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OPEC slashed oil output in January, pumping just above oil target



The biggest cuts by far came from top OPEC producer Saudi Arabia. The kingdom pumped about 10.2 million bpd in January, down 350,000 bpd from December and nearly 100,000 bpd below its official quota under the output cutting deal. The kingdom will continue to cut production, reducing output to about 9.8 million bpd in March, Saudi Energy Minister Khalid al-Falih told the Financial Times in an article published on Tuesday.

The next biggest cuts came from the United Arab Emirates and Kuwait, though UAE pumped slightly above its quota last month.

Altogether, most of the participating OPEC countries exceeded their quota during the first month of the deal, though some just barely pumped above target.

The biggest miss came from Iraq, which regularly surpassed its limit during OPEC’s last production cutting deal that ran from January 2017 through June 2018. OPEC’s No. 2 producer pumped nearly 4.7 million bpd last month, 157,000 bpd above its quota.

Nigeria, which was exempt from the last round of output curbs, overshot its cap by 107,000 in January. Figures provided directly from the country showed Nigeria pumped in line with its quota.

OPEC’s effort to throttle back supplies got a boost from production declines in Iran, Libya and Venezuela, the three member countries that are exempt during the current deal.

Iran’s production ticked slightly lower as the nation weathered its third month under U.S. energy sanctions. Libya’s output fell by 52,000 bpd as the country’s largest oilfield remained sidelined by a dispute with workers and armed protesters.

Venezuela’s production slipped by another 59,000 bpd in January, continuing its steady decline as the country remains gripped by political turmoil and economic crisis. The nation’s output is expected to fall even further after the Trump administration slapped sanctions on PDVSA, the state-owned oil company.

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London is still in the running to stage a Formula One race



Conversations are underway with Silverstone and talks are going in the right direction, according to the sources, but no announcement is expected anytime soon.

A report in the Financial Times this week said that Liberty Media was close to agreeing a deal, but there was still a debate over the amount payable to the U.S. company for race “promotion fees.” Liberty Media is demanding £18 million ($23.5 million) a year, while the BRDC has offered £15 million, according to the FT article.

Earlier this week the former F1 chief Bernie Ecclestone expressed his concern for the future of the brand, suggesting that if it was to survive for another 50 years it should embrace electric.

Ecclestone even went as far as to say rival racing company Formula E currently looks the better business proposition moving forward.

“There’s more chance there of big, big expansion and more chances commercially than there is of changing things in Formula One,” said Ecclestone to Reuters.

It appears this safeguarding is on the agenda for current F1 officials as well. Speaking in a feature for the FIA’s Auto magazine, Ross Brawn, F1’s managing director of motorsport, promised to continue the push to make the sport “even more spectacular.”

“This is an opportunity to trace out a new path for a sport that has few rivals, in terms of the spectacle it offers and its global reach,” he explained.

“We want to make Formula One ever more spectacular, with more unpredictable racing and endow it with sustainability, both financially and ecologically. We are all working together to achieve this and I am very optimistic, as we are starting from an incredibly solid base.”

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Chevron to buy Anadarko Petroleum in a $33 billion cash and stock deal



Chevron on Friday announced plans to acquire oil and gas exploration and production company Anadarko Petroleum in a cash and stock deal valued at $33 billion. The transaction will give the second biggest U.S. energy company a boost in shale oil production as well as natural gas.

Shares of Anadarko rose 31% in the premarket trading following the news. Chevron shares were down 4.2% from Thursday’s close of $125.99 a share.

Chevron’s deal values Anadarko at $65 per share, a 37% premium to its Thursday close. Based on Chevron’s closing price of $46.80 on April 11, Anadarko shareholders will receive 0.3869 shares of Chevron and $16.25 in cash for each Anadarko share. Chevron will assume $15 billion of Anadarko’s debt.

The deal represents the 11th biggest ever for an energy and power company, according to Refinitiv.

“This takes a great company and makes it even better,” Chevron’s Chairman and CEO Michael Wirth told CNBC’s “Squawk Box” immediately after the news broke. “As our company has strengthened its financial situation over recent years, we’re always looking to make our portfolio even stronger.”

Wirth sees $65 per share as a “fair price” for Anadarko. Wirth, who assumed his role in February 2018, expects the deal will allow Chevron to “win in any environment,” playing to the company’s strengths in shale, deep water and natural gas. He said the company expects the deal to create over $1 billion in synergies.

Chevron will have greatly expanded access to assets as a result of the combination. The deal comes as oil majors like Exxon Mobil look to carve out a dominant position in the Permian basin, the largest U.S. shale field and the driver of a boom in American oil production.

“They take their Permian position up a further level. They get West and East African reserves. They roll their Australian LNG development capability into Mozambique,” Mizuho Securities analyst Paul Sankey said in a note to investors. “And they take down Anadarko’s notoriously lavish Houston HQ.”

Chevron’s Permian production of oil, natural gas and associated liquids hit 16.2 billion barrels of oil equivalent (BOE) in 2018. Anadarko produces about 4 billion BOE from the Permian region, which underlies western Texas and eastern New Mexico. The companies say the tie-up creates a 75-mile wide corridor across the Delaware basin portion of the Permian. Stringing together continuous acreage allows companies to more efficiently carry out the advanced drilling methods needed to produce shale oil and gas. That is at the heart of Chevron’s Permian strategy. The company is bringing industrial scale to shale drilling, once the domain of small, independent wildcatters.

Anadarko also brings more access to deepwater drilling in the Gulf of Mexico, where the company “is already a leading producer,” Chevron said. Anadarko currently operates 10 facilities in the Gulf. Chevron sees opportunities for tie-backs to Anadarko assets in the Gulf, which involves connecting offshore fields to existing infrastructure. Drillers have increasingly turned to the low-cost strategy to avoid the massive expense of building multi-billion dollar deepwater platforms.

Chevron also touted Anadarko’s liquefied natural gas (LNG) production, as noted by Mizuho. Anadarko has a “world-class resource base in Mozambique,” Chevron said.

The deal, which is subject to shareholder and regulatory approval, is expected to close in the second half of 2019. If approved, Chevron said it plans to boost its annual share buyback program to $5 billion from $4 billion.

Chevron said it plans to divest $15 billion to $20 billion of assets between 2020 and 2022.

“This transaction will unlock significant value for shareholders, generating anticipated annual run-rate synergies of approximately $2 billion, and will be accretive to free cash flow and earnings one year after close,” Wirth said earlier in the company’s release.

Credit Suisse Securities is Chevron’s financial adviser, while Paul, Weiss, Rifkind, Wharton & Garrison is its legal adviser. Evercore and Goldman Sachs are financial advisers to Anadarko, while Wachtell, Lipton, Rosen & Katz and Vinson & Elkins LLP are its legal advisers.

Anadarko Petroleum stock has risen 6.8% this year, compared to a 17.6% increase in the S&P 500 Energy index over the same time.

Watch: Full interview with Chevron CEO on plan to acquire Anadarko Petroleum

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The IMF is worried about rising debt in the corporate sector



The level of debt and the lack of regulation in the corporate sector is a concern for the International Monetary Fund (IMF), one of its directors told CNBC.

These vulnerabilities could have a wide of range implications in the event of an economic shock, Tobias Adrian, director of the monetary and capital markets department at the IMF, said Thursday.

“We are particularly worried about the corporate sector, where leverage is rising, underwriting standards and some pockets of the corporate sector are deteriorating,” he told CNBC’s Joumanna Bercetche at the IMF’s Spring Meetings.

The Washington-based institute said in its latest Global Financial Stability report that vulnerabilities in the corporate sector are elevated in systemically important countries, which account for about 70% of global growth.

According to the Institute of International Finance (IIF), in the United States, non-financial corporate debt-to-GDP (gross domestic product) stood at 73% at the end of last year — close to its pre-crisis peak. Meanwhile in emerging markets, non-financial corporates were one of the top contributors to rising debt levels in the region last year.

Corporate debt has risen in the aftermath of the financial crisis, mainly for two reasons. Borrowing conditions have eased across the world and, at the same time, this type of debt has also provided investors with higher returns compared to government debt — which is perceived as being safer. The attractiveness of corporate debt has therefore made it easier for firms to get the money they want for investments, or in some cases buying back their own stock.

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