Oil Markets Prepare For Bankruptcies, Layoffs And A Drilling Slowdown

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Friday, March 13th, 2020: It has been a horrific week for oil prices, and crude is down about 50 percent since the start of the year. Oil rebounded a bit on Friday following movement in the U.S. Congress to pass a coronavirus economic relief bill. Nevertheless, the near-term looks dire for oil markets, with supply rising quickly as demand continues to collapse.

Oil prices could stay in $30s for months. According to the 21 experts surveyed by Reuters, WTI Crude prices are set to average $30.37 a barrel in the second quarter this year and $37 for the full year.

Russia aims at U.S. shale. According to the Wall Street Journal, Russian President Vladimir Putin asked Rosneft’s chief executive prior to the collapse of the OPEC+ negotiations if Russian oil companies can withstand low oil prices. Igor Sechin replied that low oil prices “are great because they will damage U.S. shale.” Outwardly, Moscow does not link its motivations to an intention to harm U.S. oil companies, but Russia had grown weary of the OPEC+ cuts, which contributed to a 4-mb/d increase in U.S. shale over the past three years. Also, multiple reports suggest that U.S. sanctions on Nord Stream 2 and Rosneft stoked ire in Moscow.

BofA: Russia can withstand low prices. “Russian companies can ensure sustainable production until oil hits $15 to $20 per barrel,” Karen Kostanian, a Moscow-based oil and gas analyst with Bank of America, told Bloomberg.

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China’s oil trader tries to back out of deals. Unipec, the trading arm of China’s Sinopec, is trying to avoid taking delivery of at least four supertankers of oil for April, according to Bloomberg.

Premier Oil’s balance sheet under strain. Premier Oil (LON: PMO) could lose $1.2 million per day with oil prices below $40 per barrel, according to Bloomberg.

Oilfield service job cuts expected. Between 1,500 and 3,000 oilfield service jobs could be on the chopping block in the next two months, according to Primary Vision.

Shale drillers want 25% discounts from oilfield services. U.S. shale drillers are demanding price cuts from service companies, according to Reuters. Parsley Energy asked service providers “to reconsider your pricing,” and help them achieve an “at least 25%” reduction in costs. But oilfield servicers are arguably in a worse position. “Anyone dumb enough to ask for a discount today is an (expletive),” a drilling executive who did not want to be identified told Reuters.

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Occidental slashes dividend by 86 percent. Occidental Petroleum (NYSE: OXY) slashed its dividend for the first time in 30 years this week. The reduction of 86 percent comes just two weeks after CEO Vicki Hollub said that the dividend was one of the “defining characteristics” of the company. “This is genuinely frustrating and disappointing to see, especially after the repeatedly, consistently stated commitment to the dividend from management,” Raymond James analyst Pavel Molchanov wrote in a note.

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Hedges offer shale drillers a lifeline. A study of 30 shale drillers accounting for 38 percent of total U.S. oil production finds that roughly 50 percent of their output is hedged an average price of $56 per barrel. If WTI averages $40 this year, the hedges would save the companies a combined $10.5 billion; or $17 billion if WTI averages $25.

Oil-producing countries at risk of a downgrade. The collapse of oil prices could set off a wave of sovereign credit downgrades. Countries like Saudi Arabia, Iraq, Oman, Nigeria, and Angola are at most risk.

Equinor reports the case of coronavirus offshore. Equinor (NYSE: EQNR) said that one of its workers at an offshore installation in Norway tested positive for the coronavirus. The Martin Linge field is scheduled to start production at the end of the year.

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More mandatory cuts possible in Alberta. Crude-by-rail shipments from Alberta could fall by as much as 400,000 BPD next month, which will contribute to a buildup of storage in the province. Alberta’s Premier Jason Kenney said that mandatory cuts could be becoming. “We will use the curtailment tool responsibly to ensure at least a survival price for our producers,” Kenney said. Layoffs in Canada’s oil industry are also in the offing. “We, unfortunately, do expect to see a number of layoff announcements coming from the energy sector in the next two or three weeks,” Jason Kenney told reporters.

Oil industry spending cuts. Shale drillers announced a series of immediate cuts to CAPEX this week, hoping to weather the downturn. More cuts, layoffs, and bankruptcies are likely. Globally, Wood Mackenzie estimates that the oil industry could see $380 billion in cash flow vanish if Brent averages $35 per barrel this year, relative to $60.

U.S. postpones SPR sale. The U.S. Department of Energy was scheduled to sell 12 million barrels of oil from the strategic petroleum reserve (SPR) but canceled the sale in the wake of the downturn. Now, some industry lobbyists are pressing the government to instead buy oil for the SPR to help soak up some surplus.

Shale credit under stress. Roughly $110 billion in shale debt has fallen into the distressed territory, according to the FT. That is 12 percent of the $936 billion in bonds issued by U.S. oil and gas companies. “There is definitely a significant amount of default risk,” Michael Anderson, a strategist at Citi, told the FT. A lot of bonds are in the “danger zone,” he added.

50 oil tankers in Nigerian waters. Nigeria has about 50 cargoes of oil sitting offshore in international waters.

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Oil Markets Prepare For Bankruptcies, Layoffs And A Drilling Slowdown - Brand SpurOil Markets Prepare For Bankruptcies, Layoffs And A Drilling Slowdown - Brand Spur

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Oil Markets Prepare For Bankruptcies, Layoffs And A Drilling Slowdown - Brand SpurOil Markets Prepare For Bankruptcies, Layoffs And A Drilling Slowdown - Brand Spur

Latest News

Cityneon Raises S$235 Million; Well Positioned for Next Growth Chapter

  • The global experience entertainment company gets a S$235 million shot in the arm, closes its private fund raising in April 2021
  • Investors both new and existing include Singapore's Pavilion Capital, Seatown Holdings International and EDBI, Qatar's Doha Venture Capital and financial institutions and family offices in Singapore and China
  • These now join other existing Cityneon shareholders CITIC Capital, veteran entrepreneur and investor Mr. Johnson Ko, and Executive Chairman & Group CEO Mr. Ron Tan
  • Funding comes just after the Group acquired multi-year licensing rights for James Cameron's AVATAR touring exhibition, and two original artefacts IP on the ancient civilization Machu Picchu from Peru and Ramses the Great (Ramses II) from Egypt
  • Investments position the Group well to bring experiences across the globe, targeting to launch six experiences in China and five in the U.S. by the end of 2021, with more in other parts of the world
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SINGAPORE - Media OutReach - 21 April 2021 - Cityneon Holdings ("Cityneon", the "Company"/collectively with its subsidiaries, the "Group") raised S$235 million in the most recent round of private funding. The latest round of funding adds seasoned investors to Cityneon's already strong stable of shareholders.

This funding round was led by Singapore's Pavilion Capital, Seatown Holdings International, EDBI, and Cityneon's Executive Chairman & Group CEO, Mr. Ron Tan. EDBI and Pavilion Capital are existing shareholders of Cityneon whilst new investors include Seatown Holdings International, Qatar's Doha Venture Capital, which will now own approximately 4 per cent of the Group, and other financial institutions and family offices in Singapore and China.

These now join other existing Cityneon shareholders CITIC Capital, veteran entrepreneur and investor Mr. Johnson Ko, and Executive Chairman & Group CEO Mr. Ron Tan to form a new and strong shareholder base for the Group. Mr. Johnson Ko and Mr. Ron Tan remain as the largest shareholders of the company via their combined entity, West Knighton Limited.

The Group is now well positioned for its next growth chapter and will use the proceeds for capital expenditure that includes building more of its various intellectual property (IP) exhibition sets, totaling 24 travelling and four semi-permanent sets under the Studio IP partnerships and three travelling sets under the original artefact IP partnerships by the end of 2022.

Already, the Group just signed its fifth IP rights with Avatar from 20th Century Studios last year. Amidst the anticipation from Avatar fans worldwide, Cityneon will debut a multi-sensory Avatar exhibition in Chengdu, China in May 2021, ahead of the Avatar movie sequel which is slated for release in 2022. Avatar is the world's top grossing film of all time at over US$2.8 billion, and adding millions more after its successful re-release in China in March 2021. Avatar's director James Cameron has announced that he will be producing four sequels with 20th Century Studios, with the first sequel slated for release next year. Disney acquired 20th Century Studios for US$71 billion in 2019.

The Company also recently entered the original artefacts IPs space and will stage international exhibitions of the treasures of the ancient civilization Machu Picchu from Peru in Boca Raton, Florida and Pharaoh Ramses II from Egypt in Houston, Texas. These two experiences will start welcoming visitors in October and November 2021, respectively.

Other IP rights that the Group holds include partnerships with Universal Studios for Jurassic World: The Exhibition, Marvel for Avengers S.T.A.T.I.O.N., Lionsgate for The Hunger Games: The Exhibition and Hasbro for Transformers Autobot Alliance. All in, Cityneon holds the IP rights for five of the top 10 worldwide box office hits and two artefacts IP from Peru and Egypt. The Group expects to have six sets of its various IP rights travelling across China, and five travelling and permanent sets in the United States, with a few more in other parts of the globe.

The Group will also be reopening experiences that were temporarily closed in 2020, aiming to provide visitors with a safe entertainment option. These include the Marvel Avengers S.T.A.T.I.O.N. in Toronto, Canada that will be re-opening in May 2021; and the Marvel Avengers S.T.A.T.I.O.N. exhibition in Lotte Mall in Seoul, Korea in April 2021; the same exhibition space which previously housed Jurassic World: The Exhibition, another IP experience exhibition by the Group in 2019. In the past month, the Group also witnessed record visitor numbers at their semi-permanent installations in Las Vegas, USA, signaling a strong comeback and demand for their immersive experiences, as they step into the 6th year of operations there.

While there are exciting plans lined up, the Group is not resting on its laurels. More Hollywood IPs and artefact IPs can be expected, and there will be further announcements on new IP verticals in entertainment experiences that the Group is looking to enter.

Mr. Ron Tan, Executive Chairman & Group CEO of Cityneon, said: "It is exciting that the Company is going through such strategic expansion as one of the largest providers of exhibition entertainment experiences globally. The S$235 million funding round sets a solid foundation for us to invest in developing more of our entertainment experiences, to stage even more exhibitions of the five box office hits and two artefact IPs that we hold the rights to all over the world. I'm thankful that our strong investors base, now from Singapore, Hong Kong, China and the Middle East, have trust in our vision, and believe alongside us that this space of big ideas and big experiences will only grow."

By the end of this year, Cityneon will arguably be the largest provider of exhibition entertainment experiences internationally; with global footprints in more than 50 cities and welcoming 10 million unique visitors across the world by 2022.

Cityneon Holdings

With its global reach and international partnerships, Cityneon has the capability to serve its clients anywhere in the world. Cityneon was listed on the Mainboard of the Singapore Stock Exchange since 2005, and was privatized on February 2019 by West Knighton Limited, a company wholly owned by Cityneon's Executive Chairman and Group CEO, Ron Tan, together with Hong Kong veteran entrepreneur and investor, Johnson Ko Chun Shun. Johnson is a capital markets veteran and has held controlling interests and directorships in many listed companies. In May 2019, Cityneon welcomed CITIC Capital as a new shareholder, who holds approximately 10% shares in Cityneon. CITIC Capital is part of CITIC Group, one of China's largest conglomerates, and has over US$25b of assets under its management across 100 funds and investment products globally. Other institutional shareholders of the Group include EDBI - a Singapore government-linked global investor, and Pavilion Capital - a Singapore-based investment institution which focuses on private equity investments, that made strategic investments in August and October 2019 respectively, to support the Group's further expansion globally. For more information, please visit www.cityneongroup.com.


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