ALO FP
Norway postpones new oil and gas exploration licences until 2025
Domestic budget deal goes against Oslo’s promises to help Europe through energy crisis
Norway is postponing its next round of new oil and gas exploration licences by a further three years as part of a domestic political deal that cuts across its promises to do all it can to help Europe with its energy crisis.
The so-called 26th licencing round for new oil and gasfields, originally scheduled for this year, had already been delayed but will now not take place for the entire parliamentary period, which ends in September 2025, as part of a deal the centre-left Norwegian government struck with a leftwing party to pass its budget.
Norway is increasingly pushing itself as a reliable and democratic supplier to Europe. The country has displaced Russia as Europe’s biggest supplier of gas since Moscow’s full-scale invasion of Ukraine in February and is also western Europe’s biggest oil producer. But the deal struck on Tuesday goes against that rhetoric.
The Scandinavian country will still hand out licences in existing areas, which often allow oil and gas companies to expand production relatively quickly. But the 26th licencing round would be for new unexplored areas, many in the Arctic, which offer the same companies a higher-risk approach but with the prospects of bigger potential discoveries.
Oil minister Terje Aasland sought to play down the importance of the deal between the minority government and its Socialist Left (SV) support party, calling it “no drama”. Prime minister Jonas Gahr Støre said both the government and SV supported a “high and stable” level of activity in Norway’s petroleum industry.
But business and opposition politicians disagreed. Terje Halleland, energy spokesperson for the populist rightwing Progress party, said: “Tonight they will celebrate in Moscow. Putin’s regime is the only one served by the government and SV now restricting oil and gas exploration.”
He added: “The government cannot possibly have learnt anything at all for the serious security situation we are facing as a result of the energy policies pursued in Europe.”
Ståle Kyllingstad, chair of the Federation of Norwegian Industries, decried the move as “very, very sad”, adding: “It’s very worrying that the government is kowtowing to SV. The world and Europe needs energy, and we have to explore for more.”
The news came on the same day that Norwegian police decided it no longer needed the military to help it guard oil and gas installations. Armed forces from Norway and its Nato allies will continue to patrol offshore oil rigs as part of an effort to reassure the public, workers and European policymakers after the sabotage of the Nord Stream gas pipeline in September in international waters just outside Denmark and Sweden.
Norway has also been unnerved by a number of sightings of drones near to oil and gas installations. It is prosecuting several Russian citizens for flying recreational drones in different parts of the country, although not near such installations.
Juventus: the peril of soaring ambitions and shallow pockets
The Italian football club’s finances look ropey even without disputed accounting
Football is great fun for star players and fans. Perhaps less so for investors in the sport. Given a flurry of high-profile deals in the sector, Juventus’s troubles provide a timely reminder.
The board of the Italian football club — majority owned by Exor, the Agnelli family’s listed vehicle — has resigned after an investigation into its accounting for players’ salaries and transfers. That, combined with financial losses, have reduced the market value to €700mn, down 35 per cent in the past year.
The investigation is still at a preliminary stage. Prosecutors allege that Juventus swapped players with other clubs at inflated values, producing fat capital gains with little or no money changing hands. Juventus is also alleged to have agreed to pay players back for most of their pandemic-related salary reductions without accounting for this to regulators’ satisfaction.
The club denies wrongdoing and has said it will amend accounts for 2022.
Juventus’s finances look ropey even without disputed accounting. The club has lost money in each of the past five years, for a total of €612mn. It has raised €700mn of fresh equity since 2019. This reflects the vicious spending cycle many European football clubs find themselves in.
To perform well, clubs must wrest star players from wealthy rivals. Juventus, for instance, acquired Cristiano Ronaldo from Real Madrid for a transfer fee of €100mn in 2018, paying him tens of millions annually on top.
Revenues, meanwhile reflect the popularity of the team’s home league. Italy’s Serie A teams make less than half the revenues of the Premier League, according to Deloitte. Worse, these Italian clubs, where Deloitte reckons players take home more than 80 per cent of the revenues, have collectively lost money in eight of the past 10 years.
This begs the question of whether public markets are the best home for football assets. Exor minority shareholders — saddled with an Agnelli family heirloom that looks increasingly like an albatross — might well agree.
Gapping down
In reaction to earnings/guidance:
- AZEK -5.9%, HIBB -5.7%, BNS -2.6%
Other news:
- MIRM -9.8% (to discontinue the OHANA study of volixibat in intrahepatic cholestasis of pregnancy due to enrollment feasibility)
- CS -3.3% (makes pillar 3 and regulatory disclosures for 3Q22)
- SI -2.9% (issues statement regarding exposure to BlockFi)
- USNA -2.5% (acquires Rise Bar and Oola)
- ENFN -2.4% (CFO to resign; reiterates Q4 guidance)
- SF -1.4% (reports October operating results)
- ICHR -1.2% (names new COO)
Analyst comments:
- ROKU -3.3% (downgraded to Sector Weight from Overweight at KeyBanc Capital Markets)
- EVRG -1.2% (downgraded to Underperform from Outperform at Credit Suisse)
- DRI -0.9% (downgraded to Neutral from Outperform at Robert Baird)
Gapping up
In reaction to earnings/guidance:
- BILI +10.4%, BZUN +4.3%, MCHP +2% (reiterates guidance)
Select rail stocks showing strength after reports President Biden wants Congress to pass legislation immediately to adopt the tentative agreement between railroad workers and operators:
- CNI +1.4%, CP +1.3% (also upgraded to Buy from Hold at Deutsche Bank) NSC +0.8%, UNP +0.7%.
Other news:
- APEN +63.2% pollo Endosurgery to be acquired by Boston Scientific (BSX) for $10 per share)
- BIDU +6.1% (to build world's largest fully driverless ride-hailing service area in 2023)
- NXST +5.7% (replacing SABR in S&P MidCap 400)
- SABR +2.9% (replacing FBC in S&P SmallCap 600)
- BIGC +2.8% (merchant GMV increased 31% on Black Friday)
- NUS +2.7% (replacing PBF in the S&P SmallCap 600)
- BNGO +1.5% (to acquire Purigen Biosystems)
Analyst comments:
- UPS +1.8% (upgraded to Buy from Hold at Deutsche Bank)
Research Calls
- Upgrades:
- Canadian Pacific (CP) upgraded to Buy from Hold at Deutsche Bank; tgt raised to $98
- Geo Group (GEO) upgraded to Outperform from Neutral at Wedbush; tgt raised to $14
- NovoCure (NVCR) upgraded to Overweight from Equal Weight at Wells Fargo; tgt raised to $89
- UPS (UPS) upgraded to Buy from Hold at Deutsche Bank; tgt raised to $220
- Downgrades:
- American Homes 4 Rent (AMH) downgraded to Outperform from Strong Buy at Raymond James
- CinCor Pharma (CINC) downgraded to Equal-Weight from Overweight at Morgan Stanley; tgt lowered to $22
- CinCor Pharma (CINC) downgraded to Perform from Outperform at Oppenheimer
- Darden Restaurants (DRI) downgraded to Neutral from Outperform at Robert W. Baird; tgt raised to $150
- Evergy (EVRG) downgraded to Underperform from Outperform at Credit Suisse; tgt lowered to $57
- Generac (GNRC) downgraded to Underperform from Hold at Jefferies; tgt lowered to $85
- Invitation Homes (INVH) downgraded to Outperform from Strong Buy at Raymond James
- PagSeguro Digital (PAGS) downgraded to Neutral from Overweight at JP Morgan; tgt lowered to $12
- Roku (ROKU) downgraded to Sector Weight from Overweight at KeyBanc Capital Markets
- Others:
- 23andMe (ME) initiated with a Buy at Berenberg; tgt $7
- American Express (AXP) initiated with a Neutral at Redburn
- Atlantic Union Bankshares (AUB) initiated with an Outperform at Hovde Group; tgt $41
- Butterfly Network (BFLY) initiated with an Outperform at Oppenheimer; tgt $4.50
- Century Communities (CCS) initiated with a Neutral at BTIG Research
- Ginkgo Bioworks (DNA) initiated with a Buy at Berenberg; tgt $6
- Mastercard (MA) initiated with a Neutral at Redburn
- OmniAb (OABI) initiated with an Outperform at SVB Leerink; tgt $6
- RCI Hospitality (RICK) initiated with a Buy at H.C. Wainwright; tgt $120
- Smith Micro Software (SMSI) initiated with a Buy at The Benchmark Company; tgt $5
- Toast (TOST) initiated with a Peer Perform at Wolfe Research
- VersaBank (VBNK) initiated with an Outperform at Keefe Bruyette
- Visa (V) initiated with a Sell at Redburn