NYC-based PIRA Energy Group believes that Brent crude prices will average higher as global oil markets tighten. On the week, U.S. products continue to build, crude draws again.  In Japan, turnarounds continue, crude stocks build. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

European Oil Market Forecast

Brent crude prices will average higher, in the $110-115/Bbl range for the third quarter, as global oil markets tighten. Urals differentials will firm over the next two months. Rising product exports from Russia, the U.S., and Saudi Arabia will be absorbed by demand increases in Latin America, Africa, and elsewhere in the Atlantic Basin, as well as by lower runs in Europe year-on-year.

U.S. Products Continue to Build, Crude Draws Again

Overview inventories increased this past week with product stocks increasing while crude stocks fell. It was the second consecutive weekly crude inventory decline, and declines should generally be commonplace in the weeks ahead. For products, the large inventory build reflected weak reported demand. It turns out last year’s stock build for the same week was more than twice the size of last week's reported inventory increase, thereby widening the year-on-year stock deficit. Most of the deficit is in crude and the two major light products.

Japanese Turnarounds Continue, Crude Stocks Build

Crude runs dropped back, and while crude imports also dropped, crude stocks built over 4 MMBbls for the second straight week. There have been two key delays in planned turnarounds, which will keep runs low for at least the next two weeks. Finished products drew slightly. Product demands showed only modest changes. Refining margins continued to decline with all the cracks, other than fuel oil, losing ground. Margins are deemed to be weak, despite ongoing refinery downtime.

International LPG Prices Mixed Last Week

Despite WTI crude oil prices rallying nearly 3% last week, U.S. propane prices were flat on another huge stock build. Butane prices fared only slightly better. High U.S. LPG inventories, which will soon be in surplus to the year-ago period, will pose challenges for domestic prices. European and Asian LPG prices proved to be far more susceptible to geopolitical supply risks than their American counterparts. Both European propane and butane surged with rising crude by 3% to $780/MT and $747/MT respectively. Asian prices were even stronger with propane’s weekly average up 3.1% to $919/MT, and butane up 3.3% to $921/MT. A lack of incremental European demand and tight competition with naphtha in Asia will continue to act as headwinds for international LPG prices. Record waterborne exports from all regions to Asia will ensure the region remains well supplied in June.

Ethanol Prices Decline

U.S. ethanol prices declined during most of the week ending June 6 due to greater production, rising inventories, and lower corn costs. Prices manufacturing margins fell, breaking three straight weeks of gains, as lower product and co-product prices outweighed the decrease in corn cost.

Ethanol Output and Stocks Increase

U.S. ethanol production increased for the fifth consecutive week the week ending June 6 to 944 MB/D, the highest level thus far in 2014. Inventories accumulated, building by 172 thousand barrels to a 14-month high 18.4 million barrels.

Iraq Update Conference Call with Dr. Kenneth Pollack and Dr. Gary Ross

Iraq is now in a state of sectarian civil war. The most likely situation is that Iraq will become mired in a Syria-like stalemate, with the population divided along ethno-sectarian lines. Kurdish independence looks more likely, but only if Turkey supports an independent Kurdistan. Northern Iraqi exports are unlikely to return, but the 2.6 MMB/D of current southern exports could remain relatively well-protected in Shia-dominated territory. However, periodic disruptions are likely, either from local extortionists or Sunni militia attacks. Right now, oil markets are firmly in a $110-$115/Bbl Brent price range, but even a temporary disruption in the south could quickly send prices into a $115-$120/Bbl range, where risks of an SPR release would increase. Forecast Iraqi production growth (in 2014, 2015 and beyond) is now called into question, providing more support to prices as the pressure on Saudi Arabia to cut production (in 2015+) is likely diminished.

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.

NYC-based PIRA Energy Group reports that U.S. demand growth was only 0.3%, but distillate and kero-jet demands were very strong. On the week, U.S. stock deficit widens in spite of commercial stock build.  In Japan, crude runs eased with continuing low crude imports such that stocks posted a moderate draw. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

March DOE Monthly Supply/Demand

DOE released its final monthly March 2014 (PSM) U.S. oil supply/demand data today. Demand came in at 18.53 MMB/D versus the 19.10 MMB/D PIRA had assumed in its balances. Compared with the weekly preliminary data, total demand was revised downward by only 14 MB/D. While demand growth was only 0.3%, or 50 MB/D, distillate and kero-jet demands were very strong, aided by colder-than-normal weather and colder weather relative to last March. End-March total commercial stocks stood at 1,057 MMBbls. PIRA had assumed 1,052 MMBbls in its balances. Crude stocks came in 7.6 MMBbls lower than PIRA assumed, while products came in 13.2 MMBbls higher.

Stock Deficit Widens in Spite of Commercial Stock Build

Total commercial stocks built for the week ending May 23, although the three major light products drew, reflecting strong pre-holiday-weekend demand. A surge in imports drove crude stocks higher, and all other oils built collectively. With a much larger total stock build last year, the year-over-year stock deficit increased. As noted last week, the effective stock deficit could be even larger, with approximately 9.5 million barrels of crude operational stocks for new infrastructure this year versus last.

Japanese Turnarounds Continue

Crude runs eased with continuing low crude imports such that stocks posted a moderate draw. Finished products also drew. Demands were only slightly changed, with a small stock build in gasoline, a small draw in kerosene, and larger draws on fuel oil, gasoil, and notably naphtha.

LPG Scorecard

Stronger demand and favorable arbitrage economics for LPG exports will be counteracted by ever increasing U.S. LPG inventories. Lower demand in Europe will keep LPG prices within range, while Saudi loading delays, higher contract prices, and less spot Middle Eastern volumes will be supportive for prices in Asia.

Ethanol-blended Gasoline at an All-time High

U.S. Ethanol-blended gasoline manufacture soared to a record 8,980 MB/D the week ended May 23, eclipsing the previous high of 8,957 MB/D set earlier in the month. U.S. inventories increased by 499 thousand barrels to an annual high 17.5 million barrels.

Prices/Margins Rise in May

U.S. ethanol prices increased during May as consumption in gasoline soared to a record high, while inventories in the Midwest are at the lowest level of the year. After declining for six consecutive weeks, manufacturing margins rose, with lower corn costs adding to the improved economics.

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.

NYC-based PIRA Energy Group believes that the physical markets are recovering. In the U.S., commercial stocks continue to March higher. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

Physical Markets Are Recovering

PIRA's economic growth forecast is on track. Market positioning is more of a concern for next month's prices than seasonality. Physical markets are recovering, especially in the Atlantic Basin, supported by relatively low stocks and higher crude run demand. As expected, low inventories have strongly kicked off the gasoline season, but with higher crude runs gasoline stocks will build back towards more typical levels. Diesel tightness will ease over the next few months, but stocks will stay generally low all year.

European Oil Market Forecast

Atlantic Basin crude supply growth in light grades supports continued relative strength in Urals differentials hurting refining margins for medium-sour grades. Light product exports from Russia will increase and VGO/straight run resid exports will decline, this year and next. Refining margins in Europe will remain challenged this year with marginal FCC/visbreaking capacity modestly attractive through midyear but then weaker in the 4th quarter. Gasoline cracks will peak early as stocks will build back quickly over the next few months. Distillate inventories will remain low and prices will strengthen further as demand picks up after midyear.

U.S. February 2014 DOE Monthly Revisions

DOE released its final monthly February 2014 (PSM) U.S. oil supply/demand data today. Demand came in at 18.99 MMB/D versus the 18.77 MMB/D PIRA had assumed in its balances. Compared with the weekly preliminary data, total demand was revised higher by a large 538 MB/D, with distillate demand revised higher by 601 MB/D, and gasoline higher by 226 MB/D. This is because of much lower exports than the DOE was assuming. End-February total commercial stocks stood at 1,047 MMBbls, nearly identical to PIRA's projection.

The Freefall in Ethanol Prices paused at the end of April

U.S. ethanol prices declined sharply during most of April as the weather in the Midwest improved and the gridlock in the rail system eased. The last few days of the month, prices stabilized as some companies needed to purchase ethanol to meet April supply commitments.

Ethanol Stocks Build

Ethanol inventories built to the highest level since July 2013 the week ending April 25, rising by 694 thousand barrels to 17.2 million barrels. Ethanol production fell to 898 MB/D from 910 MB/D during the preceding week.

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.

NYC-based PIRA Energy Group Reports that on the week, U.S. commercial oil stocks built; the largest increase since 2009. Japanese crude stocks also built, while demand is still impaired. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

Commercial Oil Inventories Build W/W

Commercial oil inventories built 14.5 million barrel the week ending April 11, the largest weekly increase since 2009. Crude stocks gained 10 million barrels, the largest increase in over five years, with the SPR contributing just 0.6 million barrels to the increase. Crude stocks have now moved above 2013 levels for the first time this year, while all the main product categories are below last year. 

Japanese Stocks Build, Demands Still Impaired

In Japan, total commercial stocks rose 4.6 MMBbls for the second straight week. Crude stocks built 2.7 MMBbls with finished products rising 1.5 MMBbls. All the major product stocks built, with the exception of naphtha. There is still demand impairment from the April 1st consumption tax increase, although the impact should soon begin to diminish. The indicative refining margin was modestly higher and margins remain good.

February Census Exports Clarify February U.S. Product Demand & Crude

The month-on-month decline in distillate and gasoline exports for February, 2014, as well as the EIA’s export plug used during the weeks of February, resulted in upward revisions to calculated February U.S. product demand. For distillate, February exports point to an upward demand revision close to what one would expect with the colder weather. For gasoline, February exports imply an added 190 MB/D to the demand rates reported in the weekly. Some of this demand growth could be a function of declining efficiency. On the crude oil side, exports of 240 MB/D during February reflected a continuation of the recent high level of crude exports to Canada.

Weaker Price Environment to Benefit Vessel Operators

PIRA expects a weaker price environment over the next five years will prove beneficial to vessel operators by reducing bunker costs from current levels. The flat prices for crude and products over the past several years have been stable as positive supply news from rapidly rising shale production has been nearly offset by continued supply disruptions both from OPEC and non-OPEC nations. Risks still remain to Iraqi, Libyan and Venezuelan crude supplies.

Rising Freight Rates To Alter Trade Flow

The shoulder season is seeing anticipated U.S. propane stock builds. Exports are active, but sharply rising freight rates will lead to some trade flow shifts in the weeks ahead. Ethane usage is being impacted by a relatively high level of cracker downtime. Overseas markets are seeing more LPG feed usage.

Ethanol Output Jumps W/W

U.S. ethanol production soared to an eighteen-week high 939 MB/D the week ending April 11 from 896 MB/D during the preceding week. This was the second highest output since January 2012 as the industry is finally breaking free of the frigid weather and logistical problems that have hampered operations over the past few months.

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.

Marsol International, a UAE-based global marine solutions provider focused on the offshore oil terminal market and related infrastructure, has entered into a partnership with RMA Engineering Solutions (RMAES) to support its international growth strategy.

RMAES is a member of the RMA Group, a diversified American-owned company headquartered in Bangkok, Thailand. RMA specializes in providing innovative infrastructure, automotive and engineering solutions to clients in the emerging markets of Asia, Africa, and the Middle East, often in extremely challenging frontier environments. The company has approximately $1 billion in annual revenues with offices on the ground in 21 counties, and has over 8,000 staff.

Marsol International men at work

RMA's global breadth and support via development and investment funding will enable Marsol to deliver its solutions to a greater service level and a wider customer base. It will also allow Marsol to pursue international growth through its ability to train local resources to take their rightful place in the operation and maintenance of the facilities and related equipment.

Since 2005, based on experienced gained over 46 years, Marsol International has provided operational engineering and management solutions to clients, consultants and EPC contractors for new offshore facilities, and operational and IRM services for existing facilities to offshore terminal owners and operators.

Mike Young, Managing Director of Marsol International, said: "Marsol International has always employed a holistic approach to growing our business. We understand that the key to developing emerging markets is to train local people to an internationally accepted level, whereby empowering them to manage their own resources.

"Marsol International adds value by managing this process. From the concept and design stage, through to installation and operation, we work closely with clients to understand their requirements to ensure their needs are met by a fully operational solution with minimal modifications. Taking ownership of this process and training local staff to operate the field on a day-to-day basis is key to this integrated approach."

"We are delighted to be working with RMA. Its understanding of emerging markets gives another dimension to our service and offers real value and insight to our customers."

James Hamann, CEO RMAES, said: "For the past 25 years RMA has enjoyed steady growth across the globe. This is largely through our ability to diversify our offering while remaining focused on servicing clients with excellence across the frontier markets of Asia, Africa and the Middle East. Combining the global size and breadth of RMA with Marsol International's specialised skills and experience in the oil and gas market will give Marsol the platform it needs for growth."

Marsol's team of experienced engineers understand first-hand the real life scenarios on a busy oil field and ensure their services and related infrastructure / products are designed, manufactured and installed to meet customer's operational requirements. The focus being on OPEX control, reliability with limited risk through ensuring integrity and life extension potential. The company is involved in all stages of offshore terminal projects from Front End Engineering Design (FEED) to Operations and Maintenance (O&M).

NYC-based PIRA Energy Group reports that Asian oil markets remain constructive. On the week, demand surge lessens U.S. stock build, while Japanese turnarounds build crude stocks. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

Asian Oil Markets Remain Constructive

Crude oil stock draws have begun and will continue through September. As expected, physical markets are now supported by relatively low stock levels and higher crude runs. The Atlantic basin has tightened first and Asia will follow. Supply disruptions remain near record highs, and while some return of shut-in supplies are assumed in PIRA's balances, they are by no means assured and can be accommodated if fully realized. Product demand growth trends remain positive as we move off the May lows to the summer peak.

Demand Surge Lessens U.S. Stock Build

Overall commercial inventories increased this past week, with nearly 1.0 million barrels of the build being in crude oil. It was the smallest stock increase in six weeks as reported demand surged. With a roughly similar sized build last year for the same week, the year on year inventory deficit narrowed marginally. Most of this deficit is in gasoline and distillate.

Japan Turnarounds Build Crude Stocks, Finished Product Stocks Rising, while Gasoil Demand Remains Weak

Crude runs eased slightly while crude imports rose such that stocks built 1.9 MMBbls. Finished product stocks also built 1.6 MMBbls due to builds in jet-kero, gasoil, and a modest rise in fuel oil. Finished product stocks have been rising steadily since mid-March. Gasoil demand was exceedingly weak, even post holiday. Refining margins were slightly higher but remain in the lower half of their statistical range.

Scenario Planning Quarterly Highlights

US shale liquids growth continues to outpace our forecast, but only slightly. A close examination of shale potential in Western Canada has led us to increase our outlook for crude and condensate although production costs in Canada appear to be higher than in the US. The developments in Ukraine increase the odds of greater investment in gas exports in the US and around the world in response to supply security concerns

Freight Market Outlook

The U.S. shale crude revolution is changing the dynamics of global crude and product trade, and there is now an active dialogue on whether to lift the ban on crude exports from the U.S. If exports of crude or condensate are allowed at some point, global crude trade and ton-miles would increase, as U.S. refiners import heavier grades more suited to their refinery configurations, while some lighter crude grades and condensates are exported to Europe and Asia. PIRA’s Reference Case outlook in a soon-to-be released multi-client study anticipates that some crude and condensate exports will be allowed but not until 2017, after the next presidential election.

Low Shoulder Season Demand Exacerbates Upcoming Inventory Builds

Large stock builds continue to weigh on prompt prices. As the year-on-year deficit continues to narrow, US LPG prices could come under additional pressure. Low shoulder season demand will only exacerbate upcoming inventory builds. Excess ethane due to surging production will leave ethane prices tied to natural gas prices for some time to come.

Ethanol Prices Rebound

U.S. ethanol prices bottomed early the week ending May 9 but rose sharply after the DOE reported that production and inventories both declined during the week ending May 2. Cash margins dropped for the sixth straight week.

Record Ethanol Blending

U.S. ethanol-blended gasoline manufacture rocketed to a record high 8,957 MB/D the week ending May 9, up 4.5% from 8,571 MB/D during the previous week, as gasoline output remained extremely strong. Ethanol production rose to 922 MB/D, the second highest output thus far in 2014

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.

Aker Solutions will split into two companies to speed up a streamlining process that will reduce costs and better position all parts of the group to meet the needs of customers in an increasingly competitive global energy industry.

The Subsea, Umbilicals, Engineering and Maintenance, Modifications and Operations (MMO) areas will form a new company under the Aker Solutions name. The company will be more strategically aligned, have a narrower focus and deeper synergies to strengthen its leading position through its unique subsea technology and state-of-the-art offshore field design.

The other units, including Drilling Technologies, Aker Oilfield Services and Process Systems, will be developed independently as part of a new oil-services investment company, named Akastor. These business areas, which have significant operational, technological and commercial differences, will have greater strategic freedom to develop individually through both organic growth and transactions.

The split, which will take place as a spin-off of the new Aker Solutions, is scheduled to occur around the end of September. Both companies will be listed on the Oslo stock exchange.

"The new Aker Solutions will be a leaner and more focused company that will be able to offer customers the unique and cost-effective technology and design they need to succeed," Executive Chairman Øyvind Eriksen said. "The company will, through a commitment to operational excellence and organic growth, be better placed to build on its leading position in the fastest growing areas of the global energy markets."
 
Shareholders will get one new Aker Solutions share for each stock held in the existing company at the time of the separation. They will also keep their shares in the remaining business, which will be renamed Akastor at the time of the split, ensuring that the existing shareholder structure is implemented in each company.

The transaction has met with approval from Aker Solutions' largest shareholders, Aker Kværner Holding and Aker ASA. An extraordinary general meeting will be held in August to vote on the separation.
 
"We are taking a major step in a transformation that began 12 years ago with the merger of Kværner and Aker Maritime," said Eriksen. "After this transaction and the 2011 Kværner spin-off, we will have created three distinct companies to service the global energy industry, providing offshore construction, unique subsea technology and field design and oilfield services. We have also divested NOK 12 billion in assets as part of the process."

New Management 
Luis Araujo, the regional president for Aker Solutions in Brazil, will be chief executive officer of the new Aker Solutions. Frank Ove Reite, currently managing partner at Converto, will become CEO of Akastor. Øyvind Eriksen will remain chairman of the board of Aker Solutions.

"While I will continue to play an active role as chairman, it is time for new leadership to take these companies forward," Eriksen said. "Luis has proved more than capable in managing our expansion in Brazil and will provide inspired leadership as the new Aker Solutions builds on its success in the subsea and deepwater markets. Frank has a long experience within the Aker group and is excellent at developing businesses and pushing them toward their full potential. I look forward to working closely with Luis and Frank to unlock the great values in both companies."

Leif Borge, current chief financial officer of Aker Solutions, will be CFO of Akastor. Svein Oskar Stoknes, who heads the subsea area's finance function, will take on the role as CFO of the new Aker Solutions. 
 
Synergies
The new Aker Solutions will be streamlined to focus on the fast-growing deepwater and subsea oil-services markets and in areas with operational, commercial and strategic similarities. There will be a swifter realization of synergies as the subsea and field design areas share the same customers and main markets. The company will have a simpler strategy focused on value creation through technological development, organic growth and operational excellence. It will be uniquely positioned to design, equip, build and maintain the future subsea production factory and will build on its expertise within project execution and offshore field design.

"The new Aker Solutions will benefit from greater synergies and a more coordinated customer approach, leading to a stronger market position and higher and more predictable returns on capital," said Eriksen. 
 
The Akastor management team has extensive experience in developing companies and creating value through operations, restructuring and transactions. The company will provide a structure where the businesses Drilling Technologies, Aker Oilfield Services, Process Systems, Surface Products and Business Solutions will be developed as largely independent entities with management teams, boards of directors and strategies aimed at maximising their value. Each company will have greater strategic and transactional freedom because it will no longer be constrained by the competing needs of other businesses. The entities will be able to focus marketing efforts on core customers and invest strategically. Akastor will also hold financial and real estate assets representing about 20 percent of the company's balance sheet.

Drilling Technologies will be the largest business within Akastor, accounting for about 60 percent of the earnings and workforce.

"There is a strong industrial logic underpinning this move," Eriksen said. "The businesses that will make up Akastor have significant operational, technological and commercial differences that have prevented them from achieving synergies with the other businesses in Aker Solutions. Through this separation, we will be able to more fully realize the industrial and return potential of all our business areas and create value for our shareholders."

Oceaneering International, Inc. (NYSE: OII) has reported record first quarter earnings for the period ended March 31, 2014 and that its Board of Directors declared a regular quarterly dividend of $0.27 per common share, an increase from its prior quarterly dividend of $0.22 per share.  The dividend is payable June 20, 2014 to shareholders of record at the close of business on May 30, 2014.

On revenue of $840.2 million, Oceaneering generated net income of $91.2 million, or $0.84 per share.  During the corresponding period in 2013, Oceaneering reported revenue of $718.6 million and net income of $74.8 million, or $0.69 per share.

Year over year, quarterly EPS increased 22% on profit improvements by all oilfield business operations.  Sequentially, quarterly EPS declined, as anticipated, as a result of lower operating income from Subsea Products and Subsea Projects. 

M. Kevin McEvoy, President and Chief Executive Officer, stated, "We are off to a good start to the year as our record first quarter EPS was above our guidance.  All of our business segments performed well relative to our forecasts, and we continue to expect to achieve record EPS for a fifth consecutive year.

"Compared to the first quarter of last year, quarterly ROV operating income improved on an increase in days on hire, the expansion of our fleet, and an improvement in operating margin.  Our fleet utilization increased to 86% from 83% a year ago.  During the quarter we put 14 new systems into service and retired 4.  At the end of the quarter, we had 314 vehicles in our ROV fleet, an increase of 20 from March 2013.  For the balance of 2014, we expect to place 16 to 21 more new systems into service.

"Subsea Products operating income was higher due to improved demand for subsea hardware and an increase in umbilical plant throughput.  Our Subsea Products backlog at quarter-end was $894 million, compared to $776 million at the end of March 2013 and $906 million at the end of December 2013.

"Subsea Projects operating income increased on higher deepwater vessel activity in the U.S. Gulf of Mexico and offshore Angola.  Asset Integrity operating income improved on increased service demand in the Middle East and the Caspian Sea area.  Advanced Technologies operating income was lower on reductions in theme park project work and U.S. Navy submarine maintenance and engineering service activity.

"Our outlook for the rest of this year remains positive.  We continue to project record EPS for 2014 in the range of $3.90 to $4.10.  We anticipate sustained global demand growth for our services and products to support deepwater drilling, field development, and inspection, maintenance, and repair activities.  We expect all our oilfield segments to achieve higher income in 2014 compared to 2013.  For the second quarter of 2014, we are forecasting EPS of $0.97 to $1.01.

"Our liquidity and projected cash flow provide us with ample resources to invest in Oceaneering's growth.  At the end of the quarter, our balance sheet reflected $106 million of cash, $90 million of debt, and $2.1 billion of equity.  During the quarter we generated EBITDA of $186 million and for 2014 we anticipate generating at least $850 million of EBITDA. 

"During the quarter we repurchased 500,000 shares of our common stock at a cost of about $35 million.  Today we announced a 23% increase in our regular quarterly cash dividend to $0.27 from $0.22 per share.  These actions underscore our continued confidence in Oceaneering's financial strength and future business prospects. 

"Looking beyond 2014, we believe that the oil and gas industry will increase its investment in deepwater projects.  Deepwater remains one of the best frontiers for adding large hydrocarbon reserves with high production flow rates at relatively low finding and development costs.  With our existing assets and opportunities to add new assets, we are well positioned to supply a wide range of services and products required to support the safe deepwater efforts of our customers."

Arnlea Systems (Arnlea), the leading asset management provider in the North Sea, has received a £5.5 million investment package from a combination of NVM Private Equity and management as part of a buy-out. The investment will provide the firm with capital to fund product development and international expansion.

Arnlea targets the global upstream oil and gas industry, helping operators, offshore floating systems and drilling companies to optimise their inspection and repair processes, ensure compliance with industry regulations, and manage asset integrity during the entire lifecycle. The deal included NexusAB, Arnlea's partner company, which provides integrated quality assurance and technical inspection technology.

The management team of Arnlea includes Allan Merritt, managing director, Martin Slowey, business development director and Jeremy Lai, finance director.

Mr Merritt said: "The NVM investment is a great opportunity for Arnlea; our business is now perfectly poised, as the demand for our inspection and tracking solutions grows rapidly.

"We already maintain a market-leading position with established and new products being delivered to the oil and gas sector, however we have created a three year business plan, aiming to triple our turnover to £15 million by 2017. To help support this demand we also look to double our head count to 60 staff."

The product demand for Arnlea is driven by growth in asset integrity, health, safety and environmental concerns; and a tightening of compliance and regulation post the Macondo oil spill. BP is currently among Arnlea's extensive blue-chip customer base, along with Total, Shell, Nexen, Chevron, ConocoPhillips, Talisman and Subsea7.

Mr Merritt added: "The global demand for our products emphasises a need for us to be based overseas, and we are aiming to open a second office in South East Asia as part of our three year business plan."

Mauro Biagioni, director of NVM Private Equity said: "We are delighted to back an experienced and high quality management team from two businesses that have the potential to create a large international company.

"Allan and the team delivered significant growth in 2013, more than doubling the group's revenues. This demonstrates the capability of the team to take their business forward to the next stage, and we look forward to supporting them on this journey."

KPMG Corporate Finance advised the management team. Dane Houlahan, head of KPMG's Oilfield Services M&A team in Aberdeen, said: "KPMG were delighted to advise on this successful transaction. Through combining two quality businesses, Allan and the team have created a fantastic platform for growth and now, with the support of NVM, have the backing to significantly expand Arnlea's portfolio and international footprint.

"This transaction represents another great example of how growth capital is being used to drive accelerated growth for a number of SME businesses in the Oilfield Services sector."

Arnlea is the leading asset management provider in the North Sea and has supported companies operating in hazardous and harsh areas for more than 20 years to maximise operational efficiency and effectiveness. The company's suite of mobile and radio frequency identification tracking technology, used by the oil & gas, petrochemical and food & drink industries, enables users to manage and monitor their assets. 

Western Europe will continue to rely on imported Russian gas into the 2020s as mature offshore provinces struggle for growth, while large-scale shale gas extraction looks increasingly unlikely in the medium term. Following Moscow's intervention in Ukraine and the resulting strained diplomatic ties with the West, it remains to be seen if North Sea production can rally to support any drop in gas flow from Russia.

With many IOCs planning investment into UK offshore fields through enhanced oil recovery (EOR), deeper water plays and downstream infrastructure upgrades, our Development Drilling & Production Forecast predicts that production will rally slightly to around 1.75 million b/d by 2017, requiring a maintaining of the recent 6% jump in well completions. The necessary high levels of expenditure are unlikely to be sustained in the long-term due to the UK's offshore maturity; therefore, DW expect a resumption of decline towards the end of the decade. Hope for any long-term growth rests with much-needed reform of the UK's offshore regulator, which must swiftly adapt to the shift towards production from smaller fields.

On the other side of the North Sea, Statoil are to attempt improved recovery from brownfield projects offshore Norway. Along with the start of projects in the large Johan Sverdrup and Goliat fields, this will see the number of well completions sustained at around 200 a year beyond 2020. DW expect these projects will see Norway break from the mould of other mature Western European producers and sustain production into the next decade. It must be noted, however, that both of these fields are currently subject to delay. Johan Sverdrup is facing electrification issues whilst ENI's Goliat FPSO is still to be completed and may take millions of man-hours more.

Potential risks to future growth include rising costs and the potential (albeit currently small, and in the longer term) competition from shale gas production. A recent victim of rising costs was the subsea compression project at Ormen Lange, despite positive results during testing and the backing of Statoil and ExxonMobil. Recent onshore legislation changes in the UK now allows for drilling and pipeline construction under private property. This, along with growing encouragement from Westminster of E&P companies, shows that shale gas extraction could be possible on a larger scale towards the end of the decade.

Matt Cook, Douglas-Westwood London

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Noble Corporation (NYSE: NE) has announced an update to its plan to spin-off Paragon Offshore. Noble expects to effect the spin-off as a dividend of 100 percent of the shares of Paragon Offshore to Noble's shareholders during the third quarter of this year.

As previously announced, Paragon Offshore will own and operate most of Noble's current standard specification drilling business, including five drillships, three semisubmersibles, 34 jackups, and one FPSO. The new company will also be responsible for the Hibernia platform operations. Noble will continue to own and operate its high-specification assets with particular operating focus in deepwater and ultra-deepwater market segments for drillships and semisubmersibles and harsh environment and high-specification segments for jackups.

David W. Williams, Chairman, President and Chief Executive Officer of Noble, said, "The spin-off of Paragon Offshore to our shareholders will be an important milestone in Noble's transformation and will allow each company to have a more focused business and operational strategy. The spin allows us to bring certainty to our shareholders and to both of the Noble and Paragon business organizations.

"I am excited for the future of both Noble and Paragon Offshore. Noble can move forward as an industry-leading high specification and deepwater drilling company, and Paragon Offshore can better leverage its fleet and substantial backlog to focus on the drivers of its particular business segment. In light of financial market conditions, both generally and with respect to the equity markets for offshore drilling companies, we decided to eliminate the initial public offering and accelerate the completion of the separation transaction.

"Each company will have capable assets and great talent that will allow the two fleets to be optimally marketed and operated for the benefit of all shareholders."

The spin-off, which is expected to be tax-free to shareholders, will be subject to approval by Noble's shareholders at the upcoming annual general meeting. Noble will also file a registration statement on Form 10, and the distribution will be subject to such registration statement being declared effective, as well as final board approval of the actual dividend and other customary matters.

NYC-based PIRA Energy Group believes that Asian oil markets remain supported. In the U.S., stocks built.  In Japan, consumption tax increase depresses product demands. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

Asian Oil Markets Remain Supported

Oil prices should find increasing support moving forward as the worst of the spring crude stock building is almost behind us. Asian gasoline cracks should improve seasonally. Gasoil cracks should hold up with ongoing turnarounds and then higher demand, especially into 3Q.

Consumption Tax Increase Depresses Japanese Product Demands

Total commercial stocks rose 4.6 MMBbls due to a 4.9 MMBbl build in crude. Finished product stocks were modestly lower. Gasoil stocks drew for the eleventh straight week. All the major product demands fell back, as an increase in the consumption tax went into effect April 1st. That increase is likely to keep demands abnormally soft for the next couple of weeks and produce adverse demand comparisons to last April.

A Closer Look at Canadian Shale Liquids Potential

It is becoming increasingly likely that the next location of significant shale liquids growth will be Western Canada. A closer look at resource potential suggests that production volumes will substantially grow. There will be obstacles including cost pressures, water management, takeaway infrastructure limits and environmental concerns that will slow progress but none of these appear to be showstoppers.

Propane Stock Building Has Commenced

U.S. stock building occurred at a faster pace than last season, but propane inventory comparisons will remain far lower year-on-year. Propane exports will grow during the course of the year as new terminal capacity is added. Near term ethane usage is affected by a relatively high level of cracker downtime. The key development is the sharp escalation in spot international freight costs which is adversely impacting trade economics.

Ethanol Prices Plummet

U.S. ethanol prices tumbled the week ending April 4 as plant output increased sharply, enabling stocks to build for the second consecutive week. At the same time, prices had reached a high enough premium over gasoline that companies reduced the percentage of ethanol-blended fuel to the lowest level in about eight weeks.

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.

NYC-based PIRA Energy Group reports that Cushing crude stocks continue to fall. On the week, product inventories push U.S. stocks higher.  In Japan, refiners begin coming out of turnarounds. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

Cushing Crude Stocks Continue to Fall, Supporting WTI

Crude differentials in Midcontinent markets were mixed in May, with improvement in the most heavily discounted grades, like Canadian heavy and those in Midland, but declines in most other light grades. Cushing crudes remained relatively strong, with plenty of outgoing pipeline capacity now in place. Cushing stocks in May reached an all-time low in percentage terms and a five-year low in absolute terms. As Gulf Coast stocks drop this summer, causing the Cushing-Houston arb to reopen, severe WTI backwardation is a strong possibility. In other regions, rail and pipeline projects expected in the second half of this year portend increased takeaway capacity and stronger differentials in coming months.

Product Inventories Push U.S. Stocks Higher

Weaker reported product demand and a product import high for the year caused product stocks to increase, also a weekly high for 2014. Crude inventories fell for the week, leaving the overall stock build at 8.8 million barrels, which is in sharp contrast to last year’s 1.2 million barrel inventory decline during the same week. Thus, the year-on-year stock deficit narrowed by 10 million barrels to 13.6 million barrels, or just 1.2%.

Japanese Refiners Begin Coming Out of Turnarounds

Crude runs rose 29 MB/D as it appears turnarounds have begun to wind down. Imports rose from relatively low levels and crude stocks built 4.9 MMBbls. Finished products built slightly though gasoil and jet kero stocks posted draws. Refining margins were slightly lower with falling middle distillate cracks more than offsetting higher gasoline, naphtha, and fuel oil cracks.

India Quarterly Oil Demand Monitor

Market jitters that shook India in mid-2013 have faded. Economic data on growth continue to be disappointing, but optimism is running high after a decisive outcome in last month’s national election. Oil demand was held down in recent quarters by the sluggish performance of the economy and a continuous rise in retail diesel prices. But recent data on diesel under-recoveries showed that price hikes should be over soon. PIRA projects a moderate acceleration in oil demand growth going forward.

LPG Scorecard

Surging LPG inventories complicated by an upcoming export facility turnaround will pose challenges for domestic prices. A lack of incremental European demand and tight competition with naphtha in Asia will act as headwinds for LPG.

Ethanol Inventories and Production Soar

U.S. ethanol inventories soared to a 14-month high the week ending May 30 as plant output increased for the fourth consecutive week and ethanol-blended gasoline production dropped sharply. As a result, June ethanol futures prices plummeted.

Biofuels Programs Continue to Proceed Actively in Many Countries

Enerkem recently started its 10 million gallon per year waste-to-biofuels plant in Edmonton, Alberta. Universal Robina started up its 30 million liter per year ethanol plant in Manjuyod in the Negros Oriental province of the Philippines in May.

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.

NYC-based PIRA Energy Group reports that midcontinent crude differentials strengthen in April. On the week, another U.S. commercial stock build narrows the stock deficit versus last year. In Japan, total commercial stocks built. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

Midcontinent Crude Differentials Strengthen in April

Canadian crude differentials strengthened relative to WTI in April, and all Midcontinent crude prices strengthened relative to Brent and LLS. Stocks continued to fall in Cushing, as recently installed pipeline capacity continues to move the PADD II crude surplus into PADD III.

Another Commercial Stock Build Narrows the Stock Deficit Versus Last Year

Although U.S. crude stocks posted their first weekly draw since the end of March, a total commercial stock build for the week of May 2 narrowed the year-over-year stock deficit by building at about twice the rate as the same week last year. The deficit of the four major refined products actually widened, while the deficit of propane and all other products was almost halved. Propane led the way with the largest weekly build in at least 10 years.

In Japan, Oil Balances Reflect Golden Week Holidays

Due to the "Golden Week" holidays, two weeks of data were reported this past week, both April 26th and May 3rd. Total commercial stocks built with finished products and crude rising. Runs declined in both weeks. There were two consecutive stock builds for both gasoline and gasoil. Gasoline demand didn't exhibit as much of a "holiday pop" as expected and stocks built both weeks. Gasoil demand declined due to holiday impacts and stocks built for both weeks.

Ethane Prices Tied to Natural Gas Prices

Low shoulder season demand will continue to pressure propane prices. Next week’s propane inventory report will be an important indicator. Excess ethane due to surging production will leave ethane prices tied to natural gas prices for some time to come.

Ethanol Prices Plummet

After a brief pause at the end of April, U.S. ethanol prices resumed their freefall the week ending May 2, as inventories built for the second straight week, reaching the highest level since July 2013. Cash margins declined again, but they are still substantially higher than at this time last year.

Aramco Announces Crude Price Differentials for June

Saudi Arabia's formula prices for June have just been released. Most notably, U.S. formula prices were increased by $0.80/Bbl versus the sour benchmark and stand at their highest levels seen yet. Since December 2013 the price for Saudi crude for U.S. destinations has risen by $3/Bbl compared to local competing USG grades. This will ultimately result in lower liftings by U.S. refiners and consequent repositioning of Saudi exports more toward growing Asian import markets.

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.

NYC-based PIRA Energy Group reports that the April rate of U.S. inventory increase is historic. In the U.S., stocks built while in Japan inventories drew. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

Another Huge U.S. Stock Build

Commercial oil inventories increased for the week ending April 18, following the stock increase for the week earlier. So far, the April rate of inventory increase is historic. It will substantially moderate for the rest of the month, but will still end up being a rather large inventory increase.

Japanese Inventories Draw Due to Lower Crude Stocks

Total commercial stocks drew due to a draw on crude. Finished product stocks were modestly higher. There is still demand impairment from the April 1st consumption tax increase, though that impact lessened this past week with modestly higher gasoline, gasoil, and kero demands. The indicative refining margin was modestly higher and margins remain good.

Rising Freight Rates Affect Markets

The pace of U.S. propane stock building is increasing, even as exports are sustained at high levels. Ethane usage is affected by cracker downtime, but will be increasing over the next couple of months. Freight rates keep increasing leading to weakening of spot arb margins while some cargoes are being redirected to shorter haul routes, as the emphasis shifts to more efficient operations.

Ethanol Prices Fall

U.S. ethanol prices dropped to the lowest level in over four weeks on April 16 as production rose to the highest level of the year. Values were significantly below gasoline again, after selling at a premium just two weeks ago.

Ethanol Output Declines

U.S. ethanol production fell to 910 MB/D during the holiday-shortened week ending April 18, down from an 18-week high 939 MB/D during the preceding week. Despite the decline, this was the third highest output thus far this year as the weather improved and logistical problems eased.

Nigeria: Risks to Oil Supply Disruptions and Long-Term Growth on the Rise

Risks to Nigerian crude supply are on the rise in both the near and long term. In the near term, oil infrastructure sabotage may increase ahead of the February 2015 elections, adding to existing oil theft and pipeline vandalism. In the longer term, growth remains challenged. Persistent insecurity has led to a broad exit of foreign oil companies from vulnerable areas, and a highly uncertain regulatory climate due to the long-delayed Petroleum Industry Bill has stalled investment in the deepwater.

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.

DW's new Drilling & Production information service is producing some interesting numbers, not least that meeting future global oil & gas demand will require massive numbers of new development wells to be drilled; in 2014 some 83,000, of which 80,000 will be onshore and 3,000 offshore. However, a forecast 17% increase in oil & gas demand by 2020 means that annual well completions will need to climb 35%; in all an additional 670,000 wells must be drilled by the end of the decade.

Offshore, the developing shallow water gas and highly productive deepwater sectors will offset the effects of an aging shallow water oil sector into the forecast, with total offshore oil & gas production set to rise 22% by 2020. DW expect to see a surge of deepwater well completions in the medium term - reaching 476 by 2018, up from 185 in 2013.

New annual onshore well numbers are set to grow 35% by 2020, as more completions are needed to offset ongoing production decline. Worldwide, more drilling for less oil & gas is a recurring theme; the Middle East will need to achieve more than 30% growth in drilling as the NOCs of KSA, Kuwait, Qatar and UAE start large redevelopments in the near-term – nevertheless, production will rise just 10% due to the maturing of existing fields. It is of note that the well numbers of the national oil companies will surge as the international oil majors endeavor to reign-in their spending.

Greenfield projects (onshore and offshore) in Russia could see production maintained at current levels into the 2020s, though recent diplomatic tensions could affect this considerably. China will invest significantly into output at home and abroad, notably Central Asia, as it looks to satisfy rapidly rising domestic demand.

On a global basis, much of the drilling is due to the continued resurgence of the dominant North American market (which accounted for 62% of worldwide development wells drilled in 2013).

Due to the fundamental importance of development drilling to the industry, we will be starting a new monthly Drilling & Production email service shortly. In the meantime further information can be obtained from: