Chevron Triples Low-Carbon Investment, but Avoids 2050 Net-Zero Goals

Oil producers globally are under mounting pressure from investors and governments to join the fight against climate change and sharply cut greenhouse gas emissions by mid-century, with U.S. majors lagging efforts by European companies.

Chevron said half of its spending will go to curb emissions from fossil fuel projects. A total of $3 billion will be applied for carbon capture and offsets, $2 billion for greenhouse gas reductions, $3 billion for renewable fuels and $2 billion for hydrogen energy.

Chevron is not ready to commit to net-zero targets. Chief Executive Michael Wirth told investors on Tuesday that the company does not want to “be in a position in which we lay out ambitions that we don’t believe are realistic and deliverable.”

Just a minority of its shareholders currently support a strategy used by European oil companies to invest in less-profitable solar and wind power, he added.

“The board is looking to see, how do you deliver a strategy that meets the needs of shareholders today and the expectations of shareholders for the future?” the CEO said. Directors may re-address a net-zero goal later this year with the company’s climate report, Wirth said.

European oil producers have set plans to shift away from fossil fuels with larger investments in renewables and 2050 emission targets. U.S. oil producers Chevron, Exxon Mobil Corp and Occidental Petroleum sought to reduce carbon emissions per unit of output while backing carbon capture and storage, and doubling down on oil.

BP Plc has said it will invest $3 billion-4 billion a year in low-carbon projects by 2025 and shrink oil and gas production by 40% in the next decade. Royal Dutch Shell Plc in February set annual investments of $2 billion-3 billion in clean energy.

Chevron maintained its goal of paring greenhouse gas intensity by 35% through 2028 compared to 2016 levels from its oil and gas output.

It said it would expand renewable natural gas production to 40 billion British thermal units (BTUs) per day and increase renewable fuels production capacity to 100,000 barrels a day to meet customer demand for renewable diesel and sustainable aviation fuel.

“We expect to grow our dividend, buy back shares and invest in lower-carbon businesses,” Wirth said.

Chevron aims to increase hydrogen production to 150,000 tonnes a year to supply industrial, power and heavy duty transport customers and raise carbon capture and offsets to 25 million tonnes a year by co-developing regional hubs.

Environmentalists said Chevron’s focus is on offsetting emissions from oil and gas output, not reducing oil output.

“Chevron’s new announcement does not represent a particularly large strategic shift,” said Axel Dalman, an associate analyst with climate change researcher Carbon Tracker. “The main item is that they plan to spend more on ‘lower-carbon’ business lines.”

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Sabrina Valle in Houston, Arunima Kumar in Bengaluru; additional reporting by Laura Sanicola in New York; Editing by Arun Koyyur, Will Dunham, David Gregorio and Mark Porter)

Energy Stocks Help Steady FTSE 100 After Worst Week Since Mid-August

By Devik Jain

The blue-chip index climbed 0.6%, after sliding 1.5% last week on concerns of a stalling domestic economic recovery.

Oil majors BP and Royal Dutch Shell each rose nearly 2%, tracking crude prices, while banks were 1.9% higher. [O/R]

The domestically focused mid-cap FTSE 250 index advanced 0.2%.

Investor focus is now on data releases in Britain and the United States later this week, including jobs and keenly watched inflation and retail sales, for clues on monetary policy actions ahead of central bank meetings next week.

“There appears to be a build up in anxiety that the continued rise in inflationary pressure may well be much more persistent than central bankers would have us believe,” Michael Hewson, chief market analyst at CMC Markets UK, said.

“In July both UK and U.S. consumer prices saw a pause as some base effects dropped out of the headline numbers, and while there is some expectation that this might continue in August, this appears to be more of a hope than anything else.”

Last week, a Reuters poll forecast that the Bank of England will raise borrowing costs by end-2022, earlier than previously thought, and it could come even sooner.

Among individual stock moves, Associated British Foods fell 2.4% after fourth-quarter sales at its Primark fashion business were lower than expected.

Recruiter SThree rose 3.8% after forecasting annual earnings “significantly above” estimates.

Transport company FirstGroup jumped 3.2% after saying its First bus passenger volumes reached 65% of pre-pandemic levels on average in recent weeks.

Martin Sorrell’s S4 Capital fell 3.8% despite the advertising group lifting its annual gross profit guidance, driven by strong demand from global tech platforms.

(Reporting by Devik Jain and Amal S in Bengaluru; Editing by Shounak Dasgupta and Alexander Smith)

Fifty Shades of Green: EU Sustainable Fund Rules Muddy the Waters

A Reuters analysis of funds marketed to retail investors increasingly hungry for anything green shows asset managers are adopting a wide range of strategies to justify the sustainable label since the EU brought in disclosure rules in March.

The EU’s Sustainable Finance Disclosure Regulation (SFDR) is an attempt to deliver transparency for investors focussed on environmental, social and governance (ESG) issues but fund managers say the definition of sustainability is too vague and has created confusion about what makes the cut.

Take the Allianz Global Water fund.

It actively invests in companies that improve the supply, management and quality of water and is marketed as falling under Article 8 of the SFDR, which means it is a fund that promotes “among other characteristics, environmental or social characteristics, or a combination of those characteristics”.

Now take one of Legal & General Investment Management’s (LGIM) Article 8 exchange-traded funds (ETF).

The L&G UK Equity UCITS ETF tracks the Solactive Core United Kingdom Large & Mid Cap Index, which excludes coal miners and firms that make weapons such as cluster bombs or have breached U.N. principles on corporate values.

Its top 10 holdings are the same as for L&G funds tracking the FTSE 100 index that don’t carry the Article 8 label and include oil giants BP and Royal Dutch Shell, miner Rio Tinto and British American Tobacco.

L&G said the fund was considered Article 8 because it promotes sustainability characteristics by applying LGIM’s Future World Protection List and this was a “binding element” of the investment process.

“The lens we should use is what is right. It’s not just about what is legally required because it seems not very much is legally required,” said Eric Christian Pedersen, head of responsible investments at Nordea Asset Management.

GREEN RUSH

The new EU rules have sparked a rush by investment firms to badge products as sustainable as they seek to grab a share of the booming market in sustainable mutual funds that hit a record $2.3 trillion in the second quarter.

From March 10, the rules automatically placed all investment funds into a coverall Article 6 category. Managers could then upgrade them to Article 8, or Article 9 which is for products with an explicit sustainable investment objective.

The investment industry has dubbed Article 8 funds “light green” and Article 9 “dark green”, though the EU regulations do not use those terms.

A European Commission spokesperson said its rules were designed to ensure funds were transparent about the sustainability of products so investors could make choices, and was not a labelling scheme.

Reuters asked 20 of the biggest fund houses for a list of products they market as Article 8 or 9.

An analysis of the funds of the 14 firms that replied shows some Article 8 products have limited claims to sustainability, such as those tracking conventional stock and bond indexes, investing in fossil fuels or buying debt from countries with weak ESG standards such as Saudi Arabia and Nigeria.

Some claims hinge on funds excluding securities they would not have bought anyway, based on the index being tracked.

For some in the industry this represents so-called greenwashing, where the benefits of a business or asset are exaggerated to attract environmentally aware investors.

Hortense Bioy, director of sustainability research at Morningstar, said Article 8 funds ranged from climate-themed green to “very, very light green”, excluding just a few firms.

“Managers need to ask if they are even relevant,” she said. “That is the key message: investors shouldn’t expect anything from Article 8.”

INDEX TRACKERS

Industry experts say none of the asset managers is breaking any rules. Managers determine themselves which article to apply and Brussels does not check whether claims are justified.

The Reuters analysis shows some managers are more likely to brand funds as sustainable than others.

Two of Europe’s biggest firms, Alliance Bernstein and AXA Investment Management, classify nine in every 10 euros of assets they manage under the scope of SFDR as Article 8 or 9, according to data they supplied to Reuters.

Others such as Pictet Asset Management and Allianz Global Investors place a little over half of their relevant assets in those categories, their data showed.

Morningstar data published in July shows a third of the assets falling under SFDR are now billed as Article 8 or 9, with Article 6 products disappearing from recommendation lists sent by investment advisers to retail investors.

Many Article 8 funds have clear sustainability criteria, such as strategies that invest in businesses with the lowest carbon impact in their sectors, or Allianz’s water-focused fund.

For others, that’s not always the case. Candriam’s Cleome Index Europe Equities is another Article 8 product. It tracks the MSCI Europe index but excludes companies that don’t comply with the U.N. principles.

Critics say such exclusions are very limited.

When asked for an example, Candriam did not point to any company expelled from the U.N. list that is also part of MSCI Europe. The Candriam fund’s top 10 holdings replicate the index.

A Candriam spokesperson said it also applies exclusions on companies materially involved in controversial weapons, tobacco and thermal coal, and the Cleome equity fund uses proprietary ESG analysis relative to the benchmark, justifying Article 8.

Morningstar analysis shows one in four Article 8 funds has exposure to companies involved in controversial weapons and one in five to tobacco. A third of Article 8 and 9 funds have more than a 5% exposure to fossil fuel firms.

‘NASTY’ ESG?

Demand for funds with a sustainable label is soaring.

“There is a clear commercial opportunity,” said Eric Borremans, head of ESG at Switzerland’s Pictet Asset Management, which classes 57% of its assets as Article 8 or 9.

Borremans said Pictet had no index-tracking Article 8 funds but planned to apply the label to some after incorporating more exclusions.

U.S. investment giant BlackRock told Reuters it expected to exceed a target of putting 70% of its new, or rebranded, products this year under Articles 8 or 9.

Some funds use ESG thresholds to justify sustainable labels.

JPMorgan Asset Management says 51% of the securities in its Article 8 range must carry an ESG score in the top 80%. These are scores fund firms or third-party providers give companies based on ESG metrics such as carbon usage, governance or human rights in supply chains.

Critics say such thresholds are too weak.

“You have funds saying most of our holdings are not nasty and therefore I’m ESG,” said Pedersen at Nordea, which requires 100% of its Article 8 holdings be above a minimum ESG score.

The JPMorgan threshold, for example, also means 49% of companies in its funds could rank in the bottom 20% for ESG goals, although the funds exclude sectors such as tobacco, controversial weapons and coal miners.

JPMorgan Asset Management did not respond to questions about ESG scores. A spokesperson said the firm remained “focused on a thoughtful and thorough approach to the implementation of SFDR”.

Pictet’s Borremans said funds interpreting the rules loosely now can get away with it, but strategies sailing close to the wind will eventually be exposed.

By next year, the EU will flesh out its taxonomy — a list of environmentally sustainable economic activities — and from July 2022 funds must detail how they meet sustainability criteria based on the EU’s Regulatory Technical Standards (RTS) that will clarify disclosure requirements.

“It could hurt the reputation of an asset manager to offer financial products as falling under Article 8 and 9 or as taxonomy aligned if this cannot subsequently be backed when the RTS enters into application,” the European Commission spokesperson said in emailed comments.

Amundi’s head of cross-border product, Florian Schneider, said SFDR rules made clear products with minimal exclusions were Article 8.

“The danger is everyone blindly assuming all Article 8 funds offer the same level of ESG integration when there are very different shades of green.”

For a look at all of today’s economic events, check out our economic calendar.

($1 = 0.7274 pounds)

(Additional reporting by Simon Jessop; Editing by Sujata Rao, Alexander Smith and David Clarke)

Why BP Stock Is Up By 6% Today

BP Raises Dividend And Announces New Buyback Program

Shares of BP gained strong upside momentum after the company released its second-quarter results. BP reported revenue of $37.6 billion and GAAP earnings of $0.92 per share, exceeding analyst estimates.

The company has also increased its dividend by 4% and announced that it would execute a share buyback of $1.4 billion prior to announcing its Q3 2021 results. A strong buyback program which will be completed in just several months provided additional support to the stock during the current trading session.

BP has also noted that the company expected that it would be able to deliver buybacks of about $1 billion per quarter in case Brent oil price stays around $60 per barrel. Currently, Brent oil trades near the $72 level. In addition, the company has the capacity to increase its dividend by around 4% annually through 2025.

What’s Next For BP Stock?

BP shares remain attractive for income-oriented investors after the recent increase of the dividend, and such investors may provide additional support to the company’s stock in the upcoming trading sessions. The new buyback program and the company’s plans to buy back $1 billion of its stock each quarter will serve as additional catalysts.

Analysts expect that BP will report earnings of $2.8 per share in 2021 and a profit of $3.12 per share in 2022, so the stock is trading at roughly 8 forward P/E which is very attractive in the current market environment. Earnings estimates have been trending higher in recent weeks and will likely move even higher after the solid second-quarter report.

The main risk for BP shares right now is the potential sell-off in the oil market, which could be triggered by problems with coronavirus in China. However, internal positive catalysts may provide enough support to BP shares even in this negative scenario. In case oil prices stay near current levels, BP stock will have a good chance to get back to yearly highs due to solid financial performance, higher dividend and a new buyback program.

For a look at all of today’s economic events, check out our economic calendar.

BP Shares Climb After Payout Boost, Energising Transition

By Ron Bousso

The strong results, underpinned by higher sales at petrol stations, went some way towards easing investors’ concerns over BP’s plan to shift away from oil and gas to renewable and low-carbon energy to combat climate change.

The 4% dividend increase coupled with a $1.4 billion share repurchase over the next three months drove BP shares 5.6% higher by 1130 GMT, exceeding peers Royal Dutch Shell and TotalEnergies, which were up by over 2%.

Tuesday’s announcement brings BP’s total shareholder payouts in 2021 to around 4.4 billion pounds ($6.13 billion), representing more than 7% of its market capitalisation, said Russ Mould, investment director at AJ Bell.

BP, which plans to reduce its oil output by 40% or 1 million barrels per day by 2030, generated surplus cash of $2.4 billion in the first half of the year.

“Investors must now weigh up whether that return offers more than compensation for the risks associated with owning BP’s stock, as the company tries to maximise the value of its existing hydrocarbon assets… while investing in renewables,” Mould said.

Rivals, including Shell, TotalEnergies and Chevron, also boosted shareholder returns last week, reflecting a recovery from the impact of the pandemic on energy demand.

BP increased its dividend to 5.46 cents after it was halved to 5.25 cents in July 2020 for the first time in a decade.

BP’s dividend BP’s dividend https://graphics.reuters.com/BP-DIVIDEND/gdvzyrarapw/chart.png

The company is repurchasing shares after in April announcing a $500 million buyback plan to offset dilution from an employee share distribution programme.

Chief Executive Bernard Looney said stronger performance and an improving outlook would allow the company to press ahead with a shift to cleaner energy.

“The strengthening of the balance sheet and the excess cash flow allow us to prosecute our agenda around the energy transition,” Looney told Reuters.

BP expects global oil demand to recover to pre-pandemic levels in the second half of 2022.

Its underlying replacement cost profit, the company’s definition of net earnings, reached $2.8 billion in the second quarter, beating the $2.15 billion expected by analysts.

That was up from $2.63 billion in the first quarter and marked a rebound from a loss of $6.68 billion a year earlier.

The results were also buoyed by stronger demand for fuel, including aviation fuel, and higher profit margins at convenience stores in BP’s petrol stations, it said.

BP’s net debt fell dropped to $32.7 billion from $40.1 billion.

BP’s profits https://graphics.reuters.com/BP-RESULTS/xmpjogqwbvr/chart.png

STRONGER OUTLOOK

BP said it has increased its price forecast for benchmark Brent crude oil to 2030 to reflect expected supply constraints, while also lowering its longer-term price forecast because it expects an acceleration in the transition to renewable energy.

As a result, the company increased the pre-tax value of its assets by $3 billion, following writedowns of more than $17 billion last year.

The company said at an oil price of $60 a barrel, it expects to be able to buy $1 billion in shares and boost its dividend by 4% annually through 2025.

Brent oil prices rose in the second quarter to an average of $69 a barrel from $61 in the previous quarter and from $29.56 a year earlier.

($1 = 0.7177 pounds)

(Reporting by Ron Bousso, editing by Anil D’Silva, Jason Neely and Barbara Lewis)

BP, EnBW Enter Joint Bid in Scottish Offshore Wind Lease Round

Crown Estate Scotland’s ScotWind wind leasing tender is its first for a decade, and is aimed at supporting the development of around 10 gigawatts of offshore capacity.

BP said its joint bid with EnBW represented a potential 10 billion pound ($14 billion) investment into Scottish offshore wind projects and support infrastructure including ports, harbours and shipyards.

The bid focused on fixed-bottom wind turbines rather than floating turbines which other companies bid for, Dev Sanyal, BP’s head of for gas and low carbon, told Reuters.

Floating offshore wind technology is still in early stages of deployment around the world and is significantly more expensive than fixed-bottom technology.

Under the rules of the tender the amount of money companies are expected to pay for the seabed lease is capped, unlike an auction round held earlier this year for seabed leases around the coast of England and Wales which attracted record prices.

BP said it would also invest in net zero industries, including green hydrogen production and accelerate the expansion of Scotland’s electric vehicle charging network.

BP and EnBW formed a 50-50 joint venture this year to develop and operate two offshore wind leases in the Irish Sea.

They face competition in ScotWind from companies such as Equinor, Orsted, Royal Dutch Shell, RWE, TotalEnergies and Macquarie Group’s Green Investment Group.

The results of the ScotWind leasing round are expected to be announced early next year.

($1 = 0.7261 pounds)

(Reporting by Nina Chestney, Susanna Twidale and Ron Bousso; Editing by Jason Neely and Mark Potter)

Consumer Staples, Energy Stocks Boost FTSE 100; Delayed Reopening Cap Gains

The blue-chip index rose 0.4% to its highest close since February 2020 highs. Dollar-earning consumer staples stocks, including Unilever, Reckitt Benckiser Group, British American Tobacco and Diageo Plc gained between 0.58% and 1.77%, on the weaker pound.

Energy stocks gained 0.32% as oil majors including BP and Royal Dutch Shell gained 0.7% and 1.8% respectively, tracking crude prices.

The domestically focused mid-cap FTSE 250 index fell 0.5%. Prime Minister Boris Johnson pushed back plans to lift most remaining COVID-19 restrictions to July 19, citing the rapid spread of the more infectious Delta variant.

Travel and leisure stocks fell 0.8%, with Flutter Entertainment Plc and Entain Plc among the top decliners.

There was good news however on the jobs front, as the number of employees on British company payrolls surged by a record 197,000 in May as COVID-19 restrictions eased, tax data showed.

Meanwhile global markets including London are focused on the U.S. Federal Reserve meeting for clues to a sooner-than-expected tapering of its monetary policy, prompted by rising inflation.

“The latest test of the market’s more relaxed attitude over rising prices is likely to come with the next meeting of the Federal Reserve tomorrow when its position on rates and stimulus will be announced,” said Russ Mould investment director at AJ Bell.

The FTSE 100 and the FTSE 250 have gained more than 11% this year, but they have oscillated in a narrow range since mid-April on worries that a COVID-19 resurgence might crimp the recovery, and rapid economic growth could lead to higher inflation.

Among stocks, Boohoo Group Plc gained 1.07% after the British online fashion retailer reported a 32% rise in sales in its latest quarter benefiting from rising demand as lockdown restrictions eased.

However, Non-Standard Finance slipped 17.2% as the subprime lender plans to raise around 80 million pounds ($112.98 million) in the third quarter potentially through a share sale.

(Reporting by Devik Jain and Amal S in Bengaluru)

 

Why BP Stock Is Trading At Yearly Highs

BP Stock Gains Ground As Oil Moves To New Highs

Shares of BP gained strong upside momentum and moved to yearly highs as oil continued to move towards the $75 level.

This year, oil majors faced skepticism from analysts due to pressure from environmental activists and governments around the world. However, BP stock is up by almost 40% this year, and shares of other oil majors are also moving higher.

The rally in the oil market served as the main catalyst for BP, but cheap valuation also played an important role.

Aanalysts expect that BP will report earnings of $2.67 per share this year and $2.92 per share in 2022. At current price levels, the stock is trading at less than 10 forward P/E for 2022 which is cheap for the current market environment.

In fact, BP is trading at a discount to peers like Chevron and Exxon Mobil, which serves an additional bullish catalyst for the company’s shares.

What’s Next For BP Stock?

In the near term, dynamics of BP shares will depend on the fluctuations of the oil market. Oil gained strong upside momentum in recent weeks, which is bullish for oil-related stocks, including BP.

It should be noted that earnings estimates for BP have been moving higher together with the price of oil, and this trend may be continued in the next few weeks since estimates typically lag market developments.

At less than 10 forward P/E for 2022, the stock looks really cheap. Unlike its American peers like Exxon Mobil and Chevron, BP stock is still well below pre-pandemic levels, and there is plenty of work to do to close the gap.

At this point, it looks that it will be hard for traders and investors to ignore cheap oil majors despite risks of the energy transition. In this light, BP stock has decent chances to continue its current upside move.

For a look at all of today’s economic events, check out our economic calendar.

Singapore’s Pavilion Energy Signs 10-year LNG Deal With BP

By Jessica Jaganathan

The long-term binding LNG sale and purchase agreement (SPA) is for the supply of about 0.8 million tonnes of LNG a year to Singapore, Pavilion and BP said in a joint statement. They did not give financial details.

This is the third long-term deal that Pavilion, owned by Singapore state investor Temasek Holdings, has signed since November. The other two deals were with Chevron Corp and Qatar Petroleum Trading.

Singapore is trying to diversify its gas imports as its long-term piped-gas contracts with neighbouring Indonesia start to expire from 2023.

As part of the deal, Pavilion and BP will also aim to jointly develop and implement a greenhouse gas quantification and reporting methodology, they said, adding that the methodology will cover emissions from wellhead-to-discharge terminal.

When issuing a buy tender for LNG last year, Pavilion had asked potential suppliers to outline their carbon mitigation efforts because it aims to eventually make its purchases carbon neutral.

Leading industry traders and consumers have been seeking more transparency on carbon and methane emissions in the gas value chain amid a global decarbonisation push.

While LNG is generally considered a cleaner fuel than coal or oil, there is no accepted standard for measuring the emissions from producing and transporting the fuel, which needs to be cooled to minus 162 degrees Celsius (minus 260 degrees Fahrenheit).

Eugene Leong, chief executive of BP’s trading & shipping division of Asia Pacific and Middle East, said the deal with Pavilion will not only help supply the Singapore market with LNG but also “co-develop a methodology to quantify the carbon intensity associated with the supply”.

(Reporting by Jessica Jaganathan; Editing by Muralikumar Anantharaman)

BP invests $220 Million in U.S. Solar Projects

The deal, for assets with production capacity of 9 gigawatts, marks BP’s first independent investment in solar since buying a stake in Europe’s largest solar developer, Lightsource, in 2017.

BP said the new assets will be developed and operated through its 50-50 joint venture with Lightsource BP.

BP CEO Bernard Looney last year launched a strategy to sharply reduce carbon emissions by 2050 by reducing oil output and growing its renewables business 20-fold between 2019 and 2030 to a capacity of 50 gigawatts (GW).

The deal will grow BP’s renewables pipeline from 14GW to 23GW. The company expects to start developing around 2.2 GW of the acquisition’s pipeline by 2025.

BP will integrate the new solar output into its large U.S. power trading business, which includes onshore wind and natural gas electricity. In future, it will also have offshore wind from a project it is developing off the East Coast with Norway’s Equinor, Dev Sanyal, BP head of gas and low carbon energy, told Reuters.

BP is confident it can reach returns on investment of 8% to 10% on its renewable investments, Sanyal added.

“This acquisition gives us a very significant development pipeline in one of the most important markets,” Sanyal said.

The projects acquired are spread across 12 U.S. states, with the largest portfolios in Texas and the Midwest.

(Reporting by Yadarisa Shabong in Bengaluru and Ron Bousso in London; Editing by Devika Syamnath and Barbara Lewis)

BP Says It Will Stick with Top U.S. Oil Lobby After Climate Shift

By Ron Bousso

BP, which plans to sharply cut its oil output and boost its renewable energy capacity over the next decade, said in a report that despite “uneven progress”, the API was “heading in the right direction”.

The API has faced growing pressure from member companies and activist groups to change its policies relating to climate change and drilling regulations.

The trade group started to shift some of its positions as the climate-focused Biden administration came to power this year. In March it said it supports a carbon price as one measure to mitigate climate change risk.

BP said it was “encouraged” by the API’s support for federal regulation on limiting emissions of methane, a potent greenhouse gas and its support for carbon pricing as well as improving its transparency.

“API’s progress has been uneven at times but, on the whole, the organization has moved considerably over the past year and is heading in the right direction,” BP said in the report.

“We will continue to make our case – as members – to influence API on climate and many other areas relevant to our business in the US.”

London-based BP, led by CEO Bernard Looney, last year quit the main U.S. refining lobby and two other trade groups but stuck with the API despite saying it was only “partially aligned” with its policies.

BP will publish a comprehensive review of its membership of the API and other associations next year.

France’s Total in January became the first major global energy company to quit the API due to disagreements over its climate policies and support for easing drilling rules, saying it would not renew its 2021 membership.

Total’s stance put pressure on other European oil majors that have set out strategies to sharply reduce carbon emissions.

Royal Dutch Shell also chose to extend its API membership despite “some misalignment” with its climate stance.

BP’s interim report also reviewed its participation in four other associations which were partly aligned with its policies including the Australian Institute of Petroleum and the Canadian Association of Petroleum Producers.

BP said it was encouraged by progress made by all four groups over their climate stances.

(Reporting by Ron Bousso; Editing by Alexander Smith)

BP Seeking to Build Wind Farms Off Scotland

BP Chief Executive Officer Bernard Looney told The Times the firm was looking at bidding in the forthcoming Crown Estate Scotland auction to lease the seabed off Scotland for offshore wind projects.

Bids for the ScotWind process, offering 17 areas spanning 8,600 square km (3,320 square miles) of seabed, are yet to be finalised with a deadline of July 16, The Times reported.

BP is working on bidding jointly for the Scottish leases with EnBW Energie Baden Wuerttemberg AG, the German regional utility it partnered with on its first move into Britain’s offshore wind market in February in the Irish Sea, The Times report said.

In February, BP won two sites representing a total of 3 gigawatts (GW) jointly with EnBW, in what Bernstein analysts called a “highly contested race”.

It aims to ramp up renewable power generation from 3.3 GW at present to 50 GW by 2030, while slashing oil output to reduce greenhouse gas emissions.

(Reporting by Anirudh Saligrama in Bengaluru; Editing by Kim Coghill and Karishma Singh)

Europe’s Oil Majors Leave Pandemic Blues Behind

By Shadia Nasralla

Last year’s demand collapse forced BP, Royal Dutch Shell and Equinor to slash their dividends and preserve cash as they to try to transform themselves into companies that can thrive in a low-carbon world.

With benchmark oil prices recovering from an April 2020 low of $16 a barrel to about $67 a barrel this month, most of the companies managed to drive profits back above levels seen before the coronavirus pandemic first struck.

BP’s first-quarter headline profit figure of $2.6 billion exceeded its first-quarter profit of $2.4 billion in 2019 and was more than 200% higher than in 2020.

France’s Total reported headline profits of $3 billion in the first three months of 2021, up 69% from last year and 9% above the first quarter of 2019.

Norway’s Equinor, meanwhile, came in with a first-quarter profit of $5.5 billion on Thursday, also exceeding its pre-pandemic profit of $4.2 billion.

Shell’s first-quarter profit climbed 13% from last year to $3.2 billion though that was still below 2019’s $5.3 billion.

But despite recovering profits, payouts were still below pre-pandemic levels with the exception of Total, which had kept its dividend steady throughout the pandemic.

“(Total’s) dividends are held flat but the buyback question will now arise given the sub 20% gearing (debt-to-equity ratio),” Bernstein analysts said.

While Shell has increased its dividend twice in the past six months, the 17.35 cents it paid per share in the first quarter was below the 47 cents it paid out before the pandemic.

Shell, which is set to increase its dividend by 4% next year, has flagged share buybacks once its debt falls to $65 billion which Barclays and Bernstein say is possible this year.

Equinor also raised its payout to 15 cents per share, but again this was short of 2019’s 26 cents per share.

“The suggestion is that capital is being preserved to allow for an acceleration of new energy investment,” Citi said.

BP’s 3.8 pence per share first-quarter dividend was about half of what it paid in 2019. However, it is starting share buybacks which analysts expect to increase in the third quarter.

“BP should be able to buy back at least $10 billion between 2021 and 2025,” said analysts at Jefferies.

Spain’s Repsol reported a 5.4% rise in first-quarter adjusted net profit to 471 million euros, though this was 24% below earnings in the first three months of 2019.

It decided in November to cut its 2021 and 2022 cash payouts to 0.60 euro from 1 euro per share, but said share buybacks could push returns above 1 euro per share by 2025.

(Reporting by Shadia Nasralla; Additional reporting by Nerijus Adomaitis, Isla Binnie and Benjamin Mallet; Editing by David Clarke and Elaine Hardcastle)

Europe’s Oil Majors Leave Pandemic Blues Behind

By Shadia Nasralla

Last year’s demand collapse forced BP, Royal Dutch Shell and Equinor to slash their dividends and preserve cash as they to try to transform themselves into companies that can thrive in a low-carbon world.

With benchmark oil prices recovering from an April 2020 low of $16 a barrel to about $67 a barrel this month, most of the companies managed to drive profits back above levels seen before the coronavirus pandemic first struck.

BP’s first-quarter headline profit figure of $2.6 billion exceeded its first-quarter profit of $2.4 billion in 2019 and was more than 200% higher than in 2020.

France’s Total reported headline profits of $3 billion in the first three months of 2021, up 69% from last year and 9% above the first quarter of 2019.

Norway’s Equinor, meanwhile, came in with a first-quarter profit of $5.5 billion on Thursday, also exceeding its pre-pandemic profit of $4.2 billion.

Shell’s first-quarter profit climbed 13% from last year to $3.2 billion though that was still below 2019’s $5.3 billion.

But despite recovering profits, payouts were still below pre-pandemic levels with the exception of Total, which had kept its dividend steady throughout the pandemic.

“(Total’s) dividends are held flat but the buyback question will now arise given the sub 20% gearing (debt-to-equity ratio),” Bernstein analysts said.

While Shell has increased its dividend twice in the past six months, the 17.35 cents it paid per share in the first quarter was below the 47 cents it paid out before the pandemic.

Shell, which is set to increase its dividend by 4% next year, has flagged share buybacks once its debt falls to $65 billion which Barclays and Bernstein say is possible this year.

Equinor also raised its payout to 15 cents per share, but again this was short of 2019’s 26 cents per share.

“The suggestion is that capital is being preserved to allow for an acceleration of new energy investment,” Citi said.

BP’s 3.8 pence per share first-quarter dividend was about half of what it paid in 2019. However, it is starting share buybacks which analysts expect to increase in the third quarter.

“BP should be able to buy back at least $10 billion between 2021 and 2025,” said analysts at Jefferies.

Spain’s Repsol reported a 5.4% rise in first-quarter adjusted net profit to 471 million euros, though this was 24% below earnings in the first three months of 2019.

It decided in November to cut its 2021 and 2022 cash payouts to 0.60 euro from 1 euro per share, but said share buybacks could push returns above 1 euro per share by 2025.

(Reporting by Shadia Nasralla; Additional reporting by Nerijus Adomaitis, Isla Binnie and Benjamin Mallet; Editing by David Clarke and Elaine Hardcastle)

BP Profit Soars on Strong Oil, Gas Trading as Share Buybacks Start

By Ron Bousso and Shadia Nasralla

The jump in profits from a year earlier comes as BP says it expects oil demand to recover in 2021 due to strong growth in the United States and China as COVID-19 vaccination programmes accelerate.

In a sign of growing confidence in the economic recovery and its operations following a year of cutting costs, headcount and its dividend, BP said it will buy back $500 million of shares in the second quarter to offset the dilution from an employee share distribution programme.

Net debt dropped $5.6 billion from the end of December to $33.3 billion at the end of March, chiefly due to around $4.8 billion worth of disposals and stronger oil prices.

That pushed debt below the company’s $35 billion target sooner than expected, allowing it to deliver on its promise of buying back shares.

The company said it would provide an update on the third quarter buyback programme later this year.

As part of Chief Executive Bernard Looney’s plan to shift the focus of the oil major to low carbon energy investments, BP aims to sell $25 billion of assets by 2025.

BP’s shares were 3% higher in early trading, adding to a more than 15% gain so far this year on the back of stronger oil prices.

However, it is the weakest performer among the oil majors, with shares still around a third lower than their pre-pandemic level as investors fret over the company’s energy transition strategy.

BP's net profit

BP’s first-quarter underlying replacement cost profit, the company’s definition of net income, rose to $2.6 billion, far exceeding forecasts of $1.64 billion in a company-provided survey of analysts.

That compared with a $110 million profit in the fourth quarter of 2020 and a profit of $790 million a year earlier.

“This result was driven by an exceptional gas marketing and trading performance, significantly higher oil prices and higher refining margins.”

Benchmark Brent oil prices rose to an average of $61 a barrel in the first quarter from $44 in the previous quarter and $50 a barrel in the first quarter of 2020.

BP expects global oil inventories, which swelled as the coronavirus pandemic hit fuel demand, to fall to historic levels by the end of 2021.

(Reporting by Ron Bousso, editing by Louise Heavens, Kirsten Donovan)

BP Applies to Set up U.S. Retail Power Business

By Ron Bousso and Chris Prentice

BP wants to supply electricity in California, Illinois, Ohio, Pennsylvania and Texas in its first foray into the retail power business, according to an April 20 filing with the Federal Energy Regulatory Commission (FERC) seen by Reuters.

The British company has no retail energy trading business but is one of the largest North American power traders, supplying wholesale customers such as power generators and cities with gas, renewable energy and storage.

A new subsidiary called BP Retail Energy will supply the power, going head-to-head with utilities that are under growing pressure from investors and governments to cut carbon emissions.

“BP Energy Retail is a retail energy marketing company that intends to sell electricity products directly to commercial and industrial customers and residential customers,” the filing said.

BP declined to comment.

The filing listed the sources of electricity generation BP Retail Energy is affliated with. They were BP’s U.S. onshore wind farms, solar power plants and its natural gas plant in Whiting, Indiana.

BP has set out plans to increase its renewable power capacity 20-fold while reducing its oil output by 40% by 2030 to slash its greenhouse gas emissions.

Its plans rely in large part on expanding its customer base for fuels, electric vehicle charging and convenience stores. It has not said publicly it would set up a retail power business.

European rivals including Royal Dutch Shell and France’s Total are also targeting fast growth in the retail power sector as they move away from oil and gas.

Shell’s retail business has focused on Britain while Total has built a large portfolio in France and northwest Europe.

BP generates renewable power in the United States through several onshore wind farms and Lightsource BP, a solar developer in which it holds a 50% stake. BP is also developing offshore wind farms with Norway’s Equinor off the east coast.

BP wants to boost its renewable power generation from about 3.3 gigawatts (GW) in 2020 to 50 GW in 2030 and ramp up the volume of electricity it trades from 214 terawatt-hours (TWh) a year to 500 twh over the same period.

(Reporting by Ron Bousso; Editing by David Clarke)

Why a U.S. Hospital and Oil Company Turned to Facial Recognition

By Paresh Dave and Jeffrey Dastin

The technology finds certain faces in photos or videos, with banks representing one sector that has taken interest in systems from AnyVision or its many competitors to improve security and service.

Organizations in other industries are chasing similar goals. The Los Angeles hospital Cedars-Sinai and oil giant BP Plc are among several previously unreported users of AnyVision.

Cedars-Sinai’s main hospital uses AnyVision facial recognition to give staff a heads-up about individuals known for violence, drug fraud or using different names at the emergency room, three sources said.

Cedars said it “does not publicly discuss our security programs” and could not confirm the information.

Meanwhile, BP has used facial recognition for at least two years at its Houston campus to help security staff detect people on a watchlist because they trespassed before or issued threats, two sources said.

BP declined to comment.

AnyVision declined to discuss specific clients or deals.

Gaining additional clients may be difficult for AnyVision amid mounting opposition from civil liberties advocates to facial recognition.

Critics say the technology compromises privacy, targets marginalized groups and normalizes intrusive surveillance. Last week, 25 social justice groups including Demand Progress and Greenpeace USA called on governments to ban corporate use of facial recognition, according to their open letter.

AnyVision’s Chief Executive Avi Golan, a former SoftBank Vision Fund operating partner who joined the startup in November, sees a bright future. He told Reuters that AnyVision has worked with companies across retail, banking, gaming, sports and energy on uses that should not be banned because they stop crime and boost safety.

“I am a bold advocate for regulation of facial recognition. There’s a potential for abuse of this technology both in terms of bias and privacy,” he said. But “blanket bans are irresponsible,” he said.

The startup has faced challenges in the past year. AnyVision laid off half of its staff, with deep cuts to research and sales, according to people who have worked for the company as well as customers and partners, all speaking on the condition of anonymity.

The slashing followed the onset of COVID-19 shrinking clients’ budgets, sources said, and investor Microsoft Corp in March 2020 saying it would divest its stake over ethical concerns.

AnyVision announced raising an additional $43 million last September.

DETECTING THREATS

Macy’s Inc installed AnyVision in 2019 to alert security when known shoplifters entered its store in New York’s Herald Square, five sources said. The deployment expanded to around 15 more New York stores, three sources said, and if not for the pandemic would have reached an additional 15 stores, including on the West Coast.

Macy’s told Reuters it uses facial recognition “in a small subset of stores with high incidences of organized retail theft and repeat offenders.”

Menards, a U.S. home improvement chain, has used AnyVision facial recognition to identify known thieves, three sources said. Its system also has alerted staff to the arrival of design center clients and reidentified them on future visits to improve service, a source said.

Menards said that its current face mask policy has rendered “any use of facial recognition technology pointless.”

AnyVision in an online video without naming Menards has touted its results, and two sources said the companies struck a deal for 290 stores. In 2019, Menards apprehended 54% more potential threats and recovered over $5 million, according to the video.

The U.S. financial services unit of automaker Mercedes-Benz said it has used AnyVision at its Fort Worth, Texas, offices since 2019 to authenticate about 900 people entering and exiting daily before the pandemic, adding a layer of security on top of building access cards.

Such employee-access applications are a common early use of AnyVision, including at Houston Texans’ and Golden State Warriors’ facilities, sources said.

The sports teams declined to comment.

ENTERTAINMENT DEALS

Several deals failed to materialize, however. Among organizations that considered AnyVision early last year were Amazon.com Inc’s grocery chain Whole Foods to monitor workers at stores, Comcast Corp to enable ticketless experiences at Universal theme parks and baseball’s Dodger Stadium for suite access, sources said.

Talks with airports in the Dallas and San Francisco areas referenced in public records also have not led to contracts.

Universal Parks, the Los Angeles Dodgers and the airports all declined to comment on their interest. Whole Foods did not respond.

Government requirements for surveillance at casinos have made the gaming industry a big purchaser of facial recognition. Las Vegas Sands Corp, for instance, is using AnyVision, three sources said. Sands declined to comment.

MGM Resorts International and Cherokee Nation Entertainment also use AnyVision, representatives of the casino operators said last month in an online presentation seen by Reuters.

Ted Whiting of MGM said the software, deployed in 2017 and used at 11 properties including the Aria in Las Vegas, has detected vendors not wearing masks and helped catch patrons accused of violence.

MGM said its “surveillance system is designed to adhere to regulatory requirements and support ongoing efforts to keep guests and employees safe.”

Cherokee’s Joshua Anderson said in addition to security uses, AnyVision has accelerated coronavirus contact tracing as the Oklahoma company rolls out the technology across 10 properties.

(Reporting by Paresh Dave and Jeffrey Dastin in San Francisco; Additional reporting by Sanjeev Miglani in Delhi, Nathan Allen in Madrid and Shilpa Jamkhandikar in Mumbai; Editing by Jonathan Weber and Lisa Shumaker)

Oil Markets in Flux, Banks Expect Doomsday Scenarios?

International bank Goldman Sachs seems to have joined the peak oil demand proponents, as the bank has brought forward its forecast for peak oil demand in the transportation sector by one year to 2026. GS analysts even reiterate that automotive demand could even peak before 2026, if accelerating adoption of electric vehicles (EVs) increases. The bank predicts an overall “anemic” pace of global oil demand after 2025. Some optimism is still there, as they see continuing growth in jet fuel and petrochemicals.

Goldman Sachs assessments, next to BP’s market shock statements, will have a detrimental effect on long-term prices, as they belong to a strong market movers groups, which also includes the IEA and EIA. The statements of GS however stand contrary to others, such as OPEC, the latter expects still strong growth. The hydrocarbon sector is expected to face severe risks from the energy transition onslaught, activist investors and government strategies.

However, oil and gas markets insiders still are not in majority believing the overall negative picture, as strong demand growth for oil is expected from emerging giant India, while other upcoming markets in Africa or Latin America are not yet even booming. To rely on the impact of EVs, first of all to take over the hundreds of millions of conventional cars, or trucks, taking into account the ongoing shift from small vehicles to SUVs or even bigger, demand is still strong for a very long time.

Without an adequate EV power infrastructure in place, high costs and needed government subsidies, expectations should be tempered much more than EV reports are showing. The expected worldwide government drive, as stated in EU Green Deal or Biden’s Energy Strategy, are until now mainly paper reports, where analysts are looking at as facts, but reality is much more stubborn than forecasting. At the same time, worldwide economic growth is even expected to accelerate faster, as stated by the IMF, than a couple of months ago. Reality shows that at present renewables are still only taking a thin slice of overall oil and gas demand, which will continue even longer. A rule of the thumb is a clear indicator, it takes 5 million EVs to replace 1 million bpd of oil demand.

Goldman’s sometimes market moving approach, not always resulting in a desired outcome for banks, investors or 3rd parties, is not being followed by others. A growing amount of banks is concerned about the current and future markets based on two other issues. The first is that positivism in the market is still not based on facts on the ground. Morgan Stanley already has stated that it has changed its oil price range for 2021 from $70 per barrel to between $65-70 per barrel.

The latter not due to lack or growth of demand, but based on higher US shale production in future and possible return of additional Iranian barrels. Morgan Stanley reiterates that at present, overall storage volumes are going down, while US mobility is still up. The bank did not look yet at outside issues, such as 3rd wave of COVID in EU, Latin America or India. Remarkably, GS is very bullish, forecasting Brent to hit $80 per barrel in summer.

The GS long-term demand predictions are also not supported by short-midterm assessments made by Rystad Energy. The latter foresees a strong year-on-year oil demand growth of 6% in 2021. Total global oil demand is expected to increase from 89.6 million bpd in 2020 to 95.4 million bpd in 2021. For 2022 Rystad expects a demand of 99.4 million bpd. Road fuel demand in 2021 is expected to increase by 9% to 45.1 million bpd in 2021, in comparison to 41.3 million bpd in 2020. 2022 could even add another 2.4 million bpd. Other fuels are also looking good. Jet fuel will increase by 21% to 3.9 million bpd in 2021, and 5.4 million bpd in 2022, almost at normal levels.

A more worrying picture, not for oil prices or demand, but supply is the ongoing financial onslaught on US oil and gas producers. According to the “Oil Patch Bankruptcy Monitor” by Haynes and Boone, since 2015, there have been 262 producer bankruptcies. In the same period, 298 oilfield services and midstream companies have filed for bankruptcy, bringing the combined North American industry total to 560.

For 2021 the picture already is very bleak, as during Q1 2021 eight producers filed, the highest level since 2106, when 17 were filed. The aggregate debt for producers that filed in Q1 2021 is just over $1.8 billion, which is the second lowest Q1 total, after $1.6 billion in Q1 2019. Main territory for filings in Q1 2021 is Texas, showing 50% of the total. Still, some light is there when you want to keep optimistic. Haynes and Boone report that there were no producers with billion-dollar bankruptcies this quarter, which has not happened since Q3 2018.

The US picture can be put on other regions too. Financials are constraining recovery of hydrocarbon sector companies for longer. If no change in cash flows, or investment inflows, supply is more an issue before 2025/26 than demand. Demand is there, now we need to have upstream companies produce the barrels.

On another front, the market is watching with anticipation the ongoing JCPOA Iran discussion. A possible re-joining of Washington of the international Iranian nuclear agreement is still in doubt, but the options that the Biden Administration will take this step is still there. The market expects that, if the JCPOA again is a success, if the USA joins, Iran will reenter in full the market, putting additional barrels on the market. Analysts are worried about the possible negative repercussions for global oil supply volumes and oil prices.

At the present market, the stability is still weak, as it is still a storm-wracked ship trying to find a safe harbor. The vessel is being repaired at sea, however, lingering storms on the horizon are still on the mind of OPEC+ leaders and traders. Part of the stability at present is the fact that Iranian, Venezuelan, and Libyan oil is still out of the market. Arab producers, US shale and Russia, are however fearful of a re-emergence of Iran’s export potential at a time of a very weak market equilibrium.

This concern could however also be a idee-fix, as Iranian oil is already in the market. The IEA reported that “China never completely stopped its purchases (of Iranian oil)”. The OECD energy watchdog also said that Iran’s estimated oil sales to China in the fourth quarter of 2020 were at 360,000 barrels a day, up from an average of 150,000 barrels per day shipped in the first nine months of last year. Just before the JCPOA discussions again started, Iran increased exports to China to around 600,000 bpd. Major Asian clients in China, India and elsewhere, are happy to take Iranian or (Iranian origin) volumes based on their very low price settings and attractiveness.

The question to be answered here however is will Iran be able to sell much more oil than at present if sanctions are retracted. Iran’s main position for several clients is linked to low prices or large discounts. When there is no need for a discount, expectations are that Iranian oil prices will be market conform again.

The latter could be a major constraint for exponential export growth in future, as clients will look more at cost/barrel than origin. The competition will be harsher, putting a damper on overall potential for sure as long as demand is constraint, and OPEC+ spare production capacity is relatively high. To expect higher supply volumes while markets are weak is too optimistic. Iran is not going to decide oil markets in 2021, at least via oil volumes. Fundamentals are not promising, the only price increase at present is geopolitical! Ukraine-Russia, Turkey-East Med, China-Taiwan or Biden’s Middle East policy is price drivers, the rest is just marginal.

For a look at all of today’s economic events, check out our economic calendar.

Why Shares Of BP Are Up By 4% Today?

BP Video 06.04.21.

BP Reached Its Net Debt Target

Shares of BP gained strong upside momentum after the company stated that it expected to reach its $35 billion net debt target during the first quarter of 2021.

BP noted that it had received around $4.7 billion of disposal proceeds during the first quarter. The company expects that disposal proceeds in 2021 will be “at the top end of the previously announced $4-6 billion range”.

BP also stated that its business performance during the first quarter of 2021 was very strong which allowed the company to reach its debt target.

The market reaction to the news is so strong because BP plans to return at least 60% of surplus cash flow to shareholders when it reaches the net debt target. The company plans to return this cash flow via share buybacks.

What’s Next For BP?

BP stated that it would provide additional information on share buybacks when the company releases its first quarter results on April 27. While shares of BP have moved away from lows at the $15 level that were reached in October 2020, they remain well below pre-pandemic levels.

Meanwhile, the oil market continues to rebound, and WTI oil is trading near the $60 level despite worries about the third wave of the virus in Europe and challenging situation in Brazil and India.

In this light, share buybacks may be seen as a good way to return capital to shareholders as BP would be buying its shares at reasonable levels. Analysts expect that the company will report earnings of $1.82 per share in 2021 and $2.65 per share in 2022, so the stock is trading at a forward P/E of less than 10.

In case oil manages to stay above the psychologically important $60 level, shares of BP will have a good chance to gain additional upside momentum as investors and speculative traders would be attracted by the upcoming share buyback program and cheap valuation.

For a look at all of today’s economic events, check out our economic calendar.

BP Expects to Hit $35 Billion Net Debt Target in First Quarter

The company, which had a debt pile of $39 billion at the end of 2020, had earlier expected to reduce its debt to $35 billion around the fourth quarter of 2021 or first quarter of 2022.

BP plans to start share buybacks once it reaches its debt target. The company said it would provide an update on share buybacks during its first-quarter results on April 27.

The London-based company said on Tuesday it expects sale proceeds in 2021 to be at the top end of its existing $4 billion to $6 billion range.

The oil major plunged to a $5.7 billion loss last year, its first in a decade, as the COVID-19 pandemic took a heavy toll on oil demand and in February warned of a tough start to 2021 amid widespread travel restrictions.

(Reporting by Yadarisa Shabong in Bengaluru; Editing by Shounak Dasgupta)