Occidental shareholders unhappy with its financial decisions

MOSCOW (MRC) - Several major Occidental Petroleum Corp shareholders have voiced opposition to the oil company's USD38 billion bid for rival Anadarko Petroleum Corp that now includes a pricey financing deal with billionaire Warren Buffett, said Reuters.

Occidental and Chevron Corp are battling for Anadarko and its holdings of nearly a quarter million acres in the Permian Basin, the top U.S. shale field, where low-cost production has helped turn the United States into the world's top oil producer at 12.3 million barrels per day. Occidental shares were trading on Thursday at USD57.48, down sharply from USD66.63 a month ago, prior to rumors it might challenge Chevron. It trumped Chevron's bid last week, and its offer now includes USD10 billion in financing from Buffett's Berkshire Hathaway Inc in exchange for preferred shares that would pay an 8 percent dividend.

Major Occidental shareholders told Reuters they opposed the plan. They called the $76-per-share bid for Anadarko expensive and cited concerns about the cyclical nature of the oil business as well as the cost of getting financing from Buffett.

Several Occidental shareholders said they viewed Chevron's lower $65-per-share bid as a better fit because it could more easily swallow a company of Anadarko's size.

T. Rowe Price Group Inc, which holds shares in all three oil companies, cited merger risks and the cost of the Berkshire infusion. John Linehan, portfolio manager at T. Rowe Price, said Buffett's deal could allow Occidental to restructure its cash-and-stock deal to avoid a shareholder vote, although its current offer includes a vote.

T. Rowe Price, Occidental's sixth largest shareholder, had 21.1 million shares at the end of 2018, according to Refinitiv Eikon figures, along with 8 million Chevron shares and 865,000 Anadarko shares.

Berkshire would receive a warrant to purchase up to 80 million shares of common stock at $62.50 apiece in a private offering, in addition to the preferred stock that will accrue dividends at 8 percent per annum.
MRC

MOSCOW (MRC) -- U.S. commercial crude oil inventories have been rising in recent weeks, which some observers have interpreted as evidence the global oil market is adequately supplied and blame for a sudden decline in oil prices, said Hydrocarbonproceesing.

But this narrative cannot explain the steep backwardation in futures prices for global grades such as Brent, which is usually associated with a market that is significantly under-supplied.

In fact, U.S. commercial inventories have been rising much less than normal for the time of year - even though refiners are undertaking heavy maintenance, which would otherwise have resulted in a larger stock build.

Refiners have been undertaking more maintenance than normal to avoid autumn and winter shutdowns in the run up to the introduction of new IMO marine fuel standards (“U.S. refiners planning major plant overhauls in 2nd quarter”, Reuters, April 19).

The limited increase in U.S. commercial crude stocks despite heavy spring maintenance tends to confirm that the global market has tightened significantly since the start of the year and will tighten even more in the second half. U.S. commercial crude stocks had increased by almost 30 million barrels by April 26 compared with the end of last year, according to the latest weekly data from the U.S. Energy Information Administration.

The stock build was much larger than the 12 million-barrel increase at the same point in 2018 but well below the 10-year average increase of 45 million barrels and otherwise the smallest seasonal build since 2011. The United States produced an estimated 211 million barrels of domestic crude oil in the 17 weeks to April 26, which was more than offset by a reduction in net oil imports of 239 million barrels, according to the EIA.

However, U.S. refiners cut their crude consumption by almost 28 million barrels compared with 2018, which more than accounted for the faster rise in stocks compared with last year. So far this year, U.S. refiners have processed an average of just 16.32 million barrels per day compared with 16.55 million at the same point in 2018, according to EIA data.

Once refiners complete their maintenance and return to full production in preparation for the summer driving season, crude consumption is likely to surge, and stocks will draw down quickly.

Brent futures prices are trading in a backwardation of more than USD2.70 per barrel between July and December as traders anticipate a big drawdown in global oil inventories during the second half of the year.

Hedge funds and other money managers have amassed a bullish position in Brent and WTI futures and options contracts equivalent to 723 million barrels by April 23, in the expectation prices will rise further.
MRC

MOSCOW (MRC) -- The American Petroleum Institute issued a revised standard aimed at reducing fatigue among workers in the nation’s refineries and chemical plants, the trade group said.

The fatigue standard, officially called Recommended Practice (RP) 755, was first issued in 2010, based on the U.S. Chemical Safety Board’s finding that worker fatigue was one of the factors in the 2005 explosion at BP Plc’s refinery in Texas City, Texas, which killed 15 workers and injured 180 others.

The revised RP 755 is intended to further tighten the limits on the number of consecutive hours and days work may be required including during malfunctions and shutdowns.

“The second edition of RP 755 advances unified and condensed requirements to avoid fatigue for all workers involved in safety sensitive processes,” said Debra Phillips, vice president of API’s Global Industry Services division in a statement issued on Thursday.

The United Steelworkers union (USW), which represents 30,000 workers in the oil industry did not reply to a request for comment on Thursday.
USW officials have in the past criticized the standard for being too easy for refinery and chemical plant managers to bypass or abuse.

It is up to individual companies to decide how to implement RP 755, if at all.
MRC

MOSCOW (MRC) -- McDermott International, Inc. announced it has been awarded a sizeable contract by ADNOC Refining to provide front-end engineering design (FEED) services for the Refinery Offgases (ROG) project at the Ruwais Refinery in Abu Dhabi, as per Hydrocarbonprocessing.

The scope of work in the concept study phase includes evaluating various technology configurations and options for the recovery of hydrogen, ethane and sales-grade LPG or C3 and C4. The ROG FEED services will be used as the basis for the preparation of the engineering, procurement and construction management (EPCM) estimate and inquiry phase.

Work on the project will begin immediately, and the contract award will be reflected in McDermott's second quarter 2019 backlog.

As MRC reported earlier, in May 2018, ADNOC unveiled plans to invest AED 165 billion (USD45 billion) alongside partners, over the next five years, to become a leading global downstream player, enabling it to further stretch the value of every barrel it produces to the benefit of ADNOC, its partners and the UAE.
MRC

MOSCOW (MRC) -- The European diesel market is finding unexpected support from disruption in the refining sector from the shutdown of Russia’s Druzhba pipeline due to contaminated oil and after a Russian refinery went bust, as per Hydrocarbonprocessing.

Diesel refining margins, a measure of the profitability of making diesel from crude, hit a six-week high of nearly USD15 a barrel on Thursday and were trading close to this level.

Oil in the 1 million barrel per day (bpd) Druzhba pipeline running from Russia to eastern Europe via Belarus was contaminated by chemical compounds which made it unusable by several European refineries that rely on its supply.

"It’s all a matter of how much strategic stocks can be released because literally between German, Polish and Hungarian refineries, there are probably five or six refineries which are completely land-locked and there is literally no other way to supply them than the pipeline," one trader said.

Poland, Hungary and the Czech Republic are making available to their domestic refiners around 8 million barrels of crude from strategic stocks to tackle the Russian Druzhba pipeline shutdown, industry sources said on Friday.

Traders said that Total’s 240,000 barrel per day Leuna refinery in Germany had slashed runs because of the contamination by around 30 percent but exact details could not be immediately confirmed.
MRC