Oil Prices and News

Key Civeo shareholder jumps ship

Jana sells Civeo
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Jana sells Civeo

It's been a tough week for Civeo, a company that rents dorm-style living quarters to oil field workers.

On Wednesday, Jana Partners, one of the company's largest shareholders, sold its entire 11.5 percent stake in the firm after the company issued a profit warning and announced job cuts.

And on Tuesday, the company's shares lost more than half their worth.

The massive drop in Civeo shares is being seen by some as an early indicator of a much-anticipated slowdown in oil infrastructure investment, said John Kilduff, founding partner of Again Capital.

"It's obviously a reaction to ... oil prices," Kilduff said. "I think we're going to see more of this."

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Internationally traded Brent crude and U.S.-traded West Texas Intermediate have both been at five-year lows recently. Baker Hughes reported last week that the total U.S. land oil rig count fell by 35 to 1,770 and said that hundreds more rigs will be idled.

"Unfortunately, companies like Civeo will have to bear the brunt of this," Kilduff said.

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Next year will be a tough year, not only for companies like Civeo, but for big-time players in the oil production and exploration sector. "Everyone from Exxon Mobil all the way down to the little guys will feel the effect of this price drop," Kilduff said. "

"In a way, this is what the Saudis were banking on," he said. The domestic oil market will contract, and Saudi Arabia will have to suffer through low crude prices, but ultimately smaller producers will be squeezed out, Kilduff said.

Crude oil inventories down 1.8 million barrels
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Crude oil inventories down 1.8 million barrels

Other industry experts concur with Kilduff's analysis.

Leo Mariani, senior analyst at RBC Capital Markets, said oil investments in the U.S. are slowing down. "The problem we have is an oversupply of oil," he said. "Lower oil prices will affect all aspects of the global economy."

Mariani added he expects 30 percent to 35 percent budget cuts from domestic exploration and production companies in 2015.

RBC Capital is forecasting WTI and Brent to rise to $67 and $73 per barrel, respectively, in the third quarter of 2015. "It's going to be a slow recovery for oil," Mariani said.

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Civeo CEO Bradley Dodson said in a conference call that the company's weak guidance is due in large part to the recent drop in oil prices.

"Since our third-quarter earnings conference call in early November, commodity prices, particularly oil prices, have continued to fall," he said. "Customer accountable spending outlooks have been reduced, and foreign currencies have weakened against the U.S. dollar. These ... factors have all negatively impacted our outlook for 2015."

Shares of Civeo clawed back about 4 percent on heavier-than-typical volume Wednesday. The former subsidiary of Houston-based Oil States International was spun off in June of this year.