|Bid||2,181.50 x 0|
|Ask||2,182.00 x 0|
|Day's Range||2,146.00 - 2,185.00|
|52 Week Range||3.05 - 2,637.50|
|Beta (3Y Monthly)||0.84|
|PE Ratio (TTM)||868.98|
|Forward Dividend & Yield||1.46 (6.81%)|
|1y Target Est||N/A|
Royal Dutch Shell , Mitsubishi Corp and Trafigura presented bids for a contract to lift some 20.2 million barrels of Ecuadorean crude between 2020 and 2023, the Andean country's energy minister told reporters on Tuesday. The country expects to pick a winner for the contract, which is expected to generate $950 million (£740.45 million) in export income for Ecuador, in the coming days, said the minister, Jose Agusto. Ecuador invited some 51 companies to participate in the auction, the first of its kind in more than a decade.
(Bloomberg) -- The European Union is gearing up for the world’s most ambitious push against climate change with a radical overhaul of its economy.At a summit in Brussels next week, EU leaders will commit to cutting net greenhouse-gas emissions to zero by 2050, according to a draft of their joint statement for the Dec. 12-13 meeting. To meet this target, the EU will promise more green investment and adjust all of its policy making accordingly.“If our common goal is to be a climate-neutral continent in 2050, we have to act now,” Ursula von der Leyen, president of the European Commission, told a United Nations climate conference on Monday. “It’s a generational transition we have to go through.”The commission, the EU’s regulatory arm, will have the job of drafting the rules that would transform the European economy once national leaders have signed off on the climate goals for 2050. The wording of the first draft summit communique, which may still change, reflects an initial set of ideas to be floated by the commission on the eve of the leaders’ gathering.The EU plan, set to be approved as the high-profile United Nations summit in Madrid winds up, would put the bloc ahead of other major emitters. Countries including China, India and Japan have yet to translate voluntary pledges under the 2015 Paris climate accord into binding national measures. U.S. President Donald Trump has said he’ll pull the U.S. out of the Paris agreement.In a pitch of her Green Deal to member states and the European Parliament on Dec. 11, von der Leyen is set to promise a set of measures to reach the net-zero emissions target, affecting sectors from agriculture to energy production. It will include a thorough analysis on how to toughen the current 40% goal to reduce emissions by 2030 to 50% or even 55%, according to an EU document obtained by Bloomberg News.Make It IrreversibleIn the next step, the commission will propose an EU law in March that would “make the transition to climate neutrality irreversible,” von der Leyen told the UN meeting. She said the measure will include “a farm-to-fork strategy and a biodiversity strategy” and will extend the scope of emissions trading.The EU Emissions Trading System is the world’s largest cap-and-trade market for greenhouse gases. It imposes pollution caps on around 12,000 facilities in sectors from refining to cement production, including Royal Dutch Shell Plc and BASF SE. Von der Leyen eyes the inclusion of road transport into the market and cutting the number of free emission permits for airlines.Some of the transportation industry’s biggest polluters have already stepped up efforts to reduce their environmental impact. In June, France’s Airbus SE, its U.S. rival Boeing Co. and other aviation companies pledged to reduce net CO2 emissions by half in 2050 compared with 2005 levels. EasyJet Plc, the U.K.-based discount airline, has promised to offset all of its carbon emissions by planting trees and supporting solar-energy projects, while Air France will take similar steps on its domestic routes.Germany’s Volkswagen AG, the world’s largest automaker, aims to become CO2 neutral by 2050, while Daimler AG plans to reach that target for its Mercedes-Benz luxury car lineup by 2039.To ensure that coal-reliant Poland doesn’t veto the climate goals next week, EU leaders will pledge an “enabling framework” that will include financial support, according to the document, dated Dec. 2. The commission has estimated that additional investment on energy and infrastructure of as much as 290 billion euros a year may be required after 2030 to meet the targets.The EU leaders will also debate the bloc’s next long-term budget next week. The current proposal would commit at least $300 billion in public funds for climate initiatives, or at least a quarter of the bloc’s entire budget for the period between 2021 and 2027.(Updates with details on draft sumit communique from fourth paragraph.)\--With assistance from Ania Nussbaum, Siddharth Philip and Christoph Rauwald.To contact the reporters on this story: Ewa Krukowska in Brussels at firstname.lastname@example.org;Nikos Chrysoloras in Brussels at email@example.comTo contact the editors responsible for this story: Chad Thomas at firstname.lastname@example.org, Chris ReiterFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Since 1980, the year Saudi Aramco was fully nationalized, the world’s largest oil producer has pumped about 116 billion barrels of crude oil from giant fields below the kingdom’s desert and the waters of the Persian Gulf.At today’s rate of consumption that crude would keep the world going for more than three years without using a single drop from any other oil-producing country. Put it through a refinery and you’d get enough gasoline to fill the tanks of more than 70 billion Chevy Suburban SUVs.And then there’s the carbon. All that oil has released more than 30 billion tons of carbon dioxide into the atmosphere in the last four decades, more than double China’s annual emissions. An analysis published in the Guardian newspaper last month reckoned Aramco’s oil was responsible for more emissions than any other single company.On one level that’s not surprising -- the modern global economy runs on petroleum and Aramco has been the prime supplier. But as Aramco makes the transition to becoming a publicly listed company, environmental concerns are one reason global investors have proved reluctant to embrace the world’s largest oil producer.Exxon Mobil Corp., Royal Dutch Shell Plc and other large oil and gas producers are already being pressed by a cohort of fund managers moving environmental, social and governance concerns up the agenda. Before Saudi Arabia decided to concentrate the IPO on local investors, one of the world’s largest sovereign wealth funds, Singapore’s Temasek, had decided to pass on Aramco because of environmental concerns.Big Oil is already under pressure “due to excessive carbon emissions, environmental footprint, social and community disruption, corruption exposure, health and safety and the now ubiquitous ‘stranded asset risk,”’ said Oswald Clint, an analyst at Sanford C. Bernstein Ltd. “Clearly then, the undisputed No.1 oil producer globally, Saudi Aramco, will come under a lot of scrutiny from investors as it embarks upon the public chapter of its life.”But Aramco is convinced it has a good story to tell on emissions. It goes like this: as the energy transition freezes and then shrinks demand for oil the complex, expensive, high-carbon supply sources like the Canadian oil sands will be increasingly abandoned. At the end of the story, only fields that are profitable in a world with strict emissions laws and depressed prices will remain, and from there this world will draw its last drop of oil.In Aramco’s 658-page IPO prospectus, the company explains why it possesses that last drop. There’s a table showing drilling a ton of Saudi oil takes half the energy of producing a barrel in the U.S. It shows that last year its lifting costs, expenses associated with bringing crude to market, were far lower than at each of the five oil majors -- Exxon, Shell, BP Plc, Chevron Corp. and Total SA -- even after those competitors worked vigorously for years to eliminate bloat.Aramco “is uniquely positioned as the lowest cost producer globally,” according to the prospectus. That’s “due to the unique nature of the kingdom’s geological formations, favorable onshore and shallow water offshore environments in which the company’s reservoirs are located.”An analysis from the influential consultant Carbon Tracker backed that up, saying the company was probably going to be “one of the last oil producers standing” in a carbon-constrained future.Mixed ObjectivesBut it isn’t likely to be that simple.While each individual barrel of Aramco oil was produced at a competitively low volume of CO2, much of the company’s value is derived from the sheer number of barrels at its disposal. The company has five times the amount of proved liquids reserves than the five largest oil majors combined, according to the Aramco prospectus.It has so much crude that even in a case where Saudi Aramco is the last oil company on earth, it still can’t produce all its barrels in a world that limits global warming to less than 2 degrees Celsius, according to an analysis from Rob Barnett at Bloomberg Intelligence.Under that scenario, a good chunk of Aramco’s reserves -- set to last more than 50 years -- may well end up as stranded assets.Governance is also likely to be a concern for potential investors. Just 1.5% of Aramco shares will be listed, leaving the Saudi state in a totally dominant position. Aramco will remain the main source of revenue for the kingdom, already running a larget fiscal deficit.“Governance issues will be a concern for investors,” analysts at Jefferies wrote in a research note. “The kingdom controls the board, is the resource owner and dictates production objectives.”Saudi Aramco has implemented some programs to cut its net carbon footprint, such as pledging to plant 1 million trees by 2025. It also is a founding member of the Oil and Gas Climate Initiative, which funds carbon-reduction technology and has made pledges to cut flaring. However, its oil major competitors have been listening to environmental complaints for decades also do that, and have gone further.An analysis from Bernstein showed the full-cycle emissions of Exxon, Shell and BP have trended downwards since about 2000. They are expected to keep falling as they implement measures suggested to them by eco-conscious shareholders, the report showed. Aramco’s full-cycle emissions have meanwhile increased sharply, reaching about double the volume of the three largest oil majors combined in 2015.Other oil companies are starting to take more radical action as pressure from governments, investors and customers to tackle the climate crisis builds. On Monday, Spain’s Repsol decided to promise zero net carbon emissions by 2050, while writing down the value of the business to reflect lower long-term oil prices Ben van Beurden, chief executive officer of Shell, said in an interview at the sidelines of the Oil & Money Conference in London in October that if he had any advice for Aramco at its IPO, it’s to learn to work with the oil industry’s climate critics. After all, they aren’t going anywhere.“When you get out in the market, you will get a lot of advice, a lot of conflicting advice, a lot of opinions and everything else,” van Beurden said. I think the IPO “is the opportunity for Aramco to plug into much more of the opinions of the world. To have their thinking shaped by that as well, rather than by events in the kingdom.”To contact the reporters on this story: Will Kennedy in London at email@example.com;Kelly Gilblom in London at firstname.lastname@example.orgTo contact the editors responsible for this story: Will Kennedy at email@example.com, Rakteem KatakeyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Oil prices fell on Wednesday and Thursday after Trump backed Hong Kong protesters and Saudi Arabia suggested that OPEC would refuse to deepen production cuts
(Bloomberg) -- Fires were still burning at a Texas chemical plant after multiple explosions injured three workers and forced residents of Port Neches to evacuate.As of about 6 a.m. local time Thursday, the fire was still burning and the evacuation order remains in place, an officer at Port Neches police department said by phone.The first blast at TPC Group Inc.’s facility on Wednesday morning occurred in the site’s south processing unit at a tank with finished butadiene, the company said on its website. A second explosion about 12 hours later sent flames and debris high into the air. Jefferson County Judge Jeff Branick declared a state of disaster.“It is not clear at this time for how long the plant will be shut down,” TPC Group Inc. said on its website on Wednesday, adding that affected products included both raw materials and processed butadiene and raffinate. The facility about 100 miles (160 kilometers) east of Houston produces more than 16% of North America’s butadiene, and 12% of gasoline additive methyl tert-butyl ether, or MTBE, according to data provider ICIS. Butadiene is used to make synthetic rubber that is used for tires and automobile hoses, according to TPC.Bonds in closely held TPC, which is headquartered in Houston, fell as much as 8% on the news, making them the worst performer among junk-rated securities.The blasts at Port Neches follow a string of similar accidents in Texas this year. An explosion at a chemical plant northeast of Houston in March left one person dead, just two weeks after a blaze at an oil storage facility caused thousands of gallons of petrochemicals to flow into Houston’s shipping channel. Exxon Mobil Corp.’s suburban Houston refining and chemicals complex erupted in flames in July.The Jefferson County evacuation order issued late on Wednesday covered a radius of 4 miles that included parts of Port Neches, Groves, Nederland and Port Arthur.“I don’t think the focus is on putting the fire out, but letting the materials in there burn themselves out and keeping the surrounding tanks cooled with the water being sprayed,” Judge Branick said at a press conference.The Coast Guard said earlier that traffic was moving with restrictions on the Sabine-Neches channel, which links refineries and terminals in Beaumont and Port Arthur with the Gulf of Mexico.TPC said the initial blast injured two employees and one contractor. All three have since been treated and released from medical facilities, Troy Monk, director of health, safety and security at TPC, said at a press conference Wednesday.“You don’t want to be downwind of this,” Monk said. He couldn’t say when the fires would be extinguished, saying the main goal was “fire suppression.”Total SA’s Port Arthur refinery hasn’t been affected by the chemical plant fire, a company spokeswoman said in an email. BASF SE’s steam cracker in Port Arthur and Exxon’s Beaumont refinery also weren’t affected, according to representatives for the companies.Royal Dutch Shell Plc shut the Nederland station on its Zydeco oil pipeline, which pumps crude oil from the Houston area to refineries in Louisiana, a company spokesman said by email.TPC received 11 written notices of emissions violations from September 2014 to August 2019, according to Texas Commission on Environmental Quality records. Three of those were this year and were classified as “moderate” violations. The company also received several high-priority violation notices from the U.S. Environmental Protection Agency.TPC was taken private in a $706 million deal in 2012 by private equity firms First Reserve Corp. and SK Capital Partners, which staved off a rival bid from fuel additives maker Innospec Inc. that was backed by Blackstone Group. The company, formerly known as Texas Petrochemicals Inc., competes with LyondellBasell Industries NV in the butadiene market and is run by former Lyondell senior executive Ed Dineen.“Our hearts go out to them as well,” Port Neches Mayor Glenn Johnson said of TPC at a press conference Wednesday. “We appreciate TPC,” he said twice.Spot butadiene prices in the Gulf region are down 43% this year to 26 cents per pound, according to data from Polymerupdate.com. The decline is due to weak tire demand caused by the slump in global car sales, analysts at Tudor, Pickering, Holt & Co. said in a note Wednesday. Lyondell, which also makes butadiene, may benefit if a significant outage at the TPC plant leads to an increase in prices, the analysts said.Port Neches is a city of about 13,000, halfway between the refining centers of Beaumont and Port Arthur, Texas. Located on the Neches River, the city has long been associated with oil refining and petrochemicals.(Updates with police comment on status of fire in second paragraph, details on location of blast, affected products in third and fourth paragraphs. An earlier version of the story corrected the name of the company.)\--With assistance from Mike Jeffers, Adam Cataldo, Stephen Cunningham, Sheela Tobben, Kriti Gupta, Dan Murtaugh, Bill Lehane and Fred Pals.To contact the reporters on this story: Rachel Adams-Heard in Houston at firstname.lastname@example.org;Catherine Ngai in New York at email@example.comTo contact the editors responsible for this story: Simon Casey at firstname.lastname@example.org, Carlos Caminada, John DeaneFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Oil & gas companies with a diversified portfolio and a good dividend continue to be the backbone of many investment portfolio, but which are the best?
(Bloomberg Opinion) -- Britain’s opposition Labour Party is turning its sights on the country’s aging fossil fuel industry and raising the specter of a windfall tax. The oil and gas companies working in Britain’s North Sea are a soft target and taxing them more might be justified. But the real challenge for Labour or anyone else is to identify the U.K. industry’s role in the transition to cleaner forms of energy and the fiscal incentives that would deliver that.The North Sea is a collection of mature, declining fields. While the London-listed oil majors BP Plc and Royal Dutch Shell Plc are still there, these operations make a relatively small contribution to their global profits. U.S. oil giants have a very minor presence. Big Oil’s preference is to go where the economics are more favorable — for example in U.S. shale.The U.K.’s oil assets have nevertheless proved attractive for closely-held operators with specialist skills in extending the life of old fields. The emergence of this sector has brought investment that probably wouldn’t have been forthcoming from the fields’ former owners; and it’s kept the local industry and its workers going longer than might have otherwise been the case.That spending has been encouraged by a looser tax regime, which has mitigated the deteriorating attractions of the assets. In 2011, the U.K. slapped a windfall tax on the North Sea producers, only to cut taxes again a few years later when the industry was grappling with a sudden fall in oil prices. As things stand, local producers pay more corporation tax than the standard U.K. rate, plus a supplementary levy.Labour’s manifesto, published on Thursday, says it seeks to tax those companies that “knowingly damaged our climate.” At the same time, it promises a strategy that safeguards jobs. But it’s not clear whether this policy means a retrospective tax on the companies that enjoyed higher cash flows from the North Sea in the past — the party is preoccupied by historic profits that it believes are under-taxed — while going soft on the new industry now emerging.The party’s aim is to create a fund that enables the industry’s workforce to reapply their skills and experience to developing green technologies. That’s a laudable goal but is easier said than done.There are some specific environmental issues facing the North Sea sector. The infrastructure that crisscrosses the freezing waters is old and therefore its carbon intensity — the emissions generated in the extraction activity itself — is probably higher than in fields developed more recently. Compounding this, smaller players lack the scale economies of the oil majors that help fund investment in more energy-efficient operations.There are no simple answers. Anything perceived as retrospective taxation would come at the expense of making the U.K. an unpredictable place to invest, and that could cost more than it generates by deterring investment from all sources.One place to start would be to incentivize capital investments that reduce the carbon footprint of these aged operations, such as improved carbon capture technology. If the ambition is to raise revenue to build a new clean energy industry in Aberdeen, a progressive tax tied to the oil price might achieve that with fewer side effects. The risk is that arbitrary changes force U.K. households and companies that rely on fossil fuels, and are trying to cut their consumption, to purchase them from overseas sources over whose operations Britain has no say whatsoever.To contact the author of this story: Chris Hughes at email@example.comTo contact the editor responsible for this story: James Boxell at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Chris Hughes is a Bloomberg Opinion columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
Given its tremendous oil and gas reserves, Iraq could become a mayor petrochemicals player, but corruption and competition and geopolitical instability have proven to be major stumbling blocks
Royal Dutch Shell's gender pay gap in Britain edged higher in 2019 following the acquisition of a utility company, with women earning on average 18.7% less than men. This year's figure, which compares to 18.6% in 2018, comes after Shell UK incorporated around 1,000 employees from First Utility which it had acquired in March, Shell said in a report. Excluding First Utility, which was re-branded Shell Energy, the pay gap would have narrowed to 15.1%.
(Bloomberg) -- Saudi Aramco set a valuation target for its initial public offering well below Crown Prince Mohammed bin Salman’s goal of $2 trillion and pared back the size of the sale after the government decided to make the deal an almost exclusively Saudi affair.The initial public offering will now rely on local investors after most international money managers balked at even the reduced price target. The deal won’t be marketed in the U.S., Canada or Japan and on Monday bankers told investors roadshow events in London and other European cities, planned for this week, were canceled.Aramco will sell just 1.5% of its shares on the local stock exchange, about half the amount that had been considered, and seek a valuation of between $1.6 trillion and $1.71 trillion. As well as slimming down the deal, the Saudi authorities relaxed lending limits to ensure sufficient local demand to get the share sale done.While the new valuation means Aramco will overtake Apple Inc. as the world’s biggest public company by some distance, the plans are a long way from Prince Mohammed’s initial aims: a local and international listing to raise as much as $100 billion for the kingdom’s sovereign wealth fund.At the lower end of the price range, the offer would fall short of a record, coming in just below the $25 billion raised by Alibaba Group Holding Ltd. in 2014.Aramco Chief Executive Officer Amin Nasser kicked off the IPO’s final phase at a presentation for hundreds of local fund managers in Riyadh on Sunday.This is “a historic day for Saudi Aramco,” Nasser said. “We are excited about the transition to being a listed company.”With the offer price putting Aramco’s maximum valuation at about $1.7 trillion, there should be room for investors to make some money, said one local investor, who like all the people attending asked not to be identified.Aramco will need to lean heavily on local investors, large and small, to get the job done. The Saudi Arabian Monetary Authority will allow smaller retail investors to borrow twice their cash investment, double the normal leverage limits the regulator allows for IPOs, according to people familiar with matter.The kingdom’s richest families, some of whom had members detained in Riyadh’s Ritz-Carlton hotel during a so-called corruption crackdown in 2017, are expected to make significant contributions to the IPO.Cornerstone InvestorsThe final version of the prospectus didn’t identify any cornerstone investors, though the company is still in talks with Middle Eastern, Chinese and Russian funds.Foreign investors had always been skeptical of the $2 trillion target and recently suggested they would be interested at a valuation below $1.5 trillion. That would offer a return on their investment close to other leading oil and gas companies like Exxon Mobil Corp. and Royal Dutch Shell Plc.The new valuation implies Aramco, which has promised a dividend of at least $75 billion next year, will reward investors with a yield of between 4.4% and 4.7%. That compares with just under 5% for Exxon Mobil and 6.4% for Shell.“Institutional investors are unlikely to find this valuation range attractive,” analysts at Sanford C. Bernstein said in a research note Sunday, adding that the price range implies a premium to Western oil majors on most metrics, including price-to-earnings and free cash flow yield. “Cornerstone investors, sovereign wealth funds and local investors could still provide enough support to support the IPO given some of the strategic interests.”Saudi Arabia has been pulling out all the stops to ensure the IPO is a success to a skeptical audience. It cut the tax rate for Aramco three times, promised the world’s largest dividend and offered bonus shares for retail investors who keep hold of the stock.“Aramco’s price range takes into account some uncertainties that weren’t fully absorbed when the IPO was first floated,” such as governance, said Jaafar Altaie, managing director of Abu Dhabi-based consultant Manaar Group. “The lower range reflects uncertainties. It takes into account issues of supply that are very fluid, and demand that doesn’t look so good now.”Aramco has also faced the challenge of the strengthening global movement against climate change that’s targeted the world’s largest oil and gas companies. Many foreign investors are concerned the shift away from the internal combustion engine -- a technology that drove a century of steadily rising fossil fuel demand -- means consumption of oil will peak in the next two decades.Speaking in Riyadh on Sunday, Nasser acknowledged the prospect of peak demand, but argued that with the lowest production costs in the industry, Aramco would be able to win market share from less-efficient producers.The IPO is a pillar of Prince Mohammed’s much-hyped Vision 2030 plan to change the social and economic fabric of the kingdom and attract foreign investment. The prince, who rules Saudi Arabia day-to-day, is trying to recover his reformist credentials after his global reputation was damaged by the 2018 assassination of government critic Jamal Khashoggi in the kingdom’s Istanbul consulate.Proceeds from the IPO will be transferred to the Public Investment Fund, which has been making a number of bold investments, plowing $45 billion into SoftBank Corp.’s Vision Fund, taking a $3.5 billion stake in Uber Technologies Inc. and planning a $500 billion futuristic city.No matter what the final valuation, the share sale will create a public company of unmatched profitability. Aramco earned a net income of $111 billion in 2018 on revenue of $315 billion.\--With assistance from Nayla Razzouk, Abbas Al Lawati, Filipe Pacheco, Archana Narayanan, Dinesh Nair, Ramsey Al-Rikabi, Jack Farchy and Swetha Gopinath.To contact the reporters on this story: Matthew Martin in Dubai at email@example.com;Javier Blas in London at firstname.lastname@example.orgTo contact the editors responsible for this story: Nayla Razzouk at email@example.com, ;Stefania Bianchi at firstname.lastname@example.org, Bruce StanleyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Foreign oil stocks seem to be weathering the current environment better than US drillers, and some of them have managed to significantly raise profits over the last few quarters
(Bloomberg Opinion) -- Saudi Arabia has accepted the reality that the initial public offering of its state oil company, Saudi Arabian Oil Co., won’t generate a trillion-dollar valuation beginning with “2.” Moreover, there is tacit acknowledgement that investors outside the kingdom think Aramco is worth even less than the $1.6 trillion to $1.7 trillion now sought. The transaction is going to fall short of its original ambitions, both strategic and financial.The $100 billion gulf in the valuation range announced Sunday represents a 6% spread over the midpoint. This is tight for an IPO. Usually, when bankers set very narrow price ranges, it's because they think the shares will sell easily at a higher price and, therefore, perform strongly once listed. That assumption faces a severe test.For overseas investors, it appears $1.5 trillion was their limit. Saudi Arabia may feel the company is worth more, and not want to give it away at what it thinks is too cut-rate a price to outsiders. But that is the reality of any IPO: A company is sold a bit cheaply, in return for the owner monetizing a stake and obtaining a liquid currency.In any event, much of that conversation has now ended, with Aramco’s shares no longer marketed actively in North America. Hotels in Boston and New York should brace for a spate of cancellations. Sure, other international investors may yet be treated to the pitch, and qualifying overseas funds can still proactively buy in, or purchase the shares once listed. But the hurdles deterring them remain.While Aramco generates more profit than any other company in the world, it is also the biggest producer of hydrocarbons, a sector from which investors have been running away. It is also impossible to treat the investment decision to buy Aramco as somehow unaffected by the fact that it’s controlled by the repressive Saudi regime. And, as with most national oil companies, there is a tension between market demands and political imperatives, with the latter usually winning. It is hard to see Aramco as being able to make big moves that aren’t in step with the wishes of the kingdom.Meanwhile, Aramco offers a dividend yield below that of western oil majors like Exxon Mobil Corp. and Royal Dutch Shell Plc. True, those companies don’t have Aramco’s supercharged profitability. On the other hand, they don’t have to fund a country with their earnings.The shortage of international interest means local demand, and passive buying by index funds, will have to do the heavy lifting. A retail offering of 0.5% with a further 1% institutional float must meet a total offer size of roughly $25 billion. That is a lot of orders to find. The free-float of Saudi Arabia’s local exchange, the Tadawul, is only $260 billion — less than Exxon’s market cap.We are a long way from where this all started almost four years ago. The headline then was a possible $100 billion issue, comprising 5% of the company at a $2 trillion valuation endorsed by the world’s biggest fund managers. Now, selling about 1.5% for $25 billion at home, the risk is that the shares end up being highly illiquid once listed. They have been marketed almost like bonds, with guaranteed dividends and bonus shares for retail investors who hold on for six months. This may dampen selling pressure, but could lead fresh investors to sit tight until it’s clear where the price and volumes are settling.Having failed to live up to the hype, it may have been embarrassing to pull Aramco’s debut. But a mainly Saudi transaction doesn’t help establish Aramco’s independent commercial identity. And if simply harvesting cash for Saudi’s sovereign wealth fund was the primary objective, cutting the price and finding more buyers would probably raise a bigger sum.To contact the authors of this story: Chris Hughes at email@example.comLiam Denning at firstname.lastname@example.orgTo contact the editor responsible for this story: Beth Williams at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Chris Hughes is a Bloomberg Opinion columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.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) -- Oil climbed to the highest in nearly two months amid optimism that the U.S. and China are close to locking down a partial trade deal.Futures jumped 1.7% on Friday in New York, pushing a weekly advance to 0.8% after White House economic adviser Larry Kudlow said late Thursday negotiations between the two countries were coming down to the final stages. That outweighed U.S. government data earlier this week that showed an expansion in crude stockpiles and oil production at record-high levels.“The most important factor is economic growth and demand growth and the trade talks are going to be the indicator for expectations about how that’s going to play out,” said Gene McGillian, senior analyst and broker for Tradition Energy Group in Stamford, Connecticut. “We’ve seen optimism surrounding the trade deal bring some length into the market.”Still, U.S. crude is down about 13% since late April. The Organization of Petroleum Exporting Countries has indicated it won’t cut output deeper to stave off the impending surplus and predicts worldwide supplies will exceed demand by about 645,000 barrels a day in the first half of next year. Meanwhile, the International Energy Agency said soaring production outside OPEC and high inventories will keep consumers comfortably supplied next year.West Texas Intermediate for December delivery gained 95 cents to settle at $57.72 a barrel on the New York Mercantile Exchange.Brent for January settlement rose $1.02 to end the session at $63.30 a barrel on the London-based ICE Futures Europe Exchange. The global benchmark crude traded at a $5.47 premium to WTI for the same month.Also see: Russia Is Making More Money From OPEC+ Deal Than Saudi ArabiaU.S. crude output increased by 200,000 barrels a day to 12.8 million a day last week, according to Energy Information Administration data on Thursday. While nationwide crude inventories rose, stockpiles at the key storage hub at Cushing, Oklahoma, declined for the first time in six weeks.To contact the reporter on this story: Jacquelyn Melinek in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: David Marino at email@example.com, Jessica Summers, Christine BuurmaFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Royal Dutch Shell Plc has made $1 billion from trading fuel oil this year, making it one of the standout winners from rules designed to make the shipping industry greener.Shell said last month that it made substantial money in fuel-oil trading in the third quarter, but the company didn’t disclose the size of the profits. Shell traders celebrated hitting the $1 billion mark so far, likely the biggest by any one company in fuel oil this year, by ringing a bell on the company’s trading floor in London earlier this month, people familiar with the matter said.Shell declined to comment.The fuel-oil market has been shaken this year by the so-called IMO 2020 new regulations that ban the use of high-sulfur fuel oil, known as HSFO, to power ships. The rules are aimed at combating human health conditions such as asthma and environmental damage including acid rain. Prices are collapsing because the global shipping fleet, which burns more than 3% of the world’s oil, will instead have to consume very low sulfur fuel-oil, or VLSFO.Although better known for its oil fields, refineries and pump stations, Shell runs an in-house trading business that’s larger than the better-known independent oil traders like Vitol Group, Glencore Plc and Trafigura Group, handling 13 million barrels of oil equivalent per day. The company describes itself as “one of the largest and most experienced energy merchants in the world” with major trading floors in Houston, London, Dubai, Rotterdam and Singapore.Europe’s largest oil company told investors that its downstream business, which includes refining, oil trading and fuel stations, benefited during the third quarter from “stronger contributions from oil-products trading and optimization, mainly fuel oil.” In a conference call with analysts, Jessica Uhl, Shell’s head of finance, said the company’s traders benefited from “the change in the fuel standards” linked to IMO 2020, the name by which the ship-fuel rules are widely known.It’s unclear exactly how Shell’s traders made their profit, but premiums for fuel that’s lower in sulfur have surged this year, potentially benefiting those companies that produce more of the product. Shell’s refining system is a relatively sophisticated one, something that could put the company in a better position as the regulations enter into force. The margin to produce high-sulfur fuel oil in Europe recently slumped to a more than 10-year low, according to the International Energy Agency.The new shipping rules allow traders to produce blended fuels, including mixing so-called low sulfur fuel-oil, or LSFO, mainly used in power stations that burn the fuel to produce electricity, with diesel to produce VLSFO. The spread between high and low sulfur fuel-oil blew up to almost $30 a barrel in late October, compared with an average of about $2 a barrel in 2018, according to the International Energy Agency.\--With assistance from Jack Wittels.To contact the reporters on this story: Javier Blas in Dubai at firstname.lastname@example.org;Alaric Nightingale in London at email@example.comTo contact the editors responsible for this story: Will Kennedy at firstname.lastname@example.org, Alaric Nightingale, John DeaneFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Royal Dutch Shell has appointed investment bank Citi to run the sale of its onshore Egyptian oil and gas assets which could fetch around $1 billion (£781.5 million), sources close to the process said. Shell said last month it plans to sell its onshore upstream assets in the Western Desert to focus on expanding its Egyptian offshore gas exploration. The Western Desert portfolio includes stakes in 19 oil and gas leases of which Shell's working interest included production of around 100,000 barrels of oil equivalent per day last year, one of the sources said.
(Bloomberg) -- Royal Dutch Shell Plc is reassuring investors, workers, and anyone else who will listen that it’s the international oil major that’s staying in Canada as others pull up stakes.Shell’s future in the country is largely as a natural gas producer and exporter focused on the $30 billion LNG Canada project, though the company is also committed to its local chemicals and retail businesses, Shell Canada head Michael Crothers said in an interview.A number of large multinational energy companies have either left or reduced their presence in the country in recent years, including Norway’s Equinor ASA, France’s Total SA and ConocoPhillips. Independent explorers like Devon Energy Corp., Apache Corp. and Marathon Oil Corp., as well as pipeline giant Kinder Morgan Inc., have gotten in on the act, too. Even Encana Corp., a Canadian company born out of the nation’s 19th-century railway boom, said last month that it’s moving to the U.S. and dropping the link to its home country from its name.Shell stoked some concern that it would be among the pack leaving when it sold most of its stake in the Athabasca Oil Sands Project to Canadian Natural Resources Ltd. for about $8.2 billion in 2017. The company went a long way toward allaying those fears when LNG Canada announced it would build a massive export facility on British Columbia’s Pacific Coast that’s slated to operate for decades to come.“We’re the multinational that’s staying,” Crothers, 57, said from Shell Canada’s headquarters in Calgary. “We’re the multinational that’s investing. We see enormous opportunity here because of the resource base we have and the excellent people we have.”Shell has been in Canada for more than 100 years, evolving from a broad-based, integrated oil company -- at one point even mining coal -- into an oil-sands focused producer and now into a focus on gas, said Crothers, whose full title is president and country chair of Shell Canada.Aside from the liquefied natural gas project -- of which it owns 40% -- and the Groundbirch gas production complex in British Columbia that will partly supply it, Shell has some light oil production, the Scotford refinery, two chemicals plants and a carbon capture facility in Alberta, plus the Sarnia refinery and chemicals and lubricants plants in Ontario.The company sought to sell the Sarnia refinery and a chemicals plant this year as it focuses on LNG Canada, but pledged to keep operating the units if it didn’t get a good offer.Shell’s B shares were down 1.3% to 2,295 pence at 4:34 p.m. in London. They are down about 2% for the year. Shell also still owns a 10% stake in the Athabasca oil sands, which it sees as a core asset because it provides feedstock for the Scotford complex. Shell has no plans to sell that stake, Crothers said.“We need to be able to ensure that we have access to that supply, and without some kind of equity stake, we feel that would be a concern,” he said.The company has about 3,600 workers in the country and is hiring for LNG Canada, Crothers said. Other parts of the business are always facing cost pressures, keeping headcount in check, he said.Another growth area is Shell’s retail business, which is building 50 new stations a year in the country and experimenting with new services like electric-vehicle charging stations and hydrogen refueling stations for fuel-cell vehicles, he said.“We’re a big, integrated business,” Crothers said. “We’ve never left, but we keep evolving.”(Updates with sharels in ninth paragraph. A previous version corrected to say chemicals plant in eighth 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, Carlos CaminadaFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Oil fell as equity markets faltered on concern chances of a U.S.-China trade settlement are slipping away.Futures in New York fell 0.7% on Monday. President Donald Trump dashed expectations over the weekend that a trade deal had been reached. Meanwhile, Oman’s oil chief said OPEC and allied producers probably won’t deepen output cuts when they meet next month.“Obviously we are a little concerned about the trade war,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago.Oil has rallied more than 8% since early October amid signals the U.S. and China were moving closer to settling the protracted trade dispute that’s undermining energy demand. Hedge funds have cautiously revived bets on rising prices.West Texas Intermediate for December delivery fell 38 cents to close at $56.86 a barrel on the New York Mercantile Exchange.Brent for January delivery slid 33 cents to $62.18 on the London-based ICE Futures Europe Exchange. The global crude benchmark traded at a $5.28 premium to WTI for the same month.See also: Aramco IPO Prospectus Flags Peak Oil Demand Risk in 20 Years“These days it’s largely the trade war” that’s moving prices, Bob McNally, president of Rapidan Energy Group and a former oil official at the White House under President George W. Bush, said in a Bloomberg TV interview on Monday. “Folks are also looking into early next year and seeing an oversupplied market, and there’s questions whether OPEC+ will rise to the challenge.”To contact the reporter on this story: Jacquelyn Melinek in New York at email@example.comTo contact the editors responsible for this story: David Marino at firstname.lastname@example.org, Mike Jeffers, Joe CarrollFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Want the lowdown on European markets? In your inbox before the open, every day. Sign up here.BP Plc, Royal Dutch Shell Plc, Total SA and Vitol Group are among partners in a new exchange to trade Abu Dhabi’s flagship oil grade in what could become a new price benchmark for a fifth of the world’s crude.Intercontinental Exchange Inc. Chairman Jeffrey Sprecher confirmed the partnerships, speaking on Monday to reporters in Abu Dhabi. Other partners in the exchange are Petrochina Co., Inpex Corp. and JXTG Holdings Inc. of Japan, PTT Pcl of Thailand, and South Korea-based GS Caltex Corp., he said.Although oil producers across the Persian Gulf pump about a fifth of the world’s oil, they have never had a region-wide, exchange-traded crude benchmark. Adnoc wants the Murban futures contract to become a benchmark for crude from the Middle East, the biggest oil-exporting area of the world.Abu Dhabi National Oil Co. will join major international oil companies, traders and customers as founding partners in a platform operated by ICE for the trading of futures contracts in Abu Dhabi’s flagship Murban crude, Adnoc Chief Executive Officer Sultan Al Jaber said in a speech earlier Monday. Murban futures will allow buyers to hedge in the open market, he said.Trading StartThe contracts are likely to begin trading around June, and are set to be the benchmark for other Abu Dhabi grades, Al Jaber said in an interview after ICE’s announcement. ICE will be a majority shareholder in the Abu Dhabi futures exchange, he said.Having a large number of well-known international partners “gives you instant credibility that what we’re doing is the right step forward,” Al Jaber said.ICE plans also to introduce swaps contracts on the Abu Dhabi exchange -- for example, between Murban and North Sea Brent -- to improve liquidity by offering more hedging options. The swaps would start trading at about same time as the Murban futures, Stuart Williams, president of ICE Futures Europe, said in an interview in Abu Dhabi.Murban is Adnoc’s most plentiful grade, at about 1.7 million barrels a day, and accounts for more than half of the crude pumped in the United Arab Emirates. Abu Dhabi holds most of the oil in the U.A.E., the third-largest producer in the Organization of Petroleum Exporting Countries.Crude BenchmarksAbu Dhabi won’t be the first regional producer to offer futures contracts for its crude. Oman and the neighboring U.A.E. emirate of Dubai joined with CME Group Inc. in 2007 to start the Dubai Mercantile Exchange to trade Omani crude futures. Oman, Dubai and Saudi Arabia are the only producers in the Gulf to price off the contract; most of the others base their monthly crude pricing on the Dubai and Oman crude price assessments by S&P Global Inc.’s Platts.There is room for more than one benchmark in the region, and the Oman and Murban markers could act as reference points for different crude grades and qualities, Al Jaber said. Murban is lighter and more sweet, while Oman is heavier and more sour, he said.Murban generally fetches higher prices on global markets and is similar in quality to Brent crude, the international benchmark. Brent futures are traded on the London-based ICE Futures Europe Exchange.To contact the reporters on this story: Anthony DiPaola in Dubai at email@example.com;Javier Blas in London at firstname.lastname@example.orgTo contact the editors responsible for this story: Nayla Razzouk at email@example.com, Bruce Stanley, Amanda JordanFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Investors can buy low cost index fund if they want to receive the average market return. But in any diversified...
Royal Dutch Shell said there was a gas leak on Friday on a unit at its 404,000 barrel per day Pernis oil refinery in the Netherlands. Shell did not specify the unit involved. The company separately reported on Nov 6 that while taking one of the units at Pernis offline for scheduled maintenance flaring occurred.
(Bloomberg Opinion) -- Royal Dutch Shell Plc made a big investment in offshore energy this week — wind energy, that is. The very next day, Brazil announced the results of a more traditional energy auction in the waters off its coast. They were not good.The country’s biggest-ever sale of oil deposits flopped on Wednesday morning. Only two out of four blocks were sold, and only one of those involved foreign bidders, with China’s CNOOC Ltd. and China National Oil and Gas Exploration and Development Co. taking all of 10% of the Buzios field. Petroleo Brasileiro SA took the other 90% and all of the Itapu block. Western oil majors, such as Shell or Exxon Mobil Corp., were nowhere to be seen.Offshore oil investment was all the rage among Big Oil during the supercycle, with capital expenditure almost quadrupling in the decade up to 2014. That is the problem. The majors poured money into large, multi-year projects prone to delays and, because of their often bespoke engineering, spiraling budgets. The result: tumbling return on capital and an inability to dial back investment quickly when the oil crash hit in 2014. Roughly 3,000 new offshore projects sanctioned between 2010 and 2014 have either barely generated any value for oil companies or are expected to generate none at all, according to a recent study published by Rystad Energy, a consultancy:More recent investments score better, mostly because the boom tailed off, with offshore capex falling by more than half between 2014 and 2018. That took the heat out of industry inflation; and, because of the bonfire of returns in the prior decade, oil majors got smarter about such things as standardizing offshore equipment design to cut costs and shorten schedules. The pace of new projects has picked up again after the slump. Exxon, for example, has effectively opened up an entire new offshore zone with its Guyanese fields.Still, one look at the stock prices of oilfield services firms, especially offshore-focused types such as Transocean Ltd. and Noble Corp. Plc, tells you this investment wave is nothing like the tsunami of yesteryear. Bad memories combined with unease about both near- and long-term oil demand make bold bets on big, multi-year offshore projects a tough sell with investors more interested in payouts. Even Exxon’s success in Guyana gets overshadowed by the fact that the company’s capex bill leaves it borrowing to pay its dividend. And Exxon, like Chevron Corp. and other majors, has swung more of its spending toward shorter-cycle onshore fracking in North America.Brazil’s brush-off is an ominous sign the investment discipline demanded by energy investors is choking off one of the world’s biggest sources of oil-supply growth. In its latest World Oil Outlook published this week, OPEC cited Brazil as being second only to the U.S. in terms of medium-term growth, and number one in terms of projected long-term non-OPEC growth. Bob Brackett, an analyst at Sanford C. Bernstein, published a report a couple of weeks ago pondering if global offshore oil supply would peak next year, perhaps for good.The implications are profound. There is a wide range of views on when global oil demand will slow or peak altogether. If it is later than sometime next decade, then the decline in offshore production that will inevitably follow a mass exodus from this part of the business could stoke another upcycle in prices. The Brazil auction suggests, however, that such possibilities play second fiddle to expectations on the part of many investors that oil has entered its twilight years.Such results are ominous for offshore services providers, of course, and for the countries involved. Brazil’s currency slumped Wednesday morning as the market digested the lack of foreign capital targeting the country’s choicest oil resources.Another country that should take note is Saudi Arabia. Like Brazil, it’s trying to tempt foreign buyers to pay up for a piece of its black gold. On the same morning, reports emerged that Saudi Arabian Oil Co. is seeking commitments from Chinese state-owned entities to invest in its IPO. Such strategic buyers do provide cash. But as Brazil could tell Aramco, turning to them also says a lot about the broader appetite for what you’re selling.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.