Saudi hydrocarbon sector investment outlook improves as oil prices impact business

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NewBase 27 August 2015 - Issue No. 674 Senior Editor Eng. Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
Saudi hydrocarbon sector’s investment outlook
improves: BOI
Saudi Gazette + NewBase
Outlook for investment in business expansion has weakened for the non-hydrocarbon sector, but
has improved for the hydrocarbon sector in the third quarter of 2015, the Saudi Business
Optimism Index (BOI) for Q3 of 2015 survey released by the National Commercial Bank on
Wednesday revealed.
The latest survey expressed lower optimism levels for the key sectors of the Saudi economy. The
hydrocarbon sector outlook for the business environment conditions in the third quarter of 2015 is
slightly firmer when compared to the previous quarter, with 53% of the firms indicating no negative
factors impacting their operations in Q3, 2015 against 50% in Q2, 2015.
The leading concern for this sector is the impact of oil prices as cited by 30% of the firms. 8% of
the companies expect the shortage/cost of skilled labor to hurt their operations. A higher
proportion of firms intend to invest in business expansion in Q3, 2015 (43%) compared to the
previous quarter (40% in Q2, 2015).
Respondents in the hydrocarbon sector are slightly more optimistic than in the last quarter as
around 53% of the participants cited no negative factors in Q3, 2015 compared to 50% in Q2,
2015.

The impact of fluctuating oil prices is the topmost concern impacting business operations amongst
hydrocarbon sector firms followed by the lack of, and increasing cost of skilled labor (8%). Other
hindrances include slow market conditions, low demand for products/services and competition as
indicated by 3% of the
respondents in each case.
In terms of business expansion
plans, 43% of the hydrocarbon
sector firms will invest in such
activities compared to last
quarter’s 40%. On the other hand,
a higher proportion (50%) is
cautious and will not undertake
any expansion plans in the current
quarter.
Oil & gas firms in Saudi Arabia
have further moderated their business outlook. The composite BOI has retreated to 9 for Q3, 2015
from 13 in Q2, 2015 and 25 in Q3, 2014. This is the lowest reading for the composite BOI since
the third quarter of 2009, with the index for Selling Prices dropping below the 0 mark.
77% of the respondents expect their Selling Prices to remain unchanged, while 13% anticipate a
drop and the remaining 10% foresee a rise, resulting in a BOI of negative 3 versus 0 in Q2, 2015
and 13 in Q3, 2014.
Consistent with the decline in Selling Prices optimism, the forecast for Profits and hiring has also
retreated. The Net Profits index is lower by 2 points q-o-q and 12 points lower y-o-y (23 in Q3,
2015, 25 in Q2, 2015 and 35 in Q3, 2014).
The BOI for Number of Employees stands at 20 in Q3, 2015 versus 27 in Q2, 2015 and 40 in Q3,
2014. Meanwhile, the non-hydrocarbon sector’s outlook for Q3, 2015 is at the same level as a
year ago (composite BOI of 36), but lower than the optimism level recorded in the previous quarter
(composite BOI of 43 in Q2 2015).
When compared to Q2, 2015, all five parameters constituting the index have shown moderation in
Q3 due to low demand, holiday/festival season, competition, no new projects and political tensions
in the region. The BOI for Volume of Sales stands at 42 in Q3, 2015 against 53 in Q2, 2015, while
the BOI for New Orders has dipped by 8 points to 47 in Q3, 2015.
The index for Selling Prices has shown a marginal decline from 14 in Q2, 2015 to 12 in Q3, 2015.
The profitability and hiring outlook is also weaker, with the BOI for Net Profits slipping by 10 points
to 39 and that for Number of Employees decreasing by 4 points to 38.
The non-hydrocarbon sector participants are positive about the business environment for Q3,
2015; 69% of the respondents compared to last quarter’s 52% have cited no negative factors
impacting business operations. Availability/cost of skilled labor (8%) and competition (7%) are the
key concerns impacting business operations in Q3, 2015.
Sentiments in the non-hydrocarbon sector have moderated as 37% of the participants intend to
invest in business expansion plans in Q3, 2015, compared to 49% in the last quarter. Construction
and trade & hospitality firms are very optimistic in this regard.

Commenting on the findings of the survey,
Mrs. Sharihan Al-Manzalawi, economist at
the National Commercial Bank, said “with
the continuation of lower oil prices, the level
of optimism for the hydrocarbon and non-
hydrocarbon sectors weakened, as the
hydrocarbon sector’s composite BOI has
retreated to 9 points for Q3, 2015, which is
the lowest reading for the composite BOI
since 2009.
However, the Kingdom of Saudi Arabia has
maintained it production of crude above 9
million bpd level, rising from 9.9 million bpd
in Q1, 2015 to 10.4 million bpd during Q2,
2015.
The outlook for the business environment conditions and investment for the third quarter of 2015
is slightly firmer when compared to the previous quarter, with 53% of the firms in the hydrocarbon
sectors indicating no negative factors impacting their operations in Q3, 2015 against 50% in Q2,
2015, with a higher proportion of firms intending to invest in business expansion in Q3, 2015
(43%) compared to the previous quarter (40% in Q2, 2015).”
Meanwhile, the impact of the lower oil prices has been rather limited on the non-oil sectors, where
the optimism level of non-oil companies is still at the same level recorded the year before, though
it came lower than the level recorded in the previous quarter (43 points Q2 versus 36 points for
Q3,2015).
“With the government drawing down $59 billion from its huge reserves, and recently announcing
its intention to issue Saudi Government Development Bond (SGDB) to finance budget deficit, and
accordingly maintain economic growth, these policies contributed to lessening the decline in the
optimism level of non-hydrocarbon sectors.
The non-hydrocarbon sector participants are positive about the business environment for Q3,
2015, as 69% of the respondents compared to last quarter’s 52% have cited no negative factors
impacting business operations.
But regarding investment in the non-hydrocarbon sector, it has moderated as 37% of the
participants intend to invest in business expansion in Q3, 2015, compared to 49% in the last
quarter.”

Saudi investors may have got what’s needed to hold rating
Bloomberg If investors were looking for a sign that Saudi Arabia is doing more than just pumping oil
at a record pace to shore up its finances, they may have just got it.
The world’s biggest crude exporter is seeking advice on how to cut billions of dollars from next
year’s budget because of the slump in crude prices, two people familiar with the matter said on
Tuesday. The cost of insuring Saudi bonds against default fell for the first time in six days after the
report.
“Saudi Arabia is moving in the right direction at this point,” Steven Hess, senior vice president at
Moody’s Investors Service, said by phone from New York on Tuesday. “We think that’s positive.
We’ll have to see how that pans out over the next year or two.”
The kingdom is eating into $664bn of reserves as plunging oil prices and fighting in Yemen
threatens to saddle the country with its biggest budget deficit in almost three decades. Brent oil is
near a six-year low just as Saudi Arabia starts to tap the domestic bond market for the first time in
eight years. Fitch Ratings Ltd cut its credit outlook on the country to negative last week, citing
falling oil prices and lack of spending cuts.
Saudi credit-default swaps retreated to 100 basis points after the report that the government is
studying spending cuts. The measure of how much investors must pay to insure against a Saudi
default had doubled over five days to August 24, according to prices compiled by CMA. That
compares with an average 43 basis-point gain for government debt in the six-member Gulf
Cooperation Council, which includes Saudi Arabia.
The Arab world’s largest economy is expected to post a budget deficit of $97bn in 2015, Fitch
estimates. Last year, the gap was $17.5bn, according to data compiled by Bloomberg. The
country sold at least 35bn riyals ($9.3bn) of bonds on local markets this year, turning to the capital
markets for the first time since 2007.

Oil prices have dropped 58% in the past year as the 12-country Organisation of Petroleum
Exporting Countries exceeded its production target at a time when the US hasn’t cut back. Saudi
Arabia will probably keep output close to current levels to support government income, Fitch said
in an August 24 report.
The country pumped a record 10.48mn bpd in June.
Moody’s rates Saudi debt Aa3, the fifth-highest investment grade, and has a stable outlook for the
country. It can rely on government reserves and bond sales for a year or two before risking a
downgrade, Hess said. That assumes oil prices stay at the current level of about $45 a barrel.
Spending cuts could support the credit rating, he said.
Fitch on August 21 revised the outlook for the country to negative for the first time, from stable.
Jan Friederich, a senior director at the ratings company, said he needed more details on the
possible spending cuts to comment if it changes the outlook.
“In the situation of a declining oil price, a challenge for the government is can they make a
significant effort to address that by cutting expenditures,” Friederich said. “So that’s what we are
quite focused on. Are there going to be more substantial reactions in terms of expenditure
adjustment over the next year?”
The outlook for the Saudi Arabian banking system remains stable, unchanged
since September 2009, said Moody’s Investors Service

Oman Norway’s DNO exits Oman Blocks 30 and 31
Oman Observer
Norwegian oil and gas operator DNO International ASA has confirmed that it has pulled out of two
oil and gas blocks in the Sultanate.
The company said in its second quarter earnings report that it had withdrawn from Block 30 and
Block 31 in northwestern part of Oman. With its departure from the two concessions, DNO has
seen its portfolio of Omani hydrocarbon assets shrink to two blocks: Block 8 offshore Oman, and
Block 36 onshore Oman.
DNO’s decision to vacate the two concessions is in line with a period of “consolidation and
rationalisation” under way across its international portfolio since the start of the year, it said in a
review of the company’s operational performance during Q2 2015.

A key priority for the current year, it noted, is to align its spending with earnings. Accordingly, the
2015 capital expenditure programme has been scaled back to $80 million, of which $49 million
was already expended in the first half of the year. Besides, reductions in operating costs, including
staff levels, have led to annual savings of $50 million from mid-2015, it said. Furthermore, the
company is high-grading its overall portfolio by “focusing on core assets while shedding others”,
the oil firm stated.
Block 31, also known as the Sunainah North Block, was the first to be relinquished by DNO, a
process that was formalised last year, it is learnt. Earlier this year, the company withdrew from
Block 30, a small concession which is home to the Nadir, Al Sahwa and Hafar gas field,
collectively dubbed the ‘NASH Trend’, besides the Hamrat Duru field.
Attention will now be focused on DNO’s flagship concession, Block 8, which contains the nation’s
only offshore producing fields at Bukha and West Bukha offshore Musandam Governorate. DNO
is the operator of the block with a 50 per cent participation interest. The balance is held by LG
International Corp.
Gross production from the two fields averaged 9,076 barrels of oil equivalent per day (boepd) in
Q2 2015, of which the company’s working interest (CWI) production was 4,538 boepd. DNO says
it is also weighing plans to drill a new development well to boost oil and gas output from the West
Bukha field.
DNO’s onshore Block 36, located in the Rub Al Khali basin, is the subject of an early stage
exploration programme. DNO has a 75 per cent participating interest in the 18,000 sq km
concession, which it acquired in 2013 via a farm-in agreement concluded with the previous
operator, Allied Petroleum. It is currently identifying targets for an exploration well planned to be
drilled in 2016, it added in its Q2 operational review.
Founded in 1971 and listed on the Oslo Stock Exchange, DNO holds stakes in onshore and
offshore licenses at various stages of exploration, development and production in the Kurdistan
region of Iraq, Yemen, Oman, the United Arab Emirates, Tunisia and Somaliland.

Russia plans to supply fuel to Iranian nuclear plant
The National - Anthony McAuley
Russia’s state nuclear company said it was planning to supply new fuel to Iran’s controversial
Bushehr nuclear power plant before the end of the month, moving quickly to keep power supply
from the plant flowing.
Russia was one of six world powers that reached a deal last month with Iran to lift nuclear-related
sanctions in return for an oversight regime that will curb Iran’s nuclear programme over the next
decade.
Russia has been Iran’s partner in developing its nuclear energy plant at Bushehr, on Iran’s
Arabian Gulf coast, having taken over from German firms to complete the protracted project and
bring the first reactor online in 2011.
TVEL, the nuclear fuel-making unit of Russia’s Rosatom, on Tuesday said that last month’s deal
on sanctions cleared the way to reestablish a banking relationship with the Atomic Energy
Organisation of Iran, the joint operator of Bushehr with the Russians, thus allowing TVEL to restart
nuclear fuel deliveries.
“The deal [means] that Iran’s nuclear reactor will be connected to the country’s energy system on
time,” said a TVEL spokesman.

“Loading of fresh fuel with the presence of international experts during a planned maintenance of
the plant is scheduled for September.”
TVEL said Russia’s support of
Bushehr, the first nuclear plant to
go online in the Middle East,
“serves as a benchmark for the
further development of a
peaceful nuclear energy
production across the region”.
Indeed, Russia has shown that it
is keen to play a major role in the
development of nuclear power in
the region. It has been making
diplomatic efforts this month to
push this agenda, including
during state visits from the
leaders of Saudi Arabia, Egypt,
and the UAE that included discussions of nuclear energy. Russia has already secured a number
of firm deals in the region, as well as initial cooperation agreements.
TVEL is, for example, a key supplier for the UAE’s nuclear programme, the most advanced in the
region outside Iran. The Russian nuclear fuel company was the largest of six companies to sign a
US$3 billion deal with the UAE in 2012, agreeing to supply fuel for 15 years starting last year.
This year, Saudi Arabia and Russia signed an agreement to cooperate on the development of
nuclear energy. Although the deal covers only various types of information sharing, Russia has
expressed a desire to play a part in building up to 16 reactors by 2030 in Saudi Arabia, which
shares the UAE’s ambition of meeting growing electricity demand and freeing up hydrocarbon
resources for export and industrial use.
Russia is keen to sell Saudi Arabia its VVER (water-water energetic reactor) design, which is
used at Bushehr. It is already building the Akkuyu plant on Turkey’s Mediterranean coast. The
project is expected to start commissioning the first of four planned reactors in 2020.
Also, as part of Russia’s active nuclear energy diplomacy this year, the president Vladimir Putin
and his Egyptian counterpart, Abdel Fattah El Sisi, signed a deal in February to fulfil the long-held
desire of Egypt to build a plant on its Mediterranean coast.

First Gas from Kiliwani North Licence in Tanzania
Expected This Quarter …Aminex + NewBase
Aminex on Wednesday said first gas production from Kiliwani North in Tanzania is expected
during current quarter.
This is in line with the
timetable issued by the
Tanzanian authorities
following the commencement
of production into the new
main gas pipeline in the south
of the country, the company
said.
The signing of the Kiliwani
North gas sales agreement,
expected in the near future,
should also assist the
acceleration of the company’s
other activities, particularly
appraisal drilling at Ntorya,”
Aminex CEO Jay
Bhattacherjee commented.
The Kiliwani North-1 gas well,
which tested at 40 mmscfd,
has been completed and is
now ready to produce. Initial
gas production will enable the
pipeline operator to pressure-
test the short spur line
between the wellhead and the
new gas plant with gas sales
expected in third quarter
2015.
First commercial gas from
Kiliwani North will be delivered
into a 36-inch regional pipeline system, the construction and pressure testing of which is now
complete, Solo Oil, a joint venture partner in the development program said.
Kiliwani North Development Licence are currently are Ndovu Resources Ltd (Aminex) 58.5%
(operator), RAK Gas LLC 25%, Solo Oil plc 6.5% and Bounty Oil & Gas NL 10%.

India’s coal industry in flux as government sets
ambitious coal production targets
Source: Energy Statistics 2015, Government of India, Ministry of Statistics and Programme Implementation;
Coal consumption in India, particularly in the electric power sector, is outpacing India's domestic
production. From 2005 to 2012, India's coal production grew by only 4.7% per year to about 600
million metric tons while the country's coal-fired electric power capacity grew by a much faster rate
(about 9.4% per year), reaching 150 gigawatts.
To help resolve the shortfall in coal supply and to support expanded coal-fired generation, India
has set a coal production target of 1.5 billion metric tons by 2020. Recent shifts in government
policies and practices may play a key role in India's ability to meet this coal production goal.
Increasing coal production from its national coal producer. Coal India Limited (CIL), the
national coal producer responsible for more than 80% of India's current production, initially
planned to produce 1 billion metric tons of coal by FY2020, almost double its FY2015 production.
Although CIL revised its current expectations downward to about 900 million metric tons, its
annual production must still rise faster than the current rate of increase to achieve its new goal.
Since 2012, CIL has increased coal production by outsourcing production operations to private
and foreign companies in an effort to improve mechanization and mining expertise and by working
to adhere to detailed mine plans for achieving its 2020 production target.
Encouraging greater private and foreign participation. In August 2014, allegations of
impropriety, hoarding of coal resources, lost government revenue, and a lack of transparency led
India's Supreme Court to cancel 214 coal licenses allocated to the private and public sector,
representing 9% of FY2013's production.
The Ministry of Coal quickly reauctioned many of these properties to help minimize the disruption
from the cancellation, but the impact of this redistribution of coal properties on production is
uncertain.

Private mining may be expanded further as a result of the Coal Mines Special Provision Bill
passed in March. This law opens the door to commercial coal mining by both private companies
and foreign companies having an Indian subsidiary. The government is now evaluating the effect
of a coal block auction to allocate properties for commercial development—a significant change
for a coal industry that has been nationalized for 40 years.
Easing environmental restrictions, permiting processes, and land acquisition. Forest
clearances, environmental permits, and land acquisition challenges remain obstacles to the rapid
development of India's coal industry. In 2012, the government dropped a forestry policy that had
blocked 660 million tons of potential coal production, and drafts of its replacement suggest a forest
policy that may be more lenient toward mining.
The Ministry of Coal is tracking mine projects in the preproduction stage to monitor the speed of
permit processing and environmental clearances, and it may intervene if there are significant
delays. If passed, the Land Acquisition Reform Act pending in India's Parliament could make it
easier to acquire land for coal mining activity, potentially displacing farmers and landowners in
coal-producing regions.
Focusing attention on coal transportation expansion. In 2014, 50 million tons of coal were
stranded at mines because of rail limitations, including line congestion and a shortage of railcars.
Several coal-rail projects have stalled over the past decade, including the 93-kilometer Tori-
Shivpur-Kathautia line to connect coal mines in Jharkhand in eastern India. Begun in 1999 and
scheduled to be completed in 2005, this project is still only halfway done. Lately, the government
is concentrating on three key rail projects that together could facilitate an additional 100 million
metric tons of coal production. The earliest of these is the Jharsuguda-Barpali railway link
scheduled to be completed
in 2017 in Odisha, a key
coal-producing state
directly south of
Jharkhand.

UK: UK Oil & Gas Investments announces Schlumberger independent
assessment of Horse Hill licence area, onshore UK . Source: UKOG
AIM-listed UK Oil & Gas Investments (UKOG) has announced that a mean Oil in Place ('OIP') of
10.993 billion barrels has been independently calculated by Schlumberger to lie within the 55
square miles of the PEDL137 and PEDL246 Horse Hill licences in the Weald Basin, located in
the South East of England. UKOG has a net attributable interest of 20.358% in the Licence Area.
The tight Jurassic limestones and shales of the Kimmeridge Clay Formation in the Licence Area
are calculated to contain a total OIP of 8.262 billion barrels, with the shales of the Oxford Clay and
Lias Formations containing an aggregate OIP of 2.731 billion barrels, as shown in Table 1.
Table 1: Licence Area mean OIP estimates, millions of barrels ('MMBO)
Schlumberger acquired the Horse Hill-1 well ('HH-1') electric logs during the drilling of HH-1. This
analysis builds on their previous petrophysical evaluation of HH-1, located in PEDL137 near to
London Gatwick Airport, as announced on 5 June 2015. In that previous HH-1 analysis, a total
mean OIP, excluding the Upper Portland sandstone oil discovery, of 255 million barrels of oil per
square mile was calculated. The current report incorporates the analysis of a further nine wells
located within and beyond the Licence Area.
It should be noted, as previously reported, that the HH-1 Upper Portland sandstone oil discovery
is a geologically separate oil accumulation from, and additional to, the identified underlying
Jurassic tight oil plays.
As previously stated by the Company, the above estimated OIP hydrocarbon volumes should not
be construed as recoverable resources or reserves and also should not be construed in any way
to reflect potential producibility of hydrocarbons from the formations evaluated. The Company
would expect to report estimated recoverable resources following a successful well flow test, in
order to comply with the standards of the Society of Petroleum Engineers' 2007 Petroleum
Resources Management System.
The Company will integrate the report's findings into the planned flow test of the HH-1 well
expected later this year subject to approval by the Environment Agency. This is another key step
in the proof of concept process for Jurassic tight oil and the Kimmeridge limestone reservoirs in
particular.
The Company is now well advanced with additional internal and external technical studies to fully
understand the possible implications of the report's key findings upon the hydrocarbon potential of
UKOG's other Weald interests.

Stephen Sanderson, UKOG's Chairman, commented:
'The independent analysis has further tested and given support to our geological model which
predicts that the significant volumes of OIP calculated within the tight Jurassic section of HH-1
extend across the Licence Area. The report is thus a further step towards establishing proof of
concept for the Jurassic tight oil play potential of Horse Hill and the Weald Basin.'
Future Plans:
In parallel with its subsurface and HH-1 flow test studies for the Portland sandstone and
underlying tight Jurassic oil zones, the Company has also commissioned related engineering and
environmental studies to investigate a conceptual Weald Jurassic field development, with the
prime objective that it must respect and preserve the rural beauty and way of life of the area, with
minimal environmental impact, while at the same time providing a valuable contribution to the
area's economy. This is fundamental to the Company's operating philosophy and policy.
UKOG's interest in the Licence Area and Horse Hill:
The Licence Area, comprising licences PEDL137 and PEDL246, is located on the northern side of
the Weald Basin of South East England near Gatwick Airport. The HH-1 discovery well is located
in PEDL137. UKOG owns a 30% direct interest in Horse Hill Developments Ltd ('HHDL') and a
1.32% interest in HHDL via its 6% interest in Angus Energy Limited. HHDL is a special purpose
company that owns a 65% participating interest and is the operator of the Licence Area. The
remaining 35% participating interest in the Licence Area is held by Magellan Petroleum
Corporation.

Norway: Faroe Petroleum announces spudding of Portrush
exploration well 6407/10-5 in the Norwegian Sea
Faroe Petroleum, the independent oil and gas company focusing principally on exploration,
appraisal and production opportunities in Norway and the UK, has announced the commencement
of the Portrush exploration well 6407/10-5 (Faroe 20%).
The Portrush Prospect is
located in the Norwegian Sea
in licence PL793 and approx.
10 kms south east of the
producing Statoil-operated
Njord field (Faroe 7.5%) and
20 kms west of the Shell-
operated Draugen field. The
exploration well will target
prospective resources along
the Vingleia fault in Upper
Jurassic reservoirs, analogous
to the reservoirs found in Pil,
Bue and Draugen.
The exploration licence PL793
was awarded to Faroe in
January 2015 as part of the
2014 APA licensing round in a
joint venture with Norske
Shell (40% and operator),
VNG Norge (20%) and Petoro
(20%). The Portrush well will
be drilled by the Transocean
Barents semi-submersible
drilling rig.
Graham Stewart, CEO of
Faroe Petroleum commented:
'I am very pleased to
announce the spudding of the
Shell operated Portrush
exploration well located in
proximity to our Pil and Bue
discoveries and the Njord and
Draugen fields.
'In addition, drilling operations on the Boomerang prospect continue. The Company
will announce the results from the Boomerang well when drilling operations are
complete, which is expected in September 2015. The Company's exciting 2015
exploration drilling campaign, focuses entirely on this area in the Norwegian Sea,
and has the potential to add considerable additional value.' Source: Faroe Petroleum

US: EIA expects near-term decline in natural
gas production in major shale regions
Source: U.S. Energy Information Administration,
Natural gas production across all major shale regions in EIA's Drilling Productivity Report (DPR) is
projected to decrease for the first time in September. Production from these seven shale regions
reached a high in May at 45.6 billion cubic feet per day (Bcf/d) and is expected to decline to 44.9
Bcf/d in September. In each region, production from new wells is not large enough to offset
production declines from existing, legacy wells.
The DPR provides a month-ahead forecast of natural gas and crude oil production for the seven
most significant shale formations in the United States. In order to estimate total natural gas
production within a DPR region in a given month, production from both new wells and legacy wells
must be taken into account.
New-well production is estimated by multiplying estimated rig productivity by the number of rigs
operating in the region, lagged by two months. Production from new wells is then compared to the
anticipated production declines from legacy wells, which are typically based on well depletion
rates, to estimate net production.
In any given month, new-well production depends on the number of drilling rigs and the
productivity of those rigs and the wells added through their use. As rig counts fall, increases in rig
productivity are necessary not only to compensate for the reduced rig total, but also for rising
levels of legacy-well declines.
Given the substantial drop in rig counts since the fourth quarter of 2014 in each of the DPR
regions and growing declines in production from legacy wells, productivity increases are less able
to completely offset lower rig counts and legacy-well declines.

The Utica region in eastern Ohio is the only DPR region expected to show production increases in
June, July, and August. Production declines from legacy wells in the Utica are estimated to total
55.6 million cubic feet per day (MMcf/d) in September.
Partially countering this decline is expected production from new wells of 52.2 MMcf/d in
September. New-well natural gas production per rig is estimated to be about 7 MMcf/d, an
increase of 47% from September 2014. Seven rigs were drilling in the Utica in July (the most
recent data available). Multiplying the seven rigs by the estimated new-well gas production per rig
yields the total new-well production estimate for September. Because this value is lower than the
decline from legacy wells, total production is expected to fall by 3.4 MMcf/d.
A year ago, the higher number of rigs operating in the Utica meant that new-well production more
than offset the 26.5 MMcf/d in legacy-well declines, resulting in a net production increase of 116.5
MMcf/d. Since then, falling rig counts and increasing legacy-well declines mean the increase in
Utica new-well productivity is insufficient to overcome legacy-well production declines.
Several external factors could affect the estimates, such as bad weather, shut-ins based on
environmental or economic issues, variations in the quality and frequency of state production data,
and infrastructure constraints. These factors are not accounted for in the DPR. For example, on
August 1, the Rockies Express Pipeline started to deliver 1.8 Bcf/d of Appalachian natural gas
production west on its existing mainline as part of the Zone 3 East-to-West Project. This increase
in takeaway capacity may encourage increased production from regions such as the Marcellus
and Utica.
The DPR provides a very near-term forecast in specific plays based on the most current
information. Longer term outlooks that include play-level detail, such as the Annual Energy
Outlook, reflect resource and technology assumptions and projected prices and often move in
different directions than the DPR, which reflects short-term factors.

NewBase 27 August- 2015 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
Brent climbs by over $1 on crude stock draw,
U.S. economic data
Brent crude climbed by more than $1 a barrel on Thursday on an unexpected fall in U.S. crude
inventories and a rally in global equity markets, but a stronger dollar capped gains.
Front-month Brent LCOc1, the global oil benchmark, had gained $1.10 to $44.24 a barrel by 0300
GMT (11.00 p.m. EDT), having ended down 7 cents at $43.14 on Wednesday.
U.S. crude's front-month contract CLc1 rose 91 cents to $39.51 a barrel, after settling down 71
cents, or 1.8 percent, at $38.60 a barrel.
"The local region is ... shrugging off some of the currency impact, instead pricing in the draws on
inventory and a better than expected industrial outlook," said Michael McCarthy, chief market
strategist at CMC Markets in Australia.
U.S. crude inventories USOILC=ECI fell 5.5 million barrels in the week to Aug. 21, the biggest
one-week decline since early June, data from the Energy Information Administration showed on
Wednesday. That was in line with the industry group the American Petroleum Institute's late-
Tuesday report.
Analysts had expected an increase of 1 million barrels.
But some said the inventory drop may not mark the start of a trend.
Oil price special
coverage

"This sudden drop in inventories should be the result of drops in US crude imports, suggesting
that this week could be an anomaly," said Daniel Ang, an investment analyst at Phillip Futures Pte
Ltd said.
Wang Tao, a Reuters market analyst for commodities and energy, said Brent crude may approach
resistance at $44.64 per barrel again, as its bounce from the Aug. 24 low of $42.23 seemed to be
incomplete.
In other financial markets, a rebound on Wall Street helped soothe investors' tattered nerves,
while the dollar rallied as risk aversion eased.
Regaining confidence after a sharp rebound on Wall Street where investors had been hit by
worries over China's faltering economy, London copper futures also strengthened on Thursday.
Data released on Wednesday showed U.S. non-defense capital goods orders excluding aircraft,
which is a proxy for business investment, increased 2.2 percent in July, the biggest rise since
June last year and handily beating expectations.
"This suggests that business investment has continued to pick up at the beginning of the third
quarter following a solid finish to the second quarter," ANZ said in a morning note on Thursday,
referring to the U.S. core capital goods order data.

NewBase Special Coverage
NewBase News Release 27 Aug 2015
Qatar tops GCC corporate earnings of $34bn in H1
Gulf Times
Gulf Cooperation Council corporate earnings stood at $34bn in the first half of this year (H1),
driven mainly by “strong performance” from banks and real estate, Kuwait Financial Centre
(Markaz) has said in a report.
Among the GCC countries, Qatar had the highest earnings growth in H1 at 13%, Markaz said.
However, Markaz said this was a
7.2% drop compared with the same
period last year. Aggregate net
profits for banks came in at $16.7bn
in H1, a rise of 9% over the same
period in 2014.
Earnings from real estate came in at
$3.7bn recording a growth of 44.5%
year-on-year (YoY). Robust growth
in the earnings of banking sector,
which accounts for 49% of earnings,
could not prevent overall corporate
earnings from declining by 7.2%
(YoY) in H1.
The telecom sector continued its
negative run from 2014, with
overall profits declining by 35%.

Qatar had the highest earnings growth in H1 at 13%, with the rest of the GCC countries recording
a decline. The fall in oil prices, a strengthening US dollar and company-specific issues were
responsible for the poor earnings in the first half of 2015.
Earnings in Kuwait and Saudi Arabia contracted by 19% and 16%, respectively in the first half on
a YoY basis, while UAE, Bahrain and Oman also registered negative earnings growth of 2%, 5%
and 7%, respectively.
Real estate and banking sectors have been the star performers in the region in H1, registering
growth of 44.5% and 9%, respectively. Despite signs of slowing down towards the end of last
year, the real estate sector had a great run in the first half of 2015.
The commodities sector, which is the second largest in terms of net earnings, was impacted by
lower oil prices. The telecom sector, the fourth largest in terms of net earnings was affected by the
reduction in ARPUs (average revenue per user), as well as company-specific losses.
A real estate boom in major markets such as the UAE (Dubai and Abu Dhabi) and Qatar as well
as the introduction of mortgage lending reforms in Saudi Arabia have led to significant earnings
growth of the sector.
The telecommunications sector’s earnings were affected by strengthening of the dollar (Ooredoo),
the earnings restatement of Mobily and its continued dispute with Zain Saudi. Falling ARPU
across the region was also a reason behind the fall in telecom earnings.
GCC corporate earnings are expected to contract by 0.3% in 2015 compared with last year and
reach $69.7bn by the end of the year. Earnings growth in the UAE, Qatar and Bahrain are
expected to be robust at 8%, 6.2% and 6%, respectively, for the full year of 2015 as against 2014.
Corporate earnings in other GCC countries are also expected to decline, during the same period,
with earnings in Saudi declining the most at 7.9%. Corporate earnings in Kuwait and Oman are
expected to fall moderately by 1.6% and 0.4% respectively.

NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
Your partner in Energy Services
NewBase energy news is produced daily (Sunday to Thursday) and
sponsored by Hawk Energy Service – Dubai, UAE.
For additional free subscription emails please contact Hawk Energy
Khaled Malallah Al Awadi,
Energy Consultant
MS & BS Mechanical Engineering (HON), USA
Emarat member since 1990
ASME member since 1995
Hawk Energy member 2010
Mobile: +97150-4822502
khdmohd@hawkenergy.net
khdmohd@hotmail.com
Khaled Al Awadi is a UAE National with a total of 25 years of experience in
the Oil & Gas sector. Currently working as Technical Affairs Specialist for
Emirates General Petroleum Corp. “Emarat“ with external voluntary Energy
consultation for the GCC area via Hawk Energy Service as a UAE
operations base , Most of the experience were spent as the Gas Operations
Manager in Emarat , responsible for Emarat Gas Pipeline Network Facility &
gas compressor stations . Through the years, he has developed great
experiences in the designing & constructing of gas pipelines, gas metering &
regulating stations and in the engineering of supply routes. Many years were spent drafting, &
compiling gas transportation, operation & maintenance agreements along with many MOUs for the
local authorities. He has become a reference for many of the Oil & Gas Conferences held in the
UAE and Energy program broadcasted internationally, via GCC leading satellite Channels.
NewBase : For discussion or further details on the news above you may contact us on +971504822502 , Dubai , UAE
NewBase 27 August 2015 K. Al Awadi

6th
– 8th
Oct.

Saudi hydrocarbon sector investment outlook improves as oil prices impact business

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