NYC-based PIRA Energy Group reports that Cushing stocks decline; WTI rises. In the U.S., a more typical U.S. stock draw returns.  In Japan, Japanese crude stocks correct downward. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

Cushing Stocks Decline; WTI Rises

The decline in Cushing crude stocks continued for a third straight month, while Gulf Coast stocks continued to rise, reducing the discount of WTI to Brent and LLS. Canadian differentials improved modestly from very weak levels, while rising stock levels in the Rockies and West Texas caused differentials for crudes in those regions to weaken.

A More Typical U.S. Stock Draw Returns

This past week has closed out the first quarter with a stock decline. We had just four weeks of stock builds during this year's first quarter and we also matched the largest inventory decline since 2009.

Aramco Announces Crude Price Differentials for May

Saudi Arabia's formula prices for May were recently released. European differentials were lowered, relative to April, while U.S. and Asian differentials were tightened. The European reductions were greatest on the lightest of grades, and slightly less for the heavier grades such as Arab Medium and Arab Heavy. After two months of "no change", U.S. differentials were tightened fairly significantly, with the biggest adjustment coming on Arab Heavy.

Heating Season Is Ending with U.S. Propane Stocks Low

The shoulder season is beginning with U.S. propane inventory relatively low. Stock building will be commencing but with exports remaining high the comparison to the year ago will be quite favorable. Ethane usage will be affected by a high level of steam cracker downtime over the next couple of months. Increased cargo flow especially to the East of Suez markets has led to sharply increasing VLGC freight rates.

Ethanol Prices Spike

U.S. ethanol prices increased sharply to an eight-year high Monday, and inventories dropped to a 15-week low during March as the lack of railcars to transport ethanol forced manufacturers to reduce output. As a result, manufacturing margins at PIRA’s model ethanol plant jumped to a record of nearly $2 per gallon by the end of the month.

U.S. Ethanol Production Rises

U.S. ethanol production increased sharply to a fourteen-week high 922 MB/D the week ending March 28 from 885 MB/D during the previous week as manufacturers sought to take advantage of near-record prices. Storage and transportation problems have eased for some manufacturers, but the issues still persist for many producers. Inventories rose for the second consecutive week, by 222 thousand barrels to 15.9 million barrels.

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.

Announcing its results for the 2013 financial year, VIKING Life-Saving Equipment A/S has again led the way in its industry, achieving growth in both turnover and profits for 10 straight years.

In doing so, the Danish-based company with a worldwide presence has once more beaten the
odds in an industry plagued by reductions in passenger and cargo ship newbuilds, falling exchange rates in key markets, and downward price pressure.

Photo: Viking Offshore Evacuation System

Adjusted for falls in the US dollar exchange rate, currencies pegged to the dollar, and European member state non-euro currencies, the company's turnover for 2013 increased 6 percent to DKK

1.612 billion. Profit before tax grew more than 20 percent to a record DKK 141.2 million.

"Our earnings have now reached an appropriate level for a healthy manufacturing company," says VIKING CEO Henrik Uhd Christensen. "In 2013, VIKING achieved moderate growth in turnover, and the increased profit level primarily reflects internal improvements. We have, in fact, been able to reduce the costs of administration, logistics and production while simultaneously strengthening customer service."

Long-term strategy in a sluggish market

As one of the world's leading manufacturers of maritime safety equipment, VIKING is closely tied to the newbuild market for passenger and cargo ships, a market that has been declining in recent years. Southern European countries, in particular, the traditional stronghold of ferry traffic in the Mediterranean, are still feeling the effects of the economic crisis. Moreover, low economic growth rates in several large markets have had considerable influence on global cargo traffic which, in turn, affects contracts for new cargo ships.

"We have been able to handle the worldwide market saturation of recent years because VIKING's owners take a long-term approach to expanding our global market position, focusing on growth and making sure we are right where our customers are," says Henrik Uhd Christensen. "During the
crisis years, we have continued to develop a competitive product portfolio based on concepts and
services tailored to each customer's specific needs."

Offshore market continues to grow

Henrik Uhd Christensen points to the VIKING Shipowner Agreement, where his company offers to take care of all aspects of a shipowner's safety equipment and servicing tasks for predictable, transparent prices. It's a concept that addresses shipowner needs for flexibility at a time where access to financing is limited, and has quickly become the industry's gold standard since its launch four years ago.

With its broad product portfolio, VIKING has also been able to compensate for slower activity in some market segments by expanding in more promising ones. Here the offshore industry stands out, with growth rates fueled by continued high oil prices.

"As the hunt for new oil and gas discoveries moves further from shore, higher-quality safety equipment and servicing arrangements are necessary," says Henrik Uhd Christensen. "With a product range well-suited to the North Sea and polar conditions, and with a specialised offshore business unit based in Norway, VIKING is uniquely positioned to dominate the offshore market for the foreseeable future."

2014 just as difficult

Despite difficult prevailing market conditions, VIKING expects to see growth both in turnover and profit during 2014.

"We are again facing a challenging year where there is little room for improvement in newbuilds, or strong growth in other areas. We expect the passenger and cargo markets will marginally improve, and that the offshore market will continue to show its strength. Within these largely unchanged parameters, we will continue to be on the offensive with our products and services, tailored to individual customer needs," says Henrik Uhd Christensen.

The positive earnings for 2013, combined with a conservative dividends policy, have contributed to further strengthening the company. VIKING's equity at the end of the financial year amounted to DKK 617.2 million.

Net income was 11% up on 2012 due to diesel (20%) and gasoline (11%) price increases in 2013, increased production of oil products, cost optimization, gains from the sale of assets, lower write-offs for dry wells and lower foreign exchange impact due to hedge accounting. Adjusted EBITDA totaled R$ 62.967 billion, up 18% on 2012.

Fourth quarter net income was R$ 6.281 billion, up 85% on the third quarter. This result reflects higher oil export volumes, lower dry well write-offs, gains from sale of the interest in block BC-10 and tax benefits stemming from provision of interest on own capital.

2013 oil and natural gas production totaled 2.539 million barrels of oil equivalent per day (boed), down 2% on 2012, primarily due to delays in starting up new systems, natural decline of fields and sale of assets abroad. Fourth quarter domestic output was up 1% on the third quarter.

In 2013, five new platforms came on stream and another four systems were deployed at their permanent locations. A pre-salt daily output record of 371,000 bpd was set on December 24th.

Proven reserves in Brazil reached 16 billion barrels of oil equivalent, up 1.6% on 2012. The Reserve Replacement Ratio has been higher than 100% for 22 years in a row.

Average production of oil products in Brazil totaled 2.124 million bpd in 2013, up 6% on 2012, cutting back diesel and gasoline imports.
 PROEF (Campos Basin operational efficiency improvement program) contributed with additional oil output of 63,000 bpd. Operational efficiency reached 75% for the Campos Basin Operational Unit (UO-BC) and 92% for Rio (UO-RIO).

PRODESIN (divestment program) contributed R$ 8.5 billion to cash flow in 2013 .

PROCOP (operating costs optimization program) achieved savings of R$ 6.6 billion in 2013, exceeding the R$ 3.9 billion target set for the year.

NYC-based PIRA Energy Group reports that western Canadian and Bakken crude price differentials strengthened in January. On the week, U.S. stocks declined. In Japan, crude and product stocks also drew. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

Western Canadian and Bakken Crude Price Differentials Strengthened

Western Canadian and Bakken crude price differentials strengthened in January, as frigid temperatures in the North slowed production growth, and rail volume continued to rise. Cushing stocks were flat in January, but WTI moved into backwardation in anticipation of large stock draws following the recent startup of TransCanada's Gulf Coast pipeline.

Another U.S. Stock Decline

January has been remarkable with U.S. oil inventories falling over 700 MB/D or some 22 million barrels. This past week contributed 5.3 million barrels of the decline, all of which was in products since crude oil inventories built slightly

Japanese Crude and Product Stocks Draw

Total commercial stocks drew 5.9 MMBbls on the week. Crude runs rose slightly and implied crude imports eased sufficiently to draw crude stocks 2.4 MMBbls. Finished product stocks also drew with declines in kerosene, fuel oil, and a more modest draw on gasoil stocks. Gasoil demand was relatively strong at 960 MB/D. Kerosene demand was surprisingly lower, but a low yield allowed for a strong stock draw rate of 139 MB/D for the week.

Aramco Crude Price Differentials for March

Saudi Arabia's formula prices for March were recently released. Pricing adjustments for the key markers were lowered for Asian destinations on all grades of crude, other than Arab Heavy. The greatest reduction was on the lightest grades, which saw more generous terms by as much as $1.40/Bbl. European pricing differentials were raised across the board, with the greatest increase at the heavy end. Pricing for purchases destined to the U.S. were left unchanged.

U.S. Propane Remains the Market Leader

U.S. propane remains the market leader as low inventories and on-going cold weather provides price support. The economics of moving cargoes from the USGC to either Europe or Asia has turned negative. Indeed, North Sea cargoes are due to arrive in the Northeast, as some U.S. export shipments are also canceled. The redirection of propane to the mid-continent seems to have been effective in taking some of the froth out of the market.

Ethanol Prices Higher

U.S. ethanol prices increased the week ending January 31 as weather-related production problems and rail car shortages persisted. Demand was strong as the manufacture of ethanol-blended gasoline rose to a five-week high, and inventories declined.

Ethanol Output Decreases

U.S. ethanol production declined to a three-week low of 895 MB/D the week ending January 31 from 900 MB/D in the preceding week as brutally cold weather and power shortages limited output. Inventories dropped by 193 thousand barrels to 16.7 million barrels, the largest week-on-week draw since October.

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 stronger economic headlines are ahead. In the U.S., we had the largest stock build of the year.  In Japan, crude stocks jumped, but products drew. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

Stronger Economic Headlines Ahead

Physical crude oil markets will struggle with stock builds. PIRA sees a renewed interest in financial investment in commodities. The oil shale revolution in North America has directionally moved the oil price setting point to the United States. The gasoline season this year looks set to be healthy. Political risks have been balanced but are skewed bullish ahead.

Largest Stock Build of the Year

With runs picking up now that the lows for the refinery maintenance season are in, product inventories fell this past week. This was less than the prior week product inventory decline as reported demand fell while product supply from higher imports and aforementioned runs increased. Despite the increase in runs, the weekly crude stock build was the largest of the year. Both the product and crude year-over-year stock deficits narrowed.

Japanese Crude Stocks Jump, but Products Draw

Total commercial stocks rose 3.0 MMBbls, with crude rising 3.3 MMBbls due to higher crude imports. Product draws were most notably registered for gasoline and gasoil. Kerosene stocks transitioned to stock building mode. The indicative refining margin was modestly lower.

Low Storage as Entering Shoulder Season

The collision in the Houston Ship Channel this past week delayed outbound LPG shipments. Nevertheless, propane stocks are expected to still draw for March, leading to quite low storage entering the shoulder season. Inventory will continue to sharply lag year-ago levels. Also ethane inventory reached below 30 MMBbls this January for the first time in 22 months. Stocks will continue to decline during the course of the year. Delays in USGC exports as well as outbound from Europe cargoes has tightened the European market just as feedstock demand is gaining momentum

Biofuels Programs Continue To Proceed Actively in Many Countries

Canada is expected to need about 2.2 billon liters (580 million gallons) of ethanol this year to satisfy its 5% ethanol mandate. The country has imported over 1 billion liters of ethanol per year over the past three years, nearly all from the United States.

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 Permian Basin is now being targeted for tight oil production. The United States is now in the heart of the refinery turnaround period which means a max crude stock build.  In Japan crude stocks declined. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

Permian Basin Tight Crude Oil Update

A source of conventional production for decades, the Permian Basin is now being targeted for tight oil production, using horizontal drilling and hydraulic fracturing. Relative to Bakken and Eagle Ford, the Permian is in an earlier stage of development. To date, production growth in the Permian more closely resembles the steady increase seen in Bakken than the rapid growth in Eagle Ford.

Max Turnaround Period = Max Crude Stock Build

The United States is now in the heart of the refinery turnaround period. March 14 should be the max turnaround week, after which it drops the subsequent two weeks, if everything comes back as planned, which would be unusual. Historically, unexpected delays have added some 400 MB/D to monthly downtime. Not surprisingly, crude runs hit a low for the year this past week and crude stocks had a very large stock build. Runs are still well above year ago levels as advantaged crude provides U.S. refiners with good margins.

Japanese Crude Stocks Decline

Total commercial stocks dropped on the week. Crude stocks fell, but finished product stocks were only modestly changed, though gasoil stocks fell to a new yearly low and remain very lean. The kerosene stock draw rate moderated further as demand eased and yield rose. The indicative refining margin was modestly higher with gains in gasoline cracks more than offsetting lower cracks in the other products.

Freight Market Outlook

After a strong start to the year, when tanker rates in a number of key trades registered their highest levels in six years, crude tanker rates dropped precipitously. The Baltic dirty tanker index doubled from 674 at the end of November 2013 to 1,344 on January 20, before dropping back to 676 recently. This has touched off a debate on whether the spike in rates was a weather-related, one-off event or a precursor of tighter balances and better times to come.

 Ethanol Prices Soar

U.S. ethanol prices soared as corn values rose to the highest values since September. Product was tight with prices at the coasts reaching seven-year highs. Ethanol manufacturing cash margins reached the highest level in 10 weeks. Brazil is in a terrible drought which will likely cause serious damage to this year’s (2014-2015) harvest.

Low Stock Levels

U.S. propane storage will finish the heating season at a quite low level. While stock building should start in 2Q, year-on-year comparisons will be far lower than last season. The pace of exports will certainly remain firm in the months ahead. As the heating season winds down, more chemical usage will be needed in overseas markets and LPG is being priced to displace naphtha.

Upcoming PIRA Conference Calls--North American Gas Market Presentation

PIRA will conduct a 40-minute online presentation and discussion (via WebEx) for North American Natural Gas Retainer clients, titled North American Gas Market Outlook: Filling the Hole Left in Storage, on Friday, March 21, at 3:30pm EDT. Contact PIRA at This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.

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 Asian oil fundamentals remained largely positive. On the week, U.S. commercial oil stocks increased and Japanese crude stocks built, but finished products drew. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

Asian Oil Fundamentals Remain Largely Positive

Oil prices will come under the increasing influence of global crude stock building as refinery maintenance takes hold. Asian gasoline cracks should improve seasonally and some further minor gains are forecast. Naphtha cracks have begun to ease and should decline further. Gasoil cracks have held relatively firm, but lower demand should allow room for some easing, though turnarounds will limit erosion. Fuel oil cracks have improved with lower Asian stock levels being seen in January.

U.S. Commercial Stocks Increase

Overall U.S. oil commercial inventories increased the week ending February 7^th as crude stocks built and product inventories drew. The product inventory declined week-on-week and the decline was smaller than the prior week, largely due to a fall off in reported demand, while higher product output was offset by lower product imports.

Japanese Crude Stocks Build, but Finished Products Draw

In Japan, total commercial oil stocks were modestly higher with a build in crude outpacing a draw in finished products. Runs moved modestly higher as did the implied crude import rate, which led to the crude stock build. Gasoline demand was higher, perhaps influenced by the holiday, but exports fell back and stocks built slightly. Gasoil demand was lower, but held up rather well considering the holiday

EPA Issues Guidance for Fracking Using Diesel, With Little Likely Impact on Production

Final Permitting Guidance for Oil and Gas Hydraulic Fracturing Activities Using Diesel Fuels, was released on February 11th — more than a year later than initially expected. While PIRA believes implementation of the guidance will have limited direct impact on operations, their issuance provides additional insight into the Administration's approach to fracking — confirming their desire to have EPA engaged in the regulatory process while not imposing any serious obstacles to growth in production.

Crude Tanker Markets to Start 2014 Strong

Crude tanker markets are off to a strong start in 2014 with the Baltic Dirty Tanker Index doubling in mid-January from the end of November 2013 to its highest level since 2008. The improvement was driven by an exceptionally strong winter rally in Atlantic Basin Aframax trades. Clean tanker trades however, did not participate in the rally.

U.S. Market Moves Closer to Equilibrium

The extraordinary efforts undertaken to move propane from the USGC to the Midwest and East Coast have had the desired effect of easing the spread between Mt. Belvieu and Conway prices. The warming for the next week will certainly further help ease conditions as has price induced demand losses. Nevertheless, propane stocks will end the heating season at a quite low level.

Ethanol Production Rises W/W

U.S. ethanol output rose to a three-week high of 902 MB/D the week ending February 7^th from 895 MB/D during the preceding week despite soaring natural gas prices and rail car shortages. Inventories increased by 323 thousand barrels to 17.1 million barrels, the highest since July.

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.

Milbank, Tweed, Hadley & McCloy LLP has represented international lenders Mizuho Bank, Ltd. and Itaú BBA International plc in providing approximately $150 million in financing for the purchase of an innovative compact semi-submersible multi-service vessel destined for Brazil's most productive offshore oil and gas location.

The support unit, named Olympia, represents a groundbreaking new vessel design, which suppliers believe will change the long term landscape of the offshore vessel market. It was developed to help increase production in Brazil's Campos Basin, source of some 80% of the country's substantial oil reserves. DP-3 rated, meaning it has redundant systems designed to hold it in place in virtually all weather and sea conditions, the 276-foot (84.25 meters) craft was built in Fujian Province in southern China and holds up to 500 people.

Olympia is the first of a group of three sister vessels ordered by Rio-based oil and gas firm GranEnergia and will be leased to state-owned energy major Petrobras. Olympia is part of Petrobras'$5.6 billion program to increase operating efficiency in the Campos Basin, a 44,000-square-mile area off the coast north of Rio de Janeiro. The vessel, whose primary function is to act as a floating accommodation unit for rig personnel, will begin operating in the Campos Basin in the second quarter of 2014.

New York-based project finance partner Daniel Bartfeld led the Milbank deal team, which included London-based partner James Cameron, and associates Fernando Capellão, Russell King and Caroline Rasmussen. Milbank has previously advised on the financing of a new fleet of deepwater drillships produced in South Korea that are also on the frontlines of Brazil's burgeoning offshore oil recovery sector.

"

We're delighted to participate in this important financing for a new generation of advanced support and maintenance vessels for the Campos Basin, site of significant ongoing investment by Petrobras,, Mr. Bartfeld said. "

The Olympia is one part of a larger effort to increase productivity and efficiency in this mature drilling area, which, despite challenging conditions, remains Brazil's most productive offshore oil field."

Songa Offshore SE is pleased to announce that the documentation for the previously announced USD 1,014 million loan facilities for the financing of the first two Cat D drilling rigs, Songa Equinox and Songa Endurance, have been finalized and the loan agreements have been signed by all parties.

The new facilities are split into senior loans of USD 774 million and junior loans of USD 240 million and have an average amortization profile of 10.5 years. The junior loans include a pre-delivery tranche of USD 104 million. Drawdown of the pre-delivery tranche is expected to take place in early May 2014.

NYC-based PIRA Energy Group believes that recent economic softness will be temporary and we continue to expect above-trend growth in 2014. On the week, pretty close to flat U.S. stock profile, while Japanese crude stocks built sharply. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

Economic Softness Will Be Temporary

PIRA believes recent economic softness will be temporary and we continue to expect above-trend growth in 2014. While flat price has ignored weaker economic data, crude stock builds are forecast to somewhat undermine bullish sentiment. Global refinery runs will bottom in April and then move sharply higher by midyear. Light product inventories will remain low, but diesel cracks will seasonally ease while gasoline cracks strengthen. Political risks to supply are growing, raising the probability of even larger MENA disruptions than PIRA is assuming.

Pretty Close to Flat U.S. Stock Profile

Commercial oil inventories decreased a slight 0.50 million barrels this past week, all of which was in products. This is the seventh consecutive week of product stock declines. Large product stock declines are quite typical in February because it is a strong product demand month. In fact, last year's product inventory decline during February was even larger with this past week's decline being 7.0 million barrels.

Japanese Crude Stocks Build Sharply

Total commercial stocks jumped 7 MMBbls with crude moving higher by nearly 8 MMBbls due to a surge in implied imports. Finished product stocks fell largely due to a strong draw on kerosene but also smaller draws on the other major products. Gasoil demand was very strong at 992 MB/D, the third highest level in a year. The indicative refining margin was modestly lower with all the major cracks weakening slightly.

Prices Will Be Under Some Downward Pressure

Brent crude prices remain supported by relatively tight global supply-demand balances due to continued supply disruptions and low stocks. United States crude prices relative to Brent will be choppy with WTI stronger with new pipelines, while the entire USG complex will see inventory builds during U.S. refinery maintenance before tightening again later in the 2nd quarter. European distillate cracks will trend lower as demand seasonally eases and currently tight inventories build back when Atlantic Basin runs ramp up after maintenance. Gasoline cracks are likely to increase significantly over the next few months with Atlantic Basin inventories expected to be lower than last year.

December 2013 DOE Revisions

DOE recently released its final monthly December 2013 (PSM) U.S. oil supply/demand data. While demand was revised lower by 519 MB/D, strong year-on-year gains continued. Total commercial inventories were revised higher by 8.5, with all the upward revision in products. Inventory levels of both crude and product were in deficit compared to year-ago, with that deficit having grown from end-November comparisons.

Severe Winter Weather Impacts Rail Performance

Every few years, severe winter weather causes major problems for rail transportation. This winter the weather problems have caused a record deterioration in service performance for the major U.S. railroads. These problems have contributed to the slight decline in U.S. crude by rail volumes since early December 2013. It will take two or three weeks for the rail system to recover from the cumulative effects of the weather, assuming that the rest of the winter returns to “average.” So the impact on crude by rail volumes will continue to be felt until mid-March, at a minimum.

U.S. Propane Exports Set a Record

U.S. propane exports set a new record in 2013 and are expected to increase further during the course of 2014. This will tend to keep inventories relatively low during the upcoming year, especially with stocks ending 1Q at around a record low for the period. As the season ends it will be necessary for the European and Asian chemicals operations to pick up the pace of LPG feedstock usage.

The Output of Ethanol-Blended Gasoline Soars

The production of ethanol-blended gasoline increased to a two-month high of 8,364 MB/D the week ending February 21 from 8,069 MB/D in the preceding week. U.S. ethanol output climbed for the third consecutive week, reaching 905 MB/D for the first time in five weeks.

Russian Gas Risks Greater for Central Europe; Oil Risks Minimal

The Ukrainian corridor for Russian gas exports is not as important as it used to be, but it still plays a central role in European gas supply. PIRA's analysis of pipeline flows shows that Russia can divert a little over half of the gas it moves through Ukraine to locations all over Europe. Spare capacity in the Nord Stream (Baltic) pipeline to Germany and the Yamal pipeline through Poland will allow Western Europe to receive most of the gas it needs. Central Europe and the Balkans could face some scarcity if the Ukrainian route were to temporarily disappear, but this is considered unlikely. For oil, there is less potential impact than with gas since most Russian oil exports go by tanker from Russian ports in the Baltic and Black seas.

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.

Oceaneering International, Inc. (NYSE: OII) has reported record fourth quarter and annual earnings for the periods ended December 31, 2013.

For the fourth quarter of 2013, Oceaneering earned net income of $93.4 million, or $0.86 per share, on revenue of $894.8 million. During the corresponding period in 2012, net income was $80.6 million, or $0.74 per share, on revenue of $780.9 million. For the year 2013, Oceaneering reported net income of $371.5 million, or $3.42 per share, on revenue of $3.3 billion. For the year 2012, net income was $289.0 million, or $2.66 per share, on revenue of $2.8 billion.

Fourth quarter 2013 results included a $3.3 million charge to establish an allowance for doubtful accounts related to Remotely Operated Vehicles (ROV) receivables from OGX Petróleo e Gás S.A., which initiated a court-supervised restructuring under Brazilian bankruptcy law during the period. This charge was recorded as an ROV selling, general and administrative expense.

Quarterly EPS increased year over year due to profit improvements by all oilfield business operations, led by ROV and Subsea Products. Subsea Products achieved record quarterly operating income.

Annual EPS increased as all operating segments attained higher income. Four of five segments achieved record operating income. Although not a record, Subsea Projects operating income increased by 48%. Overall operating margin was the second highest in Oceaneering's history.

M. Kevin McEvoy, President and Chief Executive Officer, stated, "Results for the fourth quarter and the year were exemplary as we achieved record EPS in each period. Our ability to produce these exceptional results is largely attributable to our global focus on deepwater and subsea completion activity, the business expansion strategy we have in place, and our solid operational execution.

"We achieved record ROV operating income for the tenth consecutive year on higher global demand to provide drill support and vessel-based services and the expansion of our fleet. We increased our days on hire by more than 9,000, to over 91,000 days for the year. Our fleet utilization rose to 85% from 80% in 2012. During 2013 we put 26 new ROVs into service, retired 10, and transferred 1 system to Advanced Technologies for non-oilfield use. At year end, we had 304 vehicles in our ROV fleet.

NYC-based PIRA Energy Group believes that low inventories are currently supportive for oil prices. On the week, U.S. product stocks draw while crude builds, while in Japan crude and finished product stocks ease. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

World Oil Market Forecast

Significant momentum in major developed economies should provide a lift for emerging markets, eventually easing financial market pressure. Low inventories are currently supportive for oil prices. Diesel cracks stay strong for two to three more weeks before seasonally weakening, while gasoline cracks will benefit from a substantial refinery maintenance program. Cushing crude stocks will drain, supporting WTI, while also weighing on LLS, but then back pressure on WTI will occur until refiners return from maintenance. Political risks were balanced in January and PIRA assumes disruptions remain high but will decline in 2014, although it is by no means a sure bet.

U.S. Product Stocks Draw While Crude Builds

Total commercial inventories decreased this past week with major draws in products partially offset by a large build in crude. The drivers behind this week were mostly due to a weather-related demand surge and a crude import surge to over 8 MMB/D for the first time since September (which was also partly weather-related as imports bounced back from earlier port delays). Products drew (and crude built) even with higher crude runs and higher product imports.

Japanese Crude and Finished Product Stocks Ease

Crude runs eased on the week and the crude import rate backed down from 4.2 MMB/D to 3.66 MMB/D. The 1.6 MMBbl crude stock draw was a reversal of the build seen the previous week. Finished products drew 1.5 MMBbls with a modest decline in gasoline and gasoil and more substantial declines in jet-kero and fuel oil. The indicative refining margin was modestly lower with all the major product cracks declining slightly.

U.S. Propane Continues to Lead the NGL Market

U.S. propane storage is at a new all-time period low for the latest week. The weather will remain quite cold with stocks drawing further. The imbalances in the Midcontinent are being somewhat relieved as movements are redirected. The flow of product from the USGC is expected to slow given current adverse trade economics.

U.S. Ethanol Prices and Margins Tumble

U.S. ethanol prices and margins tumbled in January. Higher corn and natural gas prices and lower co-product DDG credits also put downside pressure on margins. RIN prices soared due to uncertainty in the timing of the EPA finalizing the biofuel requirements for 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. 

NYC-based PIRA Energy Group believes that Asian oil markets should remain supported. In the U.S., accelerated overall stock draw resuming so far in march.  In Japan, kerosene stocks reach record lows. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

 Asian Oil Markets Should Remain Supported

Crude stock building peaks in March, and then in April builds will lessen. As we move further into the second quarter, refinery run increases absorb incremental crude. Asian gasoline cracks should improve seasonally with some further gains being forecast. Gasoil cracks have eased a bit, but further downward pressure is seen as limited as Asian turnarounds and low stocks levels help keep balances in check. Fuel oil cracks have been falling, but recently they have found a degree of support.

Japanese Kerosene Stocks Reach Record Lows

Total commercial stocks dropped on the week. Crude stocks fell only slightly, but finished product stocks declined 2 MMBbls, of which half was kerosene. This draw left kerosene stocks at record lows. Gasoil stocks declined for the eighth straight week and also remain very lean. This tight position in middle distillate stocks should prevent any large scale erosion in middle distillate cracks, though they have eased a bit of late. The indicative refining margin was modestly lower.

Inland North American Crude to Generally Reconnect to USGC, But Not Fully to Global Markets

The inland North America crude market is reconnecting to coastal markets as new infrastructure is put in place. Historically three distinct markets—the Northern Tier, Midcontinent and Gulf Coast — are now quickly becoming one integrated market. Producers' crude oil netbacks are generally aligning with coastal values after adjusting for quality and transportation costs, but there will still be occasions when inland congestion occurs. Moreover, the unlocking of inland markets by pushing crude oil supply to the Gulf Coast has unhinged Gulf Coast values from international prices, sometimes substantially. In a special report PIRA assesses the historical extent of crude prices disconnecting from refiner parity and our expectations for the remainder of 2014.

4Q13 Tight Oil Operator Review

Activity proceeded in line with operators’ expectations in 4Q13, notwithstanding temporary impacts from extreme weather. In this quarter, most operators shifted away capital from more gassy plays like the Woodford and focusing their attention on the Bakken, Eagle Ford, and Permian, where they reported better returns. Permian in particular experienced an industry-wide ramp in activity. In Bakken and Eagle Ford, operators focused mostly on improving the productivity of their acreage through better designs, well down-spacing, and tapping different intervals simultaneously. Significant cost reductions were not evident this quarter, but neither were there indications of cost escalation.

A Quick Note on Upstream Cost Escalation

There are two sources of reported increases in upstream costs that have very different causes and implications. One is the decision by industry to pursue upstream projects that have higher costs because these projects are now economic under a higher price regime. The second is the increase in costs for a given resource due to increases in contractor drilling, manpower and other capital or operating costs. It is extremely difficult to disentangle the two from company reports, but the former has been a major factor since prices began their sharp increase early last decade

Heating Season Coming to a Close

U.S. propane stocks will end the first quarter at quite low levels and comparisons will remain well behind the prior year. Exports continue to be quite active. Butane blending season is coming to a close soon. With the heating season ending, chemical feedstock users will be helping set the tone for the LPG markets in the months ahead.

Inventories Fall

The lack of rail movement continued to cause tightness in the market, particularly on the coasts. Inventories fell by 631 thousand barrels to a fifteen-week low 15.3 million barrels.

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 ongoing growth of shale continues to dominate both the oil and gas outlooks. On the week, the U.S. product stock draw resumes, while Japanese commercial stocks drew sharply. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

Shale Growth Continues To Dominate

The ongoing growth of shale continues to dominate both the oil and gas outlooks. Even with a slowdown in growth from the recent pace, shale will remain a major contributor to global liquids growth and the US will still face a steady decline in import requirements. However, we continue to face increasing violence in Iraq, significant outages in Libya coupled with political turmoil, sanctions and extremely uncertain negotiations with Iran, growing unrest in Venezuela, and an unending war in Syria that could spread violence anywhere in the Middle East. The bounceback of global demand growth in 2013, even during a subpar economic growth year, confirms our view that reports of the death of demand growth are premature.

U.S. Stock Draw Resumes

Overall commercial oil inventories drew this past week with product stocks falling and crude building. This was the sixth consecutive weekly product stock decline and fifth consecutive crude inventory build. The entire product inventory decline was outside of the three major light products, for they built a combined 0.6 million barrels. A similar major light product inventory profile is forecast for next week. In contrast, crude inventories are forecast to decline, for the Gulf Coast faced extended weather related delivery delays which will keep imports low.

Japanese Commercial Stocks Draw Sharply

Total commercial stocks were sharply lower by 8.6 MMBbls due to a sharp drop in crude stocks and a much lower draw in finished products, which was mostly kerosene. Runs eased slightly and crude imports plunged. Gasoline and gasoil demands fell back slightly, and gasoline stocks build modestly, while gasoil stocks still were able to post a small draw on much lower yield and higher incremental exports. Kerosene demand perked up and the draw rate came in at its highest rate of the year

U.S. Refiners Have Significantly Reduced Yield of Fuel Oil + Asphalt

U. S. refiners have typically had the lowest yield of residual fuel products (residual fuel oil plus asphalt) compared to other refiners worldwide. However, beginning in 2008, U.S. refiners have reduced their yield of fuel oil/ asphalt at a faster rate than can be accounted for by facilities additions alone, from over 7% to less than 5%. With continued substitution of light shale crudes, PIRA estimates that the yield of fuel oil plus asphalt for U.S. refiners will continue to decline to around 4%.

U.S. Propane Stocks Will Continue Lower

Export cancellations and fog delayed shipping from the USGC led to a relatively low stock draw last week. The pace of inventory decline should pick up as new record low positions will continue to be set. The March trading arb is open. Winter is not yet over but sentiment shifted as it is close to winding down, but not before some late season cold blasts.

Ethanol Manufacturing Margins Rise

U.S. ethanol production margins improved significantly the week ending February 14 due to higher ethanol values, stable corn costs, and lower natural gas prices. Rising DDG and RIN values also provided support

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.

For several years we have been voicing our concerns over a tide of issues facing the oil majors; firstly it seems that their oil production has peaked, then one year ago we noted that the spiraling capital expenditure was unsustainable – some will remember that the likelihood of 'Capex Compression' was the subject of our first 'DW Monday'. And it is now happening. Hess's 2014 spend is to be 30% lower than that of two years earlier, Shell is reducing by 20% compared to 2013, BG's is also set to fall and BP's Bob Dudley has stressed the importance of "capital discipline".

The upstream spend of the publicly listed international oil majors totaled about $270bn in 2013, approximately one-third of industry upstream spend. If we project the trajectory of Shell to the other IOCs then we might expect their Capex to fall by 20% over the next two or three years. This would equate to about 7% of the total industry's annual upstream Capex. The brunt is likely to be felt in the high Capex segment, notably in arctic, deepwater and LNG projects, reflected in our forecasts being somewhat more conservative than other firms.

However, there is the other 93% of Capex to go for, possibly in excess of $650bn in 2014. There are two other important groups of players in the game – the highly innovative smaller independent oil companies responsible for the surging onshore production of oil & gas from the US shales and at the other end of the scale the national oil companies such as Saudi Aramco. The NOCs are typically characterised by long-term spending programmes, and commit to long contracts for equipment and services. The NOCs are in the main continuing their spend – as we will show in a later edition, they are having to drill more and more holes for less and less oil. Indeed, in the latest Barclay's Capital industry survey, the NOC's expected their spend to grow at some 11%.

So what of the impact on the oilfield services companies? The cutback in high Capex projects will impact on the unprepared and those who do not have diversified offerings and client base. But all downturns bring major opportunities for well financed companies able to take the long term view – oil & gas is not a short-term business. Indeed, our research in Middle East tells us that the process of becoming an accepted vendor to NOCs such as Saudi Aramco can take several years.

Finally it must be remembered that E&P is not just Capex – the oil and gas must be kept flowing and the associated maintenance, modifications and operations (MMO) spend keeps slowly ramping upwards.

Douglas-Westwood

Speaking to investors today, new Shell CEO Ben van Beurden updated on the company’s priorities: improving Shell’s financial results and achieving better capital efficiency, as well as continuing to strengthen operational performance and project delivery.

Van Beurden, who became the new CEO of Royal Dutch Shell plc (“Shell”) on 1 January 2014, said Shell’s strategy overall is sound. The company has a high quality portfolio and key strengths in technology and project delivery. Shell will continue to invest in new projects that deliver more energy to customers, and create value for shareholders. The strategy is designed to deliver through-cycle growth in cash flow, to drive competitive returns and a growing dividend.

Van Beurden said: “Our ambitious growth drive in recent years has yielded a step change in Shell’s portfolio and options, with more growth to come, but at the same time we have lost some momentum in operational delivery, and we can sharpen up in a number of areas.”

“Our overall strategy remains robust, but 2014 will be a year where we are changing emphasis, to improve our returns and cash flow performance”, he continued, highlighting three priorities:

•    Improved financial performance, including restructuring in some areas of the company

•    Enhancing capital efficiency, with hard choices on new projects, reduced growth investment,

    and more asset sales

•    Continued strong delivery of new projects, and integration of recent acquisitions.

The landscape the company had expected has changed. Factors such as the worsening security situation in Nigeria in 2013, and delays to non-operated projects in several other countries, have altered the outlook. Oil prices remain high globally, but North America natural gas prices and associated crude markers remain low, and industry refining margins are under pressure. Restructuring and improving profitability in North America Upstream resources plays, and Oil Products world-wide, is a particular focus for the company.

The recent Ninth Circuit Court decision against the Department of the Interior raises substantial obstacles to Shell’s plans for drilling in offshore Alaska. As a result, Shell has decided to stop its exploration program for Alaska in 2014. “This is a disappointing outcome, but the lack of a clear path forward means that I am not prepared to commit further resources for drilling in Alaska in 2014,” van Beurden said. “We will look to relevant agencies and the Court to resolve their open legal issues as quickly as possible.”

The company will increase the pace of asset sales, which are expected to be $15 billion for 2014-15 combined in Upstream and Downstream. “We are making hard choices in our world-wide portfolio to improve Shell’s capital efficiency”, van Beurden said.

With a changing operational landscape and the streamlining of Shell’s portfolio, the company will no longer be updating against previous cash flow and net spending targets. “I want Shell to be measured on our competitive performance”, van Beurden said.

Capital spending will be reduced. In 2013, this totaled $46 billion, including $8 billion of acquisitions. In 2014, Shell expects total capital spending of around $37 billion, including $2 billion of previously announced acquisitions.

Innovative large-scale projects such as Pearl gas-to-liquids have been the main drivers behind Shell’s recent increase in cash flow, which reached over $87 billion in 2012-13 combined, an increase of 35% on 2010-11. Recent start-ups and Shell’s latest projects and acquisitions – dominated by liquefied natural gas, and deep-water oil in the Gulf of Mexico, Brazil and Malaysia – are expected to build on this growth in 2014.

Shell has distributed more than $11 billion to shareholders in dividends and repurchased $5 billion of shares in 2013. Reflecting confidence in the potential for free cash flow growth in 2014, the company is expecting the Q1 2014 dividend to be $0.47/share, an increase of over 4% compared to Q1 2013, and total dividends announced in respect of 2014 to be potentially over $11 billion.