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The real price of Occidental’s ‘costless’ oil hedge is it will cost them EVERTHING

WHAT THE FUCK WERE THEY Thinking>>>>> Biggest oil company hedge ever….. WIPE OUT!

 

(Reuters) – In just 12 days, Occidental Petroleum Corp pulled off one of the biggest hedges against falling oil prices ever placed by a U.S. energy company. It characterized the transaction as “costless” but a Reuters review of regulatory filings, market data and interviews shows that’s not the whole story. The aim of the complex financial maneuver, the company said, was to help preserve Occidental’s generous dividend to shareholders as it sought to take over rival Anadarko Petroleum for $38 billion last summer in the biggest industry deal for years. “With the additional leverage from the Anadarko acquisition, these new hedges will strengthen our 2020 cash flow in a low oil price environment, and provide additional assurance that our dividend is safe, while we are deleveraging,” Occidental’s Chief Financial Officer Cedric Burgher told an earnings call in August. However, to secure the hedge swiftly and discreetly and to avoid paying its bankers a fee for arranging it, the company took a bigger potential hit to future revenues with only limited protection against falling oil prices, according to a source with direct knowledge of the transaction. While Occidental disclosed the financial details of the hedge in filings, fulfilling its regulatory obligations, the fact that the company took on the additional risk to secure the transaction fast and to avoid banker fees has not been previously reported.

Occidental declined to comment for this story.

Occidental used a complex series of transactions for its hedge, which was arranged by Bank of America Merrill Lynch and Citigroup, according to six sources with direct knowledge of the trades. The summer hedge covered nearly 110 million barrels of oil, or 300,000 barrels a day, each for 2020 and 2021, nearly enough to meet the annual oil imports of Australia.

Bank of America Merrill Lynch and Citigroup declined to comment.

The hedge meant the firm could sell the oil at a minimum of $55 a barrel in 2020, even if crude prices fell below that, to a limit of $45 a barrel; but the company’s selling price was capped at $74.09, and it would lose out on any revenue earned from oil prices rising beyond that mark.

Occidental capped revenues for 2020 and also 2021 but only got downside protection for 2020 –

a lopsided deal sometimes referred to as a naked hedge. Limiting future revenue without getting a guarantee against falling prices is unusual in the energy sector. While Occidental has disclosed the details of the 2020 hedge in regulatory filings, the absence of a hedge against falling oil prices in 2021 was not explicitly mentioned. The company said the 2021 options were meant to increase the maximum selling price it would receive for 2020 sales.

“Occidental entered into the 2021 call options to substantially improve the ceiling price that the Company will receive for the contracted commodity volumes in 2020,” it said in a filing.

Some analysts said investors should have been given more information about the potential implications of the hedge.

“It seems very strange that they left a naked hedge in 2021 which capped upside but offered no downside protection,” said David Katz, president and CIO of Matrix Asset Advisors, which owns 0.3% of Occidental’s shares.

However, other analysts said Occidental needed to secure a hedge quickly to defuse some of the pressure from investors.“Doing this gives Oxy a lot of flexibility in 2020 with cash flow,” said Trisha Curtis, President of PetroNerds, an energy analytics and advisory firm specializing in U.S. shale. “You can’t have an acquisition that big and then willy-nilly hope that oil prices hold up. Regardless of what it cost them, it was needed for a number of reasons.” Nick Note: nI essence they bet the company… Stupid. In essence they  get minimal protecton from falling oil price this year and are betting on BIG increases in price next year that will NEVER HAPPEN!  They have wiped out the company…..

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Video of Moment Missile Fired at Doomed Ukrainian Plane Released

On Saturday, the Iranian Guards Corps Troops announced they had taken down Ukraine International Airlines Boeing 737 plane en route from Tehran to Kiev, mistaking it for a missile. At the same time Ukrainian authorities have called on Iran to take full responsibility for the incident that claimed 176 lives. A new video allegedly showing a moment the missile that hit a Ukrainian airliner was launched has been making round on the internet. Posted by Foreign affairs editor of Walla News, Guy Elster, the footage shows what seems to be a missile firing that is filmed during the night at a parking lot. Mere seconds after the launch, the night sky gets flashed. Ukrainian Airlines Boeing 737-800 bound to Kiev crashed soon after it took off in Tehran airport on Wednesday morning. The catastrophe left no one from 176 people aboard the aircraft alive. Among initial versions of the incident were technical malfunction and collision with a flying object. However, on Saturday the commander of the Aerospace Force of the Islamic Revolutionary Guard Corps, Amir Ali Hajizadeh announced that the plane was downed bu Iranian military after it had been “mistaken” for a cruise missile. Nick Note: A cruise missile my ass NOT POSSIBLE. The radar center on the SAM located near the airport knows the difference between a Jetliner and a cruise missile a fraction of the size. Besides the jetliner was a regularly sqeudialed flight and its transponder was squeaking its altitude, direction, flight number, heading indicating its direction (away from any targets) and Altitude The fact it was climbing into the radar envelope. Cruse missiles hug the ground especially as they get close to their targets., This was not a accident. But a take down of escaping agents involved in the assignation of Qassem Soleimani. The people who died in the downed jet liner were being evacuated. Their cover blown. These were the people that provided the intelligence that Iran was targeting 4 US embassies. AND they gave the travel planes that were top secret of the date and time General Soleimani was to land at Baghdad airport. With out that inside information the assignation would not have been possible. Thats OK the powers that be want to make you stupid

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US troops knew Al-Asad air base would be attacked and sheltered in bunkers, exclusive tour reveals

Al-Asad, Iraq (CNN)United States troops at the Al-Asad air base in Iraq were aware that an Iranian attack was imminent, allowing them to take shelter two-and-a-half-hours before missiles struck on Wednesday, CNN has been told during an exclusive tour of the devastated site. Most troops were either flown out of the base or sheltering in bunkers by 11:00 p.m. local time Tuesday — shortly before the first of four volleys of missiles began at just after 1:30 a.m. on Wednesday, officers said during the first tour by journalists of the air base.

A bunker at Al-Asad air base where US personnel sheltered.
A bunker at Al-Asad air base where US personnel sheltered…… You need one of these!… Simple and cheap to make… Especially since you will be nuked,,,someday. Not real soon.
The attack lasted around two hours, only targeting the US areas of the air base, which comprise around a quarter of the Iraqi base. Officers called it a “miracle” that there were no casualties at the blasted site, with missiles landing just a few meters from bunkers, and some essential personnel remaining outside throughout. It is the first time troops at the base have spoken in detail of the moments before the attack, revealing that they were able to seek shelter in bunkers shortly before missiles struck. US troops knew there was going to be an attack on their base — they just didn’t know what the nature of the attack would be.
The ruined remains of the living quarters where soldiers were evacuated.

The ruined remains of the living quarters where soldiers were evacuated. The Iranian attack on the Al-Asad airbase was one of two on Iraqi military bases housing US troops on Wednesday. The attacks were in retaliation for a drone strike at a Baghdad airport that killed Iran’s most powerful military commander, Qasem Soleimani, earlier in the week. President Donald Trump said Soleimani was plotting “imminent and sinister attacks” on Americans, though he has been unable to offer a time frame on when this would be. Iraqi Prime Minister Adil Abdul Mahdi previously said Iran sent Iraq an official verbal message that an attack “had begun or would begin shortly,” on unspecified US military locations. An Arab diplomatic source also told CNN that Iraq gave advance warning to the US on “which bases would be hit” after Iranian officials passed on the information.
Lieutenant Colonel Staci Colemsan said it was a "miracle" there were no casualties.

Lieutenant Colonel Staci Colemsan said it was a “miracle” there were no casualties. The first strike hit at 1:34 a.m. and after a brief pause of around 15 minutes, the next volley began. Two more volleys of missiles followed over the next two hours. At dawn, officers finally emerged from bunkers to discover the full scale of destruction. Al-Asad airbase
The Al-Asad air base, which houses US troops, is one of the largest and oldest military bases in Iraq.
It is located in Anbar province, a hotbed of ISIS activity in western Iraq between 2014 and 2017. Anbar was the birthplace of Sunni extremism in the aftermath of the US invasion of Iraq in 2003.
In December 2018, Trump visited troops at Al-Asad. “We came in, we felt very safe coming in. It was a pretty difficult journey in certain ways, but we felt very, very good, very safe,” Trump said, according to a White House transcript. Nick Note: For a FACT this  “attack” was a staged even. The fix was in. I have seen this a few times… Strickley for public consumption,,,,,,,,
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Boeing employee said 737 Max ‘is designed by clowns’ and ‘supervised by monkeys’

Newly released internal emails from Boeing show workers mocking FAA, ridiculing 737 Max’s safety
Getty Images A 737 Max 8 is seen outside Boeing’s factory in Renton, Wash.

Newly released internal emails from Boeing Co. paint a disturbing picture of its 737 Max program, with employees bragging about fooling FAA regulators and ridiculing its safety. The emails were part of more than 100 pages of documents sent Thursday by Boeing BA, -1.91%   to House and Senate committees that have been investigating the aircraft maker in the wake of two crashes in 2018 and 2019 that killed a combined 346 people. The 737 Max family has been grounded for nearly a year, with no return date yet. “This airplane is designed by clowns who in turn are supervised by monkeys,” read one email. Some messages detail problems with the development of Boeing’s 737 Max simulator and suggest the planes got FAA approval under false pretences. “I still haven’t been forgiven by God for the covering up I did last year,” one of the employees says in a 2018 email, apparently referring to interactions with the Federal Aviation Administration. Nick Note: this is going on in every major corporation in America. The big guys do as they please in every industry. Their is no regulation and the system is being abused. YES WE NEED REGULATION. No we do not need over regulation.!

“Would you put your family on a Max simulator trained aircraft? I wouldn’t,” one employee emailed a colleague. “No,” the co-worker responded.

Read: Pilots of the grounded 737 Max will get ‘sim training.’ Here’s what that means

“These newly-released emails are incredibly damning,” Rep. Peter DeFazio, D-Ore., said in a statement Thursday night. “They paint a deeply disturbing picture of the lengths Boeing was apparently willing to go to in order to evade scrutiny from regulators, flight crews, and the flying public.”

In a statement Thursday night, Boeing defended its simulators as “functioning effectively” and denounced the emails.

“These communications do not reflect the company we are and need to be, and they are completely unacceptable,” the Chicago-based company said. “We regret the content of these communications, and apologize to the FAA, Congress, our airline customers, and to the flying public for them. We have made significant changes as a company to enhance our safety processes, organizations, and culture.”

Boeing shares have fallen 4.6% over the past year, as the Dow Jones Industrial Average DJIA, -0.46%  , of which it is a component, has risen 20.6%.

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Pelosi signals Trump impeachment charges may go to Senate next week

WASHINGTON (Reuters) – The Democratic-led U.S. House of Representatives will send formal impeachment charges against President Donald Trump to the Senate as early as next week, House Speaker Nancy Pelosi said on Friday, setting the stage for his long-awaited trial. U.S. Speaker of the House Nancy Pelosi (D-CA) speaks ahead of a House vote on a War Powers Resolution amid the stalemate surrounding the impeachment of U.S. President Donald Trump, as she holds her weekly news conference at the U.S. Capitol in Washington, U.S., January 9, 2020. REUTERS/Tom Brenner Pelosi, the top Democrat in the House, has been engaged in a three-week cat-and-mouse game with Senate Majority Leader Mitch McConnell over the rules for Trump’s trial in the Republican-controlled Senate. Democrats have demanded it include new witness testimony and evidence about the Republican president’s pressuring of Ukraine to probe former Vice President Joe Biden, one of the Democrats running for the right to face Trump in the November election. McConnell effectively slammed the door shut on that idea this week when he said had enough Republican votes to start the trial without a commitment to hear from additional witnesses, including former Trump national security adviser John Bolton. Nick Note: A trial without witnesses….. What is amazing to me is the fact they can get away with this shit

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Iran to probe black boxes after missile blamed for plane crash

DUBAI (Reuters) – Tehran said on Friday it wanted to download black box recordings itself from a Ukrainian airliner crash that killed all 176 people aboard, amid Western suspicions the plane was brought down by an Iranian missile, probably by mistake. The crash has heightened international pressure on Iran after months of friction with the United States and tit-for-tat military strikes. Washington killed an Iranian general last week in Iraq, prompting Tehran to fire at U.S. targets. Iran, which denies the Boeing 737-800 (BA.N) was downed by a missile, showed the voice and flight data recorders on state TV on Friday but said it could take a month or two to extract data. Later in the day, the semi-official Fars news agency reported that on Saturday Iran would announce the reason for the crash, citing an informed source. The announcement will be made after a meeting of an Iranian commission focused on air accidents, Fars said, but it gave no further details.

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Oil producers locking in price gains from Middle East tension

NEW YORK (Bloomberg) – U.S. oil producers are taking advantage of the rally following the killing of a top Iranian general to lock in prices for more of their 2020 and 2021 output. The hedging may extend a lifeline to producers, allowing them to maintain higher output at a time when analysts are expecting growth to slow. That potentially undercuts calls for a slow winding down of the shale boom, driven by a combination of firms buckling under investor demands for capital discipline, lower forward prices and engineering issues.

Producers operating in some of the largest U.S. shale basins have added hedges since Friday, according to people familiar with the trades.

The firms used a combination of options strategies, including spreads and collars, to lock in the highest selling prices in months as oil pushed above $70 a barrel in London for the first time since September.

The 13 largest producers tracked by BloombergNEF had hedged an average of 13% of their 2020 output as of Sept. 30, analysts said in a note last month. Half of the 12 largest had no hedges in place. NN: That number by my estimation is now over 40%

The Energy Information Administration said in December that U.S. 2020 oil production will grow by 930,000 barrels a day this year, down from the 1 million barrels in its previous forecast. The average price for U.S. crude for all of 2020 closed above $60 a barrel on Friday, the highest level since May 2019. Many firms missed the September rally, as prices quickly came back down following a quick spike after unprecedented attacks on Saudi Arabia’s oil infrastructure. A number of large trades in the financial options market were booked on Friday, notably some average-price options in the form of three-way collars on the New York Mercantile Exchange for 2020 and 2021, according to data compiled by Bloomberg. Those strategies involve a producer buying put spreads — which offer protection against a drop in prices — while selling calls to offset the cost of the insurance. That will limit how much additional profit the producer can make if prices continue higher. It’s not just U.S. companies that have been using the recent price rally to increase their hedging levels, as those in the North Sea have also been active, traders said. Brent for 2020 has rallied toward $65 since the start of the year, enabling producers to potentially lock in the highest prices in almost eight months. Nick Note: I guess oil producers tithed enough to the TV preacher, , sacrificed virgins, booked good Karma,  the Haitian witch doctor and meditated at the Ashram. BECAUSE this is a life line. Mr Fracking banker asshole… Get in your (leased)  Beamer and head out to the fracking company office and offer him whiskey, lap dance coupons, loan extensions and have him hedge the shit out all his production for the next 2 years. And don’t forget to light a candle to the patron  saint of oil workers Honorius of Amiens.  Crude Light NY il under $50 here we come agan

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EU Chief Negotiator Barnier Warns UK of No-Deal Brexit’s Harmful Economic Consequences

https://youtu.be/gNj9gZ3M6bI

 

MOSCOW (Sputnik) – The economic consequences of a no-deal Brexit will be worse for the United Kingdom than the European Union, EU chief negotiator Michel Barnier said on Thursday after UK Prime Minister Boris Johnson has repeatedly rejected any proposals to extend the Brexit transition period beyond December 31. Barnier made the comments during an appearance at a seminar in the Swedish capital of Stockholm, one day after holding talks with UK Prime Minister Boris Johnson in London, alongside European Commission President Ursula von der Leyen. The EU negotiator stressed that securing a free-trade agreement with the UK was a priority for the European Union, but that the economic consequences of a no-deal Brexit will be worse for London.

“Yes, the UK represents 9 percent of all EU27 trade … but more significantly, the EU27 accounts for 43 percent of all UK exports and 50 percent of its imports. So, it is clear that if we fail to reach a deal, it will be more harmful to the UK than for the EU27, all the more so because EU member states can rely on each other or many other partners that the EU has free trade agreements with,” Barnier stated.

He added that any potential free trade agreement with the UK would be subject to no quotas, no tariffs, and no environmental dumping. Any trade deal would also require both parties to align on environmental standards and workers’ rights, Barnier added.

The threat of a no-deal Brexit has become more pronounced since the re-election of Johnson as prime minister on December 12. Johnson secured a comprehensive victory on the promise of finally securing a withdrawal agreement with the EU before the January 31 deadline and concluding a free trade agreement before the end of the transition period. The withdrawal agreement deadline has already been extended three times, but Johnson has rejected any further extensions.

“The UK made a choice to leave everything, with all the consequences. And they made the choice, if I correctly understood yesterday the prime minister, not to request any prolongation of the transition. So that is a choice, and we will respect the choice,” Barnier remarked.

Lawmakers await the result of the vote on The European Union (Withdrawal Agreement) Bill in the House of Commons in London, Friday Dec. 20, 2019. British lawmakers approved in principle Prime Minister Boris Johnson’s Brexit bill, clearing the way for the U.K. to leave the European Union next month. The House of Commons voted 358-234 on Friday for the Withdrawal Agreement Bill.
© AP Photo / House of Commons British MPs Discuss Johnson’s Brexit Deal as UK Prepares to Leave EU

On Wednesday, Johnson and top EU officials, including Barnier and von der Leyen, discussed the next steps in the Brexit withdrawal process. Johnson stated that he was looking forward to concluding a free trade agreement with the EU, while von der Leyen was cautious, and stressed that prioritizing a number of key areas, such as defence, would be necessary given the short time frame to conclude negotiations and Johnson’s unwillingness to extend the transition period.Johnson’s Brexit Withdrawal Agreement Bill passed its second reading in the House of Commons on December 20. Barnier added that the European Parliament would vote to ratify the legislation, which covers key issues such as the UK’s financial settlement with the EU and the issue of the Irish border, at the end of the month, just days before the withdrawal agreement’s deadline. Nick Note:  Their is no deal their will be no deal and the Pound will gets its ass kicked… Sooner or later  they will figure it out… and then the  fund begins in earnest

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Permian pipeline competition accelerates as capacity exceeds supply

Tubes running in the direction of the setting sun. Pipeline transportation is most common way of transporting goods such as Oil, natural gas or water on long distances.

NEW YORK (Bloomberg) – Five new oil pipelines are set to open in the Permian Basin through 2021, expanding a gap between production and takeaway capacity that’s already spurring midstream rate cuts and could mean cutthroat competition ahead.

Producers in the West Texas and New Mexico oilfield are pumping about 4.72 million barrels a day, according to Rystad Energy AS. That compares with nearly 6 million barrels of pipeline capacity that could rise by about 3.5 million barrels in the next two years as planned new conduits come online.

Most of those planned projects were announced when the Permian was posting annual growth rates in excess of 1 million barrels a day. Now, some analysts see yearly growth slowing to as little as 650,000 barrels a day, with older wells producing less and oil companies preparing to curb spending this year to boost investor returns.

Competition will heat up particularly among pipeline companies seeking to renew long-term shipper contracts that are set to expire, including those seeking to proceed with new pipeline projects, said Sandy Fielden, director of research for Morningstar Inc. “There is a chance that some of the projects would get canceled or consolidated and that would depend on shipper commitment.”

Adding to this, the difference between the price of crude on the coast compared with Midland in the Permian has plummeted in the last year, making it more difficult for shippers to make money after paying the pipeline fees.

Operators of legacy pipes in the oil patch already started cutting tariffs last year to retain or lure shippers to keep their systems fully loaded. In August, Energy Transfer Partners LP cut rates for users on portions of their Permian Express system, while Magellan Midstream LP issued incentive rates for large-volume shippers on its Bridgetex pipeline. Epic Pipeline Co LP halved its transportation rate prior to the line coming into service.

Oil producers are warning that they are preparing to curb spending this year to boost investor returns. “The Permian is definitely slowing down,” said Elisabeth Murphy, an analyst at ESAI Energy Llc. Declines from legacy wells are outstripping the new wells, and there aren’t enough rigs to offset the decline in the legacy wells, she said.

“New pipe start ups like Cactus II starting up and Epic in the summer have put us over the top on capacity,” said John Auers, executive vice president at energy consultant Turner Mason & Co. “Now, there is surplus capacity out of the Permian.”

For pipes still at proposal stage, it doesn’t help that the spread between Midland, Texas, and Houston which has access to export markets, has narrowed from over $10 a barrel a year ago to around $2.50. This would mean transportation costs from the Permian bound for the Gulf would have to be even cheaper, straining profit margins.

Ultimately, only projects initiated by companies with well-established infrastructure will stand a chance to succeed, said Fielden. Connectivity on their existing systems would be plus points that will usher their projects through to completion, he added.

Still, some companies are forging ahead with pipeline expansions because of industry support. Enterprise Products Partners LP plans to push ahead with adding nearly 1 million barrels a day of new connectivity from Midland, Texas, to its ECHO terminal in southeast Texas, ready in 2021, according to Tony Chovanec, senior vice president for fundamentals and commodity risk assessment.

“It’s no surprise to anyone that next year and probably for the next couple of years, it’s going to be highly competitive, which will create volatility in earnings,” Magellan Chief Executive Officer Mike Mears said on the company’s earnings call in October.

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Canadian crude weakness returns after Alberta eases output limits

CALGARY (Bloomberg) – Alberta’s loosening of crude-production limits has renewed risks of a price collapse similar to the one experienced in 2018. Oil sands benchmark Western Canadian Select is trading near the weakest discount to West Texas Intermediate in more than a month, data compiled by Bloomberg show. At the same time, the discount for Edmonton Mixed Sweet crude, a benchmark for Canada’s conventional producers and shale frackers, grew to the widest in more than a year.

Those differentials suggest that Canadian oil is at high risk of a “blowout,” according to a report by Credit Suisse analyst Manav Gupta.

Alberta’s government has loosened output limits imposed at the start of 2019 to counter a glut caused by a lack of pipeline capacity and too much oil production. Before the cuts, Western Canadian Select’s discount to WTI has grown as wide as $50 a barrel. With those limits winding down, production is on the rise, prompting oil-pipeline operator Enbridge Inc. to increase rationing on its heavy oil line in December and January. A temporary shutdown of a major export pipeline and a rail strike in November contributed to record-high inventories in Western Canadian that month, according to Genscape data. Should Western Canadian Select’s discount to WTI widen to more than $25 a barrel, the “Alberta government might be forced to step back in and raise the volumes on mandated cuts to control a bloating inventory situation,” Gupta said. A “wider WCS spread is a near-term tailwind.” Nick Note: The oil supplies keep rolling in…. We are having fun NOW!