Los Angeles gasoline gained to its highest level against futures in almost two weeks after Tesoro Corp. (TSO) was said to be planning repairs on a unit at its Southern California refinery in January.
The fuel advanced after Tesoro was said to plan maintenance on the hydrocracker in the Wilmington, California, section of its 363,000-barrel-a-day Los Angeles complex, according to two people familiar with the schedule. The work is expected to last six weeks, said one of the people, who asked not to be identified because the information isn’t public.
California-blend gasoline, or Carbob, in Los Angeles jumped 5 cents against futures traded on the New York Mercantile Exchange to a premium of 2 cents a gallon at 5:19 p.m. East Coast time, its highest level since Nov. 12, data compiled by Bloomberg show. Retail gasoline in California slipped 0.1 cent to $3.561 a gallon, according to Heathrow, Florida-based AAA. Tina Barbee, a Tesoro spokeswoman at the company’s headquarters in San Antonio, declined by e-mail to comment on the maintenance.
Carbob in San Francisco gained 1 cent against futures to a discount of 11.5 cents. The fuel had weakened earlier today after Tesoro’s 170,000-barrel-a-day Golden Eagle refinery in Northern California reported a “major unit” startup. The plant was also changing out a different unit, the company said in a filing with county regulators today.
The Golden Eagle refinery is performing planned maintenance, Barbee said.
The 3-2-1 crack spread of Alaska North Slope crude, Carbob in Los Angeles and state-grade diesel in Los Angeles, an indicator of refining profitability in the western U.S., narrowed $1.93 a barrel, or 15 percent, to $10.60 at 4:10 p.m.New York time, according to data compiled by Bloomberg, the lowest since Oct. 2.
Wednesday, November 27, 2013
Monday, November 18, 2013
One Dead As Fire Hits Chevron Refinery in Mississippi
HOUSTON, Nov 15 (Reuters) - A Chevron Corp worker was killed in a fire that broke out early Friday morning at a cracking unit at the U.S. oil company's 330,000-barrel-per-day refinery in Pascagoula, Mississippi.
Tonya Graddy, an "operator" with 5 years of service, was killed after a fire broke out at a furnace in a gasoline-making unit known as the "Cracking II area," Chevron said.
All other workers were accounted for after the plant's emergency teams put out the fire that started at 2 a.m. CST (0800 GMT), the company and officials from Jackson County and Pascagoula said.
The fire, which is under investigation, happened a day after a Chevron pipeline unrelated to the refinery exploded in rural Milford, Texas - shooting flames high into the air and prompting evacuations but causing no injuries.
The mishap was the latest in a string of accidents in the booming U.S. energy sector.
Chevron's board trimmed Chief Executive John Watson's 2012 bonus in a bid to hold managers accountable for "operational incidents" such as a major refinery fire in California, according to a filing with the U.S. Securities and Exchange Commission earlier this year.
Still, the Pascagoula refinery has received few citations for safety violations from the U.S. Occupational Safety and Health Administration.
OSHA cited the refinery in 2009 for 10 serious violations and 1 other violation as part of a nationwide effort to improve refinery safety after a deadly explosion in 2005 at what was then BP Plc's Texas City plant.
Cash gasoline prices on the U.S. Gulf Coast spiked briefly on news of Friday's fire before retreating, traders said.
MAINTENANCE BEFORE FIRE
The Pascagoula refinery appeared to have been undergoing some maintenance work before the fire, according to energy intelligence group Genscape, which reported on Thursday that a unit had shut down and then had begun restarting with another unit.
Genscape, which monitors activities at refineries by camera, said on Friday the restart of the 55,000-bpd catalytic reformer, which turns naphtha into gasoline components, was halted at the time of the fire.
It said the restart of a 29,000-bpd hydrocracker, which uses hydrogen to break down molecules into other refined products, had been completed and that all other units were online.
Chevron did not comment on the Genscape reports.
The refinery, which began operating in 1963, is the largest of three in Mississippi.
The plant can process and treat low-grade heavier, sour, foreign crude oil. It produces about 130,000 bpd of motor gasoline, 50,000 bpd of jet fuel and 68,000 bpd of diesel fuel, according to Chevron's website.
The Gulf Coast refinery network has started to emerge from seasonal work that drained stockpiles after plants cranked up runs to binge on cheap domestic feedstock and ship products abroad.
Since the start of September, distillate stockpiles in the region have fallen by 3.5 million barrels to 38.5 million barrels, nearly 2.8 million barrels below the five-year seasonal average. Gasoline inventories are off 5.2 million barrels over the past nine weeks, but at nearly 73 million barrels are 1.1 million barrels above the five-year average.
Tonya Graddy, an "operator" with 5 years of service, was killed after a fire broke out at a furnace in a gasoline-making unit known as the "Cracking II area," Chevron said.
All other workers were accounted for after the plant's emergency teams put out the fire that started at 2 a.m. CST (0800 GMT), the company and officials from Jackson County and Pascagoula said.
The fire, which is under investigation, happened a day after a Chevron pipeline unrelated to the refinery exploded in rural Milford, Texas - shooting flames high into the air and prompting evacuations but causing no injuries.
The mishap was the latest in a string of accidents in the booming U.S. energy sector.
Chevron's board trimmed Chief Executive John Watson's 2012 bonus in a bid to hold managers accountable for "operational incidents" such as a major refinery fire in California, according to a filing with the U.S. Securities and Exchange Commission earlier this year.
Still, the Pascagoula refinery has received few citations for safety violations from the U.S. Occupational Safety and Health Administration.
OSHA cited the refinery in 2009 for 10 serious violations and 1 other violation as part of a nationwide effort to improve refinery safety after a deadly explosion in 2005 at what was then BP Plc's Texas City plant.
Cash gasoline prices on the U.S. Gulf Coast spiked briefly on news of Friday's fire before retreating, traders said.
MAINTENANCE BEFORE FIRE
The Pascagoula refinery appeared to have been undergoing some maintenance work before the fire, according to energy intelligence group Genscape, which reported on Thursday that a unit had shut down and then had begun restarting with another unit.
Genscape, which monitors activities at refineries by camera, said on Friday the restart of the 55,000-bpd catalytic reformer, which turns naphtha into gasoline components, was halted at the time of the fire.
It said the restart of a 29,000-bpd hydrocracker, which uses hydrogen to break down molecules into other refined products, had been completed and that all other units were online.
Chevron did not comment on the Genscape reports.
The refinery, which began operating in 1963, is the largest of three in Mississippi.
The plant can process and treat low-grade heavier, sour, foreign crude oil. It produces about 130,000 bpd of motor gasoline, 50,000 bpd of jet fuel and 68,000 bpd of diesel fuel, according to Chevron's website.
The Gulf Coast refinery network has started to emerge from seasonal work that drained stockpiles after plants cranked up runs to binge on cheap domestic feedstock and ship products abroad.
Since the start of September, distillate stockpiles in the region have fallen by 3.5 million barrels to 38.5 million barrels, nearly 2.8 million barrels below the five-year seasonal average. Gasoline inventories are off 5.2 million barrels over the past nine weeks, but at nearly 73 million barrels are 1.1 million barrels above the five-year average.
Shell to sell Geelong refinery (AUS)
The future is uncertain for more than 400 Shell employees after the company announced it is selling its refinery in Geelong in Victoria.
A year ago, the general manager of the Shell refinery assured the community that he had no plans to close the Geelong operation.Today Shell Australia announced not a closure but a sale, which it hopes can take place by the end of 2014.
The vice-president of Shell Australia's downstream operations, Andrew Smith, says he regrets the uncertainty the sale creates for the company's employees.
"Naturally this announcement will be difficult for the hard-working people of the refinery," he said.
"Shell is committed to a timely sale process and during this time providing employees with counselling, employees with changed management support and a commitment to ongoing communication."
Australia's remaining refineries:
ExxonMobil Altona Refinery, VIC: Posted a loss in 2011 because of low margins and a big investment loadBP Bulwer Island Refinery, QLD: undergone several expansions, employs 340 people
Caltex Lytton Refinery, QLD: remaining open with a focus on operational and financial performance
BP Kwinana Refinery, WA: Australia's largest remaining refinery, employs 380 people
Caltex Kurnell Refinery, NSW: due to close 2014, 630 job losses
Shell Clyde Refinery, NSW: due to close this year, about 450 job losses
Shell Geelong Refinery, VIC: likely to be sold, 400 jobs under a cloud
"It's an uncertain time and there is a lot more that is unknown at the moment than is actually known," he said.
"Our only priority and concern at this point is the lives and jobs of our members and their families and community."
Mr Davis says he is not confident a buyer will be found and is concerned the plant could close.
"The Australian oil industry is obviously going through a rationalisation, that's a polite way of saying they're closing refineries and sacking employees," he said.
"We are desperately concerned to try and make sure the Geelong refinery remains a viable option."
The union says it is in the national interest that the refinery remain operational, or Australia could become increasingly exposed to interruptions in the international supply chain.
Victorian Premier Denis Napthine says Shell management told him they want to sell the refinery as a going concern so there would be ongoing demand for the skilled workers at the site.
"Victoria has proved time and time again that it is a great place to invest and the Coalition Government is giving Shell its full support in achieving a successful outcome," he said.
"I have asked to be kept informed by Shell throughout this process."
The refinery supplies 50 per cent of Victoria's fuel and 30 per cent of South Australia's fuel.
"If this refinery is closed and the sale is not achieved then Australia will become more dependent on imported fuel and more dependent on price spikes on the world market and less self-sufficient in its own energy needs and that would be terrible," Mr Davis said.
EU Duty-Free Jet Fuel Sets New Battle for World Refiners
LONDON, Nov 13 (Reuters) - U.S. refiners are expected to ship large volumes of jet fuel across the Atlantic starting in 2014 after the European Union scrapped an import duty on the product, opening a new battleground for the world's largest refineries, traders said.
U.S. Gulf refiners that have been pumping at record levels will offer stiff competition to established exporters to Europe from Asia and the Middle East, long exempt from a 4.7 percent duty due to a preferential trade status.
"The removal of the tariff will definitely make jet fuel from the United States more competitive," said Andrew Reed, analyst from the U.S.-based ESAI Energy consultancy.
Despite diminishing demand for jet fuel due largely to more-efficient aircraft engines, Europe has been a key market for refineries in Gulf Arab countries, India and South Korea.
In 2012, Europe imported around $20 billion of jet fuel, or one third of its total jet fuel needs of 1.2 million barrels per day (bpd), according to the International Energy Agency and traders.
However, the European Commission's move this month to remove duty on all jet fuel imports "regardless of their country of origin" opened Europe to the U.S. Gulf Coast refiners that benefit from proximity as well as cheap and abundant shale oil.
The decision is largely expected to be approved by the year's end, an EU official said.
U.S. exports to Europe have risen sharply in recent years but remain marginal at around 20,000 bpd in 2012, according to the U.S. Energy Information Administration.
Most of this volume goes to Britain, where airlines avoid duty on the jet fuel if used on aircraft heading out of the European Union, traders said.
"We are already seeing increased jet fuel exports to Europe and that just opens the gate wider. The U.S. has a steady surplus of jet fuel and as Latin America needs less, refiners will want to place it in Europe," ESAI's Reed said.
"South Korea has the most to lose. Those long-haul deliveries are at risk," he added.
Chinese refiners, flush with surplus product, may also seek a foothold in Europe.
WINNERS AND LOSERS
U.S. Gulf refiners, including Valero Energy Corp, Exxon Mobil, Marathon Petroleum Corp and Royal Dutch Shell Plc, are no newcomers to the transatlantic trade route, which has seen diesel flows reach record levels this year at above 2 million tonnes a month.
Neither are they strangers to competing in Europe's diesel market with refiners such as Reliance Industries Ltd, which operates the world's biggest refining complex in western India at 1.2 million bpd, or Middle Eastern plants.
Those include the recently launched 400,000-bpd Jubail refinery, a joint venture between Total and Saudi Aramco.
"Valero has been working to expand its production of distillates, including jet fuel but also diesel, because of increasing demand for distillates here in the U.S. and especially abroad," spokesman Bill Day told Reuters.
"We have the flexibility to take advantage of market conditions as they present themselves," he added.
Though import volumes will not change due to the duty reform, the price of jet fuel in Europe will likely decrease due to growing competition from outside. That will further pressure the region's refiners, which have seen profit margins slump in 2013 due to large diesel imports and weaker demand.
"This will give Europe another source of jet fuel and could potentially bring down prices in Europe," a trader said.
Jet fuel flows from the United States will likely fluctuate in 2014 because European traders and airlines have already locked in most term deals with Middle Eastern and Asian suppliers.
"I imagine there will be some fluctuations until a pattern emerges, probably in 2015," he said
U.S. Gulf refiners that have been pumping at record levels will offer stiff competition to established exporters to Europe from Asia and the Middle East, long exempt from a 4.7 percent duty due to a preferential trade status.
"The removal of the tariff will definitely make jet fuel from the United States more competitive," said Andrew Reed, analyst from the U.S.-based ESAI Energy consultancy.
Despite diminishing demand for jet fuel due largely to more-efficient aircraft engines, Europe has been a key market for refineries in Gulf Arab countries, India and South Korea.
In 2012, Europe imported around $20 billion of jet fuel, or one third of its total jet fuel needs of 1.2 million barrels per day (bpd), according to the International Energy Agency and traders.
However, the European Commission's move this month to remove duty on all jet fuel imports "regardless of their country of origin" opened Europe to the U.S. Gulf Coast refiners that benefit from proximity as well as cheap and abundant shale oil.
The decision is largely expected to be approved by the year's end, an EU official said.
U.S. exports to Europe have risen sharply in recent years but remain marginal at around 20,000 bpd in 2012, according to the U.S. Energy Information Administration.
Most of this volume goes to Britain, where airlines avoid duty on the jet fuel if used on aircraft heading out of the European Union, traders said.
"We are already seeing increased jet fuel exports to Europe and that just opens the gate wider. The U.S. has a steady surplus of jet fuel and as Latin America needs less, refiners will want to place it in Europe," ESAI's Reed said.
"South Korea has the most to lose. Those long-haul deliveries are at risk," he added.
Chinese refiners, flush with surplus product, may also seek a foothold in Europe.
WINNERS AND LOSERS
U.S. Gulf refiners, including Valero Energy Corp, Exxon Mobil, Marathon Petroleum Corp and Royal Dutch Shell Plc, are no newcomers to the transatlantic trade route, which has seen diesel flows reach record levels this year at above 2 million tonnes a month.
Neither are they strangers to competing in Europe's diesel market with refiners such as Reliance Industries Ltd, which operates the world's biggest refining complex in western India at 1.2 million bpd, or Middle Eastern plants.
Those include the recently launched 400,000-bpd Jubail refinery, a joint venture between Total and Saudi Aramco.
"Valero has been working to expand its production of distillates, including jet fuel but also diesel, because of increasing demand for distillates here in the U.S. and especially abroad," spokesman Bill Day told Reuters.
"We have the flexibility to take advantage of market conditions as they present themselves," he added.
Though import volumes will not change due to the duty reform, the price of jet fuel in Europe will likely decrease due to growing competition from outside. That will further pressure the region's refiners, which have seen profit margins slump in 2013 due to large diesel imports and weaker demand.
"This will give Europe another source of jet fuel and could potentially bring down prices in Europe," a trader said.
Jet fuel flows from the United States will likely fluctuate in 2014 because European traders and airlines have already locked in most term deals with Middle Eastern and Asian suppliers.
"I imagine there will be some fluctuations until a pattern emerges, probably in 2015," he said
Pemex Raises Questions on Future of New Tula Refinery
MEXICO CITY, Nov 15 (Reuters) - Mexican state oil monopoly Pemex said on Friday it is studying "the nature and timing" of its new Tula refinery following repeated delays and speculation that the project could be suspended pending the government's planned energy reform.
Planned for more than $10 billion, the Tula Bicentenario refinery would be Mexico's first such project since the late 1970s and has been the subject of controversy since Pemex omitted it from its five-year business plan last month.
Pemex has denied reports in Mexican media this month that said the project had been canceled.
Pemex chief executive Emilio Lozoya is likely to face questions on Tula's future when he takes part in public hearings in the lower house of Congress next week.
Earlier this week, the lower house said in a statement announcing the hearings that "cancellation of the Tula refinery" is among the possible items on the agenda for Lozoya.
In a filing with the U.S. Securities and Exchange Commission, Pemex said it is weighing its options on Tula.
"As of the date of this report, we are in the process of evaluating the nature and timing of this project," Pemex said.
President Enrique Pena Nieto hopes to push a major energy bill through Congress before the end of the year which the government hopes will spur billions of dollars in new investment across the industry, including in refining.
Gasoline imports have jumped in recent years as the country's six refineries have failed to keep pace with rising demand, despite Mexico's status as a major crude producer.
Announced with great fanfare in 2008, company officials have time and again denied the refinery in central Hidalgo state has been shelved, a position reiterated by Pemex refining unit chief Miguel Tame on Thursday.
Tame added that he expects basic engineering and other site preparations to be completed by December.
So far only a wall enclosing the perimeter of the project has been completed at the site 51 miles (82 km) north of Mexico City. Pemex had planned to finish the project by 2017, but officials have said that target is unlikely to be met.
The new refinery would be adjacent to the existing Miguel Hidalgo refinery, Mexico's second largest with a crude oil processing capacity of 315,000 barrels per day.
Planned for more than $10 billion, the Tula Bicentenario refinery would be Mexico's first such project since the late 1970s and has been the subject of controversy since Pemex omitted it from its five-year business plan last month.
Pemex has denied reports in Mexican media this month that said the project had been canceled.
Pemex chief executive Emilio Lozoya is likely to face questions on Tula's future when he takes part in public hearings in the lower house of Congress next week.
Earlier this week, the lower house said in a statement announcing the hearings that "cancellation of the Tula refinery" is among the possible items on the agenda for Lozoya.
In a filing with the U.S. Securities and Exchange Commission, Pemex said it is weighing its options on Tula.
"As of the date of this report, we are in the process of evaluating the nature and timing of this project," Pemex said.
President Enrique Pena Nieto hopes to push a major energy bill through Congress before the end of the year which the government hopes will spur billions of dollars in new investment across the industry, including in refining.
Gasoline imports have jumped in recent years as the country's six refineries have failed to keep pace with rising demand, despite Mexico's status as a major crude producer.
Announced with great fanfare in 2008, company officials have time and again denied the refinery in central Hidalgo state has been shelved, a position reiterated by Pemex refining unit chief Miguel Tame on Thursday.
Tame added that he expects basic engineering and other site preparations to be completed by December.
So far only a wall enclosing the perimeter of the project has been completed at the site 51 miles (82 km) north of Mexico City. Pemex had planned to finish the project by 2017, but officials have said that target is unlikely to be met.
The new refinery would be adjacent to the existing Miguel Hidalgo refinery, Mexico's second largest with a crude oil processing capacity of 315,000 barrels per day.
Thursday, November 7, 2013
Furmanite Futures - Barron's Report
10/28/13
Furmanite. The name sounds like a 1950s-era maker of floor coverings and countertops. But in fact, it's one of the largest global providers of specialized maintenance and inspection services to oil refineries, petrochemical plants, and offshore oil rigs. It's a very attractive investment, as well.
Since Charles Cox, a longtime industrial-services veteran, took over as CEO in 2010, Furmanite (ticker: FRM) has undergone a major transformation, by centralizing its previously disparate global operations.
From a company made up of 75 nearly autonomous service locations that operated regionally, Houston-based Furmanite has been remade into a cohesive operation offering its services across the globe. In addition, it has expanded its service lines, and it's now better positioned to benefit from the trend of oil and gas companies' preference for bigger providers in the heavily fragmented service market.
After a rocky ride that was made worse by a tough European economy last year, the changes are producing results. In the first half of the year, sales jumped 25%, and operating income nearly quadrupled, helped by a tailing off of restructuring costs. In August, management lifted its revenue and earnings guidance for the year.
The two Street analysts who follow the stock see sales growing 33% this year to $432 million -- with earnings of $17 million, or 45cents a share -- and 27% to $550 million in 2014. The company earned 11 cents a share in 2012. Furmanite is due to report third-quarter earnings on Nov. 1.
Investors have taken notice. The shares have doubled this year to a recent $ 10.84. Despite the rally, Furmanite's stock could have more room to run.
Ross Taylor, a portfolio manager at Somerset Capital Advisors, which owns Furmanite in its funds, thinks that over the next 18 months, the share price could increase by about 30%.
The new organizational structure, new lines of business, and growing demand for its services from the oil and gas industry could drive further gains.
Taylor estimates that in 2014, Furmanite could earn 68 cents to 70 cents a share. His estimate is above the 59 cents that the two Wall Street analysts who cover the company predict. At 20 times his 2014 estimate, in line with peers Team (TISI) and Mistras Group (MG), Taylor thinks the stock could be worth $14 a share.
Founded in the 1920s, as a maker of leak-sealing kits for steam-driven naval boats, Furmanite specializes in leak sealing and pipe-and-valve repair at high- pressure facilities. The company also provides testing and inspection services. Oil refineries and petrochemical plants account for 65% of sales. Power plants, offshore oil rigs, and mining customers account for the remainder.
Furmanite has 1,600 technicians who work out of 80 offices on six continents, with North America and Europe accounting for most of its business. Technicians work on-site at the client's plant. Much of the work is routine maintenance when the plant is shut down, but the technicians also work in emergency situations, during unplanned outages. This is very profitable, high-margin work.
Management has also been adding new lines of business, outside its traditional mechanical expertise, which could boost sales. Last year, the company began acquiring companies that provide plant-inspection services. The inspection business, while it is probably lower-margin than the traditional offering, could help Furmanite win more mechanical and repair work from customers that hire out the company as their inspector.
Matt Duncan, an analyst at Stephens, notes in a recent report that he believes "Furmanite has been aggressively going after market share in inspection," and that the business "could be a key growth driver."
In September, Furmanite bought the Gulf Coast project-management business of ENGlobal (ENG), which handles the management of oil and gas facilities. Similar to inspection, the work is lower-margin than its typical services, but the presence could help Furmanite score new repair work.
Future acquisitions that build on the company's offerings could also be in the cards. With just $40 million in net debt, management has plenty of flexibility to do just that.
On its second-quarter conference call in August, CEO Cox affirmed the growth strategy by saying, "We are continuing to define and target a larger market size, as well as a greater share of the larger market." He added that the company is looking forward to combining "the capabilities of ENGlobal's Gulf Coast operations with our mechanical and inspection services." Management couldn't be reached for comment.
Furmanite has the wind at its back. During the recession, its refinery and chemicals customers deferred routine maintenance to save on costs. That is no longer the case. U.S. oil refineries and petrochemical plants are running at high levels, due to renewed investment in oil and gas production, and cheap natural gas, a key feedstock. That bodes well for the company -- and the stock.
Furmanite. The name sounds like a 1950s-era maker of floor coverings and countertops. But in fact, it's one of the largest global providers of specialized maintenance and inspection services to oil refineries, petrochemical plants, and offshore oil rigs. It's a very attractive investment, as well.
Since Charles Cox, a longtime industrial-services veteran, took over as CEO in 2010, Furmanite (ticker: FRM) has undergone a major transformation, by centralizing its previously disparate global operations.
From a company made up of 75 nearly autonomous service locations that operated regionally, Houston-based Furmanite has been remade into a cohesive operation offering its services across the globe. In addition, it has expanded its service lines, and it's now better positioned to benefit from the trend of oil and gas companies' preference for bigger providers in the heavily fragmented service market.
After a rocky ride that was made worse by a tough European economy last year, the changes are producing results. In the first half of the year, sales jumped 25%, and operating income nearly quadrupled, helped by a tailing off of restructuring costs. In August, management lifted its revenue and earnings guidance for the year.
The two Street analysts who follow the stock see sales growing 33% this year to $432 million -- with earnings of $17 million, or 45cents a share -- and 27% to $550 million in 2014. The company earned 11 cents a share in 2012. Furmanite is due to report third-quarter earnings on Nov. 1.
Investors have taken notice. The shares have doubled this year to a recent $ 10.84. Despite the rally, Furmanite's stock could have more room to run.
Ross Taylor, a portfolio manager at Somerset Capital Advisors, which owns Furmanite in its funds, thinks that over the next 18 months, the share price could increase by about 30%.
The new organizational structure, new lines of business, and growing demand for its services from the oil and gas industry could drive further gains.
Taylor estimates that in 2014, Furmanite could earn 68 cents to 70 cents a share. His estimate is above the 59 cents that the two Wall Street analysts who cover the company predict. At 20 times his 2014 estimate, in line with peers Team (TISI) and Mistras Group (MG), Taylor thinks the stock could be worth $14 a share.
Founded in the 1920s, as a maker of leak-sealing kits for steam-driven naval boats, Furmanite specializes in leak sealing and pipe-and-valve repair at high- pressure facilities. The company also provides testing and inspection services. Oil refineries and petrochemical plants account for 65% of sales. Power plants, offshore oil rigs, and mining customers account for the remainder.
Furmanite has 1,600 technicians who work out of 80 offices on six continents, with North America and Europe accounting for most of its business. Technicians work on-site at the client's plant. Much of the work is routine maintenance when the plant is shut down, but the technicians also work in emergency situations, during unplanned outages. This is very profitable, high-margin work.
Management has also been adding new lines of business, outside its traditional mechanical expertise, which could boost sales. Last year, the company began acquiring companies that provide plant-inspection services. The inspection business, while it is probably lower-margin than the traditional offering, could help Furmanite win more mechanical and repair work from customers that hire out the company as their inspector.
Matt Duncan, an analyst at Stephens, notes in a recent report that he believes "Furmanite has been aggressively going after market share in inspection," and that the business "could be a key growth driver."
In September, Furmanite bought the Gulf Coast project-management business of ENGlobal (ENG), which handles the management of oil and gas facilities. Similar to inspection, the work is lower-margin than its typical services, but the presence could help Furmanite score new repair work.
Future acquisitions that build on the company's offerings could also be in the cards. With just $40 million in net debt, management has plenty of flexibility to do just that.
On its second-quarter conference call in August, CEO Cox affirmed the growth strategy by saying, "We are continuing to define and target a larger market size, as well as a greater share of the larger market." He added that the company is looking forward to combining "the capabilities of ENGlobal's Gulf Coast operations with our mechanical and inspection services." Management couldn't be reached for comment.
Furmanite has the wind at its back. During the recession, its refinery and chemicals customers deferred routine maintenance to save on costs. That is no longer the case. U.S. oil refineries and petrochemical plants are running at high levels, due to renewed investment in oil and gas production, and cheap natural gas, a key feedstock. That bodes well for the company -- and the stock.
Furmanite Future Growth - D.A. Davidson & Co.
Third Quarter Near Expectations, Further Growth Expected
Raising Projections Slightly, Share Reaction Creates Opportunity
Q3 near estimates. Earnings of $0.06 per share were near our $0.07 projection
and substantially above a loss of $0.03 a year ago. For more information on
results relative to our projections, see our previous note.
U.S. remains growth driver. Revenue growth of 32% exceeded our
expectations, driven by growth in inspection and testing services as well as some
contribution from the recently acquired project management business. North
America revenue increased 69% in the period and included approximately 44%
organic growth. The revenue growth contributed to substantial margin gains,
reflecting solid execution and project timing. Additionally the company incurred
restructuring and problem project costs last year that did not repeat.
Raising projections slightly. Management reiterated its EPS projection of
$0.44-$0.48 per share for 2013 and indicated it expects no accretion from the
project management business this year. We are increasing our projections for Q4
2013 to incorporate less dilution from the transaction as well as continued growth
in North America. Our Q4 projections are within the implied guidance range of
$0.14-$0.18 per share. For 2014 we are increasing our projections assuming
continued organic growth in the U.S. as well as contributions from the company’s
project management acquisition.
Reiterate BUY rating. We view the shares’ negative reaction to the company’s
solid quarter and continued growth outlook as an opportunity. Our $12 price
target is unchanged and represents a 9x multiple of FY14 EV/EBITDA projections,
in line with peers. Furmanite is well-positioned to take share and leverage
additional service offerings across its global footprint, particularly in North
America. Given the current upside to our revised price target, we reiterate our
Friday, November 1, 2013
Grangemouth manager says it will take weeks for site to fully reopen
The oil refinery and petrochemicals plant at Grangemouth will take “two to three weeks” to fully reopen, the site manager has said.
Mr Grant said: “It’s a very integrated site, with stock and raw materials going into one plant, producing products which then feed into another plant. “So the sequence has a chain where we move from one plant to another plant. “There’s nothing coming out of the petrochemical plant. There are some fuels coming out of the refinery but low volumes. “We will start to see chemical products probably towards the end of next week, with full chemical production the week after. “That’s similar to the refinery — we’ll start to see products emerging and growing as we go through the week, with the full refinery being up and running in two to three weeks.”
Ineos now plans to press ahead with a £300 million investment in a new gas terminal at Grangemouth. Mr Grant added: “This is a new start for Grangemouth, a start that modernises Grangemouth, with new materials, new equipment and a project worth £300m.
“And it’s also a time for a new, modern way of communicating and consulting with our employees.”
Humber Refinery injuries: HSE investigates 'steam leak'
10-31-13 United Kingdom - A steam leak that injured two workers at a North
Lincolnshire oil refinery is being investigated by the Health and Safety
Executive (HSE) and police.
The employees were airlifted to Pinderfields Hospital in Wakefield from the Humber Refinery in South Killingholme on Wednesday.
Humberside Police said one man was in a critical condition with another man described as "poorly".
Plant owners Phillips 66, said the refinery's operations were unaffected.
The HSE said police involvement was routine in investigations when serious injuries were involved.
Team Inc. steps up training efforts with local expansion
Team Inc. (NYSE: TISI) is seeing a surge in Gulf Coast customer demand, which has led the company to expand its local operations.
The Sugar Land-based company, which offers industrial inspection, maintenance, repair and compliance services mainly for the energy and chemical industries, is in the process of establishing a larger local training facility and a new local warehouse.
As more companies invest in Gulf Coast-area pipelines, chemical facilities and refining facilities that take advantage of shale oil and natural gas, Team sees more work, explained Don Bleasdell, Team’s vice president of finance.
Team moved its headquarters from Alvin to Sugar Land last year, but Bleasdell recently told the Houston Business Journal that his company kept its old Alvin building. Now, Team is refurbishing the old 13,000-square-foot building, which it plans to use as a training facility.
“Our customers want us to provide something they can’t do. We have the expertise, which is why we’ve always had a focus on training,” Bleasdell said. “Our customers are also pushing us to do our job safely, and in order to do a job safely, you have to be an expert in what you are doing, which is why we are investing in training."
The new training facility will have about 20 to 30 employees, some of which will be new hires.
In addition to the new training facility, Team also revealed that it is constructing a new 50,000-square-foot warehouse at its Alvin site. The warehouse will have about 30 employees.
While Team has always had a lot of its work in the Gulf Coast area repairing and maintaining refineries, pipelines and production sites, Bleasdell said work on new construction projects is a growing part of Team’s business. For example, Team will heat treat new pipes and also inspect these new pipes when they are put in place.
The Sugar Land-based company, which offers industrial inspection, maintenance, repair and compliance services mainly for the energy and chemical industries, is in the process of establishing a larger local training facility and a new local warehouse.
As more companies invest in Gulf Coast-area pipelines, chemical facilities and refining facilities that take advantage of shale oil and natural gas, Team sees more work, explained Don Bleasdell, Team’s vice president of finance.
Team moved its headquarters from Alvin to Sugar Land last year, but Bleasdell recently told the Houston Business Journal that his company kept its old Alvin building. Now, Team is refurbishing the old 13,000-square-foot building, which it plans to use as a training facility.
“Our customers want us to provide something they can’t do. We have the expertise, which is why we’ve always had a focus on training,” Bleasdell said. “Our customers are also pushing us to do our job safely, and in order to do a job safely, you have to be an expert in what you are doing, which is why we are investing in training."
The new training facility will have about 20 to 30 employees, some of which will be new hires.
In addition to the new training facility, Team also revealed that it is constructing a new 50,000-square-foot warehouse at its Alvin site. The warehouse will have about 30 employees.
While Team has always had a lot of its work in the Gulf Coast area repairing and maintaining refineries, pipelines and production sites, Bleasdell said work on new construction projects is a growing part of Team’s business. For example, Team will heat treat new pipes and also inspect these new pipes when they are put in place.
Phillips 66 to build $1 billion LPG export terminal
HOUSTON — Phillips 66 is planning to build a liquefied petroleum gas export terminal in Freeport, Texas, a $1 billion push to tap international markets for refined products used in gasoline blending and heating, the company said Thursday.
The Houston-based oil refiner said it plans to assemble an export capacity of 4.4 million barrels per month by 2016, about the size of eight very large gas carries. That’s nearly a fourth of the capacity that two proposed Enterprise Products Partners LPG terminals in the Gulf Coast are expected to have in late 2015.
Phillips 66 expects to build the facility, which is in early engineering design stages, at its marine terminal in Freeport. The company’s Sweeny complex in Old Ocean, Texas, and its Gulf Coast Fractionators facility in Mont Belview, Texas, would provide the new facility’s supply of liquefied petroleum gas.
News of the company’s first such facility comes a day after Phillips 66 executives announced profit growth in its midstream and chemicals businesses, which they expect get the lion’s share of next year’s $2.5 billion to $3 billion capital budget.
We are looking at a rapidly changing energy landscape that presents excellent opportunities in the natural gas liquids piece of our midstream business,” Tim Taylor, an executive vice president for the company, said in a written statement.
The LPG export facility would bolster the company’s midstream growth strategy, and “there are attractive markets outside of the U.S. for products like butane and propane,” Taylor said.
Butane and propane, liquefied petroleum gas products derived from natural gas liquids, are used in motor gasoline blending and the heating of air conditioning and household appliances, according to the Energy Information Administration.
The facility would also create 25 permanent jobs and “hundreds of temporary construction jobs” in the region, said Dean Acosta, a spokesman for Phillips 66.
The Houston-based oil refiner said it plans to assemble an export capacity of 4.4 million barrels per month by 2016, about the size of eight very large gas carries. That’s nearly a fourth of the capacity that two proposed Enterprise Products Partners LPG terminals in the Gulf Coast are expected to have in late 2015.
Phillips 66 expects to build the facility, which is in early engineering design stages, at its marine terminal in Freeport. The company’s Sweeny complex in Old Ocean, Texas, and its Gulf Coast Fractionators facility in Mont Belview, Texas, would provide the new facility’s supply of liquefied petroleum gas.
News of the company’s first such facility comes a day after Phillips 66 executives announced profit growth in its midstream and chemicals businesses, which they expect get the lion’s share of next year’s $2.5 billion to $3 billion capital budget.
We are looking at a rapidly changing energy landscape that presents excellent opportunities in the natural gas liquids piece of our midstream business,” Tim Taylor, an executive vice president for the company, said in a written statement.
The LPG export facility would bolster the company’s midstream growth strategy, and “there are attractive markets outside of the U.S. for products like butane and propane,” Taylor said.
Butane and propane, liquefied petroleum gas products derived from natural gas liquids, are used in motor gasoline blending and the heating of air conditioning and household appliances, according to the Energy Information Administration.
The facility would also create 25 permanent jobs and “hundreds of temporary construction jobs” in the region, said Dean Acosta, a spokesman for Phillips 66.
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