Chancellor George Osborne has confirmed that he will cut North Sea oil and gas taxes. He pledged to reduce the supplementary charge from 32% to 30%, expand the ring-fenced expenditure supplement from six to 10 years, and introduce a new cluster area allowance. The UK Government insisted that the changes would trigger billions of pounds of investment in the North Sea and create thousands of new jobs. The cut in the supplementary charge represents a partial climb-down by the chancellor, who infamously almost wiped out investment at a stroke when he hiked it from 20% to 32% without consultation in 2011.
The FTSE 100 bounced back yesterday as stronger commodity stocks helped it more than recover the ground lost in a 1% decline over the previous session. The rebound came as the price of Brent crude rose to $71 a barrel, having slumped to a five-year low close to $67 on Monday after Opec ministers failed to cut production.
Offshore leaders are poised to find out if UK ministers will move to resuscitate the North Sea sector – or stand by as price falls hammer a "nail in the coffin". Chancellor George Osborne is under pressure from oil and gas chiefs to provide major new tax breaks for the industry when he delivers his Autumn Statement to MPs today. The Treasury is due to publish its review of the North Sea tax regime, which was launched at the Budget in March, against a backdrop of plummeting world prices and soaring costs which experts fear could put projects and jobs at risk.
The falling oil price has caught-out investors in a retail bond linked to a leading North Sea producer. EnQuest issued the bond two years ago, offering an attractive 5.5% interest rate until 2022. The company used it to raise £155million to help develop the Kraken field off the Shetland Islands.
BG Group has revised the salary package for its new chief executive Helge Lund following a backlash from shareholders. Mr Lund, who has been likened to Real Madrid and Portuguese footballer Cristiano Ronaldo because of his superstar status in the global oil and gas industry, was set to get a £12million “golden hello” in shares and the chance to earn £13.5million a year if he hits performance targets. Mr Lund’s share award has been cut from £10million to £4.7million.
A fresh slide in the price of oil to a five-year low triggered more pain for energy stocks today as the London market started the week on the back foot. The slump was accompanied by a rout across the commodities sector as the FTSE 100 Index dropped by 71.7 points to 6650.5. With Brent crude now firmly below the 70 US dollars a barrel mark, shares in exploration firm Tullow Oil topped the fallers board with a dive of 8%, off 34.3p to 391.7p.
Energy firms and airlines were big movers today after the decision by Opec ministers not to cut output triggered a further fall in oil prices. With Brent crude at a fresh four-year low of 72 US dollars a barrel overnight, the FTSE 100 Index tumbled 40.1 points to 6683.3 on the back of sizeable declines for some of the City’s biggest stocks. BP was down 3%, or 14.15p to 412.25p, and rival Royal Dutch Shell slid by 65p to 2200.5p. Oil and gas exploration firm BG was the biggest faller in the top flight with a decline of more than 7% or 73.8p to 912.9p, while energy services firm Weir declined 152p to 1808p.
Norwegian Energy Co. ASA plunged to near a record low after writedowns on two of its oil fields exceeded earlier estimates, leading to a probable breach of cash covenants at the end of the year and through next. The stock traded 14 % lower at 1.8 kroner a share at 10:21 am in Oslo, extending a losing streak to four consecutive days. It is trading near the lowest since the shares were listed in 2007.
Declining oil and gas production saw UK stocks fall for the third straight day.
Western Europe’s biggest crude producer said it won’t adjust spending to match any decline in oil revenue after a decision by OPEC to maintain supply levels triggered a slump in the price of oil. Norway’s government can’t redraft its budget because of what may turn out to be a temporary shock to prices, Finance Minister Siv Jensen said yesterday in an e-mailed reply to questions. Instead, she signaled the central bank is better equipped to address such disruptions. The comments come as the krone suffers its biggest pummeling in more than five years as traders speculate lower oil prices will hurt Norway’s economy.
OPEC’s decision to cede no ground to rival producers underscored the price war in the crude market and the challenge to U.S. shale drillers. The 12-nation Organization of Petroleum Exporting Countries kept its output target unchanged even after the steepest slump in oil prices since the global recession, prompting speculation it has abandoned its role as a swing producer. Yesterday’s decision in Vienna propelled futures to the lowest since 2010, a level that means some shale projects may lose money.
Weaker oil stocks hit the FTSE 100 Index today as prices tumbled to a four-year low on expectations that Opec will not take action to cut production. BP, Royal Dutch Shell and Petrofac were among the fallers as the FTSE 100 remained close to its opening mark at just 5.2 points higher at 6734.4. The cost of Brent crude dipped to around 76 US dollars a barrel, a third below its level in June, as members of the Opec oil cartel gathered in Vienna. Saudi Arabia, which dominates the 12-member organisation, has downplayed the likelihood of a cut in production, with oil minister Ali Naimi arguing that the market would eventually “stabilise itself”.
The US stock market eked out another record close ahead of the Thanksgiving holiday as investors assessed the latest reports on the economy and some corporate earnings. However, energy stocks were once again the biggest loser of the 10 industry groups represented in the S&P 500 index as the price of oil dipped again.
The oil market will “stabilize itself,” Ali Al-Naimi, Minister for Saudi Arabia, the world’s largest crude exporter, said in Vienna yesterday. The comment will keep people guessing before today’s meeting of the Organization of Petroleum Exporting Countries in Vienna, said Harry Tchilinguirian, head of commodity markets at BNP Paribas SA. Here are some potential outcomes:
Oil slid to a four-year low amid concern OPEC won’t agree to cut output at today’s meeting while gold fell. European equity-index futures rose as Chinese shares traded at a three-year high, and the yen gained a third day. West Texas Intermediate crude tumbled 1.3 percent to $72.75 a barrel by 7:12 a.m. in London, falling for a fourth straight day. The Shanghai Composite Index closed at the highest since August 2011 amid record turnover. Euro Stoxx 50 Index contracts increased 0.2 percent while Standard & Poor’s 500 Index futures were little changed after the U.S. gauge rose to a record. Samsung Electronics advanced as much as 8.3 percent in Seoul after saying it will buy back shares. The yen gained 0.3 percent and Russia’s ruble fell 0.8 percent.
A stunted demand market saw Seadrill fall to a record low for the past six years. A "difficult" move to suspended the offshore driller’s dividends spurred the slide. The firm fell 16% to NOK118.8. The offshore driller, which is controlled by billionaire John Fredriksen, was hit by a weakened demand for rigs and faltering oil prices. Seadrill is currently sitting at its lowest valuation level since July 2010. Speaking about the suspension, Fredriksen insisted it was a “difficult” decision but equally necessary to weather the current market climate.
The OECD has cut its forecast for UK growth as it sounded a warning about the dangers facing the world economy. Gross domestic product (GDP) is now expected to increase by 3% this year, down from 3.1%, according to the international think-tank. It still leaves the UK growing faster than any other major advanced economy. But the growth forecast for next year was also scaled back by 0.1%, to 2.7%, as the US remains on course to lead the recovery race in 2015.
Oil fell ahead of a crucial meeting in Vienna on Thursday of the Organisation of Petroleum Exporting Countries. Traders will be looking for a possible agreement to cut production to shore up prices. The price of crude has tumbled 26% since June as producers kept output stable while demand in Europe and other markets weakened. Benchmark US crude fell 73 cents, or 1%, to $75.78 per barrel on the New York Mercantile Exchange. Brent crude, a benchmark for international oils used by many US refineries, fell 68 cents to close at $79.68 a barrel on the ICE Futures exchange in London.
The biggest FTSE 100 faller was oilfield services company Petrofac, which lost nearly a quarter of its value after issuing a profits warning. It said it expected net profit for 2015 of $500million (£320million), due to lower oil prices and expectations for the delivery of some projects, with current oil price expectations expected to result in a $45million (£29million) hit.
Brent crude rose for a third day amid signs that Iran will seek an output cut at OPEC’s meeting this week and after China unexpectedly reduced interest rates. West Texas Intermediate also extended gains in New York. Futures climbed as much as 0.6 percent in London. Iranian Oil Minister Bijan Namdar Zanganeh may propose that the Organization of Petroleum Exporting Countries trim supply by 1 million barrels a day when he meets with Saudi Arabia’s Ali Al- Naimi before the group gathers on Nov. 27, according to Iran’s state-run Mehr News agency. China cut borrowing costs for the first time since July 2012 as the world’s second-biggest oil consumer stepped up support for its economy.
Brent crude traded above $80 a barrel after China, the world’s second-largest oil consumer, cut interest rates for the first time since 2012 to bolster its economy. West Texas Intermediate also rose in New York. Futures gained as much as 2.3% in London. The People’s Bank of China cut lending and deposit rates effective from tomorrow, according to a statement on its website. Half of the 20 analysts surveyed predict the Organization of Petroleum Exporting Countries will reduce output, while the rest expect no change, when the group meets next week.
Tullow Oil set the pace in the FTSE 100 as the price of Brent crude crept back towards the $80 a barrel mark.
Ophir Energy has made an indicative offer to acquire Salamander Energy, the companies have said in a joint statement. The company is making an offer of 0.5719 of its own shares for each Salamander share. Both Ophir Energy and Salamander said there was “compelling strategic logic” for the move, that will leave the pair with a strong portfolio of operations across Africa and South East Asia.
Struggling seismic surveyor CGG has knocked back a £1.2billion takeover bid from French energy services giant Technip amid a nosedive in oil prices that has sparked a sector-wide consolidation drive. Technip, which has about 1,400 staff at its Aberdeenshire headquarters in Westhill, made the approach earlier this month. Commenting yesterday on its decision to rebuff the offer, CGG said that "the conditions to pursue were not met."
Maersk Oil and Gas has hired DNV GL in a multi-million service contract deal for its Culzean project in the UK North Sea. The scope of contract includes Independent Competent Person (ICP) verification, Independent Verification Body (IVB) and Pressure Equipment Directive (PED) work. The team will be managed from a single point in the UK and DNV GL said it will use additional resources and expertise from Maersk’s team in Denmark to deliver the work.