|Day's range||5.70 - 5.70|
* Wall Street closed for Washington's Birthday Welcome to the home for real-time coverage of European equity markets brought to you by Reuters stocks reporters. You can share your thoughts with Thyagaraju Adinarayan (email@example.com), Joice Alves (firstname.lastname@example.org), Julien Ponthus (email@example.com) in London and Danilo Masoni (firstname.lastname@example.org) in Milan.
(Bloomberg) -- While climate-change activists are urging Harvard University’s endowment and New York City’s pension fund to rethink their fossil-fuel holdings, New Jersey says the best way to fight for cleaner energy is as an investor.Phil Murphy’s administration says that joining a global oil-and-gas divestment wave would eliminate its shareholder voice. Climate activists, though, say New Jersey’s holdings in Exxon Mobil Corp. and others like it contradicts the Democratic governor’s vow to help tackle global warming.In January, Murphy set a goal for 100% clean energy by 2050 and made New Jersey the first state to require builders to evaluate the climate impact of projects to win approval. Those steps, he said, will help counteract President Donald Trump’s support for coal, withdrawal from the 2016 Paris Accord and other attacks on greenhouse-gas reduction policy.Still, Exxon is the New Jersey pension’s 10th-largest stock holding, with an almost 1% portfolio share as of Oct. 31. The state has holdings in 148 energy stocks, including Phillips 66, Royal Dutch Shell Plc and China Shenhua Energy Co., that make up 3.7% of the equity in New Jersey’s $80 billion pension.“Why are you investing in companies that are involved in the destruction of people’s habitats -- and then fueling extreme weather events that affect other parts of your portfolio?” said Tina Weishaus, a spokesperson for the DivestNJ Coalition, a group of environmental organizations that’s pressuring the State Investment Council to abandon fossil fuels and urging lawmakers to ban such investments.The S&P 500 energy sector returned 7.6% in 2019, the index’s weakest performance by far, and is expected to continue a years-long streak of lagging behind the broader market amid a glut in supplies and threats to demand. Since Murphy took office in January 2018, Exxon has lost 30% of its value.Murphy, a retired Goldman Sachs Group Inc. senior director, said at a Feb. 11 news conference in Maple Shade that the state has a “sort of social responsibility parameter that applies to our investment decisions, which are taken by the investment council, not by yours truly.”The state investment division is seeking climate-risk analysts and planning to hire a sustainable portfolio manager, according to Jennifer Sciortino, a treasury spokesperson.The division “believes the best financial outcomes will result from active engagement on climate change issues,” Sciortino said in a statement. “Divestment, in contrast, eliminates the division’s influence as a shareholder and, consequently, its ability to effect positive change that may lead to favorable investment returns.”Plant EmissionsExxon spokesperson Casey Norton declined to comment on New Jersey’s holdings, but said the company has invested more than $10 billion in pollution-lowering technology over 20 years.“We’re committed to doing our part to identify scalable solutions for the dual challenge of meeting a growing demand for energy and lower emissions,” Norton said in an email.Over 10 years, the California Public Employees’ Retirement System, California State Teachers’ Retirement System and the Colorado Public Employees’ Retirement Association lost more than $19 billion as a result of their fossil-fuel investments, according to Toronto-based Corporate Knights, a research firm that promotes sustainable business.Fund overseers disagree on whether divesting or investing is a better tool for climate change.Calpers, the largest U.S. pension fund with $404 billion, and the $252 billion Calstrs have cited their proxy power as among the reasons to stay in fossil fuels. Trustees of Grinnell College in Iowa studied divestment for its $2 billion endowment and in 2018 concluded they had “not found any compelling evidence that the action of divesting fossil fuel stocks has an impact on climate change, particularly as a result of financial pressure.”On the other side of the debate, the University of California said in September that it would cut non-renewables from the $13.4 billion endowment and $80 billion pension fund.“We must meet the needs of our current operations and the current requirements of our retirees without compromising our ability to serve future students, staff members and faculty,” according to a statement posted to the website of Jagdeep Singh Bachher, the school’s chief investment officer.A Feb. 4 Harvard faculty vote called for the $40 billion endowment fund to get out of oil and gas; two days later, Georgetown University President John DeGioia said the $1.66 billion endowment will drop non-renewable energy.“Divestment allows us to divert more capital to fund development of renewable energy projects that will play a vital role in the transition away from fossil fuels,” Michael Barry, Georgetown’s chief investment officer, said in a news release.In January, New York City’s pension board created a panel to explore divestment for the $216 billion fund. The New York State Common Retirement Fund, the third-largest U.S. public pension with $226 billion, said it was reviewing 27 mining companies that derive at least 10% of their revenue from coal burned to produce electricity.“Investors who fail to face the risks and seize the opportunities presented by climate change put their portfolios in jeopardy,” State Comptroller Thomas P. DiNapoli, whose Climate Action Plan seeks to cut the state pension’s carbon footprint, said in a statement.To contact the reporter on this story: Elise Young in Trenton at email@example.comTo contact the editors responsible for this story: Flynn McRoberts at firstname.lastname@example.org, Stacie Sherman, William SelwayFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
The Zacks Analyst Blog Highlights: ExxonMobil, ConocoPhillips, Valero Energy, Marathon Petroleum and Chevron
A Nigerian oil reform two decades in the making is urgently needed to get money into its energy sector, industry executives say, as tax increases and regulatory uncertainty scupper investments. Africa's largest oil exporting nation has not carried out a full revamp of the law underpinning its oil and gas sector since the 1960s. Government officials say a sweeping overhaul is imminent and will be presented to the National Assembly next week, which for industry leaders is not a moment too soon.
German fund manager Allianz Global Investors is pushing every company it invests in to improve their climate-related disclosures ahead of the season for annual shareholder meetings. Allianz GI, which manages 557 billion euros ($605.18 billion) as part of insurer Allianz, said it had updated its Global Corporate Governance Guidelines and would push companies to do more to manage what it said was a critical risk. Specifically, it wants every company to use the Taskforce for Climate-related Financial Disclosures (TCFD) framework for assessing the impact of climate risk on their business, an initiative kick-started by the Financial Stability Board.
Exxon Mobil Corp does not have a timeline for restarting fuel-producing units at its second-largest U.S. refinery following a fire Wednesday that cut production, sources said, as the shutdown boosted gasoline prices on Thursday. Some units remain in operation at the refinery including a crude distillation unit (CDU), gasoline-producing fluidic catalytic cracking unit (FCCU) and a coker, the sources said. It was the third Exxon petrochemical plant along the U.S. Gulf Coast to suffer damage in less than a year.
Cost increases and uncertainty in Nigeria's crucial energy sector could lead to a 35% decline in oil output over 10 years as companies delay investments in key oilfields, consultancy Wood Mackenzie said in new research due to be published on Friday. In findings shared exclusively with Reuters, the company warned that three deep offshore fields, which would generate $2.7 billion a year for the government at peak production, are likely to be delayed as companies put their money in regions with better and clearer terms. "Nigeria is going to enter quite a steep decline in production," said Lennert Koch, principal analyst of sub-Saharan Africa upstream with Wood Mackenzie.
(Bloomberg) -- A fire broke out early Wednesday at Exxon Mobil Corp.’s Baton Rouge oil refinery in Louisiana, halting production at the fifth-biggest fuel-making plant in the U.S.The outage at the massive complex -- which supplies fuels across the southeast U.S. and all the way to New York Harbor -- means the refinery needs fewer barrels of crude oil, depressing a market already reeling from the coronavirus crisis in China. But it could help ease a gasoline glut in the Gulf Coast, where stockpiles hit a record in late January.The Baton Rouge fire is the third blaze in the Gulf Coast region for Exxon in less than a year, and comes after the company posted the worst quarterly profit in almost four years. Earnings at its refining and chemical business slumped by a combined $6.5 billion in 2019, and the oil giant is pursuing asset sales and even cracking down on employee travel to tide over the turmoil.Heavy Canadian oil fell from a four-month high after the Baton Rouge refinery shutdown, while Gulf Coast and New York gasoline strengthened. Consumers could feel the impact of higher prices as soon as Thursday morning.The latest blaze erupted in a natural gas line, affecting first one and then all of the facility’s crude distillation towers -- which heat and break down raw oil into products -- according to people familiar with operations. As a result, other units such as the catalytic cracker and the chemical plant had to cease operations.The fire has been extinguished and there were no injuries, according to Exxon. Operations continue at the refinery and chemical plant, spokesman Jeremy Eikenberry said. The facility is located along the Mississippi River about 80 miles (129 kilometers) northwest of New Orleans. It can process more than 500,000 barrels of crude a day and accounts for about 15% of Louisiana’s refining capacity.The local WAFB TV station’s website showed images of the fire, and said local people reported their houses being shaken by the incident. There was no initial off-site impact to air quality, or an immediate call for an evacuation of the nearby area, WAFB said.The complex’s chemical plant has shut, including its olefins unit, which takes feedstocks such as naphtha, butane, propane and ethane from the oil refinery and converts them into ethylene and propylene that are used to make plastics.Western Canadian Select crude’s discount to U.S. West Texas Intermediate widened to $16.85 a barrel. The Baton Rouge refinery uses heavy crude produced in the Kearl oil sands mine operated by Imperial Oil Ltd., which is majority owned by Exxon.Gasoline in the Gulf Coast spot market rose 1.5 cents per gallon to a 7.75-cent discount to Nymex futures, which jumped the most in almost five months on Wednesday.Exxon is in the process of a massive expansion of the plastic-ingredient capacity on the chemical side of the Baton Rouge complex that’s scheduled to begin output next year. The combined refining and chemical operations account for one in every 10 jobs in southwest Louisiana region, according to the company.U.S. refineries handled an average of about 16.5 million barrels a day of crude so far this year, Energy Information Administration data show.(Updates prices in 9th and 10th paragraphs)\--With assistance from Joe Carroll, Bill Lehane and Robert Tuttle.To contact the reporters on this story: Barbara Powell in Houston at email@example.com;Jeffrey Bair in Houston at firstname.lastname@example.org;Rachel Graham in London at email@example.comTo contact the editors responsible for this story: David Marino at firstname.lastname@example.org, Pratish Narayanan, Joe CarrollFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- BP Plc’s pledge to zero out all its carbon emissions by 2050 deepens the divide between major European and American oil producers on climate change, increasing the pressure for Exxon Mobil Corp. and Chevron Corp. to do more.The U.S. supermajors have only committed to reducing greenhouse gases from their own operations, which typically account for just 10% of fossil fuel pollution. BP on Wednesday followed Royal Dutch Shell Plc and Equinor ASA in pledging to offset emissions from the fuels they sell to customers, representing about 90% of the total.“If we do see capital flowing into BP, that may force the U.S. majors to rethink the speed at which they move on carbon reduction targets,” said Noah Barrett, a Denver-based energy analyst at Janus Henderson, which manages $356 billion. Still, he doesn’t see “Chevron or Exxon adopting a BP-like strategy in the near future” as they “have historically been less aggressive in their shift away from traditional oil and gas.”Concerns about global warming are increasingly reshaping investment policies, with BlackRock Inc. and State Street Corp. becoming the latest high-profile investors to demand companies improve environmental, social and governance metrics, or ESG.Exxon and Chevron, the West’s number one and three oil producers, say it’s not up to them to offset emissions from cars, factories and other polluters known in the industry as Scope 3. For Exxon, such emissions are the “result of choices consumers make.” Chevron says “well-designed policies and carbon pricing mechanisms” are needed.But BP’s announcement “could be a real tipping point where the norm becomes taking responsibility” for customer emissions, said Kathy Mulvey, a campaign director at the Union of Concerned Scientists. “For a company to continue to stick their heads in the sand and refuse to take responsibility for those harmful impacts is not a sustainable business model.”Exxon and Chevron do agree with the goals of the Paris Agreement, support a carbon tax and are committed to cleaning up emissions from their vast network of wells, refineries and pipelines. They joined the Oil and Gas Climate Initiative later than their European rivals but are still fully paid up members. They even lobbied against U.S President Donald Trump’s plan to roll back Obama-era emission standards.The fundamental difference with European peers, however, is that neither is reducing commitment to their oil and gas business by chasing the crowd into lower-margin renewables such as wind and solar.When asked about potentially following Shell into the power sector, Chevron CEO Mike Wirth was clear in an interview with Bloomberg News last year.“We don’t see distinctive differentiating capabilities that would say, ‘wow we can do this better,’” he said. “And it’s inherently lower return than the other things we could invest money in.”Chevron is investing in early-stage technologies that could help aid carbon capture and energy storage, but that’s a small fraction of its budget. The company helps customers clean up their energy usage by supplying gas for power generation that’s cleaner than coal, developing biofuels and adding renewable energy sources like wind and geothermal, it said in a statement.Exxon CEO Darren Woods says the real answer to climate change will come through technologies that haven’t yet been invented. The company said in a statement it has invested more than $10 billion over the past 20 years in researching and developing low emissions technologies.The oil giant is working on proprietary technologies that would reduce emissions in areas like aviation, heavy duty vehicles and industrial processes. “We can bring more value in the space where we don’t know what the solution is but we need one,” Woods said in an April interview. Exxon has pedigree in this field. It invented the lithium-ion battery in the 1970s.This approach will likely come under attack at this year’s round of shareholder meetings in May. Both companies are being asked by Dutch activist investor group Follow This to align their strategies with the Paris Agreement. Exxon is asking the Securities and Exchange Commission to exclude that proposal from a shareholder vote, arguing it “seeks to micromanage” the company.To contact the reporter on this story: Kevin Crowley in Houston at email@example.comTo contact the editors responsible for this story: Simon Casey at firstname.lastname@example.org, Carlos Caminada, Dan ReichlFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- How cheap would you like your natural gas today? Is zero low enough? OK, how about we pay you to take it off our hands?That's what’s happening in the middle of the U.S. shale patch at the moment — and it’s a symptom of a glut that could reshape energy markets across the world in the coming years.Gas prices at the Waha hub in Texas’s Permian basin fell to minus 26.8 cents per million British thermal units this week. They’re heading in an even more “aggressively negative” direction, commodities broker OTC Global Holdings told Bloomberg News, as a shortage of pipeline capacity makes producers jostle for a place in the queue.Selling a commodity for a negative price isn’t quite as crazy as it sounds. Indeed, it’s a relatively common occurrence. Fuel oil — the gloopy fraction of crude used by boilers in ships, buildings and power stations — has hardly ever earned positive margins for refiners. Instead, they aim to make their money on gasoline and diesel, treating fuel oil as a waste product from which they can extract a few extra dollars.That's the current situation with natural gas in the U.S. A growing proportion of output is produced not for its own sake but as a byproduct from shale oil fields, where operators don’t care about the price of gas as long as it doesn’t stop them earning a positive margin on their crude production.Output of this so-called associated gas has increased nearly fourfold from 4.3 billion cubic feet per day in 2006 to 15 billion in 2018, according to the Energy Information Administration, making up about 37% of shale gas production and 12% of total U.S. gas output. With this super-cheap gas meeting the first leg of demand, the price at which the entire gas market clears is being driven lower. Thanks in part to an unusually mild winter, the Henry Hub U.S. gas benchmark has fallen by more than a third since its usual early-winter peak at the start of November, hitting its lowest level since 2016 this week.Even this effect would have been a strictly local issue a few years ago — but as the global liquefied natural gas industry grows up, that’s changing, too. Traditionally gas prices in different regions had little relationship with each other, but the situation is giving way to one where the cost of U.S. exports, plus a margin for transport and conversion to and from LNG, is increasingly setting a unified global price.That's likely to shake up many long-standing assumptions about the market. Asia has been mostly immune to the switch of coal-fired generation to gas which, along with the headlong growth of renewables, has caused the rapid shutdown of coal fleets in the U.S. and Europe.Without the significant domestic gas reserves seen in those regions, prices in Asia simply haven’t been competitive enough. Except for brief periods in summer when gas demand is low, the Japan-Korea Marker gas benchmark has historically mostly priced its energy content at about twice what you'd pay for the same heating value of coal at China’s Qinhuangdao port. That’s flipped so dramatically in recent months that even imported gas is now cheaper than coal on a heating value basis. When you take into account the greater efficiency with which most gas plants convert the energy in their fuel into electricity, the discount is even more pronounced. Any utilities expecting current low prices to be sustained ought to be looking hard at switching away from solid to gaseous carbon for any generation that renewables can’t easily supply.There’s good reason to think this glut isn’t going away. China, a major driver of Asian gas demand in recent years, may be coming off the boil. Slowing industrial demand and a shift toward electricity rather than gas for replacing coal in centralized heating will push down demand, Morgan Stanley analysts wrote last month. Prices in Europe and Asia will potentially fall below $3 per million British thermal units, they wrote, approaching North American levels.Add in the impact of coronavirus and Wood Mackenzie estimates demand this year will come to between 316 billion cubic meters and 324 billion, as much as 19% below the Chinese National Energy Administration’s estimates of 350 billion cubic meters to 390 billion.LNG will take a smaller share of that shrinking pie, thanks both to rising domestic gas production and imports from Russia’s 38 billion-cubic meter Power of Siberia pipeline, which opened in December.These conditions should cause producers to slow down — but if anything, things are going in the opposite direction. A record 71 million tons a year of LNG export capacity was commissioned in 2019, adding about 97 billion cubic meters to the global market, according to Morgan Stanley.That pace will surely decelerate, with projects such as Exxon Mobil Corp.’s P’nyang looking increasingly unlikely to be developed. Still, should we see more success from the faltering crackdowns on flaring — the wasteful practice of burning off associated gas from oilfields — there's another 140 billion cubic meters of gas supply out there that's currently being vented into the atmosphere.Rock-bottom prices for gas, wind and solar swept through the energy sector in the western hemisphere over the past decade. To date, only renewables have really made an impact in Asia. With a flood of new gas supply approaching, that dam could be about to break.To contact the author of this story: David Fickling at email@example.comTo contact the editor responsible for this story: Rachel Rosenthal at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.David Fickling is a Bloomberg Opinion columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Oil posted the biggest gain in almost six weeks as signs that the spread of Asia’s coronavirus may be slowing boosted investor confidence that crude’s sell-off has peaked.Futures in New York climbed 2.5% on data from China that showed a drop in suspected coronavirus infections. The positive sentiment was largely undeterred by a government report showing U.S. crude stockpiles posted the largest build since November.“Markets are pricing in that we may have hit peak coronavirus fear,” said Daniel Ghali, a commodities strategist at TD Securities. “Investors that were bearish are thinking they want to start to take their foot off the pedal.”Prices have also drawn some support from signals that OPEC and its partners may intervene to shore up the market. The coalition slashed its estimate for demand growth in the first quarter by 440,000 barrels a day, as the coronavirus hits fuel consumption in China. In a meeting with Energy Minister Alexander Novak, Russia’s key oil producers voiced support for the idea of extending OPEC+ output cuts into the second quarter, but made no final decision.Saudi Arabia has been the strongest advocate for production cuts of an additional 600,000 barrels a day. Russia has remained noncommittal, saying more time was needed to study the proposal.The Energy Information Administration reported that nationwide crude inventories rose 7.46 million barrels last week, more than double the 3.2 million-barrel increase forecast by analysts in a Bloomberg survey. The report also showed a surprise gasoline draw of 95,000 barrels.Gasoline futures surged 4.4%, the biggest rise increase since September, after a fire broke out overnight at Exxon Mobil Corp.’s Baton Rouge oil refinery in Louisiana, halting production at the fifth-biggest fuel-making plant in the U.S.West Texas Intermediate crude for March delivery gained $1.23 to settle at $51.17 a barrel on the New York Mercantile Exchange.Brent for April settlement climbed 3.3% to settle at $55.79 a barrel on the ICE Futures Europe exchange in London, putting its premium over WTI at $4.38.The market’s structure also showed signs of strengthening with the discount on front-month Brent contracts versus the second month narrowing to 12 cents, suggesting fears of a supply glut may be easing.Still, discounts have held for Brent contracts for the majority of 2020, a pattern known as contango that typically reflects oversupply.“We’ve seen a lift because in the very near term, it’s all about the virus,” says Judith Dwarkin, chief economist at RS Energy Group. “Until we’re out of the woods the market will be laser focused on slowing demand growth and if OPEC waits to implement cuts until April, it may be too late to deal with the bulge in supply.”To contact the reporter on this story: Jackie Davalos in New York at email@example.comTo contact the editors responsible for this story: David Marino at firstname.lastname@example.org, Mike Jeffers, Reg GaleFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
ExxonMobil's (XOM) aggressive capital spending program might have disappointed investors. However, despite a conservative capital budget, Chevron (CVX) is projecting handsome production growth.
The energy companies that own Israel's offshore Leviathan gas field are seeking partners to build a floating liquefied natural gas (FLNG) platform and possibly to explore for oil in ultra-deep water, a CEO from the group said. Leviathan, one of the world's biggest offshore gas discoveries of the last decade, has turned Israel into an energy exporter in a tumultuous region and has weaned it off more polluting imports, notably coal.
(Bloomberg Opinion) -- Cars are very important to oil producers, obviously. Not just because they drink up the stuff. They also offer a ghost-of-Christmas-future dose of foresight.Daimler AG, the epitome of luxuriously engineered combustion, just slashed its dividend by 72%. As my colleague Chris Bryant wrote here, Tuesday’s announcement capped a string of profit warnings and other setbacks. That the stock actually rose briefly on this news tells you just how desperate investors were for a strategic reset, Band-Aid rip notwithstanding.It is the cut to Daimler’s payouts that should have oil executives sweating.Coronavirus has made amateur virologists out of many an investor, with the emphasis heavily on “amateur.” Tuesday morning saw oil prices, and stocks, surge as the market made one of its habitual segues from rank fear to blithe optimism. The truth is that, whatever the current rate of new infections, the sector already has a chronic condition: cost-of-capital-itis.Like Daimler, oil majors are juggling the demands of investing during a downturn, planning for a sea change in their business, and keeping investors sweet with payouts. Royal Dutch Shell Plc and BP Plc now yield roughly 7%. Even mighty Exxon Mobil Corp. now yields close to 6%, the highest since the merger that spawned the combined company.Exxon’s valuation looks especially vulnerable. Its recent exploration success, a virtual guarantee of high multiples in years past, is now viewed as a call on cash shareholders would rather have. Its integrated model has offered little respite in this weak oil market, with fourth-quarter results from the chemicals business especially poor — even before coronavirus piled on in this quarter. As it stands, the company has been selling assets and taking on debt to meet payouts, and consensus forecasts imply earnings will struggle to cover dividends through this year and next.The underlying cause is a collapse in return on capital, due to a wave of heavy spending on the back of the last commodity supercycle (when China offered an unalloyed boost). Returns have not only dropped but also compressed in range between the majors.Analysts at Evercore ISI estimate Exxon’s return on capital employed dropped to just 4.4% in 2019, on par with 2016 — when average Brent crude prices were 30% lower. Looking at Exxon alongside Chevron Corp., BP and Shell, it is telling that average returns for the group in 2013 — the last full year of triple-digit oil prices — were roughly those of 2009, just after the financial crisis. This problem predates not just coronavirus but also the oil crash.This really becomes apparent when comparing energy’s share of the S&P 500 with oil prices. The chart below divides the annual real Brent oil price by energy’s weighting to provide a ratio that can be thought of like this: How many real dollars per barrel does it take to buy the sector one percentage point in the S&P 500?Hence, investors are demanding more. Compounding this is the issue Daimler also faces: transition.One of Daimler’s failures has been its relatively slow development of electric vehicles. From one angle, that seems like a reasonable approach for an incumbent: Let others make mistakes and lose money developing a new market, and then deploy one’s established brand and resources to clean up when the concept has been road-tested. In practice, financial markets are nonplussed.It has become a cliche to say Tesla Inc.’s supercharged market cap is now a multiple of stalwarts such as Daimler’s, despite the California upstart’s miniscule market share. Don’t get me wrong; I cannot justify Tesla’s valuation on its fundamentals or any reasonable projection (see this). But that is kind of the point. Many of Daimler’s problems — high costs, production delays and even legal tangles — are all familiar at Tesla too. Yet the latter has gotten a pass. It may not be right, but as the old saw goes, irrationality’s bank balance can be way bigger than yours.A few years back, when Tesla was worth a mere $30 billion, I wrote oil majors should fear the company. Not because it would necessarily conquer the world. Rather, because investors were falling over themselves to give it capital in the absence of domination (or profits), in marked contrast to their treatment of the cash-spewing titans of oil. Imagine the fallout if Exxon CEO Darren Woods took to Twitter (in fact, just pause on that idea for a second) and announced a fanciful take-private deal. I’m no prophet, but I’m pretty sure (a) the stock wouldn’t have almost tripled since and (b) he would no longer be CEO.Daimler’s predicament is another reason to be fearful. Like the majors, it must convince investors that, despite past failings, it has what it takes to make the right choices (and bets) in an energy-transportation complex undergoing profound change after a century of incumbency. Like them, it must somehow make the necessary investment using capital that has become scarcer, and therefore pricier. On Wednesday, BP’s new CEO (and Instagrammer) Bernard Looney is due to lay out his vision for navigating this new world. Without wishing to front-run his speech, it’s worth reading these comments made by Daimler boss Ola Kallenius on Tuesday:We understand that we are in transformation. Yes, the auto industry in the next years, next decade is going to change fundamentally. This company is going to change fundamentally. We are prepared to take the actions and the measures that we need to take to make sure that we come out as a winner of this transformationSwap in “energy” for “auto,” and Looney could repurpose those words effortlessly. Change is now a constant for this business, and it has the yields to show for it.(Corrects Daimler’s dividend yield.)To contact the author of this story: Liam Denning at email@example.comTo contact the editor responsible for this story: Mark Gongloff at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Liam Denning is a Bloomberg Opinion columnist covering energy, mining and commodities. He previously was editor of the Wall Street Journal's Heard on the Street column and wrote for the Financial Times' Lex column. He was also an investment banker.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Exxon Mobil Corp. has been scrutinizing employee-travel budgets since the largest North American oil explorer posted its worst quarterly profit in almost four years, according to people with knowledge of the matter.Auditing teams have fanned out to some divisions to analyze travel requests involving industry conferences, according to the people, who asked not to be identified because they aren’t authorized to talk publicly. An Exxon spokesman didn’t respond to a request for comment.The austerity measures are unusual for Irving, Texas-based Exxon, one of the few major explorers to avoid job or dividend cuts during the 2014-16 oil slump. The restrictions may also signal intensifying concern among Exxon leadership about the prospects for a recovery as China’s coronavirus outbreak slams global energy demand.Although Exxon has thus far shielded its sacrosanct dividend from the oil-price slump, chinks began to appear in the crude giant’s armor as far back as 2016, when S&P Global Inc. revoked the company’s gold-plated credit rating for the first time since the Great Depression. Although Exxon has steadily raised annual dividends, cash flow hasn’t kept pace, forcing the company to use borrowed money and asset sales to fund the payouts.“It’s only prudent,” said Jennifer Rowland, an analyst at Edward D. Jones & Co. in St. Louis who has a ‘hold’ rating on the shares. “Commodity margins across the board are at decade low and oil and gas prices are also down. What’s in their control is costs.”Exxon has been punished by investors since disclosing fourth-quarter results on Jan. 31 and warning that conditions in its chemical business will remain “challenging” for the rest of this year. Since that report, the company shed about $17 billion in market value.The company’s stock rose 1.2% to $60.67 at 11:55 a.m. in New York.U.S. oil and gas explorers large and small are straining under the dual pressures of weak commodity prices and investor demands for richer returns. In January, Chesapeake Energy Corp. terminated a deferred-compensation plan as part of broader cost-cutting efforts, just weeks after warning it may go bust. Meanwhile, Oasis Petroleum Inc. has cut executive salaries and incentive payouts.‘Unique Position’Apache Corp., Halliburton Co. and Pioneer Natural Resources Co. have also made deep cost cuts as the sector’s outlook has darkened.“Exxon is in a unique position among the majors right now in growing and spending aggressively in a counter-cyclical manner,” said Matt Murphy, an analyst at Tudor, Pickering, Holt & Co., who has a ‘hold’ rating on the stock. “In this environment, to continue to grow the dividend, it makes sense to wring out non-core costs and strip that outspend down a little bit.Murphy estimates Exxon will outspend cash flow to the tune of $10 billion this year.(Updates with analysts’ comments in fifth, 10th paragraphs)\--With assistance from Kevin Crowley.To contact the reporters on this story: Lucia Kassai in Houston at email@example.com;Joe Carroll in Houston at firstname.lastname@example.orgTo contact the editors responsible for this story: Simon Casey at email@example.com, ;David Marino at firstname.lastname@example.org, Joe Carroll, Carlos CaminadaFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Few people are in a position to influence Jamie Dimon, the chief executive who turned JPMorgan Chase & Co. into the biggest U.S. bank. The longtime climate skeptic who turned Exxon Mobil Corp. into the biggest U.S. oil company is one of them.Lee R. Raymond, 81, holds the top position on JPMorgan’s 11-member board after Dimon. He has occupied his seat for 33 years, making him both the longest-serving and oldest director among Wall Street’s biggest banks. He helped guide JPMorgan through mega-mergers after mastering them at Exxon, backed Dimon during his rise and has stood by him. Even as the bank draws fire for lending billions to the fossil-fuel industry, the former oil executive’s power inside the $2.7 trillion financial firm has gone little noticed. That’s about to change.A nonprofit group called Majority Action is beginning a fight this week to use shareholder voting to remove Raymond from JPMorgan. The group argues that Raymond’s role as the lead independent director and his coziness to Big Oil compromises JPMorgan’s capacity to react to the climate crisis. “This is really going to be an important moment,” said Eli Kasargod-Staub, executive director of Majority Action. “The gap between what is needed and JPMorgan’s behavior is egregious.”The oil veteran’s relationship with Dimon gives him special status inside the bank, and makes the campaign against him a longshot. Raymond is described in public filings as the chief executive’s sounding board, adviser on long-term strategy and guide for annual performance reviews, as well as a key voice in who will one day succeed him. He oversees the board’s agenda, has the discretion to call members together whenever he wants, and runs meetings in Dimon’s absence.Raymond has a reputation among colleagues for being brilliant, logical and gruff, an old-school businessman. “After everyone had his say or her say, Lee’s point of view was heavily influential with everyone else,” said former Hearst boss Frank A. Bennack Jr., who served on JPMorgan’s board until 2004. “I would describe him as eminently able to influence.”A spokesman for the bank said Raymond “contributes to the success of the company in countless ways.” In his leadership, the spokesman added, he ensures “that the board represents a wide range of views and perspectives and hears from them as well.”Majority Action, which works with investors to hold corporations accountable, has managed to win attention from shareholders. The group failed to topple Facebook Inc. boss Mark Zuckerberg but helped pressure gun maker Sturm Ruger & Co. into engaging with investors over safety concerns. They’re now trying to sway JPMorgan into not re-nominating Raymond or else persuade investors to vote against him at the annual board election in May. Even though he left the top job at Exxon Mobil in 2005, the group sees him as intertwined with the fossil-fuel industry.The length of Raymond’s tenure may help the effort to end it. He should have aged out almost a decade ago, but he has received special approval to stay on past the board’s own retirement age of 72. His 33-year run is three times longer than what JPMorgan’s own asset-management arm considers appropriate for independent directors across most of the world.Dimon is the only top executive to remain at the helm after leading a big U.S. bank through the financial crisis, and he’s the one who ultimately decides how JPMorgan navigates global warming. It had $44 billion of loans out to the oil and gas industry as of the end of the September 2019, the most after Citigroup Inc. Those loans accounted for just 4.7% of JPMorgan’s corporate total, a slight decline from a year earlier. Climate change is already changing Wall Street. JPMorgan’s environmental policy now “recognizes that climate change poses global challenges and risks,” and the firm is expected to discuss environmental issues at its investor day later this month, according to a person briefed on its plans. Joe Evangelisti, a spokesman, said JPMorgan supports the 2015 Paris Agreement on climate change and is more than halfway to a goal of facilitating $200 billion of clean-energy financing through 2025. “We continually strengthen our practices and policies around environmental issues, with more to come,” he said.Last year, in another example of climate concern reaching into high finance, Goldman Sachs Group Inc. pledged to turn down financing that supports new coal mines and upstream Arctic oil exploration. The European Investment Bank, the lending arm of the European Union and the biggest multilateral financial institution in the world, recently adopted an unprecedented strategy to end funding for fossil-fuel energy projects.Things were different when Raymond was a master of the oil industry. He joined Exxon Corp. in 1963 and rose to the top job three decades later. During his time at the helm he cut investment in renewable fuels, pushed countries to unite against emission limitations, and in 1997 said the planet was cooling. The head of Greenpeace’s climate campaign once called him “the Darth Vader of global warning.”‘I would describe him as eminently able to influence’JPMorgan has been a top banker to Exxon for decades and advised on two of its biggest takeovers, including the merger that created Exxon Mobil in 1999 by reuniting two old pieces of the Standard Oil monopoly. Only a few months later, as a board member of what was then J.P. Morgan & Co., Raymond encouraged the merger with Chase Manhattan Corp., according to a person who worked with him. The two corporate giants Raymond helped put together are among the few public U.S. companies to have ever made more than $35 billion in annual profit.JPMorgan has relationships with other members of Raymond’s family. It has extended credit to an energy-investment firm run by one of Raymond’s triplet sons, according to public disclosures, and companies connected to Energy & Minerals Group, a private equity firm run by a second. The third son runs a drilling company in which the four men have owned stakes, according to a 2018 filing. (JPMorgan said it doesn’t comment on specific clients.)Wall Street's profits from the oil industry are under more scrutiny than ever. Dimon said at the World Economic Forum in January that climate change will be solved by government policy, not “beating up on fossil fuel companies and banks.” A few weeks later, environmental activists disrupted a talk he gave in Florida. They’ve criticized his rivals, too. Climate protesters with whistles and drums stopped traffic outside Goldman’s London office last April, and others kept Wells Fargo & Co. employees from entering its San Francisco headquarters in September. Majority Action’s new effort against Raymond, backed by environmental group Rainforest Action Network, shows there are more targets at big banks than chief executives. “He should be out,” U.S. Senator Sheldon Whitehouse, a Rhode Island Democrat who sits on the finance and environment committees, wrote Monday on Twitter. “He lied about climate for years.”Environmental activist Bill McKibben called JPMorgan’s annual vote “a big slap in the face to anyone who cares about the future.” He was arrested at a branch of the bank in Washington last month while protesting against oil investments. “There’s a big campaign against Chase,” he said, “and it’s going to get bigger.”(Adds comment by U.S. Senator Sheldon Whitehouse in the second-to-last paragraph.)To contact the authors of this story: Max Abelson in New York at email@example.comMichelle Davis in New York at firstname.lastname@example.orgTo contact the editor responsible for this story: Aaron Rutkoff at email@example.com, Michael J MooreFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- How do you debunk a conspiracy theory?Suppose people think that Israel carried out the 9/11 attacks or that the moon landing was faked. Or that Koch money or Hillary Clinton or Pete Buttigieg was behind the Iowa caucus fiasco, or that the coronavirus comes from a fiendish plot by multinational corporations. Conspiracy theorists tend to be emotionally invested in their beliefs, meaning that if you contradict them, you might make them angry. And if you offer them evidence that they’re wrong, you might make them angrier still – and so strengthen their commitment to their belief.Social scientists have found that, in some contexts, corrections actually backfire.If, for example, people still think that the Affordable Care Act contains death panels, a correction can make those people even more certain that the law contains death panels. One reason is that when people are told they’re wrong, they are immediately put on the defensive, and they work hard to defend their beliefs. Another reason is pure suspicion: Why would anyone bother to deny it, if it isn’t true?Apart from their emotional commitment to their beliefs, conspiracy theorists usually know a great deal. They’ve studied the subject at hand. If the issue involves the assassination of John F. Kennedy, the moon landing, the attacks of 9/11 or the Democratic caucuses in Iowa, there’s a good chance that the conspiracy-minded will have a lot of (apparent) evidence to support their theories. It’s not easy to convince such people that they’re full of nonsense. If you’re looking for help, some helpful hints come from recent research from Thomas Wood of Ohio State University and Ethan Porter of George Washington University. Studying the views of 10,100 people on about 52 different issues, Wood and Porter find that correcting people’s false beliefs about the facts really can work -- and for Democrats and Republicans alike — in certain cases. For example, many Americans believe that the abortion rate is rapidly increasing; that undocumented immigrants commit crimes at higher rates than the general population; that teen pregnancy is on the rise; that whites will soon be a minority in the U.S.; and that U.S. taxes are the highest in the world. All of these beliefs are false.After survey participants read a factual correction on these questions, they tended to believe it. This is so even if their previous belief fit well with their political convictions – and even if the correction suggested that their preferred political party was spouting falsehoods. But Wood and Porter were careful to use corrections from generally trusted institutions, lacking any obvious political affiliation: the Congressional Research Service, the Bureau of Labor Statistics, the Federal Bureau of Justice Statistics, the Organization for Economic Cooperation and Development. People could not easily respond to the corrections by dismissing those who were responsible for them. Though none of these corrections involved conspiracy theories, the central finding offers a large lesson: A conspiracy theorist is likely to care a lot about the source of an attempted refutation – perhaps even more than about its content. If Exxon says it did not conspire to suppress information about the risks of climate change, it won’t be especially credible. But if environmental organizations (such as the Sierra Club and Greenpeace) and other oil-industry critics drew the line to defend prominent companies against specific accusations that underlie conspiracy theories, people might be moved. For those who want to refute such theories, it’s important to find “surprising debunkers” – people who are not merely trusted but who are also expected to be on the same side as those who embrace the theories.A great deal of work suggests that conspiracy theorists feel fearful and threatened, and perceive a lack of control over their own lives. Finding patterns in seemingly random events helps to restore a sense of control, even or perhaps especially if the patterns seem to reveal some kind of conspiracy. But if people are given a feeling of control or are affirmed, even momentarily, they might be willing to agree that the supposed patterns are illusory. There is a corollary. Conspiracy theorists are often members of some tribe, with a shared set of political, ethical or religious convictions. Smart debunkers begin by suggesting that they are part of the same tribe, or that they like and respect its members and agree with them on important matters. A gesture like that can go a long way toward increasing receptivity to what debunkers have to say. To be sure, there is a risk that some conspiracy theorists will only hear the conciliatory parts of what the debunkers are telling them, and ignore the rest. But an effort to show respect, and to find significant common ground, can open minds, even among those who seem strongly committed to outlandish beliefs.To contact the author of this story: Cass R. Sunstein at firstname.lastname@example.orgTo contact the editor responsible for this story: Katy Roberts at email@example.comThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Cass R. Sunstein is a Bloomberg Opinion columnist. He is the author of “The Cost-Benefit Revolution” and a co-author of “Nudge: Improving Decisions About Health, Wealth and Happiness.”For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.