HC2 Holdings, Inc. ("HC2") (OTCQB: HCHC) announces the acquisition of Bridgehouse Marine Limited ("Bridgehouse"), the parent holding company of Global Marine Systems Limited ("Global Marine").
Global Marine is a leading provider of engineering and underwater services, responding to the subsea cable installation, maintenance and burial requirements of its customers around the world. With a fleet of vessels and specialised subsea trenching and burial equipment, the company brings a 160 year legacy in deep and shallow water cable operations. The company's main operating offices are in Chelmsford, UK and Singapore.
Philip Falcone, HC2's Chairman, President and Chief Executive Officer, stated, "We are acquiring the world's most experienced undersea cable installation and maintenance services provider at a time when significant opportunities exist globally in terms of Telecoms, Oil & Gas and Offshore Power requirements for subsea cabling expertise. This investment in a truly global industry leader gives us the opportunity to support the growth plans of a proven management team."
"I am delighted that our ambitions for Global Marine have the support of an investor that has the vision necessary to enable us to realize the substantial growth potential in the coming years," said Ian Douglas, Chief Executive Officer of Global Marine. "Together we will have the opportunity to develop the services we offer our existing customers and to bring our leading capability and expertise to customers and markets around the world."
The Board of Global Marine will be strengthened with the addition of Dick Fagerstal as Executive Chairman. Mr. Fagerstal brings a wealth of industry-relevant experience to the Board alongside current directors, Ian Douglas and Global Marine's Chief Financial Officer Bill Donaldson.
HC2 acquired Bridgehouse pursuant to a Sale and Purchase Agreement between Global Marine Holdings, LLC, a subsidiary of HC2, and the stockholders of Bridgehouse. The purchase price reflects an enterprise value of approximately $260 million, including assumed indebtedness of Global Marine, and was funded through a new senior secured credit facility provided by Jefferies Finance LLC and a sale of convertible preferred stock to DG Capital Management, LLC and another investor. The sale of preferred stock will also provide HC2 with additional working capital for general corporate purposes.
Keith Hladek, HC2's Chief Operating Officer, commented, "We are pleased with the response to our capital raise. This new capital raise will also allow HC2 to complete the tender for the remaining 30% that is outstanding of Schuff International, Inc. that the company does not already own."
Please refer to HC2's Current Report on Form 8-K to be filed with the Securities and Exchange Commission for a more complete description of the terms of the issuance of preferred stock and the terms of the Credit Agreement.
This press release is not an offer to sell or a solicitation of offers to buy preferred stock. The preferred stock has not been registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States absent an effective registration statement
At present we are seeing lower oil prices as a function of softer demand growth in both Europe and China combined with recent output increases from OPEC, particularly Libya, together with the ongoing surge in US production.
In the short-term, supply could start to be taken out of the market quite quickly if lower price levels are sustained – we have earlier noted that returns for most E&P companies have been eroded by rapidly-rising costs. This has pushed hurdle rates for new projects higher often to around $80/bbl, indeed many are described by our E&P clients as 'marginal' at $100/bbl, which means that we could start to see a major shift in oil company strategy if prices fall much further. This is likely to manifest itself in terms of pressure on the supply chain to cut costs, delays in project sanctioning and in major modification projects. So below $85 we are likely going to see investment levels materially impacted.
Further supply-side pressure may well be seen in Russia, albeit in the longer term. There are reports that western activity with 'sanctioned companies' (includes Rosneft, Lukoil, Surgutneftegaz) will have to stop in the coming weeks which could halt the likes of Exxon working with Rosneft in the Arctic and have wider implications for the oil field service community (e.g. Seadrill's provision of rigs for Rosneft). However, in reality, Artic joint ventures such as these are long-term in nature and any impact on the oil supply is most likely to be seen over a 2-5 year period.
Without political interference markets eventually self-correct. Much of the additional production capacity added in recent years is high cost US unconventional oil – and these wells peak early and decline rapidly. So if drilling stops, over-production capacity will quickly evaporate which could bring global oil supply down materially, and as we have stated so often in the past, if investment slows significantly we will be short on oil supply and there will again be upward pressure on oil prices.
NYC-based PIRA Energy Group reports that accounting for the strength of U.S. jet fuel demand this summer. In the U.S., stock excess accelerates. In Japan, stocks draw, but finished product stocks continue to rise. Specifically, PIRA's analysis of the oil market fundamentals has revealed the following:
Accounting for the Strength of U.S. Jet Fuel Demand this Summer
Jet fuel demand spiked in June, July and early August. Because the economy's fundamentals do not support such a high level of domestic demand, we suspect that higher than currently assumed exports will result in a revision downward of the final demand numbers. There is already data from the Bureau of the Census that suggests that July exports will be revised up by 100 MB/D, which will put July demand back to levels more consistent with the underlying fundamentals.
U.S. Stock Excess Accelerates
The year-on-year stock excess widened this past week to the highest this year. The inventory increase was mostly in crude oil as weekly imports jumped to the second highest level this year. The recent relative weakness in dated Brent to U.S. crude prices is encouraging more imports to the United States. The product inventory increase was the smallest in several weeks as reported product demand increased compared to the week before and product imports remained quite low, eliminating most of the huge excess in products the week earlier. The entire excess in inventory over last year is outside of crude oil and the four major products, being mostly in NGLs, where production is soaring.
Japanese Crude Stocks Draw, but Finished Product Stocks Continue to Rise
Crude runs fell back and crude imports declined which drew crude stocks. Finished product stocks continued to rise. Demand impacts from the Respect for the Aged holiday, directionally came in as expected, with gasoline demand higher and gasoil demand lower, but the impacts were muted. Gasoline and gasoil stocks rose modestly, while the kerosene stock build rate came in slightly above seasonal norms. Refining margins improved slightly, but remain soft. Gasoline and fuel oil cracks improved, while middle distillate cracks were little changed.
Freight Market Outlook
A glut of crude oil in the Atlantic Basin has driven the flat price of dated Brent crude below $100 per barrel to its lowest level in over two years and shifted the market structure into contango, encouraging storage. These developments have conjured up memories of the large buildup of crude in floating storage in 2008-2009, when the unfolding financial crisis plunged the global economy into the great recession. At the peak in 2009, over 100 million barrels of crude were placed into floating offshore storage on VLCCs and Suezmax tonnage. Vessel operators are also benefitting from the lowest bunker prices since June 2012 as these have plunged along with the flat price of crude oil.
Inexpensive Naphtha to Check Further Asian LPG Price Gains
Propane contango in Asia widened $14/MT with the FEI curve catching up to consistently steeper Saudi CP structure. Reports of recently lowered Saudi crude production would lead to a corresponding drop in LPG exports. Spot large cargoes jumped 3%, being called at $857/MT for late October and 1st half November arrival. Butane followed, up $15/MT to $886. Naphtha held steady. Steepening Saudi CP structure and stronger seasonal Asian demand should support prices next week while increasingly inexpensive naphtha should limit upside in the region. European prices will trend with Asian and American markets.
Biofuel Demand is Slowing Down in the U.S., Europe and Brazil; Growing Elsewhere
Biofuels programs continue to proceed actively in many countries. Canada will need about 2.2 billon liters (580 million gallons) of ethanol this year to satisfy its 5% ethanol mandate.
The information above is part of PIRA Energy Group's weekly Energy Market Recap, which alerts readers to PIRA's current analysis of energy markets around the world as well as the key economic and political factors driving those markets.
Denmark is the European Union's (EU) only net exporter of oil. The Nordic state's oil exports totaled approximately 13.7 million barrels of oil equivalent in 2013. This is in stark contrast to the EU's only other significant oil producer, the UK, which became a net importer in 2004 and has experienced a steep decline in output since, as its historically productive North Sea fields reach extreme maturity. Denmark has maintained its status as a net exporter despite peak oil production in 2004. A strong shift towards wind power has seen a decrease in oil used for electricity generation while district heating systems traditionally fuelled by oil are now switching to natural gas and renewable sources.
Denmark's ability to hold on to its status as the EU's last net exporter is likely to diminish in the long-term. Its North Sea fields continue to stutter and decline in output, seeing production half from a peak of 389 kb/d in 2004 to just 192 kb/d in 2014. In 2013, a range of technical issues meant that only 12 of 19 operational fields were producing from August to December. A lack of large discoveries has also inhibited Denmark's upstream sector, seeing oil reserves fall from 1.3 Bnboe in 2006 to 0.8 in 2013. A lack of fresh developments has also led to a decline in drilling, just eight development wells have been drilled over the last three years. Well completions increase slightly in the medium-term with the development of the high-pressure-high-temperature Hejre field – however DW do not expect this to arrest the production decline.
Based on current trends, DW predict Denmark's ongoing issues with North Sea developments will see it become a net importer of oil by 2021. By this time, oil production will likely have waned to around 130 kb/d – the country's lowest daily output in 30 years.
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