TheChek News Flow

DAX:

MDAX:

SDAX:

LONDON (Reuters) - BP’s trading arm made nearly $4 billion in 2020, according to a copy of an internal BP presentation seen by Reuters, almost equalling the record trading profit in 2019 despite the collapse in oil demand caused by the pandemic.

Trading revenue for majors such as BP and rival Royal Dutch/Shell shielded them from the full impact of the worst recession to hit the modern energy industry, helping finance their shift towards a new business model in a lower carbon economy.

Even with near record trading earnings, BP posted a $20.3 billion loss with writedowns in 2020 and a $5.7 billion loss without writedowns, plunging into the red for the first time in a decade.

BP, which does not publicly disclose the revenue from its trading arm, would not confirm the content of the presentation seen by Reuters and declined to comment for this article.

BP and Shell are banking on cash flow from trading to support them through their transition and to generate profit as they focus on renewable and power markets and become less dependent on fossil fuels.

BP has formally promised to cut oil and gas output, while Shell says its oil production has peaked. Both say they are expanding trading and they still make billions of dollars a year moving oil and gas around the world.

BP plans to expand power and renewables trading but many of those markets are highly regulated and unlikely to deliver the same profit margins as oil and gas.

One of the biggest trading plays in 2020 was to store oil during the downturn, buying it at low prices and selling it later when prices recovered.

It was a relatively simple game with minimal risk because the oil futures market allowed traders with access to large storage to lock in future profits through hedging.

BP made around $1.7 billion on this strategy alone in the second quarter of 2020, according to the presentation.

It made lower but steady earnings in the first and third quarter, while it generated only about $250 million in the fourth quarter of 2020 after betting on weak gas prices that soared instead, according to the presentation.

RARE DISCLOSURE

BP’s 2020 result showed the big impact oil and gas trading can have on performance.

BP Chief Financial Officer Murray Auchincloss told analysts in August on a second quarter results call that there had been an “exceptionally strong contribution from oil trading”.

Last year, was one of the most volatile for oil, which is generally good for trading. Volatility is likely to become a more prominent feature of what is an uneven transition to renewable energy worldwide.

Trading is likely to provide a financial buffer before investments in renewables start to pay off.

“We think the power of integration from our trading organisation is awfully good,” Auchincloss said in August, adding BP could secure returns on investment in “double digits” with integrated trading of oil, power, natural gas and solar energy.

Oil majors typically do not disclose any figures for their trading divisions’ performances and figures emerge once every few years through internal reports.

Without contributions from trading last year, BP’s results would have looked bleaker.

BP had a replacement cost net loss of $18.1 billion in 2020, down from a $3.5 billion profit in 2019, because of massive writedown due to low oil prices.

Without the writedowns, underlying replacement cost loss before tax was $5.7 billion, of which BP’s production division generated a $5 billion loss and refining a $3.1 billion profit.

In the BP structure, oil trading belongs to the refining division while gas trading sits under production.

The internal presentation seen by Reuters combined results of oil and gas trading under one umbrella as integrated supply and trading (IST).

Last year, IST made close to $4 billion in replacement cost operating profit (RCOP), a near record amount compared to slightly over $4 billion in 2019, according to a presentation seen by Reuters.

RCOP excludes tax and changes in value of inventories and is the closest metric to the underlying replacement cost pre-tax result. BP declined to provide company-wide RCOP metrics.

Akio Toyoda says new entrants should be ready for 40-year commitment to the industry

TOKYO— Toyota TM 0.22% Motor Corp. President Akio Toyoda said he welcomed the possible entry of Apple Inc. AAPL -0.91% into the car business but said the iPhone maker should be ready for a decadeslong commitment to its customers.

“Anyone can make a car if they have the technical ability, but, once they make a car, I hope they’ll recognize they have to steel themselves for 40 years of responding to customers and to various changes,” Mr. Toyoda said in a news conference in his capacity as chairman of the Japan Automobile Manufacturers Association.

Apple hasn’t spoken in public about its automotive plans. The Wall Street Journal reported that it began seeking potential automotive partners late last year and was considering whether it could begin production of a vehicle as soon as 2024. Hyundai Motor Co. said in January that it was talking to Apple about cooperation in driverless electric vehicles. The next month it said it wasn’t in talks.

Mr. Toyoda said he had no problem with Apple making cars, but he said car makers have to deal with many issues over the life of a vehicle, starting with obtaining the materials to manufacture it and ending with its scrapping decades later.

“Technology companies entering the car industry means that the car industry has a future and choices for customers will widen,” Mr. Toyoda said. “We welcome new entries, but I don’t think it would be fair for those people who are newly entering to say, ‘We don’t need to steel ourselves for 40 years, and you other folks who have been around for many years, you do that.’”

Apple’s Japan office didn’t respond to a request for comment.

Should Apple enter the car market, it could build the vehicles itself or outsource production, as it does with its iPhones. If it chooses outsourcing, Apple and its contractor would have to decide who would be responsible for repairing cars, handling recalls and dealing with safety regulators.

Mr. Toyoda’s comments as head of the Japan industry group suggested that the industry wouldn’t be happy with an arrangement in which an Apple partner bore responsibility for long-term risks. He didn’t say whether anyone in the group was talking to Apple.

ESPN Strikes Seven-Year Deal for Rights to NHL Games

Deal turns ESPN+ into streaming home of out-of-market local-TV hockey games

Walt Disney Co. DIS 0.28% ’s ESPN and the National Hockey League said they struck a seven-year deal that will bring the Stanley Cup Finals to Disney’s ABC broadcast network and make hundreds of local-TV games available on the ESPN+ streaming service.

ESPN is paying roughly $2.8 billion for the pay-TV and streaming rights over the course of the deal, according to people familiar with the matter. An ESPN spokeswoman declined to comment on financial terms. “We believe that the deal reflects the quality and volume of content we acquired,” she said.

The pact, which starts at the beginning of the 2021-22 season, puts dozens of national regular-season games exclusively on ESPN’s traditional TV networks and the ABC broadcast network and gives ESPN+ and Hulu the exclusive rights to stream 75 national regular-season games, the companies said.

The talks between the NHL and ESPN were previously reported by The Wall Street Journal and others Tuesday.

The companies said the deal gives ESPN the rights to stream 1,000 local-TV games on ESPN+ for people living in different media markets. That offering that was previously available on NHL.TV streaming service will be shut down, a person familiar with the matter said.

In addition to the digital rights, the deal between ESPN and the NHL covers the TV rights for about half of the league’s playoffs and regular-season games, the person said. The league is in talks with several other media companies to license the other half, the person said.

Currently, Comcast Corp.’s NBCUniversal is the biggest television partner of the NHL in the U.S. It has a 10-year pact valued at $2 billion that expires at the end of this season. NBCUniversal is also in talks with the NHL about maintaining its relationship with the league, one of the people familiar with the matter said.

As a result of the agreement, the Stanley Cup Finals will be broadcast on ABC in four of the next seven years, the companies said. ESPN and ABC will also have live, exclusive coverage of one conference final series and half of all first- and second-round games from the Stanley Cup Playoffs.

The deal also includes rights to show TV games in some international markets such as Latin America and Europe. At about $400 million on average a year for full U.S. digital rights and partial U.S. TV rights, ESPN is paying a premium over what NBCUniversal pays for the full U.S. TV rights, a person familiar with the matter said. ESPN currently pays $100 million to the NHL annually for digital and streaming rights, which are also part of the new deal, the person said.

NBCUniversal carries most of its NHL coverage on the NBC Sports Network and the NBC broadcast channel, but the company has said it is shutting down NBC Sports Network at the end of the year and moving its NHL games to the USA Network. The NHL also carries games on its own channel, the NHL Network. Comcast is a partner in the NHL Network.

The NHL’s deal with ESPN continues a trend of escalating sports costs. ESPN, NBC, ViacomCBS Inc.’s CBS and Fox Corp.’s Fox are negotiating new long-term National Football League rights contracts. Fox Corp. and Wall Street Journal parent News Corp share common ownership.

Market capitalization of the videogame platform now stands at roughly $45 billion

Shares of videogame platform Roblox Corp. RBLX 54.44% soared in their public debut Wednesday, in an indication that the mania that gripped the IPO market late last year shows no sign of abating.

The stock leapt more than 54% above the $45 reference price for its direct listing, an increasingly popular way for companies to go public that sidesteps the traditional IPO process. At its closing price of $69.50, the San Mateo, Calif., company has a market capitalization of roughly $45 billion, a steep jump from the $29.5 billion valuation it secured in a private fundraising just two months ago.

It is the latest marker of a historic boom in initial public offerings, as investors clamor for newly minted shares of fast-growing companies in the midst of a record surge in technology and other stocks. So far this year, nearly $103 billion has been raised in IPOs, including the red-hot market for special-purpose acquisition companies, or SPACs, according to Dealogic. That far outpaces every comparable-period total on record and the full-year tally in all but three years since 1995.

What also makes this surge different from prior ones is that companies are taking a variety of routes to the public market, including by merging with SPACs or through direct listings.

SPACs, empty shells that raise money in an IPO and then look for a private company to merge with, have dominated the headlines this year, raising more than $75 billion, or roughly 74% of overall stock issuance. Yet even stripping out that amount, more money has been raised so far this year for traditional IPOs—roughly $26.5 billion—than in any other comparable period on record, including at the height of the dot-com boom.

While there has been a recent selloff in shares of technology firms and SPACs, many of the hardest hit among them surged Tuesday in a sign that the appetite for risk that is fueling new issues remains voracious.

Indeed, the 2021 IPO party is just getting started, bankers say.

South Korean e-commerce giant Coupang Inc. is expected on Thursday to follow Roblox with a traditional IPO that is set to be the largest this year by dollars raised and valuation, and the biggest for a foreign company since Alibaba Group Holding Ltd. ’s blockbuster 2014 debut.

The shares priced at $35 apiece, above an already-raised range of $32 to $34, according to people familiar with the deal. That means Coupang’s IPO will raise more than $4 billion and its valuation on a fully diluted basis including proceeds is set to be nearly $63 billion.

Demand has been so ravenous that the underwriting team has expressed concerns that the shares will pop as dramatically on the first day of trading as stock in Airbnb Inc. and DoorDash Inc. did in their respective debuts in December, according to people familiar with the matter.

Fears over such a pop, which effectively means the company and other sellers in the offering leave big money on the table, led Roblox to delay a planned December IPO and opt instead for a direct listing, in which no money is raised.

The current boom times will invariably come to an end—it is just a matter of when and why—and some market participants say that helps explain the rush to the public markets now.

Bankers and other IPO advisers say both established and still-nascent companies are accelerating their timetables for moving into the public markets. In two examples, WeWork and Shutterfly Inc. are in talks to go public through SPACs, The Wall Street Journal has reported.

All the exuberance is helping mint fortunes. The rush of public investors into Roblox and Coupang means giant returns for their early investors.

Roblox raised $520 million from Altimeter Capital and Dragoneer Investment Group, which paid $45 a share in the January funding round. That valuation was already a dizzying jump from the $4 billion at which the company raised money in early 2020, from a group including venture-capital firm Andreessen Horowitz.

A group of investors including Japan’s SoftBank Group Corp. , hedge fund Maverick Capital Ltd. and venture-capital firm Greenoaks Capital Partners LLC are poised to book big gains on the Coupang IPO. Greenoaks, whose founder Neil Mehta serves on the board, invested in Coupang in 2010 when it was valued at roughly $10 million and now owns about 17% of the company. Maverick bought in at a valuation of less than $100 million in 2011, and now it owns roughly 6% of Coupang.

Since 2015, SoftBank has invested $2.7 billion in Coupang in exchange for roughly 37% of the company. At a $60 billion valuation, SoftBank and its Vision Fund would generate a profit of roughly $19 billion.

SoftBank also holds more than one-third of Compass Inc.’s stock. The real-estate brokerage firm is expected to debut in the coming weeks at a valuation of around $20 billion, according to people familiar with the deal, more than triple the $6.4 billion valuation at which it last raised capital.