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It was the enlightenment, certainly, through which a whole host of new political views about public voice and the independent integrity of the individual emerged into the mainstream, even if took another 150 years, or even 200, to work themselves out. And at the same time it was the beginning of the age of extraction, when humankind started to use the stored resources of the planet at scale for their profit and endeavour. Both of these ideas are still the dominant frames of our public discourse, certainly in the richer world, and shape (almost completely) competing arguments about sustainability.

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Directories group says move to digital products slower than expected and risk of not meeting covenants

Debt-laden directories group Yell has dropped around 18% after it warned its attempted shift towards digital products was not moving ahead fast enough, and it may not meet its banking covenants this year.

Full year revenues fell 14% to £1.6bn with print sales down 21%, with earnings down £47m to £461m. The company said:

Yell has not progressed as fast as it would like in bringing new products to market, with the sheer scale and logistics of the task stretching its nascent teams.

The group has debts of around £2bn and agreed a relaxation of its covenants to allow its new strategy time to succeed. Now it has hired Goldman Sachs and Greenhill “to put in place a new capital structure” ahead of its debt maturing in 2014. But it warned:

As a consequence of increasingly difficult trading conditions and a greater proportion of future income expected to come from as yet unproven new strategies, there is a higher risk in the current year than in the previous year that the group would not be able to meet its financial covenants with its lenders.

The news has sent Yell’s shares down 0.56p to just 2.6p.

And after five months it has come up with a new brand “to help customers and consumers find, and identify with, its new products.” That brand is “Hibu” – whatever that means – and the company will also use that name, although it also says its print products will continue to use their existing names. Gareth Davies at Numis has a reduce recommendation on the business:

Headline numbers are fine, but outlook statement on covenants is a concern. The equity, in our view, is just not worth the risk given current macro fears, potential difficulties in refinance and the structural challenges faced by the business. For those looking for a highly geared bombed out recovery play our preferences would be Trinity Mirror over Johnston Press and Yell.

In this post, I present a little about developments in actual natural gas production from the Norwegian Continental Shelf (NCS) and a forecast towards 2020. I will also talk about where gas from the NCS is reported as being sold, and give a closer look at what estimated recoverable natural gas reserves and the Reserves over Production ratio (R/P) as of end 2011 may suggest for the future production of natural gas from the NCS.

Finally, I will talk a little about the likely impact from present plans for developments of natural gas discoveries in the Norwegian Sea.

Figure 01: The figure above shows the development of actual Norwegian gas production by field between 1996 and 2011 as reported by the Norwegian Petroleum Directorate (NPD). The figure also shows a forecast (developed by the author) on the potential of deliveries for the years 2012 to 2020. The forecast includes all producing and sanctioned fields and expected effects from developments in the R/P (Reserves divided by Production), NPD estimates for remaining recoverable reserves, facilities constraints, etc.

The forecast does not include the effects from fields being shut down as these become unprofitable.
My forecast is based upon recent data from the NPD and shows the future potential for Norwegian gas deliveries under the assumption of “normal” seasonal variations in the buyers’ nominations.

The chart also includes the future expected production range from the Ministry of Petroleum and Energy (MPE) and a forecast from the IEA (International Energy Agency) towards 2020.
Norwegian gas production is now expected to reach a new high in 2012 (see also Figure 3) after a slight decline from 2010 to 2011. For the years 2012 to 2015 Norwegian gas production is now expected to remain on what would be described as a plateau. As from 2016 Norwegian gas production is expected to decline steeply towards 2020 and beyond.

Several discoveries in the Norwegian Sea, like Aasta Hansteen (formerly Luva), Linnorm and Zidane, are now in planning for possible startups from late 2016.

Most of the content for this post was originally published in Norwegian here.

WHERE NORWEGIAN NATURAL GAS IS SOLD

Figure 02: The figure above shows the annual developments in Norwegian natural gas deliveries (for the years 2001 to 2010) and imported volumes by some countries.

• Norway delivered close to 100 Bcm of natural gas in 2011 and most of its natural gas is sold and delivered to customers in Europe (that is, Continental Europe and the UK).
• As of 2011 Norway was the world’s second largest exporter of natural gas after Russia.
• Around 95% of Norwegian natural gas sales are delivered by pipelines and the balance by liquefied natural gas (LNG).
• Growth in Norwegian gas sales post-2005 has primarily been to the United Kingdom, and during 2010 Norway supplied the UK with approximately 28% of all natural gas consumed in the country.

A LITTLE ON SHRINKAGE AND DOMESTIC USES

The observant reader will have noticed that sold and delivered gas volumes as shown in Figure 2 are slightly less than what the NPD has reported as produced as shown in Figure 1.

NPD reports gas volumes metered and delivered from production facilities. These volumes, which are believed to include natural gas liquids [NGL; mainly ethane (C2H6), propane (C3H8) and butane (C4H10)], are all in the gaseous state at normal pressure and temperature. The natural gas which is sold is mainly methane (CH4).

NGLs are often referred to as “bottled gas”, as natural gas liquids after extraction and fractionation (as performed at Kårstø and Kollsnes), are sold and delivered under pressure in the liquid state. Extraction and fractionation of NGLs shrink the amount of gas volumes delivered from the production facilities and thus lower sales gas volumes and their volumetric energy content.

The NGL extraction process is required to meet gas specifications from the buyers and pipeline operators.

For 2011 it is estimated that this shrinkage amounted to more than 4 billion cubic meters (Bcm), or about 4% of total reported volume of gas metered and delivered from the production facilities.

Norway uses little natural gas domestically (around 2% of annual production). It is used for power generation at the production facilities, increased oil recovery (Grane), feed for the methanol plant at Tjeldbergodden, and for power plants and supplies to households and industries in Haugesund and Stavanger.

Figure 03: The figure shows actual total natural gas production split by some major fields and groups of fields from January 2001 to March 2012. The figure is based upon monthly NPD data.
In the chart is included a 12 Month Moving Average (12 MMA) black line. In January 2012 Norwegian natural gas production reached a new monthly high.
NOTE: The chart shows production per calendar day, thus variations in flows from one day to another are normal.

The chart above also illustrates the seasonal variations in buyers’ nominations for Norwegian natural gas. The chart illustrates that during recent winters two fields, Ormen Lange and Troll, accounted for around 50% of the total Norwegian gas deliveries. Most Norwegian natural gas is sold under long term contracts.

In North America natural gas production is subject to less seasonal variations than it is in Europe. In North America seasonal variations in demand are normally covered by storage withdrawals/injections. In Europe seasonal variations are to a larger extent covered by a combination of storage withdrawals/injections and more production elasticity designed into the production installations and pipelines.

For January 2012 the NPD reported Record gas sales in January, which supports the forecast shown in Figure 1.

R/P AT END 2011 AND WHAT IT SUGGESTS FOR FUTURE PRODUCTION

The ratio for Reserves over Production, (R/P), may be a helpful parameter in perceiving future production developments. A low R/P ratio suggests that production should be expected to decline and a high R/P suggests production levels may be sustained or even grow.

Figure 04: The figure shows the duration of production of natural gas from fields and groups of fields on the Norwegian Continental Shelf (NCS) by applying the R/P ratio at year-end 2011. In the real world the production will not follow a rectangular profile (although it would be desirable for economic reasons).
As reservoirs deplete they will at some point (for natural gas normally at around 70 – 80% depletion) experience a loss of productive potential and follow an exponential decline. The figure also shows the NPD’s recent forecast for the years 2012 to 2016. The figure is based on reserve estimates and production data from the NPD at the end of 2011 and includes all fields in production and under development, like Gudrun, Gaupe, Skarv, Valemon, and Martin Linge.
NOTE: The figure shows production per calendar day.

The R/P rectangles above have varying degrees of elasticity and some fields had higher productive potential than what buyers asked for during the gas year 2010 (the gas year starts in October and lasts through September the following year). The fields’ elasticity is also related to facilities constraints like liquefaction (LNG) capacity for Snøhvit and by production and export capacities for Ormen Lange (which could be upgraded if new fields are landed at Nyhamna) and by treatment capacities at Kollsnes for Kvitebjørn and Troll.

Based upon NPD data the Sleipner area had an R/P of around 2.7 as of end of 2011, and this suggests that the production from the Sleipner area is about to enter into a steep decline.

The Åsgard fields and later Kvitebjørn are expected to be subject to declines in their productive capacities in the next few years as these fields continue to deplete.

Kollsnes (Troll and Kvitebjørn) and Ormen Lange are providing most of the swing production for seasonal demand. This leaves primarily other fields (see Others in Figure 3) as sources for any near term growth in natural gas production from the NCS.

As Figure 3 illustrates Others has in recent years compensated for the declining production from the Sleipner area. A look at the R/P ratios for the fields and group of fields, when new developments are scheduled to start flowing and their expected production levels, leaves little expectation for an increase in total production. For the near future it is now expected that Others will primarily compensate for declining production from aging and depleting fields.

Figure 4 with the R/P ratios suggests that the production from NCS could grow during 2012 relative to 2011 and that the production then may remain on a plateau towards 2015/2016 before it enters into a steep decline towards 2020 and beyond, as shown in Figure 1.

DISCOVERIES IN THE NORWEGIAN SEA IN PLANNING FOR DEVELOPMENT

Figure 05: The chart shows actual production of Norwegian natural gas (thick red line), a forecast towards 2020 for producing and sanctioned developments (thinner dark red line) and a forecast for fields in the Norwegian Sea (Aasta Hansteen, Linnorm and 6506/6-1, dashed dark red line) in planning and scheduled to start flowing late 2016.
Plans now call for multiple coordinated field developments in the Norwegian Sea to enable a trunk line NSGI (Norwegian Sea Gas Infrastructure) to Nyhamna (receiving facility for the Ormen Lange and start of the Langeled pipeline).

The fields that are now considered for development in the Norwegian Sea are Aasta Hansteen (formerly Luva) 46 Bcm (Billion cubic meters), 1.300 meters of water, Linnorm, 24 Bcm and 6506/6-1, 27 Bcm.

These 3 discoveries are now estimated to hold a total of 100 Bcm of recoverable gas, which represents the same volume that Norway presently exports and that the UK consumes annually.

These fields in the Norwegian Sea may extend the plateau for total Norwegian gas deliveries by 2 – 3 years, (refer to Figure 5).

Based upon publicly available data it has been estimated that Aasta Hansteen has a breakeven price of 1.60 – 1.70 NOK/Scm (0.50 to 0.55 p/therm) at delivery points like NBP (National Balancing Point in Heeren) in the UK or if related to the US market, $8.00 – $8.50/Mcf at Henry Hub.

This serves as an illustration of what price buyers may expect for future supplies of Norwegian natural gas from new developments.

The chart in Figure 5 also illustrates that as this decade comes to an end it becomes harder to sustain the plateau for natural gas deliveries from the NCS, and also that the developed discoveries tend to be smaller and thus have a short plateau and most likely steep decline rates.

Directories group says move to digital products slower than expected and risk of not meeting covenants

Debt-laden directories group Yell has dropped around 18% after it warned its attempted shift towards digital products was not moving ahead fast enough, and it may not meet its banking covenants this year.

Full year revenues fell 14% to £1.6bn with print sales down 21%, with earnings down £47m to £461m. The company said:

Yell has not progressed as fast as it would like in bringing new products to market, with the sheer scale and logistics of the task stretching its nascent teams.

The group has debts of around £2bn and agreed a relaxation of its covenants to allow its new strategy time to succeed. Now it has hired Goldman Sachs and Greenhill “to put in place a new capital structure” ahead of its debt maturing in 2014. But it warned:

As a consequence of increasingly difficult trading conditions and a greater proportion of future income expected to come from as yet unproven new strategies, there is a higher risk in the current year than in the previous year that the group would not be able to meet its financial covenants with its lenders.

The news has sent Yell’s shares down 0.56p to just 2.6p.

And after five months it has come up with a new brand “to help customers and consumers find, and identify with, its new products.” That brand is “Hibu” – whatever that means – and the company will also use that name, although it also says its print products will continue to use their existing names. Gareth Davies at Numis has a reduce recommendation on the business:

Headline numbers are fine, but outlook statement on covenants is a concern. The equity, in our view, is just not worth the risk given current macro fears, potential difficulties in refinance and the structural challenges faced by the business. For those looking for a highly geared bombed out recovery play our preferences would be Trinity Mirror over Johnston Press and Yell.

Leading commodities consumer reportedly brings forward infrastructure projects to boost economy

Leading shares are moving higher as eurozone politicians jostle for position ahead of Wednesday’s key EU summit, but positive news from China has lifted mining shares.

Rio Tinto is the biggest riser in the FTSE 100, up 101p at £29.24 after reports suggested China will accelerate infrastructure spending to help boost its slowing economy. The government has asked for project proposals by the end of June, said the China Securities Journal, including those initially intended for the end of the year.

Other miners also benefited from the news, with Antofagasta adding 31p to £10.61 and Xstrata up 23.6p at 966.6p. Indonesian-focused Bumi is 54.1p better at 437.1p after Barclays began coverage with an overweight rating and 565p price target. The bank said issues about debt and political change were improving, and Bumi was now at a turning point:

We believe that under new management the company can continue to ease its debt burden, push through a strong expansion scheme and improve corporate governance.

Overall the FTSE 100 is up 26.27 points at 5330.75, helped by better than expected UK inflation figures. But downbeat comments from the OECD and IMF regarding the economic effects of the eurozone crisis mean the index has come off its best levels.

Man‘s share price boost from Monday’s announcement of the purchase of investment firm FRM did not last long. It is now down 1.8p at 77p after JP Morgan Cazenove cut its price target from 100p to 85p. Bank of America Merrill Lynch, however, has stuck with its buy rating on the hedge fund group albeit the bank has edged down its target from 230p to 220p.

But Marks & Spencer is up 0.3p at 338.5p despite a 1% drop in underlying annual profits.

Leading commodities consumer reportedly brings forward infrastructure projects to boost economy

Leading shares are moving higher as eurozone politicians jostle for position ahead of Wednesday’s key EU summit, but positive news from China has lifted mining shares.

Rio Tinto is the biggest riser in the FTSE 100, up 101p at £29.24 after reports suggested China will accelerate infrastructure spending to help boost its slowing economy. The government has asked for project proposals by the end of June, said the China Securities Journal, including those initially intended for the end of the year.

Other miners also benefited from the news, with Antofagasta adding 31p to £10.61 and Xstrata up 23.6p at 966.6p. Indonesian-focused Bumi is 54.1p better at 437.1p after Barclays began coverage with an overweight rating and 565p price target. The bank said issues about debt and political change were improving, and Bumi was now at a turning point:

We believe that under new management the company can continue to ease its debt burden, push through a strong expansion scheme and improve corporate governance.

Overall the FTSE 100 is up 26.27 points at 5330.75, helped by better than expected UK inflation figures. But downbeat comments from the OECD and IMF regarding the economic effects of the eurozone crisis mean the index has come off its best levels.

Man‘s share price boost from Monday’s announcement of the purchase of investment firm FRM did not last long. It is now down 1.8p at 77p after JP Morgan Cazenove cut its price target from 100p to 85p. Bank of America Merrill Lynch, however, has stuck with its buy rating on the hedge fund group albeit the bank has edged down its target from 230p to 220p.

But Marks & Spencer is up 0.3p at 338.5p despite a 1% drop in underlying annual profits.

Repairs and insurance group plans to cut back UK operations after recent problems with customer service

Homeserve is being investigated by the UK financial regulator over possible mis-selling, the repairs and insurance group has confirmed, sending its shares down by nearly a quarter.

The company suspended its UK telesales operations after failures in marketing and complaints handling, leading to a management reshuffle and a decision to cut back its UK business.

Homeserve said it had taken longer than expected to restart telesales, and admitted the Financial Services Authority is investigating its past performance. This could take several months to complete.

Meanwhile it reported an 8% rise in underlying profits to £126m, but a 9% fall in UK customer numbers. It plans a smaller, more focused business in the UK, while developing its overseas operations.

Confirmation of the FSA probe has sent its shares tumbling 53p to 174.4p. Analyst David Brockton at Espirito Santo said:

HomeServe’s full year profit is 1% below our forecast, which represents the relative good news in an otherwise negative update. The statement confirms for the first time that the FSA intends to investigate past issues, raising the likelihood of a fine. We understand the FSA investigation will centre on HomeServe’s governance, controls and processes.

Customer numbers are also expected to fall 2.2-2.4m during 2013 on stable retention, implying a material downgrade to our 2014 forecasts of around 20%. These results will ensure the perceived risk profile remains high and do not rebuild credibility in the investment case.

Henry Carver at Peel Hunt issued a sell note, saying:

The 2012 numbers are ahead, but plans to downsize the UK business means we expect to downgrade our 2014 pretax profit estimate by around 25%. Also, an investigation into historical activities by the FSA is about to begin, for which the scope has not yet been finalised. The international business is progressing well, but there is clearly still a long way to go before the UK business stabilises. We are placing our price target under review and maintain our sell recommendation.

Repairs and insurance group plans to cut back UK operations after recent problems with customer service

Homeserve is being investigated by the UK financial regulator over possible mis-selling, the repairs and insurance group has confirmed, sending its shares down by nearly a quarter.

The company suspended its UK telesales operations after failures in marketing and complaints handling, leading to a management reshuffle and a decision to cut back its UK business.

Homeserve said it had taken longer than expected to restart telesales, and admitted the Financial Services Authority is investigating its past performance. This could take several months to complete.

Meanwhile it reported an 8% rise in underlying profits to £126m, but a 9% fall in UK customer numbers. It plans a smaller, more focused business in the UK, while developing its overseas operations.

Confirmation of the FSA probe has sent its shares tumbling 53p to 174.4p. Analyst David Brockton at Espirito Santo said:

HomeServe’s full year profit is 1% below our forecast, which represents the relative good news in an otherwise negative update. The statement confirms for the first time that the FSA intends to investigate past issues, raising the likelihood of a fine. We understand the FSA investigation will centre on HomeServe’s governance, controls and processes.

Customer numbers are also expected to fall 2.2-2.4m during 2013 on stable retention, implying a material downgrade to our 2014 forecasts of around 20%. These results will ensure the perceived risk profile remains high and do not rebuild credibility in the investment case.

Henry Carver at Peel Hunt issued a sell note, saying:

The 2012 numbers are ahead, but plans to downsize the UK business means we expect to downgrade our 2014 pretax profit estimate by around 25%. Also, an investigation into historical activities by the FSA is about to begin, for which the scope has not yet been finalised. The international business is progressing well, but there is clearly still a long way to go before the UK business stabilises. We are placing our price target under review and maintain our sell recommendation.

European markets split with French CAC and German DAX up but Spanish IBEX and Italian FTSE MIB down

The panic of last week, which sent the FTSE 100 down to a five-month low, was replaced by caution and intrigue today as the stock market of leading shares closed up 36 points at 5304.

The G8 leaders’ call for Greece to stay in the eurozone soothed fears of the country’s imminent exit and appears to have steadied the market – albeit temporarily.

The problems are far from over and the reaction from the markets to this Wednesday’s meeting of leaders in Brussels will be one to watch.

The German DAX and French CAC were both up 59 and 19 points respectively, at 6331 and 3027, while the Spanish IBEX and Italian FTSE MIB both dropped slightly – 42 points and 36 points respectively to 6524 and 13012.

With a lull in the political arena it was left to India-focused mining company Vedanta Resources to steal top place of the biggest risers on the FTSE 100.

The company’s shares were up 49.5p to £10.05, a rise of 5.16%, thanks to a jump in copper prices.

But precious metals suffered in equal measure, leaving miner Fresnillo the biggest faller, dropping 39p to £13.44, a fall of 2.9%. Randgold was also affected, dropping in early trading, to recover and close up 39p, or 0.8%, at £48.39.

Gold and silver prices both fell, with traders waiting to see where the eurozone lurches next, although polls are now suggesting pro-austerity parties could get enough votes for a coalition in Greece’s newest election on June 17.

Other strong performers in the FTSE 100 included Man Group, closing up 3.5p, or 4.7%, at 78.4p, following its purchase of investment group Financial Risk Management.

While banks Royal Bank of Scotland (up 0.8p, or 4%, to 20.3p) and Standard Chartered (up 42p, or 3.3%, to £13.14) were both strong risers.

It is worth remembering the taxpayer-controlled RBS did suffer badly last week though.

In the FTSE 250 the biggest riser was Heritage Oil, up 9.5p, or 8.25%, to 124.25p, with biggest faller Waitrose food delivery firm Ocado losing 6.7% of its value to close at 103.6p.

The company is expected to suffer when Waitrose introduces its own in-house delivery service.

There was little in the way of announcements, but Rolls-Royce Group (down 3.5p, 0.4%, at 804p) did say it has won a $136m contract to supply Dolphin Energy to transport natural gas from Qatar to the UAE and Oman, in one of the biggest cross border projects in the region.

Barclays (up 3.9p, 2.2%, at 179p) also revealed its plans to sell its $6.1bn stake in BlackRock, which the US asset manager said would see it buyback $1bn of its own stock.

Tomorrow, Vodafone Group – one of the FTSE’s biggest firms – announce their final results and analysts will be looking out for any update on the phone giant’s £1bn bid for Cable & Wireless Worldwide.