $61.00 2007: $67.88

Operating costs per boe: 2005:$1.55 2006:$2.16 2007:$2.57

Netback: 2005:$37.83, 2006:$39.25 2007:$41.06

Funds from operations per unit: 2005:$3.01 2006:$2.93 2007:$2.65

Payout ratio 2005: 46% 2006: 57% 2007:63%

Comments:
The supply of natural gas is increasing in North America, mainly due to unconventional resource plays, a strong reason to stay away from natural gas focused energy trusts. Peyto's low operating costs and long-life reserves do balance the picture quite a bit. Unlike most trusts Peyto has maintained and increased it's reserves through the drill bit instead of M&A.
What is Peyto worth? Three year average netback multiplied with 20% discounted proved&probable reserves, minus total liabilities((37.83+39.25+41.06)/3)x(0.80x164,7)-714=4461, in this equation one assumes that there will be no significant surprises with the reserves and that operating costs and realized prices do not significantly deviate from figures from recent years. In a more conservative estimate the three year average netback will be discounted with 30% and the reserves also with 30%=2456. With a current market value of $1.21 billion Peyto would seem to be ~51% undervalued.

UPDATE (02/12/2008)

Insider activity in October and November:

President, CEO, Director Darren J.Gee bought 10 000 shares
Exec. VP, COO Scott Robinson bought 4000 shares
Director Rick Braund bought 8500 shares
Director Don T. Gray bought 150 300 shares
Director Ian Mottersheap sold 70 000 shares

New Offshore Arenas

Financial Post: Caribbean now known for oil as well as beaches

"The Caribbean Basin could well be the next big thing in the world of oil and gas, but investors should be warned; the opportunity to cash in on the area's new and exciting potential discoveries comes with a host of uncertainties and will require a great deal of patience."

OGJ: MMS takes first steps for leasing process off Virginia

Petrojack IV Contracted

Petrojack's jack-up Petrojack IV has been awarded a five-year contract by Thailand's PTT E&P. The day rate is $151 000, which is pretty much in line with other recent Southeast Asian contracts.

News

A couple of articles from Houston Chronicle

Ex-official says Mexico may have to halt oil exports

"The U.S. could soon find itself scrambling to make up 11 percent in lost oil imports.

Mexico, the third-largest foreign supplier of U.S. oil, faces the real possibility of having to halt oil exports in four years, a former top Mexican energy official was reported as saying Tuesday in Mexico’s El Universal newspaper..."

Falling crude prices could slow deep-water drilling

"So far unscathed by plummeting oil prices, costly deep-water drilling projects in the Gulf of Mexico could soon become less attractive if crude prices continue falling, as they did again Tuesday.

Oil prices closed below $60 a barrel, a level widely considered to be near the break-even point for multibillion-dollar deep-water projects that have been a key driver of Houston’s energy economy in recent years.

If prices go lower still, oil companies could be forced to re-evaluate and possibly postpone deep-water projects, just as they have already done with less-costly land and shallow-water drilling plans, analysts said.

“At $50, they probably start canceling projects or slowing projects up,” said Eric Smith, associate director of the Tulane Energy Institute in New Orleans..."

Nordic American Tanker

A very quick look at Nordic American Tanker Shipping Ltd. (NYSE:NAT).

market cap $1.09 billion

P/E 9.95

*"The Company does not engage in any type of derivatives"

Fleet

14 suezmax(including 2 newbuildings) double hull crude carriers. Fleet age: 4 built in 1997(11 years), 4 in 1998(10 years), 1 in 2002(6 years), 2 in 2003(5 years) and 1 in 2005(3 years).
11 out of the 12 tankers operate on spot rates.
"We estimate that our average cash breakeven for our trading fleet of 12 vessels is below $9,000 per day per vessel". For comparison market leader Frontlines(NYSE:FRO) breakeven rates for Suezmaxs is $24 800.

Balance Sheet
"As of the end of 3Q08, NAT does not have any net debt". NAT has a 500 million dollar undrawn revolver.

Total assets $842 million

Long term liabilities 0

Short term liabilities $17 million

From Concordia Maritimes market bulletin, suezmax section:
"November dates have passed and gone and there's still plenty of tonnage for the end of the month. Expect rates to drop significantly next week as we see December dates start to work and Nov tonnage has to clear out."

Comments:
NAT's financial situation is far superior compared to most of it's peers, thus it is able to take advantage of current or future weaknesses of its competitors or shipyards. The company is heavily exposed to the spot market, which at the moment is not a good thing, in the near future it can be a very bad thing. I would prefer that at least 20% of the fleet would be on long term t/c. It appears that whilst I am writing this a J.Cramer has given NAT the infamous Cramer-bumb.

Crescent Point Q3

Crescent Point Energy Trust(TSX: CPG:UN) Q3 report was published yesterday

(000's)

fundsflow from operations C$ 183 843 (+99%)

net income per unit C$ 3,92 (+2078%)

operating netback C$ 58.52 (+41%)

Payout ratio per unit 48% (-19%)

Net debt 672 812 (+223%)

Outlook:
"Crescent Point is well positioned to withstand the current market uncertainty and to take advantage of acquisition opportunities. Crescent Point’s balance sheet is strong with projected 2009 net debt to 12 month cash flow of 1.1 times and its
3½ year risk management program provides cash flow stability. The Trust’s 10 year drilling inventory and current 140 well fracture stimulation inventory provide long term sustainability and capital investment flexibility at oil prices well below current levels.
In light of the uncertainty over capital markets and commodity prices, Crescent Point does not anticipate finalizing its 2009 capital expenditure budget until December of 2008. However, Crescent Point expects to spend less capital in 2009 than in
2008, with most of the reductions coming in the areas of facilities and land. Approximately 40 percent of the Trust’s 2008 budget was directed toward facilities and land. Despite expectations of lower capital spending in 2009, Crescent Point expects 2009 average production to be in the range of 37,500 boe/d and expects to exceed this level in the fourth quarter of 2008."

Report(.pdf)

Comments:
Average daily production grew 36% compared with Q3/07 to 37 630 boe(mostly light oil). The production figure doesn't include CPG's 20% equity production(~150 bbl/d) from Shelter Bay.
CPG's high quality assets and hedging should ensure that there will be no cuts in the distributions. My intent is to increase my CPG position significantly by the end of the year.

Wavefield and CGGVeritas tie the knot

CGV is making an all share offer for Wavefield-Inseis ASA. The board of Wavefield supports the bid and shareholders representing 25,33% shares outstanding have accepted the offer.
Personally I think this is good news for the entire seismic sector as competition is tightening with new vessels and streamers entering the market. This merger should loosen the supply side some what.

Energia Salkku

Tai kassi, miten vaan. Eli omistukseni energiasektorilta+kommentteja(lista ei ole täydellinen, mutta sisältää painoltaan suurimmat, jätän mainitsematta pari mielenhäiriössä tehtyä ostosta):

Seadrill(Oslo:SDRL)
*poraaja, suurin osa kalustosta syvän veden yksiköitä, tuloksen pitäisi kasvaa rajusti seuraavina vuosina uuden kaluston valmistuessa
*suurehko velka
*"the great consolidator", eli yritysostoja odotettavissa
*todennäköisesti antelias osingon maksaja
*tarkoitus lisätä

Pride International(Nyse:PDE)
*amerikkalainen poraaja
*johto osaa palkita itsensä, mutta ei omistajia
*ostokohde teoriassa, mutta ei käytännössä niin kauan kuin valta on johdolla
*ei maksa osinkoa ja omien osakkeiden ostot ajoitettu huonosti
*en lisää vaikka on halpa

PGS(Oslo:PGS)
*offshore ja maaseisminen(kolmonen kooltaan maailmassa)
*velkainen huonosti ajoitetun Arrow Seismic oston vuoksi, mutta velka on otettu huomioon osakkeen viime aikojen hinnoittelussa
*osingot jäissä velkatilanteen vuoksi
*maaseisminen tehnyt huonoa tulosta viime vuosina
*lisään todennäköisesti jossain vaiheessa

Linn Energy (Nasdaq:LINE)
*öljy ja kaasu yhtiö LLC-muodossa, eli jakaa tuloksensa ulos->korkea osinko
*yhtiö on ostanut ja myynyt omaisuutta ahkerasti viime aikoina, ehkäpä liiankin ahkerasti
*"what you see is what you get", Linnin reservien suhteen tuskin tulee yllätyksiä suuntaan tai toiseen ja ahkera hedgin pehmentää öljyn ja kaasun hinnan heilunnan vaikutuksia tulokseen(molempiin suuntiin)

Crescent Point Energy Trust(TSX:CPG.UN)
*kanadalainen kevyt öljy trusti, jonka tuotanto tulee pääasiassa Saskatchewanin Bakken-muodostelmasta
*tuotantokustannukset Bakkenissa vaihtelevat rajusti alle 20 dollarista yli 50 dollariin, tällä hetkellä CPG tuottaa melko edullisesti, mutta kustannukset saattavat nousta rajusti jatkossa
*yhtiön maaalueilla on yli 6 miljardin tynnyrin edestä öljy ja kaasua, ja yhtiö pystyy kasvattamaan/ylläpitämään tuotantoaan ja reservejään pitkän aikaa Bakkenin kautta
*lisäys listan kärjessä

Prosafe SE(Oslo:PRS)
*norjalainen Kyprokselle rekisteröity majoituslautta yhtiö
*velkainen, mutta liiketoiminta on vakaata
*halukas maksamaan osinkoja
*kilpailu lisääntymässä
*myymässä en ole, lisäys harkinnassa

More on Seismic

The number one in seismic CGG Veritas reports Q3

revenue $1062 million (+28%)

EBIT $265 million (+69%)

EPS $1.14(€0.74)(+65%)

backlog 1900 million (+15%)

Outlook: "Within the context of the current oil supply challenges and the global financial market conditions, CGGVeritas with its high-end seismic equipment and services and its solid financial position is well positioned for the future."

The Report

Presentations by CGG Veritas and Reservoir Exploration Technologies(RXT) from Oil Voice's Advanced Geophysics Forum are available at Oil Voice.
(flash video)

My conclusions from recent reports:
The demand fundamentals for offshore oil service companies are very strong: virtually all seismic companies have record order backlogs, day rates for all types drilling vessels are still high in spite of significant number of newbuilds which already have entered or will enter the market in the near future. Also the drop in oil prices has for now had little effect on service company demand. Interest for offshore E&P licenses remained firm in recent licensing rounds in Indonesia ,Norway and Canada a another positive sign for the future demand.

Seadrill Update

Seadrills newbuild semi West Hercules has started work on it's three-year contract with Husky Oil in China and Seadrill has taken delivery of semi West Taurus, which will head towards Brazil where it'll work for Petrobras.

Earlier this week Seadrill director Kate Blankenship has purchased 3000 shares at a price of 58 NOK, value of transaction 174 000 NOK.

Seadrills share ended the week at 64.70 NOK.

Brazil's dreams collide with reality

Brazil's Hopes for Home-Grown Offshore Rigs Hits Credit Snag

Brazil, a net oil importer until 2006, is primed to become one of the world's biggest producers over the next decade as it develops several fields in a portion of the Atlantic Ocean known as the Santos Basin thought to contain billions of barrels of crude. In addition to boosting production, Brazil hopes to follow in the path of Norway, which in the 1970s used the discovery of oil in the North Sea to create world-class drilling and technology sectors. Over the past two years, state-run energy giant Petroleo Brasileiro SA, known as Petrobras, has awarded 20 out of 30 contracts to construct drilling rigs to Brazilian-based firms with little experience in deepwater drilling.But the fledgling Brazilian deepwater rig industry is running up against the realities of the tight credit market. Several of the contract winners haven't been able to borrow money needed to finish construction on the rigs they promised, which can cost more than $600 million each. Should their struggles continue, Petrobras will be forced into a difficult choice. The rising energy giant would need to add billions of dollars to a long-term budget already in jeopardy over concerns about the future availability of credit to ensure the rigs get built on time, or risk delaying Santos Basin production for lack of equipment. With Brazil hoping to increase production by 2 million barrels of oil equivalent a day by 2015, Petrobras' options may be limited...

Good news for the established drillers. My opinion from the start was that Brazil's artificial attempt to create it's own offshore industry was doomed to fail at least partially even without the credit crunch.

Transocean reports in

Transocean(NYSE:RIG)
Q3

Operating revenues 2,699 (MUSD)(+85%)

Costs& Expenses 1,808(MUSD)(+140%)

Operating Income 1,383(MUSD)(+83%)

EPS $3.44(-26%)

Average day rates for the entire fleet increased 1.5%. Total contract backlog at the end of the quarter was $41.4 billion.

Q3 report

The stock is currently down 2.2%.

Crescent Point Energy Trust

Crescent Point Energy Trust(TSX: CPG.UN)


Market value(03.11.-08): C$3.47 billion

Yield: 9.94%(C$0.23/month)

Total assets 2007: 2613.4 million 2006: 1371.4 million 2005: 808.2 million

Total liabilities: 2007:1196.4 million 2006: 467.0 million 2005: 375.6 million

Net debt(30.06.-08): C$635.7 million 2007: C$650.0 million 2006: 227.9 million 2005: 194.5 million

Funds flow per unit: 2007: C$ 3.51 2006:C$ 2.98 2005:3.04

Payout ratio: current(YTD-08): 50% :2007:68% 2006:81% 2005:70%

Average realized prices per boe 2007: C$63.55 2006: C$56.52 2005: C$56.55

Netback: 2007: C$40.02 2006: C$30.08 2005: C$28.74

Production current: 36 250 boe/d(87% oil, 13% natural gas)2007:28,117 boe/d 2006: 20,723 boe/d 2005: 12,164 boe/d

Reserves(P&P): 175.7 million BOE 2006: 115.3 million boe 2005: 90.3 million boe

reserves per unit:1.4 BOE

*Original Oil in place(OOIP) >6 billion barrels

*potential of significant production and reserve expansion in the Bakken

CPG's lands hold more than 6 billion barrels of oil, a very impressive figure, which however is some what misleading. Majority of that oil is in the Bakken formation(Saskatchewan portion) and most of it(probably >70%) will never, ever be recovered. Enhanced oil recovery(EOR) techniques may enable CPG to book much more reserves in the future.
CPG is currently one of my largest holdings and I'll probably increase my position by the end of the year.
Value estimate for CPG: ((40.02+30.08+28.74)/3x)0.70)x175.5-1196.4=2850.2 mllion(netbacks discounted with 30%(higher future operating expenses because of EOR-technology use), no discount for reserves(unlikely downside in current booked reserves)). Assuming that CPG could book 50% more reserves(total of 263 million boe) from it's current landbase its value could be 4853 million, which would indicate a potential upside of ~40%.

Vermilion Energy Trust

Vermillion Energy Trust (TSX: VET.UN)

Market value: CDN$ 2.07 billion
Total assets: C$1746 million
Total liabilities: C$486 million
Net debt: 285 million
yield:7.6%(CDN$ 0.19/month)
payout ratio: 2007:35% 2006:38% 2005:46%
funds from flow per unit: 2007: C$5.28 2006: C$4.86 2005: C$4.08
netback(per BOE): 2007: C$33.75 2006: C$34.25 2005: C$30.15
Production: current: 33 743 boe/d 2007: 31,325 boe/d 2006: 27,401 boe/d 2005: 25,166 boe/d

Reserves(proved&probable): 2007:127.6 million boe 2006: 123.3 million boe 2005:110.8 million boe.
Current reserves consist of: 58% oil, 4% NGL, Oil based gas 14%, Canadian Gas 24%, Reserve Life Index: 10.6 years.
reserves per trust unit: 1.66 BOE

*Geographically diverse asset base: Canada(gas), France(oil), Australia(oil), Netherlands(gas),
*Management ownership 9%
*Converting to a corporation between 2011 to 2013
*48% ownership of Verenex Energy Inc.(TSX:VNX)




There isn't much upside in Vermillion's own oil&gas assets but Verenexs concessions in Libya are a different mather: Verenex announces increased oil and gas resource estimates for Area 47 in Libya

Area 47 Gross Contingent Resources September 30, 2008 Total- million barrels oil equivalent(5) Low Estimate 180.7, Best Estimate 351.7, High Estimate 1,099.5

One has to keep in mind that Libya's revenue sharing contracts are very strict and Verenex's share of the revenues will probably be below 10% of the total.

A some what conservative value estimate for Vermillion ((33.75+34.25+30.15)/3)x0.70)x(127.6x0.7)-486+200=1759(30% discount on reserves and netbacks(due to lower ng& oil prices), Verenex shares valued at 200 million).

Update

After listening to the Vermillion earnings call it seems clear that Vermillion is planning to sell the Verenex stake. The current market situation will probably either delay the transaction or will result in a lower price. The latter alternative is unlikely since Vermillion has no urgent need for cash.

Demand

For oil(and petroleum products)that is. It's down, at least in France and United States.

US August Oil Demand Down 975,000 B/D

U.S. oil demand in August was 975,000 barrels per day less than previously estimated and down 1.758 million bpd from a year earlier, with petroleum consumption at the lowest level for any month since December 2001, the Energy Information Administration said on Thursday.

French conservation decreases motor fuel demand

High oil prices and dwindling domestic purchase power over the first 9 months of this year pulled down motor fuel consumption in France by 1.9%, indicated the oil trade group Union Francaise des Industries Petrolieres (UFIP).