Page 12 - NorthAmOil Week 18

NorthAmOil PERFORMANCE NorthAmOil
Cheniere reports first-quarter profit, but moderates growth forecast
US GULF COAST
Cheniere had exported over 1,100 cargoes as of April 27.
CHENIERE Energy, the US’ leading exporter of LNG, reported this week that its net income in the first quarter of 2020 reached $375mn, or $1.43 per share, compared with $141mn, or $0.55 per share, in the same quarter a year ago.
The growth in profits came alongside a rise in the number of cargoes the company shipped from its two terminals on the US Gulf Coast – 128 in the first quarter of 2020 compared with 87 in the first quarter of 2019. Cheniere’s first-quar- ter revenue reached $2.7bn, up 17.3% year on year from $2.3bn.
However, Cheniere warned at the same time that it has experienced an increase in the num- ber of cargo cancellations by its customers in response to market conditions as the coronavi- rus (COVID-19) pandemic continues to weigh on demand. The warning comes as no surprise, given that media have been reporting rising numbers of cancellations affecting cargoes that were due to be loaded in the US in June in recent days. According to Argus Media, the number of cancellations of cargoes from Cheniere’s
terminals may have reached 16.
Under Cheniere’s contracts, buyers that can-
cel cargoes still have to pay a tolling fee. This, combined with the fact that Cheniere’s output is highly contracted, means it does not expect the cancellations to have a material impact on its pre- dicted financial results for the year. The company also said revenue of around $53mn in the first quarter of 2020 was associated with cancelled LNG cargoes.
As of April 27, Cheniere says it has produced, loaded and exported more than 1,100 cumula- tive LNG cargoes totalling over 75mn tonnes.
Cheniere’s CEO, Jack Fusco, described the first quarter as “defined by unprecedented cir- cumstances”, as a result of which the company has moderated its growth projections for LNG exports over the whole of 2020. Cheniere said global demand for LNG had grown by about 10% y/y during the first quarter of 2020, but added that it now expects “to potentially see year-over-year declines in some future quarters” as a result of reduced economic activity and high storage inventory levels.™
POLICY
Texas regulator rejects output cut proposal
TEXAS
THE Railroad Commission of Texas (RRC), the state’s oil and gas regulator, has rejected a pro- posal to impose mandatory cuts to crude pro- duction. The proposal, which was supported by some producers in the state but opposed by others, was aimed at helping the oil industry as it grapples with the impact of the coronavirus (COVID-19) pandemic.
On May 5, the three-person commission voted 2-1 against holding a hearing on the pro- posed cuts. Only Commissioner Ryan Sitton voted to allow further discussion on the matter, but the outcome of the vote effectively means the proposal has been killed off.
Sitton had supported further discussion on the matter in part because he was interested in the impact it could have on flaring levels of excess natural gas in Texas.
“I’m not disappointed that we didn’t pro- ration,” Sitton said. “I’m disappointed that we didn’t do the work to really analyse how prora- tion would have addressed waste.”
The proposal involved cutting production by 20%, or 1mn barrels per day (bpd) of oil, as Texas considers how to support producers through crude prices falling to multi-decade lows and
storage capacity filling up. Mandatory output curtailments have been in place in the Canadian oil-producing province of Alberta since the start of 2019, and have received an equally mixed response from operators there.
Even as they voted against the proposal, however, the RRC commissioners passed other measures aimed at supporting the Texas oil industry. These include a move to waive various fees and surcharges related to the construction of new crude storage projects up to the end of 2020.
A measure that would allow operators to store crude underground, as long as it is not stored in salt reservoirs, was also voted through. However, Sitton voiced concern over allowing producers to store crude underground without the usual public oversight required.
“It’s great that we’re moving quickly and allowing some additional storage capacity quickly, but I don’t want to hear a story in three months about how we put oil in some sort of cave somewhere and ended up having groundwater pollution,” Sitton said.
The RRC estimates that there is at least 71mn barrels worth of unused storage capacity still available in Texas.™
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w w w . N E W S B A S E . c o m Week 18 07•May•2020