Will falling oil prices curb America’s shale boom?
This time some of the pain will be taken by the big integrated energy firms, such as Exxon Mobil and Shell. After a decade of throwing shareholders’ cash at prospects in the Arctic and deep tropical waters to little effect, they began cutting budgets in 2013.
Extracts from an article published by The Economist on 6 December 2014
In a bind
Abundant oil and gas have been extracted from underground rocks by blasting them with a mixture of water, chemicals and sand—“fracking”, in the jargon.
…the firms responsible embody an all-American formula of maverick engineers, bold entrepreneurs and risk-hungry capital markets that no country can match.
Yet now that oil prices have fallen by almost 40% in six months, these firms’ mettle is being tested. Across America shale-shocked executives will spend Christmas overhauling their strategies to cope with life at $70 per barrel, even as investors dump their firms’ shares and bonds.
Oil-price slumps usually lead to cuts in energy firms’ investments. Production eventually falls, helping prices to stabilise. In 1999, after the Asian crisis, global investment in oil and gas production dropped by 20%. A decade later, after the financial crisis, investment fell by 10%, then recovered.
This time some of the pain will be taken by the big integrated energy firms, such as Exxon Mobil and Shell. After a decade of throwing shareholders’ cash at prospects in the Arctic and deep tropical waters to little effect, they began cutting budgets in 2013. Long-term projects equivalent to about 3% of global output have been deferred or cancelled, says Oswald Clint of Sanford C. Bernstein, a research firm. Most “majors” assume an oil price of $80 when making plans, so deeper cuts are likely.
And if and when prices recover, new wells can be brought on stream in weeks, not years. America’s capital markets will roar back into life, forgiving all previous sins. “There is always a new set of investors,” says the boss of a one of the world’s biggest natural-resources firms. He predicts a shale crash—and a rapid rebound.
SEE ALSO Cheikhs v shale
Church of England investors file shareholder resolutions at BP and Shell
The Church Commissioners and Church of England Pensions Board have announced this week that they are in the process of co-filing shareholder resolutions on climate change at the AGMs of two of world’s biggest oil and gas companies – BP and Shell.
Church investors file shareholder resolutions at BP and Shell
By Edward Mason, Church Commissioners Head of Responsible Investment
The Church Commissioners and Church of England Pensions Board have announced this week that they are in the process of co-filing shareholder resolutions on climate change at the AGMs of two of world’s biggest oil and gas companies – BP and Shell. This is one of the ways in which the Church of England’s national investing bodies are deepening and strengthening their engagement with the businesses in which they invest on the ethical issues that are of the greatest importance to the Church.
It is clear from the latest assessment report of the Intergovernmental Panel on Climate Change (IPCC), released this year, that the world is on a path towards dangerous climate change. It is imperative that over the decades ahead we make the transition to a low carbon economy.
As shareholders Church investors have a vital opportunity to influence the strategy on climate change of the companies whose shares we own. That’s why the largest members of the Church Investors Group – whose members have investments of £15 billion – helped to establish a major new investor initiative to engage on climate change with the 10 largest extractives and utilities companies listed on the London Stock Exchange. Every year the performance of global companies on climate change is rated by an NGO we support, CDP (www.cdp.net). CDP’s highest rating is an A rating. We call our initiative ‘Aiming for A’ because we want to see all ten of these companies achieve CDP A ratings. The initiative is led by CCLA Investment Management, the specialist church and charity fund managers who manage over £1.5bn of Church of England money in the CBF Church of England funds. The investor coalition also includes the £150bn Local Authority Pension Fund Forum (LAPFF) and Rathbone Greenbank, the ethical fund manager.
The intiative has already had a significant impact on the performance of the 10 companies on climate change. When we started engaging in 2012 only one of the companies was rated A. Five were rated B, four C and one E (there were 11 companies then, but two of them have since merged). Now all of the 10 companies with whom we are engaging have A or B ratings.
We have chosen to file shareholder resolutions at BP and Shell because they have the biggest carbon footprints of all the companies listed on the London Stock Exchange, and they are yet to achieve A ratings (they are both rated B). Of course oil and gas companies have a particular responsibility because the fuels they produce contribute to climate change when they are burned.
The shareholder resolutions are intended to challenge the companies to run their businesses so that they participate constructively in the transition to a low carbon economy. The resolutions are supportive, but stretching. The idea is to give all of the shareholders of both companies the opportunity to signal that, like us, they want to see BP an Shell adapt their businesses over the long term for a low carbon economy. We want the companies to be sustainably profitable. We hope that a large proportion of other shareholders will agree when it comes to the vote at the BP and Shell AGMs next spring.
Edward Mason, Church Commissioners Head of Responsible Investment
BP: April 2015 AGM
Special resolution – strategic resilience for 2035 and beyond
That in order to address our interest in the longer term success of the Company, given the recognised risks and opportunities associated with climate change, we as shareholders of the Company direct that routine annual reporting from 2016 includes further information about: ongoing operational emissions management; asset portfolio resilience to the International Energy Agency’s (IEA’s) scenarios; low-carbon energy research and development (R&D) and investment strategies; relevant strategic key performance indicators (KPIs) and executive incentives; and public policy positions relating to climate change. This additional ongoing annual reporting could build on the disclosures already made to CDP (formerly the Carbon Disclosure Project) and/or those already made within the Company’s Energy Outlook, Sustainability Review and Annual Report.
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Church of England challenges BP and Shell over global warming (THE GUARDIAN)
Extract
The Church of England has challenged BP and Shell, two of the world’s biggest oil companies, to take responsibility for their carbon footprints and limit their contribution to global warming.
Church challenges Shell and BP over climate change(THE FINANCIAL TIMES)
The Church of England has waded in to the debate over climate change by urging Royal Dutch Shell and BP to cut their carbon emissions and invest more in renewables, the first time it has attempted to use its position as an investor as a “force for good”.
Shell settles Californian environmental contamination lawsuit for $91 million
Shell’s settlement with 1,491 residents will be a total of $90 million
From The Daily Breeze
City officials have announced final settlement agreements involving Shell Oil Co., the city, and hundreds of current and former residents of the Carousel neighborhood in the city’s southern end over a contamination lawsuit stemming from a former oil tank farm at the site.
The details of the two separate settlements between Shell and the city, and Shell and residents, weren’t disclosed during Tuesday night’s City Council meeting. But Shell’s settlement with 1,491 residents will be a total of $90 million divided with attorneys and disbursed by a mediator based on health and property damage claims, according to documents obtained by the Daily Breeze.
The neighborhood was developed from a tank farm into a residential community in the 1960s. Widespread petroleum contamination was found beneath hundreds of the homes in 2008 and an environmental investigation began. Shell is now finalizing a plan to remove the contaminated soil.
— Sandy Mazza
The TRUTH will set you FREE.
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