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ExxonMobil Corp. is courting refiners with rare long-term U.S. crude export deals, according to people familiar with the matter, as the company expands its trading scope.
The oil giant has approached several refiners to discuss contracts for exports of light, sweet crude from the prolific Permian basin starting as early as this year, said the people, who asked not to be identified because the discussions are private. The talks are in early stages, with volumes, timing and price still to be determined.
Long-term contracts — which involve the sale of cargoes of a certain quality, volume and price over a set period from as little as six months to multiple years — for U.S. oil are uncommon, with the sector still in its early innings after a decades-long export ban was lifted in late 2015. Rather, most deals are done on a spot basis, depending on the relative cost of American supplies versus cargoes from the Middle East and Asia.
The move is a next step for the Irving, Texas-based oil major as it seeks to capitalize on its extensive global network of oil production and refineries. In recent months, the firm has hired senior traders and analysts to expand its operations beyond just selling its own crude and refined products and into proprietary trading, seeking to boost performance that has lagged its competitors.
Exxon’s move to secure potential customers comes at a time when Chinese buyers such as Sinopec have delayed purchases of U.S. oil due to the escalating tariff conflict.
The company first focused on waterborne cargoes, according to people familiar with the matter, to take advantage of its strong position in the Permian and access to pipelines and storage. Exxon said earlier this year it wanted to triple production by 2025. The company has also been exporting at least double the amount of crude it moved last year, people familiar with the matter said in June.
Asian buyers
Exxon has been talking to buyers in Asia and discussing the possibility of a term deal because the company’s production in the Permian is scheduled to ramp up, according to a person familiar with the talks, although volume or timelines have yet to be discussed.
One Asian refiner in discussion with Exxon for long-term supplies hasn’t agreed on firm details at this point, a person familiar said. Exxon is looking to lower its freight costs by co-loading several U.S. cargoes onto a supertanker for discharge at its own refinery in Southeast Asia as well as for trading and supply into other processors in the region.
Exxon spokesman Scott Silvestri didn’t have an immediate comment when contacted by Bloomberg News.
Internationally, term deals are more common. Producers from the Middle East to Latin America sell much of their oil that way, as a way to guarantee steady income. An increase in term deals may mean a regular flow of oil to Asia, despite fluctuations in the relationships between benchmark Brent, Dubai and WTI prices.
In its second-quarter earnings call, Exxon executives said that the company has brought on more than 50 new wells in the current quarter, boosting Permian output 45% from the previous three months. The oil giant has reserved space on pipelines to the Gulf coast and enough capacity at export docks to support growth through 2022.
“The largest increase we’re going to see through this year is most likely going to come from the Permian,†Senior V.P. Neil Chapman said on the call.
Nascent exports
Traders have rushed to move U.S. oil to overseas markets after the export ban was lifted, an effort that recently pushed shipments up to 3 MMbpd in late June. Exports have offered an outlet for accelerating production from the Permian basin, which has almost doubled since the end of 2015.
Asia refiners are showing more interest in moving toward term contracts. Indian Oil Corp. signed a contract to buy about 6 MMbbl of U.S. crude for November through January delivery in a single tender.
“This term tender is the first step toward future imports of U.S. crude oil through term contracts,†Arun Kumar Sharma, the company’s director of finance, said Wednesday.
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Valaris Limited announced new contracts awarded subsequent to issuing the Company’s most recent fleet status report on February 21, 2023. Three-year contract with Petrobras for drillship VALARIS DS-8. The rig will be reactivated for this contract. The total contract value is approximately $500 million, including a $30 million mobilization fee. 100-day contract with a TotalEnergies affiliate for drillship VALARIS DS-12. The contract is expected to commence in second quarter 2023. 70-day contract with Beach Energy offshore New Zealand for heavy duty modern jackup VALARIS 107. The contract is expected to commence in third quarter 2023. The total contract value is approximately $26 million. President and Chief Executive Officer Anton Dibowitz said, “We are particularly pleased to have secured the award for preservation stacked drillship VALARIS DS-8, for a contract that is expected to generate a meaningful return over the firm contract term, and we remain focused on exercising our operational leverage in a disciplined manner. This most recent award represents the sixth contract awarded to one of our high-quality stacked floaters since mid-2021, and speaks volumes about our demonstrated track record of project execution when reactivating rigs.” Dibowitz added, “Following the reactivation of VALARIS DS-17 and DS-8, we will have ten floaters working across the golden triangle, including four drillships in Brazil, a market where we expect to see continued growth over the next several years.” Updated Guidance As a result of the contract awarded to VALARIS DS-8, which will require the rig to be reactivated from preservation stack, we are updating our first quarter 2023 and full-year 2023 guidance provided on our fourth quarter 2022 conference call on February 21, 2023. First Quarter 2023 Contract drilling expense is expected to increase by approximately $5 million to $385 million to $395 million. Adjusted EBITDA is expected to decrease by approximately $5 million to negative $5 million to breakeven. Adjusted EBITDAR, which adds back one-time reactivation expense, is expected to be $25 million to $30 million, unchanged from the guidance provided on our fourth quarter 2022 conference call. Full-Year 2023 Revenues are anticipated to be $1.8 billion to $1.9 billion, unchanged from the guidance provided on our fourth quarter 2022 conference call. Contract drilling expense is expected to increase by approximately $60 million to $1.49 billion to $1.59 billion. Adjusted EBITDA is expected to decrease by approximately $60 million to $180 million to $220 million. Adjusted EBITDAR, which adds back one-time reactivation expense, is expected to be $280 million to $320 million, unchanged from the guidance provided on our fourth quarter 2022 conference call. Capital expenditures are expected to increase by $60 million to $320 million to $360 million. Source: Valaris Join our mailing list here We are #1 on Google and Bing for the "Largest Mobile Energy Network" Come join our community! Download the Rig Lynx app here
Seadrill Limited announced that the West Neptune has executed approximately six months of term extensions with LLOG Exploration Offshore, L.L.C in the US Gulf of Mexico. The extensions will commence in direct continuation of the existing term, and will keep the rig busy until Q3 2024, furthering Seadrill and LLOG’s long-term association. Total contract value for the extension is approximately $79 million. Source: Seadrill Join our mailing list here We are #1 on Google and Bing for the "Largest Mobile Energy Network" Come join our community! Download the Rig Lynx app here
Semisub rig owner Dolphin Drilling has inked a new contract with Peak Petroleum in Nigeria for its 1974-built Blackford Dolphin. The firm contract, which follows the letter of award in January, gives the Euronext Growth-listed owner of three rigs the potential to extend the unit’s backlog by a minimum of 120 days and up to 485 days. The deal adds to and will be a direct continuation of the previously announced 12-month contract with General Hydrocarbon Limited (GHL). Øystein Stray Spetalen-backed company said the effective dayrate associated with the minimum firm period of the contract is $325,000, including the mobilisation fee. “The final award of the contract for Blackford Dolphin shows the opportunities in Nigeria at a strong dayrate, in addition to building on the backlog for the rig. It also underlines the attractiveness of our assets, and we look forward to returning to revenue-generating operations in 2023,” noted Bjørnar Iversen, CEO of Dolphin Drilling. Source: Dolphin Join our mailing list here We are #1 on Google and Bing for the "Largest Mobile Energy Network" Come join our community! Download the Rig Lynx app here
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