WSJ : Saudi Aramco Set for Chinese Energy Deals

Saudi Aramco Set for Chinese Energy Deals

State-owned oil group eyes refinery pacts with China’s CNPC and Sinopec

RIYADH—Saudi Arabian Oil Co. is in advanced talks with two of China’s leading energy companies over a number of energy projects to help increase the Saudi state-owned oil group’s sales in Asia.

The talks, which are at an advanced stage, include projects with China National Petroleum Corp. and Sinopec and involve refineries in the city of Qingdao and in the provinces of Yunnan and Sichuan, according to Saudi Aramco Chairman Khalid al-Falih.
“We are hoping for other projects with Sinopec, especially in China.,” Mr. al-Falih said on Wednesday. “We are hoping that Aramco will expand its investments in the refining, marketing and petrochemicals sectors,” he said.

Mr. al-Falih comments follow Tuesday's visit by Chinese President Xi Jinping to Riyadh against a backdrop of evolving Chinese ties with the region. After Saudi Arabia, Mr. Xi starts a two-day stay in Egypt on Wednesday night before heading to Iran.

Saudi Arabia, the world’s leading oil-producing country, remains a steady supplier to China, but today, Chinese oil imports are growing faster from Russia, Iraq and other producers.

Imports of Saudi Arabian crude by China rose just 2% in the first 11 months last year, compared with overall Chinese import growth of about 9%, according to customs data. Imports from Russia—China’s No. 2 supplier after Saudi Arabia—meanwhile jumped nearly 30%.

Low oil prices have rocked the Saudi economy, prompting the kingdom to cut popular subsidies for gasoline and other energy products. Its longtime alliance with the U.S. has been challenged by the American-led deal to lift sanctions on Iran which is increasing its own oil exports. Iran made a move on Tuesday to claw back market share it lost in Europe during sanctions, cutting crude prices to much of the continent following similar moves by Saudi Arabia this month.

Saudi Arabia has sought to tighten ties to Chinese customers through the building of refineries in tandem with Chinese companies. Aramco has been in yearslong talks with CNPC about building a 260,000-barrels-a-day refinery in Yunnan province, but little progress has been made. Aramco is also in talks to acquire a stake in a CNPC refinery as well as retail assets, people familiar with the matter have said.

Oil prices slid on Wednesday, with U.S. oil futures falling to their lowest level since 2003, dragged down by a slide in global financial markets and continued concerns about the glut of crude.

Fears about an economic slowdown in China, the world’s second biggest economy, have rattled financial markets at the start of the year and added to the bearish sentiment on the oil market.

>>> US Gapping down


Gapping down
Briefing note: With US Futures down ~1.5% in pre-mkt, most stocks are trading lower. The following represents stocks lower on more specific items.

In reaction to disappointing earnings/guidance: IBM -6%, AMD -4.6%, EAT -4.6%, IBKR -4.4%, RDS.A -3.7%, PACB -2.7%, GS -1.6%

Select financial related names showing weakness: HSBC -3.8%, CS -3.8%, DB -3.3%, BAC -3.3%, BCS -3.2%, C -2.9%, ING -2.7%, LYB -2.7%, JPM -2.3%

Select oil/gas related names showing early weakness: WLL -9.7%, LEI -8.1%, DVN -5.8%, CHK -5.2%, PBR -4.7%, STO -4.2%, TOT -3.2%, APC -2.9%, SLB -2.9%

Other news: THS -7.8% (to offer up to $750 mln in common stock to fund part of its acquisition of ConAgra's (CAG) Private Brands business), SUNE -6.5% (still checking), BHP -6% (reported FY15 op metrics), DOC -5.7% (upsizes and prices 18.5 mln shares of common stock at $15.75), AMD -5.6% (following IBM results), MU -4.3% (following IBM results), SSS -3.5% ( commences a public offering of 2.3 mln shares of common stock), BABA -3.3% (weakness in Chinese mkts overnight), BIDU -2.7% (weakness in Chinese mkts overnight)

Analyst comments: SDRL -10.8% (downgraded to Underperform at BofA/Merrill), FTNT -6.7% (downgraded to Neutral from Overweight at Piper Jaffray), VALE -6% (downgraded to Hold from Buy at HSBC Securities), RACE -2.2% (initiated with a Neutral at Citigroup; tgt $37), TIF -2% (downgraded to Neutral from Buy at Goldman), PRU -1.9% (downgraded to Neutral from Buy at BofA/Merrill)

>>> US Gapping up



Gapping up
In reaction to strong earnings/guidance: GNC +14.6%, CLMT +5%, AMTD +2%, CREE +1.7%, ASML +1.7%, LLTC +1.6%, NLS +1.5%, ADTN +1.5%, TEL +0.8%, APH +0.7%

Select gold mining stocks trading higher: HMY +9.3%, IAG +5.2%, HL +3.3%, ABX +3%, GG +2.8%, GFI +2.5%, NEM +2.4%, AEM +2%, GLD +1.2%

Other news: ZFGN +37% ( positive efficacy results from the bestPWS ZAF-311 Phase 3 trial), SYN +21.7% (The second Phase 2 clinical trial of SYN-010 for the treatment of irritable bowel syndrome with constipation met its primary endpoint), CBAY +17.3% (Announces Successful Completion of End-of-Phase 2 Discussions With FDA for Arhalofenate), SFUN +5.5% (made significant progress on acquisition of controlling stake in Chongqing Wanli New Energy), PESI +5.1% (part of winning team led by CH2M Hill selected by US Navy for a $240 mln, 5-year Comprehensive Long-Term Environmental Action Navy (CLEAN) contract), CLMT +5% (declared $0.685 dividend, unchanged from prior dividend; reaffirmed objective of providing all unitholders a stable-to-growing quarterly cash distribution), SCS +2.1% (Board approved a $150 mln increase to its share repurchase program)

Analyst comments: BSFT +2% (upgraded to Outperform from Market Perform at Wells Fargo)

UK 'will not participate' in new refugee-sharing arrangements agreed by the EU

UK 'will not participate' in new refugee-sharing arrangements agreed by the EU
So the great thing about Davos is that more-or-less everyone is here (swank) so nailing down a tale is easier than normal.

What I've learned is that the UK is not going to participate in any new refugee-sharing arrangement agreed by the rest of the EU - and may even frustrate it (OK maybe that's not a big surprise - but it matters).

The point is that the prime minister is intent on preserving the Dublin Regulations, at least for the UK - because, according to a government source, it really matters to us that we can send asylum seekers who illegally enter the UK back to the place they first entered the EU (such as Greece).

And, according to my source, there is no chance of the UK taking any refugees on top of the 20,000 Syrians David Cameron already said he would in effect recruit by 2020 directly from camps in the Middle East.

This will certainly complicate EU negotiations - in that countries like France and Spain, which refugees are largely avoiding right now, are highly unlikely to want to absorb many tens of thousands of migrants if the UK is exempt.
For what it's worth, a European political leader said to me this morning that it would be enormously helpful if David Cameron could find a way of joining a new EU migrant deal.
And this leader seemed to think this would happen.
Apparently not - which, I fear, may make other EU leaders grumpier with the UK Government than they already are (if that is possible)

>>> Goldman Sachs reports Q4 (Dec) results, beats on revs

--> -2.35% pre open 25k traded

Goldman Sachs reports Q4 (Dec) results, beats on revs
  • Reports Q4 (Dec) earnings of $4.68 per share, may not be comparable to the Capital IQ Consensus of $3.62; revenues fell 5.5% year/year to $7.27 bln vs the $7.04 bln Capital IQ Consensus.
    • Diluted earnings per common share were $1.27 compared with $4.38 for the fourth quarter of 2014 and $2.90 for the third quarter of 2015. During the fourth quarter of 2015, the firm recorded provisions for the settlement with the RMBS Working Group (1) of $1.80 billion ($1.54 billion after-tax), which reduced diluted earnings per common share by $3.41 and annualized ROE by 8.1 percentage points.The $4.68 figure does include CVA/DVA
  • Annualized ROE as 3.0% for the fourth quarter of 2015.
  • Investment Banking
    • Net revenues in Investment Banking were $1.55 billion for Q4, 7% higher y/y.
    • Net revenues in Financial Advisory were $879 million, 27% higher y/y.
    • Net revenues in Underwriting were $668 million, 11% lower y/y.
  • Institutional Client Services
    • Net revenues in Institutional Client Services were $2.88 billion for the fourth quarter of 2015, 9% lower y/y.
    • Net revenues in Fixed Income, Currency and Commodities Client Execution were $1.12 billion for the fourth quarter of 2015, 8% lower y/y.
    • Net revenues in Equities were $1.76 billion for the fourth quarter of 2015, 9% lower y/y.
    • The fair value net loss attributable to the impact of changes in the firm's credit spreads on borrowings was $68 million.
  • Investing & Lending
    • Net revenues in Investing & Lendingwere $1.30 billion for the fourth quarter of 2015, 15% lower y/y.
  • Investment Management
    • Net revenues in Investment Management were $1.55 billion for the fourth quarter of 2015, essentially unchanged compared with the fourth quarter of 2014 and 9% higher than the third quarter of 2015.
  • Noncomp Expenses
    • Non-compensation expenses were $4.14 billion for the fourth quarter of 2015, 64% higher y/y. The increase compared with the fourth quarter of 2014 was due to significantly higher net provisions for mortgage-related litigation and regulatory matters, which are included in other expenses.
    • Net provisions for litigation and regulatory proceedings for the fourth quarter of 2015 were $1.95 billion compared with $161 million for the fourth quarter of 2014 (both primarily comprised of net provisions for mortgage-related matters).
  • Book value per common share was $171.03 and tangible book value per common share was $161.64, both 5% higher compared with the end of 2014 and essentially unchanged compared with the end of the third quarter of 2015.