SKY News Summary 07-18-08
BP, which saw its oil and gas production drop 2.8% last year, is buying 90,000 acres in Oklahoma of natural-gas leases, believed to contain two trillion cubic feet of gas, from Chesapeake Energy for $1.75 billion. The purchase is significant in that it follows the recent trend of oil companies investing in what used to be considered expensive oil-shale fields within politically stable countries, especially the U.S. Oil shale is coal-like rock that is abundant in the U.S. (they could yield triple the current proven reserves of Saudi Arabia), but needs to be heated to between 650 and 700 degrees Fahrenheit in order to melt into oil. The trend toward oil shale will accelerate if Congress lifts a moratorium on leasing government-owned land for oil-shale development as President Bush requested earlier this week when lifting the executive ban on offshore drilling, given that 80% of the known reserves exist under Federal land. Oil shale may be expensive to produce, but it carries less risk than other forms of oil. Each well is basically the same and costs of production actually decrease with time, compared to the rising costs of conventional wells overseas. The first major oil shale field was the Barnett Shale near Fort Worth, and is estimated to contain the equivalent of 9 billion barrels of oil.
Shell, Exxon, ConocoPhillips and Chevron all have either oil shale sites or other unconventional gas sites. Royal Dutch Shell partnered with EnCana to get a position in the Haynesville Shale in east Texas and Louisiana, which may hold five times the Barnett Shale field. In April, Exxon bought an interest in an unconventional gas field in Hungary. Three years ago, ConocoPhillips, a leader in unconventional oil production, purchased Burlington Resources for $35 billion.
As BP continues its strife with Russia on its joint venture called TNK-BP, and Exxon Mobil and ConocoPhillips are forced to relinquish their fields in Venezuela, unconventional oil fields, such as oil-shale within the United States will become increasingly attractive. Pennsylvania and Arkansas with their massive shale reserves may well be the focus of the next oil rush.
http://online.wsj.com/article_print/SB121632046936062689.html
http://online.wsj.com/article_print/SB121633718791563829.html
Americans may pay 30%-50% more to heat their homes this winter if they use natural gas. If they use oil, the increase will be more like 50%-100% more. It is expected that in New England, heating oil, electricity, and gasoline will cost $1,600 to $1,700 each month in the winter.
http://online.wsj.com/article_print/SB121633904671763931.html
Texas may become the first state to really embrace wind energy. Officials there approved a preliminary plan to spend billions of dollars on new transmission lines to carry electricity generated from wind turbines, boosting capacity to about 18,000 megawatts, compared to the 5,000 megawatts currently generated by wind.
Wall Street Journal’s U.S. Watch
Sources: Wall Street Journal, The Hartford Courant, and USA Today
SKY News Summary 07-15-08
Pepsi has a good presentation from the Deutsche Bank – Global Consumer & Food Retail Conference from last month.
http://library.corporate-ir.net/library/78/782/78265/items/298037/DB%20Paris%20presentation%20v[1].17Final.pdf
Chicago Bridge’s presentation from the JP Morgan 3rd Annual Basics & Industrials Conference is worth reviewing.
http://www.cbi.com/ir/presentations/documents/20080604JPMorgan3rdAnnual.pdf
UBS announced that Per Larsson, formerly head of Dubai’s stock exchange, will become the company’s CEO of Middle East and North Africa operations. He will be a great asset to the company in that region.
http://online.wsj.com/article/SB121609478446053855.html?mod=todays_us_money_and_investing
Boeing fared well at the Farnborough air show today. Arik Air will purchase the company’s 747-8, and Etihad Airways will purchase 35 787-9 Dreamliners and 10 777-300ERs. Etihad is based in Abu Dhabi and their order is valued at around $9.4 billion. Pat Shanahan, vice president and general manager of the 787 program points out that, “Often, when people think of the 787 what immediately comes to mind is a more composite airplane. But it’s not just that. It’s the whole process, from a brand-new design using a new suite of tools that burns 20 percent less fuel to bold innovations in technology to a more comfortable passenger cabin and flying experience.”. As of today, the plane has 896 orders from 58 customers. Last year, the company received orders for 259 787s.
http://www.boeing.com/news/releases/2008/q3/080715b_nr.html
http://www.boeing.com/news/releases/2008/q3/080714b_nr.html
http://www.boeing.com/news/releases/2008/q3/080715d_nr.html
Intel unveiled its new Centrino 2 chip for laptops that boosts processing speed, as well as the range of wireless, while running cooler than other chips.
http://www.intel.com/pressroom/archive/releases/20080715comp_sm.htm?iid=pr1_releasepri_20080715m_sm
Shell Canada offered to buy all the outstanding shares of Duvernay Oil Corp. for C$83 per share, or about C$5.9 billion (a 36% premium over the average share price of the past 30 days). Duvernay holds 450,000 acres in the Western Canadian Sedimentary Basin, which yield about 25,000 barrels of oil equivalent per day of mostly natural gas. According to the Wall Street Journal, “the acquisition of Duvernay, which produces “tight,” hard-to-extract gas in dense rock formations, would underline Shell’s focus on unconventional oil and gas. Shell is using state-of-the-art technology to squeeze crude out of Canada’s gooey tar sands and is producing tight gas in places such as South Texas and Pinedale, Wyoming.
http://www.shell.com/home/content/investor/news_and_library/press_releases/2008/duvernay_proposal_14072008.html
http://online.wsj.com/article/SB121604343453850851.html
Details of the new company, Anheuser-Busch InBev are coming to light. Mr. Busch will not have an executive position, but will be one of two Anheuser representatives on the new company’s Board of Directors. The company said it expects to cut about $1.5 billion in annual costs by 2010.
http://online.wsj.com/article/SB121608697120353241.html?mod=todays_us_marketplace
GE 2Q earnings call is available at the link below:
http://www-waa-akam.thomson-webcast.net/us/dispatching/?event_id=fb304d116e18f717e6f34fcae37c66a7&portal_id=c6c30454812c2ada94daffda39b7115d
Sources: The Wall Street Journal, USA Today, Chicago Bridge, Boeing, Intel, Shell, GE, Anheuser-Busch, and Pepsi web sites.
SKY News Summary 07-14-08
Dow Chemical will pay $15.3 billion for Rohm & Haas which produces high-tech, high-margin specialty chemicals for products such as paint and semiconductors. Berkshire Hathaway and the Kuwait Investment Authority are buying $3 billion and $1 billion (respectively) in convertible preferred securities, and Berkshire will end up being Dow’s largest shareholder.
http://online.wsj.com/article/SB121568954817042381.html?mod=todays_us_marketplace
The Wall Street Journal has an interesting article on why GE is a good buy right now. The author values the whole company at about $300 billion, well below the current market value.
http://online.wsj.com/article/SB121573584220044365.html?mod=todays_us_money_and_investing
Retail sales were stronger than expected for the month of June, with Wal-Mart accounting for about half of the overall increase in sales. Wal-Mart enjoyed a 5.8% increase in same-store sales, in part because of tax rebate check spending.
USA Today “Retailers manage stronger-than-expected sales in June”
Yesterday, the Treasury Department and the Federal Reserve outlined a plan to help Fannie Mae and Freddie Mac. The plan comes in three parts: 1) The Treasury would take an ownership position in the companies if it was needed. 2) Their line of credit at the Treasury would increase from its existing $2.25 billion. 3) The Federal Reserve would help set the capital requirements and other benchmarks. This plan requires Congressional approval. Both companies saw their stock drop by nearly 50% last week. It is hoped that the plan will support interest in today’s $3 billion debt auction of Freddie’s three- and six-month notes.
http://online.wsj.com/article/SB121597057216549037.html?mod=todays_us_page_one
Anheuser-Busch agreed to an acquisition proposal by InBev for about $52 billion, or $70 per share. This is up from the original $65-a-share proposal. Anheuser’s shares have traded between $45 and $50 a share for about five years. The new, global, company will have sales of about $36 billion and about 300 brands.
http://online.wsj.com/article/SB121598077288249131.html?mod=todays_us_marketplace
Sources: Wall Street Journal, The Hartford Courant, and USA Today
SKY News Summary 07-10-08
In a little-noticed move, the dollar is up 6% against the British pound and the Japanese yen since last November.
http://www.usatoday.com/money/economy/2008-07-09-dollar_N.htm
The Pentagon announced that it had taken the advice of the U.S. Government Accountability Office and will rebid the contract to make 179 Air Force tankers. Boeing will get a second chance to bid on the contract, worth $35 billion. Defense Secretary Robert Gates hopes the contract will be awarded by December.
http://www.usatoday.com/money/industries/technology/2008-07-09-tanker-rebid_N.htm
Gas consumption for the fourth of July dropped 3.3% from the prior year, and was the least spent on the fourth of July since 2003. Diesel consumption, on the other hand, continues to be strong, up almost 6% from last year.
http://online.wsj.com/article_print/SB121564732244940919.html
The Wall Street Journal had a great editorial on the repercussions of a Fannie Mae/Freddie Mac failure. It points out that, together, they have a $5 trillion liability, compared to the total U.S. GDP of $14 trillion. Putting that kind of liability on the U.S. balance sheet would influence how much and at what rates the government could borrow.
http://online.wsj.com/article/SB121565255349741343.html?mod=opinion_main_review_and_outlooks
Merck, Lilly, Pfizer and a venture-capital firm called PureTech Ventures, have teamed up to form Enlight Biosciences. The new entity is charged with developing technologies to discover new drugs. According to Steven Paul, an EVP at Lilly, “70% of industry trials fail at the Phase II stage, the level just before final human trials… and that’s where these technologies come into play.”
http://online.wsj.com/article_print/SB121565639890841655.html
American Express gave a good presentation at the Keefe, Bruyette & Woods 2008 Diversified Financials Conference and June 4, 2008. The first link is the slide show; the second is the talking points.
http://media.corporate-ir.net/media_files/irol/64/64467/KBWFinal.pdf
http://media.corporate-ir.net/media_files/irol/64/64467/TalkingPoints.pdf
Finance firms plan to increase spending on information technology in the next year according to a survey of 200 IT executives by IBM. The Wall Street Journal reported that the survey showed, “that 21% of those questioned were planning to increase IT spending by up to 10% this year, and 18% saw increases of more than 10%…For 2009, 41% predicted budgets would increase….”
http://online.wsj.com/article_print/SB121565780653541815.html
Lilly has a really enlightening presentation about the “the biomedical revolution”.
http://www.lilly.com/news/speeches/060908_speech_st_biomedical.html
Applied Materials announced a new product, a factory automation software package for photovoltaic solar cell manufacturing, that can boost productivity by 30% and shorten the production cycle.
http://www.appliedmaterials.com/news/pr2007.html?menuID=6
Lilly acquired SGX, a biotechnology company based in San Diego, for about $64 million. The company is focused on drug discovery and development in the area of oncology.
http://newsroom.lilly.com/ReleaseDetail.cfm?ReleaseID=320348&print=yes
The featured company of the day is Emerson.
Emerson’s 2007 Annual report
http://www.emerson.com/en-US/EmersonDocuments/Annual%20Reports/pdf/Current/o_EmersonAR07_complete.pdf
2nd quarter conference call
http://www.emerson.com/en-US/EmersonDocuments/Quarterly%20Earnings%20Presentations/FINAL%20Rev%205%20Q208%20%20Conf%20Call%20Presentation.pdf
Institutional Investor magazine has named David N. Farr, chairman, CEO and president of Emerson (NYSE: EMR), one of “The Best CEOs in America.” Farr was named the top CEO in the electrical equipment and multi-industry category.
http://www.emerson.com/en-US/news_center/news_releases/Pages/Corporate_News7.aspx
Business Week explains the matrix the company uses to spur innovation.
http://www.businessweek.com/magazine/content/08_24/b4088046119515.htm?chan=search
Sources: The Wall Street Journal, USA Today, Business Week, and Emerson, Lilly, Applied Materials, and American Express web sites.
SKY News Summary 07-08-08
ConocoPhillips and Abu Dhabi National Oil Company plan to jointly develop the Shah Gas Field in Abu Dhabi. The field requires special techniques as the gas is high in sulfur content, and will require construction of a natural gas processing plant in Shah.
http://www.conocophillips.com/newsroom/news_releases/2008news/07-08-2008a…
Today, T. Boone Pickens launched his campaign to reduce U.S. dependence on foreign oil by focusing on wind energy and natural gas-powered cars and trucks. ExxonMobil joint ventures in Qatar over the next two years will make the company the market leader in liquefied natural gas. This market dominance was made possible by a technological advance that gives Exxon an 80% increase in LNG ship cargo capacity.
http://www.businesswire.com/portal/site/exxonmobil/index.jsp?ndmViewId=news_view&ndmConfigId=1001106&newsId=20080701005909&newsLang=en
Here are two presentations worth viewing: First, the Johnson and Johnson presentation at the Goldman Sachs 2008 Healthcare Conference,
http://files.shareholder.com/downloads/JNJ/280474799×0x206095/229c734a-8b19-4d10-b4fa-8feb762f8c6b/ChrisPoonGoldmanJune2008_WEBfinalNONOTES.pdf
And second, Shell’s presentation at the UBS Energy Conference, entitled Leadership in integrated gas.
http://www.shell.com/static/investor/downloads/presentations/2008/chadwick_ubs_june2008.pdf
Shell announced that it has begun injection of salt water into its Ursa and Princess oil fields in the Gulf of Mexico to extend the life of the wells by ten years and increase production by 30,000 barrels of oil per day. The injection of salt water displaces the oil and physically sweeps the displaced oil into adjacent wells.
http://www.shell.com/home/content/investor/news_and_library/press_releases/2008/waterflood_ursa_princess_07072008.html
Praxair China will supply liquid nitrogen and a nitrogen cooling system to the Jiangsu Defeng Pharmaceutical and Chemical Company. The system uses heat exchange from nitrogen and does not use CFCs or other ozone-depleting substances found in mechanical refrigeration processes.
http://www.praxair.com/praxair.nsf/AllContent/4BAFBA9AA0121DC08525747F0068FF30?OpenDocument
Texas Instruments introduced a great enhancement to cell phones and personal navigation devices that can be hard to hear. The company’s new Class-D amplifier prevents distortion at higher volumes.
http://focus.ti.com/pr/docs/preldetail.tsp?sectionId=594&prelId=sc08057
UBS expanded its Middle East operations, setting up operations in Saudi Arabia, applying for a license to operate in Qatar, and adding investment banking personnel in its existing Middle East operations.
http://www.ubs.com/1/e/investors/releases?newsId=145019
Sources: The Wall Street Journal, USA Today, ConocoPhillips website, Shell website, J&J website, Praxair website, TI website, and UBS website
SKY News Summary 07-03-08
U.S. Commerce Secretary and former CEO of Kellogg, Carlos Gutierrez said, in an interview with the Financial Times, that he feels the U.S. economy is in better shape than was previously thought, and that it “remains on a positive growth trajectory.” Consumption grew in the first quarter, at an annualized rate of 1.1% and core inflation (excluding food and oil) grew at an annualized rate of 2.3%. “I find it very interesting and very impressive that the economy grew 1% in spite of all the dire predictions we had at the time.”
http://www.ft.com/cms/s/0/84b6d766-43b9-11dd-842e-0000779fd2ac.html?nclick_check=1
The National Association of Realtors announced a 2% increase in existing home sales in May, and a 6.3% increase in pending home sales. In this week’s Case-Shiller report, 13 out of 20 cities showed record annual home price drops, while 8 cities, including Boston, Chicago and Cleveland, actually reported annual home price increases.
http://www.ft.com/cms/s/0/1aa3ad90-43aa-11dd-842e-0000779fd2ac.html
The Labor Department announced that the unemployment rate remained at 5.5% in June, the same as May, and average hourly earnings were up six cents to $18.01, or 3.4% from the year before. The Institute for Supply Management said its index of services fell from 51.7 in May to 48.2 in June. A reading of above 50 indicates growth in the service sector.
http://online.wsj.com/article_print/SB121508581485825997.html
For those of us who occasionally switch between Mac and Windows here is an invaluable article explaining the differences in functions.
http://online.wsj.com/article/SB121504459642924941.html?mod=todays_us_personal_journal
According to an article in USA Today, the S&P 500 has turned $10,000 into $72,793 in the past 20 years, vs. $23,714 for T-bills.
http://www.usatoday.com/money/markets/2008-07-02-long-term-investing_N.htm
Sources: Bureau of Economic Analysis, The Wall Street Journal, USA Today, Hartford Courant, Financial Times
SKY News Summary 07-01-08
Halliburton has acquired the rest of WellDynamics (49%) from Shell Technology Ventures (see SKY News Summary 06-19-08). As we wrote in our April 8th blog, Halliburton and WellDynamics were awarded nearly $900 million in contracts from StatoilHydro for projects on the Norwegian continental shelf.
http://www.halliburton.com/default/main/halliburton/eng/news/source_files/news.jsp?newsurl=/default/main/halliburton/eng/news/source_files/press_release/2008/corpnws_070108.html
HP announced that the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 relating to HP’s proposed acquisition of Electronic Data Systems Corporation has expired. Since there has been no request for additional information by the U.S. Department of Justice or the Federal Trade Commission, HP can proceed with its acquisition. The company must win EDS stockholder approval and regulatory approval from the European Commission.
http://www.hp.com/hpinfo/newsroom/press/2008/080630a.html
ExxonMobil is starting more new liquid natural gas projects than any other international company with the help of Qatar. ExxonMobil, Qatar Terminal Limited and Edison are involved in the first offshore gravity-based re-gasification terminal, called the Adriatic LNG terminal, which will be placed off the Italian coast in August.
http://www.businesswire.com/portal/site/exxonmobil/index.jsp?ndmViewId=news_view&ndmConfigId=1001106&newsId=20080701005909&newsLang=en
Chicago Bridge was awarded a $90 million contract to engineer, procure and fabricate a hydrogen plant in California. The plant will use CBI’s box furnace technology and will be completed in 2010.
http://www.cbi.com/ir/release.aspx?releaseid=319010
Shell opened the first public gas station selling hydrogen on the West Coast. The company has a similar station in Washington D.C. According to the Shell web site, “hydrogen produced at the Shell station will be done on-site by the electrolysis of water using ‘green electricity’ purchased from the Los Angeles City Department of Water & Power. It will then be compressed and stored to provide daily fueling.” The Air Resources Board plans to fund the opening of three more hydrogen fueling stations at a cost of $7.7 million.
http://www.shell.com/home/content/media/news_and_library/press_releases/2008/la_hydrogen_station_26062008.html
http://www.courant.com/news/nationworld/nation/wire/sns-ap-hydrogen-station,0,5363053.story
ConocoPhillips is collaborating with Colorado Center for Biorefining and Biofuels (CCBB or C2B2) to develop new ways to convert biomass into fuel. C2B2 is comprised of Colorado State, University of Colorado, the National Renewable Energy Laboratory, and the Colorado School of Mines. The first project will be to convert algae into fuel. Conoco Phillips will build a technology research facility to support their efforts in Louisville, Colorado.
http://www.conocophillips.com/newsroom/news_releases/2008news/07-01-2008.htm
Sources: The Wall Street Journal, USA Today, Hartford Courant, Conoco Phillips web site, Shell web site, Chicago Bridge web site, HP web site, Halliburton web site, and ExxonMobil web site.