Monday, August 9, 2021
Friday, August 6, 2021
Glencore to return $2.8bn to shareholders in 2021
Glencore’s Mutanda operation in the Democratic Republic of Congo. (Credit: Glencore)
Glencore will return $2.8 billion to shareholders in 2021 after soaring commodity prices helped the mining and trading company to a record performance for the first six months of the year, it said on Thursday.
The London-listed company joins rivals Rio Tinto and Anglo American in declaring bonanza payouts after record half-year profits buoyed by a rebound in demand for commodities.
Provided commodity prices hold up and net debt stays in check, Glencore could increase payouts further, chief financial officer Steven Kalmin said.
“We wouldn’t leverage the business further to pay distributions but we are happy to move towards 100% payout ratio given where the balance sheet is,” Kalmin told reporters on a call.
Glencore cut debt to $10.6 billion from $15.8 billion at the end of 2020.
This was within its target range of $10-$16 billion, which the miner said it would need to reach before increasing dividends and in February, it recommended a total payout of $1.6 billion. It will now add a further $1.2 billion.
Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) rose 79% to a record $8.7 billion in the six months to June, compared with $4.8 billion a year earlier, broadly in line with analysts’ consensus.
The results surpass a previous high in 2018, when Glencore was again buoyed by a strong commodity rally.
Glencore’s trading or marketing division, which sets it apart from the other big diversified miners, cashed in on volatility in the market and recorded a EBIT of $1.8 billion in the period. The division is expected to hit the top end of its guidance of $2.2-$3.2 billion per annum.
Tight supply
Prone to boom and bust, the mining sector is still recovering from a period of cost-cutting that halted exploration projects and acquisitions and has raised the risk of supply shortfalls as demand increases with economic recovery.
Nagle told analysts in a call the company favoured expanding existing projects over greenfield projects or acquisitions.
Glencore shares shed 1.2% by 1105 GMT, but still outperformed most of its peers that tracked wider stocks lower.
Analysts at Citi said the strong results “set the stage” for a bigger buyback at the year-end and that Glencore’s commodity mix was weighted towards the metals, such as cobalt and copper, needed for the transition to electric vehicles and other low emission technology.
But investors focused on ESG (environmental, social and governance) factors have pressed for changes at mining companies.
Glencore in June bought the stakes it didn’t already own in its Colombia thermal coal mine from partners BHP plc and Anglo American, boosting its coal assets when others are looking to exit the sector. The deal should complete in the first half of 2022.
It has pledged to reach net-zero carbon emissions by 2050 as its output of fossil fuels declines over time and it says it is taking steps to reduce emissions.
Glencore said legal costs, including its own investigations, rose to $216 million during the first half from $56 million in the same year-ago period, having “provided for one specific narrow aspect of these investigations”. It did not provide further explanation.
The U.S. Department of Justice is scrutinising Glencore over alleged corruption in dealings in the Democratic Republic of Congo, Venezuela and Nigeria.
Any settlement would remove an important risk factor from Glencore’s stock, which is still well below its flotation price, analysts said.
(By Clara Denina and Zandi Shabalala; Editing by David Goodman and Barbara Lewis)
Thursday, August 5, 2021
BlackRock joins Citi to study plan to shut coal plants early
Coal mining in East Kutai, East Kalimantan. Credit: Wikimedia Commons
BlackRock Inc. and other major financial institutions are working on plans to accelerate the closure of coal-fired power plants in Asia in a bid to phase out the use of the worst man-made contributors to climate change.
ADB couldn’t immediately confirm the identities of the proposed partners. Representatives for Citi and BlackRock declined to comment. HSBC didn’t immediately respond to emailed requests for comment.
Even as governments set out goals to reduce greenhouse gas emissions, coal remains a principal source of energy for many countries in Asia, with China and India accounting for two-thirds of global demand. Consumption in key markets is forecast to increase for the next few years and coal-fired electricity generation could hit a record in 2022, according to the International Energy Agency.
By acquiring and running the power plants at a lower cost of capital than is currently available to commercial operators, ADB and partners would be able to generate similar returns over a shorter period, facilitating the early closures of the assets, Reuters reported.
Funding for the ADB plan is expected to come from both public and private institutions, although targets have not been set, said Ahmed M Saeed, the lender’s vice president for East Asia, Southeast Asia and the Pacific.
ADB is currently in discussions with governments in Vietnam, Indonesia and the Philippines on the proposal, and may see a pilot acquisition that is “big enough to matter” next year, Saeed said. ADB plans to start raising funds at the COP26 climate conference in November.
For the plan to be successful, it will need countries to commit to not replace eliminated coal use with other fossil fuels, said Saeed. The timeframe of 15 years will allow for sufficient planning, and will help to avoid consequences such as poor regions suddenly losing access to heating, he said.
Earlier this year, Citi met with large institutional investors in London to pitch a vehicle intended to acquire coal mines and shutter them before 2045.
(By Krystal Chia, with assistance from Nabila Ahmed, David Stringer and Alaric Nightingale)
Wednesday, August 4, 2021
Iran opens oil export terminal beyond Strait of Hormuz
https://www.tankeroperator.com/ViewNews.aspx?NewsID=12521
Iran has just launched a new export terminal in Jask, Hormuzgan Province, south of Iran, which can receive up to 1 mbd of crude oil from a massive pipeline from Goreh, Bushehr Province.
The terminal is built to allow Iran export its crude oil beyond Strait of Hormuz. The project has been officially inaugurated by a direct order from Iranian President Hassan Rouhani via videoconference on Thursday, July 22, 2021.
Implementation of Goreh-Jask crude oil transfer project took place with
about $2 billion investment with the aim of creating a daily export
capacity of 1 million barrels of crude oil through the new Jask
terminal, ensuring continued oil exports, decentralization of export
terminals and diversification of oil export centers, sustainable
development and job creation on the shores of Makran, where a capacity
of 300,000 barrels of oil (per day) has been provided so far, and this
capacity will gradually increase to one million barrels in the near
future.
The share of more than 90% of domestic manufacturing and maximum use of
the power of Iranian contractors and builders is one of the most
important features of this national plan; 250 contractors and domestic
manufacturers have participated in the project’s implementation and by
relying on domestic capabilities, the equipment and goods required for
the project were manufactured domestically for the first time in the
country. The items include slabs, sheets and pipes suitable for sour
fluid, raw materials for FBE pipe coating, giant 2.7 MW BB3 pumps,
42-inch class-900 motor valves and all-Iranian control systems.
Another notable feature that stands out in this national plan is the
construction and commissioning of about 1,000 kilometers of crude oil
transmission pipeline in less than 2 years, with full reliance on
domestic capabilities.
To reach its current stage, this project has created 5,000 direct and
15,000 indirect jobs. Once fully operational, the project will pave the
ground for construction of refining and petrochemical facilities in the
Makran region, heralding a prosperous and thriving future for the
region.
Tuesday, August 3, 2021
Iraq Wants Other U.S. Oil Company To Replace Exxon
Iraq wants another U.S. company to replace Exxon as a shareholder in the West Qurna 1 field, one of the country’s largest after the supermajor leaves the country.
“Exxon Mobil is considering exiting Iraq for reasons that are to do with its internal management practices, decisions, and not because of the particular situation in Iraq,” Prime Minister Mustafa al-Kadhimi told media after a meeting with President Joe Biden, as quoted by Reuters.
Exxon, which holds a $32.7-percent interest in West Qurna 1, has been looking for a buyer with plans to exit the country entirely. The stake was valued last year at up to $500 million. At the time, reports said two Chinese companies were interested in acquiring it, state-owned CNPC and CNOOC.
The plans for the stake sale appear to have been prompted by the impact the pandemic had on Exxon’s finances as it sought to keep its dividend intact and reduce debt. Later reports said that Iraq could end up buying the West Qurna 1 stake itself.
There could be other reasons for Exxon leaving Iraq, too. As Gerald Jansen wrote for Oilprice earlier this month, these have to do with the souring relationship between the company and Baghdad after Exxon ventured into Kurdistan oil, and with the continued political and financial instability in Iraq. This, according to Jansen, may have compromised the profitability of whatever plans Exxon may have had for its Iraqi business earlier.
Just two years ago, Exxon was all set to take part in a $53-billion plan to boost Iraq’s oil production, but it seems the pandemic and the Iraqi situation changed many things, including this ambitious plan.
“When Exxon Mobil departs, we will not accept its replacement to be
other than another American company,” Prime Minister Kadhimi told media
this week, but an American company has yet to express interest in
acquiring Exxon’s holdings in Iraq.