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Blind as a bat , but I life to get marked , I followed you every one should follow each other , support the stock & each other,
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More on Gazprom deaths -
https://en.wikipedia.org/wiki/Gazprombank
>>> On January 29th, 2022, Leonid Shulman, the head of the Gazprom-invest transport service, was found dead.[14]
On February 25th, 2022, Alexander Tyulyakov, Deputy General Director of the Unified Settlement Center of Gazprom, was found dead in a noose.[15]
On March 2nd, 2022, Igor Volobuev, Vice President of Gazprombank, fled Russia to move to his native Ukraine, having been born in Okhtyrka, Sumy.[16] Since he arrived in Kiev he stated that his life was in danger, and that the death of Vladislav Avayev was not a murder suicide, but an assassination.[17] He has also joined the Ukrainian territorial defense in an effort to 'wash off' his Russian past.[18]
On April 18th, 2022, former Gazprombank vice-president Vladislav Avayev was found dead from gunshot wounds in his Moscow apartment, along with his wife and daughter, in an apparent murder-suicide.[19] Volobuev considers the death of Vladislav Avayev an assassination.[17]
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Gazprom execs being liquidated - >>> Russian Oligarchs Who Died Mysteriously This Year Have Two Things in Common
Newsweek
BY ZOE STROZEWSKI
5/11/22
https://www.newsweek.com/russian-oligarchs-found-dead-all-have-2-things-common-1705780
Every Russian Oligarch Who Has Died Since Putin Invaded Ukraine: A Full List
Since the start of the year, at least seven Russian oligarchs have been found dead under mysterious circumstances in a grim trend happening alongside the ongoing Russia-Ukraine War.
While few connections can be definitively drawn between all seven oligarchs and their mysterious deaths, they all have two key things in common: none were known to be outwardly critical of Russian President Vladimir Putin's war in Ukraine, and none were included on sweeping lists of sanctions imposed on Russian figures, systems and organizations.
Strings of high-profile Russian deaths have gained attention in the past. USA Today published a list in 2017 of 38 Russian officials and figures who died under suspicious circumstances. But even while Russia has been accused in the past of attempting to silence critics by deadly means, the seven oligarchs' lack of known criticism of Russia's invasion and freedom from sanctions lists muddies any potential alleged links between Russia and their deaths.
Newsweek viewed a Russian sanctions tracker run by Reuters and was able to confirm that none of the seven deceased oligarchs had been sanctioned. DW News reported that none of the oligarchs were known to have publicly criticized the war in Ukraine, and Newsweek was not able to locate any information that indicated otherwise.
Similarities Between Deceased Russian Oligarchs
All but one of the known mysterious oligarch deaths have occurred since the start of the Russia-Ukraine War on February 24. The one outlier, Leonid Shulman, who was the head of transport at Gazprom Invest, was reportedly found dead of an apparent suicide in a cottage bathroom in Russia's Leningrad region on January 30, according to CNN.
This was less than a month before the start of the war, a time when concerns had already risen that Russia was preparing to invade Ukraine.
The death of the next Russian oligarch, Alexander Tyulyakov, was discovered on February 25, the day after the start of the war. Tyulyakov was also a high-ranking official at Gazprom, serving as the Russian majority state-owned company's Deputy General Director of the Unified Settlement Center (UCC) for Corporate Security.
Days later, on February 28, Ukrainian-born Russian tycoon Mikhail Watford was found dead in his U.K. home.
Two of the deaths were discovered within a day of each other: those of Sergey Protosenya, a gas oligarch, and Vladislav Avayev, a former Kremlin official and Gazprombank vice president.
The final two known deaths, those of billionaires Vasily Melnikov and Alexander Subbotin, were discovered on March 24 and May 8, respectively.
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Oil and gas prices
President Biden promised to take down American energy during his campaign.
— Senator Ted Cruz (@SenTedCruz) May 18, 2022
Record gas prices are the intended effects of his deliberate actions. pic.twitter.com/MzGEerGpbv
In 2015 I sold all my Intel and put $20k in Dominion and $20k in LNG. I continued to load LNG to the point I dumped all my Dominion for LNG to the tune of 12k shares.
LNG has been my biggest home run play. I’ve been loading Its CQP too.
Now I’ve been repeating this blessing by loading TELL. LNG is the energy of the future. The green new deal and EV will be a massive flop over the next 10 years.
The graphene battery technology will be that game changer. But till then LNG will be dominate. It will be in my port the rest of my life. It’s given me freedom.
I want 10-20k+ shares of TELL. 3 years from now, it should be on the same path as LNG is enjoying. I just don’t see this World changing much but going further to chit.
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Check out 3 Energy Infrastructure Stocks to Buy Right Now according to the Motley Fool
https://www.fool.com/investing/2022/03/27/3-infrastructure-stocks-to-buy-right-now/
>>> Houthis escalate attacks on Saudi Arabia, striking oil facility
The Yemen rebel group launched attacks on Saudi Arabia on Friday, hitting an oil facility in Jiddah and other state institutions.
The Washington Post
By Sarah Dadouch
3-25-22
https://www.washingtonpost.com/world/2022/03/25/houthis-escalate-attacks-saudi-arabia-strike-oil-facility/
BEIRUT — Saudi Arabia underwent a widespread and coordinated barrage of attacks on Friday after Yemen’s Houthi rebels launched drones into the neighboring kingdom, targeting oil facilities and other state institutions, the rebel group and Saudi state media said.
The Houthis said their attacks into Saudi Arabia, which stretched over six hours, struck facilities in Jiddah belonging to state controlled Saudi-Aramco, the world’s largest oil company. The group also said it struck the capital Riyadh, two other oil refineries, Aramco facilities in the south of the country, as well as other targets in the south.
Videos spread on social media of the attack on the Jiddah oil facility, showing massive black plumes of smoke rising into the sky, dotted with occasional exploding fireballs. State TV channel al-Ekhbariya released a video of fire damage at an electricity plant in the south of the country, of firefighters putting out fires and blackened husks of concrete.
After the attacks the group’s leader, Abdel-Malek al-Houthi, gave a live address on a Houthi-aligned channel. He placed, the blame for the country’s seven-year civil war on the United States, saying that Saudi Arabia is merely the “executor.”
The United States is a major arms supplier to Saudi Arabia, which has used those weapons in its war in Yemen. But under President Biden, who came into office with a promise to “step up our diplomacy to end the war in Yemen,” the United States no longer refuels coalition aircraft and has stopped supporting “offensive” operations in Yemen. However, the peace talks, now in their eighth year, are stalled.
Yemen’s Houthi militants launch new attack on UAE as conflict widens
The Iran-backed Houthi rebels took over Yemen’s capital in 2015, but a Saudi-led coalition launched a military intervention soon after to restore the country’s internationally recognized government. The war has dragged on since, causing a severe humanitarian crisis and widespread hunger.
Throughout the day, the Saudi-led coalition released several statements on the Houthi attacks as they intensified. It said the rebels had struck civilian housing, an electricity plant, and water tanks belonging to the national water company. It later acknowledged the Jiddah attack and that fires that had erupted in two tanks were under control.
The statements did not expand on the extent of the damage to the oil facilities, but said there were no casualties or effect on citizen life in Jiddah, the country’s second-most populous city. There was no immediate statement from Aramco on the extent of damage to its facility, and the effect the attack might have on its oil supply.
The coalition emphasized the danger on the global energy market, saying the Houthi attacks “are a dangerous escalation that threatens the security of energy and the backbone of the global economy.” A statement at 7:11 p.m. local Saudi time tallied the attacks at 16, and repeated that it was “practicing self-restraint for the success of the Yemeni peace talks.”
As Biden pushes for peace, Yemeni rebels ramp up strikes on Saudi Arabia
Houthi attacks into Saudi Arabia have increased in the past week. On Thursday the coalition said it destroyed two booby-trapped boats that approached oil tankers in the Red Sea. It said the boats were launched from the Houthi-controlled port of Hodeidah in Yemen.
The Houthis also struck Saudi energy facilities in at least three cities over the weekend, prompting Saudi Arabia to issue a statement on Monday saying it would not bear responsibility for any shortages in the global oil supply and asking the international community to stand “firmly” against the Houthis to prevent attacks that “pose a direct threat to the security of petroleum supplies in these highly sensitive circumstances that global energy markets are witnessing.”
Washington has placed pressure on Saudi Arabia to boost oil production as prices surged in the wake of a U.S. ban on Russia oil imports in response to Russia’s invasion of Ukraine. But Saudi leaders have grown frustrated with the United States, saying it is not doing enough to counter the Houthi threat.
Saudi Arabia’s ire grew after Biden ended the Houthis’ designation as a terrorist group on humanitarian grounds. Saudi Arabia, Israel and the United Arab Emirates have been pushing for a reinstatement of the designation as Houthi missile attacks on the UAE and Saudi Arabia have expanded in the past months.
The United States denounced Friday’s attack. “Unprovoked Houthi attacks against Saudi Aramco’s oil storage facilities in Jeddah as well as attacks against civil facilities in Jizan, Najran, and Dhahran are acts of terrorism aimed to prolong the suffering of the Yemeni people,” national security adviser Jake Sullivan said in a statement.
The United States urged the Houthis to work with the United Nations to de-escalate the conflict.
“The United States stands fully behind those efforts, and we will continue to fully support our partners in the defense of their territory from Houthi attacks,” Sullivan said. “We call on the international community to do the same.”
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>>> Oil Prices Tumble Below $100 and Keep Falling. Here’s Why.
Barron's
By Callum Keown and Avi Salzman
March 15, 2022
https://www.barrons.com/articles/oil-prices-tumble-below-97-a-barrel-heres-why-51647341663?siteid=yhoof2
U.S. oil prices fell more than 6% early Tuesday, to below $97 a barrel.
Oil prices extended their slump on Tuesday as West Texas Intermediate crude futures fell below $96 a barrel to its lowest level this month.
Prices have now nearly retreated to prewar levels, as bullish traders have cashed in on bets they made before the run-up and new money is reluctant to buy in.
Oil stocks were falling hard, with Chevron (ticker: CVX) down 5.6% and Exxon Mobil (XOM) down 6%, on pace for their steepest declines since June 2020. The Energy Select Sector SPDR exchange-traded fund (XLE) was down 4.5%.
U.S. oil settled at $109 a barrel Friday, but it has already fallen more than 10% this week. It reached nearly $125 last week. Brent crude futures, the international benchmark, also dropped more than 6% Tuesday, to $99.60 a barrel, having topped $130 at one point last week.
The selloff comes amid hopes over cease-fire talks between Russia and Ukraine and as China imposed lockdown restrictions on major manufacturing regions and millions of people, potentially weakening demand for oil.
“The prospect of a diplomatic solution toward Russia’s military aggression against Ukraine would help ease the world’s energy supply shock that has sent commodities soaring,” Interactive Investor’s head of investment Victoria Scholar says.
“Meanwhile on the demand side for oil, fears about an aggressive policy response from Beijing to China’s Covid outbreak has raised the prospect of a much weaker demand for oil from the world’s second-largest economy,” she adds.
Technical factors are also clearly at play. Traders had come into March holding aggressive long bets on oil that would pay off at futures prices above $100. There is evidence that many of them sold out of positions when oil spiked. Open interest in oil futures is now at the lowest level in six years, according to Bloomberg.
An oil market momentum indicator known as the Relative Strength Index, which measures price changes, has fallen to the mid-40s from highs above 80. Generally, a reading above 70 indicates that an asset is overbought.
“When you get up to 80, it’s implying that the last bull is in the market,” Robert Yawger, director of energy futures at Mizuho Securities, tells Barron’s. “It was way extended to the upside.”
Trading in other products was even more extended, with heating oil’s Relative Strength Index above 90 last week, Yawger says. “I’ve been doing this for 30 years plus, and I can count on one hand the amount of times I’ve seen something above 90.”
Yawger says it is clear that smaller investors who had been buying oil above $100 saw the reversal and moved to “bail fast.”
“There are some fundamental reasons here, there’s geopolitical reasons here, but positioning is also having a big say in where this market is going,” he says.
BDSwiss head of investment research, Marshall Gittler, notes that oil prices weren’t that far off their levels a month ago, before Russia’s invasion began.
“OPEC and others have been pointing out that at the moment there is no shortage of oil, just the fear of a shortage of oil in the future,” he says. “The price of oil further out in the future isn’t that different than it was a month ago.”
Absent a change in the Ukraine conflict, the next important indicator will be Wednesday’s Energy Information Administration’s weekly oil update, which will have information on U.S. oil supply and demand.
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>>> Asia plans to build hundreds of nuclear power stations
Asia is leading the charge for more nuclear reactors.
World Economic Forum
05 Jan 2022
Florian Zandt
https://www.weforum.org/agenda/2022/01/asia-nuclear-reactors-power-energy/
Nuclear Security
There are 35 nuclear reactors currently under construction in Asia.
China, Japan and India are driving the dash for nuclear energy in Asia.
Across Asia there are proposals for another 220 nuclear power plants.
Germany and Italy are phasing out nuclear power stations.
Across Europe there are 15 nuclear reactors being built.
Concerns remain over safety and the treatment of nuclear waste.
After announcing its plans for a phase-out of nuclear power in 2000 and ramping up financial and infrastructural investments in renewable energy production since then, Germany is entering the home stretch: In the following weeks, the country will take offline three of its six remaining nuclear power plants, with the remaining three following at the end of 2022. Since there are no plans to build new reactors, this will make the European country only the second nation worldwide next to Italy to close down all preexisting nuclear reactors without constructing new ones so far. As our chart indicates, the rest of the world is not ready to ditch this power source quite yet.
Can the world ever learn to love nuclear power?
These are the countries with the most nuclear reactors
Nuclear waste recycling is a critical avenue of energy innovation
Asia in particular is still big on nuclear power, even with the nuclear disaster at Fukushima happening as recently as 2011 and some neighboring regions still being visibly affected by the fallout to this day. Japan still has 33 reactors in commission while proposals, planning or construction have started on an additional eleven according to data by the World Nuclear Association. India plans to triple its number of nuclear power plants to 72 in total, while China has proposed the construction of 168 new reactors in addition to 18 being built and 37 being planned, which would amount to an increase of 337 percent. Overall, 35 reactors around Asia are already in construction, with Europe coming in second with 15 plants.
While the steady increase in energy consumption and the scarcity of fossil fuels like coal, crude oil and gas might make nuclear energy a viable, clean option on paper, the technology still poses a great many risks, especially when it comes to the correct disposal and storage of highly radioactive waste products and the condition of older plants. According to data by the International Atomic Energy Agency, two thirds of the 441 currently active nuclear power plants are older than 30 years, a fact that might make thinking about at least overhauling those plants instead of building new ones something to consider.
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>>> Plans For New Reactors Worldwide
(Updated March 2022)
https://world-nuclear.org/information-library/current-and-future-generation/plans-for-new-reactors-worldwide.aspx
Nuclear power capacity worldwide is increasing steadily, with about 55 reactors under construction.
Most reactors on order or planned are in the Asian region, though there are major plans for new units in Russia.
Significant further capacity is being created by plant upgrading.
Plant lifetime extension programmes are maintaining capacity, particularly in the USA.
Today there are about 440 nuclear power reactors operating in 32 countries plus Taiwan, with a combined capacity of about 390 GWe. In 2020 these provided 2553 TWh, about 10% of the world's electricity. About 55 power reactors are currently being constructed in 19 countries, notably China, India, Russia and the United Arab Emirates. Units where construction is currently suspended, i.e. Angra 3 (Brazil), Ohma 1 and Shimane 3 (Japan), and Khmelnitski 3&4 (Ukraine), are not shown in the Table below.Each year, the OECD's International Energy Agency (IEA) sets out the present situation as well as reference and other – particularly carbon reduction – scenarios in its World Energy Outlook (WEO) report. In the 2021 edition (WEO 2021), the IEA's 'Stated Policies Scenario' sees installed nuclear capacity growth of over 26% from 2020 to 2050 (reaching about 525 GWe). The scenario envisages a total generating capacity of 17,844 GWe by 2050, with the increase concentrated heavily in Asia, and in particular India and China. In this scenario, nuclear's contribution to global power generation is about 8% in 2050.The IEA's Stated Policies Scenario (formerly named 'New Policies Scenario') is based on a review of policy announcements and plans, reflecting the way governments see their energy sectors evolving over the coming decades. The IEA estimates in WEO 2021 that the cumulative impact of the stated policies would result in global carbon dioxide emissions declining by less than 1% to 2050.The IEA has produced energy transition scenarios since 2009, beginning with the '450 Scenario', which was consistent with the narrow aim of keeping carbon dioxide concentrations below 450 ppm (parts per million) – the level associated with a 50% likelihood of keeping the average global temperature rise below 2 °C (compared with pre-industrial levels). In 2017, the IEA introduced the 'Sustainable Development Scenario' (SDS), which "portrays an energy future which emphasises co-benefits of the measures needed to simultaneously deliver energy access, clean air and climate goals." The SDS in WEO 2021 sees nuclear capacity increase to 669 GWe by 2050.Nuclear plant constructionAbout 100 power reactors with a total gross capacity of about 100,000 MWe are on order or planned, and over 300 more are proposed. Most reactors currently planned are in Asia, with fast-growing economies and rapidly-rising electricity demand.Many countries with existing nuclear power programmes either have plans to, or are building, new power reactors. Every country worldwide that has operating nuclear power plants, or plants under construction, has a dedicated country profile in the Information Library.About 30 countries are considering, planning or starting nuclear power programmes (see information page on Emerging Nuclear Energy Countries).Power reactors under construction
Start † Reactor Model Gross MWe
2022 Belarus, BNPP Ostrovets 2 VVER-1200 1194
2022 China, CGN Fangchenggang 3 Hualong One 1180
2022 China, CGN Fangchenggang 4 Hualong One 1180
2022 China, CGN Hongyanhe 6 ACPR-1000 1119
2022 India, NPCIL Kakrapar 4 PHWR-700 700
2022 India, NPCIL Kalpakkam PFBR FBR 500
2022 India, NPCIL Rajasthan 7 PHWR-700 700
2022 Korea, KHNP Shin Hanul 1 APR1400 1400
2022 Russia, Rosenergoatom Kursk II-1 VVER-TOI 1255
2022 Slovakia, SE Mochovce 3 VVER-440 471
2023 Argentina, CNEA Carem Carem25 29
2023 Bangladesh Rooppur 1 VVER-1200 1200
2023 China, CNNC Xiapu 1 CFR600 600
2023 France, EDF Flamanville 3 EPR 1650
2023 India, NPCIL Kudankulam 3 VVER-1000 1000
2023 India, NPCIL Kudankulam 4 VVER-1000 1000
2023 India, NPCIL Rajasthan 8 PHWR-700 700
2023 Korea, KHNP Shin Hanul 2 APR1400 1400
2023 Korea, KHNP Shin Kori 5 APR1400 1400
2023 Russia, Rosenergoatom Kursk II-2 VVER-TOI 1255
2023 Slovakia, SE Mochovce 4 VVER-440 471
2023 Turkey Akkuyu 1 VVER-1200 1200
2023 UAE, ENEC Barakah 3 APR1400 1400
2023 UAE, ENEC Barakah 4 APR1400 1400
2023 USA, Southern Vogtle 3 AP1000 1250
2023 USA, Southern Vogtle 4 AP1000 1250
2024 Bangladesh Rooppur 2 VVER-1200 1200
2024 China, SPIC & Huaneng Shidaowan 1 CAP1400 1500
2024 China, Guodian & CNNC Zhangzhou 1 Hualong One 1212
2024 Iran Bushehr 2 VVER-1000 1057
2024 Korea, KHNP Shin Kori 6 APR1400 1400
2024 Turkey Akkuyu 2 VVER-1200 1200
2025 China, SPIC & Huaneng Shidaowan 2 CAP1400 1500
2025 China, CGN Taipingling 1 Hualong One 1200
2025 China, Guodian & CNNC Zhangzhou 2 Hualong One 1212
2025 Turkey Akkuyu 3 VVER-1200 1200
2026 China, CGN Cangnan/San'ao 1 Hualong One 1150
2026 China, Huaneng & CNNC Changjiang 3 Hualong One 1200
2026 China, CNNC Changjiang SMR 1 ACP100 125
2026 China, CGN Taipingling 2 Hualong One 1202
2026 China, CNNC Tianwan 7 VVER-1200 1200
2026 China, CNNC Xiapu 2 CFR600 600
2026 India, NPCIL Kudankulam 5 VVER-1000 1000
2026 Russia, Rosatom BREST-OD-300 BREST-300 300
2026 UK, EDF Hinkley Point C1 EPR 1720
2027 China, CGN Cangnan/San'ao 2 Hualong One 1150
2027 China, CNNC Tianwan 8 VVER-1200 1200
2027 China, CNNC & Datang Xudabao 3 VVER-1200 1200
2027 China, Huaneng & CNNC Changjiang 4 Hualong One 1200
2027 India, NPCIL Kudankulam 6 VVER-1000 1000
2027 UK, EDF Hinkley Point C2 EPR 1720† Latest announced/estimated year of grid connection.
Note: units where construction is currently suspended are omitted from the above Table.Increased capacityIncreased nuclear capacity in some countries is resulting from the uprating of existing plants. This is a highly cost-effective way of bringing on new capacity. Numerous power reactors in the USA, Switzerland, Spain, Finland, and Sweden, for example, have had their generating capacity increased.In the USA, the Nuclear Regulatory Commission has approved about 165 uprates totalling over 7500 MWe since 1977, a few of them 'extended uprates' of up to 20%.In Switzerland, all operating reactors have had uprates, increasing capacity by 13.4%.Spain has had a programme to add 810 MWe (11%) to its nuclear capacity through upgrading its nine reactors by up to 13%. Most of the increase is already in place. For instance, the Almarez nuclear plant was boosted by 7.4% at a cost of $50 million.Finland boosted the capacity of the original Olkiluoto plant by 29% to 1700 MWe. This plant started with two 660 MWe Swedish BWRs commissioned in 1978 and 1980. The Loviisa plant, with two VVER-440 reactors, has been uprated by 90 MWe (18%).Sweden's utilities have uprated three plants. The Ringhals plant was uprated by about 305 MWe over 2006-14. Oskarshamn 3 was uprated by 21% to 1450 MWe at a cost of €313 million. Forsmark 2 had a 120 MWe uprate (12%) to 2013.Plant lifetime extensions and retirementsMost nuclear power plants originally had a nominal design operating lifetime of 25 to 40 years, but engineering assessments have established that many can operate longer. By the end of 2016, the NRC had granted licence renewals to over 85 reactors, extending their operating lifetimes from 40 to 60 years. Such licence extensions at about the 30-year mark justify significant capital expenditure needed for the replacement of worn equipment and outdated control systems.In France, there are rolling ten-year reviews of reactors. In 2009 the Nuclear Safety Authority (ASN) approved EDF's safety case for 40-year operation of its 900 MWe units, based on generic assessment of the 34 reactors. There are plans to take reactor lifetimes out to 60 years, involving substantial expenditure.The Russian government is extending the operating lifetimes of most of the country's reactors from their original 30 years, for 15 years, or for 30 years in the case of the newer VVER-1000 units, with significant upgrades.The technical and economic feasibility of replacing major reactor components, such as steam generators in PWRs, and pressure tubes in CANDU heavy water reactors, has been demonstrated. The possibility of component replacement and licence renewals extending the lifetimes of existing plants is very attractive to utilities, especially in view of the public acceptance difficulties involved in constructing replacement nuclear capacity.On the other hand, economic, regulatory and political considerations have led to the premature closure of some power reactors, particularly in the USA, where reactor numbers have fallen from a high of 110 to 93, as well as in parts of Europe and likely in Japan.It should not be assumed that a reactor will close when its existing licence is due to expire, since operating licence extension is now common. However, new units coming online have more or less been balanced by the retirement of old units in recent years. Over 1999-2020, 103 reactors were retired as 104 started operation. There are no firm projections for retirements over the next two decades, but the World Nuclear Association's 2021 edition of The Nuclear Fuel Report has 123 reactors closing by 2040 in its reference scenario, using conservative assumptions about licence renewal, and 308 coming online. Notes & referencesGeneral sourcesInternational Energy Agency, World Energy Outlook 2021
World Nuclear Association, World Nuclear Performance Report 2021
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>>> Nord Stream 2: Why Russia’s pipeline to Europe divides the West
The Russia-owned pipeline is at the centre of a disagreement between Germany and the US, which sees the project as a way for Moscow to increase leverage in Europe.
A map of the Nord Stream 2 pipeline
Aljazeera
By Liz Cookman
25 Jan 2022
https://www.aljazeera.com/news/2022/1/25/ukraine-russia-what-is-nord-steam-2-and-why-is-it-contentious
As Western powers attempt to avert a Russian invasion of Ukraine, Nord Stream 2, a long-touted energy infrastructure project that has already driven a wedge between Germany and the United States, could become a key bargaining chip.
The $11bn gas pipeline across the Baltic Sea, owned by Russia’s state-backed energy giant Gazprom, runs from western Siberia to Germany, doubling the capacity of the already-in-use Nord Stream 1 pipeline.
While Germany has maintained it is solely a commercial project, Nord Stream 2 also has geostrategic consequences, bypassing Ukraine and potentially depriving it of the approximately $2bn in transit fees Russia currently pays to send gas through its territory.
The pipeline could heat 26 million German homes at an affordable price and construction was completed in September.
However, German regulators have yet to issue the final legal permission Gazprom needs to begin operations.
The US has viewed the pipeline as a geopolitical tool for Russia to undermine energy and national security, increasing Moscow’s leverage over Europe, where gas prices have been soaring.
The pipeline has been opposed by Ukraine and Poland and has left Washington in a difficult position with some of its European allies. It has also caused political infighting within Germany’s new coalition government and left the West divided in its response to the situation.
Last week, German Chancellor Olaf Scholz, who had previously refused to be publicly outspoken on the possibility of halting the pipeline if Russia were to attack Ukraine, offered his strongest indication that this was still possible.
“It is clear that there will be a high cost and that all this will have to be discussed if there is a military intervention against Ukraine,” Scholz said at a news conference with NATO Secretary General Jens Stoltenberg.
On January 13, the US Senate failed to pass a bill sponsored by Republican Senator Ted Cruz to slap sanctions on Nord Stream 2.
The administration of US President Joe Biden had lobbied Republican senators against the bill, fearing its effect on US-German relations and the possibility that it could further antagonise Russia amid the Ukraine crisis.
Ukraine’s President Volodymyr Zelenskyy had asked the Senate to approve the Nord Stream 2 sanctions, while Germany had specifically asked that the US Congress not to propose sanctions.
In May, Biden waived sanctions on the Russian-owned, Swiss-based company running the pipeline project, Nord Stream 2 AG, as part of an agreement with Germany.
However, the US’s stance has not had the desired effect in Germany, and Russia has piled on the pressure, with the state-run Tass news agency saying sanctions on the pipeline would lead to declining energy supplies and gas price growth in Europe.
“The more the US talks about sanctioning or criticises the project, the more it becomes popular in German society,” said Stefan Meister, a Russia and eastern Europe expert at the German Council on Foreign Relations.
“Germans in the majority support the project, it is only parts of the elite and media who are against the pipeline.”
A gas supply shortage in Europe has been widely blamed on a dearth of gas flows from Russia. It has particularly hit Germany’s low-income workers, which Scholz’s Social Democrats (SPD) party rely on for votes.
Tens of thousands of Russian troops have been deployed near Ukraine’s borders, prompting fears that Moscow could launch an attack at very short notice.
The US and UK have begun withdrawing some of their embassy staff from Kyiv, while the European Union has refused to follow suit, with a top diplomat saying that they did not wish to “dramatise” the situation further.
The US has promised to boost security assistance for Ukraine, but recent talks between the West and Russia failed to reach a breakthrough, with some of Moscow’s demands rejected as non-starters.
They include that Ukraine should never join NATO and that NATO’s military activities be limited to member states, including Poland.
However, a subsequent round of talks last week in Geneva between US Secretary of State Antony Blinken and Russian Foreign Minister Sergey Lavrov appeared to have calmed tensions, at least temporarily.
The situation seems unlikely to be solved quickly – few want a conflict, but there is a possibility one could be triggered accidentally by a political misstep.
Russia has agreed to further talks between Lavrov and his UK counterpart, Ben Wallace.
Ukraine, a former Soviet republic that shares borders with both the EU and Russia, has social and cultural ties with Russia, with Russian widely spoken. Despite gaining independence in 1991, Russia still sees Ukraine as an important territory and has long resisted its move towards European institutions.
Two months after the Nord Stream 2 certification process was suspended, it has become one of the strongest remaining tools for the West to influence Russian decision-making when it comes to military action in Ukraine.
For Russia, the pipeline is important because it removes the risks associated with sending gas through transit countries, allowing Gazprom to ship gas directly to its most important European customer, Germany,
The pipeline could cut their operating costs by about $1bn per year, as transit through Ukraine, in particular, is expensive.
“Germany has been resisting pressure from the US because it absolutely needs reliable gas supplies from Russia and, for all it is now one of the top exporters of liquified natural gas in the world, the US cannot replace Russia in that role as key gas supplier to Germany,” said Ronald Smith, senior oil and gas analyst at BCS Global Markets.
“Ukraine stands to lose several billion dollars per year in transit fees – which is what makes NS2 a cheaper option for shipment – a key stream of hard currency income for the country.”
Bypassing Ukraine sharply reduced the country’s leverage with Russia and reduced its income. However, Europe and Germany depend on Russia’s gas, with this current conflict exposing vulnerabilities, meaning Nord Stream 2 has become both a deterrent to war in Ukraine and a punishment option in the event there is one.
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Chevron - >>> My Top Picks To Play A Weakening US Dollar Entering 2022
Zacks
by Daniel Laboe
December 22, 2021
https://finance.yahoo.com/news/top-picks-play-weakening-us-204308136.html
Chevron (CVX) and its best-in-class operations provide the perfect way to buy the dip in this momentum-charged sector with the highest return potential.
Chevron is an energy powerhouse with LNG operations that position it for the future of (lower emission) energy. With its savvy purchases across the Permian and Marcellus basins, the enterprise has established itself as a leader in the US oil industry (2nd largest US energy company behind ExxonMobil). I dare to call CVX an oil growth stock, but it has all the makings of a long-term winner.
Despite what oil critics say, I can assure you that the world economy is far from kicking its addiction to fossil fuels. Analysts project that natural gas and oil demand will continue to rise over the next decade with revving energy needs (LNG is expected to be a winner). CVX is poised to drive substantial profits throughout the roaring 20s.
I deem that Chevron's 4.7% dividend yield is almost as safe as US Treasury Note. The oil industry's commitment to maintaining its dividend regardless of financial adversity (short of bankruptcy) is unprecedented. Chevron has proven to have the liquidity to support its endlessly growing yield in even the most devastating economic environments. Chevron maintained its dividend through the past 18-months of economic shutdowns and actually raised its quarterly payout in Q2, which none of its major competitors can boast of.
The firm has already returned to pre-pandemic profitability levels, remarkably faster than most of its competitors, yet its share price remained below its pre-COVID high in January 2020. I expect that currency tailwind will further fuel CVX's upside potential.
Sell-side analysts have been getting increasingly optimistic about CVX, with 13 out of 17 analysts calling this a buy today and a consensus price target of nearly $130 (more bullish targets above $150).
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>>> Saudi Aramco sells oil pipeline stake for $12.4 billion
Aramco is under pressure from its main owner, the Saudi government, to generate cash to finance state operations as well as new investments.
The New York Times
By Stanley Reed
April 12, 2021
https://www.nytimes.com/2021/04/12/business/saudi-aramco-pipeline.html
Saudi Aramco, the national oil company of Saudi Arabia, has reached a deal to raise $12.4 billion from the sale of a 49 percent stake in a pipeline-rights company.
The money will come from a consortium led by EIG Global Energy Partners, a Washington-based investor in pipelines and other energy infrastructure.
Under the arrangement announced on Friday, the investor group will buy 49 percent of a new company called Aramco Oil Pipelines, which will have the rights to 25 years of payments from Aramco for transporting oil through Saudi Arabia’s pipeline networks.
Aramco is under pressure from its main owner, the Saudi government, to generate cash to finance state operations as well as investments like new cities to diversify the economy away from oil.
The company has pledged to pay $75 billion in annual dividends, nearly all to the government, as well as other taxes.
Last year, the dividends came to well in excess of the company’s net income of $49 billion. Recently, Aramco was tapped by Crown Prince Mohammed bin Salman, the kingdom’s main policymaker, to lead a new domestic investment drive to build up the Saudi economy.
The pipeline sale “reinforces Aramco’s role as a catalyst for attracting significant foreign investment into the Kingdom,” Aramco said in a statement.
From Saudi Arabia’s perspective, the deal has the virtue of raising money up front without giving up control. Aramco will own a 51 percent majority share in the pipeline company and “retain full ownership and operational control” of the pipes the company said.
Aramco said Saudi Arabia would retain control over how much oil the company produces.
Abu Dhabi, Saudi Arabia’s oil-rich neighbor, has struck similar oil and gas deals with outside investors.
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>>> Top money managers expect these green-energy companies to benefit most from Biden’s infrastructure plan
MarketWatch
April 3, 2021
By Michael Brush
https://www.marketwatch.com/story/top-money-mangers-expect-these-green-energy-companies-to-benefit-most-from-bidens-infrastructure-plan-11617286472?siteid=bigcharts&dist=bigcharts
Major themes are the electrification of transportation and a reduction in the carbon footprint of buildings.
President Biden’s infrastructure-spending proposal is a veritable grab bag of goodies, supporting everything from basic infrastructure to broadband and home health-care workers.
But for green-energy fans, there was plenty to like.
The proposal offers $621 billion to modernize transportation infrastructure — including changes that favor electric vehicles (EVs), according to the Wall Street Journal. It proposes $213 billion to help make buildings more energy-efficient. Biden also sets an ambitious goal of making the power grid carbon neutral by 2035.
To find some of the best investing angles, I checked with two money managers who have great records. Before we get to stocks, first some high-level impressions of the Biden proposals.
Overview of Biden’s proposals
EVs and energy-efficient buildings are “really important mega trends in sustainable energy that we are paying close attention to,” says Andy Braun, who manages the Pax Large Cap Fund PAXLX, +0.35%. His fund outperforms its Morningstar large blend category by five percentage points, annualized, over the past three years.
Another key angle for investors is that the Biden spending initiatives would reinforce similar plans in the two major economic centers outside the U.S. — Europe and China. This amplifies the impact, notes Jonathan Waghorn of the Guinness Atkinson Alternative Energy Fund GAAEX, +0.31%. His fund beats its Morningstar foreign small- and mid-cap value fund category by an impressive 21.8 percentage points, annualized, over the past three years, according to Morningstar. The fund is being converted into an exchange treaded fund (ETF) called SmartETFs Sustainable Energy II SULR, +0.45%.
Putting governments aside, a third force is at work for investors. The greater use of renewable power and reducing the carbon footprint of buildings makes economic sense for companies, says Waghorn. This is important, because investing based on government spending plans alone can be risky.
Now here’s a look at green companies these two money managers say would get a boost if the Biden infrastructure plan gets passed.
Electrification of transportation
The obvious plays here are companies like Tesla TSLA, -1.17% in vehicles and lithium-ion batteries, and ChargePoint Holdings CHPT, -0.75% and Blink Charging BLNK, +1.86% in charging stations. But both Braun and Waghorn instead look beyond these to single out companies that make the building blocks and components supporting this trend.
For example, consider ON Semiconductor ON, -0.66%, a top holding of the Guinness Atkinson Alternative Energy and Waghorn’s SmartETFs Sustainable Energy II. This company would benefit from the Biden plan because its power-management chips convert, control and monitor electricity in EVs, from the charging process to driving. It also makes sensors used in cars.
Next, consider Infineon Technologies IFNNY, -0.01%, which specializes in power semiconductors that regulate electricity in cars. This is a top holding of the SmartETFs Sustainable Energy ETF, and another ETF Waghorn helps manage in this space called SmartETFs Smart Transportation & Technology MOTO, -0.14%. He also likes Samsung SDI, a Korean pure-play on lithium-ion batteries that’s building partnerships with European car manufacturers.
Braun, at the Pax Large Cap Fund, highlights fund holding Aptiv APTV, +0.41%, which offers software, components and electrical power distribution systems used in EVs. He also singles out TE Connectivity TEL, +0.12%, which makes connectors and sensors used in EVs.
Cutting the carbon footprint
“Buildings are a big culprit in greenhouse-gas emissions, a theme we have felt strongly about for years,” says Braun. Biden’s plan to spend hundreds of billions to help make commercial buildings and homes become more energy efficient would boost business at Trane Technologies TT, +0.09%, which offers energy-efficient climate-control systems.
Waghorn highlights Ameresco AMRC, -2.40%. The company helps customers improve the energy efficiency of buildings through the use of LED lighting, solar photovoltaic power sources, and modifications to heating, ventilation and cooling systems. His funds also own Hubbell HUBB, +0.79% in energy-efficient lighting.
‘Aggressive target’
Biden wants to completely eliminate carbon emissions from the power grid by 2035. “That is an enormously aggressive target,” says Waghorn. Whether the U.S. actually gets there or not, green energy companies will benefit as the government rolls subsidies and incentives to try to make it happen.
Holdings from Waghorn’s SmartETFs Sustainable Energy II that he thinks will benefit include NextEra Energy NEE, +1.34%, a power utility that uses renewable energy from wind and sun; and Ormat Technologies ORA, +0.74%, a utility that draws on geothermal and solar power.
Downsides of the proposals
While Biden’s infrastructure and green-spending initiatives would help companies in the sector, it might not really help stocks overall, for two reasons.
First, someone has to pay for it. A big chunk of the spending in the bill would be footed by companies, and this will hit earnings.
Ed Yardeni, of Yardeni Research, estimates that without any tax increases, S&P 500 SPX, +0.33% earnings per share (EPS) would increase to $215 by the end of next year. Tax hikes may eat into that substantially.
“We estimate that Biden’s tax hike would reduce S&P 500 earnings per share by $15 to $200,” says Yardeni.
Bank of America economists estimate Biden’s corporate tax proposals would hit S&P 500 earnings by 7%, around the same amount as Yardeni’s estimate.
Next, the additional Biden stimulus may already be priced in by the stock market. Bank of America tracks an interesting metric, the ratio of S&P 500 market cap to M2 money supply. The average since the financial crisis has been 1.4. It is now at 1.7. This suggest the market was already anticipating $2 trillion in stimulus, say economists at Bank of America.
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>>> Clean Energy ETFs Take a Hit, but Money Keeps Flowing In
Exchange-traded funds that track renewable-energy indexes have posted double-digit declines this year
Clean energy stocks rallied after last year’s presidential election as investors bet the Biden administration would hasten the U.S.’s transition toward wind and solar energy.
The Wall Street Journal
By Michael Wursthorn
June 28, 2021
https://www.wsj.com/articles/clean-energy-etfs-take-a-hit-but-money-keeps-flowing-in-11624878181?mod=itp_wsj
Investors have lost a bundle this year betting on solar-panel and wind-turbine makers. Their response: to double down.
A year ago, green stocks and the funds that track them rallied tremendously after the market’s recovery from a pandemic-induced swoon.
Solar-panel and wind-turbine companies were among firms benefiting from a surge of investor- and consumer-driven demand for renewables, despite many being small unprofitable ventures.
This year, returns are trailing the broader stock market. That is thanks, in part, to stocks having run so far and uncertainty around the Federal Reserve’s interest-rate course and how its actions may ultimately affect growth stocks.
Exchange-traded funds that track renewable-energy indexes have posted double-digit declines this year. BlackRock’s iShares Global Clean Energy ETF has fallen 16% since December; Invesco Ltd.’s popular Solar ETF has posted a roughly 11% decline.
Even so, money continues to pour in.
Professional money managers and individual traders have invested $6.2 billion in green-energy ETFs this year, according to data from Refinitiv Lipper as of last week.
The inflows are on course to eclipse last year’s record $7.2 billion.
Index makers and asset-management firms say that, for now, large pullbacks in share prices don’t reflect investors’ desire to bet on green companies.
“It’s an area where we see continuous demand,” said Ari Rajendra, a senior director of strategy and volatility indexes at S&P Dow Jones Indices.
At BlackRock, the world’s largest asset manager, clean energy funds reported $2.7 billion in inflows this year and $1 billion into a European clean-energy fund, according to FactSet data as of last week. Interest was so high that S&P had to broaden its clean-energy benchmark used by BlackRock funds to fix the problem of having too much money in mostly small, hard-to-trade companies.
Such changes don’t happen often, said S&P’s Mr. Rajendra, but intense demand from investors warranted the index’s revamp to 82 stocks from just 30. The firm also lowered the criteria for the inclusion of stocks, among other things.
Ross Gerber, chief executive of Gerber Kawasaki Wealth & Investment Management, said renewable-energy stocks, from solar-panel makers to manufacturers of alternative batteries, will eventually transform transportation and other facets of everyday life.
With clean energy stocks pricey, they and funds that track them may be more vulnerable to market or political changes.
Mr. Gerber has put more client cash into Invesco’s clean-energy fund, contributing to the $446 million of total inflows into the ETF this year, as of last week. He shuns oil stocks, which are among the stock market’s best performers this year.
“The more speculative the stock, the higher the valuation. But in this market, people care more about fantasy than reality,” said Mr. Gerber. “So with solar, you have a little bit of the fantasy in there, too.”
Invesco’s solar ETF jumped 233% in 2020, while BlackRock’s global clean-energy fund soared 140%—easily the best years ever for both as valuations of green stocks climbed to dizzying heights.
Although both funds have declined in the year to date, valuations are elevated.
Invesco’s solar ETF trades at a forward price/earnings ratio of 36, versus 21 for the S&P 500, according to FactSet.
Meanwhile, clean-energy companies trade at a 70% premium to traditional energy companies based on a ratio of enterprise value to earnings before interest, taxes, depreciation and amortization, a standard valuation yardstick, strategists at Bank of America said.
They noted this valuation was down from highs earlier this year but still well above the five-year average.
With stocks pricey, they and funds that track them may be more vulnerable to market or political changes. Their allure may dim, for example, if the Fed begins to raise interest rates earlier than expected, taking some of the shine off growth stocks.
Or volatility could increase if there are hiccups for a $1 trillion infrastructure plan agreed to by President Biden and some U.S. senators.
Green stocks rallied last year after Mr. Biden won November’s presidential election, as investors bet the new administration would hasten the U.S.’s transition toward wind and solar energy and away from fossil fuels.
Investors already are experiencing some of that volatility. Clean-energy stocks have rallied alongside growth stocks in recent weeks.
Invesco’s solar fund is up nearly 15% over the past month, while BlackRock’s ETF has added 3.2%.
The willingness of investors to continue pouring money into this part of the market shows they are positioning for a potential longer-term readjustment of the energy sector and economy.
Rene Reyna, head of thematic and specialty product strategy at Invesco, said expectations are premised on a belief that technology will eventually bring the cost of batteries, solar panels and other green efforts down enough to garner wider adoption—and big profits.
Clean energy companies trade at a 70% premium to traditional energy companies.
In that sense, clean energy is the “hope trade,” he said.
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>>> The Era of Cheap Natural Gas Ends as Prices Surge by 1,000%
Bloomberg
By Anna Shiryaevskaya, Stephen Stapczynski, and Ann Koh
August 5, 2021
https://www.bloomberg.com/news/articles/2021-08-06/the-era-of-cheap-natural-gas-ends-as-prices-surge-by-1-000
High prices seen sticking as demand jumps amid weak supplies
Energy transition’s focus on gas to impact global economy
The era of cheap natural gas is over, giving way to an age of far more costly energy that will create ripple effects across the global economy.
Natural gas, used to generate electricity and heat homes, was abundant and cheap during much of the last decade amid a boom in supply from the U.S. to Australia. That came crashing to a halt this year as demand drastically outpaced new supply. European gas rates reached a record this week, while deliveries of the liquefied fuel to Asia are near an all-time high for this time of year.
With few other options, the world is expected to depend more on cleaner-burning gas as a replacement to coal to help achieve near-term green goals. But as producers curb investments into new supply amid calls from climate-conscious investors and governments, it is becoming apparent that expensive energy is here to stay.
“No matter how you look at it, gas will be the transition fuel for decades to come as major economies are committed to reach carbon emission targets,” said Chris Weafer, chief executive officer of Moscow-based Macro-Advisory Ltd. “The price of gas is more likely to stay elevated over the medium-term and to rise over the longer-term.”
Strong Consumption
Asia seen underpinning global LNG demand growth through 2040
By 2024, demand is forecast to jump 7% from pre-Covid-19 levels, according to the International Energy Agency. Looking further out, the appetite for liquefied natural gas is expected to grow by 3.4% a year through 2035, outpacing other fossil fuels, according to an analysis by McKinsey & Co.
Surging natural gas prices means it will be costlier to power factories or produce petrochemicals, rattling every corner of the global economy and fueling inflation fears. For consumers, it will bring higher monthly energy and gas utility bills. It will cost more to power a washing machine, take a hot shower and cook dinner.
It’s especially bad news for poorer nations like Pakistan and Bangladesh that reworked entire energy policies on the premise that the fuel’s price would be lower for longer.
European natural gas rates have surged more than 1,000% from a record low in May 2020 due to the pandemic, while Asian LNG rates have jumped about six-fold in the last year. Even prices in the U.S., where the shale revolution has significantly boosted production of the fuel, have rallied to the highest level for this time of year in a decade.
While there are several one-off factors that have pushed gas prices higher, such as supply disruptions, the global economic rebound and a lull in new LNG export plants, there is a growing consensus that the world is facing a structural shift, driven by the energy transition.
Natural gas prices in Europe and Asia have surged to new heights in 2021
A decade ago, the IEA declared that the world may be entering a “golden age” of natural gas demand growth due to historic expansion of low-cost supply. Indeed, between 2009 and 2020, global gas consumption surged by 30% as utilities and industries took advantage of booming output.
Countries championed gas as a way to quickly reduce their carbon footprint. The shift to natural gas can be done relatively quickly with limited deployment of capital, while having a significant impact on lowering emissions, according to James Taverner, an analyst at IHS Markit. Natural gas is the cleanest burning fossil fuel, and emits almost 50% less CO2 than coal. Meanwhile, non-fossil-fuel alternatives such as wind and solar are at a relatively early stage in the energy transition.
Demand isn’t showing any signs of slowing down.
Utilities in Europe are switching to the cleaner-burning gas due to sky-high carbon prices, South and Southeast Asian governments are planning dozens of new gas-fired plants to meet greater electricity needs, and China is poised to depend more on gas than ever as it seeks to peak coal consumption.
Even as prices are poised to be higher over the next decade, they won’t be high enough to drastically reduce demand for the fuel, according to Gavin Thompson, Asia-Pacific vice chairman at Wood Mackenzie Ltd. “In emerging economies, with policy support, we don’t see demand destruction,” he said.
Ordinarily, robust demand would encourage a rush of investment in fresh export facilities. But a big factor in higher gas prices is a lack of fresh capital to increase supply. Growing anti-gas sentiment and heightened scrutiny of dirty methane emissions has stalled projects and forced energy majors to rethink plans. The IEA, which heralded natural gas as a bridge fuel to a low carbon future, drew widespread attention earlier this year when it said investments in new upstream fields need to stop if the world wants to hit net-zero emissions by 2050.
Without new investment, LNG consumption in Asia -- the engine for future gas demand growth -- will outstrip supply by 160 millions tons in 2035, according to WoodMac’s Thompson. For comparison, Asia imported about 250 million tons of LNG last year.
Already, there are signs around the world that supplies will fall short:
Beyond a massive expansion in Qatar, few new LNG export projects have been cleared since the start of 2020.
End-users have been less willing to take equity stakes in upstream projects or sign long-term supply deals due to uncertainty surrounding government-led efforts to reduce emissions.
U.S. shale drillers aren’t immediately responding with additional production, as they’re under pressure from investors to curb spending and avoid creating another glut, while key pipeline projects struggle to move forward.
Mark Gyetvay, the deputy chief executive officer of Russian LNG exporter Novatek PJSC, warns that the green movement could disrupt the delivery of adequate and affordable supply to consumers.
“The lack of capital investments in future natural gas projects does not lead us to an energy transition, but instead leads us down an inevitable path toward an energy crisis,” said Gyetvay.
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$EXN Excellon Resources Inc., a silver mining and exploration company, acquires, explores for, evaluates, develops, and finances mineral properties in Mexico and Canada. The company primarily explores for silver, lead, zinc, and gold deposits. It holds 100% interests in the Platosa property covering an area of 11,000 hectares located in Durango State, Mexico; the Evolución property that covers an area of 45,000 hectares situated in the states of Durango and Zacatecas, Mexico; and the Silver City Project totaling an area of 164 square kilometers in Saxony, Germany. The company also holds 100% interests in the Kilgore Project that covers an area of 6,788 located in Clark County, Southeastern Idaho; and the Oakley Project covering an area of 2,833 hectares in Oakley, Idaho. Excellon Resources Inc. was incorporated in 1987 and is based in Toronto, Canada.
Ideanomics $IDEX - How to Insert Company into Chinese Battery Market
$IDEX Ideanomics Brand Identity - Our Divisions
>>> Warren Buffett reversed plans to buy a $1.3 billion pipeline to avoid antitrust scrutiny - and its shows how the rich and powerful see Washington's growing regulatory threat
Business Insider
by Katie Canales
7-13-21
https://www.msn.com/en-us/money/companies/warren-buffett-reversed-plans-to-buy-a-13-billion-pipeline-to-avoid-antitrust-scrutiny-and-its-shows-how-the-rich-and-powerful-see-washingtons-growing-regulatory-threat/ar-AAM7cz4?ocid=uxbndlbing
Warren Buffett's Berkshire Hathaway abandoned plans to buy a $1.3 billion natural gas pipeline.
Buffett's energy company operates in states where the pipeline runs, which seller said the FTC could have used to block the deal.
The abandoned purchase signals that Buffett sees a growing federal regulatory threat.
Washington's beefing up its antitrust regulatory muscle, and billionaire investor Warren Buffet is seemingly well aware of it.
The Berkshire Hathaway owner's energy subsidiary said Monday it's throwing out plans to buy a $1.3 billion natural gas pipeline that operates in 16 states, including Utah, Wyoming, and Colorado. Those are territories where his subsidiary's energy company also runs, as CNN noted.
Berkshire Hathaway owning two pipelines that serve customers in the same states could have raised eyebrows from the Federal Trade Commission, which the company and the pipeline's seller acknowledged in a Monday press release.
"The decision is a result of ongoing uncertainty associated with achieving clearance from the Federal Trade Commission under the Hart-Scott-Rodino Antitrust Improvements Act of 1976," Dominion, which was set to sell its Questar Pipelines to the company, said.
Dominion said it already sold gas transmission and storage assets to Berkshire in November, a deal that won't be affected by the pipeline purchase termination and that was originally worth $4 billion, plus $5.7 billion that Berkshire Hathaway agreed to take on in debt.
Both Buffett and Dominion backing away from the pipeline deal shows that even the rich and powerful understand the regulatory threat currently posed by the US government - specifically from the FTC.
The agency is now helmed by Lina Khan, a big tech critic whose extensive antitrust law background has reshaped modern-day antitrust discussion. Khan, a Democrat, is joined by two other Democratic commissioners and two Republicans.
Apart from the FTC's new make-up, lawmakers are also zeroing in on reshaping antitrust regulation in the US. Congress unveiled a package of five bills in June that are intended to keep big tech companies from becoming too large and powerful.
And just last week, President Joe Biden signed an executive order to combat corporate consolidation, or mergers, in the US economy, a move the administration said would increase healthy competition.
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Up 13% on News... Avanti Energy Inc (AVN)
https://finance.yahoo.com/news/avanti-energy-completes-geophyiscal-review-122600969.html
$NAK Discussion with Ron Thiessen | Northern Dynasty Minerals | Part One
$NAK The global rare earth market will grow in value from $8.1 billion in 2018 to more than $14.4 billion by 2025 as demand for electric vehicles, cellphones and other products rise.
>>> Oil Spike Lifts Energy ETFs
Yahoo Finance
Dan Mika
June 22, 2021
https://finance.yahoo.com/news/oil-spike-lifts-energy-etfs-150000081.html
The stars are aligning for a bull run in the oil markets, as the world continues to shed its pandemic-induced cabin fever with road trips and flights amid uncertainty over how flexible the supply of the commodity will be in handling that demand.
Prices for the U.S. benchmark West Texas Intermediate recovered from the $40 per barrel mark at the start of the year to hit $70 per barrel earlier in June on the back of massive demand for travel in places where COVID-19 is on the retreat.
The International Energy Agency’s latest projections expect global oil demand to recover to prepandemic levels by the end of 2022, leading to domestic surplus drawdowns and a possible lag in refineries being able to keep up in turning crude into gasoline.
Consider the Invesco DB Energy Fund (DBE), which tracks energy-related futures contracts and has posted year-to-date returns of 38.93%. Let’s compare it to the other largest commodity baskets in the ETF realm.
Invesco DB Base Metals Fund (DBB), industrial metals: 12.98%
Invesco DB Agriculture Fund (DBA), agriculture: 9.54%
Aberdeen Standard Physical Precious Metals Basket Shares ETF (GLTR), precious metals: -4.26%
Here’s what’s driving oil prices higher, and how ETF investors can get into the market.
Geopolitics & Demand Flip
The crude oil crash last March was driven by both ends of the supply and demand curve. Much of the world went into lockdown to avoid the spread of COVID-19, which kept people from driving and flying, sending demand down substantially.
At the same time, Saudi Arabia and Russia began an oil production war after the latter walked out of OPEC negotiations on how the cartel’s members would react to the pandemic. The spat between the world’s second- and third-largest producers depressed prices further until early April, when the two countries agreed to curtail production.
The world was awash in oil that it didn’t need late last spring, so much so that the price of West Texas Intermediate went negative on April 20 as traders with expiring oil futures were forced to pay buyers to take those contracts on instead of taking delivery of oil they couldn’t store.
Now, the scenario is flipped on its head.
Americans are itching to travel after nearly a year and a half at home, and other countries are opening up to travel as more people get vaccinated.
At the same time, geopolitics in the Middle East could complicate global oil supplies. Iranian President-elect Ebrahim Raisi told reporters on Monday that he would not meet with U.S. President Biden or negotiate on other matters, while demanding the U.S. lift its banking and shipping sanctions on the country.
A hardline approach could scuttle attempts to revive the Iran Nuclear Deal and leave the country unable to export to other countries that move money through American financial institutions.
Tying Investment To Crude Prices
The ETF most closely following the whims of the oil market is the US Oil Fund LP (USO), which holds futures contracts expiring within two months into the future at the latest. Its closest competitor is the Invesco DB Oil Fund (DBO), which is less prone to price swings because it moves its expiring contracts into whatever month is most attractive within the next 13 months on the market.
However, the funds have respective expense ratios of 0.79% and 0.78%, both fairly pricey compared to the broader ETF market. Plus, both funds are structured as commodity pools, so long-term holders could incur greater capital gains taxes.
A less volatile option is the ProShares K-1 Free Crude Oil Strategy ETF (OILK), which splits its exposure equally between contracts that roll each month and contracts that expire semiannually. This fund is structured as an open-ended fund rather than a commodities pool, which keeps investors from having to make a separate filing come tax time, and which an expense ratio of 0.68%.
Producers & Refiners
The simplest way to get exposure to the companies in the oil space is by using the Energy Select Sector SPDR Fund (XLE). The benchmark fund following U.S. energy companies in the S&P 500 has year-to-date returns of 43.98% and an expense ratio of 0.12%.
Alternative options for a broader energy portfolio include the Vanguard Energy ETF (VDE), which has a wider share of holdings, and produced 47.48% returns so far this year. It has a 0.10% expense.
An option with narrowed focus is the VanEck Vectors Oil Refiners ETF (CRAK), the only fund right now that’s solely tracking the companies that turn crude oil into the stuff that goes into gas tanks. However, it carries a relatively pricey expense ratio of 0.60%.
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>>> Biden’s Crime Against the Economy
BY JAMES RICKARDS
JUNE 21, 2021
https://dailyreckoning.com/bidens-crime-against-the-economy/
Biden’s Crime Against the Economy
I try to keep politics out of my economic analyses, and my approach is non-partisan. But sometimes I can’t avoid it because political policies can have significant economic impacts. Today is one of those times.
One of Joe Biden’s first acts as President was to kill construction of the Keystone XL pipeline. This is a pipeline that would bring oil from the tar sands of Alberta, Canada to the Midwest United States. From there it would be moved through other pipelines or refined and distributed to gas stations and industrial users in America.
Biden’s decision was destructive for a long list of reasons.
The immediate impact was to kill about 10,000 high-paying union jobs with benefits in construction, transportation and expert services. The ripple effects were even greater. Once a pipe delivery operation is killed, the trucking company and pipe manufacturer lay off more personnel and those workers stop spending at local restaurants and so on.
But killing the pipeline accomplishes nothing from an environmental standpoint. The decision to end the pipeline is pointless because the oil still moves out of Alberta. In the absence of a pipeline, the oil moves by railroad tanker cars on rail lines owned by Warren Buffett.
Pipelines Are Better for the Environment
It’s just that the railroad uses more energy and has higher CO2 emissions than a pipeline. If you cared about the environment, you’d favor a pipeline over railroads. But opponents don’t really care about the environment, they just want to shut down the oil and gas industries completely.
Shutting the pipeline is a step in that direction. Claims about local environmental damage and crossing Native American tribal areas were just feel-good red herrings. The goal was always just to kill the pipeline. Mission accomplished. Now, the Biden administration may have done more damage than thought at first.
Construction on the pipeline had been halted in the past by the Obama administration only to be started-up again by President Trump. The worksites and equipment were mothballed until the green light was turned on again. Not this time. The primary company backing the pipeline has announced they are throwing in the towel and terminating the project for good.
The science of climate change is highly uncertain. There’s some evidence that the world is cooling, not warming. There’s no conclusive evidence that man-made CO2 emissions are the primary cause of warming if there is any. CO2 is a trace gas of little impact except as plant food.
Climate change is real, but it happens over hundreds, sometimes thousands of years for reasons that science does not completely understand.
Real Climate Change
I lived for ten years on Long Island Sound, a beautiful body of water where locals enjoy fishing, sailing, swimming and other water sports. It has a rocky coast because 10,000 years ago it was a glacier (A glacier pushes rocks out of its way and they accumulate along the edges in a formation called a moraine).
Going from a glacier to a waterway is the result of real climate change, but the process took ten millennia, not ten years. The idea that cities will be inundated by rising oceans in ten years, a stock claim of climate alarmists, is nonsense. (By the way, the alarmists made the same claim twenty years ago, fifteen years ago, and ten years ago and they’ve been dead wrong every time; they’re still wrong).
Climate changes due to sunspot cycles, shifting ocean currents, volcanic activity and extreme geological events. Still, the climate change narrative persists because it provides political cover for global government, global taxation, open borders and other facets of the globalist agenda.
That might sound conspiratorial to some, but it isn’t. It’s just the way these globalist elites operate. I’ve been watching them closely for years and know how the game is played.
Propaganda
They know they can’t impose global solutions unless they concoct a global “problem” and climate change as the alarmists define it fills the bill perfectly.
This hidden agenda is revealed in their writings, which discuss the need to “frame” the issue, for example. But why do you have to “frame” anything if the story is true?
According to him, there are no fewer than three ticking time bombs that could derail Joe Biden's highly popular "rescue plan" for America.
It's not the message the media wants you to hear.
It's not what Joe Biden wants you to believe.
But you need to hear it -- click here for more details.
Framing is a form of propaganda, the climate alarmist’s favorite tool. You don’t need to frame a narrative if you have good science on your side. The facts will speak for themselves. So, you can be sure you’re being fed propaganda, which is.
The best advice is to ignore propaganda, stick to real science (when you can find it) and make long-term investment decisions that don’t rely on false predictions of climate doom.
But, there’s money to be made from climate alarmism.
ExxonMobil recently had their annual meeting. A small hedge fund named Engine No. 1, with only 0.02% of the ExxonMobil stock, proposed four new directors of whom each has a “green” background with experience in renewable energy sources such as wind and solar.
Normally, a dissident slate like that would have no chance. But, Engine No. 1 managed to recruit major institutions such as BlackRock to join their cause. With other major investors joining in, the green directors won three board seats outright. Eight sitting directors and the CEO retained their seats.
Three incumbent directors got the boot, something practically unprecedented in major corporations absent a hostile takeover. What’s the impetus behind this?
Follow the Money
The public story is that ExxonMobil was too slow in adapting its business plans to a world of solar and wind power and electric vehicles. The reality is more complicated.
There’s good reason to believe that solar and wind will never provide more than a small percentage of the power needed to run America. ExxonMobil is an oil and gas exploration and distribution company. They should stick to what they do best and let others build windmills. Oil and gas, nuclear and hydro-electric will power the country for decades to come or longer.
So, why did Larry Fink of BlackRock climb on the green train?
It turns out he’s promoting so-called ESG funds (for Environmental, Social and Governance) with higher fees to customers. Fink and others are just promoters using the green banner to make more money at investor expense.
What happened in the board room at ExxonMobil is an example of how private corporate resources are being hijacked by activists and do-gooder institutional investors to pursue social policy goals with little or no scientific evidence to back them up.
Research shows ESG funds and related ETFs do not outperform major index funds. Fink just needed to bolster his ESG credentials and he did so at ExxonMobil’s expense. Concern about the environment is minimal or incidental. It turns out that Fink and the others are only in it for the money.
That’s the kind of green they really care about.
Regards,
Jim Rickards
for The Daily Reckoning
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>>> Best Oil ETFs for Q3 2021
OIL, OILK, and BNO are the best oil ETFs for Q3 2021
Investopedia
By NATHAN REIFF
May 18, 2021
https://www.investopedia.com/news/5-etfs-track-oil-usodbooilucouwti/?utm_campaign=quote-yahoo&utm_source=yahoo&utm_medium=referral
Oil exchange-traded funds (ETFs) offer direct access to the oil market by tracking the price of oil as a commodity. This approach is different from investing in funds that own a portfolio of oil stocks. There is potential for significant returns through investing in the oil sector, but risks remain high amid the COVID-19 pandemic and the resulting massive disruption of economies worldwide. Oil prices historically have been prone to quick, dramatic swings up and down. Oil ETFs provide investors a straightforward way to gain exposure to those price swings without having to buy and store the physical commodity or navigate the complexities of investing in oil futures contracts.
KEY TAKEAWAYS
Oil prices have dramatically outperformed the broader stock market over the past year.
The ETFs with the best 1-year trailing total return are OIL, OILK, and BNO.
The top holdings of the first two ETFs are futures contracts for Sweet Light Crude Oil (WTI), and the top holdings of the third are futures contracts for Brent Crude Oil.
There are currently 6 distinct oil commodity ETFs that trade in the U.S., excluding inverse and leveraged ETFs, as well as funds with less than $50 million in assets under management (AUM). Oil prices have climbed by 137.2% over the past twelve months, significantly outperforming the S&P 500's total return of 48.7%, as of May 14, 2021.12 The best-performing oil ETF, based on performance over the past year, is the iPath Pure Beta Crude Oil ETN (OIL). We examine the top 3 oil ETFs below. These ETFs focus on oil as a commodity rather than oil company stocks. All numbers below are as of May 17, 2021.3
iPath Pure Beta Crude Oil ETN (OIL)
Performance over 1-Year: 114.5%
Expense Ratio: 0.75%
Annual Dividend Yield: N/A
3-Month Average Daily Volume: 32,369
Assets Under Management: $55.0 million
Inception Date: April 20, 2011
Issuer: Barclays Capital
OIL provides exposure to the Barclays WTI Crude Oil Pure Beta TR Index, which aims to reflect potential returns of futures contracts in the crude oil markets. The fund is structured as an exchange-traded note (ETN), a type of unsecured debt security that is similar to a bond, but trades on an exchange like a stock. The ETF's underlying index may utilize futures contracts of varying expiration dates. The holdings of OIL are futures contracts of Sweet Light Crude Oil (WTI).45
ProShares K-1 Free Crude Oil Strategy ETF (OILK)
Performance over 1-Year: 113.9%
Expense Ratio: 0.68%6
Annual Dividend Yield: N/A
3-Month Average Daily Volume: 28,559
Assets Under Management: $83.3 million
Inception Date: Sept. 26, 2016
Issuer: ProShares
OILK targets the Bloomberg Commodity Balanced WTI Crude Oil Index. Unlike some other oil ETFs, OILK does not aim to track the performance of the spot price of WTI crude oil, and indeed may perform very differently. Rather, like the target index, OILK aims to track the performance of three separate contract schedules for WTI crude oil futures. The fund's holdings are futures contracts of Sweet Light Crude Oil (WTI).67
United States Brent Oil Fund (BNO)
Performance over 1-Year: 105.0%
Expense Ratio: 1.13%8
Annual Dividend Yield: N/A
3-Month Average Daily Volume: 1,142,773
Assets Under Management: $324.3 million
Inception Date: June 2, 2010
Issuer: Concierge Technologies
BNO, a futures-based commodity pool, does not track West Texas Intermediate (WTI), like the two funds above. Rather, BNO tracks the spot price of Brent Crude Oil, the crude oil benchmark for the EMEA region. Because Brent often trades at a different price from WTI, BNO can be a useful way of gaining alternative exposure. The holdings of BNO are futures contracts for Brent Crude Oil.89
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>>> Here comes $100 oil prices: BofA strategist
Yahoo Finance
by Brian Sozzi
June 21, 2021
https://finance.yahoo.com/news/here-comes-100-oil-prices-bof-a-strategist-172630376.html
The growing consensus on Wall Street is that the rally in oil prices has more room to the upside as the global economy recovers from the COVID-19 pandemic, maybe a lot more room.
Bank of America commodities strategist Francisco Blanch said in a research note on Monday he sees a case for $100 a barrel oil next year.
"First, there is plenty of pent up mobility demand after an 18 month lockdown. Second, mass transit will lag, boosting private car usage for a prolonged period of time. Third, pre-pandemic studies show more remote work could result in more miles driven, as work-from-home turns into work-from-car. On the supply side, we expect government policy pressure in the U.S. and around the world to curb capex over coming quarters to meet Paris goals. Secondly, investors have become more vocal against energy sector spending for both financial and ESG reasons. Third, judicial pressures are rising to limit carbon dioxide emissions. In short, demand is poised to bounce back and supply may not fully keep up, placing OPEC in control of the oil market in 2022," explained Blanch.
While other commodities prices such as lumber and copper have corrected lately, oil has maintained its bullish bias.
At more than $74.63 a barrel currently, brent crude oil prices are trading at levels not seen since fall 2018. The price of brent crude is up about 88% over the past year.
Recent gains in the oil patch have been fueled by indications of strong demand amid economic rebounds meeting low levels of supply.
The Energy Information Administration (EIA) reported last week that U.S. crude oil inventories fell by 7.4 million barrels for the week ended June 11. Meanwhile, the National Bureau of Statistics reported that crude oil throughput in China for May rose 4.4% versus last year to hit a record high.
Similar to BofA, Goldman Sachs is expecting firmer oil prices moving forward. Strategists at the investment bank don't rule out prices nearing $100 a barrel before year end.
"Near term our highest conviction long is oil where we still see brent [crude oil] averaging $80/bbl this third quarter with potential spikes well above $80/bbl. Global demand likely rose to 97.0 million barrels a day in recent days from 95.0 million barrels a day just a few weeks ago as the U.S. passes the baton to Europe and emerging markets, where even India is beginning to show improvements," Goldman Sachs global head of commodities research Jeffrey Currie contends.
Adds Currie, "With such robust demand growth against an almost inelastic supply curve outside of core OPEC+ (GCC + Russia), the global oil market is facing its deepest deficits since last summer at nearly 3.0 million barrels a day. With refiners quickly responding to small improvements in margins, petroleum product supplies have broadly matched this jump in end-use demand, leaving this deficit almost entirely in crude."
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>>> Fukushima Wastewater Will Be Released Into the Ocean, Japan Says
The New York Times
https://www.nytimes.com/2021/04/13/world/asia/japan-fukushima-wastewater-ocean.html
The government says the plan is the best way to dispose of water used to prevent the ruined nuclear plant’s damaged reactor cores from melting.
Japan said on Tuesday that it had decided to gradually release tons of treated wastewater from the ruined Fukushima Daiichi nuclear plant into the ocean, describing it as the best option for disposal despite fierce opposition from fishing crews at home and concern from governments abroad.
The plan to start releasing the water in two years was approved during a cabinet meeting of ministers early Tuesday.
Disposal of the wastewater has been long delayed by public opposition and by safety concerns. But the space used to store the water is expected to run out next year, and Prime Minister Yoshihide Suga said during the cabinet meeting on Tuesday that disposing of the wastewater from the plant was “a problem that cannot be avoided.”
The government will “take every measure to absolutely guarantee the safety of the treated water and address misinformation,” he said, noting that the cabinet would meet again within a week to decide on the details for carrying out the plan.
Some activists rejected the government’s assurances. Greenpeace Japan denounced the decision, saying in a statement that it “ignores human rights and international maritime law.” Kazue Suzuki, a climate and energy campaigner for the organization, said that the Japanese government had “discounted the radiation risks.”
“Rather than using the best available technology to minimize radiation hazards by storing and processing the water over the long term,” the statement added, “they have opted for the cheapest option, dumping the water into the Pacific Ocean.”
The Fukushima crisis was set off in March 2011 by a huge earthquake and tsunami that ripped through northeastern Japan and killed more than 19,000 people. The subsequent meltdown of three of the plant’s six reactors was the worst nuclear disaster since Chernobyl. Tens of thousands of people fled the area around the plant or were evacuated, in many cases never to return.
Ten years later, the cleanup is far from finished at the disabled plant, which is operated by the Tokyo Electric Power Company. To keep the three damaged reactor cores from melting, cooling water is pumped through them continuously. The water is then sent through a powerful filtration system that is able to remove all of the radioactive material except for tritium, an isotope of hydrogen that experts say is not harmful to human health in small doses.
There are now about 1.25 million tons of wastewater stored in more than 1,000 tanks at the plant site. The water continues to accumulate at a rate of about 170 tons a day, and releasing all of it is expected to take decades.
In 2019, the Japanese Ministry of Economy, Trade and Industry proposed disposing of the wastewater either by gradually releasing it into the ocean or by allowing it to evaporate. The International Atomic Energy Agency said last year that both options were “technically feasible.” Nuclear power plants around the world routinely discharge treated wastewater containing tritium into the sea.
But the Japanese government’s plan faces strong opposition from local officials and fishing crews, who say that it would add to consumer fears about the safety of Fukushima seafood. Catch levels in the area are already a small fraction of what they were before the disaster.
After meeting with Mr. Suga last week, Hiroshi Kishi, head of the National Federation of Fisheries, told reporters that his group was still opposed to the ocean release. Neighboring countries including China and South Korea have also expressed concerns.
Responding to Japan’s decision, the U.S. State Department said in a statement, “In this unique and challenging situation, Japan has weighed the options and effects, has been transparent about its decision, and appears to have adopted an approach in accordance with globally accepted nuclear safety standards.”
The International Atomic Energy Agency welcomed Japan’s announcement and said it would offer technical support. It called the plan to release the water into the sea in line with international practice.
“Today’s decision by the government of Japan is a milestone that will help pave the way for continued progress in the decommissioning of the Fukushima Daiichi nuclear power plant,” the agency said in a statement. The decommissioning process is expected to take decades.
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Hague court ruling against Shell - >>> Royal Dutch Shell was a case heard by the district court of The Hague in the Netherlands in 2021 related to efforts by multinational corporations to curtail carbon dioxide emissions. In May 2021, the Hague ordered that Royal Dutch Shell must reduce its global carbon emissions from its 2019 levels by 45% by 2030; it is considered the first major climate change litigation ruling against a corporation. <<<
https://en.wikipedia.org/wiki/Milieudefensie_et_al_v_Royal_Dutch_Shell
>>> Colonial Pipeline’s Silence Has Got U.S. Energy Traders Nervous
Bloomberg
By Sheela Tobben and Jeffrey Bair
May 9, 2021
https://www.bloomberg.com/news/articles/2021-05-09/u-s-fuel-sellers-scramble-for-alternatives-to-hacked-pipeline?srnd=premium
No update in over 24 hours from operator of key route for fuel
U.S. fuel prices may jump on concerns about possible shortages
Traders and shippers are increasingly nervous about the possibility of a shortage of fuel in the eastern U.S. almost two days after the shutdown of a major pipeline following a cyberattack.
The lack of any update from Colonial Pipeline in more than 24 hours has become a particular source of concern in the market for oil products, which includes gasoline, diesel and jet fuel, according to people familiar the matter. Electronic trading of gasoline futures is set to resume at 6 p.m. in New York on Sunday.
Traders are already seeking vessels to deliver gasoline that would have otherwise been shipped on the Colonial system, according to other market participants, who asked not to be identified because the information isn’t public. Some tankers are being secured to temporarily store gasoline in the U.S. Gulf in the event of a prolonged shutdown, they said.
Colonial, the nation’s biggest fuel pipeline, halted all operations on its system late Friday after suffering a cyberattack that affected some of its IT systems. The company has said it’s working to restore operations but has given no timeline for a restart.
The attack comes just as the nation’s energy industry is preparing to meet stronger fuel demand from summer travel and could raise more concerns about inflation as commodity prices from oil to corn rally in a post-pandemic rebound. Americans are once again commuting to the office, planning major travel for the first time and booking flights. A prolonged disruption along the pipeline system threatens to send the national average gasoline price above $3 a gallon for the first time since October 2014, a threshold that often piques concern from federal lawmakers that worry about the impact on consumers.
“It’s an all-hands-on-deck effort right now,” U.S. Commerce Secretary Gina Raimondo said of federal government actions as the shutdown drags on. “We are working closely with the company, state and local officials to make sure that they get back up to normal operations as quickly as possible and there aren’t disruptions in supply.”
Colonial is just the latest example of critical infrastructure being targeted by ransomware. Hackers are increasingly attempting to infiltrate essential services such as electric grids and hospitals. The escalating threats prompted the White House to respond last month with a plan to increase security at utilities and their suppliers. Pipelines are a specific concern because of the central role they play in the U.S. economy.
Colonial is a critical source of gasoline, diesel and jet fuel to the East Coast from the nation’s refining belt along the U.S. Gulf Coast. It has the capacity to send about 2.5 million barrels a day on its system from Houston as far as North Carolina, and another 900,000 barrels a day to New York.
The attack appeared to use a ransomware group called DarkSide, according to Allan Liska, senior threat analyst at cybersecurity firm Recorded Future. The cybersecurity firm FireEye Inc. said its Mandiant incident response division was assisting with the investigation.
Ransomware cases involve hackers seeding networks with malicious software that encrypts the data and leaves the machines locked until the victims pay the extortion fee. This would be the biggest attack of its kind on a U.S. fuel pipeline.
The national gasoline average stood at $2.96 a gallon Friday, according to auto club AAA. With gasoline inventories ample, the pump price wasn’t expected to tick much higher until Memorial Day at the end of May, which is traditionally viewed as the start of the U.S. summer driving season. If the pipeline doesn’t restart soon it will accelerate the move higher.
“I think we’re at strong odds for it by Memorial Day given current trends,” said Patrick De Haan, head of petroleum analysis at Gas Buddy.
A key concern at present is meeting product demand in the U.S. Southeast, which is especially dependent on the Colonial system, people familiar with the situation said. Drivers in landlocked and car-dependent Atlanta may be the first to feel the pinch at the pump.
“Atlanta will be one of the earlier sore spots, along with eastern Tennessee, and perhaps the Carolinas,” De Haan said.
The Northeast can secure gasoline shipments from Europe but it will come at an increasing cost the longer the pipeline stays shut.
“The longer it lasts, the more bullish it will be for refined products on the East Coast,” said Warren Patterson, head of commodities strategy at ING Groep NV. “This will likely also drag European product prices higher, as we see more waterborne cargoes needing to go into the U.S. East Coast to meet the shortfall.”
Airports on the East Coast, which continue to have some of the steepest drops in air traffic due to the pandemic, have been operating smoothly Sunday, according to the flight-tracking website FlightAware.com.
MORE ON THE COLONIAL PIPELINE SHUTDOWN
Colonial Hackers Stole Data Thursday Ahead of Shutdown
Restarting U.S. Pipeline Hit by Cyberattack May Not Be Easy
Cyber Warfare Is the New Oil Embargo: Liam Denning
Marathon Petroleum: Colonial Issue Has No Impact on Commitments
Kinder PPL Pipe Working to Allow Extra Supply on Colonial Snag
In the meantime, fuel producers including Marathon Petroleum Corp. are weighing alternatives for how to ship their products to the Northeast.
One potential route is the Kinder Morgan-operated Plantation Pipeline, even though it only extends as far north Washington D.C. and has a capacity of 720,000 barrels a day, far short of Colonial’s. Kinder said Sunday it’s working with customers to accommodate additional barrels during Colonial’s outage, and that Plantation is deferring where possible any non-essential maintenance that might otherwise reduce flow rates.
Inventories offer minimal cover, ClearView Energy Partners said in a research note. Tankers leaving Rotterdam could take up to 14 days to make the trip to the New York Harbor. The Midwest could theoretically send some of its supplies to the East Coast via rail and barge, but the region’s inventories are tighter than in previous years, ClearView said.
“The Colonial outage comes at a critical juncture for the recovering U.S. economy: the start of the summer driving season,” ClearView said. “We therefore think lawmakers could begin a ‘blame game’ immediately, and a sustained disruption that leads to a significant pump price spike could increase prospects of domestic policy interventions.”
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>>> Colonial Is Just the Latest Energy Asset Hit by Cyber-Attack
Bloomberg
By Lynn Doan
Updated on May 9, 2021
https://www.bloomberg.com/news/articles/2021-05-08/colonial-is-just-the-latest-energy-asset-hit-by-cyberattacks?srnd=premium
Cyber-Attack Shuts Colonial Pipeline
A cyber-attack has never taken down a U.S. fuel pipeline quite as big as the Colonial Pipeline. It’s the nation’s largest gasoline, diesel and jet fuel system and a critical source of fuel supply for the U.S. Northeast.
But this isn’t the first time hackers have hit energy assets in America and beyond in recent years, at times disrupting services and upending operations.
“The ransomware attack on the Colonial Pipeline in the U.S. shows the critical importance of cyber resilience in efforts to ensure secure energy supplies,” Fatih Birol, the head of the International Energy Agency, said in a tweet. “This is becoming ever more urgent as the role of digital technologies in our energy systems increases.”
Two-Day Gas Outage
In February 2020, the U.S. Department of Homeland Security issued an alert about a ransomware attack that brought down a U.S. natural gas compressor facility for two days.
The agency didn’t say which facility was targeted, when the attack occurred or who was behind it. But it did offer some details: Hackers sent emails with a malicious link, known as a phishing attack, to gain control of the facility’s information technology system.
It appeared likely that the attacker explored the facility’s network to “identify critical assets” before executing the ransomware attack, Nathan Brubaker, a senior manager at the cybersecurity firm FireEye Inc., said at the time. This tactic, which has become increasingly popular among hackers, makes it “possible for the attacker to disable security processes that would normally be enough to detect known ransomware indicators,” he said.
Pemex Systems Down
Mexico’s oil giant Petroleos Mexicanos reported a cyber-attack in November 2019 that crippled its computer systems. The company’s communication systems were affected for weeks afterwards.
For some employees, Internet access was limited, some computer files weren’t accessible and they had difficulty receiving external emails, people in Pemex’s finance, legal and refining departments said at the time. The hacker behind the attack tried to squeeze almost $5 million out of the company. Pemex at the time refused to pay the ransom.
Gas Communications Targeted
In April 2018, several U.S. natural gas pipeline operators including Energy Transfer Partners LP and TransCanada Corp. reported that a third-party electronic communications system had been hit with a cyber-attack. Five of the companies confirmed service disruptions from the hacking.
Though the cyber-attack didn’t disrupt the supply of gas to U.S. homes and businesses, it showed how even a minor attack can have ripple effects. The attack forced utilities to warn of widespread billing delays and made it difficult for analysts and traders to predict a key government report on gas stockpiles.
Ukraine Grid
In December 2016, hackers took down almost a quarter of Ukraine’s power grid. Officials blamed Russians at the time for tampering with the utilities’ software and then jamming the power companies’ phone lines to keep customers from alerting anyone.
The hack knocked out at least 30 of the country’s 135 power substations for about six hours. Cybersecurity firms working to trace its origins say the attack occurred in two stages. First, hackers used malware to direct utilities’ industrial control computers to disconnect the substations. Then they inserted a wiper virus that made the computers inoperable.
Saudi Aramco
In 2012, Saudi Arabia blamed unidentified people based outside the kingdom for a cyber-attack against state-owned Saudi Arabian Oil Co. that aimed to disrupt production from the world’s largest exporter of crude.
More than 30,000 computers were compromised or affected by a so-called “spear-phishing” attack, raising concerns about the threat hackers may pose to output at the company also known as Saudi Aramco. A spokesman for the Interior Ministry, declined at the time to identify any of the “several foreign countries” from which the attack originated.
Energy companies from electric utilities, to power-grid operators to oil and gas pipeline operators have warned that cyberattacks are becoming more and more prevalent. The largest U.S. power grid operator, PJM Interconnection LLC, has warned regulators that it’s facing increasing attacks. Last May, the U.K.’s grid data system was hacked, although electricity supplies weren’t affected. And in March, an attack against Europe’s association of grid operators, ENTSO-E, affected its internal office systems.
Iran Nuclear Facility Hit
Iran said its largest uranium enrichment facility was a target of “nuclear terrorism” last month. A senior official said a blackout at the Natanz plant, home to thousands of gas centrifuges, was an attempt to thwart both Iran’s atomic progress and ongoing nuclear talks in Vienna.
In the past, Iran has largely blamed Israel for attacks on its nuclear infrastructure.
It was the second suspicious incident at Natanz in less than a year. Last July, an explosion and fire caused significant damage to an outbuilding that contained an assembly line for centrifuge machines, officials said at the time, blaming sabotage and foreign interference.
In 2010, Natanz was the target of a major cyber attack using the Stuxnet computer virus.
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(Stuxnet - a cyberweapon built jointly by the United States and Israel)
https://en.wikipedia.org/wiki/Stuxnet
>>> Top U.S. pipeline operator shuts major fuel line after cyber attack
Reuters
May 8, 2021
By Stephanie Kelly
https://finance.yahoo.com/news/colonial-pipeline-halts-pipeline-operations-045443078.html
NEW YORK (Reuters) -Top U.S. fuel pipeline operator Colonial Pipeline has shut its entire network after a cyber attack, the company said in a statement on Friday.
Colonial's network supplies fuel from U.S refiners on the Gulf Coast to the populous eastern and southern United States. The company transports 2.5 million barrels per day of gasoline, diesel, jet fuel and other refined products through 5,500 miles (8,850 km) of pipelines.
Colonial Pipeline says it transports 45% of East Coast fuel supply.
The company shut down systems to contain the threat after learning of the attack on Friday, Colonial said in the statement. That action has temporarily halted operations and affected some of its IT systems, the company said.
Colonial has engaged a third-party cybersecurity firm to launch an investigation and contacted law enforcement and other federal agencies, it said.
Colonial did not give further details or say for how long its pipelines would be shut.
"The fact that this attack compromised systems that control pipeline infrastructure indicates that either the attack was extremely sophisticated or the systems were not well secured," said Mike Chapple, a professor at the University of Notre Dame's Mendoza College of Business and a former computer scientist with the U.S. National Security Agency.
"This pipeline shutdown sends the message that core elements of our national infrastructure continue to be vulnerable to cyberattack," he added.
Reuters reported earlier on Friday that Colonial had shut its main gasoline and distillate lines.
During the trading session on Friday, Gulf Coast cash prices for gasoline and diesel edged lower.
Both gasoline and diesel futures on the New York Mercantile Exchange rose more than crude prices during the day. Gasoline futures gained 0.6% to settle at $2.1269 a gallon, while diesel futures rose 1.1% to settle at $2.0106 a gallon.
Longer-term price effects will depend on the amount of time that the lines are shut. If barrels are not able to make it onto the lines, Gulf Coast prices could weaken further, while benchmark prices in New York Harbor could rise, one market participant said. Rising benchmark prices typically lead rises in prices at the pump.
Colonial shut down its gasoline and distillate lines during Hurricane Harvey, which hit the Gulf Coast in 2017. That contributed to tight supplies and gasoline price rises in the United States after the hurricane forced many Gulf refineries to shut down. Gasoline prices in the Gulf rose to a five-year high, while diesel prices rose to around a four-year high.
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Pipelines - >>> These High-Yield Stocks Could Keep Paying Dividends for Decades
These companies should continue producing a gusher of cash even as they switch fuel sources.
Motley Fool
Matthew DiLallo
Apr 11, 2021
https://www.fool.com/investing/2021/04/11/these-high-yield-stocks-could-keep-paying-dividend/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article
The energy market is in the midst of a major transition. The global economy is shifting its primary power source, moving away from fossil fuels toward renewable energy. It's a massive undertaking that will take decades and trillions of dollars in new investment.
Because of that long time horizon, the industry isn't going to abandon the current infrastructure supporting fossil fuels anytime soon. Instead, it could become more valuable in the interim as investment shifts while potentially playing a prominent role in supporting the fuels of the future. That leads Canadian energy infrastructure giants Enbridge (NYSE:ENB) and TC Energy (NYSE:TRP) to believe that they can continue generating lots of cash and paying high dividend yields (both currently yield more than 5%) for decades to come.
The green enabler
Enbridge and TC Energy's CEOs believe that their companies can play a vital role in the energy transition. They see their existing infrastructure supporting the global economy during the interim phase by continuing to supply it with reliable energy. That's crucial because one of the drawbacks of renewable energy is intermittency since the sun isn't always shining and the wind doesn't always blow. While energy storage will eventually help bridge that gap, it's not widely available because of higher costs.
Enbridge CEO Al Monaco called out the importance of natural gas in the energy transition. At a recent virtual energy conference, he stated that gas is a "great enabler" for renewable energy because it's a reliable source of cleaner power that can backstop renewables. He noted that it's "low-cost, abundant, it's important in reducing utilization of coal, but it's equally important in fostering renewables. You've got to be able to create baseload capability, and it addresses the enormous intermittency challenges."
That outlook leads TC Energy CEO Francois Poirier, who spoke at that same conference, to believe that "natural gas and liquids will continue to play a prominent role in the energy economy for decades to come." He believes that the industry's existing infrastructure will remain "useful for quite a long time and generate a tremendous amount of cash flow that we will be able to deploy into the energy transition." In addition to deploying cash to support the energy transition, TC Energy and other energy infrastructure companies should be able to keep paying attractive dividends.
Valuable assets both now and in the future
Enbridge and TC Energy believe that their existing infrastructure is becoming increasingly valuable because of the energy transition. On one hand, it's getting harder to build new pipelines because of increasing pushback from environmentalists and governments. It's also proving to be challenging to utilize existing infrastructure. Enbridge has struggled to complete its Line 3 replacement project for years while also facing a potential shutdown of its Line 5 pipeline. Given these obstacles, Enbridge believes that existing pipeline values will rise since the industry won't build many more new ones in the future even as energy demand keeps growing.
Meanwhile, Enbridge and TC Energy see their existing infrastructure playing a vital role in transporting and storing the fuels of the future. Both companies believe they can repurpose a large portion of their existing assets to help transport and store low-carbon fuels in the future.
Enbridge is already working on several low carbon projects. It operates two renewable natural gas plants in Ontario and has more in the works. It also operates North America's first utility-scale power-to-gas facility that produces hydrogen and has a pilot project under way to blend hydrogen with natural gas to utilize in its transmission and distribution systems. Finally, it's evaluating potential ways to leverage its liquids pipeline and storage capabilities for carbon capture and storage. Enbridge is also investing in renewable energy projects, including several offshore wind farms in Europe.
TC Energy sees several ways it can leverage its existing assets to support the energy transition. It sees opportunities to expand its gas network to support the increased usage of cleaner natural gas in the near term. Meanwhile, in the medium term, it can support coal-to-gas switching in the Alberta power sector and increase the availability of LNG exports on both Canadian coasts. Finally, longer term, TC Energy sees opportunities to convert existing natural gas compression to electric compression and the potential to transport alternative fuels like natural gas and hydrogen across its existing network. The company is also investing billions of dollars in extending the life of its emissions-free nuclear power plant in Ontario.
The power to keep paying dividends
Enbridge and TC Energy believe that their integrated North American infrastructure systems will remain essential in fueling the global economy. These see their existing infrastructure becoming increasingly more valuable because of the challenges of building new assets to support fossil fuel transportation and storage. On top of that, they believe they can eventually repurpose a large portion of those assets to transport and store the fuels of the future, giving them a second life. That should enable them to continue generating a gusher of cash flow. That would give them the funds to expand their operations to provide adjacent services such as producing, transporting, and storing renewable energy and low-carbon fuels and pay attractive dividends.
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>>> Exxon Removed From the Dow After Nearly 100 Years: What It Means for Investors
Is there reason to panic?
Motley Fool
Daniel Foelber
Aug 28, 2020
https://www.fool.com/investing/2020/08/28/exxon-removed-from-the-dow-after-nearly-100-years/
The silver shimmer of Silicon Valley is replacing the oil slicks that once gilded the Dow Jones Industrial Average (DJIA) in black gold. That silver shimmer is Salesforce.com, and it's replacing the longest-tenured DJIA component: ExxonMobil (NYSE:XOM), effective Aug. 31.
Exxon's removal adds another red flag to a series of headwinds that have pushed its shares down over 40% for the year. Is there more pain ahead, or is there reason to believe Exxon can turn it around?
The fall of ExxonMobil
Going back a few years further to 2007, Exxon was the largest company by market capitalization. Limited supply and rising demand led to high oil prices that pole-vaulted revenues and profits to new heights. As the oil industry's leader, Exxon became a staple in market indexes and a key holding for investors young and old.
During the height of the Great Recession, oil endured immense volatility, with the monthly average for WTI crude reaching as high as $133.88 per barrel in June 2008 and then as low as $41.12 that December. After a brief setback, oil prices took to the skies, averaging over $90 a barrel for the five year period between 2010 to 2014.
After the oil crash of 2015, prices never recovered, and neither have Exxon's earnings.
Its stock has lost value over the past 20 years compared to an increase of over 130% for the S&P 500.
Where Exxon stands today
Exxon's stock has fallen for more than the simple fact that oil is out of favor. In cold hard numbers, Exxon simply isn't making as much as it was in the golden period between 2005 and the beginning of 2015. On top of that, its debt burden is ballooning and its free cash flow (FCF) has gone negative as a result of the COVID-19 pandemic's impact on oil and gas demand and prices.
Lower FCF means Exxon is now supporting its dividend with debt, which is unsustainable over the long term.
Where Exxon is going
Exxon would argue that its investment thesis remains strong. Oil still dominates the transportation industry and natural gas is the United States' leading fuel source for power generation.
Exxon points to developing countries as a primary growth market for oil and gas, pointing to fossil fuels' competitiveness with renewables in emerging markets. Before the onset of the pandemic, Exxon expected its earnings could double by 2025 in a moderate pricing environment.
What Exxon needs is a stable oil price where it can reach the margins needed to pay a growing dividend and achieve its long term production goals. For that to happen, Exxon would like for oil demand to start outpacing supply. However, that's partially dependent on the energy mix of developed and developing economies as well as the investment appetite of its key competitors. Given recent decisions by rival majors Royal Dutch Shell, BP, and Equinor, there's reason to believe that Exxon's competitors would rather be renewable energy stocks than compete in oil and gas over the long term.
Can Exxon reenter the DJIA?
Removal from the DJIA isn't necessarily a perpetual banishment. On August 31, Honeywell International (NYSE:HON), the third-largest U.S. industrial stock by market capitalization, will re-enter the Dow after a 12-year hiatus.
In Honeywell's case, the reentry is well deserved. The company has one of the best balance sheets in the industry and has outperformed the broader markets since its departure. Its future looks bright as it grows market share in its core business and expands further into operational technology (OT) and the industrial internet of things (IIoT).
In Exxon's case, S&P Global made it clear that it was reducing redundancies in the index and adding new companies to better reflect the economy. That came in the form of removing Exxon but keeping Chevron. Therefore, a comeback for Exxon could mean that it either has to outright outperform Chevron, post years of stable earnings growth and reduce its debt, oil and gas as a whole regains favor, or some combination of the three.
Cause for concern
Given the leaps and bounds that it took for Honeywell to get back in the index, the road to reentry won't be easy for Exxon. For now, the stock's dividend obligation is drowning it in even more debt. The upside for Exxon doesn't look great, but given that its stock has fallen substantially, it looks like a reasonable hold at this time.
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>>> What Berkshire Hathaway’s Big Gas Pipeline Buy Tells You
Forbes
by Erik Sherman
July
https://www.forbes.com/sites/eriksherman/2020/07/06/berkshire-hathaway-dominion-energy-natural-gas-pipeline/#329345d7481c
Some big news on the investing front, as the New York Times’ Dealbook newsletter put it: “Warren Buffett Is Back in the Game”. After sitting back, Buffett and his partner at Berkshire Hathaway, Charlie Munger, did their first big deal in a while.
Berkshire Hathaway purchased a gas pipeline network from Dominion Energy for $9.7 billion. The amount might at first seem crazy given current news, but it’s a strategically smart move for the future.
Dominion and Duke Energy announced that they would cancel the Atlantic Coast Pipeline. The construction was supposed to expand a pipeline network hundreds of feet under the Appalachian Trail. Environmental opponents, who point to the regular occurrence of pipeline accidents and their consequences, according to federal government data, tried to block the project in court.
Dominion and Duke managed to move decisively past one legal challenge that went to the Supreme Court, but then faced “new and serious challenges” to a necessary permit. With costs having swelled from the original $4.5 billion to $5 billion estimate, reaching $8 billion, the two companies gave up.
Although the companies specifically referred to a decision out of the United States District Court for the District of Montana and a chilled reception from the Court of Appeals for the Ninth Circuit, they could also been thinking of the shutdown of the Dakota Access Oil Pipeline. Native American tribes reportedly prevailed in court when the pipeline was ordered to shut down by August 5 for a new environmental review that will likely take more than a year.
The more projects get drawn out, the more expensive they become and the less of a chance they can return sufficient profits fast enough to satisfy investors.
Between spiraling costs and an apparent growing skepticism on the part of courts, it would seem clear why Dominion might want to exit this part of the business. But why would Buffett and Munger decide to get involved?
First stop is to check Dominion Energy’s most recent annual report. A combination of “about 10,400 miles of natural gas transmission, gathering, and storage pipelines; and a liquefied natural gas terminal” led to about 24% contribution to the company’s 2019 operating earnings of $3.4 billion, or $800 million.
The $9.7 billion deal includes an assumption of $5.7 billion in existing debt, so the value of the actual pipeline network is about $4 billion. Even at nearly $10 billion, it puts only a small dent into the $137 billion in cash that Berkshire Hathaway had, according to data and analysis from Morningstar. That firm projects about $1 billion in ongoing annual net income.
Then there is also expansion of Berkshire Hathaway’s hold on the transmission of natural gas. The acquisition should increase the portion of national capacity to 18%, according to Dealbook.
The emphasis on transit and not extraction or sale is critical. Markets have seen wildly swinging prices of energy products. Gas never followed oil into negative territory, but last month saw at least a ten-year low.
That’s bad for producers, good for buyers, and fairly immaterial for those that operate distribution. Gas will continue to run electrical generation and both heating and cooling systems. A post-pandemic economic recovery will only increase demand and prices.
Today’s market has weighed in on who seems to have gotten the best of the deal. As of about 3:30 p.m. eastern, Dominion shares are down about 10.5% while Berkshire was up 2.6%.
As true for Buffett and Munger strategies, the full value will become apparent in the long run. In this case, it’s a reminder for investors to consider which companies in a market are absolutely necessary while remaining disconnected from the whims of commodity pricing. A pipeline business is like an electrical grid, gaining its own profits for a service that can’t easily be circumvented.
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>>> Exxon’s getting booted from the Dow Jones Industrial Average may be a blessing in disguise for its investors
MarketWatch
Aug. 30, 2020
By Mark Hulbert
https://www.marketwatch.com/story/exxon-getting-booted-from-the-dow-jones-industrial-average-may-be-a-blessing-in-disguise-for-its-investors-2020-08-25?siteid=yhoof2&yptr=yahoo
Stocks deleted from an index often proceed to beat the additions
CHAPEL HILL, N.C. — Exxon Mobil’s fall from grace has been stunning.
But maybe, just maybe, being kicked out of the Dow Jones Industrial Average DJIA, -0.56% will prove to be a blessing in disguise.
The company XOM, -0.07% has been part of this bluest of blue-chip averages for 92 years. It joined in October 1928, when it was called Standard Oil of New Jersey. For decades the company was one of the 10 most valuable publicly traded companies, and for six straight years — from 2006 through 2011 — it was at the top of the market-cap rankings.
The primary reason S&P Dow Jones Indices gave for removing Exxon Mobil is that the index’s sector weightings were slated to otherwise become particularly skewed when Apple’s shares split four-for-one at the end of August. Since the DJIA is a price-weighted index, this would have reduced Apple’s weight in the index by 75%. To at least partially restore the information-technology sector’s weight, Exxon Mobil was replaced by Salesforce.com CRM, -3.89%, a company that develops enterprise cloud-computing solutions with a focus on customer relationship management.
S&P Dow Jones Indices also is replacing Pfizer PFE, -0.11% with Amgen AMGN, +0.19% and Raytheon Technologies RTX, +0.50% with Honeywell International HON, +0.23%.
It nevertheless can’t have escaped S&P Dow Jones Indices’ notice that Exxon Mobil’s stock has been suffering for the better part of a decade. Its shares traded for more than $104 in June 2014, versus $42 today. Even taking dividends into account, it has lagged the Dow by an annualized margin of plus 11% to minus 10.3%, according to FactSet — a spread of 21.3 annualized percentage points.
To appreciate why being booted out of the Dow might just turn out to be a blessing, consider what happened to IBM IBM, -1.72% in 1939. That was when it was removed from the DJIA, and it didn’t make it back in until 1979.
Over those 40 years it outperformed the market by a large margin.
It outperformed by so much, in fact, that Norman Fosback, the former head of the Institute for Econometric Research, calculated that the DJIA would today be more than twice as high had IBM not been kept out of the Dow for those four decades. To put that another way: But for IBM’s being out of the Dow for those 40 years, the Dow today would be approaching 60,000.
This is just one example, of course, but more systematic studies of index deletions have also found that stocks deleted from an index tend to do more than just hold their own. One such study conducted by Wharton University finance professor Jeremy Siegel measured the impact of all additions and deletions to the S&P 500 since its creation in the 1950s. He found that the deletions, on average, outperformed the additions.
Another study, by Jie Cai of Drexel University and Todd Houge of the University of Iowa, focused on the Russell 2000 RUT, -0.60% between 1979 and 2004. The pair found that a portfolio of stocks deleted from the index outperformed a second portfolio of the added stocks — and not by just a little bit, either, but by nine annualized percentage points.
To be sure, getting kicked out of a major market benchmark isn’t a guarantee that a stock will outperform the market. General Electric GE, +1.58%, for example, has produced an annualized loss of 21.4% since it was removed from the Dow in June 2018, in contrast to a 9.1% annualized gain for the Dow itself.
But the overall pattern is clear.
Why being part of the DJIA might not be all that it’s cracked up to be
An academic study from earlier this summer provides several clues as to why being part of a major market average doesn’t give companies much more than bragging rights. The study, by Rene Stulz of Ohio State, Benjamin Bennett of Tulane and Zexi Wang of Lancaster University, found that companies typically change their behavior after becoming part of the S&P 500 SPX, -0.81% — the blue-chip benchmark favored by money managers — for reasons having nothing to do with economic fundamentals. On average in recent years, in fact, companies added to the index experienced a decline in return on assets.
It should also be pointed out that an index of just 30 stocks is hardly representative of the overall market. With such a small number, the decision makers at S&P Dow Jones Indices are given excessive power to define the market. Why, for example, did they choose Salesforce instead of Facebook FB, -2.88%, as Barron’s columnist Andrew Bary is already asking? They no doubt had good reasons, but — as IBM’s example between 1939 and 1979 reminds us — this one decision could very well have a huge long-term impact.
If investors focused instead on the combined market capitalizations of all publicly traded stocks — which, by definition, is the entire stock market — then we wouldn’t find ourselves in a situation in which a simple stock split can have such momentous consequences.
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>>> Natural Gas Is the Past. Natural Gas Is Also the Future.
Pipelines and storage have become unpredictable, but fuel delivery still provides a clear path to returns.
Bloomberg
By Nathaniel Bullard
July 9, 2020
https://www.bloomberg.com/news/articles/2020-07-09/natural-gas-is-the-past-natural-gas-is-also-the-future
On Sunday, Virginia-based utility Dominion Energy Inc announced plans to sell almost all of its natural gas pipeline and storage assets to Warren Buffett’s Berkshire Hathaway Inc for $4 billion. At the same time, the Virginia-based utility said that it’s killing the Atlantic Coast gas pipeline despite a Supreme Court ruling that would grant it passage underneath the Appalachian Trail.
There’s a lot going on here, and not just for the second-biggest U.S. power company by market value and the Oracle of Omaha. Natural gas, the “bridge fuel” to decarbonize the U.S. electricity system, is under pressure. But it’s not yet a bridge to nowhere.
There are a number of factors motivating Dominion’s strategy. The first is that permitting for gas infrastructure is “increasingly litigious, uncertain, and costly,” Chief Executive Officer Thomas Farrell said during a call with analysts to discuss its plans. The second factor is that the economics of operating a midstream pipeline—even one that has had no trouble attracting customers—aren’t great, Farrell admitted.
That doesn’t mean the company is getting out of gas entirely. It still burns gas in power plants and will for some time. It also still owns distribution networks, which deliver gas to customers. That’s the infrastructure Dominion sees carrying it into the future.
The whole thing is part of a strategy to generate more of its earnings from assets with a return on equity that’s determined by state regulators. That may sound unexciting, but that’s part of the point. It’s predictable, and it gives Dominion a clear story to tell capital markets: for every dollar we invest in regulated assets, we’ll receive X amount back, guaranteed.
There’s a slide in Dominion’s analyst presentation that illustrates this idea. It shows the company’s past acquisitions of mostly-regulated companies such as gas distributor Questar and electric and gas utility Scana leading directly to Dominion’s decision to sell its midstream gas interests and other assets. The result, it hopes, is that 90% of its operating earnings will come from state-regulated operations.
Dominion presentation
There’s a financial strategy at work here too, one that I’ve written about before. It has three parts, the first of which is that returns on equity—both what utilities ask regulators for and what they’re awarded—have been falling for decades. Not only that, the spread between asked and awarded is also fairly tight, and definitely tighter than it was in the mid-2000s and in the mid-1990s. That’s good for messaging: it means you can say that what you want is pretty close to what regulators think you deserve.
Don't Mind This Gap
U.S. electric utility requested and awarded return on equity, four-quarter trailing average
The second part of this strategy comes from the long-term decline in the risk-free rate of return on investments, as represented by the U.S. 10-year Treasury yield. We can think of 10-year Treasuries as a utility’s opportunity cost for not investing in regulated businesses; the spread between a utility’s awarded ROE and the 10-year note is effectively the risk-adjusted return on equity for regulated utilities. That spread is at a near-record high, north of 800 basis points, and it’s more than double the risk-adjusted return of 25 years ago.
This Trend Is a Power Utility's Friend
Spread between U.S. electric utility awarded return on equity and 10-year Treasury yield
The third part of this strategy is that Dominion can match a clear growth path to this return on equity. Virginia’s power sector aims to be 100% clean energy by 2045, which requires building at least 16 gigawatts of wind and solar generation assets. Dominion is allowed, by Virginia law, to own up to 65% of those assets. Those it owns will become part of the utility rate base, the assets on which it earns its ROE. It’s not quite risk-free, but it’s not far off.
The same is happening all over the country, meaning that gas networks on the other coast face pressure, too. In California a number of municipalities have mandated all-electric new construction—that is, gas won’t be connected even for cooking purposes.
In the past three weeks, two of the state’s big utilities, Pacific Gas & Electric and Southern California Edison, have written to the California Energy Commission in support of a statewide all-electric buildings mandate. SCE’s letter says it wants the Commission to move “as quickly as possible” so that utilities might “avoid costly spending on natural gas infrastructure that may become stranded before 2045.” Implicit in that statement: not every gas infrastructure operator can count on Warren Buffett or his successors to buy their assets when the time comes.
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>>>The Problematic Future of Gas Pipelines
Bloomberg
By Emily Chasan
July 8, 2020
https://www.bloomberg.com/news/articles/2020-07-08/a-problematic-future-lies-ahead-for-gas-pipelines-green-insight
It was a tough week for the North American fossil fuel industry. Over just a few days, the Atlantic Coast natural gas pipeline was canceled by developers, the Dakota Access oil pipeline was shut down by a federal judge and the Trump administration lost its Supreme Court bid to resuscitate the Keystone XL oil pipeline (though the justices did make it easier to build other pipelines).
These three strikes, though potentially reversible, nevertheless illustrate another reason why pipelines are pretty risky investments right now—especially those that carry natural gas. Already, the pandemic-induced drop in demand, its dangerous role in global warming and questions about whether it truly is a competitive transitional fuel have many wondering whether gas is headed the way of coal.
Less Gas
“The alarming rate at which pipelines are leaking planet-warming methane is already catching the eye of regulators,” said John Hoeppner, head of U.S. stewardship and sustainable investments at Legal & General Investment Management America. As the energy transition to renewables accelerates, these issues could continue to raise costs for gas pipeline operators, especially if the industry can’t control emissions, he said.
Still, this is far from the end of natural gas. After all, Warren Buffett is betting on the industry with his $9.7 billion deal for the assets of one pipeline. The fuel remains crucial to the prospect of developing cleaner energy from hydrogen, and is an easy way to quickly replace coal. The dirtiest of fossil fuels, incidentally, faces even tougher viability questions, with about 73% of coal plants predicted to be uncompetitive with renewables by as soon as 2025, according to Carbon Tracker.
pipeline pipe gas oil
Even if one, some or all of this week’s pipeline defeats are temporary, the losses (and the rising local and environmental opposition behind them) may scare off investors. Building expensive natural gas infrastructure may not make sense when there’s a reasonable chance pipeline operators will face significant public pushback. And making matters worse, the taxpayer subsidies the industry has relied on for years are starting to shrink.
“Tax and fiscal subsidies really shift the investment landscape,” said Bronwen Tucker, a research analyst at nonprofit Oil Change International, which works to track the true price of fossil fuels. The group found that, since the Paris Agreement was signed in 2015, G-20 countries have still been forking over at least $77 billion in public financing annually to the oil, gas and coal industries. That’s more than three times the amount of subsidies those countries offered to clean energy during the same, post-Paris period. Still, the International Energy Agency said last month that fossil fuel subsidies are starting to decline, with recent coronavirus-triggered price drops presenting an opportunity for nations to disengage. Subsidy declines are not necessarily fast enough to stop global warming, but they may be enough to do more damage to an already reeling fossil fuel industry.
Public Spending
For now, however, the pandemic’s overall effect has been to prop up energy companies and their fellow travelers.
“Some countries are putting in good support for renewables and green transitions as government stimulus comes in, but overall we’re still seeing more support for fossil fuels than renewables,” Tucker said. “We know the fossil fuel sector is in decline and is going to have lots of ups and downs before being fully replaced by renewables.”
Lagging Behind
Emerging markets are the next big frontier in ESG. Right now, environmental, social and governance investing only accounts for 0.2% of total assets under management in South Korea, 0.6% in Brazil and 1.4% in China.
Sunrun, the largest U.S. residential-solar company, surged to a record high share price after its $1.46 billion deal to buy rival Vivint Solar.
Pension funds are looking to improve their tracking of efforts to achieve United Nations sustainable development goals.
A rare high-coupon green “coco” bond debuted in Europe.
Japan, which has the highest per capita plastic consumption rate in the world, just required all retailers to start charging for plastic bags. The government aims to double its material recycling rate by 2030, requiring a five-fold expansion of plastic recycling capability.
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>>> U.S. Utility Giant Kills Pipeline, Sells Assets to Berkshire
Bloomberg
By Rachel Adams-Heard, Katherine Chiglinsky, and Gerson Freitas Jr
July 5, 2020
https://www.bloomberg.com/news/articles/2020-07-05/berkshire-hathaway-buys-dominion-gas-assets-in-9-7-billion-deal?srnd=premium
Dominion, Duke Energy cancel planned Atlantic Coast project
Dominion will retain interest in LNG terminal in Maryland
Energy’s natural gas transmission and storage business in a deal with an enterprise value of $9.7 billion.
One of the largest utilities in America is starting to turn its back on natural gas.
Dominion Energy Inc., the second-biggest U.S. power company by market value, on Sunday said it’s selling substantially all of its gas pipeline and storage assets to Berkshire Hathaway Inc. for $4 billion. In a separate statement, Dominion and its partner Duke Energy Corp. said they’re killing the controversial Atlantic Coast gas pipeline along the U.S. East Coast, citing ongoing delays and “cost uncertainty.”
The moves come as utilities face increasing pressure from local governments, investors and environmentalists to quit the fossil fuel. While long heralded as a cleaner alternative to coal and heating oil, gas is now getting shoved aside in the fight against climate change as states including New York, California and Dominion’s home base of Virgina have all passed laws for utilities to be carbon free within decades.
“This transaction represents another significant step in our evolution as a company,” Dominion Chief Executive Officer Thomas Farrell said in a statement, citing the company’s goal of reaching net-zero emissions by 2050.
The push away from gas positions Dominion as more of a pure-play state-regulated utility at a time when oil and pipeline operators have lagged the broader market. In the last year, an index of pipeline companies has fallen 36%, while the S&P 500 Index has gained 4.7%.
Read More: Wall Street Falls Out of Love With Once-Coveted Fossil Fuel
To be clear, Richmond, Virginia-based Dominion, which operates utilities in eight states, isn’t walking away from fossil fuel altogether. It will still sell gas to customers for heating and cooking. It’s retaining an interest in its Cove Point liquefied natural gas export terminal in Maryland. And 40% of the electricity the company generates comes from plants fueled by gas, coal and oil, according to its website.
“They’ll still be burning lots of gas for decades ahead in the core utility business,” Bloomberg Intelligence analyst Kit Konolige said in an email.
But pressure is mounting. The law Virginia enacted in April requires Dominion’s utility in the state to be to be carbon-free by 2045.
Atlantic Coast is the third U.S. gas pipeline project to scrapped or shelved this year. Williams Cos. opted not to reapply for a permit in May for a $1 billion pipeline extension after regulators in New York blocked it. And in February the Oklahoma-based company canceled plans for a pipeline that would have run from Appalachia to New York.
While the Atlantic Coast pipeline project won a key victory last month when the U.S. Supreme Court sided against environmentalists and upheld a crucial permit, the project still faced formidable opposition and costs. “That would indicate that that wasn’t a strategic decision as much it was as a practical decision,” said Paul Patterson, an analyst at Glenrock Associates LLC.
Deal with Berkshire
Dominion’s deal with Berkshire calls for the giant conglomerate to assume $5.7 billion in debt. The utility will use $3 billion of the proceeds to buy back shares. Dominion also cut its projected 2021 dividend payment to around $2.50 a share, reflecting the assets being divested and a new payout ratio that aligns it better with industry peers.
The transaction is expected to close during the fourth quarter. It will require the approval of federal agencies including the U.S. Department of Energy.
Berkshire is amassing more than 7,700 miles (12,400 kilometers) of natural gas storage and transmission pipelines and about 900 billion cubic feet of gas storage in the deal with Dominion. Warren Buffett’s conglomerate will also acquire 25% of Cove Point.With this transaction, Buffett has ended his period of relative silence on the acquisition front since the pandemic.
The Dominion deal is set to be Berkshire’s largest acquisition ranked by enterprise value since its purchase of Precision Castparts Corp. in 2016. It will expand the company’s already sprawling empire of energy operations, which currently has operations in states including Nevada and Iowa.
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>>> Chesapeake’s Demise Marks End of Shale Model That Changed the World
Bloomberg
By Joe Carroll and David Wethe
June 12, 2020
https://www.bloomberg.com/news/articles/2020-06-12/chesapeake-s-demise-marks-end-of-shale-model-that-changed-world?srnd=premium
Drilling pioneer never escaped burden incurred by late founder
CEO Lawler running out of rescue options amid perptual glut
It will go down as wildest of the shale wildcatters, the overreaching pioneer of fracking techniques that minted vast fortunes and, now, have left behind ruin.
At long last, financial reality has caught up with Chesapeake Energy Corp., avatar of the boom and subsequent bust of North American shale.
Chesapeake’s spiral toward oblivion accelerated this week with executives said to be preparing for a potential bankruptcy filing, signaling the imminent end of Chief Executive Officer Doug Lawler’s 7-year campaign to turn around the troubled gas explorer. For a company that’s been skirting disaster for most of the past decade, the Covid-19-driven collapse in world energy prices merely added one more exclamation point to a tale of risk, hubris and debt.
Chesapeake never got out from under its borrowings
Chesapeake may be shale’s biggest corporate casualty, but it is hardly the first -- and won’t be the last. Its self-inflicted wounds have sapped confidence across the entire industry, leaving many smaller operators teetering on the edge of catastrophe.
As the remnants of shale’s turn-of-the-century heyday turn to dust, it’s unclear who -- if anyone -- will step into the void. Supermajors like Exxon Mobil Corp. and Chevron Corp. already have written off their own gas-heavy assets, and are instead focusing on oil-rich shale fields. But any shift in the global supply-and-demand balance for gas would prompt the most sophisticated giants to reassess the value of acquiring and drilling mothballed gas projects.
Extreme Pressure
Almost three dozen North American explorers, frackers and pipeline operators have fled to bankruptcy courts since the start of this year, buckling under $25.2 billion in cumulative debts, according to law firm Haynes and Boone LLP. Chesapeake’s indebtedness would swell that encumbrance by almost 40%.
And even with crude prices recovering from the unprecedented April collapse into negative territory, energy-sector bankruptcies are expected to grow in coming months because many shale companies are in too far over their heads. “Extreme financial pressure is being felt at all levels of the energy industry,” Haynes and Boone said in a report.
The template for the shale model that’s now unraveling for many companies was established by Chesapeake and its late co-founder Aubrey McClendon.
Experimental Drilling
The late Aubrey McClendon during the CERAWeek 2009 conference in Houston.
Chesapeake was the brainchild of McClendon and his pal Tom Ward, who started out with $50,000 in borrowed money in rented offices. The company went public in 1993 and soon was experimenting with sideways drilling and hydraulic fracturing to pummel open shale formations previously regarded as impermeable -- and therefore, worthless -- by geologists.
At the time, the outlook for domestic gas production was so grim that Alan Greenspan predicted the U.S. would need huge imports of liquefied gas to keep industries and furnaces running. Tens of billions of dollars were invested in massive new gas import terminals that were rendered obsolete before they even opened as Chesapeake and other shale drillers flooded the continent with gas.
By the time Ward struck out on his own to form SandRidge Energy Inc. in 2006, Chesapeake was spending on average $1 billion a year to snap up drilling rights from Texas to Pennsylvania. At the start of 2007, Forbes magazine named Chesapeake the best managed oil and gas company.
Grand Ambition
Under McClendon, Chesapeake raised production more than 10-fold between 2000 and 2013, invested heavily in experimental natural gas-fueled transport, and even toyed with expanding overseas before its geologists concluded that many European shale formations were unsuitable for drilling.
At its peak, Chesapeake pumped more American gas than anyone aside from Exxon and boasted a market valuation of almost $38 billion.
The other side of that coin was that the company only generated positive cash flow in two out of the past 30 years. When gas output from newly tapped shale fields flooded markets and prices tumbled, Chesapeake had to scramble to find new investors or joint-venture partners to provide cash infusions. By 2012, the company’s net debt load was twice the size of Exxon’s, a company that had a market value 27 times larger. Chesapeake warned it was on the verge of running out of cash.
While all of that was still brewing, little-known oil wildcatters like Harold Hamm were quietly adapting the technology McClendon and the other shale-gas innovators employed for use on crude-drenched rocks in North Dakota. Those breakthroughs reversed the terminal decline in U.S. crude production, turned America into an energy powerhouse and shattered OPEC’s decades-long grip on the world’s most important commodity.
Double Magnums
When times were good, Chesapeake spared no expense recruiting young talent to Oklahoma City and a corporate headquarters modeled after an Ivy League university campus. In between stockpiling double magnums of Bordeaux and collecting antique speedboats, McClendon singlehandedly transformed the northwest side of the city from a rundown backwater to a bustling commercial corridor.
But the good times never last forever. McClendon was ousted during an Icahn-led board revolt in 2013, and three years later he was indicted on federal bid-rigging charges. Just hours after vowing to fight the charges at all costs and clear his name, he died when his Chevy Tahoe slammed into a concrete highway abutment at 78 miles an hour along a desolate country road.
“They were absolutely guns blazing with their growth, but it took a lot of money to do that,” said Robert Clarke, research director at Wood Mackenzie Ltd. “Right now we’re looking at the ugly side of all that excess.”
Escape Routes
Although Lawler inherited many of the burdens that sank the company, the fateful 2019 takeover of WildHorse Resource Development Corp. that included the assumption of more than $900 million in debt was his own undertaking. The move -- intended to pivot Chesapeake toward oil and away from gas -- occurred just in time to expand the company’s exposure to the crude-market collapse.
In the end, Chesapeake ran out of escape routes from its $9.5 billion debt load. Gas prices were too low for too many years, and lenders and private-equity investors had long since shut the door on shale. That left asset sales as the sole avenue for raising cash, but in a market already drowning in a surfeit of gas, Lawler couldn’t find buyers.
McClendon’s legacy has haunted Chesapeake long after his 2013 ouster and his 2016 death. Lawler, the former Anadarko Petroleum Corp. exploration boss recruited by Carl Icahn and O. Mason Hawkins, has spent his entire tenure trying to right the ship.
Things were so dire in 2016 that the CEO was forced to pledge almost everything the company owned to keep open a credit lifeline. Lawler, who declined to be interviewed for this story, also sought to demonstrate he was the anti-McClendon. His predecessor’s long, drawn-out conference calls with analysts were replaced with curt recitations of bullet points. Austerity reigned at the company’s once-lavish headquarters, and Lawler eschewed McClendon’s fondness for opulent displays.
“If you see me out at a dinner, here in Oklahoma City and on company expense,” Lawler said at an event in 2014, “and you see me drinking a $500 bottle of wine, I would ask you to hit me over the head with it.”
<<<
Pipelines - >>> Why Energy Transfer Believes Its 15%-Yielding Dividend Is Safe
The midstream giant sees the light at the end of the tunnel.
Motley Fool
Matthew DiLallo
May 24, 2020
https://www.fool.com/investing/2020/05/24/why-energy-transfer-believes-its-15-yielding-divid.aspx
Units of Energy Transfer (NYSE:ET) have cratered roughly 35% this year. That sell-off pushed the yield on the master limited partnership's distribution up to an eye-popping 15%. When a payout reaches that level, it's because the market doesn't believe it's sustainable.
However, Energy Transfer has full confidence in its ability to maintain its distribution, given what it sees ahead. That was one of the key takeaways on its first-quarter conference call.
Drilling down into the current numbers
CFO Tom Long drove the discussion on the call. One of the things he noted was that Energy Transfer generated $1.42 billion of cash during the quarter. As a result, he pointed out that the "coverage ratio for the quarter was 1.72 times, which resulted in excess cash flow after distributions of $594 million." In other words, the company is generating enough cash to cover its payout with room to spare.
Unfortunately, there's a bit more to this story. The concern with the payout is twofold. First, Energy Transfer is spending a lot of money on capital projects to expand its operations. It invested $1 billion during the first quarter, implying it outspent its retained cash by more than $400 million. That means it tacked more debt onto its balance sheet, which is a concern since its leverage ratio remains above its targeted level of 4.0 to 4.5 times debt-to-EBITDA.
On a positive note, that outspend should shrink in future quarters after the company cut its capital budget by $400 million due to the turmoil in the energy market, putting it track to spend $3.6 billion this year. Meanwhile, Long noted that it's "evaluating another $300 million to $400 million for potential reduction this year." If it defers that investment, it will further narrow its spending gap, taking additional pressure off its balance sheet.
The upcoming inflection point
Given its elevated leverage, the market remains concerned that Energy Transfer might have to reduce its distribution if industry conditions deteriorate further so that it can use that cash to reduce debt. That's the course of action taken by many energy companies during this downturn.
However, Energy Transfer believes it can maintain its payout through this rough patch because it sees better days ahead. The biggest driver of this view is that the company expects capital spending to come down significantly next year as it completes its current slate of capital projects. Long stated on the call that: "As we think about future capital spend over the next three to four years, we anticipate an annual run rate of less than $2 billion. We remain committed to generating free cash flow and still expect to be free cash flow positive in 2021 after growth capital and equity distributions."
In other words, Energy Transfer expects to produce enough cash next year to fund its current distribution as well as all growth-related spending with room to spare. He provided an initial glimpse of how much excess cash flow it could generate by noting that while:
We've not put out guidance for 2021, as you know, but I think it is worth talking about when you look at 2019, we had over $3 billion of what we call retained cash flow. That's above the distributions. When you really look at this year, and you see where we currently have guidance, you'll see that we have free cash flow, we're right at that cusp. When you get to the $2 billion and less than $2 billion [in capital spending] for 2021, you can really look and see what type of free cash flow we have.
As Long points out, in 2021, Energy Transfer could produce around $1 billion in free cash after covering the distribution and capital spending. It can use that money to reduce debt in the near-term and then potentially return more cash to investors via a higher distribution or unit repurchase program once leverage is within its target range.
Walking a tight rope this year
Energy Transfer believes that it can generate enough cash this year to fund its payout and the bulk of its capital expenses, which will help keep it from putting more pressure on its balance sheet. Meanwhile, it expects to hit an inflection point next year when it finishes several large expansion projects, which will boost cash flow as capital spending declines. That has it on track to generate roughly $1 billion in excess cash, which it can use to pay off debt. The MLP believes it can maintain its distribution during this year's market turbulence and for the long term. While it's a higher-risk option, the high-yield provides an enticing reward.
<<<
>>> 7 Best Energy Stocks to Ride Out Oil's Recovery
Kiplinger
by Aaron Levitt
May 12, 2020
When it comes to energy stocks, "safety" is in the eye of the beholder.
The world faces a massive supply glut as the coronavirus pandemic has simply removed much of the world's demand for oil. Energy has become so depressed that, a few weeks ago, the unthinkable happened: crude futures went negative. This means producers were paying contract holders to take crude off their hands.
The energy market has normalized since then, and oil has moved higher, but we're still looking at low average prices not seen since the Clinton administration. Prices are still well below breakeven costs for most energy stocks, even some of oil's elder statesmen. Dividends have been cut or suspended. Some - including Whiting Petroleum (WLL) and Diamond Offshore (DOFSQ) - have filed for bankruptcy, and other oil and gas stocks could face the same fate.
Thus, few energy investments feel "safe" right now. But as is the case after every oil crash, some energy stocks will survive. And of that group, some represent considerable bargains. They might not look pretty at the moment; a few have had to cut back on capital projects, even buybacks and dividends. But these moves have made them likelier to survive this downturn and come back swinging on an upturn in oil prices.
Here are seven of the best energy stocks to speculate on as oil tries to claw its way back. It could be a bumpy ride - every one of them could experience more volatility if oil prices swing wildly again. But thanks to smart fiscal management so far in this crisis, they might pan out well for adventurous investors.
Magellan Midstream Partners, LP
Market value: $9.6 billion
Distribution yield: 9.6%*
Historically, pipeline and other energy infrastructure companies - often structured as master limited partnerships (MLPs) - were billed as "toll road operators" for the energy sector. Crude, regardless of price, needs to be stored and shipped, and these infrastructure players do just that, collecting fees along the way. There was little commodity price risk because they were paid on volume.
In an effort to boost profits, many MLPs and other pipeline plays moved into processing and other tangential businesses. This exposed them to directly to the price of crude, which intensified their pain in the current downturn.
Magellan Midstream Partners, LP (MMP, $42.72), however, has largely stuck to its guns. It continues to operate one of the largest networks of pipelines moving crude oil and refined products around the country, with some storage assets as well. In other words, Magellan mostly just moves crude and refined products from Point A to Point B.
In May, the company reported a 38% year-over-year jump in first-quarter net income despite oil's crash during the first three months of the year. Distributable cash flow (DCF) - a non-GAAP (generally accepted accounting principles) measure of profitability that represents cash that can be used to pay distributions - declined, but only by 3.6%.
Better still, Magellan says distribution coverage is expected to be 1.1 to 1.15 times what the company needs to pay shareholders for the rest of the year, despite the weakness in energy prices. This, a month after the company extended its streak of quarterly distribution increases that stretches back to 2010.
In the end, Magellan is as classic a toll-taking pipeline play as they come. Thanks to that, the MLP should be among the best energy stocks to ride out oil's current malaise.
* Distributions are similar to dividends, but are treated as tax-deferred returns of capital and require different paperwork come tax time.
Marathon Petroleum
Market value: $21.3 billion
Dividend yield: 7.1%
Marathon Petroleum (MPC, $32.70) should be another survivor of the current energy crash.
Unlike energy stocks such as former spinoff Marathon Oil (MRO), MPC has little commodity price risk - or at least, it doesn't have the same kind of risk that exploration-and-production companies have. That's because, as a refiner, Marathon can actually benefit from lower crude oil prices: The lower the cost for feedstocks, the better the margins on finished products such as gasoline, jet fuel, even plastic.
That's the good news.
The bad news is that MPC has suffered lower overall fuel demand. As we hunker down to work from home, rather than drive to work or fly to meetings, refined-product use is tumbling. The Energy Information Administration estimates that U.S. gasoline consumption fell by 1.7 million barrels per day during the first quarter of 2020. In the same quarter, Marathon was forced to take a whopping $12.4 billion impairment charge and suffered a net loss of $9.2 billion.
That might sound worse than it really is. In reality, the refining industry is prone to swings - COVID-19 is just the latest. Institutional investors realize this, which is why MPC has been able to easily tap the debt markets. MPC has made moves such as raising $2.5 billion in senior notes and adding a $1 billion revolving credit facility, giving the company available borrowing capacity of about $6.75 billion.
Marathon Petroleum also has slashed capital expenditures by $1.4 billion, suspended share buybacks and decided to idle some refining facilities. But so far, it hasn't touched the dividend.
The EIA estimates gasoline demand will improve during the back half of 2020. Marathon appears to be well-equipped to survive the current headaches and eventually bounce back, likely with its high-yielding dividend intact.
ConocoPhillips
Market value: $45.3 billion
Dividend yield: 4.0%
"Déjà Vu" is French for "already seen." And for major independent energy producer ConocoPhillips (COP, $42.27) ... well, it has seen something like this before.
Back in 2014, the last time crude oil took a serious plunge, ConocoPhillips was a different animal. It was full of expensive projects and bloated capital spending requirements, and it wasn't nearly the shale player it was today. In the years since, Conoco sold expensive deep-sea operations, cut its dividend, paid off debt and become a shale superstar. This "lean and mean" operation worked, and COP became the blueprint for many other energy firms.
That also prepared ConocoPhillips to better withstand the current low-oil environment.
Yes, COP did decide to tighten its belt in March and April, announcing capital expenditure, output and share repurchase reductions. And yes, ConocoPhillips did lose $1.7 billion during the first quarter. But it still managed to generate $1.6 billion in cash flows from operations - enough to pay its dividend, expenditures and buybacks. The company also finished the quarter with more than $8 billion in cash and short-term investments, and more than $14 billion in liquidity once you factor in the $6 billion left on its revolver.
In fact, the company's in a good enough position that CEO Ryan Lance told CNBC he's "on the lookout" for acquisition targets.
Conoco, in taking its lumps years ago, became a better energy stock. That should give investors confidence in its ability to navigate this crisis.
Royal Dutch Shell
Market value: $127.9 billion
Dividend yield: 3.9%
Integrated energy giant Royal Dutch Shell (RDS.A, $32.76) did something recently that it hasn't done since World War II: It cut its dividend, from 47 cents per share to 16 cents. The news shocked the energy sector and broke the company's 75-year streak of payout continuity.
Shares of RDS.A, which are off 44% year-to-date, dropped nearly 13% on the announcement.
But perhaps investors should be buying with two fists. Because Royal Dutch Shell could end up being stronger for it once this is all done.
Shell's dividend cut was more proactive than reactive. Truth be told, Shell's first quarter didn't look all that bad. While the company suffered a small $24 million net loss, its "current cost of supplies (CCS) basis" earnings, backing out certain items, came to $2.9 billion, which wasn't far off CCS earnings from Q4 2019. Cash from operations clocked in at $14.8 billion, which would've been only a little shy of capital expenditures and its original dividend amount.
Shell appears to be taking the Conoco approach to this downturn.
To start the announcement of the dividend cut, Shell CEO Ben van Beurden said, "The world has fundamentally changed." And it's clear he's preparing for it. Shell might have been able to squeeze out its dividend for a few more quarters under these circumstances, but instead, the company decided to focus on fiscal strength now, enabling it to not just survive, but potentially be acquisitive and otherwise expand when the time is right.
It was a bitter pill for existing shareholders. But RDS.A still might be one of the best energy stocks for new shareholders, who will enjoy a decent yield around 4% from a company much better positioned to ride out the rest of this downturn.
EOG Resources
Market value: $29.0 billion
Dividend yield: 3.0%
The story at EOG Resources (EOG, $49.84) has always been the strength of its asset base.
EOG was one of the earliest frackers, and it moved into some of the best shale fields long before anyone else. This gave it prime acreage in places such as the Permian Basin, Eagle Ford and Bakken fields. The result of these premier wells has been lower costs, higher production rates and better cash generation than many competing energy stocks.
Despite its positioning, oil, which currently trades in the mid-$20s, still is too low for EOG to make a profit off it. So the company is pulling out its 2014 playbook. That is, EOG is drilling wells but not completing them. This will allow EOG to take advantage of low services costs and "turn the spigot on" at a later date. For now, it's shutting off roughly 40,000 barrels of oil per day worth of production, and it's reducing its capex spending by about $1 billion from a previously updated budget. All told, EOG has cut back planned capex by 46% from its original 2020 estimates.
The combination of already low costs and savings via well shut-ins allows EOG to keep its balance sheet healthy. EOG Resources finished Q1 with $2.9 billion of cash on hand and $2 billion available on its unsecured revolver. It also had no trouble raising an additional $1.5 billion in a bond sale at the end of April.
If oil manages to get into the low $30s, EOG should be able to fund its capital budget and dividends via cash flow for the rest of the year.
Schlumberger
Market value: $24.1 billion
Dividend yield: 2.9%
It stands to reason that if oil firms are suspending drilling, the firms providing drilling equipment won't see much business. That has been the case for Schlumberger (SLB, $17.36), which is off 57% year-to-date as rig counts in North America plunge.
Schlumberger's North American revenues slipped 7% quarter-over-quarter in Q1, following a double-digit decline at the end of 2019, and overall sales declined 5%. Margins contracted as SLB had to cut its services prices to compete. All of this translated into a hefty GAAP loss.
The biggest headline, however, was a 75% cut to the dividend.
Schlumberger is thinking ahead. The company reported positive free cash flow of $178 million - after recording a negative number a year ago. (Cash flow was even more robust in the quarters prior, however, so naturally prices are taking a toll.) Cutting the dividend, from 50 cents quarter to 12.5 cents, should save about $500 million quarterly. That'll help bolster its $3.3 billion cash position and help it pay off its debts more quickly.
Also, while North America is painting a bleak picture, SLB's hefty international operations are showing a little resilience. While off 10% from the previous quarter, sales were up 2% year-over-year. State-run oil companies operate under a very different directive than public ones; as such, they often keep drilling when many public companies wouldn't.
Schlumberger does indeed need oil prices to continue rebounding for the stock to emerge from this deep slump. But the combination of a more fortified balance sheet and a wide operational footprint should help keep the company afloat until then.
First Solar
Market value: $4.5 billion
Dividend yield: N/A
One of the biggest misconceptions is that solar energy and oil prices go hand in hand. As a result, when oil drops, solar stocks tend to plunge, too.
That's just silly. Petroleum-powered electric plants are a dying breed in the U.S., and currently comprise about half a percent of overall production. Solar now accounts for 1.8% and is assuredly on the rise.
But this misconstrued relationship could mean an opportunity for investors in leader First Solar (FSLR, $42.87).
First Solar not only makes high-efficiency panels, but it even builds and operates utility-scale solar plants. And while shares have declined 23% year-to-date, the company showed signs of resiliency in its first-quarter earnings. Revenues were marginally higher than in the year-ago period, and the company delivered a $90.7 million profit versus a $67.6 million loss. FSLR also recorded 1.1 gigawatts (direct current) of new net bookings for its Series 6 panels. That means utilities and installers still are looking out to the future despite the coronavirus' economic impact.
First Solar also boasts $1.6 billion in cash and marketable securities, and it's cash flow-positive. The company has provided limited guidance, but it says it plans on spending $450 million to $550 million in capital projects. That means without earning another dime, First Solar still has about three years' worth of working capital on its hands.
First Solar is the largest player in a growing field. And solar's tether to oil goes both ways, giving FSLR the potential to be one of the best energy stocks as oil prices recover.
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>>> Why These 3 Oil Refinery Stocks Jumped More Than 30% in April
A crude storage crunch could be a win for oil refineries.
Motley Fool
by John Bromels
May 7, 2020
https://www.fool.com/investing/2020/05/07/why-these-3-oil-refinery-stocks-jumped-more-than-3.aspx
What happened
Shares of oil refiners HollyFrontier (NYSE:HFC), Phillips 66 (NYSE:PSX), and Valero Energy (NYSE:VLO) rose between 34% and 40% in April, according to data provided by S&P Global Market Intelligence. HollyFrontier's shares were up 34.8%, Phillips 66's increased 36.4%, and Valero's soared 39.7%.
Of course, these gains only partially offset the losses refiners sustained in February and March, due in part to the Saudi Arabia-Russia oil price war, and flagging demand for fuel and other refined products due to the coronavirus pandemic. Year to date, all three companies' shares are down by more than one-third, with HollyFrontier's stock price down 43.5%, Phillips 66's down 34.4%, and Valero's down 34.8%.
So what
U.S. refining wasn't in such good shape to begin with. In Q4 2019, major refiners saw their fuel and petrochemical margins tumble as oversupply caused margins to sag. Then, in Q1, oil prices were cut basically in half. That's not necessarily a bad thing for refiners, which make money not from selling crude at prevailing rates, but from the "crack spread": the difference between the cost of a barrel of crude oil and the selling price of the refined products that can be made from it. In theory, a lower oil price can lead to a wider crack spread, benefiting refiners.
But because of the existing oversupply -- and, in March, reduced demand due to the coronavirus -- the selling price of refined products was driven lower, preventing refiners from significantly increasing their margins. Most refineries aren't even operating at full capacity anymore, which is causing problems further up the oil chain, as storage facilities fill up with crude oil that isn't being processed.
Like much of the rest of the oil industry, HollyFrontier, Phillips 66, and Valero have taken steps to adjust their spending levels as they ride out the uncertainty in the sector. HollyFrontier is cutting its 2020 capital expenditures by 15% and is currently running its refineries at just 70% of capacity. Phillips 66 had a similar reaction: It cut its 2020 capital budget by 18.6%, suspended share repurchases, and delayed the start of construction on several pipeline projects. Valero suspended its share buybacks, too, while also deferring $400 million in capital projects until next year, resulting in a projected 16% drop in 2020 capital spending. It said it plans to run its refineries at about 73% of capacity during the current quarter.
All in all, the three refiners' efforts are remarkably similar, as is their share-price performance for the year so far:
Now what
In late April, crack spreads began to significantly improve. On its Q1 earnings call, Phillips 66 reported that the average 3:2:1 crack spread -- referring to three barrels of crude being refined into two barrels of fuel and one barrel of heating oil -- was $9.82 during the first quarter. By mid-April, that figure had already soared into the high teens.
With the crack spread improving and the U.S. taking tentative steps toward reopening, plus a crude oil glut ensuring that refiners would be kept busy in the coming months, Wall Street decided that refiners weren't in such bad shape after all, and bid up their stocks. Those with retail operations, like Phillips 66 and Valero, were also expected to see increased demand as businesses begin to reopen.
The oil sector, though, is still a volatile place. Crude prices are still too low for most shale drillers to profitably produce oil. Yet crude oil inventories are rising to the point that storage capacity is running out. Demand is still low, and OPEC+ production cuts are only in effect through May.
With all that in mind, while refiners are a better bet than many other oil companies, investors may want to avoid refinery stocks -- along with the rest of the industry -- until the dust settles.
<<<
Name | Symbol | % Assets |
---|---|---|
Exxon Mobil Corp | XOM | 23.51% |
Chevron Corp | CVX | 18.13% |
ConocoPhillips | COP | 5.43% |
Phillips 66 | PSX | 4.20% |
Schlumberger Ltd | SLB | 4.08% |
EOG Resources Inc | EOG | 3.36% |
Kinder Morgan Inc Class P | KMI | 3.26% |
Marathon Petroleum Corp | MPC | 3.26% |
Valero Energy Corp | VLO | 3.23% |
Occidental Petroleum Corp | OXY | 2.81% |
Name | Symbol | % Assets |
---|---|---|
Exxon Mobil Corp | XOM | 22.33% |
Chevron Corp | CVX | 21.24% |
Phillips 66 | PSX | 5.23% |
ConocoPhillips | COP | 4.52% |
Marathon Petroleum Corp | MPC | 4.20% |
Schlumberger Ltd | SLB | 4.11% |
EOG Resources Inc | EOG | 4.01% |
Valero Energy Corp | VLO | 4.01% |
Kinder Morgan Inc Class P | KMI | 3.88% |
Occidental Petroleum Corp | OXY | 3.61% |
Name | Symbol | % Assets |
---|---|---|
Exxon Mobil Corp | XOM | 21.76% |
Chevron Corp | CVX | 18.11% |
ConocoPhillips | COP | 4.70% |
Phillips 66 | PSX | 4.32% |
Schlumberger Ltd | SLB | 3.69% |
Marathon Petroleum Corp | MPC | 3.60% |
Valero Energy Corp | VLO | 3.37% |
EOG Resources Inc | EOG | 3.28% |
Kinder Morgan Inc Class P | KMI | 2.92% |
Occidental Petroleum Corp | OXY | 2.67% |
Name | Symbol | % Assets |
---|---|---|
TC Energy Corp | TRP.TO | 8.47% |
Enbridge Inc | ENB.TO | 8.22% |
Kinder Morgan Inc Class P | KMI | 7.89% |
Williams Companies Inc | WMB | 6.26% |
Enterprise Products Partners LP | EPD | 5.95% |
Atmos Energy Corp | ATO | 4.56% |
NiSource Inc | NI | 4.37% |
Cheniere Energy Inc | LNG | 3.97% |
Magellan Midstream Partners LP | MMP | 3.80% |
ONE Gas Inc | OGS | 3.73% |
Name | Symbol | % Assets |
---|---|---|
Schlumberger Ltd | SLB | 22.18% |
Halliburton Co | HAL | 17.48% |
Baker Hughes Co Class A | BKR | 8.58% |
National Oilwell Varco Inc | NOV | 4.76% |
Helmerich & Payne Inc | HP | 4.45% |
Transocean Ltd | RIG | 4.15% |
TechnipFMC PLC | FTI | 4.01% |
Core Laboratories NV | CLB | 2.98% |
Apergy Corp | APY | 2.97% |
Patterson-UTI Energy Inc | PTEN | 2.57% |
Name | Symbol | % Assets |
---|---|---|
National Oilwell Varco Inc | NOV | 5.56% |
Halliburton Co | HAL | 5.33% |
Baker Hughes Co Class A | BKR | 5.28% |
Core Laboratories NV | CLB | 5.27% |
Patterson-UTI Energy Inc | PTEN | 5.12% |
Helmerich & Payne Inc | HP | 5.07% |
Schlumberger Ltd | SLB | 4.91% |
Transocean Ltd | RIG | 4.65% |
Nabors Industries Ltd | NBR | 4.51% |
TechnipFMC PLC | FTI | 4.34% |
Name | Symbol | % Assets |
---|---|---|
Schlumberger Ltd | SLB | 20.29% |
Halliburton Co | HAL | 11.12% |
Baker Hughes Co Class A | BKR | 7.01% |
National Oilwell Varco Inc | NOV | 5.45% |
Tenaris SA ADR | TS.MI | 5.22% |
Helmerich & Payne Inc | HP | 4.58% |
TechnipFMC PLC | FTI | 4.58% |
Apergy Corp | APY | 4.53% |
Patterson-UTI Energy Inc | PTEN | 4.52% |
Core Laboratories NV | CLB | 4.33% |
Name | Symbol | % Assets |
---|---|---|
ConocoPhillips | COP | 14.31% |
Phillips 66 | PSX | 12.23% |
Marathon Petroleum Corp | MPC | 9.83% |
EOG Resources Inc | EOG | 9.39% |
Valero Energy Corp | VLO | 5.41% |
Hess Corp | HES | 4.33% |
Pioneer Natural Resources Co | PXD | 4.26% |
Cheniere Energy Inc | LNG | 3.66% |
Diamondback Energy Inc | FANG | 3.56% |
Concho Resources Inc | CXO | 3.45% |
Name | Symbol | % Assets |
---|---|---|
PBF Energy Inc Class A | PBF | 3.15% |
Marathon Petroleum Corp | MPC | 3.00% |
Phillips 66 | PSX | 2.84% |
Valero Energy Corp | VLO | 2.83% |
Delek US Holdings Inc | DK | 2.73% |
HollyFrontier Corp | HFC | 2.67% |
Hess Corp | HES | 2.60% |
Murphy Oil Corp | MUR | 2.50% |
Cabot Oil & Gas Corp Class A | COG | 2.47% |
ConocoPhillips | COP | 2.40% |
Name | Symbol | % Assets |
---|---|---|
Reliance Industries Ltd ADR | RIGD.BO | 8.82% |
Phillips 66 | PSX | 8.34% |
Marathon Petroleum Corp | MPC | 7.57% |
Valero Energy Corp | VLO | 6.97% |
Neste Corp | NESTE | 6.35% |
Omv AG | OMV | 5.23% |
JXTG Holdings Inc | 5020 | 5.20% |
Polski Koncern Naftowy ORLEN SA | PKN | 4.71% |
Galp Energia SGPS SA | GALP | 4.54% |
HollyFrontier Corp | HFC | 4.41% |
Name | Symbol | % Assets |
---|---|---|
Enbridge Inc | ENB.TO | 8.89% |
Kinder Morgan Inc Class P | KMI | 8.59% |
TC Energy Corp | TRP.TO | 8.48% |
Williams Companies Inc | WMB | 8.00% |
ONEOK Inc | OKE | 6.89% |
Cheniere Energy Inc | LNG | 6.46% |
Targa Resources Corp | TRGP | 4.99% |
Antero Midstream Corp | AM | 4.63% |
Energy Transfer LP | ET | 4.54% |
Equitrans Midstream Corp | ETRN | 4.48% |
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