Recently, international crude oil prices have fallen to a low of more than 20 years, falling below 20 US dollars per barrel, and some varieties have even turned negative. It is understood that the break-even point of crude oil production in most oil fields in China is 50-60 US dollars per barrel. Low oil prices have posed serious challenges to the operations of the three major domestic oil giants. In recent days, senior executives of the three major oil giants: PetroChina, Sinopec, and CNOOC have successively held meetings and spoken out, requiring companies to take countermeasures and prepare to accept the challenges of the “darkest moment.” Making long-term mental preparations and promoting cost reduction and efficiency improvement are the unanimous choices of the “three barrels of oil” in the face of the plummeting oil prices.
Chairman of PetroChina:
The company has once again reached a critical juncture for survival and development
On the afternoon of April 24, the largest oil and gas production and supply enterprise in China: PetroChina China National Petroleum Corporation (hereinafter referred to as PetroChina) held a symposium of academicians and experts. Dai Houliang, Chairman and Party Secretary of PetroChina, said at the meeting that PetroChina shoulders a major responsibility in ensuring national energy security and maintaining the stability of the oil and gas industry chain. The group company has once again reached a critical juncture for survival and development. It must rely closely on technological innovation and management innovation to lead the company through the current “darkest moment.”
Facing the complex and severe situation and facing unprecedented challenges, Dai Houliang required to do a solid job “Six Stability” work, implement the “Six Guarantees” task, be good at turning pressure into motivation, have the courage to overcome difficulties, solidly carry out quality and efficiency improvements, overcome risks and challenges, and win development initiative.
He pointed out that the level of international oil prices depends on the market, and controlling the costs of enterprises depends on themselves. Low cost is not a short-term emergency measure, but a long-term strategic move. At the same time, enhanced oil recovery technology should be regarded as a top priority for the sustainable and high-quality development of upstream business. It is necessary to pay close attention to the basic, forward-looking and disruptive technologies in the energy industry and combine basic research with applied research.
On April 20, the Party Group of China National Petroleum Corporation held a meeting and proposed that the current challenges are unprecedented. It is necessary to fully estimate the difficulties, risks and uncertainties, effectively enhance the sense of urgency, and make a solid foundation. Promote special actions to improve quality and efficiency.
Sinopec Chairman Zhang Yuzhuo:
Be prepared for a protracted war
On April 24, Sinopec Group held the ninth meeting of the third board of directors. Chairman Zhang Yuzhuo said that the company Production and operations are facing unprecedented difficulties and challenges. It is necessary to break the complex of high oil prices, optimize investment arrangements, deepen cost management, reduce expenses, be prepared for a protracted war, and make full efforts to reduce costs and increase efficiency.
He also said that debt risks must be strictly guarded to ensure that the debt ratio and debt scale are under control. It is necessary to strictly guard against capital risks, attach great importance to customer credit risks, and strengthen credit management; closely track and judge financial market risks to prevent exchange risks; strengthen free cash flow management to ensure the safety of assets and funds.
In addition, we must vigorously implement the new development concept and strive to build a world based on energy resources, with clean energy and synthetic materials as two wings, and new energy, new economy, and new fields. The “one base, two wings and three new” development pattern is an important growth point to build the world’s leading clean energy and synthetic materials company.
Chairman of CNOOC:
Strengthen confidence, reduce costs, improve quality and efficiency
On April 24, Wang Dongjin, Chairman of CNOOC, pointed out at the meeting that we must resolutely respond to low Oil prices challenge tough battle. We must attach great importance to the huge impact of the sharp drop in international oil prices on the company, be fully prepared to deal with the challenge of low oil prices in the long term, firmly establish the idea of living in “tight lives” and “hard lives”, and solidly carry out activities to reduce costs, improve quality and efficiency. We should regard the pursuit of cost leadership as an important starting point to deal with risk challenges, increase revenue and reduce expenditure, practice hard on internal skills, focus on improving cost control capabilities, and strive to make the company’s development foundation more solid and its ability to resist risks further improved. It is necessary to take multiple measures to improve efficiency, continuously enhance value creation capabilities, insist on seeking benefits from technological innovation, deepening reforms, performance appraisals, optimizing structures, and improving management, turn crises into opportunities, and strive to achieve high-quality development of the company under the new situation.
International oil prices fell
The losses in China’s petrochemical industry continue to expand
In March 2020, the China Petroleum and Chemical Industry Federation released the “2019 Economic Operation Report of China’s Petroleum and Chemical Industry “, the report shows that in 2019, against the backdrop of falling international oil prices, the profits of petrochemical companies generally declined, and losses continued to expand, especially in the oil exploration industry.
As of the end of December 2019, the total profit of the petroleum and chemical industry was 668.37 billion yuan.lowest level in years. Research data from the Japan Energy Economic Research Institute are even more pessimistic. The Japan Energy Economic Institute predicts that global city blockades will lead to a drop in oil demand of 18.1 million barrels per day in the second quarter.
S&P analysis estimates that the remaining storage capacity of global crude oil and other energy resources is 1.4 billion barrels, of which: the remaining storage capacity on land is about 1 billion barrels, and the remaining storage capacity at sea is about 4 billion barrels. Even taking into account OPEC’s full production cuts, these storage spaces will be exhausted within 2-3 months.
Beware of the “dead cat jump” in the oil market, the “Monday Massacre” may reappear
Last Monday, the May contract of WTI crude oil showed a negative value for the first time in history, with the settlement price as low as -$37.63/barrel. Bulls suffered the most brutal “massacre” in history, with a weekly plunge of 32%. The largest weekly decline in history.
However, in the second half of last week, President Trump once again stirred up trouble in the Middle East, and tensions between the United States and Iran escalated, boosting the performance of oil prices.
In addition, Saudi Aramco has already cut production ahead of the OPEC+ production reduction agreement that took effect on May 1, according to a Saudi industry official with knowledge of the matter. Aramco has begun reducing production from about 12 million barrels per day to the deal’s level of 8.5 million barrels per day and could reach the target level by May 1, the person said. This comes after Kuwait, Algeria and Nigeria all said they planned to cut production ahead of the May 1 start date.
As a result, oil prices rebounded by more than 20% in the second half of last week, making up for some of the losses. However, beware of this “dead cat jump”!
Analysts believe that the problems of weak demand, oversupply and the imminent peaking of storage capacity are still plaguing the oil market. At least until the expiration of the June WTI crude oil contract, the market will still be in a storm Among them, oil prices may fall into negative territory again. What needs great attention is that the June Brent crude oil futures are about to expire this week (May 1), and the fluctuations in the crude oil market may be difficult to calm down.
Goldman Sachs Chief Commodity Strategist Jeffrey Currie predicts that global storage capacity may reach its limit in the next 3-4 weeks, leading to the tragedy of the “Monday Massacre” It may reappear, but unlike last Monday’s negative oil price for WTI crude oil, the next crisis may be a global event, and the scope of market fluctuations may be wider. Everything may not stop until supply and demand are restored to balance; investors may once again Paying money to sell oil unless U.S. shale producers slash output in the coming days rather than weeks.
Is a wave of U.S. energy bond defaults coming? Another oil company files for bankruptcy protection
On Sunday, U.S. offshore drilling contractor Diamond Offshore Drilling filed for bankruptcy protection.
After the shale drilling company Whiting Petroleum filed for bankruptcy protection, this is another American oil company that has fallen in the current round of oil price collapse. of dominoes.
Ten days ago, Diamond Seabed Drilling Company failed to pay US$500 million in interest to bondholders in a timely manner, and was subsequently downgraded by Moody’s and S&P, triggering a 30-day Grace period: Either pay off the debt or default.
According to bankruptcy protection filing documents, Diamond Seabed Drilling Company’s liabilities are US$2.6 billion, of which US$2 billion is bonds. Formally, the price recently fell to undesirable levels, between $0.12-0.13.
However, Diamond currently holds only about $435 million in cash.
The company said it had taken various actions to shore up its financial position, including borrowing $400 million through a revolving credit facility in March, but filing for bankruptcy protection was the latest step. Choices that benefit shareholders.
The company has assets of US$5.8 billion, revenue last year of US$981 million, and 2,500 employees.
Talk about the reasons, Diamond Seabed Drilling Company stated in documents submitted to the Houston Bankruptcy Court that after the outbreak of the epidemic and Saudi Arabia launched a price war, the offshore drilling industry deteriorated sharply.
Affected by the epidemic and the collapse of oil prices, the market demand for offshore oil drilling platforms and drill ships has dried up. As a result, U.S. offshore oil producers have shut down offshore oil wells in the Gulf of Mexico, resulting in significant Affects cash flow. Land drilling is also in trouble.
Moody’s also stated at the time that the oilfield services industry was one of the industries most severely affected and most widely affected by the epidemic, the collapse of oil prices, and the decline in asset prices.
The main U.S. oil contract is currently around $16/barrel. The production costs of high-sulfur oil in South Texas and ordinary oil in eastern Kansas are both above $50/barrel.
Oil production has now become a money-losing business, causing producers to suffer, and many companies have been forced to reduce or even stop production altogether.
The number of operating oil rigs in the United States is declining rapidly, from about 650 before the outbreak to 378 last week, the lowest level in four years , the number of closures exceeded 40%.
Shale oil producers in North Dakota have shut down more than 6,000 oil wells, reducing production by about 405,000 barrels per day, accounting for about 30% of the state’s total production.
Regulators in Oklahoma voted to allow oil drillers to shut in wells without losing leases; New Mexico made a similar decision.
Energy Rystad Energy said not long ago that when oil prices fall to $20, 533 U.S. oil exploration and production companies will face bankruptcy by the end of 2021; if it falls further to $10, More than 1,100 shale oil companies are expected to close down.
However, on April 20, the May contract of WTI crude oil futures fell into an unprecedented negative number. Subsequently, the June contract also fell to single digits.
Exploration companies shut in wells without losing leases; New Mexico made a similar decision.
Energy Rystad Energy said not long ago that when oil prices fall to $20, 533 U.S. oil exploration and production companies will face bankruptcy by the end of 2021; if it falls further to $10, More than 1,100 shale oil companies are expected to close down.
However, on April 20, the May contract of WTI crude oil futures fell into an unprecedented negative number. Subsequently, the June contract also fell to single digits.
</p
