Gas Glut Weighs on Oil Giants - The Wall Street Journal

Natural-gas prices have fallen due to concerns about a glut, driven by booming production in the Permian Basin. Natural-gas flare near Pecos, Texas. Photo: James Durbin for The Wall Street Journal 

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Bradley Olson

Bradley Olson
The Wall Street Journal
• Biography
• @bradnews
• bradley.olson@wsj.com

Updated Aug. 2, 2019 11:50 am ET

The world’s largest oil companies are feeling the financial pressure of a global decline in natural-gas prices.

Exxon Mobil Corp. XOM -1.26% second-quarter profits fell 21% as diminished returns for gas and petrochemicals offset production growth in America’s hottest oilfield, the Permian Basin of Texas and New Mexico.

Chevron Corp. CVX -0.37% ’s net income rose 26% to $4.3 billion due in part to its receipt of a breakup fee from a scuttled deal to buy Anadarko Petroleum Corp. APC -0.77% , but the company saw the prices it fetches for its U.S. natural gas fall by more than half.

Exxon’s lower returns Friday mirrored similar results earlier this week from European counterparts, including Royal Dutch Shell PLC. Profits from the company’s global natural-gas segment fell by about half to $1.34 billion, as prices declined abroad due to abundant new supply from projects around the world. Shell said its quarterly profit fell by half to about $3 billion.

Natural-gas prices have been falling due to concerns about a glut of the cleaner-burning fuel, driven in part by booming production in the Permian Basin and new export projects ranging from the Texas Gulf Coast to Papua New Guinea. The abundance of the fuel has pushed down prices for liquefied natural gas, as more companies seek to sell cargoes around the world.

Oil prices also continue to be volatile due to demand and geopolitical worries. The U.S. benchmark for crude fell 7.9% to $53.95 a barrel Thursday, but was bouncing back somewhat Friday morning, up 3%.

Exxon, one of the largest natural-gas producers in the U.S., warned on July 1 that second-quarter profits would fall by as much as $600 million due to price declines. Shale companies also have suffered due to the price decrease.

Shares in Whiting Petroleum Corp. plunged 39% on Thursday after the company disclosed a production slowdown. It said it took in just 47 cents per thousand cubic feet of gas during the second quarter, down 64% from the same period last year. Whiting had to throttle its production growth as North Dakota limited how much natural-gas companies can burn off, a process known as flaring.

“Infrastructure constraints were more severe than anticipated and we did not have enough cushion for associated operating delays,” Chief Executive Brad Holly told investors. The company said this week that it was slashing its workforce by 33%, joining other shale companies such as Pioneer Natural Resources Co. PXD 0.71% in paring back to limit costs.

Other shale companies are experiencing operations-related problems. Concho Resources Inc. shares fell 22% Thursday after it disclosed disappointing output from wells it had drilled too close together, a growing problem in the shale-drilling sector.

Related Video

The U.S. has more than doubled its crude output over the last decade. Much of the growth is due to the Permian Basin of West Texas and New Mexico. WSJ traces the hotspot of North America’s crude oil boom, with a look at challenges that producers in the region face.

Exxon, boosted by its drilling operations in the Permian, said production rose about 7% from a year ago. But earnings fell 21% to $3.13 billion, or 73 cents a share. That beat analyst expectations, although they would have missed without a one-time tax benefit of about $500 million that stemmed from from a tax-rate change in the Canadian province of Alberta.

The spot U.S. benchmark price for natural gas fell by about 10% in the three months ended in June to an average of $2.51 per million British thermal units, according to FactSet. The price has continued to fall through July even as a U.S. heat wave led to a surge in demand at power plants. In some regions, such as in West Texas, natural gas has even sold for a negative value, meaning producers had to pay pipeline companies to process and ship the commodity.

U.S. gas production rose to a record of more than 37 trillion cubic feet last year, up 44% from a decade earlier.

At Exxon, revenue dropped 6% to $69.09 billion, above the consensus forecast of $63.6 billion. Capital and exploration expenditures were up 22% to $8.08 billion, due in part to a ramp-up in spending and activity in the Permian Basin.

Exxon had previously said earnings would fall in the second-quarter due to lower prices and more maintenance expenses. Some analysts said the results were even more underwhelming in light of previous disclosures.

“They missed already lowered expectations across all segments,” said Jennifer Rowland, an analyst at Edward Jones.

Exxon executives noted that prices and margins for three of its four main businesses were near 10-year lows, but the company continues to have the financial ability to invest in new projects.

“We’re in a unique position versus the rest of industry,” Exxon Senior Vice President Neil Chapman said. “We have the financial capacity to maintain our plans.”

Chevron’s production rose 9% to more than 3 million barrels of oil and gas a day, a record driven by activity in the Permian Basin and the San Ramon, Calif., company’s Wheatstone natural-gas export project in Australia.

Sales fell 10% to $36 billion, and capital spending in the first six months of the year rose 9% to $10 billion.

Read more

• Expected Surge in Oil Supply and Tariffs Add to Glut Concern (Aug. 1)
• Shares in Top Shale Driller Fall After it Discloses Well Problems (Aug. 1)
• Shell and European Rivals Hit by Lower Oil Prices (Aug. 1)
• Analysis: Oil Has a Shale Problem, Not an Oil Problem (Aug. 1)
• Chevron, Exxon Mobil Tighten Their Grip on Fracking (March 5)

Exxon shares were down about 1.5% in Friday morning trading. They were down 9.3% in the last 12 months.

Chevron shares slipped about 1.4% Friday morning. The company’s stock price has fallen about 2.7% in the last year.

—Aisha Al-Muslim and Rebecca Elliott contributed to this article.

Write to Bradley Olson at Bradley.Olson@wsj.com

Copyright ©2019 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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2019-08-02 15:50:00Z
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Regret your request for $125 from Equifax? You may be able to change your choice - CNN

The Federal Trade Commission said Thursday consumers who have already requested their checks — which are meant as subsidies for outside credit monitoring services — will soon be contacted by the third party administrator handling Equifax settlement claims. The administrator will provide consumers with the chance to switch benefits, the FTC said.

Regulators this week have been pleading with consumers to take the offer of free credit monitoring over the cash subsidy, due to an "overwhelming" amount of interest in a limited pool of funds earmarked for direct monetary relief.

So many Americans have filed for the cash reimbursements that each individual check is likely to be vanishingly small — "nowhere near" the $125 maximum payment that was held out initially, the FTC said.

"The option to obtain reimbursement for alternative credit monitoring, as set forth originally in the class action settlement, was never intended to be a cash payout for all affected consumers," the FTC said in a statement.

Just $31 million has been set aside for reimbursements for alternative credit monitoring, out of a total of $300 million that Equifax agreed to pay in a settlement with the FTC announced last week.

The money is not first-come, first-served; the $31 million will be split among those who filed a claim for credit monitoring subsidies. After 4.5 years, more money could be added to the fund, but only those who filed before January 22, 2020 would be eligible to receive it.

Much of the rest of the $300 million is devoted to providing free credit monitoring. Consumers can also be reimbursed for the time they may have spent freezing their credit or battling fraudulent charges, and for any out-of-pocket losses they may have suffered up to a total of $20,000.

On social media, consumers have expressed bewilderment that regulators seemingly did not anticipate the outpouring of demand for cash.

The FTC's moves this week also drew some fire from Capitol Hill.

"With just $31 million to be divided up by all the Americans who filed to receive their $125 check, Americans have the choice of receiving pennies for having their credit details spilled out online, or receiving virtually worthless credit monitoring," said Sen. Ron Wyden (D-Ore.), in a statement Thursday. "Another clear failure by the FTC."

Still, the FTC said the offer of free credit monitoring is a good deal.

"The free credit monitoring is worth a lot more than the cash reimbursement alternative. The market value would be hundreds of dollars a year," the agency said in its statement. "And this monitoring service is probably stronger than what consumers may have already, because it monitors their credit report at all three nationwide credit reporting agencies, and it comes with up to $1 million in identity theft insurance and individualized identity restoration services."

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2019-08-02 15:27:00Z
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Trump's tariff on goods from China could be a 'gut punch' for Apple - Business Insider

AP

• President Trump's 10% tariff on $300 billion worth of Chinese goods could weaken iPhone demand and negatively impact the company's earnings per share, according to analysts at Wedbush Securities.
• In a new note outlining the potential ramifications of the tariff on Apple, the firm called the move a "potential gut punch" for the company.
• If Apple absorbs the tariff, it could negatively impact the company's earnings per share for the fiscal year 2020 by roughly 4%.
• The newly announced tariff comes after reports had indicated Apple would move production of the Mac Pro from the United States to China.
• Visit Business Insider's homepage for more stories. 

President Trump's decision to impose a 10% tariff on $300 billion worth of Chinese goods could spell trouble for Apple, potentially weakening iPhone demand and negatively impacting the company's earnings per share, according to Wedbush Securities analysts Daniel Ive and Strecker Backe.

In a new note outlining the possible ramifications of the tariff on Apple, the Wedbush analysts called the move a "potential gut punch" for the company. If Apple fully absorbs the tariff, it could negatively impact the company's earnings per share by roughly 4% in the fiscal year 2020, the analysts say.

Should Apple pass the tariff on to consumers, it could weaken iPhone demand by about 6 to 8 million units, based on Wedbush's analysis over the next 12 months driven by its overall unit forecast of 185 million iPhones for the fiscal year 2020.

"After Cook & Co. have navigated significant noise and headwinds the last thing the bulls wanted to see today was this news from the Trump administration as Apple is clearly caught in the crossfires between DC and Beijing," the analysts wrote in the note.

Read more: Don't buy a new iPhone right now

Wedbush maintains its outperform rating for Apple.

Apple did not immediately respond to Business Insider's request for comment about how the new tariffs may impact its business.

It's not the first time Wall Street has discussed the possible consequences Apple could face as a result of the ongoing trade dispute with China. Back in May, a team of analysts at Morgan Stanley led by Katy Huberty suggested that the price of the $1,000 iPhone XS could see a price hike of $160 because of the 25% tariff on $200 billion worth of Chinese goods the Trump administration previously introduced. 

President Trump announced on Twitter on August 1 that an additional tariff of 10% on $300 billion worth of Chinese goods would go into effect on September 1. 

China is critical for Apple for two reasons: The company relies on facilities in the China to manufacture products like the iPhone, and the Greater China region is Apple's third-largest market behind the Americas and Europe.

Reports from Bloomberg and The Wall Street Journal had also suggested that Apple was planning to move production of the Mac Pro, which had been the only major Apple product made in the United States, to China. But CEO Tim Cook recently said on the company's earnings call that it wants to continue making the Mac Pro in the US, following a report from Bloomberg that it had sought exemptions from Trump's China tariffs on components for the new computer. 

Apple has eyed shifting some production from China to India and Vietnam, according to reports from Bloomberg and Reuters.

But doing so would represent a huge undertaking. In a best-case scenario, Apple may only be able to move between 5% and 7% of the production of some iPhone models to India over the next 12 months, Ives previously said to Business Insider. 

"Apple has really bet the company's production on China and on Foxconn," he said to Business Insider in June. "It would be like General Motors or Ford saying we're going to move away from Detroit."

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2019-08-02 15:19:27Z
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Dow drops 300 points as trade war escalates - CNN

Stocks are bracing for a dramatic finish this week, after President Donald Trump announced new tariffs on Chinese imports Thursday.

Starting September 1, $300 billion worth of goods from China, including toys and iPhones, will be hit with a 10% tariff. That's on top of the existing 25% tariff on $250 billion worth of imports.

US stocks and global markets are flashing red in response.

The Dow (INDU) shed 305 points late in the morning on Friday. The S&P 500 (SPX) and the Nasdaq Composite (COMP) slid 1.2% and 1.8% respectively.

The S&P and Nasdaq are on track for its worst week since December. For the Dow, it is shaping up to be the worst week since late May, according to Refinitiv.

The July jobs report did little to change the narrative. The US economy added 164,000 jobs in July, in line with the Refinitiv consensus estimate. The unemployment rate was unchanged at 3.7%.

More drama on the trade front adds to the odds that the Federal Reserve will make a deeper interest rate cut in September, according to Goldman Sachs economists led by Jan Hatzius. That said, with one month left until the new tariffs are implemented and on-going talks with Beijing, there is a chance they will never actually come into effect.

The Goldman economists anticipate the new tariffs will shave up to 0.2 percentage points off of US GDP growth. That will rise to a 0.5- to 0.6-percentage point cut if the tariffs rise to 25%, they said.

The risk of US tariffs on European auto imports has risen with Thursday's tariff announcement, they said.

It has been a volatile week for stocks.

On Wednesday, the Fed cut rates by a quarter percentage point, as widely anticipated. But comments from Fed Chairman Jerome Powell that the cut wasn't ushering in an extended period of loser monetary policy disappointed markets. Stocks sold off.

On Thursday, equities recovered and the weakest ISM manufacturing survey in three years added to the narrative that the US economy will need another boost after this week's rate cut.

Then Trump announced the new tariffs, and stocks dropped sharply. The Dow swung 600 points over the course of the day, the biggest one-day point move since January.

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2019-08-02 15:01:00Z
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Wall Street drops to one-month low on trade, growth fears - Investing.com

© Reuters. Traders work on the floor at the NYSE in New York

By Amy Caren Daniel

(Reuters) - Wall Street's main indexes sank to one-month lows on Friday after a sharp escalation in U.S.-China trade tensions and tepid job growth in July reinforced fears of a global economic slowdown.

The Labor Department said nonfarm payrolls increased by 164,000 jobs last month and the economy created 41,000 fewer jobs in May and June than previously reported. However, July's numbers were in line with economists' expectations.

"Job numbers were not too far from expected. It shows the trend is slowing down. It's consistent with another rate cut either in September or October," said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.

"The bigger issue for the Fed policy outlook is tariffs because that implies you will see higher costs for finished goods rather than intermediate goods that we have been importing from China."

The jobs report comes a day after President Donald Trump threatened to slap a 10% tariff on $300 billion of Chinese imports from next month, sending global markets tumbling overnight and investors fleeing to safe-haven U.S. Treasuries and the Japanese yen.

China on Friday said it would not be blackmailed and warned of retaliation.

Technology companies, which get a sizeable portion of their revenue from China, were the hardest hit, down 1.34%, weighed by iPhone maker Apple Inc (NASDAQ:) and chipmakers.

The Philadelphia Semiconductor index slipped 1.06%, while shares of Apple fell 1.5%.

Boeing (NYSE:) Co, the single largest U.S. exporter to China, fell 0.8% and Caterpillar Inc (NYSE:) declined 0.6%.

The sudden escalation in trade rhetoric follows the Federal Reserve on Wednesday playing down expectations of further aggressive monetary policy actions after cutting interest rates for the first time in a decade.

Hopes that the Fed would be more accommodative to counter the impact of the bruising trade war had helped Wall Street's main indexes hit record highs last month.

Fed funds futures implied traders were positioned for a 100% chance the central bank would reduce its target range on interest rates by a quarter point in September, CME Group's FedWatch program showed. [MMT/]

At 9:46 a.m. ET, the was down 128.15 points, or 0.48%, at 26,455.27, the was down 16.70 points, or 0.57%, at 2,936.86. The was down 68.59 points, or 0.85%, at 8,042.53.

The defensive utilities sector rose 0.3%, while a surge in oil prices helped the energy sector eke out small gains. [O/R]

The second-quarter earnings season is in full swing, with 74.4% of the 355 S&P 500 companies that have reported so far beating profit estimates, according to Refinitiv data.

NetApp Inc (NASDAQ:) slumped 20.7% after the data storage equipment maker lowered its forecast for the first quarter and 2020, blaming a weakening macro environment.

Declining issues outnumbered advancers for a 2.24-to-1 ratio on the NYSE and for a 2.25-to-1 ratio on the Nasdaq.

The S&P index recorded four new 52-week highs and four new lows, while the Nasdaq recorded seven new highs and 76 new lows.

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2019-08-02 14:51:00Z
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Wall St. drops at open on Trump's tariff threat, slow job growth - Investing.com

(Reuters) - U.S. stock indexes fell at open on Friday, weighed by tariff-sensitive technology stocks following a sharp escalation in U.S.-China trade tensions, while a tepid domestic jobs growth in July reinforced fears of an economic slowdown.

The fell 54.76 points, or 0.21%, at the open to 26,528.66. The S&P 500 opened lower by 9.66 points, or 0.33%, at 2,943.90. The dropped 54.70 points, or 0.67%, to 8,056.42 at the opening bell.

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2019-08-02 13:41:00Z
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New York Times Publishes Anti-Google Rant, Doesn't Mention the Author Is a Facebook Board Member - Gizmodo

Billionaire Peter Thiel speaks at the New York Times DealBook conference on November 1, 2018

Photo: Getty Images

The New York Times published an anti-Google screed by billionaire Peter Thiel last night but failed to mention a fun fact that readers might find relevant: Thiel sits on the board of Facebook, one of Google’s largest competitors.

Thiel first blasted Google as “treasonous” last month, saying that the FBI and CIA should investigate the company for working with the Chinese government. The tech investor even asked if Google had been infiltrated by Chinese spies, a highly inflammatory charge that he didn’t substantiate. Thiel has now followed up his anti-Google remarks in a new piece for the Times praising President Donald Trump and railing against “globalization.”

(Disclosure: Thiel secretly bankrolled a lawsuit brought by Hulk Hogan, which bankrupted Gizmodo’s former parent company, Gawker Media.)

Thiel’s central argument is that anyone helping China to develop artificial intelligence technologies is assisting China’s military because, he says, all AI should be seen first and foremost as having military applications:

A.I. is a military technology. Forget the sci-fi fantasy; what is powerful about actually existing A.I. is its application to relatively mundane tasks like computer vision and data analysis. Though less uncanny than Frankenstein’s monster, these tools are nevertheless valuable to any army — to gain an intelligence advantage, for example, or to penetrate defenses in the relatively new theater of cyberwarfare, where we are already living amid the equivalent of a multinational shooting war.

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Thiel, who in 2017 sold the majority of his Facebook shares but remains on its board of directors, goes on to characterize Google as “naive” for opening an AI lab in China while deciding to not renew a contract for its work on Project Maven, a U.S. military initiative for which the company was developing an AI system to analyze drone footage, following employee backlash.

Google did not yet respond to our request for comment on Thiel’s op-ed, but it has previously denied that it works with China’s military and the company’s vice president of public policy, Karan Bhatia, told members of Congress in a hearing last month that the company sees “no evidence” that Chinese spies have infiltrated Google.

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Thiel, a former advisor to President Trump, originally made his money by co-founding PayPal in the 1990s. But in the years since, Thiel has placed his money into a lot of different endeavors, including border security and life extension technologies. Thiel was also an early investor in Facebook and currently sits on the company’s board, which is why it’s so weird that none of that was mentioned in Thiel’s latest article blasting Google. In fact, the battle between Facebook and Google is one of the most important rivalries in tech, as together they control roughly 60 percent of the online ad market in the U.S.

Thiel also founded Palantir, which has a lucrative contract with the U.S. Department of Defense, yet another fact that isn’t mentioned in the article. Palantir’s data analytics software has been used in operations by Immigration and Customs Enforcement (ICE) to separate families at the U.S.–Mexico border, Homeland Security documents show, and ICE has regularly used it to conduct workplace raids, according to emails obtained by WNYC.

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Palantir has previously attempted to distance itself from ICE’s immigration enforcement activities.

In his piece for the Times, Thiel acknowledges that AI can be used for civilian purposes, but he claims that it doesn’t matter. He calls Google’s actions “shocking”:

No doubt machine learning tools have civilian uses, too; A.I. is a good example of a “dual use” technology. But that common-sense understanding of A.I.’s ambiguity has been strangely missing from the narrative that pits a monolithic “A.I.” against all of humanity.

A.I.’s military power is the simple reason that the recent behavior of America’s leading software company, Google — starting an A.I. lab in China while ending an A.I. contract with the Pentagon — is shocking. As President Barack Obama’s defense secretary Ash Carter pointed out last month, “If you’re working in China, you don’t know whether you’re working on a project for the military or not.”

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Thiel goes on to invoke the word “cosmopolitanism” in a dig at Silicon Valley. While Thiel says the tech hub’s isolation “from the problems of other places” is “better understood as an extreme strain of parochialism,” cosmopolitan has been historically used as a code word for “Jewish,” though some Trump supporters would no doubt clutch their pearls and reject that characterization:

How can Google use the rhetoric of “borderless” benefits to justify working with the country whose “Great Firewall” has imposed a border on the internet itself? This way of thinking works only inside Google’s cosseted Northern California campus, quite distinct from the world outside. The Silicon Valley attitude sometimes called “cosmopolitanism” is probably better understood as an extreme strain of parochialism, that of fortunate enclaves isolated from the problems of other places — and incurious about them.

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The end of the op-ed, which is typically where conflicts of interest might be noted if they’re not in the body of the text, simply reads, “Peter Thiel is an entrepreneur and investor.”

The New York Times did not yet respond to our request for comment. Gizmodo has also reached out to a representative for Peter Thiel. We will update this article if we hear back.

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In fairness to Thiel, he’s not altogether wrong that doing business with China could be problematic or even straight-up evil. The Chinese government currently has anywhere from 800,000 to 3 million Muslims imprisoned in Chinese concentration camps and is carrying out a campaign of cultural genocide, and it’s reportedly using AI and other technologies to do it. But given the shocking human rights violations that are currently being perpetrated every single day on U.S. soil (another person died in Customs and Border Patrol custody yesterday), it’s laughable to believe that Thiel has any moral high ground here.

Again, this is the guy who founded Palantir. The CIA-backed, Minority Report-style pre-crime company Palantir. Thiel doesn’t get to lecture anyone on support for brutal governments while the company continues to make money hand over fist from the Trump regime.

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2019-08-02 13:34:00Z
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