Strike and low price impacts

Low prices

As the global market for oil and gas remains depressed, First Titan Corp. is seizing the opportunity to target and acquire undervalued and distressed energy assets well positioned to increase dramatically in value once oil and gas prices rise again. With oil currently trading at nearly half the price it was when the US boom was at its peak, domestic drilling and exploration has slowed down heavily, with the US rig count dropping to its lowest level in five years. Many oil and gas companies are feeling the pinch, looking to sell off assets and equipment to offset projected losses.

Those same assets could pay off handsomely for FTTN and its investors when oil and gas prices rise, said company CEO Sydney Jim. “There are now half completed wells all over the country that won’t stay dormant forever. Now is the time to pick up these assets at a big discount and build up our US portfolio in preparation for the next upswing in the market.”

Strikes

The United Steelworkers (USW) strike, which has entered its second month and expanded to 12 refineries, has had a limited overall impact on refined product markets thus far but may become an issue if it is prolonged, according to Fitch Ratings. This is especially true with regard to the US gasoline market. The overall impact of the strike has been blunted by several factors: 1Q is typically a low demand shoulder period; there remains adequate refined product inventories; and companies have been able to run most striking refineries using contingency plans. However, a prolonged strike could tighten up supply balances, particularly gasoline, as the US heads into its peak driving season. A prolonged strike would have case by case effects on the company level, depending upon which of a company’s refineries were affected, what the effects were on individual plant utilisation rates, and how much crack spreads move up in response to a strike for the rest of the market.

As estimated by Fitch, the percentage of refining capacity by company that is covered by a USW contract ranges from high levels to lower exposures. Entities with middling exposure include CITGO and Marathon Petroleum. It is important to note that calculations refer simply to the amount of crude distillation capacity that is covered by a union contract, not to whether individual refineries are experiencing or are expected to experience a strike.


Edited from press releases by Claira Lloyd

Published on 12/03/2015


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