Get Back On My Stroud? Canadian Congestion Revives Cushing Rail Option

New production expected online in December 2017 from the Suncor Fort Hills project in the oil sands region of northern Alberta could increase pipeline congestion from western Canada to the U.S. Gulf Coast market where the oil is in demand. That’s because existing capacity across the Canadian border is running close to full and the only possible capacity addition across before 2019 is Enbridge’s 300-Mb/d Alberta Clipper expansion at the border — assuming it gets a long-sought U.S. Presidential Permit later this year. As a result of this continuing near-term pipeline squeeze, producers are again turning to rail transport to bypass pipeline congestion and ensure their crude gets to market. On June 2 (2017), USD Group announced a new route option for Canadian producers following its purchase of a rail terminal in Stroud, OK, that is connected by pipeline to the Midwest crude trading and storage hub at Cushing, OK; USD will offer direct rail service from its Hardisty, AB, terminal to Cushing. Today we review the economics of this rail transport route for oil sands producers. (This blog is based on a recent note published by Morningstar Commodities and Energy Research.)

Source: RBN Energy


BOEM Extends its Review of Financial Assurance Requirements for OCS Decommissioning

Secretary’s mandated review of NTL No. 2016-N01 will get more time 

In an announcement on June 22, 2017, BOEM reiterated that Secretary’s Order 3350, issued on May 1, 2017, directed BOEM to “promptly complete a review of Notice to Lessees (NTL) No. 2016-N01 and provide our recommendation on whether to implement this NTL to the Assistant Secretary – Land and Minerals Management (ASLM), Deputy Secretary, and the Counselor to the Secretary for Energy Policy,” Haynes and Boone’s energy attorneys Robert Thibault and Christopher Reagen pointed out in a note to clients today.

In its statement on the prompt NTL review requested by the Secretary of the Interior, BOEM said it is “in the final stages of our review, and has obtained significant industry feedback. We have determined that more time is necessary to work with industry and other interested parties and the NTL implementation timeline will be extended beyond June 30, except in circumstances where there is a substantial risk of nonperformance of the interest holder’s decommissioning liabilities.”

BOEM said it will continue to gather input from all interested parties.

The agency said its goal is “to ensure industry’s continued engagement in developing and implementing a risk management program that enables industry to meet its legal obligations and protects the American taxpayers from shouldering any liability for decommissioning existing or future facilities on the OCS, while recognizing the industry’s current economic realities and concerns.”

“While a significant signal of its continued interest in working with industry participants, BOEM’s announcement also indicates continued slippage in issuing its program for financial assurance with certainty for the industry,” the Haynes and Boone attorneys concluded.

The NTL was issued to operators of offshore oil and gas operations in the U.S. in 2016 under the prior administration. The new administration and Secretary of the Interior took action requiring a formal and prompt review of the new financial assurance requirements. Many industry experts believed the changes to the financial requirements for decommissioning had the potential to cause significant negative impacts the U.S. OCS oil and gas industry.

Source: Oil & Gas 360


China Has Boosted Both Imports and Production of Natural Gas

Imports and output of natural gas rose more than twice the expected amount this year in China

Imports and domestic output of natural gas are outpacing government projections in China as the country works toward a goal of making the fuel 10% of its energy consumption by 2020.

Official data for domestic production and imports shows that the total amount of natural gas available in China in the first five months of the year was approximately 72.0 million tons, up 5.9% for the same time frame last year.

The increases are more than double the annual rate needed in order for China to increase natural gas’ share of energy consumption from its current 5.9% to 10% by the end of the decade, reports Reuters.

LNG has been the main source of the increased imports, with imports of the liquefied gas up 38.4% in the first five months of 2017 while pipeline imports dropped 4.4%. LNG is becoming a more competitive option for imports as the gas becomes less costly. Customs data from May shows that the average landed cost of LNG was $7.28 per MMBtu.

This is higher than the $5.25 per MMBtu of pipeline imports, however, the customs price excludes the cost of internal pipeline and distribution, meaning imports fromCentrall Asia still have to pay to get from the border to demand centers. LNG, on the other hand, is consumed near where it is offloaded and re-gasified.

Strong natural gas demand abroad can help support jobs in the United States

Natural gas is becoming an increasingly popular fuel source for power generation, offering a cleaner alternative to coal-fired electricity generation. Natural gas demand is expected to grow faster than both oil and coal through 2035, according to BP’s (ticker: BP) annual outlook. The main centers of that growth will be China, the Middle East and the U.S. as all three look to significantly grow their use natural gas for power generation.

Natural gas demand expected to grow in the US, China and India

The increased demand in the U.S., and the increasing thirst for more natural gas abroad, could create as many as 2 million jobs in the United States by 2040, according to the American Petroleum Institute. The natural gas industry, along with related economic activity, now employs four million Americans from drilling to pipeline construction. The report, based on projections from the Energy Information Administration, also predicted an additional $1 billion in cost savings for the American consumer from lower energy prices and cheaper production of petrochemical products.

Some political obstacles remain, however, with protectionist trade talk making up a major part of President Donald Trump’s campaign. API Chief Economist Erica Bowman said the group has been talking to President Trump’s administration about the benefits of open borders for natural gas producers looking to export.
Source: Oil & Gas 360


Germans Have Reason to Pick Bunds Over Treasurys

Germans have a new reason to buy up their country’s government bonds: They’re starting to offer attractive yields.

A recent jump in 10-year German bund yields, which rose to as high as 0.406% on Wednesday, has helped push the yield above comparable U.S. Treasurys when adjusting for the cost of hedging currency risk, according to Macro Risk Advisors.

Last year, 10-year bunds sported negative yields, but they’ve been in positive territory for all of this year. They popped higher on Wednesday after the European Central Bank’s Mario Draghi made optimistic comments about the economy, stoking speculation that the ECB could be getting ready to withdraw is bond stimulus.

Bunds later pared their rise as investors considered whether they were overreacting to the comments. Still, with benchmark Treasury yields mostly falling since March, the extra yield for Germans investing in U.S. debt had been coming down. And in recent days, it has actually turned negative on a currency-adjusted basis.

“U.S. Treasury yields have been declining this year for the most part whereas German yields have been trading in a range,” said Pravit Chintawongvanich, head of derivatives strategy at Macro Risk Advisors.

The U.S. 10-year yield was recently at 2.235%. Without adjusting for the cost of hedging, that’s about 1.85 percentage points more than comparable German bund yields, near its smallest since November, according to Tradeweb.

But big investors, particularly insurers and institutional investors, often hedge currency risk to limit their exposure to fluctuations in the value of their own currencies against the dollar. It’s a consideration for investors trying to decide whether to buy their own government debt or that of the U.S. instead.

Foreign demand for Treasurys has helped keep U.S. yields so low in recently years, say rates traders. Foreign investors could pare their exposure to the U.S. government bonds if local debt starts to look attractive relative to currency-hedged Treasurys.

That said, there are many factors that influence foreign demand. Currency hedging costs, which had been particularly high last year, have retreated a bit, which boosts the attractiveness of Treasurys for some.

Treasurys also still offer a yield pick-up for Japanese investors over their country’s own government bonds, where the 10-year debt has been trading at a yield near 0%.

The additional yield Treasurys offered over Japanese government bonds had been erased by the rising cost of currency hedging last fall. But the yield advantage of Treasurys has since rebounded to 0.38 percentage points on Wednesday, according to Deutsche Bank data. Investors who watch that differential closely may not be so quick to step out of the Treasury market.

Source: WSJ


New LSU Report Forecasts Gulf Coast Spearheading America’s Bright Energy Future

The oil and gas industry along the Gulf of Mexico is set for a major expansion by 2019, according to a new report from Louisiana State University’s (LSU) Center for Energy Studies. The report predicts a surge in production and processing of oil and gas in the region, even in a continuing climate relatively low commodity prices.

The inaugural “Gulf Coast Energy Outlook” singles out 2017 as a peak year for new energy manufacturing capital spending in Louisiana, with better than $25 billion in new projects announced or completed this year, mostly in the form of new liquefied natural gas (LNG) export terminals worth a cumulative $17 billion.

This capital spending represents “historic investments in mid-stream and down-stream sectors” and is concentrated in LNG, methanol/ammonia plants, and cracker/polymer projects, according to the report.

The report also predicts that U.S. oil and gas production will continue its meteoric rise, mostly through further technological advances in hydraulic fracturing and shale exploration. The LSU report predicts U.S. oil production will reach an all-time record high of 10 million barrels per day (mbpd) by 2019 and cross the once unimaginable 12 mbpd threshold by 2022.

The report also forecasts U.S. natural gas production soon surpassing record levels reached in 2015 and growing all the way through 2030.

Much of this forecasted record production will be spearheaded by the Gulf Coast region, according to the report,

“Total U.S. crude production is projected to increase over 10 million barrels per day (MMBbls/d) by 2020, with much of this increased concentrated in the Gulf Coast region. Thus, the Gulf Coast region is expected to increase in its relative contribution to U.S. crude oil production over the next decade. U.S. natural gas production continues to be resilient and shows continued strong growth through 2020 and beyond. The Gulf Coast region makes a significant contribution to the 80 billion cubic feet per day (Bcf/d) U.S. market, but the Marcellus accounts for the largest relative share.”

Meanwhile, continuing supplies of cheap and plentiful natural gas are predicted to continue buoying the refining, chemicals, and fertilizer industry along the Gulf, which already employ 253,000 people in the region.

These low cost supplies have already facilitated $240 billion in major industrial projects announced or completed on the Gulf Coast, according to the report. It also highlighted the ability of drillers in key shale basins like the Bakken to remain profitable even in a below $40 per barrel scenario. This new shale production has also vastly changed the makeup of the oil and gas supply in the region with offshore representing stable production, but a declining share of overall output.

The shale boom also means a boom in LNG, with a potential U.S. liquefaction capacity exceeding 50 Bcf per day by 2025, if all current terminal applications are approved. Nearly 95 percent of this capacity would be in the Gulf Region, supporting thousands of new jobs and expanding the reach of American natural gas to markets all over the world.

The report predicts a modest increase in oil prices with forecasts of $51 to $59 per barrel in 2017 possibly rising as high as $75 per barrel by the end of 2018. These increases would facilitate the return of approximately 8,000 jobs to a region that has been hit hard by the fall in prices, particularly in Louisiana’s upstream oil and gas production.

Refining is yet another bright spot ahead for the industry and the region, with significant investments in crude oil transport, including pipeline reversals, expansions, and additions predicted. The report also singled out the lifting of the crude oil export ban, saying it “can create an environment that allows for the Gulf Coast to become the epicenter for hydrocarbon trading.”

The Gulf Coast Energy Outlook was sponsored by Regions Bank and created by a team including Christopher K. Coombs and Dek Terrell of the LSU Economics & Policy Research Group, as well as David E. Dismukes and Gregory B. Upton, Jr. of the LSU Center for Energy Studies.

Source: Energy In Depth


Jubilee FPSO heading stabilized, further shift needed

Following completion of the interim spread mooring of the Jubilee FPSO offshore Ghana, the vessel is now anchored to the seabed and held on a constant heading, with the turret bearing locked.

Source: Offshore


WSJ City: Pound Surges as Carney Goes Hawk, Bonds Whipsaw as Investors Question QE, City Reacts to Massive Funds Shake-Up

Good afternoon 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.


The pound surged to a three-week high against the dollar after Bank of England Gov. Mark Carney said the case for raising interest rates in the UK may strengthen in the coming months if the economy keeps motoring despite weak consumer spending. WSJ City 

Elsewhere, the story was less clear cut. Global government bonds and the euro whipsawed as investors struggled to parse signals from central banks — in particular the European Central Bank — on when they could unwind the massive stimulus programmes that have underpinned markets. WSJ City 

At least one voice in the market thinks the ECB isn’t about to take away the punch bowl just yet. S&P said the economy may be firing on all cylinders, but the central bank will be in the market for longer than investors think. Despite fears of a taper tantrum over the past 24 hours, S&P believes the bank will still be in the market next year.  WSJ City 

The City’s watchdog unveiled a massive shake-up of the asset management industry, setting out a range of extensive remedies to drive competition and transparency in the UK’s £7 trillion fund sector. Here’s how the City reacted. WSJ City 

Despite pleas for leniency on the FCA measures from investment consultants, those firms were among the hardest-hit in the shakeup and are now facing the likelihood of a full-blown competition review. WSJ City

US hedge funds are bailing out Britain’s Co-operative Bank—again. The bank on Wednesday said bondholders, including some US funds that saved the bank from failure in 2013, will inject £250 million in new equity and raise around another £443 million for the bank through a debt swap. WSJ City 

From Google to Apple, top US tech companies have been on the receiving end of tough EU decisions. The bloc’s antitrust watchdog has handed down a string of big decisions, in what might look to US companies and officials like a trend by Brussels to train investigations on large American companies. EU officials deny any bias. WSJ City 

Deutsche Bank Wealth Management has kicked off its initiative to hire 100 front office staff in 12 months with the appointment of a new head for its UK business, FN reports. Michael Morley, the former chief executive of Coutts & Co, will join the firm in July, Deutsche Bank confirmed today. WSJ City 



The EU May Need to Introduce a Bloc-Wide Tax After Brexit – Bloomberg

EU Exploring Invisible Border in Ireland Post-Brexit – Politico

German Businesses Plan for Brexit Blow – Financial Times

Philip Hammond at Odds with David Davis over Brexit Transition – The Guardian

UK House Prices Bounce Back in June but London Weak: Nationwide – Reuters


Shares of financial companies led US stocks higher Wednesday.

Following its biggest daily drop in more than a month, the Dow Jones Industrial Average rose shortly after the opening bell, the S&P 500 also gained and the tech-heavy Nasdaq Composite came off its biggest one-day percentage drop since June 9.

Financial helps drive gains on the S&P 500. They are up more than 5% in June after the Federal Reserve raised interest rates, helping financials erase losses from earlier this year. Higher rates tend to help banks’ net-interest margins, a key measure of lending profitability.

London’s FTSE 100 fell 0.6%, while the pound jumped to a three-week high of to $1.2957  against the dollar after Mark Carney signalled a possible interest rate hike in the months ahead.

The euro and government bond yields were volatile after European Central Bank Vice President Vítor Constâncio played down remarks from Mario Draghi, who had said on Tuesday that the eurozone recovery is strengthening.


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Source: WSJ


Cayley tieback goes onstream in the North Sea Montrose area

First gas has flowed on schedule from Cayley, the third and final discovery to come onstream as part of the Montrose Area Redevelopment in the UK central North Sea.

Source: Offshore


Bearish Sentiment Continues

US crude oil stocks increased by 0.1 MMBbl last week. Gasoline and distillate stocks posted withdrawals of 0.9 MMBbl and 0.2 MMBbl respectively. Yesterday afternoon, API had reported a crude oil build of 0.851 MMBbl, alongside gasoline and distillate builds of 1.35 MMBbl and 0.678 MMBbl respectively. Analysts had expected a crude withdrawal of 2.5 MMBbl. The most important number to keep an eye on, total petroleum inventories, increased slightly by 0.8 MMBbl. For a summary of the crude oil and petroleum product stock movements, see table below.

US production was estimated to be down 100 MBbl/d from last week per EIA’s estimate. Imports were up by 140 MBbl/d last week to an average of 8.1 MMBbl/d. Refinery inputs averaged 16.9 MMBbl/d (262 MBbl/d less than last week), leading to a utilization rate of 92.5%. The report has bullish and bearish signals. The build in crude oil, which ran contrary to analyst expectations, and the build in total petroleum inventories were clearly bearish. However, the withdrawals in primary refined products and the decline in EIA’s production estimates could be interpreted as bullish. WTI prices are up $0.28/Bbl to $44.52/Bbl at the time of writing.

WTI prices have continued to trade in the $42-45/Bbl range. The IEA’s monthly report showed the implied deficit for 2Q17 to be 670 MBbl/d (half of the implied deficit from the prior month’s report). Along with that, the commentary that “patience is required” for inventories to normalize have fanned the flames for recent bearish sentiment. The rising overall OPEC production due to growth from Libya and Nigeria (both exempt from quotas) has also exacerbated the concerns on the supply side. The growing US rig count and production estimates are also driving prices lower. Although WTI prices have been lower recently, most US producers have hedged production at higher prices earlier this year, which means US production will continue to grow this year. As stated here previously, without continued high compliance with production quotas and the realization of the demand growth projected by IEA, there is little chance for the global market to normalize inventories and provide an environment for higher prices. Drillinginfo expects WTI prices to trade in the mid-$40/Bbl range in the short term as the market comes to grips with whether the implied deficit will prompt global inventory normalization. Until global inventories start to decline, longer term price advances will be limited.

Please find the updated Drillinginfo charts on the link below:
Petroleum Stocks Chart

The post Bearish Sentiment Continues appeared first on Drillinginfo.

Source: Drilling Info


Fed Officials Are Watching for Bubble Trouble

Years of easy-money policies by the Federal Reserve have powered the U.S. stock market. Now, Fed officials say they are watching closely for signs that those policies are prompting risky market wagers.

A series of speeches from Fed officials Tuesday indicated a wariness about asset bubbles and hinted that the Fed may tighten monetary conditions even if key economic signals remain subdued.

As The Wall Street Journal’s Morning MoneyBeat newsletter noted, the notion that central bankers will be quick to support markets to help achieve stable prices and full employment has been validated many times since the financial crisis, but it may lose sway should Fed officials see rising bubble risks.

In remarks prepared for delivery at an International Monetary Fund conference, Federal Reserve Vice Chairman Stanley Fischer pointed to rising stock valuations, thin corporate bond spreads and ultra-low readings on the CBOE Volatility Index as signs of increased risk-taking. While such rising prices have yet to inspire extreme leverage, he said, valuations bear monitoring.

Fed Chairwoman Janet Yellen said in a separate speech that asset valuations were “somewhat rich.” San Francisco Federal Reserve Bank President John Williams told the Australian news media that there are signs of “some, maybe, excess risk-taking in the financial system with very low rates.”

Market behavior has been unusual in 2017 with prices of many assets types moving higher together. The S&P 500 is just below its all-time high hit June 19, while the yield on benchmark 10-year Treasury notes this week plumbed its lowest level since November. Gold is up 8.4% in 2017, slightly more than the S&P 500′s year-to-date return excluding dividends.

Tom Porcelli, chief U.S. economist at RBC Capital Markets, said that the speeches together highlight that the Fed, burned by asset bubbles in the past, will likely be comfortable raising rates if asset prices represent a risk to the economy.

“If the Fed thinks that risk appetite is heading toward unsustainable levels that put financial stability at risk, they are more likely to stay the course on removing accommodation even in the face of softer inflation,” Mr. Porcelli said.

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Source: WSJ


Cyberattack Briefly Jolts Oil Market—Energy Journal

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Russian state-oil colossus PAO Rosneft and several other global firms were affected by a cyberattack that resulted in a short-lived oil rally, reports The Wall Street Journal.

The attack on Tuesday, which security experts dubbed Petya, originated in the Ukraine  and spread rapidly to Russia, other European countries and the U.S.

The virus, whose victims included major companies from Merck & Co. to Denmark’s shipping giant Maersk, was similar to last month’s global ransomware attack.

The victims affected by the cyberattack were told to pay a $300 ransom  to get access to their data.

Analysts say that companies should be better prepared for this type of attack in the future.

“There is no reason why this should be an acceptable situation,” said Keir Giles an associate fellow of the Russia and Eurasia Programme at Chatham House. “Threats that can be delivered via the internet have been a known problem for decades and so it is alarming because we ought to be able to secure systems.”

Oil prices rose around 2% overnight after reports of the attack as investors anticipated the event might disrupt a persistent oversupply in the oil market. But the gains quickly fizzled out.


Crude futures edged down on Wednesday, as investors remain concerned that the oil market isn’t rebalancing.

Brent crude, the global oil benchmark, fell 0.11% to $46.60 a barrel on London’s ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading down 0.34% at $44.08 a barrel.

Read our latest market report at


The U.S. shale boom has made the fortunes of the Rice family – even as gas prices remain depressed, write Ryan Dezember and Timothy Puko.

Just a year and a half ago Daniel Rice III the founder of an eponymously named family-owned firm was pressured to sell some shares in his company as gas prices, which are sensitive to swings in the weather, were at an all-time low.

But the family’s early investment into prime gas-prospecting real-estate in the Pennsylvania region has since proven to be worth its weight in gold.

Last week, Appalachian gas producer EQT Corp. said it would buy Rice Energy for $6.7 billion in a deal that is poised to deliver more than $1 billion to the Rice family, whose members control roughly 18% of the acquisition target’s shares and make up much of the firm’s management.

The tie up could create one of country’s largest natural gas producers and the Rice family is likely one of the gas boom’s biggest winners just a decade after Mr. Rice and his sons created the company from scratch.

Source: WSJ


WSJ Wealth Adviser Briefing: Navigating Issues Faced by Same-Sex Couples

While the legalization of gay marriage eliminated many of the financial problems encountered by same-sex couples, legacy issues still present obstacles that financial advisers can help navigate, WSJ Wealth Adviser’s Veronica Dagher writes.

In particular, some same-sex couples may have to do more to prove their parentage. In other cases, financial-planning steps same-sex couples took before the Supreme Court ruled two years ago on the legality of gay marriage can cause complications if they were to divorce.

“Same-sex couples are coping with vestiges of inequality,” says Susan Sommer, director of constitutional litigation at Lambda Legal, an advocacy group that focuses on civil rights for the gay community. …

… There are instances where one or both partners in a same-sex marriage might face challenges, however, and so same-sex couples with children should undertake second-parent adoption for added protections, Ms. Sommer says. (A second-parent adoption—which can cost thousands of dollars and take several months to complete, depending on the state—allows a same-sex parent to adopt a spouse’s biological or adopted child, without the legal parent losing any rights.)

Problems sometimes arise, for example, when only one parent is named on a birth certificate. If a parent’s name isn’t on the birth certificate, he or she may be unable to put a child on their health insurance or enroll the child in school.

Read on to learn of other instances where problems may arise and how to navigate them.

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

Big money
. Apollo Global Management, the private-equity firm founded by billionaire investor Leon Black, has raised $23.5 billion for the world’s largest-ever buyout fund.

Tuesday’s markets. U.S. stocks retreated, weighed down by declines in the shares of technology companies. The tech-heavy Nasdaq Composite fell 1.6%. The Dow Jones Industrial Average dropped 99 points, or 0.5%, to 21311, and the S&P 500 dropped 0.8%.

Volatile situation
. Stock volatility is near an all-time low and corporate profits have bounced back from a year ago, but investors are increasingly moving to protect themselves from big swings. So far this month, investors have pulled $235 million from the two largest ETFs that profit from declining volatility, on track to be the biggest monthly outflow since November.

Hungry for income? Risk-averse investors looking for income will soon have a new option to consider: ground leases.

Pension problems? United Parcel Service is planning to freeze pension plans for about 70,000 nonunion employees, seeking to contain the burden of a retirement fund with a nearly $10 billion deficit.

Adviser Voices. Daniel S. Miller, co-owner and president of Miller Financial Group in Iowa, says succession planning for family farms–and the future of any family business–requires a big-picture perspective on the part of the adviser.

– In|Vest 2017 / New  York, July 11-12
– RIIA Summer Conference 2017 / Salem, Mass., July 17-18
– 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
– ADISA 2017 Annual Conference / Las Vegas, Oct. 23-25
– IMCA Private Wealth Advisor (PWA) 2017 / Chicago, Oct. 16-17
– FPA Minnesota 2017 Annual Symposium / Minneapolis, Oct. 16-17
– FinCon 2017 / Dallas, Oct. 25-28
– The SRI Conference / San Diego, Nov. 1-3


The Wealth Adviser briefing covers topics of special 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: send tips, suggestions or other comments to or Wealth Editor Brian Hershberg at

Follow WSJ Wealth Adviser on Twitter: @WSJadviser

Source: WSJ


WSJ City: Fund Managers Face FCA Shake-Up, Nestlé’s $20.8 Billion Buyback, Draghi Pivot Hits Home

Good morning from the WSJ City desks in London. Be the first with high-value stories. Download WSJ City for on your mobile and let us keep you in the loop from 6am. The WSJ City app. Upwardly mobile. iPhone and Android. Your friends and colleagues can sign up to this newsletter here.


The Financial Conduct Authority has issued a damning verdict on the UK’s asset management industry, criticising weak price competition and bumper profits in an industry it said requires substantial reforms. WSJ City

Nestlé announced plans to launch a $20.8 billion share buyback, focus its capital spending on categories like coffee and pet care and look for consumer health-care acquisitions, after finding itself the target of activist investor Third Point. WSJ City

European Central Bank President Mario Draghi sparked a broad wave of selling in government bonds while the euro posted its biggest gain against the dollar in a year, highlighting investors’ vulnerability when major central banks pivot towards a less accommodative monetary policy. WSJ City 

Artificial Intelligence could boost the British economy by 10% over the coming decade, as new technology increases consumer demand and real wages, according to research from PwC on Wednesday. WSJ City 

The headline boost to inflation from the recovery in oil prices from 2016’s lows was, like all base effects, always destined to fade. What might not have been expected was that the decline would potentially be amplified by a renewed drop in oil prices, writes Richard Barley for WSJ Heard on the Street. WSJ City 

Volatility has disappeared from the stock market. One simple reason is that the economy has never looked so calm, writes Justin Lahart for WSJ Heard on the Street. WSJ City

Stock volatility is near an all-time low and corporate profits have bounced back from a year ago, but investors are increasingly moving to protect themselves from big swings in financial markets. WSJ City 

The Bank of England has sent a warning to UK banks: Rein in the rapid growth in consumer credit or face higher capital requirements. For an economy so dependent on consumers, the move shouldn’t be taken lightly, writes Paul J. Davies for WSJ Heard on the Street.  WSJ City


Brexit tension among Cabinet ministers has broken into the open, with Philip Hammond taking a swipe at Boris Johnson over a possible EU trade deal. FT (£)

The government will consult business leaders on the process of leaving the EU under a new forum, in a change of tack since Theresa May became prime minister. The Times (£)

A survey has found that support has surged in the UK for more tax and spend policies and a shift away from austerity. FT (£)

Co-op Bank is set to announce a £700 million rescue deal with its US owners that will avert a collapse of the loss-making lender. The Telegraph

The offshoring of jobs associated with globalisation combined with technological change have been devastating for many American communities, while designing programmes to help has proved difficult, Janet Yellen said. WSJ

Senate Republican leaders abruptly postponed a vote on a sweeping health-care bill until after Congress’s July 4 recess, setting off a high-stakes lobbying sprint that could determine the fate of the GOP’s legislation to topple most of the Affordable Care Act. WSJ


The euro rallied and shares in Europe opened lower as remarks by ECB president Mario Draghi rippled through global markets.

The FTSE 100 was recently down 0.5% while the Stoxx Europe 600 index slid 0.7%.

The euro hit a fresh 10-month high against the dollar in Asia, after Draghi signalled a possible slowdown of central bank bond-buying at a conference in Portugal. The euro recently pared some of its gains but was still up 0.2% at $1.1359 after rising 1.4% on Tuesday, the most in a year.  The yield on the 10-year German bund, the benchmark for the eurozone’s debt markets, posted the biggest one-day rise since Dec 2015.

“As the eurozone recovery continues to gather momentum, markets are gradually turning their view to the growing likelihood of a change in policy stance,” said Rob Carnell, an economist at ING.


ECB’s Mario Draghi, Bank of England’s Mark Carney and Bank of Japan’s Haruhiko Kuroda speak on panel at ECB conference in Portugal.

Source: WSJ


From a Permian Well, They Cried More, More, More – Gas Takeaway Constraints Pose Challenge for Crude

Drilling, well completions and multibillion-dollar investments in the Permian are being driven by the region’s potential for producing vast quantities of crude oil. But the Permian juggernaut isn’t only about crude — far from it. Over most of the past 12 months, the fastest-growing energy commodity in the Permian wasn’t crude oil, it was natural gas. And consider this: The U.S. play with the lowest breakeven prices for natural gas is not the Marcellus/Utica. It’s the Permian, where many of the most prolific areas have negative natural gas breakeven prices. And perhaps most important, constrained gas takeaway capacity poses a bigger threat to Permian crude production growth than constrained crude takeaway capacity, because if the gas produced in the play can’t be transported to market, crude production may need to be curtailed. Today we discuss highlights from RBN’s new Drill Down Report, which focuses on the all-important gas side of the U.S.’s hottest hydrocarbon production region.

Source: RBN Energy


New Study Analyzing State-Specific Benefits of Natural Gas Finds More Than $550 Billion in Total Added Value

A new study by ICF International reaffirms the substantial economic benefits provided by natural gas development and use in the United States. The report, produced on behalf of the American Petroleum Institute (API), examines the economic impact of natural gas-related activities and employment in each of the 50 states, as well as the country as a whole.

Overall, the report finds that increased domestic natural gas use not only saves consumers money – estimated to reach $100 billion by 2040 – but also significantly contributes to the U.S. economy by supporting in an estimated four million jobs across the country.

Titled “Benefits and Opportunities of Natural Gas Use, Transportation, and Production,” the ICF report breaks down the benefits associated with each part of the natural gas value chain – from development to end use by consumers and manufacturers. In doing so, this report helps to give a full, comprehensive look at the benefits provided by natural gas. In total, the report finds that the natural gas supply chain provided more than $550 billion in economic benefit in 2015 – a truly staggering contribution. As the report notes,

“The total value added by these direct, indirect and induced activities sums to $551 billion in 2015, which is 2.9% of the entire U.S. GDP for that year.” (pg. 3)

Along with determining the current economic impact, the report also quantifies the job creation associated with the natural gas supply chain, finding that an estimated four million U.S. jobs were supported by natural gas in 2015. At a state level, Texas accounted for the largest employment in 2015 (direct, indirect and induced) associated with natural gas. While unsurprising that the Lone Star State had the largest employment associated with natural gas, given its impressive level of production and booming petrochemical industry, the numbers are nevertheless staggering: an estimated 784,900 jobs, or 6.8 percent of total state jobs in 2015.

In addition to employment gains, the economic value added by natural gas activities and use in Texas are equally impressive, accounting for roughly $114 billion in 2015 across the entire supply chain. According to the report:

“The contribution to the Texas economy in terms of direct, indirect, and induced value added in 2015 was $114.0 billion, of which $41.5 billion was related to the end use segment, $33.6 billion was from the infrastructure segment, and $39.0 billion was from the production segment.” (pg. 228)

Looking forward, the contribution of natural gas is projected to continue to be significant. According to the report, total U.S. employment associated with natural gas could reach 5.9 million people by 2040. Additionally, the report finds that total wages from employment related to natural gas activities could total an estimated $397 billion dollars in 2040. In total, the direct, indirect and induced value added by projected natural gas activities could grow by about 2.45 percent per year, reaching over $1 trillion in added value by 2040.

There is no question that domestically produced natural gas has a profound impact on the United States economy. As this report shows, not only does natural gas currently provide significant employment opportunities and hundreds of billions of dollars in added value to the domestic economy, those contributions are projected to increase substantially.

Read the full report here.

Source: Energy In Depth


Eclipse Resources Setting More Records with Super Lateral Wells

Centered in Eastern Ohio, Eclipse Resources (ticker: ECR) holds approximately 113,500 net acres in the Utica shale, with approximately 14,000 prospective net acres in the liquids rich Marcellus. The company entered the Utica play in 2011 and, since then, has drilled over 225 wells in the area.

Eclipse Resources Setting More Records with Super Lateral Wells

Source: Eclipse Resources

During Q1, 2017, Eclipse averaged 290 Mmcfe per day—which topped the company’s Q1, 2017 guidance of 275 to 280 Mmcfe per day. In light of the above-expected Q1 production, Eclipse increased its year-long guidance from between 305 and 315 Mmcfe per day to between 315 and 320 Mmcfe per day.

The company spent $78.7 million in capital expenditures, with $55 million dedicated to drilling and completions, $25 million for midstream expenses, $21 million for land expenditures, and the remaining $0.2 million for corporate expenses.

The “super-lateral” well

As of May, 2017 the company had drilled its “Super Lateral” well, appropriately named “Great Scott 3H.” The well was 27,400 feet, measured depth, with a 19,300 foot lateral—and was drilled in 17 days. In June, the company finished drilling another super lateral well with a measured depth of 27,750 feet, and a lateral length of 19,500 feet—making it the longest lateral well drilled in the U.S. to date.

As of June, the company also had completed a total of three 10,000-foot lateral wells in the Marcellus shale, with the intent to use them as condensate wells.

In total, the company drilled four gross (3.9 net) wells in the first quarter, and completed an additional seven wells. Five gross (4.7 net) wells were also turned to sales during the same quarter.

Enhanced completions

Eclipse has begun utilizing its “Gen3” completion design on its dry gas wells and the company expects that those wells will surpass the current type curve EUR which is 2.2 Bcfe per 1,000 lateral feet. On top of its Gen3 completion design, Eclipse has begun testing its Gen4 design on seven dry gas wells—the design incorporates tighter stage spacing, more proppant, and chemical diverters. The company expects that results from the Gen4 tests will be evident by the end of Q2,

Into and beyond 2017

Eclipse commenced drilling operations at the end of Q1 with its second operated rig. The rig is focused in the Utica condensate area. In the next three years, the company intends to drill an average of 19 wells per year, with an average lateral length of 13,000 feet. For later development, Eclipse has identified 316 future potential drilling locations.

Eclipse Resources is presenting at EnerCom’s The Oil & Gas Conference® 22

Eclipse will be a presenting company at the upcoming EnerCom conference in Denver, Colorado—The Oil & Gas Conference® 22.

The conference is EnerCom’s 22nd Denver-based oil and gas focused investor conference, bringing together publicly traded E&Ps and oilfield service and technology companies with institutional investors.  The conference will be at the Denver Downtown Westin Hotel, August 13-17, 2017. To register for The Oil & Gas Conference® 22 please visit the conference website.

Eclipse Resources Setting More Records with Super Lateral Wells
Source: Oil & Gas 360


Brexit & Beyond: Bank of England Orders Bank Capital Boost, Draghi Hints at Winding Down QE, EU’s Big Fine for Google

Brexit & Beyond: Europe in Flux is The Wall Street Journal’s round-up of news and analysis of how Brexit will affect global business, economies and finance. You can sign up here.


Mario Draghi, president of the European Central Bank, pauses during a news conference to discuss monetary policy in Tallinn, Estonia, on Thursday, June 8, 2017.

Bank of England Orders Banks to Boost Capital: The Bank of England took a small step Tuesday to dial back the broad stimulus it put in place for the U.K. economy following last year’s vote to leave the European Union, a move also aimed at armoring the banking system against multiple risks ranging from spiraling consumer borrowing to the possibility that Brexit talks collapse.

ECB’s Draghi Hints At Possible Winding Down of Eurozone QE: European Central Bank President Mario Draghi hinted on Tuesday that the ECB might start winding down its large monetary stimulus as the eurozone economy picks up speed, even as he warned against an abrupt end to years of easy money.

Why Central Banks Need to Worry About Falling Oil Prices: The effect of declining oil prices on inflation raises some awkward questions for markets and policy makers, writes Richard Barley.

Google Slapped With $2.7 Billion EU Fine Over Search Results: The European Union’s antitrust regulator on Tuesday fined Alphabet Inc.’s Google a record €2.42 billion ($2.71 billion) for favoring its own comparison-shopping service in search results and ordered the search giant to apply the same methods to rivals as its own when displaying their services.

European Cities Are Just Saying ‘No’ to Scandal-Tinged Diesel Vehicles: Large European cities from Munich to Madrid are banning or restricting diesel vehicles due to mounting alarm over toxic emissions, presenting a major challenge to European car makers who sell millions of them.

Arconic to Stop Selling Panels Involved in London Tower Fire: Arconic Inc. said it has stopped selling panels used on the exterior of high-rise buildings that are suspected of contributing to the spread of a deadly fire in a London apartment tower earlier this month.

Germany Warns Turks Not to Bring Security Officers Who Face U.S. Warrants: Germany warned Turkey that members of President Recep Tayyip Erdogan’s security detail facing arrest warrants in the U.S. wouldn’t be welcomed during next month’s Group of 20 summit.

Their Towns Overrun With Tourists, Some Italians Cry, ‘Basta!’: In Capri, a squabble between two mayors—who are also cousins—highlights a larger debate throughout Italy. While tourism is an important revenue source, many Italians up and down the peninsula would like tourists—at least some of them—to stay away.


U.K. Uses Newspaper Pages to Reassure EU Citizens on BrexitBloomberg

Swiss Call Time Out in Push on EU Ties as Brexit Talks BeginReuters

Noyer Says Brexit Banks Taking Formal Steps to Secure EU Business in ParisNew York Times

Almost Half of Highly Skilled EU Workers ‘Could Leave U.K. Within Five Years’The Guardian

Brexit Impact Estimates Were ‘Overly Pessimistic’: StudyPolitico

– Compiled with the help of Toby Luckhurst

For breaking news and intelligence on Brexit, finance, markets, deals and people from London, download WSJ City for iPhone or Android smartphone. And you can find more analysis of politics, economics and regulation in the European Union over on Real Time Brussels. 

Source: WSJ


New Study Finds Fracking, Wastewater Injection Rarely Linked to Seismicity

A new peer-reviewed University of Alberta study asks whether increased oil and gas production — specifically the hydraulic fracturing that made it possible and wastewater injection that is part of the day-to-day production process — leads to widespread increased induced seismicity rates. Contrary to the anti-fracking movement’s alarmist narrative, the answer is a resounding “no.”

The report finds that the well-documented increase in Oklahoma seismic activity linked to oil and gas development is the textbook definition of an anomaly. As University of Alberta professor, geophysicist and lead researcher Mirko Van der Baan also notes in the study’s press release:

“It’s not as simple as saying ‘we do a hydraulic fracturing treatment, and therefore we are going to cause felt seismicity.’ It’s actually the opposite. Most of it is perfectly safe.”

The study examines occurrences of magnitude-3.0 and greater earthquakes between 1965 and 2014 in six states — North Dakota, Ohio, Pennsylvania, Texas, West Virginia and Oklahoma — and three Canadian provinces — Alberta, British Columbia and Saskatchewan — that have all seen dramatic increases in hydrocarbon production in recent years, mostly attributable to fracking. The study finds that from 2008 to 2014, when a considerable increase in oil and gas production was observed in each of these areas, Oklahoma was the only region of the nine studied that saw an increase of felt earthquakes shallow enough to be potentially linked to induced seismicity (15 km deep or less). From the study,

“Contrary to Oklahoma, analysis of oil and gas production versus seismicity rates in six other States in the USA and three provinces in Canada finds no State/Province-wide correlation between increased seismicity and hydrocarbon production

“We find that increased seismicity in Oklahoma, likely due to salt-water disposal, has an 85% correlation with oil production. Yet, the other areas do not display State/Province-wide correlations between increased seismicity and production, despite 8-16 fold increases in production in some States. However in various cases seismicity has locally increased.”

In fact, the study finds that four states/provinces — Pennsylvania, North Dakota, West Virginia and Saskatchewan — saw no trend of increased seismicity whatsoever from 2008 to 2014, despite hydrocarbon production increasing dramatically in each area during that time.

The report notes that North Dakota saw an 8.7-fold increase in oil production and six-fold increase in natural gas from 2005 to 2013, a trend that is all-the-more notable considering the prevalence of wastewater disposal wells in the Bakken.

Though EID has stated it countless times, it bears repeating that the United States Geological Survey (USGS) states in the very first sentence of its list of myths and misconceptions regarding induced seismicity that “Fracking is NOT causing most of the induced earthquakes,” further clarifying that, “Wastewater disposal is the primary cause of the recent increase in earthquakes in the central United States.”

It also bears repeating that fracking is a separate process from wastewater disposal, and that a vast majority of water disposed of wastewater injection wells is co-produced brine from day-to-day conventional and unconventional wells rather than fracking “flowback water,” meaning that wastewater injection is not exclusive to wells that have been hydraulically fractured. And although scientists agree wastewater injection from day-to-day oil and gas production can under very specific circumstances cause induced seismicity, it is important to understand that the risk is still very low, which the North Dakota data from this report illustrates,

“Like Pennsylvania and West Virginia, North Dakota is a state with significantly increased oil and gas production but no noticeable change in seismicity. Contrary to Pennsylvania and West Virginia, numerous salt-water disposal wells exist in North Dakota within the Bakken production zone, yet few injection wells are thought to be associated with seismicity in North Dakota. North Dakota is thus an example of a state with substantially increased underground fluid injection, yet no concurrent change in regional seismicity rates.”

Similar to the Bakken in North Dakota, the development of the Marcellus Shale in Pennsylvania and West Virginia has led to a 16-fold increase in natural gas production, yet there has been no increase in seismic activity in the Marcellus during that time, according to the study,

“Contrary to Oklahoma, there is no evidence for increased regional seismicity rates between 2008 and 2014 within the Marcellus shale play, despite the 16-fold increase in gas production, largely attributed to substantial hydraulic fracturing with associated increases in underground fluid injection (Ellsworth, 2013; Lutz et al., 2013).”

The report acknowledges that although there has been documented instances of felt seismicity in Ohio, Texas, Alberta and British Columbia as oil and gas production has increased recently in those regions, this activity has been regionally clustered, a sharp contrast to the widespread activity observed in Oklahoma.

The report notes that Ohio has experienced a single cluster of seismicity in excess of M-3.0 (Youngstown area, January 2011 to February 2012) while experiencing a 6.2-fold increase in natural gas production and 2.9-fold increase in oil production from 2012 to 2014.

And though 95 of the 187 M-3.0 or higher earthquakes Texas has experienced from 1964 to 2014 occurred between 2010 and 2014, the report notes,

“The recent increase in seismicity correlates visually with increased oil production in onshore Texas. However, unlike Oklahoma (Figures 2 and 3), seismicity in on-shore Texas is spatially constrained to local areas (clusters), whereas increased production comes from large regions.”

“In other words, recent changes in seismicity only occur locally, despite substantial increases in large-scale underground fluid injection across the State of Texas due to hydraulic fracturing and salt-water disposal. This raises the question what differentiates these specific local areas?”

Van der Baan noted in an interview with the Edmonton Sun that the much-publicized cluster of seven earthquakes that occurred recently in the Fox Creek area of Alberta are not indicators of a widespread, systemic issue,

“It is pretty clear immediately that not every single hydraulic fracturing treatment is going to cause an earthquake which is potentially damaging. And so it’s important to understand why this very small percentage of treatment, whether it’s a salt water disposal or hydraulic fracturing treatment, is anomalous.”

What This Means In The Big Picture

Bottom line, this study confirms what has long been true despite all the scary headlines in recent years regarding induced seismicity: Despite what anti-fracking activists have claimed, it is rare and certainly not a widespread issue.

And fortunately, the single area where this study found a direct correlation between increased seismic activity and increased oil and gas production, mitigation measures appear to be yielding positive results.
After mandatory wastewater volume reductions were implemented in Oklahoma in early 2016, Oklahoma Geological Survey (OGS) and United States Geological Survey (USGS) data showed Oklahoma saw a 31 percent reduction of magnitude 3.0 or greater earthquakes from 2015 to 2016. Earthquake rates have continued to decline dramatically so far in 2017. The Oklahoman recently reported that Oklahoma experienced half as many M-3.0 or greater earthquakes this past April than it did in April 2016, and according to data from Tulsa World, Oklahoma is on pace to see a near 60 percent reduction in felt earthquakes this year from 2016 levels.

Induced seismicity remains a complicated issue that industry and regulators continue to take very seriously. But as this study shows, efforts by the media and activists to link earthquakes to fracking have been exaggerated.

Source: Energy In Depth


Lukoil spuds water injector well at Filanovsky in the Caspian Sea

Lukoil has completed drilling and commissioning of the fifth production well at the Vladimir Filanovsky field in the Russian sector of the Caspian Sea.

Source: Offshore


Altice IPO and the Best Activism Defense — Dealpolitik

Activists have amassed tremendous influence in recent years, but there’s still one powerful tool some companies can wield against them: supervoting shares.

More and more companies are employing multiple classes of shares in their IPOs and handing insiders stock that has extra voting power, while public investors have either limited or no voting rights. Once a company is already public it’s usually too late to introduce a supervoting share structure.

Take cable company Altice USA, which went public last week. The class B stock held by an insider has 25 votes per share compared with just one for the class A shares sold to the public. The supervoting rights of the class B stock are of little consequence at the moment since the controlling stockholder has a majority of the overall shares. But they allow the company or the controlling shareholder to sell additional shares without endangering insiders’ control.

Using multiple classes of stock is not new. (The Murdoch family has extra influence over Wall Street Journal parent News Corp due to a dual-class setup, for example.) But supervoting shares are becoming more popular for newly public companies, and make them largely immune to activist pressure. With supervoting shares, insiders can frequently block any effort to force change, which will generally discourage activists from even trying. Indeed, supervoting shares are more effective in blocking activists than governance provisions the investors often seek to dismantle.

In the case of Altice, there is no sunset on the supervoting rights as there is at some companies. When the controlling shareholder sells its class B shares, the voting rights (and even control of the company) can be sold with them. That isn’t the case for meal-kit seller Blue Apron Holdings, Inc. which is in the midst of going public. The class B shares, which get ten votes each, are automatically converted into the lower-voting shares when they are sold. And nine months after the founder dies or is disabled, all shares get identical voting rights. But that could still be quite a long way away given he is 33 years old.

[wsj-responsive-more-in tag=”Dealpolitik” category=”” ]

Snapchat owner Snap Inc. gave its public shareholders no voting rights when it went public earlier this year. The company has three classes of stock outstanding and the founders have ten times the votes per share of other pre-IPO investors. When the founders (who are in their late 20s) die or transfer their stock, all shares will have the same voting rights.

The effect of these provisions is to hang a sign saying activist or other dissident shareholders need not apply. The only `control’ public investors have, at least for a while, is to sell their shares.

Control-minded insiders might point out that before an IPO they own the company and if the limited right to vote is fairly disclosed, they should be able to do what they want. Investors can decide whether they want to invest or not on that basis. It is a fair point.

But it’s surprising that even as activists have been remarkably successful in pressuring public companies to bow to their will, including by scrapping corporate protections that are less effective than supervoting shares, the near-permanent protection many founders maintain as they enter the public markets – the realm of activists – hasn’t much bothered institutions and individuals who buy IPO shares.

IPO investors, of course, don’t buy shares to challenge management. Many probably figure that by the time there is a crisis, they will have already sold out and the lack of voting power will be someone else’s problem. Which leads to another irony: Although activists are frequently accused of having a short-term outlook, the IPO buyer is arguably more myopic, at least when it comes to governance.

Will IPO buyers ultimately be more concerned with governance? If and when ride-hailing juggernaut Uber Technologies Inc. goes public, we may find out. Travis Kalanick, who just resigned as CEO, along with two others controls a majority of the company’s voting rights. Even after the current storm passes, it’s hard to believe new Uber investors wouldn’t be troubled by having no say in the company’s direction.

Indeed, the only thing that will stop insiders more broadly from imposing bulletproof systems of control is if IPO investors make the economic penalty for doing so too costly. And it’s not clear that will happen any time soon, at least in hot offerings.

Send questions, comments or story ideas to and follow Ron on Twitter: @Dealpolitik.

Source: WSJ