1. U.S. production climbs, oil prices drop to five year lows
A perfect storm of high production and low demand sent oil prices crashing by over 40 percent in the last half of the year.
While OPEC’s reluctance to curb output hasn’t helped matters the North American shale boom is one of the primary culprits for slumping prices.
U.S. crude output hit a 30 year in October to 8.97 million barrels per day.
While anemic global prices and curbed demand are pushing prices lower U.S. production is expected to hit 9.5 million barrels per day in 2015.
Oil prices have hovered near four year lows since July, dropping as low as $57.81 per barrel on December 12.
Soft demand growth is expected to persist into the new year and, with the OPEC members refusing calls for production cuts, most analysts agree that pinpointing a price floor remains challenging.
2. Halliburton and Baker Hughes sign $34.6 billion merger
After weeks of rumors, services giant Halliburton inked a $34.6 billion merger deal on November 17 with rival firm Baker Hughes.
The combined companies had a pro-forma 2013 revenue of $51.8 billion, beating Houston-based Schlumberger’s $45.3 billion in revenue.
Houston-based Halliburton said it expects the merger to save the company nearly $2 billion per year.
The company expects to take a $75 million restructuring charge in the fourth quarter from layoffs and reduced services activities.
Halliburton is prepared to exit from businesses that generate a combined $7.5 billion per year although it expects regulators will require “significantly less” divestment.
In early December, Halliburton met with antitrust regulators to start clearing the way for the merger.
3. Total CEO Christophe de Margerie dies in plane crash
Beloved Total CEO Christophe de Margerie was tragically killed on October 20 after a jet he was riding in collided with a snowplow as it prepared to take off from a Moscow airport.
The two pilots and flight attendant on board the plane were also killed.
De Margerie, 63, served at France’s Total for 40 years, beginning his career at the company’s finance unit.
He was appointed chief executive in 2007 and chairman in 2010.
Total’s reserves saw their largest expansion in nearly two decades under De Margerie’s leadership.
De Margerie was a vocal advocate for the Russian energy sector and spearheaded numerous international projects for Total.
Nicknamed the “Big Mustache,” de Margerie will be remember for his joviality and passion for the industry.
4. Western sanctions push Russian economy to brink of recession
Low oil prices and slowing demand aren’t Russia’s only concern.
Three rounds of western sanctions against the country have crippled its economy and sent the ruble into a nose dive, falling 45 percent against the dollar during the last year.
In March, after the downing of Malaysia Flight 17 and the annexation of Crimea, the United States and European Union imposed their first rounds of sanctions including travel bans against prominent Russian business people and political movers.
Western action against Russia quickly escalated as Vladimir Putin showed no intention of cutting funds to pro-Russian separatist troops in Ukraine.
In September, the U.S. and EU tightened financial sanctions against Russian oil companies including Rosneft, Gazprom and pipeline operator Transneft that prohibit the companies from receiving bank loans with a maturity date longer than 30 days.
Exports of technology and equipment for unconventional, harsh environment and deepwater exploration and production to Russia are also bared.
The sanctions have scuttled billions of dollars worth of exploration and production deals.
ExxonMobil was forced to wind down operations in the Kara Sea with Rosneft while France’s Total had to cancel a shale exploration deal with Lukoil.
Russian gas giant Gazprom is gearing up to fight the EU sanctions against it in court.
State owned Rosneft issued a $28 million tender in October to enlist the services of UK lawyers to fight the EU sanctions.
5. BP’s Deepwater Horizon legal woes
BP suffered a number of legal defeats this year as the Deepwater Horizon trial progressed into the penalty phase.
In September, U.S. District Court Judge Carl Barbier ruled that BP had committed gross negligence that led to a well blowout causing the largest oil spill in U.S. history and killing 11 people.
Barbier assigned the company 67 percent of the fault for the accident.
Earlier this month, the U.S. Supreme Court refused to hear a challenge brought by BP against the terms of its Deepwater Horizon business economic settlement agreement.
The rejection upheld a previous ruling that BP must honor the terms of its settlement agreement although the company argued the agreement has been incorrectly interpreted by administrators.
So far, the company has paid about $28 billion for cleanup, penalties, fines and compensation.
Former BP vice president David Rainey saw a 2012 ruling that dismissed charges of obstructing a congressional investigation and making false statement overturned in August.
Rainey is currently scheduled to stand trial on March 9, 2015.
The penalty phase of the trial is set to start in January.
The Anglo-Dutch supermajor is facing up to $18 billion in fines for accident.
6. Petrobras corruption probe
Already known as the most indebted oil company in the world Brazil’s Petrobras has seen its balance sheet take a beating since Brazilian police launched a corruption probe earlier this year.
The company’s stock has fallen about 65 percent since September, bottoming out at $6.26 per share on December 15.
In April, former Petrobras director of refining Paulo Roberto Costa was arrested on charges of corruption and bribery.
Costa admitted to taking a $636,000 bribe tied to Petrobras’ purchase of a Pasadena, Texas oil refinery in 2006.
Costa alleged that employees were skimming off as much as 3 percent off the company’s deals and kicking the money back to politicians and political parties.
Downstream chief and politician Sergio Machado was one of the executives singled out by Costa.
Things went from bad to worse after PricewaterhouseCooper told the company in November it would not sign off on any accounts linked to Machado.
Machado was placed on unpaid leave in November and has yet to return to the company, although he has denied any wrongdoing.
Brazilian officials estimate various corruption schemes tied to Petrobras deals could be worth $1.2 billion.
Several individuals and companies are being investigated and police have already arrested over 36 people, including Petrobras executives, thought to be involved in corruption.
In December, the U.S. Securities and Exchange Commission served Petrobras with a supernova for undisclosed documents.
The SEC has not commented on the subpoena.
7. Louisiana governor shuts down lawsuit against 97 oil and gas companies
Louisiana governor Bobby Jindal signed a bill in June that quashed a lawsuit filed by a New Orleans area regional levee board against 97 oil and gas companies.
The Southeast Louisiana Flood Protection Authority-East alleged in federal court that oil, gas and pipeline companies are partly responsible for depletion of coastal wetlands that help protect New Orleans and South East Louisiana from hurricane damage.
Legal experts warned the bill could impact claims against BP over the 2010 Gulf of Mexico oil spill.
Louisiana’s attorney general wanted Jindal to veto the bill and keep the lawsuit alive but the governor disagreed.
Jindal championed the law and said it “further improves Louisiana’s legal environment by reducing unnecessary claims that burden businesses so that we can bring even more jobs to our state.”
8. Houston firm and CEO charged with fraud after $600 million stock collapse
In a year full of stock market tumult the $600 million collapse of Houston American Energy Corporation stands out.
The Houston based upstream and its CEO were charged with making fraudulent claim’s about the company’s oil reserves in 2009 and 2010.
“[CEO John F.] Terwilliger and Houston American misled investors by wildly exaggerating the extent and nature of their oil and gas holdings,” said Gerald H. Hodgkins, associate director of the SEC’s Enforcement Division.
The SEC also charged stock promoter Kevin T. McKnight and his firm Undiscovered Equities Inc., who were paid by Houston American to disseminate its fraudulent claims about the oil-and-gas concession project in Colombia.
During that period, Houston American raised $13 million in a public offering.
The company’s stock cratered from $20 to about $0.04 per share after the charges were announced, a loss of $600 million.
9. OPEC rejects production cuts as oil prices slide
With a supply glut already dragging crude prices to four year lows during the summer OPEC’s refusal to to cut production targets has been pushing prices even lower.
At a November 27 meeting OPEC’s members refused to cut production targets even as global demand forecasts were revised downwards.
Russia and Venezuela are expected to be the hardest hit by tumbling oil prices while Mexico and Saudi Arabia remain well positioned to weather slumping prices.
Saudi Arabia, OPEC’s largest producer, has been the most vocal opponent of price cuts.
OPEC’s wealthiest producers have been selling cheap crude at even deeper discounts to importers in the hopes of grabbing market share in Asia.
Although the oil rich kingdom has been mum on its strategy most analysts agree OPEC heavy hitters are willing to stomach the short term pain of low prices if it means pushing shale producers out of the market.
For now, OPEC’s largest producers have suggested their war chests are big enough to wait out the surge in unconventional production.
The group isn’t set to meet again until June 5, 2015 and there have been no signs that an emergency meeting will be called to solve the matter anytime soon.
10. Malaysia Air MH17 crashes in Ukraine
The crash of Malaysia Airlines Flight 17 touched every nation and every industry including oil and gas.
The plane was shot down by a surface-to-air missile over eastern Ukraine near Donetsk on July 12.
All 280 passengers and 15 crew members aboard the plane were killed.
Shortly after the crash, Royal Dutch Shell confirmed that four Shell Malaysia employees and their families were on board the flight en route to Kuala Lumpur from Amsterdam.
Tambi Jiee of Malaysia, who was travelling with his wife and four children, Paul Rajasingam Sivagnanam of Malaysia, who was travelling with his wife and son, Petra van Langeveld of the Netherlands who was travelling with her son and Klaas Willem van Luik all lost their lives.
In July, Malaysia’s Petronas set up a $3.2 million seed fund to help support the families of the crash victims.
The incident triggered political confrontations between western countries and Russia that culminated in three rounds of financial and export sanctions.