Dow Jones Futures Rebound; Salesforce.com Rises On Earnings

Global Stock Markets

Dow Jones futures rebounded early Wednesday along with the S&P 500 and Nasdaq 100 after major stock indexes marked a distribution day Tuesday.

Dow components JPMorgan Chase (JPM) and Goldman Sachs (GS) rebounded after sharp declines Tuesday. Exxon Mobil (XOM) was also indicated higher as oil prices inched up. U.S. crude oil futures for July delivery added 0.5% to around $67.10 a barrel.
Dow Jones Futures Rise

Dow Jones futures, S&P 500 futures and Nasdaq 100 futures were indicated higher by 0.6% to 0.7% in premarket trading.

The bond market saw big inflows Tuesday as the 10-year Treasury yield hit a low of around 2.76%, down 18 basis points. Early Wednesday, the 10-year yield was trading around 2.87%.

Nasdaq 100 component and Leaderboard name Amazon.com (AMZN) rose in line with index futures ahead of its annual shareholder meeting. It's been hugging the 1,600 level after a breakout from a cup-with-handle base with a 1,568.62 entry.

Buyers were in Micron Technology (MU) again after shares jumped 2% Tuesday. Shares were trading around 63.60 early Wednesday as it tries to break out with conviction from a cup-shaped base with a 63.52 entry. The caveat is that it's a later-stage base after a big price run already.

Elsewhere, PagSeguro Digital (PAGS) was indicated higher after reporting earnings late Tuesday. Shares crashed 10% Tuesday ahead of the results. PagSeguro was weak along with other Brazilian stocks due to an ongoing truckers strike.

Meanwhile, shares of cloud software pioneer Salesforce.com (CRM) were up nearly 5% in premarket trading. Earnings and sales topped expectations late Tuesday. Shares were trading around 133, still in buy range from a 128.97 entry. Salesforce was featured as a call-option trade in the latest Earnings Preview column.

Watchmaker Movado (MOV) rose sharply early Wednesday on strong earnings. Michael Kors (KORS) and DSW (DSW) (IBD) also reported earnings, but shares fell sharply in premarket trading.

Royal Dutch Shell profits soar on stronger oil prices

Oil Stock Markets

Royal Dutch Shell on Thursday reported a 42 percent rise in first-quarter profit, its highest in over three years, boosted by higher oil prices and production.

Expectations are high for Shell to continue to generate strong profits and cash flow after the Anglo-Dutch company beat larger rival Exxon Mobil <XOM.N> on both fronts in 2017 thanks to cost cuts and higher efficiencies.

The world's top oil companies are expected to generate more cash in 2018 than at any other time this decade after three years of cuts, but boards remain cautious amid uncertainty over near- and long-term prices.

Shell in the fourth quarter scrapped its scrip dividend in a sign that it is confident of being able to maintain around $15 billion in annual dividend payments without resorting to borrowing after a three-year oil price downturn.

It plans to buy back $25 billion (17.94 billion pounds) of shares by 2020 in order to offset the dilutive effect of the scrip and its $54 billion acquisition of BG Group.

It did not specify a time to start the program on Thursday.

After falling short of expectations in the previous quarter, Shell's cash flow from operations in the first three months of 2018 recovered to $9.43 billion, which was still slightly weaker from $9.5 billion a year earlier.

Free cash flow was little changed from a year earlier at $5.178 billion.

Net income attributable to shareholders, based on a current cost of supplies (CCS) and excluding identified items, rose to $5.322 billion, topping a company-provided analysts' consensus of $5.277 billion.

A year ago, net income was $3.754 billion.

Production grew by 2 percent to 3.839 million barrels of oil equivalent per day. Earnings for the segment almost tripled from a year earlier.

Income from the refining and marketing segment, known as downstream, weakened due to lower refining margins and plant availability.

Gearing, the ratio between debt and Shell's market capitalisation was slightly lower from the end of 2018 at 24.7 percent by the end of March.

Brent crude oil prices in recent months have risen to $75 per barrel, their highest since late 2014.

Prices averaged around $67 a barrel in the first quarter, up nearly 25 percent from a year earlier.

Exxon top executive confirms Gulf Coast oil-refining expansion

Global Stock Markets

A top Exxon Mobil Corp (XOM.N) official confirmed a multi-billion dollar plan under consideration to double U.S. light crude oil refining capacity along the U.S. Gulf Coast to take advantage of the nation’s growing shale oil production. 

Exxon’s proposed project, which has not received a final investment decision, would be the first major expansion of gasoline and motor fuels production in the nation in six years. 

Exxon’s Beaumont, Texas refinery could become the nation’s largest by capacity when the work is complete in the next decade. 

Exxon expects to add a crude distillation unit (CDU) at its 362,300 barrel per day (bpd) Beaumont refinery and boost refining capacity at plants in Baytown, Texas and Baton Rouge, Louisiana, Senior Vice President Jack Williams said in a presentation to Wall Street analysts last week. 

Sources familiar with Exxon’s plans said that the company was near a final investment decision for a project to expand crude oil processing capacity at the Beaumont refinery to as much as 850,000 bpd. 

Williams said the project would increase the integration of Exxon’s Gulf Coast operations by supplying its Baton Rouge and Baytown refineries with products made at Beaumont, reducing third-party purchases. 

He called the plan“perhaps my favourite example on integration” because it couples production and refining across business groups. 

Exxon plans to invest $9 billion in six refinery projects globally in the next eight years and forecasts returns from its downstream to grow by 20 percent on average, the company said. 

The expansion would offer a new outlet for the rising shale oil production from the Permian Basin in west Texas and New Mexico, which is expected to overwhelm U.S. refining capacity in the next few years, said an analyst from energy consultancy IHS Markit.

Shell focussed on increasing U.S. shale oil production

Oil Stock Markets

Royal Dutch Shell Plc is focussed on increasing its U.S. shale operation’s oil production while slowing investment in lower-margin natural gas.

 

The Anglo-Dutch company aims to boost its overall shale production by 200,000 barrels of oil equivalent per day (boe/d) to 500,000 boe/d between 2017 and 2020, mostly in the United States with some production in Argentina. 

Although the shale business has yet to generate a profit, it is expected to do so next year, Greg Guidry, who heads Shell’s shale operations, told Reuters on the sidelines of the CERAWeek energy conference in Houston. 

Shell, like Exxon Mobil Corp (XOM.N) and Chevron Corp (CVX.N), aims to make shale production a driver of growth in the next decade. But today most of its output is natural gas, where profit margins are lower. 

As a result, around 85 percent of Shell’s shale budget for at least the next two years will go towards new oil resources, particularly in the Permian oilfield of West Texas and Canada’s Duvernay Basin.

After years of faltering performance and increased spending in shale, Shell has in recent years transformed the business to adapt to the sharp drop in oil prices since 2014. 

Shale oil wells today can be profitable with oil prices above $40 a barrel and gas above $2 per million British thermal units.

Shell has earmarked between $2 billion and $3 billion per year, roughly 10 percent of its capital expenditure, for shale until 2020. 

Gas production will remain largely flat in the coming years and would be boosted in Canada’s Montney basin once Shell decides to go ahead with a major natural gas liquefaction plant in British Columbia known as LNG Canad.

In its eastern U.S. Appalachia gas fields, an increase in output would require construction of pipelines to deliver fuel to demand hubs.

Shell also is advancing shale production in Argentina’s Vaca Muerta basin and will make a decision on developing a production well later this year.

Shell’s 2016 acquisition of BG Group in 2016 boosted the share of natural gas to 50 percent of its global fossil fuels output and made it the world’s largest natural gas trader.

Global dividends hit record of $1.25 trillion in 2017, more to come

Global Stock Markets

Global dividends rose 7.7 percent to an all-time high of $1.25 trillion (£891 billion) last year boosted by a buoyant world economy and rising corporate confidence, Janus Henderson (JHG.N) said on Monday, predicting another record year ahead.

The surge - the strongest since 2014 - was driven by increases in every region and almost every industry with record showings in 11 countries including the United States, Japan, Switzerland, Hong Kong, Taiwan and the Netherlands, the investment manager added.

For 2018 Janus Henderson expects dividends to keep the same 7.7 percent growth rate to reach around $1.35 trillion, as corporate and economic growth remains strong even in more volatile financial markets.

Royal Dutch Shell (RDSa.L) kept its position as the world’s biggest dividend payer. China Mobile (0941.HK) rose to second from 19th last year and was followed by Exxon Mobil (XOM.N), Apple (AAPL.O) and Microsoft (MSFT.O), the report said.

The top 20 payers accounted for 15.7 percent of the total payout.

Adjusting for movements in exchange rates, special one-off dividends and other factors, global dividends rose 6.8 percent last year and are expected to rise another 6.1 percent in 2018.

Janus said 2017’s dividend growth showed less regional divergence than in previous years, reflecting the broadly based global economic recovery, though Europe lagged behind.

European dividends rose just 1.9 percent to $227 billion, weighed down by cuts from a handful of large companies in France and Spain, lower special dividends and a weak euro during the second quarter, when most dividends are paid, it said.

In the UK, headline growth was held back at 3 percent by the weak pound, but underlying growth was 10 percent as UK-listed multinational mining companies rapidly restored dividends that had been cut during the lean years for commodity prices.

The Asia Pacific region posted the strongest headline growth rate of 18.8 percent to 139.9 billion, followed by Emerging Markets, up 16.5 percent to $102.4 billion, while dividends in North America grew 6.9 percent to a record of $475.6 billion.

Janus said every industry saw higher underlying dividends in 2017 except telecoms, which was flat. The mining industry saw by far the fastest growth, up 27.2 percent on an underlying basis.

Shell poised to dethrone Exxon in oil titans' cash clash

European Stock Markets

Royal Dutch Shell (RDSa.L) could usurp its largest rival Exxon Mobil (XOM.N) as the energy sector’s biggest cash generator after higher oil and gas prices combined with an improved performance lifted its 2017 revenue. 

 The Anglo-Dutch company on Thursday reported a more than doubling of profit in 2017 to $16 billion, the highest since the start of the 2014 downturn as the effect of years of costs cuts and the integration of BG Group filtered through.

Shell’s shares were 1.1 percent lower at 0842 GMT, compared with a slightly positive open for the FTSE 100 index.

Cash flow from operations in 2017 rose to $35.65 billion from $20.62 billion a year earlier, putting Shell on course to beat Exxon, which is forecast to have generated $32.6 billion in 2017, according to estimates by Jefferies analysts. Exxon reports earnings on Friday.

The rise was driven by a sharp recovery in oil prices in the second half of 2017, as the benchmark Brent price reached a three-year high of $70 a barrel.

But it was also due to a sector-wide drive to reduce costs to adapt to a world of “lower for longer” oil prices, as Shell and others cut thousands of jobs and lowered spending.

As a result Shell can now generate more cash than it did with oil prices above $100 a barrel and in November it raised its cash flow outlook from $25 billion to $30 billion by 2020, assuming an oil price of $60 a barrel.

Free cash flow -- cash available to pay for dividends and share buybacks -- rose to $27.6 billion from a negative $10.3 billion in 2016.

Shell in the fourth quarter scrapped its scrip dividend, in a sign that it is confident of being able to maintain around $15 billion in annual dividend payments without resorting to scrip or borrowing after a three-year oil price downturn.

Shell’s oil and gas production in the fourth quarter rose from the previous quarter to 3.756 million barrels of oil equivalent per day (boed) from 3.657 million boed, but on a yearly basis, it fell 4 percent as a result of asset sales.

Production was expected to come down by 270,000 boed in 2018 as a result of divestments, including the sale of a North Sea portfolio to Chrysaor and its stake in Woodside Petroleum.

Shell announced the sale of its stake in the Bongkot gas field and adjoining acreage offshore Thailand to PTT Exploration & Production PCL for $750 million on Wednesday and is on track to hit a $30 billion asset sale target.

On a quarterly basis, Shell’s profit, based on a current cost of supplies (CCS) and excluding identified items, rose by 140 percent to $4.3 billion, slightly ahead of forecasts.

Shell said its gearing dropped to 24.8 percent from a peak of 29.2 percent in the third quarter of 2016 as it cut its debt to $74.65 billion. And while it took a $2 billion charge due to new U.S. tax rules, Shell expects a longer-term boost.

ExxonMobil, BHP end Australia gas sales joint venture

Australian Stock Markets

ExxonMobil Corp (XOM.N) and BHP Billiton Ltd (BHP.AX) have agreed to end a nearly 50-year-old gas marketing joint venture in Australia, bowing to pressure from the nation’s competition watchdog amid concerns about gas supply and soaring prices

The Australian Competition and Consumer Commission (ACCC) and the companies said on Monday they would start marketing their gas from the Gippsland Basin separately, starting in 2019.

The commission raised concern last year about the tight grip the Gippsland Basin joint venture, the biggest producer in the country’s southern states, had on the market. The ACCC flagged it might force the firms to sell their gas separately.

It could have taken ExxonMobil and BHP to court had they not agreed to break up the marketing joint venture.

But an analyst at energy consultants Wood Mackenzie said separate marketing of the gas was unlikely to soften domestic gas prices much. Gas prices were effectively being determined by the liquefied natural gas export market, not the ExxonMobil-BHP joint venture, analyst Saul Kavonic said.

BHP shares rose 1.5 percent on Monday, roughly in line with other big miners.

BHP has cooperated with the ACCC and strongly believes it has complied with the Competition and Consumer Act at all times,” the company said in an emailed statement.

The companies had long argued that joint marketing actually saved costs. ExxonMobil had warned in April 2016 that any unwinding of joint marketing “could make it more difficult to invest and bring on new supplies in Gippsland”.

The two companies will cease marketing gas jointly at the end of 2018, Esso Australia, the local arm of ExxonMobil, said in an emailed statement on Monday.

One of the commission’s principal concerns was that big gas buyers, like manufacturing companies, were getting only one or two offers at most from gas suppliers for multi-year deals. Having BHP and

ExxonMobil market separately would introduce new offers.

Production from the Gippsland Basin venture is forecast to drop to 244 petajoules (PJ) in 2018 from a record 330 PJ this year, as one of its big fields has run out of gas earlier than expected, the commission said in a report last week.

Exclusive - Exxon mulls Beaumont refinery crude unit addition

ExxonMobil Corp (XOM.N) is considering expanding light crude processing capacity at its Beaumont, Texas, refinery with the addition of a third crude distillation unit, a company spokeswoman said on Thursday.

If approved, construction could begin on Unit C in 2019 and be completed in 2022, said Exxon spokeswoman Charlotte Huffaker. She declined to disclose the contemplated capacity or possible cost of the Unit C expansion. 

The expansion would be part of the $20-billion 'Growing the Gulf' project announced in March by Exxon Chairman and Chief Executive Darren Woods. 

While Exxon has mentioned potential expansion of light oil refining capacity at the Beaumont plant as part of that project, this is the first time the company has talked about Unit C and given a timeline for possible construction. 

Since at least 2014, Exxon has been considering the addition of a large distillation unit that would boost Beaumont's crude oil refining capacity from 362,300 barrels per day (bpd) to between 700,000 and 850,000 bpd, sources told Reuters in 2014 and 2015. 

The contemplated crude capacity expansion was put on hold in early 2016 due to cuts in capital spending, sources said at the time. 

On Thursday night, sources familiar with Exxon's plans said the company was now looking at adding a large crude distillation unit at the refinery. The two crude units currently at the Beaumont refinery are Units A and B.

The last major expansion of a U.S. refinery was the 5-year, $10-billion addition of a crude distillation unit and other units at Motiva Enterprises [MOTIV.UL] Port Arthur, Texas, refinery which more than doubled its size to 603,000 bpd. The expansion was completed in 2012. 

The Motiva expansion was originally budgeted at $5 billion, but went through a year-long review in 2009.