Having contacted the Author Mark Jago, he has given me permision to post his article.
News that Oilexco one of the most innovative and technically advanced oil and gas exploration companies operating in the North Sea is almost certainly going to file a petition for Administration for its UK Subsidiary after funding has been withdrawn by a UK bank. This not a case of a company failing due bad management, but a 'sign written large' that the future is extremely bleak for other Oil and Gas Exploration Companies operating in the seas around Britain.
Whilst in Britain we are regularly shocked by the mega-profits of the major oil companies, we are rarely made aware of the other types of Oil Industry Companies, those who specialize in exploring for new reserves and applying advanced technology to existing fields to maximize their potential.
Taking the specific case of Oilexco which won the Technology Uptake prize at the 23rd Scottish Offshore Achievement Awards in March 2008,
This Company which is publicly listed on the London and Toronto Stock Exchanges and is based in Calgary Canada, specializes in fast tracking oil and gas development into commercial production, utilizing appropriate technologies to do this at the lowest possible per barrel cost.
Through its UK Subsidiary Oilexco North Sea Ltd the company has been in the process of taking over an existing Oil Production Platform and then upgrading it to take advantage of better technology and to use it to supply both oil and gas that would have been previously burnt off as gas waste. This in turn has required the company to fund and build a new pipeline for the Gas Production. These projects combined early ordering of hardware necessary to fast track future production expansion are expensive and therefore very large loans were required to carry them out.
This dependency on Banks loans as resulted in two interlined problems. Firstly that an over extended Bank, would place very onerous conditions resulting in the company not realizing most of the cash flow benefits from existing production and that as the overall global financial situation worsened and the oil price dropped, cut off funding altogether. .This is certainly what happened in the case of Oilexco and analysts are already intimating that other companies are in the same situation.
What effect would the total failure of Oilexco North Sea Ltd have?
Well during the first quarter of 2009 Oilexco would have started to add production that would have resulted in the more than doubling of oil production this year and added to UK supplies of natural gas. Significant oil field discoveries made during 2007 and 2008 would have resulted in a material increase in North Sea output over the next two and a half years.
Had the bank extended the existing funding through 2009 and committed to supporting existing operations Oilexco and shareholders would have had the time to commit the necessary capital to ensure successful survival of this company and its ongoing North Sea development. The bank would have also had the opportunity to continue profit from an ongoing successful relationship with company.
Last weeks Oilexco news came at a time when gasoline prices in the US hit a low for the week averaging around $1.61 a gallon or under 42 cents per litre with Oil consumption of 19.9 million barrels 70 percent used for transportation down 3.7 percent from more normal volume slightly above of 20.6 million barrels. According to government EIA data raw oil at 60 percent, tax at 19 percent, with sales and marketing costs accounts for the price consumers pay at the pump. Canada is the largest exporter of oil and gasoline products to the US much of it from oil sands oil produced below cost at under $50US per barrel. Canadian prices were down in some Ontario locations below 62 cents Can per litre. Pump prices and oil futures were up Friday on OPEC news that 1.2 million barrel per day production cuts were completed on announced cuts of 3.4 million barrels and shipbroker reports of an 8.9 percent decline in on board tanker oil shipments.
Successive British Governments have enjoyed massive tax revenues from North Sea Oil, now is the time to put some back into to those companies working to ensure a more efficient means of maximizing existing fields and using advanced technology to exploit new resources. As the banks seem to be unwilling to invest in the future, the Government should transfer some of the money earmarked for the rumored further bank bail-out into more equitable funding of North Sea exploration.
The alternative will risk Oilexco drilling rigs and talented personnel being move to energy development projects away from the North Sea. Other North Sea oil companies partnered with Oilexco will also be negatively affected with future development being delayed or shelved. Oil production in the North Sea will decline more rapidly and oil import costs will balloon on higher priced oil and a declining pound.
Related Posts:
7th January 2009:
Oilexco In Adminstration - Will other Dominos Fall
10/11th February 2009:
Banks Continued Failure to Provide Loans makes a UK Depression Inevitable
News that Oilexco one of the most innovative and technically advanced oil and gas exploration companies operating in the North Sea is almost certainly going to file a petition for Administration for its UK Subsidiary after funding has been withdrawn by a UK bank. This not a case of a company failing due bad management, but a 'sign written large' that the future is extremely bleak for other Oil and Gas Exploration Companies operating in the seas around Britain.
Whilst in Britain we are regularly shocked by the mega-profits of the major oil companies, we are rarely made aware of the other types of Oil Industry Companies, those who specialize in exploring for new reserves and applying advanced technology to existing fields to maximize their potential.
Taking the specific case of Oilexco which won the Technology Uptake prize at the 23rd Scottish Offshore Achievement Awards in March 2008,
This Company which is publicly listed on the London and Toronto Stock Exchanges and is based in Calgary Canada, specializes in fast tracking oil and gas development into commercial production, utilizing appropriate technologies to do this at the lowest possible per barrel cost.
Through its UK Subsidiary Oilexco North Sea Ltd the company has been in the process of taking over an existing Oil Production Platform and then upgrading it to take advantage of better technology and to use it to supply both oil and gas that would have been previously burnt off as gas waste. This in turn has required the company to fund and build a new pipeline for the Gas Production. These projects combined early ordering of hardware necessary to fast track future production expansion are expensive and therefore very large loans were required to carry them out.
This dependency on Banks loans as resulted in two interlined problems. Firstly that an over extended Bank, would place very onerous conditions resulting in the company not realizing most of the cash flow benefits from existing production and that as the overall global financial situation worsened and the oil price dropped, cut off funding altogether. .This is certainly what happened in the case of Oilexco and analysts are already intimating that other companies are in the same situation.
What effect would the total failure of Oilexco North Sea Ltd have?
Well during the first quarter of 2009 Oilexco would have started to add production that would have resulted in the more than doubling of oil production this year and added to UK supplies of natural gas. Significant oil field discoveries made during 2007 and 2008 would have resulted in a material increase in North Sea output over the next two and a half years.
Had the bank extended the existing funding through 2009 and committed to supporting existing operations Oilexco and shareholders would have had the time to commit the necessary capital to ensure successful survival of this company and its ongoing North Sea development. The bank would have also had the opportunity to continue profit from an ongoing successful relationship with company.
Last weeks Oilexco news came at a time when gasoline prices in the US hit a low for the week averaging around $1.61 a gallon or under 42 cents per litre with Oil consumption of 19.9 million barrels 70 percent used for transportation down 3.7 percent from more normal volume slightly above of 20.6 million barrels. According to government EIA data raw oil at 60 percent, tax at 19 percent, with sales and marketing costs accounts for the price consumers pay at the pump. Canada is the largest exporter of oil and gasoline products to the US much of it from oil sands oil produced below cost at under $50US per barrel. Canadian prices were down in some Ontario locations below 62 cents Can per litre. Pump prices and oil futures were up Friday on OPEC news that 1.2 million barrel per day production cuts were completed on announced cuts of 3.4 million barrels and shipbroker reports of an 8.9 percent decline in on board tanker oil shipments.
Successive British Governments have enjoyed massive tax revenues from North Sea Oil, now is the time to put some back into to those companies working to ensure a more efficient means of maximizing existing fields and using advanced technology to exploit new resources. As the banks seem to be unwilling to invest in the future, the Government should transfer some of the money earmarked for the rumored further bank bail-out into more equitable funding of North Sea exploration.
The alternative will risk Oilexco drilling rigs and talented personnel being move to energy development projects away from the North Sea. Other North Sea oil companies partnered with Oilexco will also be negatively affected with future development being delayed or shelved. Oil production in the North Sea will decline more rapidly and oil import costs will balloon on higher priced oil and a declining pound.
Related Posts:
7th January 2009:
Oilexco In Adminstration - Will other Dominos Fall
10/11th February 2009:
Banks Continued Failure to Provide Loans makes a UK Depression Inevitable
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