EXXON BEATS ALL PREVIOUS RECORD OF EARNINGS, TO MANY BILLIONS OF DOLLARS $$$$$$$$$$$ OVER 3 MONTHS

OLI GIExxon earned nearly $US11 billion ($A10.15 billion) in the first quarter, a performance likely to land it in the centre of the national debate over high gasoline prices.

The world’s largest publicly traded company on Thursday reported net income of $US10.65 billion ($A9.83 billion), or $US2.14 per share, in the first three months of the year. That compares with $US6.3 billion ($A5.81 billion), or $US1.33 per share a year ago. Revenue increased 26 per cent to $US114 billion ($A105.2 billion).

The results surpassed Wall Street estimates of $US2.04 per share on sales of $US112.6 billion ($A103.91 billion), according to FactSet.

The quarter was Exxon’s best since it earned a record $US14.83 billion ($A13.69 billion) in 2008′s third quarter. It comes at a time when some drivers are paying $US4 or more for gas and President Obama is threatening the oil industry’s multibillion-dollar tax subsidies.

Earnings grew across the company’s business segments. Income from its exploration and production business gained 49 per cent to $US8.7 billion ($A8.03 billion) while the company’s downstream business, which includes refineries, posted a huge 30-fold jump to more than $US1.1 billion ($A1.02 billion).

Anticipating a strong reaction to the results from drivers and politicians, Exxon said on a company blog on Wednesday that it has little control over the price of oil, which has risen to near $US113 per barrel. The company also noted that less than 3 cents of every dollar it earns comes from the sale of gasoline and diesel fuel.

That may not appease many motorists, however. The national average for a gallon of gas is $US3.89, about $US1.02 more than a year ago. It’s above $US4 in 8 states and the District of Columbia. And on Thursday, the Commerce Department said economic growth slowed sharply in the first quarter, partly because of high gas prices.

On the blog, Ken Cohen, Exxon’s vice president of public and government affairs, said the company was anticipating “the inevitable headlines and sound bites about high gasoline prices and what to do about them” after the earnings were reported.

Exxon’s huge profit followed similar results by other oil companies.

Europe’s largest oil company, Royal Dutch Shell PLC, reported $US8.78 billion ($A8.1 billion) in first-quarter profits, up 60 per cent from a year ago. BP PLC’s quarterly earnings rose 16 per cent to $US7.2 billion ($A6.64 billion). ConocoPhillips said net income grew 43 per cent to $US3 billion ($A2.77 billion) and Occidental Petroleum Corp said earnings climbed 46 per cent to $US1.55 billion ($A1.43 billion).

Exxon Mobil Corp increased earnings even though it produced less oil and natural gas liquids. Benchmark crude prices rose 20 per cent from a year ago.

The company has increasingly focused on producing natural gas. Exxon expects natural gas to displace coal as the second most important fuel source within the next decade, and last year it acquired XTO Energy to become the largest US natural gas producer.

Natural gas production increased 24 per cent in the quarter for Exxon, but prices declined as other companies followed Exxon’s lead and rushed to develop underground shale gas deposits in North America. Natural gas prices fell nearly 16 per cent from a year ago.

AP   Sourced & published by Henry Sapiecha

Booming WA economy

sends surplus soaring

through the $1bn mark

March 1, 2011

WA’s mining boom is raking in the money for the state government.

Western Australia’s burgeoning mining royalties have continued to strengthen the state’s economy, with the government sector recording a $1.1 billion surplus for the first half of the financial year.

The operating surplus of $1.1 billion for the first six months of 2010/11 is a huge turnaround from the $259 million operating deficit for the first half of 2009/10.

Treasurer Christian Porter said the WA Quarterly Financial Results report showed the state reaped nearly $12.3 billion worth of revenue for the first half of 2010/11.

That is up by $2.1 billion on the same period last financial year.

“The main driver of this increase was a rise of $964 million in mining royalties, partly due to the state government’s successful negotiations to remove the royalty concession on iron ore production,” Mr Porter said.

Increased taxes added an extra $509 million to revenue as well as the one-off payment of $350 million by BHP Billiton and Rio Tinto resulting from changes to the State Agreement Acts.

The report revealed that the property and retail sectors remained subdued in the first half of 2010/11, resulting in lower stamp and other transfer duties, which were down $89 million.

General government sector expenditure was also up $761 million, blowing out by 7.3 per cent because of higher grants spending and the government’s one-off payroll tax rebate.

However, Mr Porter said the December result showed that public sector salaries grew by only 4.9 per cent and reflected the government’s effort to rein in spending.

Public sector net debt also rose by $446 million in the first six months of 2010/11, in line with planned spending on major infrastructure.

Spending on public infrastructure was up $338 million from the same period in 2009/10 due to construction on the Southern Seawater desalination plant, Fiona Stanley Hospital and other health infrastructure projects.

Sourced & published by Henry Sapiecha

Santos Commits to $16 Billion

Queensland LNG Project

January 13, 2011, 12:49 AM EST

Jan. 13 (Bloomberg) — Santos Ltd., Australia’s third- largest oil producer, has committed to building a $16 billion liquefied natural gas project, helping the Queensland state economy recover from “devastating” floods.

Santos and partners Total SA, Petroliam Nasional Bhd. and Korea Gas Corp. will develop a venture at Gladstone that’s expected to produce 7.8 million metric tons of LNG a year and create 5,000 construction jobs, the Adelaide-based company said in a statement today. The site is about 550 kilometers (340 miles) north of the state capital Brisbane, which is experiencing its worst floods since 1974.

“These floods will have a lasting personal, environmental and economic impact on Queensland,” Santos Chief Executive Officer David Knox said on a call with reporters. “This project will be helping Queensland to get back on its feet.”

The venture is one of four on the central Queensland coast planning to liquefy gas extracted from coal deposits for shipment to Asian clients. BG Group Plc, the U.K.’s third- largest gas producer, said on Oct. 31 that it would build the Queensland Curtis LNG development at a cost of $15 billion.

“It’s all down to project execution now,” said Benjamin Wilson, an analyst at JPMorgan Chase & Co. in Sydney. Because of competition for labor, it’s important to approve engineering and construction contracts “as quickly as possible.”

Costs, Jobs

Santos rose after the announcement, advancing 2.2 percent to A$13.45 at the 4:10 p.m. close in Sydney, the most in more than three weeks, compared with a gain of 1.5 percent for the benchmark S&P/ASX 200 Index.

The oil and gas explorer has said it is signing contracts for the development of the project at fixed prices to reduce the risk that labor shortages will drive costs higher. Santos has awarded work to Bechtel Corp., Saipem SpA and Fluor Corp.

BG has said its venture is expected to generate 5,000 construction jobs during the next four years. BG’s project will have two processing units with a combined capacity of 8.5 million tons of LNG a year.

Santos anticipates 1,500 jobs from the project in the first half of this year and that construction will gradually “ramp up” before peaking in 2013, Knox said. The Australian company will own 30 percent of the project, while Kuala Lumpur-based Petroliam Nasional, or Petronas, and Paris-based Total will each own 27.5 percent. Korea Gas will have 15 percent.

Rebuilding After Floods

“Proceeding now with projects like this will be a tremendous boost to the Queensland economy as we recover from the devastating impact of the floods,” state Premier Anna Bligh said in the Santos statement.

The venture aims to begin exports in 2015, generating an average of $6 billion in annual revenue and has combined supply agreements worth more than $120 billion, Santos said last month.

“This project and economic development more generally is important in underpinning the skills, tax revenue, wealth and capacity to respond and rebuild in the aftermath of the current flood crisis in Queensland,” Australian Energy Minister Martin Ferguson said in the statement.

ConocoPhillips and Origin Energy Ltd. plan a rival coal- seam gas-to-LNG venture in Queensland targeting rising Asian demand for cleaner-burning alternatives to coal. Arrow Energy, acquired last year by Royal Dutch Shell Plc and PetroChina Co., proposes a fourth LNG project in the state.

Gorgon LNG

Santos is feeding its project with gas resources from the Bowen and Surat Basins in southeast Queensland and building a 420-kilometre pipeline to Gladstone. The floods aren’t expected to cause any delays to the development schedule, Knox said.

Santos has “plenty of reserves available to us” to support two LNG processing units, or trains, at the Gladstone site, Knox said on the call.

The Santos-led venture will have more than half the capacity of the A$43 billion Gorgon LNG project that Chevron Corp. and partners Exxon Mobil Corp. and Shell are building in Western Australia. The country’s largest resources development is due to begin LNG exports in 2014 from a three-unit, 15 million ton-a-year facility and may add a fourth and perhaps a fifth processing unit.

LNG is natural gas that has been chilled to liquid form, reducing it to one-six-hundredth of its original volume at minus 161 degrees Celsius (minus 259 Fahrenheit), for transportation by ship to destinations not connected by pipeline. On arrival, it’s converted back into gas for distribution to power plants, factories and households.

Sourced & published by Henry Sapiecha

CURRENCIES OUTLOOK

As long as there are no other strong material fundamental circumstances prevailing in any single commodity the dollar/commodity correlation overrides all else. This is especially true for precious metals. We remain bullish of gold although the trade is an overcrowded trade we see further upside given the level of geopolitical and economic uncertainty in the immediate future. We are convinced that the driving force behind gold’s strength is not inflation nor the dollar devaluation but the acceptance that gold has become the world’s third most popular ‘currency’ and that it will move past the euro soon and into second place. The euro will become less attractive to traders, investors and asset managers while their need to hold gold will grow.

We see any short-term weakness in gold as a buying opportunity supported by increasing uncertainty related to the euro-zone and rising inflation in Asia, particularly China.

COMMODITIES OUTLOOK

World equity markets need a reason to rally – they may be getting their wish!

The Australian economy will continue to benefit from Asian growth during 2011 while Europe and the US limp along while dealing with their own problems. I expect a two speed global economy in 2011 with Chinese and Indian growth around 10% and Europe and the US at 2%.

A major structural change is under way in the global economy with emerging economies again set to outperform developed countries. The major risk to the global economy is still Europe, I expect more of the feared risks of sovereign debt to realise during 2011, possibly a major national default or a bank collapse.

Chinese Vice Premier Li Kuqiang has been touring in Europe and particularly Spain promising to purchase Spanish debt, a sign of the continuing expansion of Chinese influence around the globe.

Australia’s future will be reliant on our continued relationship with China, or Asia as a whole. We are well placed in the region and as long as we can maintain strong economic and business relationships with China we will continue to grow. China is at-tempting to engineer a soft landing after inflation has spiked above 5% and heading toward 7%. The inflation spike is directly related to their stimulus spending of 2009/2010 and should be seen as a window of what is to come in the US.

Chinese regulators will keep raising interest rates and imposing controls on property investment and speculation, such as the rumoured property tax. Inflation is now China’s number 1 concern but I cannot see Chinese regulators moving so aggressively as to cause a hard landing or a crash. Chinese politicians are about to handover leadership to a new generation and I don’t see the economy being compromised at this key political turning point.
Last year, India, quietly rose to become Australia’s fourth biggest economic market. India is expected to grow at close to 10% in 2011.

The two-speed global economy will create problems for governments and central banks. The US Federal Reserve is expected to keep rates low for ‘an extended period’, at close to zero, and press ahead with their QEII policy of buying assets in the hope of stimulating the economy.

The US government must start to reign in its massive debt eventually but I think those decisions will not need to be made until into 2012. The QEII program will extend at least until June 2011 and will support positive sentiment over the same period. Fed Chairman Ben Bernanke said he was prepared to consider QEIII if it was needed. They have painted themselves into a corner, now that they have come so far with the stimulative measures they cannot turn back. They will press ahead in the hope that at some stage soon the economy will show signs of stronger recovery, and that may be happening now. We sense growing optimism in the US recovery as each new release of data highlights an economy attempting to recover. The ADP numbers released last week changed a lot of minds about the strength of the US economy and set the stage for the Unemployment Report.

We sense growing optimism in the US recovery as each new release of data highlights an economy attempting to re-cover. The ADP numbers released last week changed a lot of minds about the strength of the US economy and set the stage for the Unemployment Report on Friday night. The ADP report showed that business (mainly small business) added 297,000 jobs in December. That number forced published unemployment ‘ guesstimates’ to be revised downwards. The market was expecting a fall in unemployment to 9.7% from 9.8% leading into the report.

We should note that the correlation between the ADP jobs report and the official employment report is not perfect, so ‘as goes the ADP number, so goes the non-farm’, just not perfectly. The ADP number is much more volatile on a month-to-month basis.

As it turned out U.S. payrolls missed the forecast adding credibility to Federal Reserve Chairman Ben Bernanke comment that it could take ‘four or five more years’ for the labour market to completely mend. Payrolls increased 103,000, less than the median projection of 150,000. The jobless rate fell to 9.4% reflecting the shrinking workforce as Americans stop looking for work.

I still hold the very strong view that there can be no complete recovery in the U.S.A. without jobs; that is not to say that the current level of optimism in the U.S. is misplaced but without jobs the recovery picture will always be incomplete, a bit like a jigsaw with a missing piece.

The European Central Bank is not likely to raise rates from the current 1.00% in the near term and is most likely to come under severe pressure to continue to pump liquidity into the system to support Ireland, Spain, Greece and Portugal. The debt crisis in Europe will spread to Portugal, Spain, Italy and Belgium this year and as a result I expect a banking crisis. The key question in Europe is whether Germany will continue to be the main source of monies to pay for the bailouts. While the German economy is growing strongly and selling its manufactured goods to the Chinese they can afford to underwrite the bailouts but there are a lot of headwinds as Germany attempts to force EU members to get their houses in order.

Sourced & published by Henry Sapiecha

Thomson Resources – Seeking investors to participate in IPO

Thomson Resources Ltd (TMZ) has acquired a dominant tenement position, covering over 6,000 sq km, in a new, unexplored mineral belt – the Thomson Fold Belt in northern NSW. The area has many distinct similarities to the rich Lachlan Fold Belt which hosts world-class deposits. The first significant direct exploration in the area has revealed Cobar-type alteration and mineralisation at the first 5 anomalies tested by drilling.

TMZ’s IPO is current and a prospectus is available on the TMZ website. http://www.thomsonresources.com.au/

For more information about Thomson Resources, click here

Sourced & published by Henry Sapiecha

Fortescue approves $8.5b

Pilbara expansion

Andrew Forrest’s Fortescue Metals has given the go-ahead for an $US8.4 billion ($8.5 billion) expansion of its Pilbara iron ore operations.

The expansion from 55 million tonnes to 155 million tonnes-a-year is to be financed by bank or bond market debt facilities, cash reserves and cash flow from operations.

‘‘I would anticipate that we would take on an additional $US4 billion of debt to see us fund the expansion,’’ chief financial officer Stephen Pearce said.He said funds would be raised well in advance of the company’s requirement for capital spending.

The final mix of external debt and cash flows will depend on iron ore price movements. At present, the Pilbara iron ore producers are enjoying boom time prices of more than $US150 a tonne for the steelmaking raw material.

The cost of the expansion – at an effective $US84 per annual tonne – is a lower cost than most analysts think is possible. The biggest Pilbara iron ore producer Rio Tinto recently said $US130 a tonne for new capacity was now the case in the Pilbara.

“This decision will enable Fortescue to leverage its existing infrastructure and its massive land holding across the Pilbara to exponentially increase product sales within key markets of Asia, Europe and Australia,” Mr Forrest said.

“After years of planning for the next phase of development, the depth of management experience and breadth of construction and operational expertise will enable Fortescue to rapidly achieve its growth ambitions within a sector that is underpinned by an extraordinary demand profile,” Mr Forrest added.

Iron ore is already Australia’s biggest export earner. Exports in 2010-11 have been estimated by ABARE at $47.7 billion. At current prices, the additional production Fortescue is targeting is alone worth $15 billion.

Pilbara iron ore production is also immensely profitable, with costs for the big three producers – Rio, BHP Billiton and Fortescue – coming in at less than $US30 a tonne. Iron ore, along with coal, is subject to the Federal government’s mining tax.

Fortescue was 1 cent lower in recent trade.

with AAP

bfitzgerald@theage.com.au

Sourced & published by Henry Sapiecha

Woodside in defence mode

as Shell sells down

Australia’s biggest independent oil and gas company Woodside Petroleum is in takeover defence mode after long-time shareholder and technical adviser Shell offloaded a 10 per cent stake for $3.3 billion.

The sale will leave Shell with a 24.27 per cent Woodside stake but has signalled that Shell is an eventual seller of the rest of its stake, with BHP Billiton a candidate following its inability to secure Canadian government approval last week for its $40 billion hostile takeover bid for crop nutrient producer Potash Corp.

Shell’s divestment to a spread of investors through UBS AG is at $42.23 a share.

That is at a discount to Woodside’s closing market price today of $45.86 a share – a higher level reached in recent days in response to speculation that BHP would now turn its attention to the operator of the North West Shelf gas project following the Potash disappointment.

Shell has told buyers of the offloaded stake that it will stick around with the rest of its holding for at least one year.

Shell chief executive Peter Voser said Shell’s selldown was part of the Anglo-Dutch giant’s drive to focus on direct investments, rather than indirect stakes. ‘‘We will manage our remaining position in Woodside over time in the context of our global portfolio.”

The selldown by Shell means that the world’s oil and gas majors – minus Shell – will be running the rule over the country’s premier liquefied natural gas producer.

The move by Shell comes as future management of Woodside is left in limbo following the recent decision by long-serving chief executive Don Voelte to return to America.

Sourced & published by Henry Sapiecha