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)

ConocoPhillips Forecasts a Recovery in Global Oil Demand; Stock Price Target $51

ConocoPhillips, an independent oil and gas exploration company, forecasts global demand for oil recovering to 100 million barrels per day and increasing from there on, a senior executive said on Thursday, Reuters reported.

According to the latest Reuters report, senior vice president Dominic Macklon said during a Question and Answer session with Raymond James said, “The view stands in contrast to that of rival BP Plc, which sees the coronavirus pandemic leaving a lasting effect on global energy demand, though ConocoPhillips still expects “quite a bit of uncertainty next year”.

Macklon added that ConocoPhillips’ capital spending for next year will be “somewhat below” its previously expected this year’s level of $6.6 billion.

ConocoPhillips shares closed 2.06% higher at $33.60 on Thursday. However, the stock is still down about 50% so far this year.

ConocoPhillips stock forecast

Twelve analysts forecast the average price in 12 months at $51.45 with a high forecast of $62.00 and a low forecast of $45.00. The average price target represents a 53.13% increase from the last price of $33.60. From those 12 equity analysts, 11 rated “Buy”, one rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley target price is $47 with a high of $69 under a bull scenario and $23 under the worst-case scenario. Wells Fargo raised their price target to $56 from $54; MKM Partners lowered their target price to $55 from $57 and Susquehanna cuts target price to $52 from $54.

A number of other equities research analysts have also recently issued reports on the stock. MKM Partners increased their target price on ConocoPhillips to $58 from $57 and gave the stock a “buy” rating in May. UBS Group increased their target price to $62 from $50 and gave the stock a “buy” rating in June. Raymond James increased their target price to $48 from $46 and gave the stock an “outperform” rating.

Analyst views

“COP checks all the boxes for sustained outperformance: excellent management, disciplined investment, and consistent return of cash coupled with high quality, low-cost portfolio that can deliver an attractive combination of FCF and growth. Attractive value proposition even in the current commodity price environment with leverage to any rally in oil and with resiliency should prices remain low,” said Devin McDermott, equity analyst and commodities strategist at Morgan Stanley.

“Strong balance sheet. While management received some investor pushback in 2019 for building an $8 billion strategic cash balance, that disciplined strategy is paying off in 2020 – creating financial and strategic flexibility,” McDermott added.

Upside and Downside Risks

Upside: 1) Higher commodity prices. 2) Upside to Alaska resource discovery. 3) Better well performance in Lower 48 – highlighted by Morgan Stanley.

Downside: 1) Lower commodity prices. 2) Cost inflation. 3) Alaska discovery has less potential resources than expected. 4) Worse than expected well results in the Eagle Ford, Permian, and Bakken.

Check out FX Empire’s earnings calendar

Stocks Mixed Over Lack of EU Rescue Deal

The original proposal was that €500 billion be distributed as grants, and the remaining €250 billion be issued as loans. A few northern European members, Austria, Denmark, The Netherlands and Sweden, were opposed to such a high proportion of grants being issued. The group have been called the ‘frugal four’, and they are keen for conditions to be attached to the grants.

Talks continued into the early hours of today, and it is understood that some of the ‘frugal’ group are pushing for €390 billion in grants and €360 billion in loans. It was reported that France are keen for €400 billion is grants – so that is where the division lies. Some progress has been made, which is encouraging, and negotiations are expected to carry on this afternoon.

The EU have a track record of a lot of in-house haggling, but in the end a deal is usually struck. Italy and Spain had high debt levels going into the pandemic, and given how hard their economies have been hit on account of the health crisis, their debt is poised to jump. The Mediterranean countries have a higher dependency on tourism, so they will feel the pain of higher debt levels more so than their northern counterparts.

Future, the media company, confirmed the integration of TI Media is going well. Future will repay furlough funds to the government. This not only adds to their public image, but it underlines their financial health. The group are in talks with employees about reducing the size of the workforce. The consensus estimate for the full year adjusted EBITDA is £86.3-£91 million, and firm said it expects earnings to be at the top end of the forecasts. Keep in mind that last year’s figure was £54.5 million.

AstraZeneca shares are higher again on continued optimism in relation to the drug that they are working on with the University of Oxford – it is tipped as a possible Covid-19 vaccine. The Lancet media journal is expected to publish trial data on the drug today.

In terms of index points, BP and Royal Dutch Shell are some of the biggest fallers on the FTSE 100. The underlying oil market is down over 1% as concerns the health crisis will impact demand has hit the energy. It was reported that Japan’s oil imports fell by 14.7% in June, on an annual basis.

According to Righmove, house prices in Great Britain have risen by 2.4% since March. The annual reading was 3.7% growth, its highest growth rate since late 2016. The property portal said that customer enquiries are up 75% when compared with last year. It is clear the reopening of the housing market has unleashed pent up demand. Most of the UK house builders are higher this morning and Berkeley Group and Taylor Wimpey are some of the biggest gainers.

It was reported that Marks and Spencer are to announce hundreds of job cuts this week. One newspaper claimed that Ted Baker will lower its headcount by 500.

British American Tobacco shares have sold off following the downgrade by Jefferies. The bank has lowered its rating to hold from buy, and the price target was cut to 3,000 from 4,800p.

The euro had gained ground against the US dollar and the pound as hopes are growing for the EU to agree on the terms of the €750 billion rescue fund. The talks will continue today. It wouldn’t be a European meeting if it didn’t drag on. The gap between the two sides is narrowing, so currency traders took that as a sign that we are nearing a deal. Last month, German PPI was -1.8% and that was an improvement in the -2.2% registered in May, but economists were expected -1.5%.

IBM will be in focus as it will post its second quarter results tonight. The first quarter update was not well received. Revenue slipped by 3.4% to $17.57 billion, undershooting the $17.62 billion forecast. EPS were $1.84, and that topped the $1.80 estimate. The cloud and cognitive unit saw a 5.5% rise in revenue to $5.24 billion, but that fell short of the $5.30 billion consensus estimate.

We are expecting the Dow Jones to open 51 points lower at 26,620, and the S&P 500 is called down 6 points at 3,218.

By David Madden (Market Analyst at CMC Markets UK)

Shell Impairments Support Bearish Market

In contrast to the current optimism in the MSM about oil prices, increased demand and a possible return of global economic growth, the Dutch IOC put a huge damper on the latter. As already stated before current optimism in the market is not based on fundamentals but mainly on a perceived optimism at institutional investors and banks. The current upsurge in oil prices is still unfounded, as now also Shell reiterates by taking an impairment of between $15-22 billion for 2020.

With a slew of bad figures, the IOC is in line with British oil major BP’s actions the last weeks. The impact of the COVID-19 pandemic and its disastrous effects on energy demand and economic growth is slowly becoming clear some parties. Big Oil has been hit severely in Q2 2020, more than analysts have agreed upon before. As Shell stated none of its business groups has been left unscathed.

Not only the results in Q2 2020 has been dramatic, the company, as also stated by BP and others, but COVID and the unexpected oil and gas demand destruction will also have a long-term effect on commodity prices. The market slowly starts to realize that not only crude oil and natural gas/LNG has been hit, downstream at the same time has been hit too. The total write-down of $15-22 billion is dramatic, but maybe it will not even be the full amount in the coming years.

As indicated before, oil prices are hit and will be depressed for the long term. For 2020 higher price ranges almost are out of reach, as the drop in demand for crude oil and gas is still large. Some green leaves have been shown in Asia and some European countries, but the latter is still very weak. Re-emergence of COVID hotspots in EU and Asia, combined with continuing dramatic developments in the USA, Latin-America and Africa, are no real basis for higher price settings.

At the same time, the current crude oil storage volumes are still at historic high levels, leaving no real room for a surge in prices, even if demand would increase substantially. In its update, Shell reiterated that all positive signs in the market are very fragile.

The Dutch major indicated that its own oil-product sales volumes are expected to be between 3.5 million to 4.5 million bpd in Q2 2020, which is a dramatic 3.1-2.1 million bpd drop from the same period last year.

Market analysts should however look not only at the overall production or delivery figures but at the company’s assessments of oil prices in the coming years. For 2020, Shell, as BP, is much less bullish than financial institutions such as Bank of America (BofA)or others. BofA’s Global Research team stated last week that it lifts its oil price forecast for this year and next as demand recovers from coronavirus-linked shutdowns, the OPEC+ output cut deal curtails supply, and producers slash capital expenditure.

The bank expected Brent crude oil averaging $43.70 per barrel in 2020, up from a previous estimate of $37. In 2021 and 2022, the bank forecasts average prices of $50 and $55 a barrel respectively. BofA also forecast that “a pattern of falling inventories across most regions should emerge as we move into H2 2020. This optimism is clearly out of reach with real fundamentals on the ground. Norwegian consultancy Rystad Energy, however, has warned that the downside risk in oil markets is still very much alive. In its report Shell stated that it expects a Brent oil price of $35 for 2020, reaching $40 per barrel in 2021, $50 2022 and 46$ in 2023. Even that the price expectations are based on long term 2020 real terms, even these figures look for 2020-2021 still a bit optimistic.

Taking into account Shell (and BP) reporting, the short-term looks bleak. At least 2020 in plain terms looks like a possible write-off. If optimism on share markets is also hit by reality, a new negative spiral could hit markets. When only looking at fundamentals, combined with increased economic and geopolitical unrest globally, there is no real justification for oil market optimism in 2020. The next 6 months will be very volatile. Optimism should instead be pointed towards 2021. The price upward potential for 2021 is clearly available.

Low investments upstream, combined with large-scale shutdowns and bankruptcies are prime factors to take into account. Even if demand stays subdued, the market could change from a demand-driven to a supply constraint market. An average crude oil price (Brent) of above $40 per barrel is wishful thinking in 2020. 2021 could be bullish, pushing the bears back into hibernation. When looking at share prices, 2020 is however already interesting, if you have a long-term view. Current PE levels are still reasonable, but will most probably become hot end of 2020 – beginning 2021.

British Petroleum Raises $12 Billion in Debt With Equity-like Features

British Petroleum, a multinational oil and gas company headquartered in London, announced that it has raised $12 billion in debt with equity-like features, according to an FT report, trying to take advantage of the hot credit markets to infuse fresh capital and consolidate its balance sheet.

The world’s six largest oil and gas company raised 5 billion in dollars, 1.25 billion in pounds and 4.75 billion in euros, locking in its annual interest as low as 3.25% on some of its fresh euro notes.

The deal is the biggest sale ever of this kind of hybrid security, relieving stress from the company’s balance sheet as the principal amount raised on the debt is never repaid.

The capital infusion comes just a day after the oil giant British Petroleum, now commonly known as BP, announced it would reduce the value of its oil and gas assets by $17.5 billion as the coronavirus pandemic brought the global economy to a near-standstill, affecting day-to-day business and demand.

The COVID-19 crisis has also affected energy demand massively, leading to record low crude oil prices in April that pushed the oil company to shift away from fossil fuels.

Analysts’ views:

Citigroup director of debt capital markets, Colm Rainey, in an interview with the FT said, “BP hasn’t issued hybrids in any market and now they’re hitting every market at once. A decently sized and priced hybrid can help the balance sheet when in the eye of the storm.”

Neuberger Berman’s Julian Marks, who manages a fund dedicated to investing in hybrid bonds, in an interview with the FT said, “Clearly, given the difficulties in the industry recently [and] the lower oil price related to COVID-19, this is a really good way of enhancing their credit profile.”

Stock outlook:

Goldman Sachs Group set a price target of GBP 550 ($7.00) in a research note published on Tuesday. BNP Paribas lowered its price target to GBX 430 ($5.47) from GBX 600 ($7.64). Deutsche Bank set it at GBX 300 ($3.82).

Further, JP Morgan Chase and Company set its target price at GBX 425 ($5.41) target price and reaffirmed a buy rating. Credit Suisse Group set it at GBX 350 ($4.45) and rated the stock as ‘Neutral’. DZ Bank AG lowered its target price to GBX 280 ($3.56) from GBX 300 ($3.82).