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Oil pipeline operators’ 2011 profits soar to record

By Christopher E. Smith

Oil pipeline operators’ net income soared to an all-time high of $6.1 billion, a 33.3% increase from 2010 achieved on the back of a nearly 12% increase in operating revenues. The resulting earnings as a percent of revenue of 48.6% were also a record. The strong bottom line coincided with a more than 47% drop in changes to carrier property, as companies pulled back from major additions.

Natural gas pipeline operators meanwhile saw their profits slip more than 6% from 2010’s high to less than $4.9 billion. The dip in net income came despite a 3.8% increase in revenues, which reached more than $20.5 billion, their highest level since 2007 (Fig. 1).

Natural Gas pipeline performance trends

Natural gas pipeline companies’ weaker bottom lines, in contrast to oil carriers, came at least in part as a result of surging capital expenditures, with additions to plant totaling more than $14.4 billion (a 178% increase from 2010). Roughly $6.35 billion of this total, however, comprised just two projects; expansion at Florida Gas Transmission and building the Ruby Pipeline. Expenditures on operations and maintenance rose 5.3% to slightly more than $7 billion. Proposed newbuild mileage, however, was just 50.3% of 2010’s announced build, while planned horsepower additions of 184,405 were 79% of 2010’s total.

The easing in anticipated demand saw overall estimated $/mile pipeline costs slip nearly 30% to $3.1 million. Pipeline labor remained the single most expensive per-mile item, despite easing in absolute terms by the same 30% to roughly $1.38 million/mile.

The balance between estimated and actual costs narrowed for both pipeline and compressor projects completed in the 12 months ending June 30, 2012. Actual land pipeline costs varied from projected costs by only $50,000/mile, with lower than expected material and miscellaneous costs cancelling out labor costs that remained higher than expected. Actual compressor station costs were 7.2% less than estimated costs for projects completed by June 30, 2011. The only cost area that was higher than anticipated was land.  Read More

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UPDATE 5-Oil down on global impact of eurozone crisis

Crude oil futures fell below $98 a barrel on Tuesday, extending losses due to fears that the euro zone debt crisis will worsen and hurt the global economy, threatening growth in oil demand.

Optimism over a bailout for Spain’s troubled banks faded because of concerns about the package’s impact on public debt, while uncertainty surrounding elections in Greece on Sunday compounded worries the financial crisis in Europe will deepen.

European shares turned negative on Tuesday and the euro was flat, little changed at $1.2504 .

Brent crude futures slipped 76 cents to $97.33 by 0954 GMT. Earlier in the session, prices fell as low as $96.62 a barrel, close to this year’s low of $95.63 struck on June 4.

U.S. oil was down 52 cents at $82.18 a barrel after hitting a one-year low at $81.07.

“Europe is significantly affecting the growth outlook and, given China is already weak, further deterioration in the Eurozone crisis could tip the global economy into a recession,” said Guy Wolf, macro strategist at Marex Spectron.

“Despite that, the supply side in Energy does not look particularly bearish and the ‘Iran premium’ has been largely priced out.”  Read More

Oil Drops to 2012 Low on Chinese Output, Europe Debt

Oil dropped to a 2012 low after China’s industrial growth unexpectedly slowed in April and concern grew that Europe’s debt crisis will worsen, reducing fuel consumption.

Futures fell 1 percent after industrial output increased in China by the least since 2009. Prices also slumped as Spain said it will force lenders to raise provisions against real estate holdings and JPMorgan Chase & Co. (JPM) reported a $2 billion trading loss. Crude declined a second week after U.S. supplies rose to a 21-year high.

“There are a combination of factors pushing oil lower,” said Stephen Schork, president of the Schork Group in Villanova, Pennsylvania. “There’s a heck of a lot of oil out there, so supply isn’t a problem, and recent economic data along with the problems in Europe point to lower demand.”

Crude for June delivery fell 95 cents to $96.13 a barrel on the New York Mercantile Exchange, the lowest settlement since Dec. 19. Prices slipped 2.4 percent this week and are down 2.7 percent this year.

Oil in New York may extend losses after settling below the 200-day moving average for the first time since Dec. 19. The technical indicator stood at $96.27. Buy and sell orders tend to be clustered near chart-support levels.  Read More

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