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December 2018

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Lack of proper remuneration to InterOil shareholders cited as reason behind delay

As if the current oil downturn is not enough damage to the company, the latest upholding by the Canadian court against the sale of the Papua New Guinea-based oil & gas company InterOil Corporation (USA) (NYSE:IOC) further concerns Exxon Mobil Corporation (NYSE:XOM).

The latest appeal against the sale has been filed by InterOil Founder, Phil Mulacek. Reasons cited by Mr. Mulacek is the terms and conditions of the deal that he found to be improperly remunerating shareholders of InterOil.

The agreement initially made in July in a transaction worth $2.5 billion received final approval in October by Supreme Court of Yukon, where InterOil is registered. The news comes as a surprise as only last month majority of InterOil shareholders of around 80%, voted in the deal’s favor.

RBC analyst, Ben Wilson, stated: “At the very least we think the ruling over the weekend defers the progression of commercial negotiations between the PNG LNG joint venture, P’nyang license holders and the Papua LNG joint venture over collaboration and possible unitisation.”

The deal would have contributed positively to Exxon Mobil’s portfolio. This is because via the acquisition of InterOil, Exxon Mobil would have attained interests in six licenses accessing the company to around four million acres in PNG.  More so, InterOil has the ownership of 36.5% share of interest in PNG’s Elk-Antelope gas field. Natural gas from this field is to undergo development into PNG’s second largest liquefied natural gas (LNG) project.

Amid the current low crude oil environment, hurdles in the oil producer’s efforts to save its dented financial profile is indeed sad news. Having said this, news sources state that both energy giants are “considering the court’s ruling and determining a path to closing the transaction”.

Brean Capital maintained a Buy rating and raised price target to $115 from $100 previously on Alibaba

Earlier this week, Alibaba Group Holding Ltd (NYSE:BABA) posted stronger than expected first quarter fiscal’17 (1QFY17) results with revenues of $4.84 billion and earnings per share (EPS) of $0.74 surpassing respective consensus estimates of $4.54 billion and $0.63.

Shedding light on the earnings, Brean Capital analyst Fawne Jiang noted that the strong revenue growth came on the back of robust performance from the China retail business. The analyst added: “Going forward, we expect BABA’s core ecommerce business to remain solid with high and sustainable margin outlook driven by 1) improving monetization trend as the company continues to build a multi-dimensional platform where merchants and consumers can seamlessly engage. This should help to drive user engagement through social ecommerce transformations and command higher pricing with broadened value propositions to merchants; 2) mobile transition with increasing upward trends for both mobile traffic and mobile monetization; and 3) further reshaping of Chinese consumer’s shopping behavior through community, social and personalization leveraging big data technology.”

The analyst further stated that Alibaba is shaping its ecosystem in a staged growth strategy. Jiang hopes that the company achieves accelerated growth in the cloud business with shrinking operating loss. The cloud could very well become the next growth driver for Alibaba, the analyst said.

Brean Capital raised price target to $115 from $100 previously on Alibaba shares while reiterating a Buy rating.

Following the strong quarterly results, Raymond James and Macquarie increased their ratings on Alibaba stock. Raymond James raised rating on the stock from Outperform to Strong Buy and hiked the price target from $95 to $124. Macquarie upgraded rating on the stock to Outperform from Neutral previously and increased the price target to $110 from $76.

Alibaba is fast becoming dominant force in world e-commerce market. It also has investments in a variety of other industries such as media and ride sharing car services. Hence, the company has a number of growth levers to cash in on and the stock is certainly a great buy.

Alibaba stock closed up 7% to $98.25 on Friday.

Low oil prices have been a nightmare for oil and gas companies; forcing them to cut CAPEX and reduce other costs in order to maintain profitability

Low oil prices have made energy companies witness the worst nightmares as they continue to halt their dividends, lower capital expenditure (CAPEX) guidance, divest assets, etc. Chevron Corporation (NYSE:CVX) is no exception as it also plans to reduce its CAPEX in order to safeguard its 90 years of dividend history.

Chevron announced that it would cut down CAPEX to $17-$22 billion in FY17. Moreover, it has already lowered its FY16 CAPEX guidance to $25-$28 billion. With depressed oil prices, the oil giant’s ability to generate sufficient cash which could fund dividends has deteriorated and hence it would have to take debt in order to maintain dividends, if it doesn’t reduce its CAPEX.

The persistent low prices of oil have resulted in less exploration projects, as companies strive to cut back its production volumes. These measures have benefitted positively for companies as they have improved cash flows, but many current and prospective employment opportunities have been lost.      

Chevron has made the decision as it is aware of the fact that its shareholders are dividend oriented and they value a persistent source of income. Hence, the company believes in continuity of dividends to shareholders. By reducing CAPEX and cutting back on new projects, the oil major is improving its overall cash position and assuring to safeguard its dividends.

Chevron had also mentioned that it would look for its credit line if necessary in order to preserve its quarterly dividend of $1.07 per share. An advantage to Chevron is that its major capital projects are nearing completion, which further reduces the burden of CAPEX. It has also mentioned that it would continue to spend on multibillion projects such as the Tengiz field in Kazakhstan.

In a way, cutting CAPEX might present a negative side to the company. Oil prices are currently at low levels, and so are revenues as compared to if oil prices had been at higher level. Oil prices would improve eventually when supply demand gap is balanced, sooner or later. If companies invest now, they can reap benefits when oil prices surge.

It’s a difficult decision for companies to make, but it has to be in best interest of the future of the company and its shareholders. Cutting CAPEX to preserve dividend appears to be the best decision as thought by Chevron’s management.

Libya is quite a lucrative country for investment purpose

Pedro Parente, the new CEO of the Brazilian state run company, Petroleo Brasiliero SA Petrobras (ADR) (NYSE:PBR), seems to be taking the business in the right direction. The company is going fairly well on its 2016 asset divestiture target of $15.2 billion and is doing well colluding with companies to rejuvenate the oil and gas sector and the economy of Brazil.

In the most recent development, the Rio de Janeiro based company plans to take ahead its production and development programs in Libya along with some of its partners. According to Reuters, the company intends to install four commercial production systems in Libya’s humongous offshore region. The first of these four facilities will be built in 2020. One production facility thereafter will be added each year. The project would thus end by 2023.

According to the reports of Reuters, Petrobras mentioned that each of the facilities would have a maximum capacity of 180,000 barrels of oil per day. Petrobras has given an estimated production figure in between 120,000 to 180,000 barrels of oil per day.

With the recent turmoil in crude oil prices, companies in the oil and gas sector heavily depends on production to offset the losses and gain through economies of scale. Libya, which also happens to be a member of the Organization of Petroleum Exporting Countries (OPEC), is quite a lucrative country for investment purpose. The offshore area of Libya is expected to have some 8 billion to 12 billion in oil and natural gas reserves which signifies a huge upside potential.

Petrobras in Libya currently has the largest stake in the offshore region with over 40%. Royal Dutch Shell plc (ADR) (ADR) (NYSE:RDS.A) and Total SA (ADR) (NYSE:TOT) come in second with about 20% stake. China National Petroleum and CNOOC follow with 10% stake.

Phil Spencer talks about the sky-high ambition of the Xbox team with Xbox One

Microsoft Corporation (NASDAQ:MSFT) Xbox boss, Phil Spencer, has talked to Stevivor about Xbox One console sales and revealed that the Redmond-based firm initially intended to ship 200 million consoles under Xbox One brand name.

Mr. Spencer stated that under the leadership of former Xbox boss, Don Mattrick, Xbox division had planned to sell 200 million Xbox One systems, far out-selling the most successful console of all time, Sony Corp’s (ADR) (NYSE:SNE) PlayStation 2. However, Don Mattrick left the company before the launch of Xbox One, and obviously, Xbox One has not managed to sell 200 million units, either as a console or a brand together with the new Xbox One S.

Mr. Spencer further said that over-the-top video services, such as Netflix, were given centre-stage for Xbox One under Mr. Mattrick, as he hoped that the diverse audience would boost its popularity, and hence, total sales. After Mattrick’s departure, Spencer steered Xbox One in the direction of gamers-first, concentrating more on proving to be the best gaming console first and entertainment system later.

After $499 as initial price was slapped on Xbox One at the time of launch, Kinect included, it is now seen as a major turn-off for customers to give it a go. Mr. Spencer has stuck by Mr. Mattrick’s guns, saying that the plan wasn’t necessarily a bad one, and that it was a completely rational goal to work towards. He has also admitted that users now put their consoles to use for content like video these days, and Mattrick’s vision of making a console that would appeal to all users was a sensible idea.

At the same time, he has reiterated that serving gamers was, and remains to be, the first priority for the company when it seeks to build its consoles. Xbox One has so far managed to sell around 10 million units, and with the upcoming Project Scorpio not too far now, we’ll know soon whether Mr. Spencer has managed to create something that captures both ideas sufficiently.

The Country Caller discusses earnings whispers for Petroleo Brasileiro, NVIDIA, and Symantec Corporation, before their scheduled earnings release in after-market hours today

After the closing bell today, Petroleo Brasileiro SA Petrobras (ADR) (NYSE:PBR), NVIDIA Corporation (NASDAQ:NVDA), and Symantec Corporation (NASDAQ:SYMC) will release their respective quarterly earnings. The Country Caller unveils the much-awaited numbers which suggest results for the three corporations are likely to be mixed.

Petroleo Brasileiro

The Brazilian multinational is about to announce its first quarter earnings for fiscal year 2016. The Street expects a loss of one cent per share, as per data on FactSet. For 4QFY15, the energy giant posted a comparatively worse loss of $(2.83). Earningswhispers.com has not issued any EPS forecast for the company. For the same quarter last year, EPS for the petroleum corporation came in at $0.41.

Revenues for the $47.7 billion corporation are anticipated to be $21.68 billion, according to the consensus. The figure is almost in line with $21.57 which the company reported in its year-ago quarter. Estimize has not provided coverage on Petrobras. The company reported $24.68 billion in revenues for its previous quarter. If it meets the consensus sales estimate for 1QFY16, Petrobras’ revenues would decline 12.15% sequentially.

NVIDIA Corporation

For 1QFY17, the technological giant is expected to post 31 cents in eps, as the Street anticipates, which calls for a 6.1% year-on-year decline. Earningswhispers.com has issued and EPS estimate of $0.34, suggesting NVIDIA might beat the consensus on earnings by one cent this quarter. For its fourth quarter, the California-based company posted 13% quarter-on-quarter growth of of 52 cents in EPS.

The consensus expects the $20 billion corporation to post revenues of $1.27 billion this quarter, in-line with its guided range of “$1.26 billion, plus or minus two percent.” In contrast to the Street, Estimize says the company would beat the Street by posting $1.28 billion, suggesting 8.69% YoY growth in its top line. Revenues for this quarter would decline 9.3% sequentially if the company successfully meets the Street’s expectations.

Symantec Corporation

The US-based software corporation will report its financial earnings for the fourth quarter of FY16 today. Earningswhispers.com suggests that the $11 billion company is about to post per share earnings of 22 cents. On the other hand, the Street projects 23 cents, calling for a 11.53% QoQ decline. Both the numbers, however, fall short of the company’s guided $0.24-0.27 range. If Symantec meets the Street on its bottom line this time, it will exhibit a 42.5% YoY decline in earnings.

The Street also anticipates Symantec to report $878.66 million in sales for 4QFY16, lesser than Estimize’s projection of $882.25 million. These figures, however, are below Symantec’s guidance of $885-915 million. The company reported $909 million in revenues for the last quarter. This implies a 3.33% sequential and 23.65% annual revenue decline, as per the consensus.

Alphabet Pixel launch will significantly bump the revenues of the company

Alphabet Inc (NASDAQ:GOOGL) has made some major product launches during the past quarter. Evercore ISI analyst believes that these launches will significantly raise the revenue of the company but the impact on the profitability remains unclear as of now. In order to incorporate the said product launches in his estimates, the analyst raised the revenue estimates for Q4 by 2% and commented that this will help in offsetting the headwinds from negative foreign exchange trends due to recent hike in the price of US dollar compared to Euro and Great Britain Pound.

During the holiday season, Google sales accelerated quite handsomely and the company saw major uptick in Google Play, Google Home, and Google Pixel revenue. The analyst now models for a revenue of $20.6 billion, which implies about 19.2% y/y growth inclusive of Foreign Exchange and 21.3% exclusive of it. The foreign exchange movement has created an impact of 204 basis points but this is very likely to be offset by the strong sales the company has been able to generate during the holidays.

Google launched the very first smartphone that is designed and marketed itself with the name of Pixel. The phone is flagship level and expected to shave some market share off Apple in the high-end market. The phone is quite futuristic and has definite edge over iPhone 7 in terms of specifications. Apart from the smartphone, the launch of Google Home was also witnessed during Q4 and a number of units have sold during the holiday season. The analyst expects $808 million worth of revenue from hardware segment up 35% y/y.

The analyst reaffirmed Buy rating with a price target of $1,001. The analyst ratings for the company are 21 Buy, 26 Outperform, 1 Hold, and 1 Sell. The stock now trades at a price of $809.38 and has gained 0.37% since the open of the market.

Analysts at Stifel maintained their bullish stance on Micron Stock, ahead of its fourth quarter earnings

Shares of the memory chipmaker, Micron Technology, Inc. (NASDAQ:MU) rallied as much as 2% in today’s trading session, after analysts at Stifel raised their estimate on the stock, citing improvement in the company’s top and bottom line figures for the current quarter. The semiconductor company faced a really hard time in the start of fiscal year 2016, as Micron stock price went south, carving its record lows in early February.

Many analysts on Wall Street attributed the continued weakness in Micron’s share price to industry-wide selloff, stemming from the falling DRAM (Dynamic Random Access Memory) prices and soft end-market demand. The ongoing downturn in the market took a huge toll on the company’s profitability and top line numbers in the previous quarters. However, analysts at Stifel remain upbeat on the future performance of the company as the research firm made an upward revision in Micron twelve-month price target to $18, up from its previous estimate of $15.

Analysts at Stifel have noted that the memory sector average prices are currently tracking above its respective estimates in the current quarter which might have a positive effect on Micron’s upcoming quarterly results. The research firm believes that the supply and demand in the memory sector have reached the equilibrium in smartphones, data centers and desktops. Stifel maintained its bullish rating on the company, recommending to own Micron’s stock at current price levels.

The company is expected to post top and bottom line financial results for its fourth quarter of 2016 on September 29. Previously, Micron recorded weak results for its third quarter which missed the Street’s estimates. Moreover, the company reported weak outlook for its fourth quarter expecting loss per share between 24 and 16 cents whereas, analysts on Wall Street were forecasting a profit of 4 cents per share. Micron stock has now jumped nearly 18% since the start of calendar year 2016.