Oil Hits Two-Week High on Dollar-Fueled Rally – Yemen:Shipping Chokepoint

Oil storage in tanks on the edge of town in Cushing, Okla.

 

Trader cites added impact of Middle Eastern conflicts on pricing
Updated March 25, 2015 4:06 p.m. ET

Oil prices surged to their longest winning-streak in more than a month as the weakening dollar continues to fire up a rally despite a historic glut of oil.

U.S. oil pushed to the verge of $50 a barrel for the first time since March 9. Four straight sessions of gains matched a winning streak from late January and early February. The market hasn’t had a five-session winning streak since June, when Islamic State militants were threatening the Iraqi capital.

Middle Eastern conflicts could have played a role Wednesday as news spread of Saudi Arabia building up forces near Yemen, said trader Tariq Zahir. But the dollar was likely the main factor behind the rally, Mr. Zahir and others said.

Oil has been rallying for most of the past week, since the Federal Reserve ratcheted back expectations for a rate increase. That news started the dollar’s retreat from a historic high, which has since fueled an inverse price move in oil.

Oil prices moved in tandem with the dollar, especially in the past four months, analysts said. Dollar-priced commodities like oil become more affordable for holders of other currencies as the dollar depreciates.

Some traders have been buying on expectation of the tandem move. Others have been buying oil simply because they are looking for other trades now that the dollar’s long rally may be over, traders and brokers said.

“It’s the hope of U.S. dollar going down and production going down in the U.S.—without [the traders] fully thinking about it,” said Mr. Zahir, who is bearish on oil prices.

Light, sweet crude for May delivery settled up $1.70, or 3.6%, to $49.21 a barrel on the New York Mercantile Exchange. That is its highest settlement since March 9.

Brent, the global benchmark, gained $1.37, or 2.5%, to $56.48 a barrel on ICE Futures Europe, its highest settlement since March 12.

It could be a panic move and a mistake, said Bob Yawger, director of the futures division at Mizuho Securities USA Inc., comparing the rise to the last winning streak when traders bought into oil as rig counts started to fall precipitously. With rigs out of work, hopes grew that production would soon decline. Instead, production has kept growing.

“They think they have this newfound gem of an information point, and then they realize” the fundamentals rule, Mr. Yawger said.

 

I
The market briefly lost ground on news that U.S. producers added to a historic glut, but rebounded within about 90 minutes and kept rallying for the rest of the afternoon.

U.S. oil inventories rose by 8.2 million barrels in the week ended March 20 to 466.7 million barrels, the U.S. Energy Information Administration said, outdoing a 5.6-million-barrel increase expected in a Wall Street Journal survey of traders and analysts.

Stockpiles are at a high in weekly data going back to 1982. In monthly data, which don’t exactly line up with weekly data, inventories haven’t been this high since 1930.

Stockpiles in Cushing, Okla., a key storage hub and the delivery point for the Nymex contract, rose by 1.9 million barrels to 56.3 million barrels, adding to its highest level on record in data going back to April 2004. The EIA said in September that Cushing’s working storage capacity was 70.8 million barrels.
Domestic crude production also slightly edged out the weekly record it set last week of 9.4 million barrels.

“Bottom line, we’re filling up those stockpiles and as long as refinery operations are subdued, we’re going to see these” additions, said Mark Waggoner, president of brokerage Excel Futures. “This is about the time we ought to sell.”

Gasoline stockpiles fell by 2 million barrels, more than the 1.7 million-barrel drop expected by analysts surveyed by the Journal.

Front-month gasoline futures settled up 2% at $1.8365 a gallon.

Distillate stocks, including heating oil and diesel fuel, fell by 34,000 barrels, less than the 500,000-barrel drop that analysts had expected.

Diesel futures settled up 1.3% at $1.7283 a gallon.

Bloomberg) — While Yemen contributes less than 0.2 percent of global oil output, its location puts it near the center of world energy trade.

The nation shares a border with Saudi Arabia, the world’s biggest crude exporter, and sits on one side of a shipping chokepoint used by crude tankers heading West from the Persian Gulf. Global oil prices jumped more than 5 percent on Thursday after regional powers began bombing rebel targets in the country that produced less than Denmark in 2013.

Yemen’s government has collapsed in the face of an offensive by rebels known as Houthis, prompting airstrikes led by Saudi Arabia, the biggest producer in the Organization of Petroleum Exporting Countries. The Gulf’s main Sunni Muslim power says the Houthis are tools of its Shiite rival Iran, another OPEC member, and has vowed to do what’s necessary to halt them.

“While thousands of barrels of oil from Yemen will not be noticed, millions from Saudi Arabia will matter,” said John Vautrain, who has more than 30 years’ experience in the energy industry and is the head of Vautrain & Co., a consultant in Singapore. “Saudi Arabia has been concerned about unrest spreading from Yemen.”

Yemen produced about 133,000 barrels a day of oil in 2013, making it the 39th biggest producer, according to the U.S. Energy Information Administration. Output peaked at more than 440,000 barrels a day in 2001, the Energy Department’s statistical arm said on its website.

Shipping Chokepoint

Brent, the benchmark grade for more than half the world’s crude, gained as much as $3.23, or 5.7 percent, to $59.71 a barrel in electronic trading on the London-based ICE Futures Europe exchange on Thursday. West Texas Intermediate futures, the U.S. marker, jumped 5.6 percent to $51.98 on the New York Mercantile Exchange.

“Yemen is not an oil producer of great significance but it is located geographically and politically in a very important part of the Middle East,” said Ric Spooner, a chief strategist at CMC Markets in Sydney.

 

Energy Sector Dealmaking On Pause- As Buyers Eye Bottom

Oil in Storage Rises More Than Expected Again

“You’re not going to lose anything by waiting,”

(Bloomberg) — When Whiting Petroleum Corp. put itself up for sale this month, the oil industry appeared on the brink of a deal surge that would dramatically redraw the energy landscape.

Instead, Whiting decided it was better off selling shares and borrowing more money to surmount a cash shortfall brought on by tumbling crude prices. The lesson? Takeover fever driven by the oil-market crash is yet to really heat up because share prices haven’t fallen as fast or hard as crude.
It may be later this year or early 2016 before buyout candidates resign themselves to a long-term market slump and lower valuations, said David Zusman, chief investment officer at Talara Capital Management LLC.
“Nobody wants to catch a falling knife,” said Chris Pultz, portfolio manager of a merger-arbitrage fund at Kellner Capital in New York. “The last thing anyone wants to do is price a deal now, only to have oil fall to $30 a barrel later on. There’s a lot of skittishness.”
Whiting, a potentially juicy prize as the biggest oil producer in North Dakota’s Bakken shale, isn’t the only one fending off bargain seekers. Tullow Oil Plc, an Africa-focused group seen as a perennial takeover target, earlier this month tapped lenders to restore its finances. In North America, Encana Corp., Noble Energy Inc., RSP Permian Inc. and Carrizo Oil & Gas Inc. have sold new shares, effectively blocking deals.
Lesser Evils
For oil producers squeezed by heavy debt and a collapse in crude prices below $50, issuing new shares and rolling over old loans, when given the choice, remain lesser evils than a corporate fire sale. So far this year, the oil and natural gas sector has seen deals worth nearly $1.9 billion, the lowest quarterly figure in at least five years, according to Bloomberg data. In the first quarter of 2014, energy deal making reached $27.9 billion.
“Every time there’s a market downturn, you always have this chorus of suggested interest in takeovers,” said Vincent Piazza, global energy research coordinator at Bloomberg Intelligence in New York. “In reality, few deals of any consequence occur.”
A disconnect between company valuations and the crude market is adding to buyers’ uncertainty. Since Dec. 15, stock values in an index of 20 U.S. producers have bounced back an average 7 percent, even as oil fell another 15 percent to $47.51 a barrel on Tuesday.
Second Half
The price crash was so swift that many companies may be waiting for the market to stabilize before agreeing to major acquisitions, said Osmar Abib, who leads the global energy practice for Credit Suisse Group AG.
“You’re going to see a much bigger flow of announcements in the second half of the year because by then, people will have adjusted to the new environment,” Abib said Tuesday in an interview.
Buyers and sellers need time to find common ground on valuations, Scott Sheffield, chief executive officer at Pioneer Natural Resources Co., said Tuesday in an interview at the Howard Weil Energy Conference in New Orleans.
“It’s going to take at least mid-summer or late in the year for oil prices to bottom and to start going up again and for people to develop their own views,” Sheffield said.
Much will depend on where oil prices settle. Sheffield said he sees a rebound to $60 a barrel by the end of the year, with prices ranging from $60 to $80 over the next five years. A $60 price over the long term will lead to more consolidation, he said.
Rising Rates
Another possible deal-driver: the availability of capital from loans and equity offerings may dry up, particularly if the U.S. Federal Reserve increases interest rates.
Dealmaking hasn’t completely ground to a halt. Whiting, based in Denver, paid $1.8 billion in stock and assumed $2.2 billion in debt in December to close on the purchase of Bakken rival Kodiak Oil & Gas Corp., a deal announced in July, when crude was still above $100 a barrel.
That same month, Spain’s Repsol SA agreed to pay $8.3 billion in cash and assume $4.66 billion in debt for Canada’s Talisman Energy Inc. The transaction has yet to close.
Companies that own drilling rigs and provide equipment and field services to the producers are most prone to consolidation during bear markets, Piazza said. During the last crude slump in 2009-10, 247 oilfield-services deals with a combined value of $32 billion dwarfed the 51 transactions among oil producers, which amounted to just $6.6 billion, he said.
Blackstone, Carlyle
Money is certainly waiting in the wings for a flurry of acquisitions. The world’s four largest buyout firms, including Blackstone Group LP and Carlyle Group LP, have amassed a $30 billion war chest for deals.
“This is one of the best periods, if not the best, to invest in global energy,” said Marcel van Poecke, head of Carlyle International Energy Partners.
Piazza of Bloomberg Intelligence said the biggest oil companies are more likely to snatch up individual assets and business units of smaller rivals, rather than acquire entire corporations. Exxon Mobil Corp. is among buyers indicating they’re particularly interested in acquiring drilling assets that expand on their existing oilfields.
For those companies with an appetite for wholesale corporate takeovers, the best approach may be to bide their time, said Jack A. Bass tax strategist .
“You’re not going to lose anything by waiting,” Jack A. Bass advises clients. “You’ll probably get it cheaper a few months from now.”

Protect your portfolio profits read more  at http://www.youroffshoremoney.com

Greece Is Now ‘Lose-Lose Game’

 

 

(Bloomberg) — The chances of Greece leaving the euro area are now 50-50 and the country could go “down the drain,” billionaire investor George Soros said.

“It’s now a lose-lose game and the best that can happen is actually muddling through,” Soros, 84, said in a Bloomberg Television interview due to air Tuesday. “Greece is a long-festering problem that was mishandled from the beginning by all parties.”

Greek Prime Minister Alexis Tsipras’s government needs to persuade its creditors to sign off on a package of economic measures to free up long-withheld aid payments that will keep the country afloat. Since his January election victory, the leader has tried to shape an alternative to the austerity program set out in the nation’s bailout agreement, spurring concern that it may be forced out of the euro.

The negotiations between Tsipras’s Syriza government and the institutions helping finance the Greek economy — the European Commission, European Central Bank and International Monetary Fund — could result in a “breakdown,” leading to the country leaving the common currency area, Soros said in the interview at his London home.

“You can keep on pushing it back indefinitely,” making interest payments without writing down debt, Soros said. “But in the meantime there will be no primary surplus because Greece is going down the drain.”

“Right now we are at the cusp and I can see both possibilities,” he said.

The start of quantitative easing by the ECB at a time when the U.S. Federal Reserve is considering raising interest rates “creates currency fluctuations,” said Soros, one of the world’s wealthiest men with a $28.7 billion fortune built partly through multi-billion dollar trades in currency markets, according to the Bloomberg Billionaires Index.

Ukraine Risk

“That probably creates some great opportunities for hedge funds but I’m no longer in that business,” he said. The war in eastern Ukraine between government forces and rebel militia supported by Russia’s President Vladimir Putin concerns Hungarian-born Soros the most, he said.

Without more external financial assistance the “new Ukraine” probably will gradually deteriorate and “become like the old Ukraine so that the oligarchs come back and assert their power,” he said. “That fight has actually started in the last week or so.”

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Apple Valued at $ 180

Cantor Fitzgerald sets Apple’s market value at $1 trillion

Having factored in the Watch, Apple TV, cash, the iPhone in China and rumors about other stuff, like cars.

Cantor Fitzgerald’s Brian White, whose neck was already stuck out further than the rest of the sell-side Apple analysts, stuck it out even further Monday.

His old price target, $160, was the market high. With his new price target, $180, he’s betting that within 12 months Apple’s market capitalization (stock price times number of shares outstanding) will have passed $1 trillion.

To put that number in perspective, the total value of the gold mined in all of history, according to the World Gold Council, is roughly $8.5 trillion.

As White sees it, Apple is firing on all cylinders:

Next month, Apple will enter its first new product category in five years, while media reports over the past several weeks have highlighted potential new areas of future innovation. Also, we believe Apple’s iPhone portfolio and position in China have never been stronger. Finally, Apple has shown its commitment to returning cash to shareholders, and we expect more in April. We believe the combination of these forces will drive the market to reward Apple’s stock.”

Below: Our current spreadsheet of analysts’ 12-month price targets, as up to date as we can make it. Corrections appreciated.

 

targets

Crude glut: A lesson in supply and demand : Running Out Of Storage

A LESSON IN SUPPLY AND DEMAND

Oil traders are growing increasingly nervous that a glut of crude will send prices into a tailspin.
5 ways surplus oil will affect us

Oil storage tanks in the United States have been filling rapidly as companies there contribute to produce more crude than refiners can process. As a result, the price differential between U.S. crude and international sources has widened considerably, once again providing a “North American” discount to the market.

North American motorists will like it

With rising inventories in key locations, refiners will be able to access cheaper crude and will pass at least some of those savings along to consumers. But refiners on the east and west coasts have limited access to cheaper North American crude and won’t feel the benefit as much as those who live in the mid-continent.

U.S. producers will fear it

With more crude in storage, oil companies are essentially competing with their own past production. And as space in the tanks become more scarce, producers will be forced to sell their current output at steep discounts, driving prices down further. Even as demand picks up in response to lower pump prices, the huge volume of inventories will moderate any rebound in crude prices.

American politicians will debate it

The boom in U.S. crude production has already prompted talk in Washington about lifting the 40-year-old ban on crude oil exports from the lower 48 states. As producers fill up available storage, the calls to end the prohibition (which does not include exports to Canada) will grow louder and more desperate.

Canadian producers will be sideswiped by it

Canadian crude prices are set in relation to the price of West Texas Intermediate, which is set in Cushing, OK., site of a major storage hub that is brimming with crude. Since U.S. crude is a “light” variety, Canadian oil sands producers are still seeing healthy demand for their “heavy” barrels. But their prices are being hammered down.

American environmentalists will seize on it

In the long-running debate over the Keystone XL pipeline, the Canadian government has sold the project as contributing to U.S. energy security. Opponents of the pipeline will point to the surplus production as another reason that the pipeline is unnecessary and should be turned down

Calgary’s Enbridge Inc. owns the largest oil storage facility at the continent’s most important location for such things, but it is a commercial secret as to how close its tanks are to full capacity.

In the past three years, as the U.S. oil boom took off, Enbridge expanded its tank farm in Cushing, Ok., by a third so that it can now store 20 million barrels of crude. Cushing is a strategic location: It is a hub for the web of pipelines that crosses the U.S. plains but is also the continent’s largest crude storage centre.

In recent weeks, oil traders have grown increasingly nervous that a growing glut of oil could overwhelm North America’s capacity to store it, and that we’ll soon run out of places to put it. If that occurred, prices would go into a tailspin and the industry would be forced to shut off their wells until growing demand caught up to shrinking supply.

The storage picture is opaque – clouded by companies’ commercial sensitivities and time lags in U.S. government data. Enbridge stores crude for its own account and on behalf of customers who profit by buying oil at today’s low prices and then re-selling it at a higher price on the futures market for delivery at some later date.

“Demand for commercial tank storage today is high since the future expected price of oil is higher than it is today so investors are looking to build up supplies in North America,” Enbridge spokesman Graham White said in an e-mailed statement. “Enbridge works with commercial storage clients to accommodate their requirements.”

Market fears were heightened late last week when the Paris-based International Energy Agency said that rising U.S. supply “may soon test storage capacity limits.” The warning prompted another selloff in oil markets, with North America’s key benchmark, West Texas Intermediate (WTI), falling to six-year lows Monday, down 2 per cent to $43.82 (U.S.) a barrel. That’s the lowest price for WTI since the depths of the great recession of 2008-09.

“The U.S. is a-flood with oil and other production points around the world are not letting up in their output. The question is how much more oil can we take before the storage tanks hit capacity?” said Gene McGillian, senior market analyst at Tradition Energy in Stamford, Ct.

For Canadians, the storage issue has broad ramifications.

Another round of price cuts would further cripple Alberta’s already-struggling oil industry, and blow an even larger hole in the province’s finances, as Premier Jim Prentice prepares to release his first budget since taking office in September. Federal Finance Minister Joe Oliver has delayed Ottawa’s budget until at least April in order to get a better sense of how falling oil prices will hit the Canadian economy.

For consumers, the further decline in crude prices offers more relief at the pump with prices again dropping below $1 per litre in major Ontario markets, while at the same time, undercutting the value of the Canadian dollar.

But some analysts argue the fears are overblown.

“Yes, the U.S. has seen unprecedented growth in crude stocks this year,” said Afolabe Ogunnaike, a Houston-based analyst with Wood Mackenzie, an international consulting group. “But we still think there is significant amount of storage capacity available.”

He said U.S. inventories have gown by 66.5-million barrels since the beginning of the year, but estimates there is still room to store another 200-million barrels. Meanwhile, the pace of the stock build-up should slow as refineries, which were down for seasonal maintenance, resume operations to prepare for the summer driving season. And as the industry reacts to lower prices by cutting drilling and other spending, it will soon begin to show up in lower production.

The U.S. energy department reported in February that crude storage capacity is 60 per cent full, and the figure has climbed a few percentage points since then. But the situation varies widely across the country and within Canada. The largest tank farms are close to production facilities, as in Cushing, or Hardisty, Alta. Or on the U.S. Gulf Coast, which is close to Texas producers and Gulf of Mexico producers and serves the world’s largest refining centre.

The U.S. separates the country into districts known as “PADDS – for Petroleum Administration Defence Districts, which were created during the Second World War for logistical purposes. PADD 1, for instance, is the East Coast, which has a large refining sector that relies heavily on imported crude and has little storage capacity beyond the refineries themselves. The East Coast market for petroleum products heavily influences the pump prices paid by consumers in Eastern Canada.

The key regions for storage are PADD 3, which includes the U.S. Gulf Coast, and PADD 2, which contains Cushing and the Midwest, where the vast majority of Canada’s record exports to the U.S. are headed. As of March 6, the U.S. Energy Information Administration (EIA) calculated that PADD 2 storage was 73-per-cent full, while PADD 3 was at 59 per cent. For technical reasons, many storage facilities can’t go above 80-per-cent capacity.

Oil storage tanks in Linden, N.J. are shown in this aerial file photo of Aug. 29, 2007. (The Associated Press)

The PADD 2 market is particularly important for Canadian producers, who have growing — but still limited ability — to reach the Gulf Coast. The International Energy Agency warned that should storage capacity in the Midwest reach its limits, Canadian exports would suffer.

However, refiners have invested heavily in equipment required to process the heavy-diluted bitumen that is produced in the oil sands and are keen to maintain those imports, said Greg Stringham, vice-president of the Canadian Association of Petroleum Producers.

Analysts note that Washington is working with out-dated numbers for storage capacity. The energy administration last updated its capacity estimates in September, and will do so again in March.

“Crude oil stocks are rising everywhere in North America,” said Hillary Stevenson, manager of supply chain network for Genscape, an energy-market consulting firm. “But there’s been considerable growth in capacity, especially on U.S. Gulf Coast since September . . . so things maybe aren’t as full as people are thinking, especially on the Gulf Coast. We do have some time to absorb this growing supply glut that we’re having.”

But there is still an incentive for investors to store crude, though companies such as Enbridge are raising prices at their tank farms. The speculators are taking advantage of a condition in the futures market called contango, when prices for immediate delivery or next month are considerably below those for later months.

On the market yesterday, one could buy a barrel of crude for April delivery for $43.79 (U.S.) a barrel, and then resell it for delivery a year from now for $55.55. So if storage for the year costs less than $12 a barrel, you stand to make a profit.

Earlier this winter, traders were anticipating the same type of transaction using supertankers. In 2009, an armada of supertankers are leased, filled with crude and left at anchored for delivery at higher prices later. But this year, international crude prices have not seen the same steep differential in the futures markets, so the sea-borne market never developed.

But there is another source of “storage” that is not as accessible as the oil in tanks but still represents a future challenge for producers. In the prolific shale oil fields of Texas and North Dakota, many companies are drilling wells but not doing the final work need to bring them into production.

As above-ground storage begins to reach its limits, more firms will decide not to complete the wells they are now drilling. The glut will be buried, but not dead.

 

Apple has The Most Rating Upgrades of the Top 25 List

For years, the most profitable industry in America has been one that doesn’t design, build, or sell a single tangible thing.
This is the list of the 25 companies that have been upgraded by (or have had their price target increased) brokerages the most during the last ninety days.

Most Upgraded Companies

Using The Caymans To Avoid Taxes on Portfolio Profits

The Keyprotect income from taxes, including those invested in the United States, from tax, while retaining control over and use of the funds.

The Cariibean Portfolio 

A typical way that U.S. individuals can easily evade tax on domestic income through a Cayman Islands operation with relatively little expense other than the ione time set-up fees :

The individual can open a bank account in the name of a Cayman corporation that can be set up for a minimal fee. Money can be electronically transferred without any reporting to tax authorities, and investments can be made in the United States or abroad. Investments by non-residents in interest bearing assets and most capital gains are not subject to a withholding tax in the United States.

In addition to corporations, foreign trusts can be used to accomplish the same approach. Trusts may involve a trust protector who is an intermediary between the grantor and the trustees, but whose purpose may actually be to carry out the desires of the grantor. These trusts are legal but in either case they can be used to protect income from taxes, including those invested in the United States, from tax, while retaining control over and use of the funds.

Limited Information Reporting Between Jurisdictions

In some cases the countries themselves have little or no information of value. One article, for example, discussing the possibility of an information exchange agreement with the British Virgin Islands, a country with more than 400,000 registered corporations, where laws require no identification of shareholders or directors, and require no financial records, noted: “Even if the BVI signs an information exchange agreement, it is not clear what information could be exchanged.”

Alternative Policy Options to Address Corporate Profit Shifting Because much of the corporate tax revenue loss arises from activities that either are legal or appear to be so, it is difficult to address these issues other than with changes in the tax law. Outcomes would likely be better if there is international cooperation. Currently, the possibilities for international cooperation appear to play a bigger role in options for dealing with individual evasion than with corporate avoidance. Several of the issues addressed below, such as hybrid entities and instruments, transfer pricing for intangibles, and debt also have been considered in the OECD action plan on base erosion and profit shifting.

Read more  at our March 22 article on The Tax Haven Guru ( wordpress) https://taxhavenguru.wordpress.com/   AND

 

Read more at http://www.youroffshoremoney.com

Application :

Do you have a tax reduction strategy ?

The most important thing that you MUST do is seek advice from a qualified advisor – Jack A. Bass, B.A. LL.B. (someone who understands international tax jurisdictions and tax law) . Your advisor must understand the benefits of particular offshore jurisdictions. It is your responsibility to take action.

In most jurisdictions you can set up your offshore company in as little as a few weeks. We most often start the process with registering a company name and sending in the right documentation and supporting documents for the incorporation and a bank account(s) or merchant account for you and your business.All of this can be conducted by internet on in rare cases we will attend in person – for you.

Contact Information:

To learn more about asset protection, trusts ,offshore company formation and structure for your business interests (at no cost or obligation)

Email info@jackbassteam.com  OR

Telephone  Jack direct at 604-858-3202

Monday – Friday 10:00- 4:00 Pacific Time Zone ( same as Los Angeles)

Do You Have A Plan – or are you just planning to think about a plan ?

 

Molycorp Inc Financial Collapse : The Fall of Rare Earth Industry

Molycorp went public in 2010, a period when prices for rare earth metals like dysprosium and neodymium were sky high.

Jacob Kepler/Bloomberg Molycorp went public in 2010, a period when prices for rare earth metals like dysprosium and neodymium were sky high.

North America’s flagship rare earth mining company is at risk of collapse, a symbol of how far the entire industry has fallen from its highs a few years ago.

Molycorp Inc. warned on Monday night that it may not be able to continue as a going concern if it can’t fix its balance sheet. The Colorado-based company has US$1.7 billion of debt, including US$206.5 million of convertible notes that mature in June of 2016. It is bleeding cash from operations and is not in a position to meet its future obligations. Its cash position was down to US$212 million at the end of December.

“We are focused on this issue and have retained financial and other advisers to assist us in strengthening our current financial position,” chief financial officer Michael Doolan said on a conference call.

The stock plunged 35% on Tuesday to close at just US48¢, giving Molycorp a market value of US$117 million. It is a stunning fall for a company that was worth almost US$80 a share at its peak in 2011, and acquired Canadian firm Neo Material Technologies Inc. for US$1.3 billion.

Molycorp went public in 2010, a period when prices for rare earth metals like dysprosium and neodymium were sky high. China, which controlled nearly all rare earth production, slapped massive export quotas on the metals that year and created supply disruptions worldwide. Rare earths have a number of important uses in sectors such as automobiles, green energy and consumer electronics, and limiting supply gave Chinese firms a potential advantage.

However, the jump in prices was short-lived. China removed the export quotas — which never worked particularly well — after the World Trade Organization deemed them illegal, and production from China and other parts of the world has expanded over the last few years.

Demand has also been soft for some rare earth products, and prices have dropped well over 50% for many of the metals.

Molycorp’s Mountain Pass mine, located in California, is the biggest rare earth project outside of China. However, it has not lived up to expectations thus far. The company has faced operational problems and has struggled to ramp up production, despite some recent improvements.

Those issues, combined with plunging prices, have put Molycorp in a tenuous financial position. The company lost US$329.8 million in the fourth quarter of 2014, which includes US$231.7 million of impairment charges. Its cash position dropped 33% year-over-year.

“We have incurred and will continue to incur operating losses due to continuing softness in product pricing, inconsistent or depressed demand for our products, and the delayed ramp-up of operations at our Mountain Pass facility,” Mr. Doolan said.

Molycorp continues to face significant capital spending requirements and interest payments on its debt, which put additional pressure on the balance sheet. The company said it does not believe it has breached any debt covenants, but noted that some covenants are “subject to interpretation.”

Additionally, Molycorp said it is not meeting listing requirements of the New York Stock Exchange and may be delisted. The company is considering a share consolidation to meet minimum share price requirements on the exchange.

Like Molycorp, Canadian rare earth companies have shed nearly all of their value in the last few years. Shares of Avalon Rare Metals Inc. are down 97% from their 2011 high, while Quest Rare Minerals Ltd.’s shares have dropped 98%.

 Protect your portfolio from the taxman  http;//www.youroffshoremoney.com

Dry bulk shippers: Stocks fall on lower capesize rates

 

Dry bulk shippers: Stocks fall on lower capesize rates

16 Mar 2015 – Reuters
BUZZ-Dry bulk shippers: Stocks fall on lower capesize rates** Shares of dry bulk shippers down 1.2-5.5 pct

** The capesize index down 1.59 percent at 372 points

** Average daily earnings for capesizes, which typically transport 150,000-ton cargoes such as iron ore and coal, fell $60 to $3,922

** Reports of laid up capesizes have started to mount and the BDI rates (rates for ships carrying dry bulk commodities) are showing no signs of recovery, Morgan Stanley analysts Fotis Giannakoulis says

** Star Bulk Carriers Corp down 5.5 pct; DryShips Inc down 4 pct; Navios Maritime Holdings Inc down 3 pct; Scorpio Bulkers Inc down 1.7 pct; Knightsbridge Shipping Ltd down 1.5 pct; Safe Bulkers Inc down 1.2 pct

DRYSHIPS INC(DRYS:NASDAQ, US)

0.7256USDDecrease0.0339(-4.46%)Volume: 
Above Average
As of 19 Mar 2015 at 10:05 AM EDT.



QUOTE DETAILS

Open 0.7500 P/E Ratio (TTM)
Last Bid/Size 0.7250 / 2 EPS (TTM) -0.10
Last Ask/Size 0.7258 / 11 Next Earnings 20 May 2015
Previous Close 0.7595 Beta 2.61
Volume 1,624,275 Last Dividend
Average Volume 5,072,012 Dividend Yield 0.00%
Day High 0.7595 Ex-Dividend Date
Day Low 0.7200 Shares Outstanding 670.0M
52 Week High 3.70 # of Floating Shares 551.8972M
52 Week Low 0.7200 Short Interest as % of Float 1.29%
DRIP Eligible No


Consensus Recommendation Provided by Thomson Reuters

3.25
Strong Sell
Strong Buy

COMPANY DESCRIPTION

DryShips Inc. (DryShips) is a provider of marine transportation services. The Company is the owner of drybulk carriers and tankers that operate across the world. The Company provides its services to dry bulk and petroleum cargoes. Through its owned subsidiary, Ocean Rig UDW Inc., DryShips owns and operates 13 offshore ultra deepwater drilling units, consisting of 2 ultra deepwater semisubmersible drilling rigs and 11 ultra deepwater drillships

 

The Economist explains : Everything you want to know about falling oil prices

Why is the oil price falling?
Mostly because of increased supply from America—up by 4m barrels a day since 2009. Although most crude exports are still banned, American imports have plummeted, contributing to a glut on world markets. Other producers have decided not to try to curb their production and keep the price up.

Highly indebted companies are going bust, with knock-on effects on investors.

Oil Slump Extends to a Fifth Week as Global Glut Seen Expanding

Why?
The Organisation of Petroleum Exporting Countries is dominated by Gulf producers, notably Saudi Arabia. They have huge reserves to cushion the impact of low prices. They also hope that the slump will eventually shut down high-cost production, tightening the market again.

Are they right to think that?
Probably not. America’s shale production boom is based on new techniques—fracking and horizontal drilling—and unlike “big oil” involves small companies and small projects. These are flexible, meaning they will quickly respond to any price rise. And they are innovative: huge productivity gains still lie ahead.

What about the other producers?
Other producers such Nigeria and Venezuela are indeed hurting badly. But OPEC solidarity stretches only so far. Russia tried and failed to get OPEC support for a production curb—and is now ramping up its production in the hope of protecting the volume of oil revenues.

Will low prices continue?
It looks like it. Some high-cost production is closing, but once wells are drilled, it usually makes sense to keep pumping, even at a loss. It is better to make a little money rather than none. And the shale revolution is marching on.

How low can the price go?
If your correspondent could forecast that, he would be on a yacht reading The Economist rather than at a desk writing for it. But much below $40 will sharply increase bankruptcies, and the pressure on OPEC to curb production. Cheap energy also leads to higher demand.

What happens next?
The debate about lifting America’s ban on crude exports is firing up. The petrochemical and steel lobbies are fighting a rear-guard action against big oil. America’s domestic crude (light and sweet) is unsuited for the nation’s refineries (configured for sour and heavy imported oil)—but would make a lucrative export.

Who benefits from low prices?
Winners necessarily outnumber losers (imagine a world in which energy was free). Consumers have more cash in their pockets; industry enjoys lower energy costs, makes bigger profits, and pays more taxes. And it is a great time for companies with strong balance-sheets to make acquisitions.

And who suffers?
The oil industry’s immediate reaction is to squeeze costs out of its supply chain. So wages and margins are falling fast. Highly indebted companies are going bust, with knock-on effects on investors. But lower costs help the industry adapt and increase efficiency.

UPDATE March 19

 

(Bloomberg) — Oil trading near the lowest price in six years is headed for a fifth weekly drop amid signs the global supply glut is worsening.

Futures were little changed in New York after falling for the seventh time in eight days on Thursday. The Organization of Petroleum Exporting Countries needs to keep its production target unchanged to maintain market share, said Kuwait, the group’s third-largest member. Iran may increase oil exports within months of reaching a deal on its nuclear program, according to U.S. and European officials.

Oil has renewed its slump after losing almost 50 percent last year as U.S. crude stockpiles expand to the highest levels in more than three decades, even as drillers idled the number of active rigs to the fewest since 2011. OPEC maintained its quota at 30 million barrels a day in November, resisting calls to curb output amid surging supply from shale producers.

“The demand-supply imbalance is going to need to be fixed by an adjustment to supply,” Ric Spooner, a chief strategist at CMC Markets in Sydney, said by phone. “Traders are waking up to the harsh reality of the U.S. inventory builds and it’s getting difficult to ignore that.”

West Texas Intermediate for April delivery was at $43.92 a barrel in electronic trading on the New York Mercantile Exchange, down 4 cents, at 11:39 a.m. Sydney time. The contract, which expires on Friday, closed at $43.46 on March 17, the lowest since March 2009. The volume of all futures traded was about 81 percent below the 100-day average.

Crude Supplies

WTI’s more active May contract was 21 cents higher at $45.74 a barrel. Front-month prices have decreased 18 percent this year.

Brent for May settlement was 15 cents higher at $54.58 a barrel on the London-based ICE Futures Europe exchange. It slid $1.48 to $54.43 on Thursday. The European benchmark crude traded at a premium of $8.85 to WTI for the same month, compared with $9.83 on March 13.

OPEC, which supplies about 40 percent of the world’s crude, has no plans for an extraordinary meeting to discuss ways to shore up prices, Kuwait Oil Minister Ali Al-Omair said in Kuwait City. The 12-member group, scheduled to gather on June 5, pumped 30.6 million barrels a day in February, exceeding its quota for a ninth straight month, data compiled by Bloomberg show.

World powers have offered to suspend restrictions on Iran’s oil exports if the Islamic Republic accepts strict limits on its nuclear program for at least a decade, said U.S. and European officials who spoke on condition of anonymity.

Crude stockpiles in the U.S., the world’s biggest oil consumer, gained by 9.62 million barrels to 458.5 million through March 13, according to the Energy Information Administration. That’s the highest level in weekly records from the Energy Department’s statistical arm dating back to August 1982. Production climbed to 9.42 million a day, the fastest pace since at least January 1983.

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