Jul 27, 2018

Axios Generate

Happy Friday! It's also the date that Stevie Nicks released "Bella Donna" in 1981, so she'll carry us into the weekend...

1 big thing: BP bets big on U.S. shale oil

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BP is buying most of BHP Billiton's U.S. onshore holdings in a $10.5 billion deal that vastly bolsters its presence in the booming shale patch — an area where BP previously had a limited portfolio.

Why it matters: The deal "transforms BP’s U.S. business" and will immediately raise its U.S. production by nearly a fifth, with room to grow from there, Wood Mackenzie analyst Maxim Petrov said in a note Friday.

  • It's also BP's largest deal since buying Atlantic Richfield in 1999.

By the numbers: BP is acquiring 470,000 acres spread across the Eagle Ford and Permian basins in Texas — which are major oil producing regions — and the gas-rich Haynesville basin in Texas and Louisiana.

  • Those assets currently produce a combined total of 190,000 barrels worth of oil and gas per day, and contain 4.6 billion barrels of oil-equivalent resources, BP said.
  • "There’s plenty of running room for BP to add value straight away as the assets have been under-invested for the past two years," Petrov said.

Go deeper: Read the full story in the Axios stream.

2. Exxon and Chevron earnings fall short

ExxonMobil and Chevron, the two largest U.S.-based multinational oil giants, both reported higher second-quarter profits Friday as the industry benefits from the rebound in oil prices.

But both reports fell short of analysts expectations and their stock prices are down in early trading.

Why it matters for Exxon: The Texas-based multinational oil giant has been falling short of Wall Street expectations in recent years, and its strategy right now is about making big investments in future production in Guyana and elsewhere.

By the numbers, for Exxon:

  • The company "produced the equivalent of 3.6 million barrels of oil...the lowest in almost a decade and well short of the 3.83 million expected," Bloomberg reports.
  • Exxon Q2 earnings per share: 92 cents, missing Wall Street's $1.27 estimate. The oil giant's earnings have fallen short "in three of the last four quarters," reports CNBC.
  • Q2 revenue: $73.5 billion, beating the expected $72.58 billion, according to Thomson Reuters.
  • Q2 profit rose 18% to nearly $4 billion.
  • "Capital expenses and spending on exploration for oil and gas surged 69 percent to $6.6 billion in the quarter, driven by investments in the U.S. Permian basin, Brazil and Indonesia," per CNBC.

What's next: The company, in a statement Friday, sought to show that it's taking a longer view. “Key projects in Guyana, the U.S. Permian Basin, Brazil, Mozambique and Papua New Guinea are positioning us well to meet the objectives we outlined in our long-term earnings growth plans," Exxon CEO Darren Woods said.

Chevron: The company reported $3.4 billion ($1.78/share) in second-quarter profits, up from $1.5 billion ($0.77/share) from the same period a year ago.

  • However, earnings and revenue missed analysts' expectations, as a big jump in oil prices was offset by a drop in natural gas prices, MarketWatch says.
  • Chevron also announced a share buyback program that's "expected to be $3 billion per year based on our current outlook."
3. A "missed opportunity" on CO2 bill

Rep. Ted Deutch (D.-Fla.). Photo: Drew Angerer/Getty Images

Axios' Amy Harder reports ... Divisions are surfacing between the bipartisan leaders of a House caucus on climate change.

Driving the news: Democratic Rep. Ted Deutch told Axios in an interview yesterday that carbon tax legislation introduced this week by GOP Rep. Carlos Curbelo, along with two other Republicans, is a “missed opportunity” to pursue a bipartisan measure.

The intrigue: Deutch expressed frustration about the state of play of a bipartisan caucus on climate change that the two Florida lawmakers founded together in 2016. Deutch said he’s been working for several months with Republican offices on different legislation that prices carbon, and that Curbelo choosing to go in his own direction muddies the waters.

  • “I just think there is a missed opportunity here since we’ve been working to come up with a bipartisan product,” Deutch told Axios by phone as he boarded a plane to Florida for a congressional break until early September.

For the record: A Curbelo spokesperson said the congressman's bill has support across the political spectrum.

The big picture: Any type of bill pricing carbon emissions is very unlikely to get far in the foreseeable future, due to conservative opposition by most Republicans and interest groups. But Curbelo’s bill, introduced Monday, is still politically significant because it’s the first substantive measure on climate change authored by a Republican in nearly a decade.

Read more in the Axios stream.

4. Trump is rattling global gas markets

Yamal LNG plant in the town of Sabetta, in Arctic Russia. Photo: Vladimir Smirnov/TASS via Getty Images

Eurasia Group CEO Robert Johnston writes for our Axios Expert Voices ... Gas has loomed large in President Trump’s recent diplomatic dealings: In his meeting with NATO heads of state in Brussels, Trump called Germany “captive” to Russian gas, and in his Helsinki summit with Vladimir Putin, he made the unusual move of fielding regulatory proposals from the Russian president to prevent plummeting prices in the international gas markets.

Why it matters: For better or worse, U.S. foreign policy is contributing to uncertainty among the three countries with the largest gas reserves — Iran, Russia and Qatar — raising alarm among major Asian and European gas importers looking for secure supply sources.

Following the U.S. withdrawal from the Iran nuclear deal, the Trump administration has promised to reimpose energy-sector sanctions on Iran, effectively freezing investment on new developments in the market with the world’s largest gas reserves. A third gas giant, Qatar, waits in vain for a U.S.–brokered end to its economic blockade by neighboring Saudi Arabia and UAE.

The Trump administration’s trade policy has added to the unease in global gas markets. American liquefied natural gas (LNG) could be subject to 25% tariffs from Beijing in the next round of tit-for-tat escalation. That would create a strong headwind for U.S. LNG exporters keen to profit from the world’s fastest-growing LNG importer.

Go deeper: Read the full story in the Axios stream.

5. Massive U.S. wind farm plan might be kaput

Plans for a huge 2,000-megawatt wind farm in Oklahoma are on the rocks.

What's happening: The Texas Public Utility Commission yesterday rejected utility giant American Electric Power's $4.5 billion project on the grounds that it does not provide ratepayers enough benefits, per Bloomberg and others.

Why it matters: The proposed Wind Catcher project — which requires regulatory approvals in both states — was slated to be the country's largest wind energy project, according to multiple reports.

  • The project is aimed at providing power to customers in Oklahoma, Arkansas, Louisiana and Texas.

What they're saying: Glenrock Associates analyst Paul Patterson tells Bloomberg that it “[l]ooks like curtains to me.”

  • “Almost everyone was opposed to this. Barring any big concessions from AEP, it looks to me like it’s dead," he said.

AEP said it's evaluating its options. “We’re extremely disappointed in today’s Public Utility Commission of Texas’ decision rejecting our Wind Catcher proposal,” the company said in a statement.

6. On my screen: EPA, offshore tech, politics

Policy: Via the Washington Post, EPA "reversed course late Thursday and announced it would enforce stricter pollution controls on freight trucks known as 'gliders,' which emit dozens of times more soot and contaminants compared to those with new diesel engines."

Technology: The Wall Street Journal has an interesting look at digital and automated tech that's enabling the use of unmanned offshore oil production platforms, which cut industry costs. The story focuses on an Equinor project.

  • "Equinor’s unmanned North Sea oil platform marks a new generation of technology that has a much wider scale of monitoring capabilities and digital sensors, as well as the capacity to manage a greater number of wells than older versions," the paper reports.

Politics: The Tampa Bay Times looks at oil-and-gas industry support for Florida GOP Gov. Rick Scott in that state's competitive Senate race.

  • "Scott's midyear campaign report shows at least $880,000 in contributions from oil, gas and energy executives and employees to his campaign and from the industry to a pro-Scott super PAC," they report.

International: In the Axios stream, Barak Ravid of Israel's Channel 10 News scoops ... The U.S. is pressing Israel to implement a deal it signed several years ago with Jordan for building the Red-Dead joint project — a pipeline that connects the Red Sea and the Dead Sea

  • Why it matters: The project, which is set to be built in Jordanian territory, is the biggest and most strategically important infrastructure project in Jordan to date and is one of the main areas of cooperation between Israel and Jordan.
  • Barak has much more here.
7. Democrats' sinking view of EPA

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A Pew Research Center poll released this week explores public opinion about federal agencies, including the EPA, and shows...

"There has been a 24-percentage-point decline in the share of Democrats with a favorable opinion of the agency since shortly before Trump took office (77% then, 53% today)."

Why it matters: The steep decline is a likely manifestation, at least in part, of the Trump administration's u-turn on several Obama-era climate and environmental policies.

  • The poll was conducted July 11-15, or roughly a week after former EPA Administrator Scott Pruitt resigned under an ethics cloud.

What's next: Acting EPA chief Andrew Wheeler is pursuing largely the same policies, but absent the ethics controversies that trailed Pruitt for months. So we'll be watching for the next poll to see whether that affects public perception of the agency.