©Bloomberg ExxonMobil and Chevron reported sharp deteriorations in first-quarter earnings, hit by lower oil and gas prices and a squeeze on refining margins, but their results reflected differing degrees of strain. Exxon earnings were down 63 per cent but exceeded analysts’ expectations, while Chevron reported a loss that was larger than expected.  More On this topic IN Oil & Gas The two largest US oil groups made losses on oil and gas production in the US, but for Exxon that was offset by profits in the rest of the world, whereas Chevron made a loss on international operations.  Both companies also suffered falling profits from downstream refining and marketing operations as margins fell from last year’s high levels, but for Exxon that was offset by a strong rise in profits from its chemicals operations. Chevron reported lower profits from its 50 per cent stake in CP Chem, its joint venture with Phillips 66.  Exxon’s net income after tax was $1.81bn compared with $4.94bn in the equivalent period of 2015. The first quarter of this year marked the recent trough in oil prices, with internationally traded Brent crude dropping to about $27 a barrel. It has since rebounded to more than $48.  Rex Tillerson, chief executive, said Exxon “continues to respond effectively to challenging industry conditions”, improving its performance and raising margins in some areas in spite of low prices.  On Tuesday Standard & Poor’s, the rating agency, stripped Exxon of the triple A grade that it and its predecessor companies had held since 1930, citing “large dividend payments” as one of the reasons.  The following day the company announced a further 3 per cent increase in its quarterly dividend.  Jeffrey Woodbury, Exxon’s vice-president for investor relations, said on a call with analysts that “nothing has changed” with respect to the company’s “prudent management of the balance sheet.” He added: “Our ability to access financial markets on attractive terms remains strong.” He said Exxon was open “very alert” to possible acquisitions, but added: “We’ve got to be patient … We need to make sure it is value accretive to the business.” Chevron reported a $725m after-tax loss for the first quarter, almost double the average of analysts’ forecasts. It said the strength of the US dollar against the currencies of countries where it operates, including the Canadian dollar and the Venezuelan bolivar, had cut earnings by $319m.  Oil and gas production lost $1.46bn in the quarter, outweighing the $735m profit from refining.  The company has stepped up its planned job cuts for 2015-16 to 8,000 — 1,000 more than it had said previously. John Watson, chief executive, said the company’s efforts were focused on “improving free cash flow”. “We are controlling our spend and getting key projects under construction online, which will boost revenues,” he added.  During the quarter, Chevron announced the first shipment from its $54bn Gorgon liquefied natural gas project in Australia. The first cargo from the new Angola LNG plant is expected in May.  Mr Watson repeated his plan to shift Chevron’s focus away from huge investment such as Gorgon towards “high-return, shorter-cycle projects”, such as drilling in the Permian Basin shale region of west Texas, where the company is ramping up production.  Joe Geagea, executive vice-president for technology and projects, told analysts on a call that Chevron had cut its costs in the Permian by 40 per cent, and now had about 4,000 sites for possible wells that would give a respectable 10 per cent return with US crude at $50 per barrel. Copyright The Financial Times Limited 2016. You may share using our article tools. Please don’t cut articles from FT.com and redistribute by email or post to the web. Source link

North Sea oil platforms will be hit with the first significant strike in a generation, as hundreds of workers protest against cost-cutting in response to lower oil prices. A 24-hour stoppage is planned for Tuesday by employees of Wood Group, an oilfield services company, across eight platforms operated by Royal Dutch Shell, the Anglo-Dutch energy group. The dispute is being closely watched as a test of companies’ ability to force through further cuts in labour costs in the face of union resistance as part of their broader struggle to keep North Sea oil and gas competitive. Union leaders say workers have already made heavy sacrifices since oil prices collapsed from over $100 a barrel in 2014 to a 12-year low of $28 in January. Prices have since bounced back to around $47 a barrel but that has not been enough to lift the gloom hanging over one of the world’s oldest and highest-cost offshore oil-producing basins. “Strike action by our members is not a decision they take lightly but they have been pushed to the limit,” said John Boland, regional officer of Unite, which called the strike together with the RMT union. By the end of this year, the number of oil and gas jobs in the UK is forecast to have fallen by 8,000 from a peak of 41,700 in 2014, according to the industry group Oil & Gas UK. When support jobs are included the number is expected to have fallen from 453,800 to 330,400 — a loss of over 120,000. The brunt of the losses has been felt in Aberdeen, capital of the UK oil industry, where the number of people claiming unemployment benefits has more than doubled since the end of 2014. People still in work have also faced sacrifices. Figures from oilandgaspeople.com, a recruitment site, show that average pay for an offshore worker has fallen from about £80,000 a year in 2014 to £62,000 now. Kevin Forbes, managing director of the site, said: “The industry has been adapting to a ‘lower for longer’ oil price with wage cuts seen by many companies as the quickest way to reduce costs.” £62,000 Average annual pay for an offshore worker today, down from around £80,000 in 2014 As well as lower pay, workers have been forced to accept new shift patterns involving longer stretches away from home. Before the price slump, most companies gave workers three weeks off after a two-week stretch offshore. That has now shifted to a two-weeks-on, two-weeks-off pattern. “The hardest thing is trying to manage things at home, especially for those of us with kids,” said one offshore worker who did not wish to be named. “When it was two weeks offshore, your wife could just about manage. But now it is a long time for her to be looking after the children on her own — especially if something goes wrong during that time.” The Wood Group dispute shows how the pressure from low prices is being passed down from producers to suppliers to workers. The Aberdeen-based company announced in May that it had won a three-year extension to its contract to provide maintenance services for Shell, which is itself in the midst of a multibillion-dollar cost-cutting programme. Terms were not disclosed but the average 3 per cent cut in pay being imposed on about 400 Wood Group employees working for Shell hints at the squeeze being felt all along the supply chain. 30% Cut in pay for some workers when changes to benefits and allowances are included, according to unions Unions say the cuts amount to as much as 30 per cent for some workers when changes to benefits and allowances are included. More than 98 per cent of those voting in the Unite and RMT ballots backed strike action, with a turnout well over 50 per cent. Dave Stewart, chief executive of Wood Group’s eastern region, said unions had been offered multiple concessions, adding that his priority was “safeguarding long-term employment” for the workforce. Shell said it hoped that discussions between Wood Group and its employees would continue in search of a resolution before Tuesday’s strike and a series of shorter planned stoppages in weeks ahead. No immediate disruption is expected to Shell’s operations but analysts said delays to essential maintenance could cause problems if the dispute drags on. Source link

Rental values in the prime central London lettings market fell by 3.6% in the year to July 2016 but activity is stronger than last summer, the latest index shows. Values were down due to higher stock levels and a degree of uncertainty surrounding the European Union referendum result, according to the report from international real estate firm Knight Frank. Where the rental value is regarded by prospective tenants as being right properties are being taken up and the number of tenancies agreed in the three months to June rose 3% compared to 2015 and viewings increased 15.8%, the data from Knight Frank also shows While overall the number of new prospective tenants fell 6.8% over the same period, the number of tenancies started via Knight Frank’s corporate relocation service increased 72% in the same period but prime gross rental yields were flat at 3.1%. According to Tom Bill, head of London residential research at Knight Frank, there are parallels between the lettings and sales markets because the Brexit vote has reinforced the existent pricing trends rather alter market fundamentals. ‘Demand has been relatively flat since the start of the year due to uncertainty surrounding the state of the global economy, particularly in the financial services sector, which contributed towards a slowdown in rental value growth from its last peak of 4.2% in May 2015,’ he said. ‘This trend has been compounded by higher levels of supply as stock has moved across from the sales market, with more vendors becoming landlords due to weaker conditions in the prime sales markets,’ he pointed out. ‘In the three months to the end of June this year, the number of new rental properties placed on the market rose by 49% compared to the same period last year. As a result, landlords are reducing asking rents to prevent void periods and tenants are becoming more selective,’ he explained. Indeed, properties where the asking rent is perceived as too high are struggling to get viewings and Bill believes that the referendum result has simply reinforced this dynamic and landlords are increasingly taking a pragmatic approach to asking rents against the background of wider Brexit uncertainty and rising stock levels. He also pointed out that despite the three month decline in the number of new prospective tenants registering, the expectation is that rental volumes will continue to rise over the summer and into the autumn. ‘The uncertainty ahead of the Brexit vote could be an explanatory factor for weaker registrations, although early signs are positive with no significant announcements that companies are pulling back from relocating staff to London following the referendum,’ he added. Knight Frank also found that relocation budgets in many cases have risen due to the effects of a weaker Sterling, which means tenants are looking in higher-value areas and at higher value properties compared to last year. The number of new prospective tenants registering with a budget of £1,500 plus per week increased 11% in the three months to 24 July compared to 2015. ‘Combined with the fact that rental values have been declining, it means tenants are widening their searches to higher value areas. For example, senior executives are increasingly able to rent in areas like Mayfair while some young professionals are looking in areas like Kensington rather than east London,’ said Bill. However, activity in the £5,000 plus per week super prime market has been quieter by comparison since the Brexit vote following a relatively strong 12 months. ‘Tenants in this higher price bracket are typically more discretionary and able to take a longer term view as the precise implications of the Brexit vote become clearer over the coming months,’ Bill added. Source link

©Reuters Kemi Adeosun: Nigeria’s finance minister Nigeria is considering selling a Chinese panda bond to help finance a budget deficit of about $11bn, its finance minister has said. “The opportunity now, with the renminbi being a reserve currency, we are looking obviously at the lowest cost of funds to fund our budget deficit. Initially we were looking simply at the eurobond but then we began to explore opportunities in the renminbi market so there is a possibility of issuing a panda bond,” Kemi Adeosun told the Financial Times and Reuters in an interview. Panda bonds are renminbi-denominated debt sold by foreigners into China’s bond markets. More On this topic IN Africa Economy The priority, Ms Adeosun said, is to borrow “the cheapest possible money” — a total of 1.8tn naira ($9bn) from international and Nigerian markets. She said it seemed that a renminbi-denominated bond would be cheaper than issuing a eurobond. She also said that, given Japan’s negative interest rates, “there’s the possibility of doing a Samurai [yen-denominated bond] which is also an option we’ll look at. We’re simply shopping around for the best deals.” President Muhammadu Buhari, elected last year, is visiting China in the coming week for a visit “aimed at securing greater support from Beijing for the development of Nigeria’s infrastructure, especially in the power, roads, railways, aviation, water supply and housing sectors”, the presidency said in a statement. Ms Adeosun told the FT in January that Nigeria planned to tap the eurobond market to plug the deficit. Nigeria started talks in January with the World Bank and the African Development Bank for loans of $3.5bn to plug the deficit. Nigeria is continuing talks started earlier in the year with the World Bank over a budget support loan, Ms Adeosun said in the interview on Saturday. She is set to travel to Washington this weekend for the World Bank’s spring meetings in the coming week. Ms Adeosun said Nigeria has already begun implementing a “whole policy framework” to “support” the World Bank loan under discussion. She said Nigeria and the World Bank are “within the process” to obtain the loan and expect to complete that process “within the second quarter”, by August at the latest, she said. She said aspects of this policy framework include “fiscal housekeeping, improving [non-oil] revenues, controlling costs” and reform of the state-owned oil company. Mr Buhari proposed record spending of 6.06tn naira in a budget that was delayed by political wrangling but approved by parliament last month. Financing of the deficit from international lenders and markets has been held back due to the delay in passing the budget, Ms Adeosun said. Ms Adeosun said Nigeria needs an expansionary budget to jump-start an economy that has suffered a dramatic slow down due to the global oil price crash. Nigeria is Africa’s top oil exporter. Spending on infrastructure such as power and roads is “really what is needed to get the economy out of where it is now”, she said, adding that the government plans to run a deficit for the next two to three years. The 2016 deficit of 2.2tn naira is 2.2 per cent of GDP, she said. The International Monetary Fund forecasts growth will slow to 2.3 per cent this year, its lowest rate in more than 15 years. The minister said the administration understands that life is very difficult for the majority of citizens in the country of more than 180m, but says the changes the government is implementing will see the country turn a corner. Despite benefiting from years of oil prices over $100 per barrel, Mr Buhari said state coffers were barren when he took office last May — a discrepancy he blamed on pervasive corruption in government. Ms Adeosun said the push to develop infrastructure outlined in the budget was essential to help Nigeria diversify away from oil in the longer term. Though the government intends to pay for some of these projects through the budget, it is also looking abroad, namely to China, for funding for them. Copyright The Financial Times Limited 2016. You may share using our article tools. Please don’t cut articles from FT.com and redistribute by email or post to the web. Source link

Beama has welcomed the government’s response to the National Infrastructure Commission’s Smart Power Report.  The UK energy system faces profound challenges as it adapts to a decentralised generation mix and major new loads.  Meeting this challenge, whilst keeping down costs to consumers, demands that the UK develops and adopts innovative solutions.  Beama members are at the forefront of providing these innovations and welcome all government and regulatory support for making these ‘business as usual’ as quickly as possible.   Beama members strongly welcome the support for interconnection, storage, demand response and the development of the distribution system operator role. It will be vital to avoid making the regulations and commercial arrangements for these overly complex and expensive to operate. Ofgem should ensure that RIIO provides an appropriate balance of pressure and reward for the network companies to adopt new approaches.  The current review of P2/6, the network system reliability standard, offers an excellent opportunity to create a market for system flexibility whilst reducing costs and Ofgem should ensure this opportunity is taken. Beama looks forward to contributing to the Government’s summer consultation on smart power.  Beama members believe the UK can take the lead in developing modern, smart networks with benefits for UK customers and the creation of large export opportunities.  However, the government must understand that as well as strong encouragement for the adoption of innovative solutions, they must also address the need for a supportive framework for the UK supply chain, putting manufacturers at the core of innovation via the NIA/NIC and the responding to the need for skilled engineers to design, build and operate the network. Source link