David Fuller and Eoin Treacy's Comment of the Day
Category - Energy

    U.S. Strike Ordered by Trump Kills Key Iranian Military Leader in Baghdad

    This article from the Wall Street Journal may be of interest to subscribers. Here is a section:

    Iraqi Prime Minister Adel Abdul-Mahdi condemned the targeted killing as a violation of the terms underpinning the U.S. troop presence in the country.

    Mr. Abdul-Mahdi said he had submitted a formal request for parliament to convene in order to adopt necessary measures “to protect Iraq’s dignity and sovereignty.” He didn’t say what those measures would be.

    The killing of the two men is likely to mark the beginning of a dangerous new chapter in the rivalry between the U.S. and Iran, which escalated after supporters of an Iran-backed Shiite militia attempted to storm the U.S. Embassy in Baghdad earlier this week. Mr. Mohandes was deputy leader of the Popular Mobilization Forces, an umbrella group that led the embassy attack.

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    Oilfield Services Ends 2019 With a Bang, Whimper

    This article by Liam Denning for Bloomberg may be of interest to subscribers. Here is a section:

    “When does it end?” is a perfectly reasonable question for New Year’s Eve. And in the case of anyone still holding onto oilfield services stocks, it is more than rhetorical.

    Core Laboratories NV, which offers services to enhance output from oilfields, dropped the ball early on Monday evening, or New Year’s Eve Eve if you will. It cut guidance for the quarter just about to end, issued underwhelming guidance for the quarter about to begin and, to cap it off, slashed its dividend by more than half. The latter was declared “sacrosanct” by management only two months ago — which, in hindsight, is one of those overwrought words that should set alarm bells ringing.

    Throw in Tuesday’s pre-drinking trading volumes, and the stock looks set to see out 2019 with a bang (not the good kind). The ostensible reason for the sudden about-face is sluggish activity in international markets, which were hoped to offset the drag from the slowdown in U.S. fracking. The underlying reason is one that blends the oil business with New Year’s Eve seamlessly: the triumph of hope over experience.

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    Chevron, Facing Fossil Fuels Glut, Takes $10 Billion Charge

    This article by Christopher M. Matthews and Rebecca Elliott for the Wall Street Journal may be of interest to subscribers. Here is a section:

    “We have to make the tough choices to high-grade our portfolio and invest in the highest-return projects in the world we see ahead of us, and that’s a different world than the one that lies behind us,” Mr. Wirth said.

    Chevron’s shares closed up less than a percentage point at $117.90 prior to the announcement Tuesday. Reaction to the news was muted in after-hours trading.

    The sobering reappraisal by Chevron, one of the world’s largest and best-performing oil companies, is likely to ripple through the oil-and-gas industry, forcing others to publicly reassess the value of their holdings in the face of a global supply glut and growing investor concerns about the long-term future of fossil fuels. Particular pressure is falling on shale producers, especially those focused on natural gas in places like Pennsylvania, which are struggling with historically low U.S. prices caused by oversupply.

    Chevron’s move follows a $5 billion write-down by Spain’s Repsol SA earlier this month and an impairment of $2.6 billion by the U.K.’s BP PLC in October. Industry executives and analysts anticipate that many more oil-and-gas companies will soon write down billions in value to comply with accounting standards because low commodity prices have undermined the economics of many projects.

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    Oil Surges After Saudis Surprise Market With Additional

    This article by Sheela Tobben and Alex Longley for Bloomberg may be of interest to subscribers. Here is a section:

    The additional supply reduction would take the kingdom’s production down to levels not seen on a sustained basis since 2014, according to data compiled by Bloomberg.

    After the announcement, Prince Abdulaziz predicted that Saudi Aramco, which just completed an IPO at a valuation of $1.7 trillion, would soon soar above the $2 trillion. The kingdom plans to pump 9.7 million barrels a day, he said. That’s a reduction of about 300,000 barrels a day from its output in November and 100,000 below the year-to-date average, according to data compiled by Bloomberg.

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    Europe Set to Overhaul Its Entire Economy in Green Deal Push

    This article by Ewa Krukowska and Nikos Chrysoloras for Bloomberg may be of interest to subscribers. Here is a section:

    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 Irreversible
    In 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.

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    Biggest LNG Producer Targets 64% Jump in Capacity by 2027

    This article by Simone Foxman and Verity Ratcliffe for Bloomberg may be of interest to subscribers. Here is a section:
     

    Qatar’s plan for a 64% increase in LNG capacity is likely to intensify a global glut in the fuel. The nation is seeking to fend off competition from rival producers such as Australia and the U.S. that have ramped up production and eroded the Gulf state’s historic dominance of the market. Australia has exported about 70 million tons of LNG this year, compared with 71.9 million for Qatar, according to vessel-tracking data compiled by Bloomberg.

    The North Field holds more than 1,760 trillion cubic feet of gas, and state-run Qatar Petroleum will “immediately” start engineering work for two additional LNG production plants, or trains, for a combined capacity of 16 million tons annually, Al Kaabi said in a statement. Qatar will be able to produce about 6.7 million barrels of oil equivalent a day by 2027, said Al Kaabi, who also serves as QP’s President and Chief Executive Officer.

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    Aramco Failure to Win Foreign Money Makes IPO Local Event

    This article by Javier Blas for Bloomberg may be of interest to subscribers. Here is a section: 

    Most of the money is likely to be raised from domestic rather than foreign investors. This means that the proceeds won’t be a fresh inflow of foreign capital but an internal transfer from Saudi households and corporates to the government. --Ziad Daoud, Chief Middle East Economist for Bloomberg Economics

    So poor is the international appetite for the deal, even at the lower valuation, Saudi Aramco decided at the last minute against marketing the IPO in the U.S., Canada and Japan -- three markets traditionally seen as a must-go destination for any big Wall Street deal. Instead of the planned approach to American investors, using what lawyers and bankers know as the 144A rule of the U.S. Securities Act, Aramco decided on Sunday the tepid interest meant it wasn’t worth the trouble.

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    Ford Unveils Electric Mustang SUV to Challenge Tesla Dominance

    This article by Keith Naughton for Bloomberg may be of interest to subscribers. Here is a section:

    The Mach-E will make a profit “on vehicle one,” he said in a Bloomberg TV interview. “That’s surprising a lot of people because electrics have not had a history of making money. This will.”

    Hackett said it will turn a profit because the vehicle “creates the passion that follows with Mustang” and prices start in the mid-$30,000 when U.S. subsides on electric cars are factored in. “So it’s attractive to customers.”

    Ford is building it in Mexico because it had an open factory there and it needed to be overhauled to build an electric vehicle, Hackett said. “As we start to adopt more electric vehicles — we had capacity down there, we had no capacity in the United States — we’re going to have electric capacity here in the United States. They’ll be building other electric platforms.”

    Still, it’s a high-risk gambit. The Mustang is Ford’s signature sports car, having sold more than 10 million units since it debuted in 1964 with simultaneous cover stories in Time and Newsweek. When Ford decided to abandon the traditional passenger-car business last year, it spared only one model: The Mustang.

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    The next 6 months favor Cyclicals: Financials, Energy, Industrials, Tech, Materials

    Thanks to a subscriber for this chart illustrated report by Barry Bannister for Stifel which may be of interest.

    What's Happening to US Shale Production?

    Thanks to a subscriber for this report from Geohring & Rozencwajg. Here is a section: