U.S. oil producers pounced on this month's 20 percent rally in crude futures to the highest level since November, locking in better prices for their oil by selling future output and securing an additional lifeline for the years-long downturn.
The flurry of dealing kicked off when prices pierced $45 per barrel earlier in April. It picked up in recent weeks, allowing producers to continue to pump crude even if prices crash anew.
While it was not clear if oil prices will remain at current levels, it may also be a sign producers are preparing to add rigs and ramp up output.
This week, Pioneer Natural Resources Co, a major producer in the Permian shale basin of West Texas, said it would add rigs with oil prices above $50 per barrel.
Selling into 2017 tightened the structure of the forward curve, with December 2017's premium to December 2016 CLZ6, known as a contango, narrowing to $1.30, its tightest since June 2015. That spread had been as wide as $2.15 a barrel just four days earlier.
Open interest in the December 2017 CLZ7 WTI contract was at a record high of 122,533 lots on Friday, up about 20,000 lots from the start of April.
Rig Movers Consolidate, Diversify To Survive Oil Slowdown
May 2, 2016
With drilling activity in the Bakken at an 11-year low, workers who specialize in moving drilling rigs to new locations are often finding themselves parked.
“It’s definitely been difficult,” said Tony Lamping, general manager for Cruz Energy Services. “There’s just not as much work to do.”
Moving each rig to a new location can take two to four days of work, involving a lot of coordination and heavy equipment to disassemble the rig and transport it to drill the next well.
Cruz has been among the busiest companies in the Bakken that specialize in rig moves. But demand is a lot different with fewer than 30 rigs operating in the state, down from the 2012 high of 218.
Now the company is looking for efficiencies and diversification to survive the slowdown and keep a core of workers to be ready when oil prices recover, Lamping said.
Cruz Energy Services has locations in both Ray and Dickinson, but starting in June the company will consolidate and only operate from its shop in Dickinson. The move means about 50 workers will relocate to Dickinson, Lamping said.
Saudi Binladin Group to Lay Off 50,000 as Low Oil Prices Bite
May 2, 2016
Jeddah-based company to cut a quarter of its workforce, mostly construction-site workers from Asia
Saudi Binladin Group will lay off 50,000 people, according to a person briefed on the plans, as the construction giant attempts to turn around a business hammered by low oil prices.
The scale of the downsizing means the Jeddah-based conglomerate will cut about a quarter of its workforce. The people who were laid off, mostly construction-site workers from Asia, have been paid their outstanding salary and dues, according to the person familiar with the situation.
“The people laid off are not thrown in the street without pay,” this person said. “The Saudi Binladin group is extremely careful in honoring its commitments.”
A spokesman for SBG said the employees who were dismissed would receive full compensation and other entitlements.
“Adjusting the size of our manpower is a normal routine especially whenever projects are completed or near completion,” said a spokesman for SBG. “Most of the released jobs had initially been recruited for contracted projects with specific time frame and deliverables,” he added.
Baker Hughes To Buy Back Stock, Debt After Halliburton Deal Fails
May 2, 2016
Baker Hughes Inc. said it planned to buy back $1.5 billion of shares and $1 billion of debt, using the breakup fee it will receive following the collapse of its proposed buyout by fellow oilfield services provider Halliburton Inc.
The merger, valued at $35 billion when it was first announced in November 2014, would have created North America's largest oilfield services company to take on global market leader Schlumberger Ltd.
Baker Hughes will get $3.5 billion as part of the merger agreement, which the companies terminated on May 1 after opposition from U.S. and European antitrust regulators.
The U.S. Justice Department filed a lawsuit last month to stop the deal, arguing that it would leave only two dominant oilfield services companies.
Baker Hughes, which is focusing on the development of products that lower costs and maximize production for oil and gas producers, also said on May 2 it planned to refinance a $2.5 billion credit facility, which expires in September 2016.
The company said an initial phase of cost-cutting was expected to result in $500 million of an