BP bucks oil industry gloom

MOSCOW (MRC) -- BP Plc surprised investors with a slight increase in its dividend, bucking the trend in what has otherwise been a bleak earnings season for Big Oil, reported Bloomberg.

In the final set of results for retiring Chief Executive Officer Bob Dudley, the London-based company offered some respite for investors who received nothing but bad news from BP’s peers. Big payouts, whether as dividends or buybacks, are the only thing attracting many investors to the industry in a world increasingly aware of the impact of fossil fuels on climate change and falling energy prices.

Last week Royal Dutch Shell Plc slowed the pace of its share buybacks due to weak macroeconomic conditions, while Exxon Mobil Corp. and Chevron Corp. failed to impress.

"We remain confident in delivering the 2021 free cash flow targets and divestment proceeds, and expect to continue to reduce net debt and gearing,” Dudley said on an analyst call on Tuesday. This underpins the company’s “ongoing commitment to sustainably growing distributions to shareholders over the long term," he added.

BP shares rose 4.4% to 472.75 pence as of 11:38 a.m. in London, the biggest increase since September.

"BP’s results have come in slightly better than expected, but they are still a reflection of the challenging environment for oil and gas companies," said Stuart Lamont, an investment manager at Brewin Dolphin Ltd.

Fourth-quarter adjusted net income was USD2.57 billion, exceeding even the highest analyst estimate. That compares with profit of USD3.48 billion a year earlier. The company’s dividend for the period will rise 2.4% to 10.5 cents a share.

Big Oil offers generous returns, but analysts are beginning to question the affordability of these payouts due to high levels of debt, volatile markets and investor pressures to invest in clean energy. BP’s gearing - a measure of debt to equity - remained above its target of 30% at the end of 2019.

BP is reducing its debt burden in part by selling unwanted assets. It has announced USD9.4 billion of deals since the start of 2019, putting it well on course to complete the targeted USD10 billion of sales in the two years to 2020, Chief Financial Officer Brian Gilvary said. It announced a further USD5 billion by mid-2021.

BP's preferred measure of debt - gearing - fell slightly during the fourth quarter, though still above its 30% target.

In an interview with Bloomberg TV, Gilvary promised a "major de-leveraging of the balance sheet" this year. BP has so far only received about a quarter of the proceeds from its 2019 divestments, so receipt of the remaining funds will accelerate the repayment of debt this year, he said. "We are very confident that today’s dividend is sustainable."

BP completed its share repurchasing program, buying USD1.5 billion of stocks in the fourth quarter. The program has offset the dilution from paying dividends in shares, know as a scrip, since the third quarter of 2017 and is on a much smaller scale than Shell’s buybacks.

BP also enjoyed its best year trading oil and natural gas since 2009, helping it weather the impact of lower energy prices and weak refining and chemical margins. Like its peers, the company doesn’t disclose the how much money it makes from its trading business, but insiders put the profitability in a good year in the order of a couple of billion dollars.

Oil and gas production increased in the quarter as maintenance season came to an end, with output 2.7% higher than a year earlier at 3.781 million barrels of oil equivalent a day, including the contribution of barrels from strategic partner Rosneft PJSC.

Bernard Looney takes over as the company’s CEO on Wednesday. Dudley is credited with saving BP from the brink of collapse following the 2010 Deepwater Horizon catastrophe in the Gulf of Mexico, which killed 11 people and caused the biggest offshore oil spill in US history. His departure is part of a wider changing of the guard, with Gilvary handing over the role to Murray Auchincloss before he retires on June 30.

Looney’s task will be to convince investors and the wider public that BP is doing enough to tackle climate change. Last week, the Church of England Pension Board launched a passive index, which includes oil and gas companies, aligned with the goals of the Paris Agreement on climate change. Shell and Madrid-based Repsol made the index. BP and its American peers did not. Looney is set to outline his ambitions for the company on Feb. 12.

As MRC informed before, in September 2019, six world's major petrochemical companies in Flanders, Belgium, North Rhine-Westphalia, Germany, and the Netherlands (Trilateral Region) announced the creation of a consortium to jointly investigate how naphtha or gas steam crackers could be operated using renewable electricity instead of fossil fuels. The Cracker of the Future consortium, which includes BASF, Borealis, BP, LyondellBasell, SABIC and Total, aims to produce base chemicals while also significantly reducing carbon emissions. The companies agreed to invest in R&D and knowledge sharing as they assess the possibility of transitioning their base chemical production to renewable electricity.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,093,260 tonnes in 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments rose from both domestic producers and foreign suppliers. The estimated PP consumption in the Russian market was 1,260,400 tonnes in January-December 2019, up by 4% year on year. Supply of almost all grades of propylene polymers increased, except for statistical copolymers of propylene (PP random copolymers).

BP is one of the world's leading international oil and gas companies, providing its customers with fuel for transportation, energy for heat and light, retail services and petrochemicals products for everyday items.
MRC

MOSCOW (MRC) -- Botswana, which has some of Africa’s largest coal reserves, wants to cut harmful carbon emissions but is committed to using its resources for a new coal-to-liquid (CTL) refinery set to come onstream by 2025, reported Hydrocarbonprocessing with reference to the mines minister's statement.

State-owned firm Botswana Oil (BOL) issued a tender three years ago seeking investors to build the plant, estimated then to cost around USD4 billion, as the diamond-rich southern African country seeks to secure its energy supplies.

"It (CTL plant) is still in its infancy stage, but we believe now it will be accelerated," Lefoko Maxwell Moagi, minister of mineral resources, green technology and energy security, told Reuters on the sidelines of the Mining Indaba investment conference in Cape Town.

Moagi described Botswana’s 212 billion coal reserves as "God’s gift" and said the CTL project, as well as a 100 megawatt pilot coal bed methane project, were two projects Botswana would fast-track.

"We believe coal has also got a beneficial way of being exploited without adding to the carbon footprint. We can convert it in coal-to-liquids, we can convert it to gas, we can do a lot of things with coal and these are the things we will be exploiting fully," Moagi said.

Asked about funding challenges for any future coal-related projects amidst a global pushback from banks and investors, Moagi said some banks, which he did not name, as well as Chinese firms remained potential financiers.

Moagi said the government had held preliminary discussions with Sasol, a recognized leader in CTL technology and whose Secunda refinery currently supplies South Africa with millions of liters of synthetic fuel each year.

Sasol did not immediately respond for comment.

Last year, Shumba Energy formed a joint venture with two Chinese companies to build a separate coal-to-liquids plant at a cost of between USD1.5 billion and USD2 billion.

Moagi said the government also expected to finalize power purchase agreements this year for a planned new 100MW pilot power plant using coal bed methane, gas trapped in underground coal seams.

Tlou Energy and Sekaname, a subsidiary of Kalahari Energy, have been shortlisted to develop the project.

"The project is at an advanced stage because what we needed to do is to make sure the power purchase agreements are finalised and we hope that this year it will be finalised," Moagi said.

He said the government expected the coal bed methane project to come onstream by 2022.

As MRC wrote before, Sasol announced that its world-scale US ethane cracker reached beneficial operation on 27 August 2019. Sasol’s new cracker, the heart of its Lake Charles Chemicals Project (LCCP), is the third and most significant of the seven LCCP facilities to come online and will provide feedstock to our six new derivative units at the company's Lake Charles multi-asset site.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,093,260 tonnes in 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments rose from both domestic producers and foreign suppliers. The estimated PP consumption in the Russian market was 1,260,400 tonnes in January-December 2019, up by 4% year on year. Supply of almost all grades of propylene polymers increased, except for statistical copolymers of propylene (PP random copolymers).
MRC

MOSCOW (MRC) -- PPG says it has completed its acquisition of Industria Chimica Reggiana (ICR, Reggio Emilia, Italy), a maker of automotive refinish products, according to Chemweek.

Financial terms of the deal, including purchase price, were not disclosed. The deal was announced on 8 January.

ICR was founded in 1961 and employs about 180 people.

As MRC wrote previously, Russia's output of chemical products dropped by 3.2% in November 2019 month on month. However, production of basic chemicals increased by 3.6% in the first eleven months of 2019, according to Rosstat's data. According to the Federal State Statistics Service of the Russian Federation, the largest increase in production volumes on an annualized basis accounted for mineral fertilizers and polymers in primary form. Last month, 255,000 tonnes of ethylene were produced versus 210,000 tonnes in October; by November, Russian producers had completed all their scheduled works. Thus, 2,721,000 tonnes of this olefin were produced in January-November 2019, up by 0.3% year on year.

Ethylene is the main feedstock for the production of polyethylene (PE).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,093,260 tonnes in 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments rose from both domestic producers and foreign suppliers.

ICR manufactures automotive refinish products, including putties, primers, basecoats and clear coats. It also makes a range of coatings, enamels and primers for light commercial vehicles and other light industrial coatings applications. ICR employs about 180 people and sells its products in more than 70 countries in Europe, Africa, the Middle East, the US and Latin America.
MRC

MOSCOW (MRC) -- Eastman Chemical Company’s sales revenue decreased to USD2,205 million in Q4 2019 compared to USD10,151 million in Q4 2018, reported Fibre2Fashion.

The 2019 full-year revenue ending January 30, 2020, decreased to USD9,273 million compared to USD10,151 million for year 2018. Eastman is a global specialty materials company that produces products found in items people use every day.

"We demonstrated resilience in the fourth quarter despite continued difficult global economic conditions impacting consumer discretionary markets such as transportation," said Mark Costa, board chair and CEO. "Notwithstanding the challenging conditions, for the year, we continued to make strong progress growing new business revenue from innovation and market development initiatives, particularly in the Advanced Materials segment. In addition, with full-year free cash flow approaching USD1.1 billion, we once again showed our capability to generate strong cash flow. Although we don’t expect global economic conditions to improve in the coming year, we remain confident in our strategy and the strength of our cash flow going forward."

In Additives & Functional Products segment, sales revenue decreased primarily due to lower selling prices, lower sales volume, and an unfavourable shift in foreign currency exchange rates for the fourth quarter of 2019 compared to 4Q 2018.

In Advanced Materials segment, sales revenue decreased due to slightly lower sales volume and an unfavourable shift in foreign currency exchange rates in 4Q 2019.

In the Chemical Intermediates segment, sales revenue decreased primarily due to lower selling prices across the segment attributed to lower raw material prices and increased competitive activity.

In Fibers segment, sales revenue decreased primarily due to lower acetate tow sales volume attributed to weakened market demand resulting from general market decline and customer buying patterns.

"We enter 2020 in a period of significant uncertainty related to macro factors that are out of our control. In this environment, we are focused on what we can control, including growing new business revenue by leveraging our innovation-driven growth model, aggressive cost management, and disciplined capital allocation. We are currently assuming that slow growth continues in 2020 at levels similar to 2019, although with less inventory destocking. Taking all of this together, we expect 2020 adjusted earnings per share to be between USD7.20 and USD7.60 and free cash flow to be between USD1.0 billion and USD1.1 billion," said Costa.

As MRC informed previously, Eastman Chemical wanted to reduce its surplus ethylene and commodity intermediates in 2016, but did not intend to sell its cracker in Longview, Texas, said chief executive Mark Costa in February, 2016.

We also remind that on 31 January, 2020, the company shut its cracker No. 3 in Longview because of a technical glitch. This unit has a production capacity of 215,000 tonnes of ethylene per year. Eastman also operates cracker No. 4 at this site with the capacity of 355,000 tonnes of ethylene per year. This cracker was taken off-stream from 19 to 24 January, 2020, due to a leak.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,093,260 tonnes in 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments rose from both domestic producers and foreign suppliers. The estimated PP consumption in the Russian market was 1,260,400 tonnes in January-December 2019, up by 4% year on year. Supply of almost all grades of propylene polymers increased, except for statistical copolymers of propylene (PP random copolymers).

Eastman is a global specialty chemical company that produces a broad range of products found in items people use every day. With a portfolio of specialty businesses, Eastman works with customers to deliver innovative products and solutions while maintaining a commitment to safety and sustainability. Its market-driven approaches take advantage of world-class technology platforms and leading positions in attractive end-markets such as transportation, building and construction and consumables. Eastman focuses on creating consistent, superior value for all stakeholders. As a globally diverse company, Eastman serves customers in approximately 100 countries and had 2014 revenues of approximately USD9.5 billion. The company is headquartered in Kingsport, Tennessee, USA and employs approximately 15,000 people around the world.
MRC

MOSCOW (MRC) -- Trinseo, a global materials company and manufacturer of plastics, latex binders and synthetic rubber, and its affiliate companies in Europe have announced a price increase for all polystyrene (PS) grades, acrylonitrile-butadiene-styrene (ABS) and acrylonitrile styrene copolymer (SAN) grades in Europe, according to the company's press release.

Effective February 1, 2020, or as existing contract terms allow, the contract and spot prices for the products listed below rose as follows:

-- STYRON general purpose polystyrene grades (GPPS) -- by EUR100 per metric ton;
-- STYRON and STYRON A-Tech and STYRON X- Tech high impact polystyrene grades (HIPS) - by EUR100 per metric ton;
- MAGNUM ABS resins - by EUR55 per metric ton;
- TYRIL SAN resins - by EUR55 per metric ton.

As MRC informed before, Trinseo increased its prices for all PS grades on 1 January 2020, as stated below:

- STYRON GPPS grades - by EUR75 per metric ton;
- STYRON and STYRON A-Tech HIPS grades - by EUR75 per metric ton;
- MAGNUM ABS resins - by EUR70 per metric ton;
- TYRIL SAN resins - by EUR70 per metric ton.

According to ICIS-MRC Price report, significant changes are not expected in the Russian PS market this month. Nizhnekamskneftekhim rolled over January prices of material for shipments in February. Penoplex also maintained its GPPS prices the same, whereas Gazprom neftekhim Salavat will finally set February prices this week, but no major changes are expected.

Trinseo is a global materials company and manufacturer of plastics, latex and rubber. Trinseo's technology is used by customers in industries such as home appliances, automotive, building & construction, carpet, consumer electronics, consumer goods, electrical & lighting, medical, packaging, paper & paperboard, rubber goods and tires. Formerly known as Styron, Trinseo completed its renaming process in 1Q 2015. Trinseo had approximately USD4.6 billion in net sales in 2018, with 16 manufacturing sites around the world, and approximately 2,500 employees.
MRC