VIX ETFs Are Trading Like Hot Cakes

Bets on stock-market volatility are gobbling up a record share of U.S. stock trading.

A frenzy of trading in the five largest exchange-traded products that profit either when volatility spikes or declines accounted for 7.2% of total composite stock market volume Thursday, an unprecedented feat for these hot-potato products, according to WSJ Market Data Group.

Friday’s trading these products represented 5.5% of total trading, third-highest ever.

The flurry of activity in CBOE Volatility Index products ramped up as the Dow Jones Industrial Average was headed toward its biggest decline in three months Thursday, a swing that sent the so-called VIX up 32%.

The VIX, an options-based measure of expected U.S. stock market price swings, declined 8.3% Friday. It is dubbed the “fear gauge” for its tendency to rise when stocks fall.

A surge in bets on volatility shows traders’ affinity for financial products that exhibit big price swings at a time of extreme calm in the broader U.S. stock market. The Dow’s decline Thursday snapped the longest streak without a 1% daily move in the blue-chip index in more than two decades.

Trading volume in the $1.2 billion iPath S&P 500 VIX Short-Term Futures ETN, which rises in price when the VIX goes up, hit 274 million Thursday, a record. The ETF turned over 10 times more than shares of Apple; it trades about double the volume in Apple on the average day.

The VelocityShares Daily Inverse VIX Short-Term ETN, ticker XIV, had its biggest share turnover of the year, accounting for 41.7 million shares traded. It was also the second time in a week that more than $3 billion traded in the ETN, according to FactSet data. The inverse product rises in price when the VIX falls.

Selling volatility, a trade expressed by owning inverse VIX ETFs, has been among the hottest trades this year with the VIX stubbornly below its long-term average. Analysts have warned for months that the easy money has been made and shorting volatility now is an especially risky gamble.

“Selling VIX has become crowded and is fraught with danger,” wrote Peter Tchir, head of macro strategy at Brean Capital.

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Source: WSJ

 

US Gulf of Mexico drilling rig count falls by one

The US Gulf of Mexico rig count fell from 17 to 16 over the past week.

 


Source: Offshore

 

Sanchez Clears Out Of Eagle Ford’s Javelina Asset In $105 Million Sale

With startling speed, Sanchez Energy Corp. (NYSE: SN) built a 70,000 net acre dry gas position called Javelina and, sooner than some analysts expected, the company said Aug. 17 it will sell the Eagle Ford field named for a type of wild boar.

Sanchez agreed to sell its assets in the Eagle Ford Shale, largely in La Salle and Webb counties, Texas, for about $105 million cash. The buyer was not disclosed.

At EnerCom’s The Oil & Gas Conference on Aug. 14, CEO Tony Sanchez III donned a masterly poker face as he told analysts and media he thought the Eagle Ford, while now a more mature basin, would still see transactions.

“You hear rumblings of potential sales,” he said

In an Aug. 17 news release, Sanchez said the Javelina transaction highlights the value of its grassroots leasing program, which had sewn up a largely contiguous position in the Eagle Ford’s dry gas window during the past 18 months.
Source: Oil & Gas Investor

 

Stock Market Plays Politics: Cohn Crater Followed by Bannon Bounce

The stock market appears to like the reports of the latest reshuffling at the White House.

Major U.S. indexes, which had been in the red on Friday, turned higher when news surfaced that President Donald Trump’s  controversial counselor, Steve Bannon, had left his position in the administration. The S&P 500 was recently up 0.2% Friday afternoon, while the Dow Jones Industrial Average climbed 0.1%.

Mr. Bannon has described himself as an economic nationalist opposed to the forces of globalization. Those viewpoints have been at odds with the trends underpinning the recent stock market rally, such as an acceleration in global growth, and his departure could give rise to other voices in the administration, some of which are viewed as more friendly to big business.

The stock market move contrasts with a decline Thursday morning as unfounded rumors circulated in some corners of the market that Gary Cohn, director of the National Economic Council, was resigning from the administration. White House aides later denied those rumors.

Mr. Cohn, a Goldman Sachs veteran, had pushed for a slew of business-friendly policies like tax-code reform. Those have been seen by some traders as an important ingredient for the stock market rally.

All in all, investors appear to like the fact that Mr. Bannon is leaving and Mr. Cohn is staying.

Source: WSJ

 

FLNG market outlook remains strong, says analyst

Despite challenging market conditions, analyst Westwood Energy forecasts global FLNG capex to total $37.6 billion between 2018 and 2023.


Source: Offshore

 

How a New Audit Rule Could Bring Sunshine to U.S. Markets

With luck, it may soon become a little harder for companies to keep investors in the dark.

The Securities and Exchange Commission is considering whether to adopt a rule proposed by the Public Company Accounting Oversight Board that would require companies’ annual reports to include information about some of the most important issues raised by accountants in the annual audit.

Similar rules are already in force in the United Kingdom and Europe and other parts of the world; all told, 124 countries have adopted or are adopting those standards, says Matt Waldron, technical director at the International Auditing and Assurance Standards Board, a global accounting organization based in New York.

Should the U.S. join them?

Corporate audits have long been conducted in a kind of twilight. An independent accounting firm confidentially pores over a company’s books and records and other aspects of the business, and then gives a terse thumbs-up or thumbs-down in the company’s annual report.

A thumbs-up states that the accounting firm obtained “reasonable assurance” that the financial statements are “free of material misstatement” and represent the company’s condition “fairly.” A thumbs-down casts doubt on whether the company can “continue as a going concern.”

That’s it. These certifications — a handful of paragraphs typically indistinguishable from one company to another — offer no further information for investors.

The new rules would make auditors describe any significant issues they raised with the audit committee of the company’s board of directors. The auditors will have to explain any “challenging, subjective or complex” judgments.

Auditors in other countries are already disclosing the areas where they have challenged management’s assumptions and where estimates are conservative or optimistic.

So companies whose shares trade both overseas and in the U.S. may have the same auditor but two drastically different reporting formats.

The 2016 U.S. annual report for Aegon N.V., the Dutch insurer and asset manager, has a cookie-cutter communiqué of less than 650 words; the international version is more than seven times as long and delves into the potential risks of specific assets and transactions. (Both were prepared by the Amsterdam affiliate of PricewaterhouseCoopers.)

After years of negotiating, the biggest accounting firms have been generally supportive of the new rules in their recent comments on the rule.

Some companies have argued that the rule could prompt their audit firm to disclose sensitive information about them that could be exploited by competitors. “I find that argument bizarre,” says Linda de Beer, an accountant and corporate director in South Africa who helped develop the international standards. “All investors are asking auditors for is, ‘We want to see a little of the detail, through your eyes, of what you drove deeper on.’ That doesn’t involve giving away any competitive edge.”

Would accountants be sued more often if they spelled out the reasoning behind their analysis? Lynn Turner, a former chief accountant at the SEC, thinks the opposite: “The obligation to come clean on critical items in the report means that auditors will have more ability to push back on management.”

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That won’t prevent notorious frauds like Enron or WorldCom, but it might make them at least slightly less likely.

In surveys by the CFA Institute, a nonprofit group of financial analysts, investors have consistently supported the concept of adding more detail to the auditor’s report. The existing format is “antiquated,” says Kurt Schacht, a managing director there. “Shareholders ought to get more information considering that they pay for these opinions.”

A spokeswoman for the PCAOB declined to comment, citing the board’s policy not to discuss rules while the SEC is soliciting input from the public. The SEC also declined to comment.

Through Friday, you can express your own opinion on the rule at sec.gov/rules/pcaob.htm; the SEC is likely to move on it by the end of October.

When future Supreme Court Justice Louis Brandeis wrote, in 1913, that “sunlight is said to be the best of disinfectants,” he couldn’t have known how long it would take to part the clouds.

Companies listed on the New York Stock Exchange weren’t required to have their financial statements prepared by independent auditors until 1933. In 1939, the SEC’s chief accountant argued that the auditor’s report should itemize “any permissible exceptions or limitations” in a company’s financial statements, along with any “unusual and significant features of the audit” — exactly in the spirit of the rule the SEC is only now considering.

A 1963 study by the SEC found that more than a quarter of all companies whose stocks traded over-the-counter “did not disseminate any financial information to shareholders at all,” and 23% of their reports weren’t even certified by the auditors.

Under the proposed rule, annual reports, already bulky, will get even fatter. But it will provide valuable information for investors, and it’s a welcome step on the long, slow path toward more transparency.

Write to Jason Zweig at intelligentinvestor@wsj.com, and follow him on Twitter at @jasonzweigwsj.

Source: WSJ

 

NAPE: Chevron Looks To Make Deals In Permian

HOUSTON—Chevron Corp. (NYSE: CVX), one of the largest acreage holders in the Permian Basin, is ready for more A&D action as it looks to create value for shareholders.

The San Ramon, Calif.-based company is reaching out to companies interested in the Permian Basin, where its net production was about 90,000 barrels of oil and 327 million cubic feet of gas in 2016.

Chevron, like some of its peers, is in the midst of shedding assets worldwide in hopes of bringing in billions of dollars in a lower commodity-price environment. Deals in what could be considered the most watched play in the world—the Permian—aren’t off the table.
Source: Oil & Gas Investor

 

‘Bitcoin Cash’ Surges, Now the Third-Most Valuable Digital Currency

Bitcoin Cash, an alternative version of the digital currency bitcoin that launched earlier this month, saw its price spike sharply overnight, as much as 86% after the fledgling network showed it could handle the kinds of higher traffic for which it was built.

Bitcoin Cash was most recently up 66% at $567. Its total market capitalization is now $9.4 billion, which pushed it over the $6.1 billion market cap of a cryptocurrency called ripple. There are more than 1,000 digital currencies and tokens, but the weeks-old digital currency trails only ethereum, valued at $28.2 billion, and bitcoin, at $69.9 billion.

The total market capitalization of the sector rose Friday to a record $144.7 billion, according to coinmarketcap.com. Most crytocurrencies have negligible value.

The higher price is good for traders who bought low, of course, but may also attract the so-called miners, who get paid for processing transactions on the network with newly minted coins; thus, a higher price makes the job more lucrative. It’s not the only consideration, but it’s a key one.

“The rising price is also creating the incentive for miners to dedicate computing power to the bitcoin cash blockchain, one that could find them moving away from bitcoin,” bitcoin developer Jimmy Song wrote on Coindesk.

Bitcoin Cash is an identical version of bitcoin, with one important change to its software: higher transaction capacity. Bitcoin and cryptocurrencies take individual transactions and pool them into groups called blocks, and these blocks are processed by the miners, who get paid for the service in newly minted bitcoins (or Bitcoin Cash). On bitcoin currently, those blocks are capped in size at one megabyte. The bitcoin industry went through a bitter, divisive debate over how and when best to increase that transaction capacity over the past two years.

In the bitcoin world, that debate is ongoing – an industry agreement earlier this year led to the implementation of an add-on network called Segregated Witness, and consensus on raising the block size to two megabytes. That increase was scheduled to go into effect later this year, but is already coming under fire, with a group of core developers arguing against it. The groups behind Bitcoin Cash decided not to wait for the resolution of that debate. They simply took bitcoin’s open-source software, increased the block size to eight megabytes, and launched this new version on Aug. 1.

The overnight event that caused Bitcoin Cash’s price spike was the first eight-megabyte block getting mined, containing roughly 40,000 transactions, but its size was an anomaly. Most blocks on the network have been less than one megabyte. “The block was processed after the network was seemingly spammed with transactions,” wrote the research site CryptoCompare. “This was an attempt to forcefully create and test an 8MB block.”

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Whether a test or not, the network did prove it was capable of handing at least one block that size. There’s little evidence though that Bitcoin Cash currently has attracted enough users that it actually needs all that extra capacity. Still, Bitcoin Cash’s continued existence is a political sore thumb for bitcoin’s old guard, the core developers. If the block-size debate heats up again this fall, Bitcoin Cash may find more converts.

For more insight into stocks and bonds, deals and dealmakers, the economy and business, listen to the MoneyBeat podcast on Apple Podcasts or on WSJ.com. Subscribe at Apple Podcasts.

Source: WSJ

 

Blackrock Manager Confirms Boost In Energy Holdings

BlackRock Inc.’s largest mutual fund hiked its exposure to “select names” in energy as the sector has lagged this year, one of its portfolio managers said on Aug. 17.

“The underperformance of energy stocks even as oil prices have stabilized creates opportunities for investors,” wrote Russ Koesterich, a manager of the $39 billion BlackRock Global Allocation Fund, in a note.
Source: Oil & Gas Investor

 

Stocks to Watch: Deere, Ross Stores, Calpine, Gap, Tenet Healthcare, Foot Locker

Among the companies with shares expected to trade actively in Friday’s session are Deere & Co., Ross Stores, Calpine, Gap, Tenet Healthcare and Foot Locker.

Shares of Deere & Co. fell 7.1% following the equipment manufacturer’s quarterly earnings. Deere reported sales that fell below Wall Street expectations, though the maker of construction and farming equipment beat on earnings.

Ross Stores shares jumped 11% premarket after the retailer reported strong same-store sales growth for the most recent quarter and raised its full-year earnings outlook.

Calpine shares jumped 9.6% premarket after the power-generation company announced that private- equity firm Energy Capital Partners and a consortium of investors have agreed to buy Calpine for $5.6 billion in cash. The deal values Calpine at $15.25 a share, a 13% premium to Thursday’s closing price.

Shares of Gap advanced 3.8% before the opening bell. The owner of clothing chains like Old Navy and Banana Republic posted same-store sales growth that outpaced analyst expectations and raised its earnings outlook for the year.

Tenet Healthcare announced early Friday that directors Randy Simpson and Matt Ripperger were leaving the board “effective immediately, due to irreconcilable differences regarding significant matters.” The two are employees of Glenview Capital Management, and their departure triggers the expiration of a standstill agreement that could allow their firm to take a more activist role. Shares were up 7.5% premarket.

Foot Locker shares fell 21% premarket after the sports apparel retailer reported far worse than expected same-store sales declines for the most recent quarter. Similar downbeat results sent Hibbett Sports shares down 10% premarket.

Applied Materials shares gained 3.4% premarket following the chip maker’s quarterly results. Profit nearly doubled from a year earlier and the company raised its earnings projections for the current quarter.

Shares of Estee Lauder advanced 4.1% premarket following the beauty company’s profit and revenue beats.

Ford Motor shares inched up 0.3% premarket after Chief Executive Jim Hackett hinted at changes to the auto maker’s self-driving vehicle plans. 

Shares of Blue Apron Holdings fell 1.7% before the opening bell following a Stifel Nicolaus analyst downgrade to hold from buy.  

This is an expanded version of the “Stocks to Watch” section of our Morning MoneyBeat newsletter. To receive it every morning via email, click here: http://on.wsj.com/MoneyBeatUSSignup

Source: WSJ

 

Chevron Drops Appeal Over Landmark Australian Tax Ruling

Chevron Corp. (NYSE: CVX) has withdrawn an appeal to Australia’s High Court over a disputed A$340 million (US$268 million) tax bill, leaving in place a landmark court ruling on related-party loans that could affect other multinational companies.

“Chevron Australia has reached agreement with the Australian Taxation Office on the loan transfer pricing dispute and have withdrawn our appeal to the High Court,” the company said in an emailed statement.

“Chevron believes the agreed terms are a reasonable resolution of the matter and are not expected to have a material impact on the year to date results of the company,” the company added.
Source: Oil & Gas Investor

 

Brady Bonds and the Rise of a New Asset Class

Emerging-market debt began to take off in the late 1980s, when then-U.S. Treasury Secretary Nicholas Brady proposed that debt-plagued Mexico restructure its defaulted commercial bank loans into tradeable bonds.

In the following years, a number of countries, including Argentina, Brazil, Panama, Russia and Venezuela, issued hundreds of billions of dollars of so-called “Brady bonds,” marking an upswing in the issuance of emerging-market debt, according to the Trade Association for Emerging Markets.

That period has given rise to one of the fastest-growing asset classes on Wall Street.

As of the end of 2016, total debt outstanding in emerging markets exceeded $20 trillion, or about 20% of the global bond market, according to Ashmore Group.

In the early days, trading emerging-market bonds was regarded a highly risky undertaking and had only a few players. J.P. Morgan & Co. was among the first banks to start making markets for such bonds, while GMO LLC, Fidelity Investments and T. Rowe Price Group were pioneers in the investment community. When the firms launched some of the first mutual funds of emerging-market bonds in 1990s, few believed they would take off among retail investors because of the volatile nature of the asset class.

Between 1995 and 1997, emerging-market bond funds returned more than 100%, but lost 25% in 1998 when Russia defaulted, Morningstar says. These funds suffered steep losses in 2008 as a result of the global financial crisis, but the asset class drew unprecedented inflows in the years that followed, as investors in the U.S. and other developed markets hunted for yields following relentless interest-rate cuts by major central banks around the world.

The market has evolved as countries developed their local-currency bond markets and companies in those countries began to issue bonds to global investors.

There were 421 emerging-market bond funds in the U.S. as of the end of June, up from 14 by the end of 1994, according to Morningstar. The J.P. Morgan Emerging Markets Bond Global index, which was launched in 1999 with 27 countries, now has 66 countries.

“There’s no more exciting place to be than where… I have been for the last 22 years,” said John Carlson, who has been running the Fidelity New Markets Income Fund since 1995. “The ups and downs are just part of life.”

Emerging markets are on a tear again this year.

Governments and companies in developing countries have raised a total of $453 billion through issuances of foreign-currency-denominated bonds so far this year through Aug. 11, a 28% increase from the previous record set in 2014 during the comparable period, according to Dealogic.

With broad investor interest in emerging markets, it has become harder for money managers to find an advantage. Many used to rely on local contacts for information, but now a protest on the streets of Caracas can be broadcast immediately across the world.

Source: WSJ

 

WSJ Wealth Adviser Briefing: Dow Streak Ends, Adviser Profile

It was a streak that might have made Joe DiMaggio envious: The Dow Jones Industrial Average fell 1.2% on Thursday, ending a 63-day streak of sessions without moves of 1% or more in either direction. The stretch was the longest since a 69-day period in 1995.

The declines were broad-based as all 30 Dow components fell, sending the index down 274 points to 21751. The S&P 500 shed 1.5% and the Nasdaq Composite fell 1.9%. Wall Street’s “fear gauge,” the CBOE Volatility Index, jumped more than 30% after recently plumbing historical lows.

But what do the declines and pickup in volatility mean? WSJ Wealth Adviser reporter emeritus, Michael Wursthorn, has some answers in his second piece in his new gig with the markets team.

Traders and money managers largely attributed the blue-chip index’s 274-point slide to a round of disappointing earnings from companies ranging from big-box retailers to technology behemoths. …

Some investors said the moves were likely being amplified by light stock-trading volumes over the summer, but they also cautioned that there were signs of increasing unease in the market after a period of calm had pushed measures of market volatility to historic lows last month.

Below, some of the best analysis and insight from WSJ writers and columnists, and occasionally beyond, on investing, the wealth-management business and more.

TALKING POINTS
Streetwise
. If investors continue to pile into passive index-tracking funds, at some point markets will stop doing their job of allocating resources efficiently in the economy. Perhaps they already have.

Bye, buybacks? S&P 500 companies spent 7.6% less on buybacks in the second quarter than in the same period a year earlier, according to a preliminary tally from S&P Dow Jones Indices. The trend has stoked concerns that a key pillar of the bull market is fading and could leave stocks vulnerable.

PLANNING AND INVESTING
Watching Your Wealth podcast
. Subscribe at wsj.com or on iTunes. And find the full archives of Watching Your Wealth here.

BUSINESS AND PRACTICE
WSJ Adviser Profile
. Andrew Crowell of D.A. Davidson in Los Angeles says a robust interview process is critical to building clients’ retirement plan and knowing when to change it. “Start early, go deep and don’t focus only on assets with an account number,” he says.

TRAVEL AND LIFESTYLE
The Watch Man. When can a watch bear the reassuring, status-sealing “Swiss-Made” label? It all comes down to a Swiss law known as the “60% Rule.” Here’s what to know before you buy.

ADVISER CALENDAR
– XYPN17 And FinTech Competition / Dallas, Aug. 28-31
– Insider’s Forum 2017 / Nashville, Tenn., Sept. 6-8
– Disrupt|Advice 2017 / New York, Sept. 12-13
– Commitment to Compliance / Boston, Sept. 18
– APFA Financial Advisor Boot Camp / Los Angeles, Oct. 5-6
– IMCA Private Wealth Advisor (PWA) 2017 / Chicago, Oct. 16-17
– FPA Minnesota 2017 Annual Symposium / Minneapolis, Oct. 16-17
– ADISA 2017 Annual Conference / Las Vegas, Oct. 23-25
– ACA Fall Compliance Conference / San Diego, Oct. 25-27
– FinCon 2017 / Dallas, Oct. 25-28
– The SRI Conference / San Diego, Nov. 1-3

$$$

The WSJ Wealth Adviser Briefing covers topics of interest to wealth managers, financial planners and other advisers. It’s delivered to subscribers by email each workday morning; you can sign up for email delivery here: http://on.wsj.com/WealthAdviserSignupPlease send tips, suggestions or other comments to michael.wursthorn@wsj.com or Wealth Editor Brian Hershberg at brian.hershberg@wsj.com.

Follow WSJ Wealth Adviser on Twitter: @WSJadviser
Follow WSJ Personal Finance on Twitter: @WSJPersFinance
Subscribe to the Watching Your Wealth podcast on iTunes or WSJ.com

Source: WSJ

 

WSJ City: Terror in Catalonia, Jitters Hit Markets, Frankfurters Unhappy Over Brexit Bankers

Good morning from the WSJ City desks in London. WSJ City is the app that delivers fast, smart news on mobile for London. Download for iPhone or AndroidHere’s essential reading on today’s developments.

MUST READS FROM WSJ CITY

A van mowed down pedestrians in the heart of Spain’s second-largest city on Thursday, killing at least 13 people in a terror attack claimed by Islamic State. Hours after the attack, police killed five alleged terrorists as they responded to a separate attack that hurt seven people in Cambrils, a town southwest of Barcelona. WSJ City 

British proposals for its future trading relationship with the European Union have left British exporters confused as ever about the future of trade across the English Channel, and importers with hints of heavy red tape to come, writes UK and Brexit editor Stephen Fidler. WSJ City 

A bigger tax base, greater clout and a boost for the local economy: The city that hosts the European Central Bank has several reasons to welcome London bankers looking for a new post-Brexit home. Frankfurt’s residents, however, aren’t happy. WSJ City

If investors continue to pile their money into passive index-tracking, at some point markets will stop doing their job of allocating resources efficiently in the economy. Perhaps they already have, writes WSJ’s James Mackintosh in his Streetwise column. WSJ City

For a central bank, even good news isn’t entirely straightforward, writes Richard Barley for WSJ Heard on the Street. The account of the ECB’s July meeting, betrayed clearer concerns about the rising euro exchange rate than President Mario Draghi had shown at the post-meeting press conference. WSJ City

In many corners of Europe, the recession cost millions their jobs. Despite a recent surge of growth, many remain unemployed with little hope of finding new jobs. WSJ City

A group of hedge funds have accused the European Commission of encouraging and accelerating a run on Spanish bank Banco Popular, FN reports. The funds’ lawyers applied to the European Court of Justice to have the resolution of Popular, which resulted in its sale to Santander, annulled. WSJ City

IN THE PAPERS

Drilling has started on the first UK shale well in six years despite claims from some senior geologists that the potential for shale in Britain is ‘overhyped.’ FT (£)

Ericsson is understood to be considering steep job cuts outside of Sweden that may affect its 3,500-strong UK workforce. The Times (£)

Heineken has been given the green light for its takeover of part of Punch Taverns after offering to sell pubs in 33 areas across the UK. Telegraph 

US Secretary of State Rex Tillerson and Defence Secretary Jim Mattis stressed that a military response to a North Korean aggression remained on the table, one day after the president’s White House strategist said that there can be no military solution to the crisis. WSJ

Donald Trump’s policy advisory council of executives disbanded on Wednesday after about eight months in existence. But several in the group had questioned its point weeks earlier. WSJ

MARKETS TODAY

European shares fell at the open on Friday, following Asian markets lower after a sell-off on Wall Street.

Jitters on Wall Street were triggered by the terrorist attack in Barcelona, disappointing blue-chip earnings and speculation that the president’s economic adviser was set to resign.

“We can now see a reversal in fortunes and sentiment deteriorating,” said Chris Weston, chief market strategist at IG Group.

The Stoxx Europe 600 opened down 0.6%, with travel and leisure one of the region’s worst performers, down 0.9% following the attacks in Spain. London’s FTSE 100 opened down 0.7%, while Spain’s IBEX 35 was down 1.4%. Airlines led the declines in London, as easyJet fell 3.2% and British Airways parent IAG slipped 3%.

The Dow Jones Industrial Average experienced its biggest decline in three months, shedding more than 247 points while Wall Street’s “fear gauge,” the CBOE Volatility Index, jumped 32%.

Asia’s bourses were a sea of red this morning, with the Nikkei down 1.2% after falling to its lowest level since May.

Source: WSJ

 

Different for NGLs – NGL Pipelines Out of the Permian, Part 5

Production of natural gas liquids in the Permian is growing so quickly that within a year or two some parts of the super-hot play may experience NGL takeaway constraints. That is good news for the owners of the eight existing NGL pipelines out of the Permian, which are likely to see flows on their pipes increase as NGL production rises — assuming, that is, that they have capacity to spare and that they are connected to natural gas processing plants within the faster-growing parts of the region. Today we continue our blog series on Permian NGL production, processing and pipelines with a look at ONEOK’s West Texas LPG Pipeline and the Chevron Phillips Chemical EZ Pipeline.

Source: RBN Energy

 

Lawmakers Get First-Hand Look at Natural Gas Lifecycles’ Impact on Ohio’s Economy

A group of Ohio legislators and their staffs attended a “Natural Gas Lifecycle Tour” last week that illustrated the tremendous positive economic impact Utica Shale development is making across each segment of the Buckeye State’s natural gas industry. Thanks to accommodations by companies like Ascent Resources, MarkWest and Dynegy, the tour included a first-hand look at a well pad, midstream operations and a natural gas power plant, comprehensively illustrating the importance of pipelines for takeaway capacity, the need for end users of natural gas and the significant Utica Shale investment that is creating billions of dollars in economic activity and tax revenue.

House Energy and Natural Resources Committee chairman Al Landis attended the tour and explained to EID the importance of understanding the natural gas lifecycle,

“These tours and informational meetings were very important to the process legislatively because legislators get to go on the site, on the tours hands-on so we can see first-hand what’s going on here in Ohio as far as energy and our gas production. It’s certainly valuable; when we’re in committees we’re talking about issues that concern energy in Ohio. And, so I’ve been here first-hand, met with the folks got to know them, know the operation and I just can’t say enough about it.”

Last week’s tour kicks off a series of events geared at educating the public about how natural gas is quite literally powering Ohio’s economy and providing a tremendous economic windfall. In support of those efforts, Energy In Depth has released a new infographic, “Natural Gas Lifecycle: By The Numbers,” showing that when the upstream, midstream and downstream segments are combined, the statewide investment already made and estimated to come within the next few years — in conjunction with taxes generated from those investments — are simply staggering.

Here’s some of what was seen and talked about on the tour:

Upstream

The tour included a visit to an Ascent Resources well pad, where attendees learned about the new technology and techniques that are helping Utica Shale operators become increasingly efficient. In addition to detailing safety and environmental measures taken during upstream activities, there was also an emphasis on the incredible boon to the economy that continues to occur in areas where production is taking place.

As Cleveland State University recently reported, fracking has directly poured over $39 billion into Ohio’s economy. And a recent EID report found that property taxes paid on production of oil and gas has meant $45.8 million in direct local tax payments, with another $250 million slated over the next 10 years. Additionally, six out of the 10 highest income growth counties in Ohio are squarely located in the heart of Utica Shale production, which is not a coincidence.

Here is a breakdown of those numbers:

Newly elected Ohio Sen. Frank Hoagland was one of the legislators touring the site. According to Sen. Hoagland,

“People don’t understand how much work is involved with gas and oil, how important it is to not only us as a local community, but on a national level and to the future of the global society. I believe we are extremely fortunate in this area, to have this opportunity.”

Here’s a quick video of his remarks after touring the well pad and learning about Ascent Resource’s operations:

One observation made along the tour route was the large number of companies that support the operation of a well pad. To that point, a recent American Petroleum Institute-Ohio report finds the oil and natural gas industry supported 262,800 jobs in 2015 alone! However, with the continued upstream activity occurring, Ohio is in dire need of takeaway capacity made possible through pipeline infrastructure, which leads us to Ohio’s midstream development update.

Midstream

After the group toured the Ascent Resources well pad, the “Natural Gas Lifecycle Tour” moved to MarkWest, the largest full-service midstream system in the heart of the Utica Shale. MarkWest representatives explained what happens after oil and natural gas is produced from the wellhead and spoke at length about the importance of pipelines and end-uses (downstream), such as the proposed PTT Global Chemical plant.

Ohio’s Utica Shale produces a tremendous amount of natural gas liquids (NGL), such as ethane, propane, butane, isobutane and pentane.  Ethane in particular was a major topic of discussion, as ethane from the Utica Shale is currently primarily blended into pipeline gas. In other words, it’s a drag to both operators and midstream companies, as the majority of the ethane is not being used. Fortunately, this could soon change, as ethane crackers are slated to come online, allowing ethane to be cracked to produce ethylene, the feedstock for chemical manufacturing of over 6,000 consumer products.

To date, midstream companies such as MarkWest, in conjunction with interstate transmission lines in various stages of development, have meant an estimated $13.7 billion to Ohioans.  As EID recently reported, tax revenues associated with the five major pipeline projects will yield at least $1.2 billion to Ohio’s local communities and schools. Here’s a snapshot of the midstream estimates in Ohio:

Downstream

Obviously, downstream investment and end-use of oil and natural gas is critical to the overall natural gas lifecycle.  In addition to the proposed petrochemical plant in Belmont County, which would add at least $5 billion of downstream investment, there has been a surge of natural gas power plants sprouting up all across the state. During the “Natural Gas Lifecycle Tour,” legislators and their staffs toured Dynegy’s natural gas power plant in Beverly, Ohio.

Dynegy is now the largest power generation company in the state of Ohio, with 10 power plants, a corporate office in Cincinnati and 400 full-time employees. During the tour, a company representative shared that the natural gas power plant in Beverly provides 35 percent of the local school district’s entire yearly budget. A spokesperson for Dynegy explained:

“As a result they have been able to give pay raises to teachers and a new HVAC system. The school district we are in (K-12), by the time they hit kindergarten through their senior year we have paid about $74,000/child.”

Dynegy’s Beverly plant is also one of the cleanest in the state, emitting 50 percent less CO2 than other fuel sources and essentially no particulate matter.

Ohio State Rep. Andy Thompson was excited to host his Ohio Statehouse colleagues in his home district, as he reported to EID:

“It’s excellent to be touring the Dynegy plant today here, just north of Beverly, Ohio. It’s in my district, it’s contributing a lot to the local economy charitably, but also because the employment that it provides. It’s a fantastically safe plant, has a tremendous safety record over the last 16 or 17 years. So, they are taking the product from the Utica shale and turning it into inexpensive electricity, adding to the reliability of the grid. They are also cost effective in the long term for the economic development of Southeast Ohio and Ohio, generally. They are supplying the grid and providing reliability and the ability to start up the grid should there be any kind of catastrophic shutdown. So, they play a vitally important role in our economy and our energy security and it’s good for economic development.”

In addition to the local gas fueling Dynegy’s plant in Beverly, the prolific natural gas production made possible by fracking has spurred investment of new combined-cycle natural gas-fired power plants all across the state.  As Rep. Thompson explained,

“Ohio is blessed with abundant, low-cost shale gas. In fact, Utica shale gas is the lowest cost gas in the entire country.”

To fully understand just how substantial downstream investments and tax revenues are estimated to be, take a look at this snapshot:

Many Ohioans believe a recent uptick in oil and natural gas investment is a signal of more good things to come, and drilling has started to pick up. Guy Coviello from the Youngstown Regional Chamber of Commerce recently stated,

“It’s a good indicator of what’s happened with the resurgence in the shale industry.”

It was made abundantly clear on the “Natural Gas Lifecycle Tour” that natural gas produced from eastern and southeastern Ohio has spurred investment throughout the state, and not just in areas where exploration and production are taking place.  A prime example is Oregon, Ohio. Despite the fact there is no Utica Shale development going on there, the community has benefited from the recent construction of a natural gas-fired power plant, and a second plant appears to be in the works. More importantly, every Ohio electricity consumer — and even residents in neighboring states — are benefiting from the ample power generated from clean burning natural gas.

Here’s how that works: Ohio is part of a 13-state “PJM Interconnection” competitive free market system. This free market includes Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia. So quite literally, gas produced using fracking in Ohio will not only take care of all in-state power needs, it will also support low-cost electricity for all of the states that participate in this 13-state free market system which services 61 million consumers.

Private investment in Ohio natural gas-fired power plant construction projects is happening at such a rapid rate that the U.S. Energy Information Administration (EIA) can’t even keep pace. A case in point: the following map from an EIA forecast released eight months ago under the headline “Many natural gas-fired power plants under construction are near major shale plays” doesn’t even include several of the new Ohio projects in the works.

If what’s happening in Ohio is any indication of where things may lead in other shale plays, it’s fair to say that the United States could see a tremendous uptick in private investment in natural gas-fired power.

Other areas of major downstream investment include an estimated investment from PTT Global Chemical.  To date, there’s already been a surge in downstream investment from smaller petrochemical plants across the state, as well as combined heat and power plants and natural gas refueling stations. Investment already accounted for and future estimates from downstream activities is currently estimated at $15.3 billion with 11 new natural gas power plants adding at least $9 million per year to Ohio school districts.

With so much in the works, it is no surprise people in Ohio are calling all of this incredible news “a dream come true.” And as last week’s tour showed, it’s not only one segment of the industry having such a profound impact on Ohio’s economy, but the entire natural gas lifecycle.

Source: Energy In Depth

 

Heard at the 2017 EnerCom Conference and Oilfield Tech & Innovation Day

Heard at the 2017 EnerCom Conference and Oilfield Tech & Innovation Day

Attendance was good and oil and gas company executives and institutional investors were upbeat at EnerCom’s 2017 The Oil & Gas Conference and Oilfield Tech & Innovation Day.

The 22nd year of EnerCom’s The Oil & Gas Conference has concluded along with the first Oilfield Tech & Innovation Day. The financial side of the conference featured three full days of dual track presenting oil and gas companies and oilfield service companies. The EnerCom Tech Day featured 23 presenters with luncheon keynotes by Flotek CEO John Chisholm and IBM’s General Manager of Chemicals and Petroleum Industries John Brantley.

Heard at the 2017 EnerCom Conference and Oilfield Tech & Innovation Day

Former Shell Oil President John Hofmeister speaks to a standing room only crowd at EnerCom’s 22nd The Oil & Gas Conference in Denver, Aug. 16, 2017.

In his keynote talk on Wednesday former President of Shell John Hofmeister answered the question “Is the Silicon Valley Taking Over” in a lively discussion of how the “keep it in the ground crowd” would not be successful in totally wiping out internal combustion engines for transportation.

Hofmeister cited three independent studies that came to similar conclusions about the penetration of electric vehicles. Bloomberg, Goldman Sachs and the IEA agreed that by 2050, there will be four billion automobiles on the road worldwide. Two billion will be battery driven and the other two billion will be internal combustion driven, fueled either by gasoline or ethanol or natural gas.

“The demand for mobility will drive power-source,” Hofmeister said. “A sudden takeover by public policy that says leave it in the ground—it’s not going to happen.”

Heard at the 2017 EnerCom Conference and Oilfield Tech & Innovation Day

IBM General Manager of Chemicals and Petroleum Industries was luncheon keynote speaker at EnerCom’s Oilfield Tech & Innovation Day in Denver, Colorado, Aug. 17, 2017.

“Right now there are one billion Watson users.” – John Brantley, General Manager Chemicals and Petroleum Industries, IBM. But the uptake by the oil and gas industry is slow. Brantley said the oil and gas industry’s use of cognitive systems will change the industry by allowing it to access the other 80% of available data that it cannot now use.

John Chisholm, CEO of Flotek—an IBM Watson user—said that by 2020 80% of oil and gas companies will do decision making based on cognitive computing.

“Geology matters:  we’re just trying to take a little of the mystery out of it.” – Josh Ulla, VP business development for FractureID.

The next EnerCom conference will be in Dallas Feb. 27-Mar.1, 2018.
Source: Oil & Gas 360

 

Exco’s $300 Million Eagle Ford Deal Unravels

Exco Resources Inc.’s (NYSE: XCO) $300 million Eagle Ford sale to Venado Oil and Gas LLC has been scuttled and the company may find liquidity challenges ahead, such as its ability to make debt interest payments.

The deal, which was to have closed in June, was sidetracked by a wrangling over a natural gas contract with a Chesapeake Energy Corp. (NYSE: CHK) subsidiary that ended up in federal court.

Venado and Exco extended the close to Aug. 15, when the agreement was terminated after the terms, including the natural gas contract, could not be met.

Exco had earmarked the Eagle Ford proceeds for use in the Haynesville Shale. The company now faces a financial bind after making two deals despite potential liquidity challenges.
Source: Oil & Gas Investor

 

IBM Watson: Not Just for Winning Jeopardy

Cognitive systems can be applied to oil and gas operations

The first EnerCom Oilfield Tech & Innovation Day featured IBM (ticker: IBM) and Flotek Industries (ticker: FTK) presenting in the keynote lunch.

John Brantley, IBM’s World Wide General Manager Oil & Gas/ Chemicals Industry, spoke on the digital transformation of the oil and gas industry. Like other industries, oil and gas can be significantly improved by adding modern computerization.

IBM Watson: Not Just for Winning Jeopardy

Companies are recognizing this opportunity, and 68% of oil and gas companies have invested a combined $100 million in data analytics over the past two years. This investment will bear fruit, as according to Brantley 80% of large oil and gas companies will run their business with help from a cognitive/AI agent.

IBM is using its Watson system to develop cognitive agents for oil and gas companies. Brantley reported that without cognitive solutions, IT and data analysis in an oil and gas company can only analyze about 20% of all data. Cognitive systems can examine the vast majority of data that falls through the cracks. For example, cognitive systems can analyze day reports, video and sensor feeds to find what data is important.

IBM has already partnered with several companies to apply cognitive programs to oil and gas operations. The company is working with Gazprom to develop an analytics platform to identify optimization opportunities, which is already creating significant improvements in recovery factors.

IBM has also partnered with Repsol to analyze the company’s historical data. Watson will be used to analyze 30 years of exploration data, to identify which factors are most important to engineers. This training will allow Watson to examine future data, automatically filtering information for analysis.

Complicated vs complex

Flotek has partnered with IBM in the push to bring cognition to the oil and gas industry. Flotek CEO John Chisholm illustrated the application of cognitive systems by identifying the difference between complicated systems and complex systems.

IBM Watson: Not Just for Winning Jeopardy

Building a jet engine or creating an iPhone are complicated activities, but they involve working with known, well-understood variables. Five o’clock traffic in LA, by contrast, is a complex system, depending on numerous variables that are not always known. According to Chisholm, completing modern unconventional wells is also a complex system, depending on variable geology and well characteristics. Most current activities in oil and gas use problem solving strategies for complicated problems to deal with what are actually complex problems.

Flotek and IBM have produced Wyatt, a program for analyzing well data and improving completion and reservoir performance. This gives companies the ability to use complex analysis on oil and gas problems, identifying optimal processes. Flotek intends to apply this system as RC2, reservoir cognitive consultant. The company is moving quickly, and intends to begin commercialization of RC2 next year.

IBM Watson: Not Just for Winning Jeopardy
Source: Oil & Gas 360

 

Dow Tumble Ends Calmest Stretch in 22 Years

Look at those Dow industrials go.

The blue-chip average dropped 274 points, or 1.2%, on Thursday, ending a 63-day streak of sessions without moves of 1% or more in either direction. The stretch was the longest since a 69-day period in 1995.

The Dow has often been moving up and down less than the broader S&P 500 on any given day, due partly to the smaller weighting of tech stocks in the price-weighted index.

The S&P 500 tilts more heavily toward components like Alphabet and Facebook, because it is market-cap weighted. It has been rising and falling faster in recent months weeks as the sector turned more volatile after big gains in the sector earlier in the year.

The S&P 500 broke its 58-day streak without a 1% move on Aug. 10 when it fell 1.4% as tech stocks underperformed. The Dow industrials only dropped 0.9% that day.

On Thursday, the S&P 500 was down another 1.5%. The tech-heavy Nasdaq Composite was down 1.9% and the small-cap Russell 2000 index was down 1.8%.

All told, Thursday was a session full of broad and heavy selling that has come in a year where markets have done little else but go up. All 11 S&P 500 sectors ended the session in the red, only the third time that’s happened so far this year, the least for any comparable period on record, according to The Wall Street Journal’s Market Data Group.

All 30 Dow stocks also ended the day in the red.

Source: WSJ