Oil Industry, Oil prices

Oil corporations cutting back due to low oil prices

Repost from The Wall Street Journal

Chevron Posts Lowest Quarterly Profit in Five Years

Oil Major to Pare Capital Budget by 13%, End Buybacks to Offset Low Crude-Oil Prices

By Daniel Gilbert and Chelsey Dulaney, Jan. 30, 2015
Chevron
Gas prices are displayed at a Chevron fueling station in Richmond, Calif. in April Photo: Bloomberg News

Chevron Corp. said it would trim ambitious spending plans and stop buying back its shares as the collapse in oil prices erased billions of dollars from the company’s cash flow.

The San Ramon, Calif., company on Friday reported $3.5 billion in profit for the last three months of 2014, down 30% from a year ago and its lowest since the 2009 recession.

It also outlined plans to spend $35 billion this year to find and tap oil and gas, a 13% cut from last year’s budget, in response to oil prices that have slumped more than 60% since the summer to under $50 a barrel.

With less cash coming in, the company is suspending its share buyback program for 2015, which had cost $5 billion a year since 2012. Repurchasing shares shrinks the number available to the public and tends to increase their value. Its shares were down 67 cents at $102.33 in recent trading.

John Watson , Chevron’s chief executive, said the company remains on track to pump the equivalent of about 3.1 million barrels a day by 2017—20% more than its current levels—despite spending less. Oil prices must rise, he said, because companies won’t invest enough to make up for the natural declines of existing oil and gas wells, eventually reducing supplies.

“The projects that are going to meet demand going forward are more complex than 20 or 30 years ago, and so the costs of the projects will be higher, and will require a higher price than we’re seeing today,” Mr. Watson said.

Chevron’s spending plans remain ambitious relative to its rivals and its shrinking cash flow. On Thursday, Occidental Petroleum Corp. said it would spend a third less on producing oil and gas this year; ConocoPhillips said it would chop 15% off its capital budget, on top of a 20% cut in December; Royal Dutch Shell PLC said it would spent $15 billion less than planned over three years. Exxon Mobil Corp. , the biggest U.S. energy company, reports results on Monday.

Chevron generated $6.5 billion from its operations in the fourth quarter of 2014, down 38% from a year ago, but still better than analysts’ expectations. Unless oil prices rebound significantly, that rate of cash generation isn’t likely to cover the company’s spending on exploration and production, plus dividend payments that totaled $7.9 billion last year.

Even before oil prices fell, Chevron had been spending at a deficit, dipping into its pile of cash and borrowing more money. The company’s debt rose to $27.8 billion by the end of 2015, doubling in two years and marking the highest it has been in at least 20 years, according to data compiled by S&P Capital IQ.

The company still has $12.8 billion in cash, but that is about $3.5 billion less than at the beginning of 2014. Patricia Yarrington, Chevron’s finance chief, said it could borrow “tens of billions of dollars” more. And Mr. Watson, the CEO, said that while acquisitions aren’t a priority, “We are actively screening opportunities that are out there and we’ll take advantage of opportunities that we see.”

Overall, Chevron reported earnings of $3.47 billion, or $1.85 a share, down from $4.93 billion, or $2.57 a share, a year earlier. Results included a net $570 million gain on asset sales. Revenue fell 18% to $46.1 billion.

Analysts polled by Thomson Reuters had forecast earnings of $1.63 a share and revenue of $30.65 billion.

Chevron’s bottom line was helped by foreign-currency effects, which have been a drag on many U.S. companies’ results recently. Chevron said foreign currency helped its earnings by $432 million in the quarter, up from $202 million a year earlier.

The pain from lower oil prices was cushioned by Chevron’s business of refining crude into fuels like gasoline and diesel. The refining business, which in recent years has accounted for less than 15% of its profits, provided $1.5 billion in earnings–44% of the company’s total. Refining profits nearly quadrupled from a year ago, due to a combination of better margins and asset sales.

The fall in oil prices masked the company’s success at pumping more oil, as it began reaping petroleum from two major projects in the Gulf of Mexico’s deep waters in the last months of 2014. But overall, Chevron’s oil and gas output slipped about 1% from a year ago. On Friday, the company said production could increase up to 3% this year.

Bakken Crude, Crude By Rail, Emergency Readiness & Response, Federal Regulation (U.S.)

Another Oregon town calls for stricter rules on crude by rail

Repost from The Dalles Chronicle

The Dalles joins oil train debate

By RaeLynn Ricarte, January 29, 2015
A UNION Pacific freight train runs west along First Street, downtown The Dalles. The City of The Dalles has joined other Oregon and Washington cities in requesting greater federal oversight of oil train transports.
A UNION Pacific freight train runs west along First Street, downtown The Dalles. The City of The Dalles has joined other Oregon and Washington cities in requesting greater federal oversight of oil train transports. Photo by Mark Gibson.

The Dalles City Council has joined Hood River, Mosier and other Oregon towns in urging state officials to pursue greater federal regulation of crude oil transports.

The resolution approved by a unanimous vote Monday, Jan. 26, also recommends that rules be put in place to require that rail companies pay for damages caused by catastrophic fire and explosions following a derailment or accident.

Councilor Dan Spatz asked to have the issue put on the agenda, but was not at the Jan. 26 meeting.

The initial resolution, which is a formal expression of the council’s opinion, did not mention finances. However, local conservationist John Nelson, who has been pursuing action regarding oil trains at the city level, gained agreement from city officials to have the language included. “It’s a very complicated issue,” said Nelson, who provided the council with two news articles about the potential dangers of having oil shipped via railroad.

He said a 2013 derailment in Quebec, Canada, that killed 47 people ended up costing $2.7 billion in cleanup, damages and settlements.

The Washington side of the Columbia River Gorge has become the Pacific Northwest’s major railroad avenue for moving oil -— about 18 trains weekly — from North Dakota to shipping terminals.

Burlington Northern Sante Fe Railroad carries Bakken crude from North Dakota that is extracted from underground rock formations and is reportedly more flammable than traditional crude.

Environmental organizations, such as the Sierra Club, are seeking greater regulation of oil transports given the potential for an increase in shipments with North America on track to lead the world in oil production within five years.

Councilor Taner Elliott was unsure that the city’s resolution, which is non-binding, would be as solid an approach as sending a letter requesting details about safety measures to railroad companies, gorge legislators and state officials.

He said the city could ask for a briefing about what measures would be taken if an emergency occurred and to be kept abreast of new safety standards.

He said conversations with BNSF and Union Pacific, which operates on the Oregon side of the Columbia River, revealed “staggering numbers” tied to their respective prevention and emergency response plans.

“It appears they are very involved,” said Elliott, who did not provide specifics about what he had learned.

Representatives from both railroad companies said Wednesday that they had not been invited to Monday’s council meeting to answer questions or address safety issues.

Nelson told the council that the city’s resolution would let state officials know they was concerned about the welfare of citizens, as well as the environment in the Columbia River Gorge National Scenic Area. He said there was no local source for the foam that was necessary to extinguish flames if an explosion occurred.

He said travel to and from Portland for that product could delay response time, which would further threaten human life or resources.

In addition, he said local fire departments did not have the manpower or equipment to fight a catastrophic fire.

At Monday’s meeting Mayor Steve Lawrence said, once the resolution was approved, the Community Outreach Team could follow up by voicing concerns during a visit to Salem in the spring.

Tim Schechtel, a downtown property owner in The Dalles, said the oil boom in America had created an “unprecedented” risk for communities along railroad tracks.

According to information obtained last year by a Chronicle reporter, oil is traditionally delivered via pipelines, but the growth in U.S. and Canadian production has exceeded what they can carry.

That has caused oil transport by rail to increase from 9,500 carloads in 2008 to 400,000 in 2013.

Schechtel said oil unit trains were more than one-mile long with 100 cars and the potential to carry three million gallons of crude.

According to BNSF, 18 unit oil trains travel through the gorge each week. Schechtel said that put 54 million gallons of crude near residential communities.

“A lot of people are chiming in on this, nationally as well as locally,” he said.

Schechtel said the bigger picture was that fossil fuels contributed to global warming and acid rain around the world. So it was not too much to ask big oil companies, which were making huge profits, to better protect the public safety.

Councilor Linda Miller asked Schectel to expand upon his statements about the problems caused by the use of petroleum products.

“So, do you want to stop all oil trains coming through or just to make things safer?” she asked.

“I think just make safer at this time,” said Schectel, who felt the issue of pollution should be addressed at some point in the future.

“The bottom line is, if we had a catastrophe, it would be overwhelming,” said Lawrence.

Bakken Crude, Crude By Rail, Emergency Readiness & Response, Hazmat notification, Massive increase in crude-by-rail

Previously secret details: Bakken crude oil rolling over Ohio rails

Repost from The Columbus Dispatch

Bakken crude oil rolls over Ohio rails

By Laura Arenschield & Rick Rouan, January 29, 2015
Ohio’s railroad tracks handle at least 45 million gallons of Bakken crude oil in a week. This view of tracks is from Groveport Road on the South Side. | Tom Dodge | Dispatch

Millions of gallons of some of the most volatile crude oil in North America are being transported on rail lines through Ohio each week, according to reports that the state had kept secret until this week.

The railroad-company reports show that 45 million to 137 million gallons of Bakken crude oil come through Ohio each week from North Dakota oil fields on the way to East Coast refineries.

Two million to 25 million gallons a week come through Franklin County alone.

Bakken crude oil is desirable to oil and gas companies because it requires less refining than other shale oil to be turned into diesel fuel and gasoline. It also is highly flammable.

Prompted by a 2013 train derailment and explosion that killed 47 people in Quebec and an explosion in Lynchburg, Va., last April, federal regulators began requiring railroads in May to report the average weekly number of trains carrying at least 1 million gallons of Bakken crude.

Those reports are sent to state emergency-management agencies. The U.S. Department of Transportation has said the files don’t contain sensitive security details, prompting some states, including Virginia and Washington, to make the reports public.

Despite requests from environmental groups, citizens and news outlets, including one from The Dispatch in July, Ohio would not release the reports, citing an exemption in the public-records law meant to prevent acts of terrorism.

Then this week, the state released the records to Lea Harper, managing director of the FreshWater Accountability Project, an environmental advocacy group.

The state released the reports to The Dispatch yesterday.

“So many other states are doing it, and our legal staff started looking into it and made a determination that it probably was not as volatile of information as it first seemed to be,” said Joseph Andrews, a spokesman for the State Emergency Response Commission in Ohio.

One of Harper’s relatives lives in a nursing home in Seneca County, near railroad tracks where Bakken crude-oil shipments pass each week. She said she worries about his safety.

“Anything that has happened in the past can certainly happen again,” she said, referencing the explosions in Virginia and Quebec.

No Bakken shipments have exploded or caught fire in Ohio, Andrews said.

Transport of crude oil via rail has surged in recent years amid the boom in the Bakken shale formation in North Dakota.

The amount of crude petroleum hauled on U.S. railroads increased from more than 20 million tons in 2012 to nearly 40 million tons in 2013, the most recent data available through the Association of American Railroads. In 2011, about 5 million tons of crude was hauled by rail.

That number includes all oil, not just Bakken crude oil.

With nearly 5,300 miles of track, Ohio has one of the densest concentrations of rail in the nation and is a crossroads between the Bakken shale formation and East Coast refineries.

Most of the Bakken crude traveling through Ohio is being transported on CSX rail lines. The CSX report shows that 30 million to 105 million gallons of Bakken crude are hauled through Ohio each week. Norfolk Southern moves 13 million to 28 million gallons of Bakken crude.

Norfolk Southern spokesman David Pidgeon said the company opposes public release of its routes for Bakken crude for security reasons.

“We have to balance that openness with operating a secure network,” Pidgeon said.

In an email, CSX spokeswoman Kristin Seay said crude-oil shipments represent less than 2 percent of the freight the railroad transports.

She said the company often goes beyond federal standards for track inspection and stays well within speed limits.

In February 2013, railroads opted for voluntary measures to ensure safe shipment of crude oil, including reduced speed limits and more inspections.

Canadian Pacific Railway runs an average of three trains per week on a short stretch of Norfolk Southern rail that cuts through northwestern Ohio. Those trains cross from Indiana into Williams County and travel northeast through Fulton County before crossing into Michigan.

The train that exploded in Quebec started as a Canadian Pacific train. The company transferred the train to Montreal, Maine & Atlantic Railway in Canada before the derailment.

Canadian Pacific has made several changes since, including tighter security requirements, more frequent inspections of tracks and equipment and more worker training, said Andy Cummings, a company spokesman.

“We took a very close look at our practices,” he said.

The reports sent to state emergency-management agencies do not say when Bakken crude oil is coming through Ohio. Railroad companies are not required to report schedules for those shipments.

In Cuyahoga County, 29 million to 45 million gallons of Bakken crude travel along rail lines each week.

“It’s a concern,” said Walter Topps, Cuyahoga County’s emergency-management agency administrator. “It’s not a concern in the sense that we’re not ready. But there’s an awareness in the first-responder community, among fire departments … we’re all aware of this.”

Bakken Crude, Crude By Rail, Derailment, Explosion, Lac-Mégantic, Public Health

Report: public health in Lac-Mégantic after train derailment and explosion

Repost from CBC News

Lac-Mégantic disaster by the numbers: Catalogue of a tragedy

54% of town’s residents suffered from depression, PTSD after explosion: health report

Jan 28, 2015

A report into the health effects of the Lac-Mégantic, Que., train derailment and explosion indicates people living there are four times more likely to drink to excess following the disaster.

Two-thirds of the 800 people studied suffered human loss, and over half experienced negative feelings such as depression and post-traumatic stress disorder (PTSD).

Marie-Claude Arguin, the town’s deputy manager, said children are among those still showing signs of PTSD, including trouble sleeping and hyper-vigilance.

“Essentially, children have taken care of their parents in the last year,” she said.

“They don’t have all the fears and worries that adults have … But they’ve seen the images, they’ve seen friends losing their parents, they’re living it.”

Lac-Mégantic Mayor Mayor Colette Roy Laroche
Lac-Mégantic Mayor Colette Roy Laroche says the town’s residents will need long-term support to cope with life after the tragedy. (CBC)

She said the community needs a firm commitment that help will continue, and hopes part of the assistance will be devoted to further studies on the population.

In July 2013, a freight train carrying 72 cars of oil derailed and exploded in the centre of Lac-Mégantic.

The explosion killed 47 people, and hundreds of thousands of litres of oil spilled into the Chaudière River as a consequence of the derailment.

Lac-Mégantic Mayor Colette Roy-Laroche said Wednesday the recovery period will be extensive for residents.

In the direct aftermath of the tragedy, resources were rushed in to meet the town’s immediate needs and its citizens were well cared for, she said.

The fear, she said, is that those services may not be there in the longer term. She urged officials to recognize ongoing mental-health support residents will require.

Human and material losses

Estrie public health director Dr. Mélissa Généreux, public health specialist Dr. Geneviève Petit and Danielle Maltais, an expert on the health consequences of major disasters, presented their findings on Wednesday morning in Sherbrooke, Que.

Généreux explained that following the tragedy, residents in the Granit MRC (regional county municipality) experienced a greater sense of belonging and community than people living elsewhere in the Eastern Townships.

​Interviews with 800 residents of the Granit MRC found:

  • 64 per cent had a human loss (fear for their lives or that of a loved one, was injured, etc.).
  • 23 per cent had a material loss.
  • 54 per cent had a negative perception (depression, post-traumatic stress, etc.).
  • 17 per cent of people had an “intense exposure” (e.g. experienced all three of the above).

Généreux, Petit and Maltais commended the fact that medical and psychological resources were quickly deployed to the area after the blast.

Still, it could take years for the mental-health issues stemming from the disaster to subside, said Maltais, a researcher and professor at the University of Chicoutimi.

The public health officials convened in Sherbrooke said the tragedy will have lasting effects on the community for years, particularly because it was due to human negligence.

Arguin said more research is needed to ensure the younger generation is also taken care of, adding it’s hard to know how to handle this type of trauma because there’s no precedent.

“It hasn’t even involved children and teenagers, which is the future of our community,” Arguin said. “And they have been affected just as much.”

In October, a coroner ruled that the deaths in Lac-Mégantic were violent and avoidable.

Three people have each been charged with 47 counts of criminal negligence causing death.

Other numbers from the Lac-Mégantic public health report:

  • 27 children were orphaned (either lost one or both parents).
  • 621 people sought help from the centre set up for homeless and people affected by explosion.
  • 44 buildings were destroyed.
  • 169 people became homeless.
  • 150 psycho-social counsellors deployed to region in wake of explosion.
  • 57,000 square metres of Lac-Mégantic downtown completely burned.
  • 5,560,000 litres of crude oil released into the environment.
    558,000 metric tonnes of contaminated soil to treat.
  • 740,000 litres of crude oil recovered from train cars that did not explode.

For safe and healthy communities…