|Bid||55.33 x 1300|
|Ask||55.66 x 1300|
|Day's range||55.11 - 55.69|
|52-week range||54.78 - 72.06|
|Beta (3Y monthly)||0.58|
|PE ratio (TTM)||11.19|
|Forward dividend & yield||3.76 (6.82%)|
|1y target est||82.00|
(Bloomberg Opinion) -- Two years ago, 10 sailors died when the U.S. Navy’s guided missile destroyer USS John S. McCain collided with a chemical tanker off Singapore. An investigation has determined that insufficient training and inadequate operating procedures were to blame, and both factors were related to a new touch-screen-based helm control system. The Navy has decided to revert its destroyers back to entirely physical throttles and helm controls.It’s worth exploring the Navy’s rationale for installing touch-screens (“Just because you can doesn’t mean you should,” says Rear Admiral Bill Galinis), as well as its rationale for getting rid of them:Galinis said that bridge design is something that shipbuilders have a lot of say in, as it’s not covered by any particular specification that the Navy requires builders to follow. As a result of innovation and a desire to incorporate new technology, “we got away from the physical throttles, and that was probably the number-one feedback from the fleet – they said, just give us the throttles that we can use.”There are lessons here — including a prescient one from 50 years ago — for other, more mundane transport-control interfaces as well.Large, interactive touch-screens are becoming increasingly prevalent in passenger cars; in the case of Tesla, they’re the only control interface. They’re lovely to look at, but as the Navy’s experience suggests, they might be more confusing than physical controls. That confusion isn’t academic, either: Distracted driving is an increasingly dangerous problem. According to the National Highway Traffic Safety Administration, 10% of all fatal crashes from 2012 to 2017 involved distracted drivers. Mobile phones are a major cause of distraction, as we’d expect, but they’re an even bigger problem for younger drivers.Almost 50 years ago, robotics professor Masahiro Mori wrote an extraordinary essay, “The Uncanny Valley,” on people’s reactions to robots as they became more and more humanlike. As Mori said, our affinity for robots rises as they more closely resemble humans. That affinity plunges, becoming negative and finally rising again once a robot reaches the (possibly unattainable) full likeness of a human being.Something similar is at work in our current touch-screen-filled vehicles. To an extent, adding more screen real estate give us more information, and with it more safety — until it begins to provide an overwhelming amount of information and an overly complex set of choices for visual navigation. And moving from one information-rich interface to another is increasingly difficult, as another Navy rear admiral said in reviewing the John S. McCain collision:When you look at a screen, where do you find heading? Is it in the same place, or do you have to hunt every time you go to a different screen? So the more commonality we can drive into these kind of human-machine interfaces, the better it is for the operator to quickly pick up what the situational awareness is, whatever aspect he’s looking at, whether it’s helm control, radar pictures, whatever. So we’re trying to drive that.There are two ways our in-car screens could evolve. The first is that, for safety’s sake, they’ll move back down the curve, so to speak, and be less ambiguous and more full of knobs and dials and physical throttles. That’s the Navy’s new approach. The second, though, is that we won’t go back, at least in passenger applications, to a more tactile interface of specific controls. We’re probably going to get more screens, with more information. Maybe the only way out of this valley is to shift the interface completely to voice or, in the very long run, to obviate the issue by having cars drive themselves. That could be how we navigate this uncanny valley of vehicle interfaces — the removal of any need to control the vehicle at all, and the chance to fill our cars’ screens with pure entertainment. Weekend readingA greener energy industry is testing investors’ ability to adapt. One coal CEO says “make money while you can” in an industry that is in terminal decline. The venture capital arm of Royal Dutch Shell Plc has invested in Corvus Energy, a maritime and offshore battery systems company. America’s obsession with beef is killing leather. A look at how Phoenix comes alive at night, and how other cities might too in a hotter world. An exploration of how extreme climate change has arrived in America. The Anthropocene is a joke. On a geological time scale, human civilization is an event, not an epoch. Three years of misery inside Google, the happiest company in tech. Here’s what happens when Apple Inc. locks you out of its walled garden after fraud suspicions. Machine vision can spot unknown links between classic artworks. When Midwest startups sell, their hometown schools often lose. A programmer in California got a “NULL” vanity license plate in the hopes that the word would not compute in a database of traffic offenders. Instead, he was fined $12,049. Robert Ballard, discoverer of the Titanic, is exploring a startling clue that may help him find Amelia Earhart’s plane. Bugatti’s one-off La Voiture Noire debuted at the Pebble Beach Concours D’Elegance. It’s already been sold, for $18.68 million. Bloomberg Businessweek’s Peter Coy looks back on the 40 years since the magazine declared “ the death of equities.” Get Sparklines delivered to your inbox. Sign up here. And subscribe to Bloomberg All Access and get much, much more. You’ll receive our unmatched global news coverage and two in-depth daily newsletters, the Bloomberg Open and the Bloomberg Close.To contact the author of this story: Nathaniel Bullard at firstname.lastname@example.orgTo contact the editor responsible for this story: Brooke Sample at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Nathaniel Bullard is a BloombergNEF energy analyst, covering technology and business model innovation and system-wide resource transitions.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- The chief executive role at Eskom Holdings SOC Ltd., considered the most challenging job in corporate South Africa, is attracting interest from people who know how difficult turning around the debt-ridden state utility will be.Andy Calitz, the former CEO of LNG Canada, who started his career as an electrical engineer at Eskom and later held various senior posts at Royal Dutch Shell Plc, confirmed he applied for the job and declined to comment further. Dan Marokane, Eskom’s former head of group capital, has also applied, according to a person with direct knowledge of the situation, who asked not to be identified because he isn’t authorized to comment. Marokane declined to comment.Business leaders suggested to Eskom’s board that former CEOs Brian Dames and Jacob Maroga also be considered for the post, according to another person familiar with the information, who asked not to be identified because it isn’t public. Neither responded to a request for comment.Phakamani Hadebe stepped down as head of the utility at the end of last month, and Chairman Jabu Mabuza has temporarily taken over the position until a permanent appointment is made. The recently appointed chief restructuring officer, Freeman Nomvalo, is expected to complete a report on Eskom’s debt-reorganization options by Sept. 30.Debt MountainEskom’s new leader will have to turn around a company that supplies about 95% of the country’s power yet isn’t generating enough income to cover its costs, is saddled with 440 billion rand ($28.9 billion) of debt and poses a serious threat to the entire South African economy. The government has given the utility a three-year, 128-billion rand bailout, but that’s unlikely to be enough to get its finances back on track.Maroga’s departure from Eskom was acrimonious -- the utility said it accepted his offer to resign in 2010, but he claimed he’d been unlawfully dismissed and filed an unsuccessful application for reinstatement.Marokane was one of three executives, including then-CEO Tshediso Matona, who were suspended by Eskom’s board in 2015 amid an independent inquiry into the electricity producer’s performance. They eventually agreed to part ways amicably, and Eskom said it had never alleged that Marokane was guilty of misconduct or wrongdoing.Applications for the CEO role closed on Aug. 2. Mabuza last month said he’d relinquish the post by the end of October.Read more:The Toughest CEO Job in South Africa Is Open. Who Wants It?Why Eskom’s Power Crisis Is South Africa’s Top Risk: QuickTake(Adds background of chief restructuring officer plan in fourth paragraph)\--With assistance from Natalie Obiko Pearson.To contact the reporters on this story: Paul Burkhardt in Johannesburg at firstname.lastname@example.org;Antony Sguazzin in Johannesburg at email@example.com;Loni Prinsloo in Johannesburg at firstname.lastname@example.orgTo contact the editors responsible for this story: James Herron at email@example.com, Mike Cohen, Hilton ShoneFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- The Trump administration is readying a plan to end direct federal regulation of methane leaks from oil and gas facilities, even as some energy companies insist they don’t want the relief.A draft proposal from the Environmental Protection Agency would prevent the federal government from directly targeting that potent greenhouse gas as it restricts emissions from oil wells and infrastructure, despite fears that time is running out to avert catastrophic consequences of climate change.The White House is finishing its review of the EPA plan, which was described by people familiar with the matter who asked not to be named ahead of a formal announcement that is expected within weeks.The proposal threatens to undermine the oil industry’s sales pitch that natural gas is a climate-friendly source of electricity -- a cleaner-burning alternative to coal that can help power an energy-hungry world for decades to come. Dozens of oil companies have made voluntary pledges to keep methane in check, and some have warned the Trump administration that federal regulation specifically targeting it is essential for natural gas to maintain that reputation.“Stakeholder confidence in natural gas is hanging by the thread, and the EPA is pulling out the scissors with this methane rollback,” said Ben Ratner, a senior director with the Environmental Defense Fund’s energy innovation arm.More than 60 oil and gas companies have made voluntary commitments to pare emissions of methane, the chief ingredient of natural gas, though some of them insist federal regulation is still essential for the highly fragmented industry. For instance, BP Plc and Royal Dutch Shell Plc executives said in March that they favor federal regulation of the oil industry’s methane emissions, with BP asserting in an opinion piece that voluntary actions by a handful of companies “are not enough to solve the problem.”“Industry gets it,” said David Hayes, a former Interior Department official who leads the State Energy and Environmental Impact Center at New York University School of Law. “They recognize that this is a tremendous liability.”The oil and gas industry is the leading industrial source of methane, which can escape from pipelines, sneak out of compressor stations and be vented from oil wells as a byproduct. Although methane accounts for roughly 10% of U.S. greenhouse gas emissions, it’s been blamed for up to a quarter of the planet’s warming as it has more than 84 times the heat-trapping potential of carbon dioxide the first two decades after entering the atmosphere. Methane’s warming potential over a 100-year time span is at least 28 times that of carbon dioxide.Walking AwayThe EPA’s plan to walk away from specifically regulating methane dovetails with other Trump administration efforts to ease limits on emissions from power plants and automobiles. Critics cast the proposal as a part of a broad Trump administration retreat from the global fight against climate change.The Senate’s top Democrat, Chuck Schumer, blasted the plan Wednesday, calling it “another disgraceful giveaway to corporate polluters at the expense of the public’s health, our environment and the fight to combat climate change.”The Obama administration targeted the oil industry’s methane emissions in 2016, by requiring energy companies to frequently seek and plug leaks. Other U.S. requirements also acted to pare methane emissions but did so indirectly, by targeting other, conventional pollutants or seeking to stop the waste of natural gas extracted from federal lands.Those targeted mandates on new wells triggered a legal requirement that EPA also regulate methane emissions from existing oilfield infrastructure -- including more than a million wells on private land. However, plugging leaks on some decades-old, low-producing wells could be expensive and unruly -- a burden that would fall disproportionately on smaller, independent oil companies.“It changes the scope, from our industry, from a rule that’s dealing with 15,000 to 40,000 new sources a year to the million existing wells that are out there,” some 770,000 of which are low-producing sites, said Lee Fuller, executive vice president of the Independent Petroleum Association of America.Imposing rigid requirements to frequently detect and repair leaks at those low-production wells, would be “a huge cost burden,” potentially eclipsing gross income from the sites, Fuller said. “It would shut in production at a lot of these wells.”Trump’s EPA has already proposed easing the 2016 mandates, but by sweeping away direct methane regulation, the agency can prevent the march to impose them on existing wells.Existing EPA requirements -- which focus on paring the release of volatile organic compounds at oil and gas wells -- would still help rein in methane emissions at the sites, just indirectly. And as new wells are drilled -- and old wells stop producing -- more of them fall under those regulations targeting volatile organic compounds. By 2023, nearly 90% of all U.S. natural gas and oil production will fall under the earlier EPA requirements, said Erik Milito, a vice president at the American Petroleum Institute.The EPA is planning to justify its move by treating parts of the oil and gas industry -- such as production from individual wells and natural gas transmission -- as distinct, separate segments, then arguing that the methane emissions associated with them don’t merit direct regulation, according to the people familiar with the proposal.Natural gas produces half as many carbon dioxide emissions as coal when used to produce electricity, but methane leaks undermine that benefit, providing fodder to activists fighting to block the construction of new pipelines and power plants using the fossil fuel.The issue is increasingly important to investors seeking to immunize their oil and gas portfolios from climate change risks. “For an investor that wants to maintain some exposure to oil and gas but have some degree of confidence that natural gas is being done right, this kind of rollback flies in the face of their investment thesis,” Ratner said.(Updates with comments from Schumer, trade groups starting in 10th paragraph.)To contact the reporter on this story: Jennifer A. Dlouhy in Washington at firstname.lastname@example.orgTo contact the editors responsible for this story: Jon Morgan at email@example.com, Elizabeth WassermanFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- President Donald Trump delivered remarks on Tuesday afternoon about “American energy and manufacturing.” As you might expect, these also covered much non-contiguous ground, including Federal Reserve Chairman Jay Powell (“another beauty that I chose”), the president’s love of trucks “of all types” and a curiously extended bit about pouring cement at Central Park’s Wollman Rink – a subject “nobody wants to talk about,” apparently.The rink riff was part of an elaborate shout-out to the Teamsters; Trump was at a new petrochemicals complex in Pennsylvania to tout his support for the local workers and fossil-fuel industry. That the message was decidedly mixed may not come as a shock, but it also says something important about the line the president is walking on energy, particularly in Pennsylvania.For me, the most interesting part came about halfway through:The last administration tried to shut down Pennsylvania coal and Pennsylvania fracking. If they got in, your fracking is gone; your coal is gone. You guys, I don’t know what the hell you’re going to do. You don’t want to make widgets, right? [Pointing to audience] You want to learn how to make a computer? [Mimicking making something] A little tiny piece of stuff; you put it with those big beautiful hands of yours, look … Nah, you want to make steel and you want to dig coal and that’s what you want to do.It should be pointed out that while Pennsylvania’s coal production fell during President Barack Obama’s administration, it had been declining since at least 2001. That trend was accelerated by the arrival of cheap shale gas from states such as Pennsylvania – where, as you can see below, the Obama administration presented little obstacle. Incidentally, cheap gas from fracking is the main reason Royal Dutch Shell Plc built the plastics plant at which Trump spoke – making its final investment decision in June 2016, several months before the presidential election.Trump’s framing is the main thing, here, though. Toward the end of his speech, he lauded Americans’ ability to “outperform anyone,” adding “no one can beat us; nothing can stop us.” Yet, mere weeks after the 50th anniversary of the Apollo 11 moon landing, he links that greatness to production of raw commodities while mocking the idea of making “widgets” or – heaven forbid – “computers.”Let’s just get the obvious out of the way and say America is big and fortunate enough to support a range of industries, from fracking to fabrication. Private production of all goods – including agriculture, mining, construction and manufacturing – amounts to less than 18% of GDP, while private services are 70%. Setting sectors up in mutual exclusion to each other is ridiculous.More importantly, putting one’s faith in such raw-calorific concepts as “energy dominance” sells short the human ingenuity that has underpinned breakthrough after breakthrough – including, as it happens, the fracking for which the president professes such admiration. It also glosses over real trade-offs that must be addressed, such as climate change and the fact that promoting gas production is the single-biggest rival to Trump’s beloved coal miners – partly because shale operators have increased productivity under pressure from the energy crash.Trump was playing to a local crowd, of course, so he was bound to focus on their particular concerns and hopes. Pennsylvania is a particularly interesting arena in this regard, in part because it’s so finely balanced.Trump won the state by a margin of less than 1%, partly by focusing on factory workers who felt ignored by his opponent Hillary Clinton, during what was a mini-recession for the sector in the year leading up to November 2016. Yet, as my colleague Justin Fox wrote here, U.S. manufacturing job gains have slowed lately, and industrial production has outright declined in the past two quarters. Trump’s tariffs, while nominally aimed at protecting domestic industry, are piling pressure on a weakening global economy. Tuesday’s surprise decision to delay tariffs on what amounted to a Christmas gift list of products suggests they’re putting pressure on American consumers too. We’re a long way from the Trump-bump to industrial stocks that greeted his election.Besides being purple, Pennsylvania’s energy identity is also mixed. While it’s one of the country’s biggest producers of fossil fuels, it’s not in the same league as states traditionally seen as big energy producers. Less than 2% of Pennsylvania’s GDP relates to production of oil and gas, for example – much lower than in Texas or even Colorado, which went for Clinton in 2016(1). And as I wrote here ahead of last year’s midterms, Pennsylvania also looks “bluer” in terms of average income and gasoline consumption:This makes Pennsylvania a microcosm of the political trade-offs in U.S. energy. Tariffs boost Trump’s standing with steelworkers but pressure energy demand (and raise producers’ costs). Boosting fracking, meanwhile, modestly helps the state’s economy but exacerbates the pressure on coal miners from natural gas without necessarily paying much of a political dividend on the oil side, given Pennsylvania’s relatively low average gasoline burden. On the other hand, those relying on fuel oil for heating may be more sensitive to rising prices, which in turn bears on Trump’s confrontation with Iran and Venezuela. Meanwhile, Pennsylvania is the only one of 15 states with a low- or zero-emissions vehicle program where Trump won the popular vote in 2016, according to ClearView Energy Partners.Such complex networks of influence and impact perhaps explain why Trump has resorted to trying to end-run the energy market in certain respects. For example, trying to force through subsidies for coal-fired power plants offers one route to garnering votes from miners while also supporting fracking – and socializing the costs and inefficiencies more opaquely across the broader electorate. In what has become a hallmark of his administration, Trump’s electoral instincts push him to divide that which is inherently linked.(1) These data are taken from ClearView Energy Partners’ “Energy Policy by the Numbers, 2019 Update”To contact the author of this story: Liam Denning at firstname.lastname@example.orgTo contact the editor responsible for this story: Mark Gongloff at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Liam Denning is a Bloomberg Opinion columnist covering energy, mining and commodities. He previously was editor of the Wall Street Journal's Heard on the Street column and wrote for the Financial Times' Lex column. He was also an investment banker.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. President Donald Trump has been boasting about creating manufacturing jobs in states key to his re-election, but an emerging recession in the sector threatens to reverse that trend and imperil his message.A decline in manufacturing jobs in coming months could hurt Trump in Rust Belt swing states such as Michigan, Ohio and Pennsylvania and could give Democrats a weapon against the president.Trump traveled to Pennsylvania on Tuesday to make his case. “Factory floors across this land are once more crackling with life,” Trump told workers at a Royal Dutch Shell Plc plant in Monaca, northwest of Pittsburgh. “Our steel mills are fired up and blazing bright. The assembly lines are roaring.”But Trump faces U.S. manufacturing output declining in consecutive quarters, the common definition of recession within the industry, the result of global weakness and a trade war between the U.S. and China.So far, job growth has helped Trump make his case.Payrolls in manufacturing totaled about 12.9 million workers in July, the most since November 2008, according to Bureau of Labor Statistics data. Since Trump took office in 2017, factory employment has increased by about a half million workers after stagnating in the prior two years.But hiring momentum in the sector has started to fade. In the six months through July, 38,000 jobs have been added at factories, the fewest for a similar period since January 2017, when Trump took office.Trump campaigned in 2016 on revamping trade deals to revive America’s industrial base -- a strategy that helped him pick off the historically Democratic states of Michigan, Pennsylvania and Wisconsin that Hillary Clinton took for granted. Democrats carried those three states in every election from 1992 to 2012 and they will likely need them to win in 2020.Nationally, manufacturing jobs accounted for 11.9% of employment in counties Trump carried in 2016 compared with 6.7% in counties Clinton carried. In Pennsylvania, Michigan and Wisconsin, manufacturing’s share of employment averaged 17.9% in Trump counties versus 8.5% in Clinton counties, according to a Brookings Institution analysis of December 2018 employment data.“There is no doubt that a core portion of Trump’s base is a group of former and current manufacturing workers,” said Mark Muro, a senior fellow at the Brookings Institution’s Metropolitan Policy Program. “This is an important part of his base, and it has also been an important part of the story he tells of having the back of the middle-class little guy.”The benefit Trump derives from the story in his campaign will depend on what happens with jobs if output continues to decline.The Fed’s latest industrial production report last month showed U.S. factory output declined at a 2.2% annualized pace in the second quarter after a 1.9% rate of decline in the previous three months. Within specific industry groups, metals, machinery, textiles, paper and petroleum and coal were among those that experienced outright production downturns during both quarters.Another gauge of American manufacturing activity fell in July to an almost three-year low, dragged down by slower production and shaky export markets that help explain the Federal Reserve’s decision to reduce interest rates last month.At least one Democratic presidential candidate has highlighted manufacturing declines.“Despite Trump’s promises of a manufacturing ‘renaissance,’ the country is now in a manufacturing recession,” Senator Elizabeth Warren wrote in a Medium.com post last month.The downturn in the index of factory activity is consistent with a recent trend of manufacturing weakness throughout the world. Producers are beset by a combination of tepid global economies and trade policies and tariffs that have left supply chains at some companies in disarray.While manufacturing makes up only about 11% of the U.S. economy, the risk is that further weakness will extend to service providers and prompt those companies to reduce investment and limit hiring.\--With assistance from Ryan Haar, Justin Sink, Sahil Kapur and Katia Dmitrieva.To contact the reporters on this story: Vince Golle in Washington at firstname.lastname@example.org;Mike Dorning in Washington at email@example.comTo contact the editors responsible for this story: Alex Wayne at firstname.lastname@example.org, Justin Blum, Scott LanmanFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Markets) -- The Caribbean beats of reggae and soca ease into American hip-hop at a roadside bar in Georgetown, Guyana. Outside, teenagers hoot as they whiz past palm trees on mopeds. But for Gavin Singh, a 36-year-old investment banker, this is no time for play or relaxation. “People out there don’t really get it,” he says, pushing aside his mojito to emphasize his point. “We have a tsunami coming.”A tsunami of what?“Of cash. Of opportunity.”This tiny nation on the north coast of South America is about to become the world’s newest petrostate—and potentially the richest. In 2015, Exxon Mobil Corp. made what one of its executives described as a “fairy tale” discovery in the vast Stabroek exploration block off the Guyanese coast. Since then, it’s found so much oil that by the mid-2020s Guyana, with a population of about 778,000, will probably produce more crude per citizen than any other country.Crucially, however, Guyana—a poor former colony, first of the Dutch, then of the British—is unprepared for what’s coming. Its petroleum laws were written in the 1980s. The Department of Energy has an annual budget of $2 million. Five years after Exxon’s discovery, the country still hasn’t finished crafting relevant new laws or even established a regulatory body to oversee exploration and production. Last year the government set up a sovereign wealth fund to soak up as much as $5 billion in oil revenue per year by 2025, but there are no plans for how to spend it.Even as the windfall approaches, more and more questions are being raised about how the country sold exploration rights off its coast—not just to Exxon, but also to other outfits that followed in the supermajor’s wake. The State Assets Recovery Agency (SARA), an anticorruption unit looking into the leases, hasn’t named any targets. It’s too early for that, says its director, Clive Thomas. “We’re building up a case,” he says. Guyana’s oil age is dawning at a rocky political moment in this still-evolving democracy. The current president, David Granger, who heads a coalition government, lost a no-confidence ballot by a single vote in Parliament last December, triggering an election that as of late July hadn’t been scheduled. The parliamentary rebuff was a stinging reversal for Granger, who took office in May 2015, and the election could pave the way for the return of the People’s Progressive Party (PPP), which had held power for 23 years, including when Guyana first sold off its oil rights.Then there’s the specter of Venezuela, which borders Guyana to the northwest and has historically laid claim to part of its rich offshore fields. Last year, Venezuelan gunboats sailed in to hinder Exxon’s activities, but drilling carried on to the south in the Stabroek block. So far Guyana has managed to weather its neighbor’s interference—no doubt aided by the cratering economy and widespread unrest that’s preoccupied Nicolás Maduro’s regime in Caracas.The whiff of oil can be intoxicating, especially in a nation where the average income is $385 a month. “It’s really a matter of how wealthy you’re going to be, rather than whether you’re going to be wealthy at all,” says Minister of Natural Resources Raphael Trotman.But oil can sometimes be a curse. For every Norway or Qatar, there’s likely to be a grim counternarrative: an Angola or, for that matter, a Venezuela, which is a wreck even though it has the world’s largest oil reserves. “I keep hearing about how wealthy we will be as a country,” says Bharrat Jagdeo, a former president who’s now leader of the PPP. “People don’t realize the timelines. It requires hard work over an extended period of time to really get wealthy. That sense of caution is not there in this euphoria.”When Mark Bynoe, the director of Guyana’s Department of Energy, was a boy, he used to play cricket barefoot with friends in his village outside Georgetown. At the end of the day, his feet “would be shiny at the bottom,” he remembers. “We knew oil was around.”Bordered by Venezuela, Brazil, and Suriname—all producers—Guyana always held the promise of oil. But for decades after independence from Britain in 1966, explorers drilled nothing but dry holes. “We were practically begging people to take a block offshore,” says Jagdeo. “Nobody wanted to come.”Then along came Exxon. It was 1999, and Jagdeo was heading the government. Guyana and Exxon signed a production-sharing agreement that covered a 26,800-square-kilometer (10,348-square-mile) deep-water area spanning virtually the entire width of the country’s maritime borders. Given all the unsuccessful exploration, Exxon secured the rights to Stabroek under terms so generous that they would come back to haunt the country.The early years were frustrating for Exxon. Border disputes with Venezuela and Suriname impeded exploration. After the Suriname quarrel was settled in 2007, Exxon began gathering data and conducting seismic imaging along the eastern reaches of Stabroek. Then, in 2013, the Venezuelan navy boarded and for four days detained an exploration vessel contracted by Anadarko Petroleum Corp., another U.S. producer that was surveying in the area. Exxon plowed on. In 2014 oil prices crashed, and its partner in Stabroek, Royal Dutch Shell Plc, pulled out. Unwilling to shoulder the financial risks on its own, Exxon remained the operator responsible for exploration but brought in New York-based Hess Corp. and China’s state-backed Cnooc Ltd., handing them 30% and 25% stakes, respectively, in exchange for sharing drilling costs.When Exxon began drilling the wildcat well Liza-1 in March 2015, Guyana was just a couple months away from a general election. On May 20, four days after Granger emerged as the surprise winner, Exxon announced it had struck oil.The timeline would later prove controversial and become a focus of the SARA investigation. But one thing was clear: Oil was coming.When Liza-1 struck oil, Lars Mangal, one of Guyana’s foremost petroleum professionals, knew exactly what to do. He’d spent two decades working in oilfield services around the world for Houston-based Schlumberger Ltd. before ending up in the U.K. Now he needed to pack up his belongings, get back to Georgetown, lease a dockyard, and bid for the Exxon services contract. “This is the big one,” Mangal, who turns 54 in August, recalls thinking.He was right. His company is now one of the lead local investors in Guyana Shore Base Inc., which acts as Exxon’s main service hub in Georgetown. He has no doubt that Guyana needs to embrace Exxon’s plans for Stabroek oil. “Damn it,” he says. “Get it out of the ground.”Somebody has written a message on a whiteboard at Guyana Shore Base that reflects Mangal’s attitude. It reads, “Don’t obsess over who’s baking the cake. Figure out how to get a slice.”Lars’s younger brother, Jan, would almost certainly take issue with that. Jan Mangal, who also has a long track record in the oil industry, has become a leading critic of exploration deals that Exxon and other companies cut with the government.Jan, 49, worked at Chevron Corp. for 13 years after earning a doctorate in engineering at the University of Oxford. He became Granger’s energy adviser in 2017. From the start, he clashed with ministers who unsuccessfully resisted his call to have all of the country’s oil contracts published and open to public scrutiny. He didn’t last long in the role, leaving after a year when his contract wasn’t renewed. He’s now a consultant.“Corruption is the main reason why countries like Guyana fail with oil and gas,” Jan says. “It undermines everything.” He says that Guyana didn’t get a fair deal from Exxon—he calls it a dated, “colonial contract”—and that other leases have been awarded without due process, potentially costing the country billions of dollars in lost revenue and exposing vulnerable Guyana to the so-called resource curse.Exxon’s manager in Guyana, Rod Henson, disagrees. He says the contract reflects the high risk of drilling the first well. In any case, he says, “the revenues that are going to be generated from that give Guyana the flexibility and the opportunity to be anything they want to be.” The months before Exxon struck oil in 2015 were an unsettled time in Guyana. Then-President Donald Ramotar had clashed with Parliament over government spending. Fearing a no-confidence vote and the end of his party’s 23-year rule, he dissolved the legislative body and called a general election for May.At the same time, unbeknownst to the wider world, Exxon was getting ready to drill Liza-1. Other companies, smelling oil, were circling Guyana’s waters.On March 4, Ramotar signed an exploration lease for the 6,100-square-kilometer Canje block with Mid-Atlantic Oil & Gas, a little-known company run by Guyanese businessman Edris Dookie. The next day, Exxon, whose Stabroek block abuts Canje, began drilling.On April 28, Ramotar signed over another exploration lease, this time with the partnership of Tel Aviv-based Ratio Petroleum Energy Ltd. and Toronto-based Cataleya Energy Ltd. It covered the 13,535-square-kilometer Kaieteur block, also adjacent to Stabroek.On May 7, then-Minister of Natural Resources Robert Persaud announced that Exxon had struck oil. The general election was four days later, and on May 16, Granger, leader of the then-opposition, was sworn in as president. Four days after that, Exxon confirmed the discovery to the stock market.The award of oil leases in developing countries is one of the most secretive, competitive, and contested corners of the industry. Before oil is discovered, governments typically offer royalty rates and tax incentives that are favorable to exploration companies. As soon as a discovery is made, unsold leases nearby become extremely valuable overnight, allowing governments to set higher rates for them. This binary before-and-after phenomenon opens the door to abuse by people acting on inside information.As Bloomberg News first reported in May, SARA is now probing the deals Guyana cut with oil companies over the years. “We’re investigating the issuance of the licenses, for example, and the various blocks,” says SARA chief Thomas. He stresses that the postmortem is in the very early stages, so he can’t disclose much except to say the investigation is focused on the runup to the 2015 election.“There are so many red flags,” Jan Mangal says, looking back at that period. He says the government could have commanded much more favorable tax and royalty rates if the Canje and Kaieteur leases had been sold after Exxon’s Stabroek discovery was announced and not before. “The country could have got 10 or 100 times what it got for these massive, massive blocks,” he says.Ramotar says he didn’t know about the Exxon find when the Canje and Kaieteur deals were signed, adding, however, “I was told that the indications were good.” He says that the SARA investigation is “politically motivated” and that contracts signed under the current government should be looked at as well. He says he welcomes “any impartial international inquiry.”Persaud, the natural resources minister at the time, says focusing on the election timeline suggests “a wrong narrative.” He says the Canje and Kaieteur leases had been all but signed, sealed, and delivered in 2013. But then the Venezuelan navy boarded the Anadarko-contracted exploration vessel, spooking Guyanese authorities. Not wanting to provoke Venezuela further, Persaud says, the government put the contracts on hold. The Canje lease, which was published on government websites, could be interpreted as backing this version of events: “2013” has been crossed out and replaced with a handwritten “2015.”Representatives from Mid-Atlantic, Cataleya, and Ratio Petroleum concur with Persaud’s timeline. “We were working away steadily in good faith for many, many years,” Cataleya Chief Executive Officer Michael Cawood says. “This wasn’t something that popped up all of a sudden.”About a year after the leases were signed, Exxon took a 50% stake in Kaieteur and a 35% stake in Canje and became the operator of both blocks. Cawood says his group took “no cash consideration” from Exxon for the stake in Kaieteur. Dookie says there were “terms” agreed to with Exxon for its Canje stake but declined to say what there were. Exxon wasn’t the recipient of the Canje and Kaieteur blocks initially and had nothing to do with the talks at the time. Exxon declined to comment on terms. All the companies involved say they have acted entirely properly.In 2016, Exxon had a problem. Its deal with Guyana was 17 years old, and under the complex terms of the agreement, the supermajor was running out of time to find more oil. This was an opportunity for Guyana’s new government, now led by Granger, to update the 1999 contract and extract better terms. Such negotiations are a fine balancing act for governments: Push too little, and you get too little; push too hard, and the company might walk away.Natural Resources Minister Trotman took a different route: no negotiation at all. He says Guyana was worried, once again, about Venezuela, fearing Exxon’s discovery would rile its prickly neighbor; neither Exxon nor the government wanted to get into a protracted negotiation.Instead, in October 2016, the government and Exxon modified the terms of the existing 1999 deal.This was a missed opportunity of epic proportions, says the PPP’s Jagdeo, the opposition leader and former president. “They had 3 billion barrels of proven reserves,” he says. “One would have thought you would have gotten a better contract.”Trotman counters that the government’s overriding concern in the Exxon talks was finding “security in what it had.” That included getting an $18 million signing bonus that, Trotman says, “we believed we should use for … the prosecution of our case” against Venezuela to settle territorial claims.There was one hitch—a big one. The bonus was kept secret from the public for what Trotman describes as “national security” reasons. The 2016 contract that modified the terms of the original wouldn’t be made public until 2017 (following the intercession of Jan Mangal), but in the small world of Guyana, it wasn’t long before word leaked out and caused an uproar. “If this is what they do with $18 million, what will they do with all the billions to come?” says Charles Ramson, 35, a PPP politician.Bynoe, the current energy director, says it was a mistake not to be more open about the $18 million. In retrospect, Trotman agrees. “We should have confided in the people much earlier,” he says. In addition to the signing bonus, according to Exxon’s Henson, the government got more “rental type payments,” royalties, and commitments of local content as part of the deal. But, crucially, the modified terms also allowed Exxon more time to explore and develop Liza. Henson says that without the 2016 modifications he’s “absolutely certain we would not be producing oil in 2020.”The controversy surrounding the 2016 contract doesn’t end there. According to an analysis of the agreement by Rystad Energy AS, an Oslo-based consultancy, Guyana will take about 60% of the oil’s profits, with the remainder going to Exxon, Hess, and Cnooc.That’s considerably lower than the global average of 75% for offshore projects, Rystad said in a 2018 report. However, it also pointed out that countries in the early stages of oil and gas development, such as Mozambique and Mauritania, are often forced to “sweeten the pot” for the exploration companies. “Clearly we have to make a profit,” Henson says. “We understand there are benefits to us and our partners, but we truly want this to benefit the country.”Bynoe takes a Goldilocks view of the whole affair. “Is it the greatest contract for government? I would say no,” he says. “Is it the worst contract? I would still say no.” Over time, he says, Guyana can “incrementally improve the conditions.”With that in mind, he says, it’s time to look forward. “We have been looking back about the contract,” he says. “There’s been too little attention in how will we treat these resources when they begin to flow to us.” At Exxon’s Investor Day meeting at the New York Stock Exchange in March, Guyana took center stage. It’s not hard to see why. Senior Vice President Neil Chapman—the exec who’d once described the Stabroek find as a “fairy tale”—pointed to a chart featuring estimates from Wood Mackenzie Ltd., an Edinburgh-based energy consulting firm. It showed that Exxon’s Guyana wells will be the most profitable of all new deep-water projects by major oil companies.Exxon expects the first Stabroek oil to flow to the Liza Destiny, a storage and offloading vessel, in early 2020, with production quickly ramping up to 120,000 barrels a day and rising by 2025 to 750,000 a day (roughly on a par with last year’s daily output in Indonesia, which has a population of 264 million).As for Guyana, the government estimates the Exxon deal will bring in $300 million in 2020, or about a third of the country’s entire tax revenue, and surge to $5 billion by 2025.“They say Guyana will be one of the richest countries in the world,” says Melissa Garrett, a waitress who supplements her income by selling potatoes, eggplant, and plantains at a stall at Georgetown’s century-old Bourda market. “People are in the mood for change. They want it now.”They also need to come to terms with the massive transformation coming their way, says Singh, the investment banker lingering over his mojito at the roadside bar. “Sitting back and doing nothing can be the worst mistake they can make,” he says.Georgetown—its crumbling colonial buildings set amid canals built by the Dutch in the 18th century—resembles a developing-world Amsterdam that’s faded in the harsh sunlight. On its bustling narrow streets, Guyanese descendants of Indian indentured laborers and African slaves live and work side by side, shop at the same markets, and dream the same dreams of wonders coming their way thanks to oil.Guyana’s political elite is torn over how to spend the money. The Granger government has said it wants to use the windfall to reshape the economy, pumping money into health and education, into the country’s vast natural resources, and into rail, road, and port projects that could provide an important pathway to the Atlantic for northern Brazil. Thomas, the head of SARA, favors bypassing government altogether in favor of a universal basic income-like stipend of $5,000 per family.First things first, says Jan Mangal. “Guyana really needs to fix all of its existing problems now before the oil money flows,” he says. “If it doesn’t, the oil money will exacerbate the existing problems and make them worse.”Chris Ram, a lawyer and former newspaper columnist (he broke the news about the $18 million signing bonus), worries that, rather than taking a leap forward propelled by oil, Guyana could slip backward. In the 1980s, under left-wing strongman Forbes Burnham, Guyana shared many traits with today’s Venezuela. Although democracy took root in the 1990s, Ram fears for its fragility.“We don’t have a culture of democracy,” he says over a meal in one of Georgetown’s many Indian curry houses. “The constitution is weak and open to abuse. Problems are swept under the carpet. It’s frightening. All the elements of a resource curse are there.”Crowley covers oil for Bloomberg in Houston. To contact the author of this story: Kevin Crowley in Houston at email@example.comTo contact the editor responsible for this story: Stryker McGuire at firstname.lastname@example.orgFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- Great thirty minutes, guys.Monday morning’s much-ballyhooed earnings call from Saudi Arabian Oil Co., or Saudi Aramco, was remarkable chiefly for its brevity. About 25 minutes in, the host was reminding people to get their questions into the queue. Just after 9:30 a.m. in New York, it was time for closing remarks.Aramco, the biggest oil major in the world, is owned by the government of Saudi Arabia, so the fact it was putting anyone on the line to talk about a published set of accounts is noteworthy. And, to be fair, they had blocked out an hour. Yet the call yielded little new information. That partly reflected the caliber of the questions, with the first amounting to “please explain why your company is so awesome.” But it was also a function of the usual reticence of major companies, compounded by the fact that this one is, after all, not merely unlisted but a virtual state within a famously secretive state.It was, therefore, entirely understandable that Aramco didn’t offer up much detail on plans to buy a 20% stake in the refining and chemicals business of India’s Reliance Industries Ltd., only made public a few hours before the call got underway.On the other hand, it was unfortunate that CFO Khalid Al-Dabbagh effectively dodged a decent question on Aramco’s capital expenditure and dividend policy. If, as recent reports suggest, Aramco still intends to go through with its IPO and this was a dry run for that, then questions about cash flow and dividends will be the ones that really matter.In a world where energy stocks have fallen out of favor because of a legacy of excess spending and concern about faltering demand growth, the majors are valued chiefly for their dividends. A public Aramco would be no different in this respect (see this).The first-half numbers just published confirmed Aramco is a cash-flow juggernaut, generating free cash flow after capex of almost $38 billion and paying its sole shareholder a dividend of more than $46 billion. The details beneath such numbers matter, though. After all, it’s immediately obvious that, despite generating more free cash flow in the first half than BP Plc, Chevron Corp., Exxon Mobil Corp., Royal Dutch Shell Plc, and Total SA combined, Aramco borrowed to pay that dividend to the government. While net debt is just 2% of capital employed, there was a $28 billion swing in net indebtedness in the space of 12 months. And Aramco’s capex in the first half looked low – which is why it was questioned – and Al-Dabbagh did allow that “timing” was one reason for that, suggesting it would rise in the second half of 2019.Roughly 40% of the first-half dividend was an outsize special payment predicated on 2018’s “exceptionally strong financial performance,” yet sitting oddly with a year-over-year decline in first-half profit. Coming alongside Aramco’s acquisition of the government’s majority stake in Saudi Basic Industries, or Sabic, this reinforces the sense that the company chiefly represents a financing channel for a government facing chronic deficits at current oil prices. To which one might respond: Duh, like, it’s a national oil company, what exactly did you think it was for?This is the central issue when it comes to Aramco’s valuation, however, because the closeness of that relationship with the government affects the risk premium on the company’s earnings. Taking the 12 months through June as a whole, Aramco’s capex of about $35 billion left it with free cash flow of about $88 billion, more than enough to fund $72 billion of dividend payments. Putting those on an Exxon-like yield of 5% implies a value of $1.45 trillion.Yet, assuming ordinary dividends are running at $52 billion a year – as the accounts suggest – about $20 billion of that payout is akin to the more discretionary buybacks oil majors use to distribute exceptional income. Aramco’s payout was 99% of earnings in the first half of 2019 versus just 52% a year earlier. That cyclical element should be priced at a discount to ordinary dividends, especially in light of Aramco’s role in Saudi Arabia’s public finances. Price the dividend at 6%, and the value drops to $1.21 trillion; at 7%, a shade higher than the yield for BP and Shell, it falls to $1.03 trillion.These are still very big numbers (and in line with the valuation I put together last year). They remain, however, far short of the $2 trillion valuation bragged about by Prince Mohammed bin Salman; and this despite those numbers reflecting, in part, an “exceptionally” strong year for the company.If Aramco’s owner still wants to get even close to a two in front of those twelve zeroes on the trading screen some day, then the company needs either a fundamental shift in the outlook for the oil market or a fundamental reappraisal of its ability to squeeze even more dividends out of that market. It has only some influence over the first option. The second would require at least a bit more time on the phone. Update: A typographical error in an earlier version of this story put Aramco’s implied valuation with a 6% dividend at $1.21 billion instead of $1.21 trillion.To contact the author of this story: Liam Denning at email@example.comTo contact the editor responsible for this story: Mark Gongloff at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Liam Denning is a Bloomberg Opinion columnist covering energy, mining and commodities. He previously was editor of the Wall Street Journal's Heard on the Street column and wrote for the Financial Times' Lex column. He was also an investment banker.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
It looks like Royal Dutch Shell plc (AMS:RDSA) is about to go ex-dividend in the next 3 days. You can purchase shares...
Royal Dutch Shell (RDS.A) stock has slumped 10.8% so far in Q3. Shell’s dividend yield has risen to 6.6%, the highest among its peers.
(Bloomberg) -- Kirsten Gillibrand is launching more than $1 million worth of television and digital advertisements as she tries to jump-start a presidential campaign that’s gained little traction in the polls.The 30-second spot will run on television in Iowa and New Hampshire, sites of the first two presidential nominating contests, the campaign said, as well as online. So far, she’s booked $42,150 in air time, all in Cedar Rapids, Iowa, according to Advertising Analytics LLC, which tracks political advertising spending. It’s the New York senator’s first TV buy of the election, and one the campaign says will help her qualify for the next round of debates.Gillibrand has 100,000 unique donors and reached 2% in one national poll, the campaign said. She’ll need 30,000 more contributors and three more national polls with at least the same level of support by Aug. 28 to qualify for the Houston debates, scheduled for Sept. 12-13.Biden Tries a Do-Over on His ‘Poor Kids’ Remark (2:07 P.M.)Joe Biden tried to clean up his remarks about race and education Friday, shrugging off suggestions that a long history of gaffes might hurt his chances to beat President Donald Trump.“We have to make sure every child -- every child -- gets a great education regardless, regardless of their race,” Biden told supporters at the Boone County Fairgrounds in Iowa. “Look, whether their parents’ income, ZIP code, disability — it shouldn’t be a determining factor. We have to eliminate the funding gap that exists between majority white and non-white districts, between majority wealthy and not-wealthy districts. We have to eliminate those.”On Thursday, he told a group of mostly Asian and Hispanic voters that “poor kids are just as bright and just as talented as white kids.” The Trump campaign immediately seized on that statement as “part of a pattern” of Biden suggesting minority children are harder to teach.While mingling with supporters Friday, a reporter asked Biden what he has to say to critics who say his gaffes hurt his electability.“Well that will be determined pretty soon, won’t it?” Biden said. -- Emma KineryTrump Headed to Chemical Plant in Pennsylvania (11:40 A.M.)President Donald Trump is headed to Pennsylvania’s Rust Belt, where he is expected to talk about economic revitalization in the key swing state.Trump will appear Tuesday at a $6 billion chemical production facility nearing completion in Monaca, about 30 miles northwest of Pittsburgh. The facility, owned by a subsidiary of Royal Dutch Shell Plc, will use natural gas liquids to annually produce 1.6 million tons of ethylene, which is used in the production of plastics and other products.The visit comes as the Trump administration has proposed turning the natural gas-rich Appalachian region into a hub for petrochemical refining as a way to help local workers hurt by a downturn in coal mining. Pennsylvania is one of the must-win states for Democrats who hope to unseat Trump in 2020. -- Ari NatterYang Is Ninth Democrat to Qualify for Debates (10:26 A.M.)Tech entrepreneur Andrew Yang has become the ninth Democrat to qualify for the next round of presidential primary debates, with several other prominent candidates still on the outside looking in.The Democratic National Committee has increased the minimum requirements to be eligible for the debates: A candidate must have both 130,000 individual donors -- with at least 400 from 20 different states -- and at least 2% support in four approved polls. For the first two rounds of debates, each of which featured 20 candidates, the requirement was either 65,000 donors or 2% support in three polls.Next closest to qualifying are Julian Castro and Tulsi Gabbard. Each has met the donor requirement; Castro has at least 2% support in three polls, and Gabbard has one.Also on the radar is billionaire Tom Steyer, who announced his campaign in July and is seeking to make his first debate appearance. He meets the threshold in three of the four qualifying polls, but has said in fundraising emails that he expects to reach the donor goal next week.Kirsten Gillibrand and John Hickenlooper also have one qualifying poll, but don’t meet the donor requirement.Campaigns don’t disclose the names of contributors who give less than $200, and many campaigns are asking for as little as $1 to meet the threshold. Fundraising emails sometimes give a clue -- Colorado Senator Michael Bennet says he’s still short of the number, and Gillibrand’s campaign told supporters she needs 30,000 more donors.The next round of debates is Sept. 12-13 in Houston. The deadline to qualify is Aug. 28. -- Gregory Korte and Bill AllisonCorn Kernels Say It’ll Be Joe Biden Vs. Donald Trump (5:30 A.M.)It’ll be Joe Biden versus Donald Trump in November 2020, if one is to believe the corn kernels.By mid-afternoon Thursday, more than 2,000 Iowans had voted in the State Fair’s “Cast Your Kernel” survey by dropping corn kernels into glass jars labeled with the names of candidates.When the poll closed for the day at 9 p.m., Democrats and Republicans were tied 50% to 50%. Among Democrats, Biden was the front-runner with 33% of the vote, followed by South Bend Mayor Pete Buttigieg with 14% and Senator Elizabeth Warren at 12%. Trump held a hefty lead over opponent Bill Weld, the former governor of Massachusetts, with 97% of the Republican vote.WHO TV, the NBC affiliate in Des Moines, has been doing the corn kernel poll at every Iowa State Fair for nearly 20 years. The survey tends to track with the state’s actual voting tends. -- Emma KineryComing Up This WeekThe major Democratic presidential candidates gather at the Iowa Wing Ding on Friday, a major Democratic fund-raiser to speak and glad-hand with donors and other voters.\--With assistance from Gregory Korte, Bill Allison, Ari Natter and Emma Kinery.To contact the reporter on this story: Bill Allison in Washington at email@example.comTo contact the editors responsible for this story: Wendy Benjaminson at firstname.lastname@example.org, Ros KrasnyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
The world’s largest sovereign wealth fund shocked the world when it said it was dumping oil and gas stocks, but it seems to have had a change of heart
We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are...
(Bloomberg) -- After revealing it wants to dump all oil stocks in a market-shattering bang in 2017, Norway’s $1.1 trillion wealth fund’s actual divestment could now be so small it hardly matters.The fund’s initial plan was heavily diluted in a political compromise that shielded the world’s biggest oil companies. Now technical adjustments look set to reduce the divestment by a further 30%, meaning the selloff would be smaller than the fund’s roughly $6 billion stake in oil giant Royal Dutch Shell Plc.It’s “like the mountain that gave birth to a mouse,” said Knut Anton Mork, an economics professor and former bank economist who’s followed the fund’s development and led a commission on its strategy.The world’s biggest wealth fund, built from decades of petroleum production to safeguard future generations of Norwegians, sent shock waves through global markets when it said it wanted to sell $37 billion in oil and gas stocks. While the fund argued it was a move to better spread Norway’s overall risk, the announcement was seized upon by climate activists as a key moment for fossil-fuel divestment movement.But the Norwegian government, fronted by two petroleum-friendly parties, decided in March to spare the big integrated companies such as Shell and BP Plc, partly because they invest in renewable energy. Instead the selloff would only include pure exploration and production companies, whittling down the divestment to about $7.8 billion. But that estimate was based on a category from index provider FTSE Russell that also included marketing, refining and petrochemical companies.Since then, the classification system has changed to include a “Crude Producers” category stripped of downstream. The fund will give its advice on the final details of the divestment to the Finance Ministry by mid-September, and declined to comment until then.Mork, as well as SpareBank 1 Markets Chief Economist Harald Magnus Andreassen, both said it’s likely that the Finance Ministry will pick the “Crude Producers” category for the divestment.The fund’s holdings in that group at the end of 2018 was $5.7 billion, according to Bloomberg calculations. Its 2.5% stake in Shell was worth $5.9 billion at the same time.Andreassen, who participated in a government-led panel that advised against the original plan because it viewed even that as a marginal insurance against lower oil prices, said there’s now “nothing left” of the fund’s initial proposal.“The resulting compromise doesn’t have anything to do with an oil-price insurance anymore,” he said. “This looks like a symbolic measure.”Steinar Holden, an economics professor at University of Oslo who supported the initial proposal, said it was “a pity” the plan didn’t go through and that the effect was now “small.”In an emailed response to questions, State Secretary Marianne Groth repeated the Finance Ministry’s argument that the divestment was appropriate even though the impact will “probably be limited.”“Since the state’s petroleum income mainly comes from upstream activity, it’s more accurate to remove upstream companies, rather than to exit a broadly diversified energy sector altogether,” she said.‘Scandalous’Activists and legislators are vowing not to give up on making the divestment more meaningful. The plan has not only lost its clout as a means to spread Norway’s risk, but its value as a figurehead for the global campaign against fossil fuels has also been diminished.The dilution of the proposal is “completely scandalous,” said Martin Norman, Greenpeace’s finance campaign director for the Nordics.The opposition Socialist Left Party, which has vowed to fight to broaden the exclusion to include integrated oil companies, said the latest estimate for the divestment, equal to just 0.5% of the fund’s value, only strengthened its point.“We’ve always viewed this as the first step,” lawmaker Freddy Andre Ovstegard said by phone. “We need to pull the fund out of all fossil energy.”Here is the likely disposal list:To contact the reporter on this story: Mikael Holter in Oslo at email@example.comTo contact the editors responsible for this story: Jonas Bergman at firstname.lastname@example.org, Stephen TreloarFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- Time was when geopolitical tensions in the Middle East would light a fire under oil prices, even if they didn’t immediately affect prospects for supply. Now, it’s threats to demand that send shock waves through oil markets. And there may be more of those to come.A spate of tanker attacks, drone downings and saber rattling around the Strait of Hormuz has had little impact on oil prices. Perhaps oil traders don’t believe that the world’s most important oil chokepoint will really be closed to tanker traffic – a sentiment I share. The seizure of the tanker Stena Impero is a particularly British problem and we are unlikely to see a growing fleet of foreign ships impounded off Iran. While the harassment of vessels using the waterway may continue, more serious escalation is unlikely – at least without further provocation.In contrast, a tweet from President Donald Trump that he would impose “a small additional Tariff of 10% on the remaining 300 Billion Dollars of goods and products coming from China” was enough to send oil prices into a tailspin. U.S. benchmark West Texas Intermediate crude fell by as much as 4% in the 15 minutes after the tweet and ended the day down almost 8%.Those additional tariffs and the ones already imposed are creating headwinds for 100 million barrels a day of global oil demand. That’s a much bigger worry than threats to disrupt crude flows through the Strait of Hormuz, which are around a tenth of that volume, according to tanker tracking data compiled by Bloomberg.The International Energy Agency, whose forecasts are closely watched by oil traders and analysts, has been slashing its oil demand growth estimates for the first half of 2019. At the beginning of the year, the agency saw pretty consistent growth at a little over 1.4 million barrels a day, with the first half looking slightly stronger than the second. Over the next six months that picture changed dramatically. Estimates of demand growth for the now-finished first half of the year have been cut to just 560,000 barrels a day, while the forecast for the second half has surged to almost 1.8 million. The IEA points to “expected stronger economic growth in the OECD” and the fact that oil prices are lower than they were a year ago to support its stronger second-half forecast. But that is unlikely to last.Crude oil prices may indeed be lower than they were last year, but that’s not much help to motorists in Europe. Weaker currencies and inflexible taxes on gasoline mean that the prices drivers are paying at the pump are within a whisker of where they were last year. That’s not going to stimulate much new demand. Pump prices in the U.S. are only around 10 cents a gallon lower than a year ago and gasoline demand is running below last year’s level, according to data from the U.S. Energy Information Administration.The July report also notes that “the forecast assumes that the trade standoff between China and the U.S. does not deteriorate over the coming months.” It just got a whole lot worse.One area where demand has been strong is petrochemicals, a segment of the oil market that is seen as a key driver of growth in the years ahead now that the transport sector faces headwinds from electric vehicles and ride-sharing. But here too there are worrying signs. BASF SE, the world’s largest chemical company, issued a profit warning last month, while Royal Dutch Shell CEO Ben van Beurden noted a “synchronized recession” in petrochemicals leading to “massive destocking” in the supply chain. That’s not going to help demand in the coming months.It may be too soon to expect a big cut in the demand growth forecast in the IEA’s next report, due Friday, but it will almost certainly come in due course – unless political leaders in Washington or Beijing blink, which seems unlikely.While the world’s oil producers continue to struggle with over-supply, any signs of demand weakness are going to have a disproportionate impact on prices.To contact the author of this story: Julian Lee at email@example.comTo contact the editor responsible for this story: Stephanie Baker at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Julian Lee is an oil strategist for Bloomberg. Previously he worked as a senior analyst at the Centre for Global Energy Studies.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
ExxonMobil (XOM) posted its Q2 results on August 2. ExxonMobil’s earnings per share reached $0.73 in Q2 2019 compared to $0.92 in Q2 2018.
(Bloomberg) -- U.S. oil giants Exxon Mobil Corp. and Chevron Corp. got a little help from their neighbor to the north last quarter.A corporate tax rate cut in the oil-rich province of Alberta, where both companies have operations, boosted Exxon’s second-quarter profit by almost $500 million, according to a statement Friday. Chevron noted a $180 million non-cash tax benefit from the measure in its report.While a Canadian tax cut benefiting U.S. companies may seem like a misfire in an era of rising trade tensions, the measure is working as intended. Alberta Premier Jason Kenney has made the tax cut a centerpiece of his effort to bring jobs and global investment back to the province, which was hit hard by the 2014 crash in global oil prices and pipeline delays.The province has seen international companies including Royal Dutch Shell Plc, ConocoPhillips and Total SA sell their local operations, stoking concerns about the region’s competitiveness. The tax supported by Kenney, who took power in April, trimmed the corporate rate to 11% from 12% starting last month. It’s already the lowest in Canada, and will continue to decline in the coming years, reaching 8% in 2022. At that point, it will be lower than in 44 U.S. states, according to Kenney’s office.The tax cut represents a material improvement in Alberta’s business environment, but it’s still only one part of the fiscal, economic and regulatory conditions that determine a region’s competitiveness, said Rich Kruger, chief executive officer of Imperial Oil Ltd., the Exxon-owned Canadian oil-sands company that benefited from the tax cut. Kruger lauded other moves by Kenney’s government, including changes to the province’s carbon tax and reductions in regulations as helping to improve the environment as well.“Any step that continues to enhance our competitiveness in a global industry, which oil and gas is because we’ve got to compete globally for capital, is a good step,” Kruger said in an interview. “How fast does it lead to new investment? That’s a different question because we still have other things we’re dealing with, like a lack of pipeline space right now.”To be sure, Alberta-based oil producers including Suncor Energy Inc. and Cenovus Energy Inc. also reported substantial second-quarter benefits from the measure.“These tax cuts are a vital part of our plan to reignite the economy, support job creators and get Albertans working again,” Kenney said in a statement after the cuts were signed into law in June. “We are hearing from companies around the world that are looking at Alberta as a prime location for investment, relocation and expansion.”(Updates with Imperial CEO’s comments in fifth paragraph.)To contact the reporter on this story: Kevin Orland in Calgary at email@example.comTo contact the editors responsible for this story: Simon Casey at firstname.lastname@example.org, Christine BuurmaFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Shell stock (RDS.A) (RDS.B) fell 7% on August 1, its earnings release day. After its earnings, CFRA downgraded Shell stock and cut its price target.