Oil companies are wooing skeptical investors with money. Will it work?
By Julia Horowitz, CNN Business
Wall Street is not convinced that the world’s largest oil companies can successfully reshuffle their businesses, as the the climate crisis is accelerating.
The industry’s response? To swing more money.
What’s happening: BP, which reported better than expected results on Tuesday, raised its dividend 4% to 5.46 cents per share and said it would repurchase $ 1.4 billion in shares over the course of of the next quarter. Its action jumped more than 5% in London at the start of the session.
Last week, rivals Chevron and Total also announced share buyback plans, while Shell raised its dividend and announced it would buy back $ 2 billion in shares by the end of the year. .
These sweeteners are made possible by the strong recovery in commodity prices, said Biraj Borkhataria, co-head of European energy research at RBC Capital Markets.
See here: Brent crude futures, the global benchmark for oil prices, were last trading above $ 73 a barrel. BP raised its Brent price forecast to 2030 on Tuesday, allowing it to increase the value of its assets by $ 3 billion after slashing them significantly last year.
“Oil price [are] up 12% quarter over quarter and industry profits are up 27%, so that just happened, ”Borkhataria said.
Whether this is enough to sell skeptical investors is another matter.
BP is touting the steps it has taken to make its business greener in line with the turnaround strategy announced by CEO Bernard Looney after taking the top job at the company last year.
The oil giant has grown its portfolio of holdings in solar power and offshore wind while undergoing major restructuring, triggering thousands of job cuts.
“What you see around the dividend is really a story of trust,” Looney said in a Bloomberg TV interview Tuesday. “Confidence in the underlying performance of the company [and] confidence in the balance sheet.
But Borkhataria said that while the plans are on track, it’s far too early to say if they will work. Even if BP can execute its strategy, it’s unclear whether oil and gas expertise will transfer to the increasingly crowded renewable energy world – and whether the company can stay ahead of tightening government regulations.
“It is very early to draw conclusions about the success or failure of BP in its transition,” he said.
Investor perspective: BP shares are up 20% this year, compared to a 10% rise for the FTSE 100. But they are still well below what they were heading for March 2020, indicating lingering concerns about its business even as the global economic recovery leads to a rebound in oil prices.
Tencent crackdown on screen time after criticism
Tencent has announced new limits on the time minors can spend playing the company’s online games, as investors fear China will extend its historic crackdown on the private sector to the gaming industry.
The latest: Fears were stoked on Tuesday after Economic Information Daily – an economic newspaper owned by Xinhua News Agency, China’s official news outlet – published a lengthy analysis criticizing the adverse effects of the game about kids, reports my CNN Business colleague Diksha Madhok.
“It turns out that ‘spiritual opium’ has grown into a multi-billion dollar industry,” the article read. “Insiders warn: beware of the harms of online gaming. “
The post, which has now been deleted without any explanation, mentioned Tencent’s popular video game “Honor of Kings” and stated that “industry insiders should be vigilant about the harmful effects of online gaming and that appropriate regulations should be adopted early on. “
Market fallout: Tencent shares fell more than 10% in Hong Kong on Tuesday, but recouped some of the losses to end the day down 6%.
Tencent said in a statement that it will now limit the ability of minors to play “Honor of Kings” to one hour on public holidays and two hours on public holidays. He also called for an industry-wide discussion on “the feasibility of banning elementary school students under 12 from playing games.”
Remember: The state media attack comes just a week after Chinese tech stocks suffered a sell-off that wiped out hundreds of billions of dollars in market value. Tencent alone lost more than $ 100 billion in 48 hours as investors worried about China’s growing campaign of pressure on the private sector.
Investors are nervous, but for good reason.
Why remote working is a big deal for the economy
Americans are returning to their pre-pandemic workplaces, but most offices are still largely empty. This greatly affects local economies.
Love it or hate it, commuting is good for economic growthwrites my CNN Business colleague Anneken Tappe. You pay train conductors’ salaries with your metro ticket. The office laundry and the local café all rely on workers who have been largely absent for nearly a year and a half.
In 2020, the number of people working from home nearly doubled, reaching 42% of the U.S. workforce, according to the U.S. Bureau of Labor Statistics. And while many workers prefer this setup, staying away is likely to delay the takeover of businesses adjacent to the offices.
Goldman Sachs economists estimate that office traffic in major US cities is only about a third of pre-pandemic levels. That’s a lot of people who don’t spend money on public transport or latte. In New York City – one of the hardest hit cities at the start of the epidemic – subway use is still not half of what it was before the pandemic.
Concerns about the Delta variant in the United States could make matters worse, with some companies like Google pushing back official return dates. What will this mean for suburban cities like New York? This is a live question.
Alibaba, Clorox, Corsair Gaming, Discovery, Marriott, Nikola and Under Armor publish their results before the US markets open. Activision Blizzard, Hyatt, Live Nation, Lyft and Match Group follow after closing.
Coming tomorrow: Toyota, CVS and Kraft Heinz profits.
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