Canadian energy companies sell "jewels" to keep oil sands afloat

2016-02-09 10:31:05

CALGARY, Alberta Feb 9 Faced with record low prices for heavy crude, Canadian energy companies are sacrificing other parts of their business to keep higher-cost oil sands production going and safeguard the billions already invested in these multi-decade projects.Companies including Husky Energy Inc, MEG Energy Corp and Pengrowth Energy Corp are selling assets or slowing light and conventional oil exploration and production, even as they forge ahead with oil sands projects that are in many cases bleeding money on every barrel.Although the move to support higher-cost production seems counterintuitive, oil sands companies take a longer-term view that shutting plants in Alberta would be very expensive and risk permanently damaging carefully-engineered reservoirs, underground deposits of millions of barrels of tarry bitumen.It is easier, and cheaper, to shut down and later restart conventional wells.Producers are also betting that oil prices will eventually recover. The latest Reuters poll of oil analysts forecasts the U.S. benchmark will average $41 a barrel in 2016, a level where most Canadian oil sands projects can break even.Bankers say the need to bolster balance sheets and cover oil sands losses will boost the number of Canadian energy deals this year, particularly sales of pipelines, and storage and processing facilities."The market was down significantly last year in terms of energy M&A, and we think that's going to reverse," said Grant Kernaghan, Canadian Investment Banking head for Citigroup. CORE BUSINESSMEG is selling its 50 percent stake in the Access pipeline, which analysts value at around C$1.5 billion ($1.08 billion), while Husky is selling a package including 55,000 barrels of oil equivalent per day of oil and natural gas production, royalties and midstream facilities, valued at between C$2.4 billion to C$3.2 billion.According to a recent TD Securities report, virtually no oil sands projects can cover overall costs, including production, transportation, royalties, and sustaining capital, with U.S. benchmark crude below $30 a barrel.The benchmark heavy Canadian blend, Western Canada Select (WCS), now trades around $16.30 a barrel, just a few dollars above record lows hit in January. But as nearly 80 percent of oil sands costs are fixed investments, such as equipment for injecting high-pressure steam underground to liquefy tarry bitumen, producers prefer to have some revenue coming in to help offset those costs than none, said FirstEnergy Capital analyst Mike Dunn.To be sure, if WCS prices dropped even further to below $12 a barrel, Dunn said producers may look at ways to trim production by 10-30 percent.Oil sands "remains our core business so we will look to various other handles we have to support that business," said Brad Bellows, a spokesman for MEG.Even as it makes major cuts, Husky is ramping up new thermal projects, including its Sunrise joint venture with BP. Sunrise in northern Alberta took three years and C$2.5 billion to build and Husky is in the midst of the two-year process of raising reservoir pressure to full production capacity. Once there, Sunrise is expected to produce for 40 years. As well as selling assets, some players, such as Canadian Natural Resources Ltd and Baytex Energy are shutting in uneconomic conventional heavy oil wells, but leaving their oil sands operations intact.JEWELS IN THE CROWNBankers say that midstream assets - pipelines, storage and processing facilities - prove popular with buyers such as pension funds and private equity firms, which favor investments with stable cash flows that are relatively easy to value."They're to a certain extent the jewels in the crown. These companies would not be looking to sell them if they could get away with not doing it," said Citi's Kernaghan.Last year, oil sands producer Cenovus Energy sold a portfolio of oil and gas royalty properties to Ontario Teachers' Pension Plan for C$3.3 billion.Industry veterans note oil sands operations also had to be "cross-subsidized" by healthier parts of the business during the last prolonged market slump in the 1980s and predicted producers would push to keep operating until prices recover. ($1 = 1.3930 Canadian dollars)(Reporting by Nia Williams and Euan Rocha; Editing by Tomasz Janowski)

Myanmar presidential vote set for March 17 as transition talks drag on

2016-02-08 09:00:07

NAYPYITAW/YANGON Myanmar's parliament will begin its election of the new president on March 17, cutting very close to an April 1 deadline, suggesting talks between Aung San Suu Kyi's victorious party and the military are likely to take longer than planned.But a top military lawmaker on Monday denied that Suu Kyi's National League for Democracy (NLD) and the armed forces were discussing provisions to change the constitution and allow the democracy champion to become the country's new president.Senior NLD members had told the media they would hold presidential elections in February, but the parliament on Monday decided the process would start two weeks before the new government is scheduled to begin its term, on April 1."I hereby announce that the meetings of the three presidential electoral colleges will be held effective March 17," joint chamber speaker Mahn Win Khaing Than said in parliament. The NLD swept the historic Nov. 8 election, securing some 80 percent of elected seats in parliament, or enough to push through its president. That kicked off a lengthy transition process during which the military and the NLD have been locked in negotiations, most probably over the shape of the new government and transfer of power, but details of the talks have been murky."There is no discussing between the military and NLD about Article 59 (f)," Brigadier General Tin San Naing, the spokesman of the military caucus in parliament, told Reuters on Monday.The article, which bars anyone with foreign children and spouses from becoming president, is seen as being aimed at Suu Kyi, whose children are British. It could only be amended with the army's approval, Tin San Naing added."The article can't be suspended. It's against the constitution. It has already been discussed in the parliament so it should not be proposed and discussed again." The article had been "put in the constitution intentionally, to protect our people from foreign invasion," he added.Under the junta-drafted constitution, parliament chooses the president. Each of the two chambers nominates its vice-presidential candidate, while the military MPs, who are guaranteed a quarter of the seats, nominate the third.Once the candidates are in place, a joint-chamber session picks the president for a five-year term. The two losing candidates become vice-presidents. (Editing by Clarence Fernandez)

New York policeman accused of shooting black man to testify at trial

2016-02-07 20:01:05

NEW YORK A New York City police officer charged with fatally shooting an unarmed black man in an unlit Brooklyn stairwell is expected to take the stand in his own defense on Monday at his trial for manslaughter.Peter Liang was conducting a routine patrol inside a public housing project on the night of Nov. 20, 2014, when he fired his gun once. The bullet ricocheted off a wall and struck the chest of Akai Gurley, 28, who was walking one floor below with his girlfriend.Prosecutors have said Liang, at the time a 27-year-old rookie police officer, spent minutes arguing with his patrol partner, officer Shaun Landau, about whether to report the shot to police headquarters while Gurley lay dying downstairs. Once Liang and Landau realized someone had been hit by the bullet, they failed to provide medical assistance despite their training, prosecutors claim.The shooting helped to inflame tensions in New York and across the United States over the use of force against minorities by police officers, though Liang, who is Chinese-American, has not been accused of deliberately firing at Gurley. Prosecutors have said Liang acted recklessly in unholstering his gun in the first place and then firing unnecessarily. Liang's defense lawyers have said Liang was justified in having his gun out as he patrolled a crime-ridden building without adequate lighting.That defense was underscored on Thursday night, when two police officers were shot during a similar "vertical patrol" inside the stairwell of a public housing complex in the Bronx. Jurors will weigh Liang's own account with versions of the story offered by Melissa Butler, Gurley's girlfriend who described frantically trying to administer aid while Liang stood by, and Liang's partner Landau, who testified last week under an immunity deal with prosecutors.Liang's lawyers have said he was in shock following the shooting and unable to render medical assistance to Gurley. Liang could be the final witness at the trial, which began two weeks ago in Brooklyn state Supreme Court. (Editing by Frank McGurty and Clelia Oziel)

Croatia backs away from plan for new coal-fired power plant

2016-02-06 19:30:10

ZAGREB Feb 6 Croatia is unlikely to go ahead with plans to build a new coal-fired thermal plant in the northern Adriatic for which it entered partnership talks with Japan's Marubeni Corp, the environment minister said on Saturday."We need a new energy strategy in line with the European Union plans on boosting renewable energy and reduction of carbon dioxide emissions. Such plants don't fit in," Slaven Dobrovic said at an energy round-table in Zagreb.Croatia agreed early last year to begin talks with Marubeni on construction of a new 500-megawatt block at the Plomin thermal plant in the northern Adriatic Istrian peninsula, a project estimated at 800 million euros."I don't know if there are some obligations towards Marubeni, but even if there were, it cannot be compared to the potential damage, economic and environmental, from such a plant," the minister said. Croatia's former centre-left government pressed ahead with the project despite protests by local environmentalists, who advocated the use of natural gas instead of coal. However, the centre-right government that took office last month has taken a different line. A junior partner of the conservative HDZ party in the ruling alliance, the reformist Most (Croatian for "bridge") party, said during campaigning that it favoured renewable power.Economy Minister Tomislav Panenic, who belongs to Most, said on Friday that the construction of thermal plants and drilling for oil in the Adriatic would be temporarily suspended until a new national energy strategy has been devised. The former government stopped short of signing concession contracts to explore for natural gas and oil in the Adriatic last year, saying it wanted to leave the decision until after the election.Environmentalists oppose drilling and say it could hit tourism, which accounts for almost 20 percent of gross domestic product. (Reporting by Igor Ilic; Editing by Helen Popper)

Special Report: Why Obama and other gun control advocates own stock in firearms makers

2016-02-05 22:00:07

WASHINGTON Barack Obama might seem an unlikely investor in the firearms industry. But the U.S. president, a fierce advocate for gun regulation, has money in a pension fund that holds stock in gun and ammunition companies.Although Obama’s stake is minuscule, worth no more than $30, it reflects a much larger surge of investment.The president is among millions of Americans buying into gun companies - often unwittingly - as mutual funds have increased such holdings to record levels, according to a Reuters analysis of institutional investment in firearms companies.Since Obama was elected in 2009, mutual funds have raised their stakes to about $510 million from $30 million in the nation’s two largest gun manufacturers with publicly traded shares, Smith & Wesson Corp and Sturm, Ruger & Co. That means such stocks are now common in retirement and college savings plans.The influx has helped to boost both companies' shares by more than 750 percent during the Obama presidency; each now has a market value of about $1 billion.Beyond mutual funds, such investments also are held in the portfolios of hedge funds and public pension plans, which are harder to track.   // The White House declined to comment on Obama’s holdings in the Illinois General Assembly’s pension plan, which he earned while serving in that state’s senate. The president has disclosed between $50,000 and $100,000 in the plan.Other indirect investors in firearms companies include advocates for gun regulation in the U.S. Congress and several parents of children who attended Sandy Hook Elementary School in Connecticut - site of the 2012 massacre of 20 students and six staff members.Fund managers are drawn to the stocks by surging sales. Buyers are arming themselves, analysts said, in response to mass shootings and calls for tougher gun laws.By the end of 2015, more than 150 mutual funds owned Smith & Wesson shares, up from 53 at the end of 2008, and nearly 130 held stock in Ruger, up from 52, according to data from Morningstar Inc.It would have taken investors "minimal due diligence" to see massive profit potential in Ruger stock when Obama was first elected, said Ruger Chief Executive Mike Fifer. Shares hit a low of $4.50 the Friday after that Tuesday election; the stock was changing hands today at $61.61."Orders at every level of the distribution channel exploded" the week of Obama's election, Fifer recalled. "And continued to do so for months afterward." AMMO RUSHAmerica’s leading ammunition maker, Vista Outdoor Inc, has drawn investments from 319 funds in its first year of public trading and now has a market value of $2.9 billion. Its bonds are owned by a who's-who of U.S. investment and insurance companies.   // Such investments can be hard to identify within large funds, even with concerted effort. Eric Milgram, a corporate research analyst whose two children were at Sandy Hook Elementary during the rampage, tried to purge his portfolio of firearms holdings. But he gave up after a frustrating search through mutual fund stock lists, holding companies and subsidiaries.“I’m disgusted with this industry; I don’t want to be invested in it,” said Milgram. But, he added, “There are only so many hours in the day.”Vanguard Group, the nation’s largest fund company, said it was unrealistic to balance political sensibilities with obligations to meet performance benchmarks. “It would be exceedingly difficult, if not impossible, to fulfill these obligations while managing portfolios that reflect the social concerns of all our clients,” said Vanguard spokeswoman Arianna Stefanoni Sherlock.Vanguard does, however, offer a Social Index fund – with about $2 billion in assets out of Vanguard’s total of about $3.4 trillion – that excludes firearms companies along with other stocks involved in an array of ethically sensitive industries.Smith & Wesson declined to comment for this story. Vista Outdoor did not respond to requests for comment. SMALL STAKES, BIG IMPACTObama and his tiny stake are typical of most Americans with holdings in firearms investments: They are invested in funds that buy shares of the relatively small part of the firearms industry that is publicly traded. But collectively, their investments are a boon to the gun industry and amount to a sizable stake in major gun and ammo makers.For some gun safety advocates, the amounts are less important than the principle. Po Murray, who put four children through Sandy Hook Elementary, has also struggled to determine whether her investments include firearms companies.“It’s a real surprise: You find out you could be invested indirectly in Smith & Wesson,” said Murray, who chairs the Newtown Action Alliance, a gun safety group. “I don’t want to be invested in gun companies.”The $16 billion Illinois pension fund that includes Obama’s investment holds at least $4.8 million in shares of gun industry stocks, including Smith & Wesson, Ruger, Vista and ammunition maker Olin Corp.Until 2014, the pension fund owned about $1.5 million of the debt of Remington Outdoors, another gun manufacturer. Remington did not respond to requests for comment.The Illinois pension plan also invests in at least one mutual fund with gun industry exposure. The $1.1 billion Templeton Global Smaller Companies Fund owned $9.5 million of Smith & Wesson stock at the end of December, fund disclosures show. Obama and other plan participants have no say in how the money is invested. That’s controlled by the Illinois State Board of Investment, which said it has no policy on investing in firearm and ammo companies.In its analysis, Reuters used mutual fund holdings data from Morningstar and Lipper Inc, a Thomson Reuters company, to examine firearms investments during the Obama presidency.The list of funds holding such stocks includes some of the biggest and most prominent, such as Vanguard and the second-largest fund group, Fidelity Investments. It extends to BlackRock Inc, and Dimensional Fund Advisors. The analysis is based on disclosures made by individual funds.Some of the gun stockholders are passively managed index funds. But many are actively managed, such as Fidelity’s $40 billion Low-Priced Stock Fund, which has become Smith & Wesson’s second-largest mutual fund investor under storied stock-picker Joel Tillinghast. The fund held about 1.1 million shares worth $20 million as of Oct. 31, according to fund disclosures.Fidelity and Dimensional declined to comment. BlackRock - the world’s largest asset manager with $4.6 trillion under management - manages $200 billion of that total in investment options that screen out certain stocks, including companies involved in firearms, tobacco and alcohol businesses, spokesman Peter McKillop said. GUN INVESTMENTS IN CONGRESSObama isn’t the only gun-regulation advocate with gun-industry holdings.Former congresswoman Carolyn McCarthy - elected after her husband was killed in the 1993 Long Island Rail Road shooting - pushed relentlessly for gun safety legislation. While in office, she held shares worth between $3,003 and $45,000 in at least three exchange-traded funds with stakes in gun and ammo companies, according to her last financial disclosure before retiring last year. She also invested between $2,002 and $30,000 for two grandchildren in so-called 529 college-savings plans that include a Vanguard fund holding firearms stocks, disclosures show.The New York Democrat could not be reached for comment. As a federal retirement benefit, members of the U.S. Congress can participate in a Thrift Savings Plan, which offers an investment option - the S Fund - that holds stock in firearms companies.Financial disclosures show that S Fund investors include Senator Dick Durbin of Illinois, the second-ranking Senate Democrat and a leading advocate for stricter background checks for gun buyers. Durbin disclosed an S Fund investment of about $115,000.Durbin's office declined to comment.Some members of Congress welcome the investment option.“I’m just grateful the fund managers are investing in something that’s making money,” said Representative Kevin Cramer, a North Dakota Republican who opposes gun restrictions and has a small investment in the S fund.Does you mutual fund invest in guns and ammo stocks?‘GOOD FOR BUSINESS’For all the debate, Obama has made no progress in passing tougher gun laws. Measures such as universal background checks have withered in Congress, where the number of anti-gun control Republicans has grown.Calls for tighter controls have been met with bursts of gun sales, according to U.S. background-check data on gun purchasers. Gun store owners attribute the extra sales to consumers who fear the president will make it harder to buy arms.“Let’s just say he’s been good for business,” Jack Lesher, manager of Chuck’s Firearms in Atlanta, said of Obama.Gun sales jumped again recently after the president blasted congressional inaction on gun control and vowed to use executive powers to expand background checks for buyers and bolster licensing requirements for dealers. His announcement followed yet another mass shooting, on Dec. 2 in San Bernardino, California, where a couple pledging allegiance to Islamic State killed 14 people.For the week that ended Dec. 20, firearms background checks - a proxy for guns sales - totaled 839,109, the second-highest week since 1998. Only the week after the Sandy Hook shootings was higher, according to the Federal Bureau of Investigation.Vista’s main factories have churned out bullets 24 hours, seven days a week for at least two years, Vista Chief Financial Officer Stephen Nolan told investors in November.Now the industry is ready for an election-year surge.“The politics of gun control could stay in the headlines, which we believe could lead to a record year,” wrote Chris Krueger, senior research analyst at Lake Street Capital Markets, in a note to investors in January.Ruger is boosting inventories to prepare, after learning a costly lesson going into the last presidential election. Demand peaked that year, based on the number of FBI background checks sought for new gun purchases. The surge followed Obama’s re-election and the Sandy Hook shooting.“When we went into late 2011, we got cleaned out of inventory … even though we increased production dramatically,” company CEO Fifer told investors during a November conference call.The company, he said, “probably left money on the table.” (Additional reporting by Jeff Mason in Washington. Editing by Jason Szep and Brian Thevenot)

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