Death: Bob's Burger's chief animator, Dave Creek; age 42; complications of a skydiving accident;
Autos: sneak peak -- Ford Maverick -- Ford's upcoming compact track. Data points:
- Ford: manufactures SUVs and trucks only; and the new Mustang Mach-E
- Maverick pickup truck: one of two vehicles that will become entry-level models for Ford
- Hermosillo, Mexico
- currently builds the Ford Bronco Sport
- price for base model: around $20,000
- will replace Ford's mediocre Ecosport
- C2 architecture: latest-generation Focus sold abroad; the Escape; and, the 2021 Bronco Sport;
- leaked tailgate photo here;
India's fuel demand: December consumption rose for a straight fourth month;
Dealmaking: oil and gas dealmaking peaks in 4Q20 as pandemic spurs consolidation. I don't think there is much new here. Deals in 2020 are tracked here.
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Oil and Gas Outlook, 2021
Westwood Global Energy Group outlook. Quite surprising "data point" regarding "17 selected US shale producers." Analysis of three E&P peer groups:
- five Supermajors:
- four selected National Oil Companies;
- seventeen selected US shale producers
- bottom line, not surprising: 2021 CAPEX likely to remain relatively flat or decrease slightly compared to 2020
Summary:
- Supermajors: reinvested 88% of operating cashflow into CAPEX 1Q20 - 3Q20; Brent averaged $41/bbl; reinvestment was the highest ratio of all assessed groups;
- collectively: will cut expenditures by $10 billion
- WTI at $48/bbl is needed in 2021 for operating cashflow to cover both CAPEX and dividends
- NOCs: likely to maintain or slightly reduce CAPEX
- the NOC group is less leveraged relative to the Supermajors and the US shale producers and has capacity to access debt markets as required:
- US shale producers: the least burdened by shareholder pay-outs and managed to be self-funding in 2020, but several companies are still very highly leveraged and servicing debt is likely to be the overriding consideration in 2021
- CAPEX could rise if WTI increases to above $45/bbl
- average "required" oil price (US$/bbl)
- Supermajors: Brent, $48/bbl
- NOCs: Brent, $48/bbl
- US shale producers: $40/bbl
Some data points:
Supermajors:
BP and ExxonMobil reported that capital expenditures alone exceeded OCF in the first 9 months of 2020, with recycle rates of c.117% and 134% respectively. Chevron’s US$7.8bn in shareholder pay-outs exceeded OCF by US$450m.
This cash outflow was funded through new debt issuance but is clearly unsustainable longer term without an oil price recovery.
NOCs:
Saudi Aramco spent c.US$50bn on shareholder pay-outs in the first 9 months of 2020 and c.US$20bn in capital expenditures.
Should Aramco continue with these levels of capex and shareholder pay-outs, then an average 2021 Brent oil price of c.US$55/bbl is estimated to be needed at 2020 production levels for self-funding from OCF, or else further capital raising could be required.
Saudi Aramco raised $8 billion in the debt markets in November. Saudi Aramco has indicated that it will exhibit capital restraint next year (with FY capex potentially as low as US$25bn). Rosneft and Sinopec would also require c.US$55/bbl in 2021, if capex and shareholder pay-outs were to be kept at 2020 levels; though neither firm has issued capital guidance for 2021.
US shale producers:
In aggregate, the 17 company US shale peer group generated US$19.4bn in operating cashflows and spent US$15.6bn in capital expenditures in Q1-Q3 2020, a recycle rate of c.80%.
The US shale companies paid shareholders on average c.9% of the OCF generated or US$1.7bn over the same period.
Three US shale companies (Pioneer Natural Resources, EOG Resources and Cabot Oil & Gas) paid more than 15% of OCF as shareholder pay-outs, accounting for c.60% of the total for the group.
Of the 17 assessed US Shale companies, 10 reduced net debt during Q1-Q3 2020, showing that deleveraging has been the key priority for the group.
Comment: this seems a fairly bullish report for US shale producers but the analysis was done during a favorable political (Trump) environment; this all changes under a Biden environment.
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