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The Economic Consequences of Restrictions on Domestic Energy Exploration; Next Generation Biofuels; Devon Energy Reports 2009 Financial Results

In Uncategorized on February 15, 2010 at 9:49 pm

America’s reliance on foreign energy will grow by 19 percent over the next 20 years, expanding the transfer of U.S. wealth to the Organization of Petroleum Exporting Countries (OPEC) by more than $600 billion, according to a report by the National Association of Regulatory Utility Commissioners.  The two-year study broadly examined the social, economic and environmental impacts of continued restrictions on developing America’s oil and gas resources.

“The study highlights the importance of developing our domestic petroleum resources in an environmentally responsible manner,” said American Trucking Associations Vice President Rich Moskowitz. “Continuing restrictions on the development of U.S. energy resources will adversely impact our economic well-being and our national security.”

The study predicts the economic results of maintaining current restrictions on accessing America’s federally owned onshore and offshore energy resources. The results, when compared with the effects that could be expected from a reasonable energy policy on federal energy resources, will include:

•Import costs for crude oil, petroleum products and natural gas will be $1.6 trillion higher;
•Imports from OPEC nations will be 4.1 billion barrels higher, resulting in increased payments to OPEC of $607 billion;
•U.S. production of crude oil will be 9.9 billion barrels lower;
•U.S. production of natural gas will be 46 trillion cubic feet lower;
•Energy-intensive industries will produce nearly 13 million fewer jobs;
•Housing starts will be 200,000 fewer;
•Annual average natural gas prices will be 17 percent higher;
•Annual average electricity prices will be 5 percent higher;
•Real disposable income will be a total of $2.34 trillion less;
•Energy costs to consumers will be $2.35 trillion higher;
•Gross Domestic Product will be $2.36 trillion lower.

The American Trucking Associations is a member of the Consumer Energy Alliance, which was among the public sector and private sector organizations that contributed energy experts’ information and analysis for the NARUC report.

The report was assembled by experts from the Science Applications International Corp. and the Gas Technology Institute and provides the most up-to-date assessment of America’s oil and natural gas resources. Utilizing the National Energy Modeling System, the study renders a quantitative summary of the jobs, revenue and number of housing starts that Americans should expect to surrender in the future under the restrictive energy policies currently in place.

To view the executive summary of the report, click here.

Next Generation Biofuels: Market Drivers, Growth Opportunities and Regulatory Change

Over 80% of the world’s primary energy supply is currently derived from coal, gas and oil (collectively known as ‘fossil fuels’), which are used to generate electricity, power, energy and heat for industrial, commercial, domestic and transportation purposes. The world’s dependence on crude oil for transportation is particularly marked, with the International Energy Agency (IEA) estimating that fuels from crude oil currently supply about 96% of the worldwide energy demand for transport purposes.

As the world’s population grows and developing countries look to expand their economies, this insatiable demand for fossil fuels is unlikely to show any sign of easing, with oil and gas accounting for 60% of the world’s increasing energy demand between now and 2030. Furthermore, with most significant reserves of fossil fuels unevenly distributed throughout the world, energy security is set to become an increasingly critical economic and political issue over the coming decades. Real or perceived disruptions to the global supply of fossil fuels — notably crude oil — are likely to grow in frequency and cause wild fluctuations in the price of energy, as they have done so in the past. However, one of the most pressing reasons for seeking alternative sources of energy and fuel lies in the form of ‘climate change’.

The combustion of fossil fuels releases carbon dioxide (CO2), a potent ‘greenhouse gas’ (GHG), which are considered by some to be responsible for ‘global warming’. According to the IEA, if no changes are made to the world’s existing energy economy, related emissions of CO2 will grow marginally faster than energy use, meaning that by 2030 global CO2 emissions will be more than 50% higher than today. Over two-thirds of that projected increase in emissions is expected to come from emerging economies, such as India, China — both of which are set to rely heavily on coal-based power stations to drive their rapidly developing economies.

The combination of biomass and biofuels accounted for around 26% of the world’s total renewable energy production in 2008. Second generation biofuels have been developed due to limitations of first generation biofuels, primarily that the resources used threatens food supplies. Second generation biofuels production processes include a variety of non-food crops such as waste biomass, the stalks of wheat, corn, wood and miscanthus. Second generation biofuels use biomass to liquid technology, such as cellulosic biofuels from non-food crops. Third generation biofuel primarily references fuel derived from algae. Algae fuel is not yet commercially available or viable due to cost constraints, but through various laboratory experiments promising results have been obtained. In 2008, the US Department of Energy noted that algae can produce 30 times more energy per acre than land crops such as soybeans.

North American Onshore Proved Reserves for Devon Energy at Record 2.6 Billion Boe; Drill-Bit Reserve Additions More than Double Record Production

Devon Energy Corporation reported that 2009 full-year and fourth-quarter financial results as well as its 2009 full-year oil and gas production from continuing operations has reached an all-time high. In addition, Devon reported record-high proved oil and natural gas reserves at December 31, 2009.

“2009 was a pivotal year for Devon as we began repositioning the company to focus entirely on our high-return, North American onshore natural gas and oil portfolio,” commented J. Larry Nichols, chairman and chief executive officer. “We grew North American onshore production by more than six percent in 2009 and replaced more than twice our production with the drill bit at very attractive costs. We expect to receive after-tax proceeds of $4.5 billion to $7.5 billion as we divest our offshore and international properties this year. This will further strengthen our rock-solid balance sheet and enable us to accelerate growth across our U.S. and Canadian asset base.”

In accordance with accounting standards, Devon’s year-end reserve reporting pertains to the company’s continuing operations, which include its Gulf of Mexico properties. Following is a discussion of proved reserves pertaining only to Devon’s North American onshore assets.

Devon increased North American onshore estimated proved reserves by 20 percent to a record 2,641 million oil-equivalent barrels (Boe) at December 31, 2009. The company added 669 million Boe to its North American onshore proved reserves from all sources. Costs incurred applicable to North American onshore properties were $3.3 billion.

Successful drilling (extensions, discoveries and performance revisions) accounted for 492 million Boe of North American onshore proved reserve additions. The company invested $3.2 billion of associated drill-bit capital during the year. Revisions related to changes in oil, natural gas and natural gas liquids prices increased 2009 North American onshore proved reserves by 176 million Boe.

North American onshore oil and gas production increased more than six percent to 220 million Boe in 2009. The reserve life index (proved reserves divided by annual production) for the North American onshore properties is approximately 12 years.

Proved developed reserves of 1,869 million Boe at December 31, 2009, represented 71 percent of total North American onshore proved reserves. Proved undeveloped reserves were 29 percent of the total. Year-end North American onshore proved reserves included 653 million barrels of crude oil, 9.4 trillion cubic feet of natural gas and 419 million barrels of natural gas liquids.

Related Links: IBISWorld industry reports

Oil Drilling & Gas Extraction in the U.S.

Global Oil and Gas Exploration and Production

Petroleum Refining in the U.S.

Rail Transportation in the U.S.

Natural Gas Distribution in the U.S.

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Majority of Americans Pessimistic About Economic Recovery

In Uncategorized on December 23, 2009 at 10:35 pm

As 2009 comes to a close and Obama’s popularity dwindles, the majority of Americans are filled with significant uncertainty and anxiety about the state of the US economy – and its prospects for a quick recovery in the New Year.

Of the 1,000 Americans surveyed by telephone over the weekend by polling firm StrategyOne, nearly 9 in 10 Americans (87%) believe the US is still in a recession and 3 in 4 (78%) disagree with economic experts that the US is no longer in a recession.

Despite increasingly optimisic talk from experts about the health of economy, just 1 in 4 (26%) believe the economy will recover fully by the end of 2010. Instead, the majority of Americans – 51% – believe the economy won’t fully recover and be back on track until sometime until the end of 2011 – or even 2012. A frighteningly high 15% believe the economy will never fully recover.

“Consumers appear more likely to believe the economy has stabilized compared to the summer, but see a pretty long road to full economic recovery,” said Bradley Honan, Senior Vice President of StrategyOne, who authored the survey. “15% of US consumers believing a full recovery won’t ever take place speaks to how deeply scarred America has been left by the recession – and how the hangover is likely to last well beyond the ‘official’ end of the recession.”

The StrategyOne survey also found that slightly more people believe that the economy is on the wrong track (48%) than on the right track (44%), and most Americans believe the economy has either “not yet bottomed out and will get worse” (34%) or that “it’s at the bottom and not getting better or worse” (19%).

That’s not to say that opinions are not shifting more positively though, indeed they are. For example, Americans are not nearly as negative about the state of the economy as they were in July.

Today 42% say the economy has “bottomed out and is getting better” compared with just 30% who felt that way in July of this year. The current StrategyOne survey found that the youngest consumers polled, those 18-34 years of age, were most likely (50%) to believe the economy has already “bottomed out and is getting better” compared with just 38% of those 55 years and older, who feel the same way. There is clearly a significant generational gap about perceptions of the economy today.

“It’s clear some of the positive discussion about the economic recovery has broken through – but there is still much, much more consumers need to hear to regain their confidence in the direction of our economy,” said Bradley Honan of StrategyOne.

Survey Methodology:

StrategyOne conducted 1,000 telephone interviews among a representative sampling of Americans between December 16 and 20, 2009. The overall margin of sampling error at the 95% level of confidence is = +/- 3.1% overall and larger for subgroups. Statistical weights were designed from the United States Census Bureau statistics.

Commodities Continue Positive Performance Across All Index Sectors

In Uncategorized on November 19, 2009 at 6:20 pm

Christopher Burton, Co-Lead Portfolio Manager for the Credit Suisse Total Commodity Return Strategy said, “The commodities market continues to perform well as global markets remain on track for recovery. Despite minor losses in equity markets, performance remains positive year-to-date. Although commodities have recovered some of their losses from 2008, we continue to believe current prices offer an exceptional entry point into the asset class, especially as central banks announce their intention to maintain low interest rates, which could lead to the stockpiling of certain commodities.”

Co-Lead Portfolio Manager, Andrew Karsh, added, “As inflation has not yet developed in terms announced by government figures, the potential for unexpected inflation remains quite high. Considering the fact that commodities are a leading indicator of inflation, we believe the time to invest in commodities is now, well in advance of lagging indicators such as in increase in CPI.”

The Dow Jones-UBS Commodity Index Total Return gained 3.28% in October as a result of positive performance from all sectors, bringing the year-to-date performance of the Index to 12.64%. Lean Hogs, continuing its positive performance from September, was the top performer in October, gaining 14.33% most likely due to the conclusion of China’s ban on U.S. pork products. Gasoline also demonstrated strong performance this month, up 10.51%, because of a larger than expected reduction of stored gasoline. Sugar was the worst performer in October as it reversed its recent gains, declining 10.16% in October, but is still up significantly, 57.63%, for the year.

Related Links

Credit Suisse Report
Clarifying Misconceptions About Commodity Indexing

IBISWorld industry reports
Commodity Dealing and Brokerage in the U.S.
Cattle & Hog Wholesaling in the U.S.
Excise – Petroleum Product Wholesaling – Federal
Global Sugar Manufacturing
World Price – Agriculture – Sugar

Recession Creates New Holiday Shopping Trends

In Uncategorized on October 20, 2009 at 8:52 pm

Survey data from PriceGrabber.com, a part of Experian, reveals that the state of the economy is shaping new trends in holiday shopping. More than ever, comparison shopping is on the forefront of consumers’ minds, with 70 percent of consumers doing more research and comparison shopping online, compared with 38 percent last year.

Consumers are also crossing acquaintances (57 percent) and coworkers (53 percent) off their gift lists. Other findings from the PriceGrabber.com survey of 2,018 online consumers conducted from Sept. 24, 2009 to Oct. 12, 2009, reveal:

Consumers are cutting back — 53 percent plan to spend less

Many consumers have made a concerted effort to cut back over the last year due to the recession. A recent PriceGrabber.com survey revealed that these efforts will continue into the holiday shopping season and set the stage for new trends in holiday shopping. Fifty-three percent of consumers are planning to spend less than they did last year. Of the consumers who are planning to spend less this year, 48 percent reveal that one of the reasons that they are spending less is due to an increase in prices (necessities, gas, etc.), 45 percent cite lack of confidence in the economy, and 38 percent indicate making less money as a reason for spending less.

Shopping starts earlier to ease the impact of holiday spending — 22 percent start their holiday shopping in October

Cutting back on spending is not the only holiday trend being impacted by the recession. In past years, Black Friday (the day after Thanksgiving) has been the unofficial start of the holiday shopping season. This year, consumers are planning to start their holiday shopping long before Black Friday, with 22 percent of consumers starting their holiday shopping in October and 29 percent starting in November.

Gift lists are trimmed down to manage budgets — 57 percent are not purchasing gifts for acquaintances

Consumers are also making some significant cuts to the number of people on their holiday gift lists. When consumers were asked to compare this year’s gift list to last year’s, 57 percent of consumers revealed that they are not purchasing gifts for the acquaintances that they purchased gifts for last year. Fifty-three percent of consumers are not purchasing gifts for the co-workers that they purchased gifts for last year. When it comes to holiday spending this year, 36 percent of consumers expect to spend between $100 and $499, 28 percent plan to spend $500 to $999, and 30 percent anticipate a holiday spend of $1,000 or more.

Consumers are using more money-saving techniques — 50 percent shop at discount or outlet stores

This year, in order to meet holiday spending budgets, more consumers are utilizing money-saving techniques for their holiday shopping when compared with last year’s PriceGrabber.com survey, Holiday Consumer Spending Survey (2,641 respondents, conducted from Oct. 20, 2008, to Nov. 10, 2008). Fifty percent of consumers are planning to shop at discount or outlet stores this year, while only 43 percent did so last year. Twenty-nine percent of consumers are planning to purchase gifts for fewer people this year, while only 10 percent did so last year.

Jobless Americans Turning to Career Resource Sites

In Uncategorized on June 30, 2009 at 9:46 pm

comScore, Inc. released a June 2009 overview of the career services & development category, which revealed that more than 65 million Americans visited the particular category in June, representing a 10-percent increase versus year ago, ranking it as one of the top-growing site categories. Seven of the top ten sites in the category achieved double-digit gains during that period.

CareerBuilder LLC led the category with 21.7 million unique visitors, followed by Yahoo! HotJobs with 17.9 million visitors (up 23 percent vs. year ago) and Monster.com with 14.5 million visitors (up 6 percent). The next three sites in the ranking have each achieved substantial growth in the past year, with Indeed growing 59 percent to 8 million visitors, Job.com Sites up 46 percent to 7.4 million visitors, and SnagAJob up 48 percent to 4.7 million visitors.

Top Career Resource Sites
June 2009 vs. June 2008
Total U.S. – Home/Work/University Locations
Source: comScore Media Metrix
  Total Unique Visitors (000)
Jun-2008 Jun-2009 % Change
Total Internet : Total Audience 189,873 193,896 2
Career Services and Development 59,031 65,221 10
CareerBuilder LLC 22,033 21,704 -1
Yahoo! HotJobs 14,535 17,861 23
Monster 13,605 14,472 6
Indeed 5,046 8,046 59
Job.com Sites 5,049 7,378 46
SnagAJob 3,160 4,662 48
Simply Hired, Inc. 2,882 3,876 35
JOBSONLINE.NET 2,294 2,996 31
OPM 973 2,765 184
BRASSRING.COM 2,249 2,005 -11

 

Top 10 Occupations Searched* on Career Service & Development Sites
June 2009
Total U.S. – Home/Work/University Locations
Source: comScore Marketer
Occupation / Search Term Searchers
Customer Service 273,310
Warehouse 257,484
Sales 216,784
Receptionist 178,787
Medical Assistant 161,232
Clerical 149,728
Construction 144,554
Driver 132,947
Retail 127,751
Security 107,219

 

WorkTree.com, the nation’s largest paid-membership job search portal, recently announced their top job search trends for the month of May, compiling data on many trends such as typical careers searched, desired salaries, and level of education.

The results show that the top careers being searched are in the fields of:

   Information Technology
   Human Resources
   Accounting/Finance
   Engineering
   Manufacturing/Operations

Sales dropped out of the top five most searched list from the previous month. These five fields represent 43% of all career fields searched during the month of May.

WorkTree.com also notes a drop in the salary level sought by its members. More than half of members searched for jobs in the $40,000 to $80,000 range, as compared with the previous month, where 21% of all searches were in the $90,000 to $120,000 range. In May, that salary range represented only 10% of searches. Typical education levels also dropped slightly. Nearly 71% of all searchers hold bachelor’s or master’s degrees as compared with 76% the previous month.

“We continue to see large numbers of highly qualified individuals actively seeking employment,” Board of Managers Chairman Allan Martin said. “One particularly interesting statistic – the willingness of people to relocate for work – is on the rise. It is the first time in many months we have seen that the number of new members willing to relocate is actually greater than the number of people unwilling to relocate for a job.”

Current Global Oil & Gas Company Market Trends

In Uncategorized on May 28, 2009 at 4:24 pm

oil

North America leads the inventory with over $9 billion (or roughly 45% of value); followed by Africa (22%) with the North Sea, Rest of Europe, South America, Asia, Australia and Middle East rounding out the pack with deals valued at between $500 million to $1.5 billion.

In North America, the most prized deal is the multi-billion dollar interest Devon Energy is offering in its four discoveries (Kaskida, Cascade, Jack and St. Malo) in the emerging Lower tertiary trend in the deepwater Gulf of Mexico. Onshore resource style plays (shale gas and oilsands) remain quite active. Notably, Shell and EnCana are looking for a partner to develop 30,000 acres of exploration leases in the Haynesville shale gas play of north Louisiana and east Texas. In Canada, UTS Energy rejected the revised $677 million cash bid by Total E&P Canada in April as inadequate and continues working with its financial advisors, RBC Capital and TD Securities, to maximize shareholder value. UTS Energy has 1.7 billion barrels of net contingent bitumen resources in the Athabasca Oil Sands area of Alberta.

Internationally, Africa is exciting with numerous deals. West Africa now offers “unparalleled opportunities” for major and independent oil and gas companies, writes Patrick Morris, CEO of Vancouver-based Gold Star Resources Corp. Changing geopolitics, reduced security and political risks, the recent 1.8 billion barrel discovery in West Africa’s largest oilfield, and a new African foreign policy by recently elected U.S. President Barack Obama have all helped in making West Africa a “desirable destination for oil and gas exploration and production.” In Ghana, two partners have put interests on the market in the world class offshore Jubilee field (estimated 1.2 billion barrels equivalent of gross recoverable reserves). Other deals are available in Uganda, Angola, Kenya, Egypt, Cote D’Ivoire, Nigeria, Gabon, Cameroon and Namibia. In other parts of the world, significant deals in play include development projects in the Kurdistan region of Iraq, which now has an improving political and security environment.

In Indonesia, BP is seeking to harvest its 46% interest in the prolific Offshore North West Java block, which includes 670 producing wells, 170 platforms and 1,600 km of subsea pipelines.

Chevron has retained Scotia Waterous to sell its interest in 13 separate concessions in the Austral and Nequen basins of Argentina which were producing nearly 4,500 b/d of gross oil and 54 MMcf/d of gross gas in late 2008.

In Australia, Woodside Petroleum has put its Otway project, offshore Victoria, on the market. “Due primarily to the whipsaw in oil and gas prices over the past 12 months, our analysis highlights an unusually high quality and diverse set of world class opportunities, particularly for well-heeled buyers seeking long term assets in early stage development,” according to Yashodeep Deodhar, CEO of Derrick Petroleum Services. “These are not distressed assets put on the market by distressed companies. Quite the contrary, we have identified numerous opportunities by first class operators who are simply managing their forward risk profiles and laying off a portion of development capital. We foresee the recent trend of national oil companies (NOCs) and government backed oil companies dominating the buy side to continue.” In completing the study, Derrick also reviewed past M&A activity and trends. “In contrast to the first half of 2008 where seven of the top ten buyers were western companies; so far this year, only three of ten buyers are western. Buyers of significant deals have recently been mostly NOCs and government-backed companies such as IPIC (Abu Dhabi), CNPC (China), KNOC (Korea) and Ecopetrol (Colombia),” according to Deodhar. “In addition to tracking deal activity, value trends regionally and globally, and deals in play, we also continuously monitor companies with financial dry powder and a desire to do more deals. Currently, notables on this list include Norway’s StatoilHydro, Colombia’s Ecopetrol, China’s Sinopec, France’s Total, United States’ Apache Corporation and Canada’s Talisman Energy. These companies alone have over $20 billion of capability,” concludes Deodhar.

“The role of junior exploration companies is to set the trend,” said Patrick Morris of Gold Star Resources Corp.  For example, Gold Star Resources is the first and only junior company to go after onshore oil and gas opportunities in Cote d’ Ivoire and Liberia since the 1970s. Larger players are competing for offshore blocks all along the coast – but with no plans for any onshore exploration.

Market research firm IBISWorld forecasts that industry revenue for oil will grow at an average annualized rate of 9.8% over the five years to 2014, where new capacity is expected to come on stream in several oil producing countries, which will help to moderate the upward price pressure, which is expected to emerge as demand starts to revive.