Oil and Gas – YPF Says 23,000-Strong Oil Workers Strike Costs $12 Million

Original Source – Bloomberg

YPF Says 23,000-Strong Oil Workers Strike Costs $12 Million

By Pablo Gonzalez  Jul 24, 2014 12:08 PM PT

YPF SA said a one-day strike by 23,000 workers in the oil-and-gas-rich Neuquen basin in Argentina will cost the state-owned oil producer as much as $12 million.

A 24-hour walkout that began yesterday at 8 p.m. local time may cut production by 160,000 barrels of oil and 6 million cubic meters of natural gas, Buenos Aires-based YPF said in an e-mailed statement today. The Neuquen basin is responsible for 40 percent of Argentina’s oil output and 56 percent of gas output, the company said.

Members of the union, which represents workers in Neuquen, Rio Negro and La Pampa, are striking as provincial governors and federal authorities discuss changes to the country’s 1967 hydrocarbons law. The outcome will determine how revenue from the Vaca Muerta formation, which holds the world’s fourth-biggest shale oil reserves and second-largest shale gas reserves, are distributed.

“YPF doesn’t understand the real reasons for the 24-hour strike,” the company said. “Argentina needs the effort of all the oil industry to become energy self-sufficient.”

Provinces want to keep the highest royalties at 23 percent while the federal government is seeking to reduce them to a 15 percent limit, in a bid to attract investors.

Continue Reading At Original Source – Bloomberg




SEC Adopts Key Cross-Border Security-Based Swap Rules, Anticipates Further Rulemaking

Source: Sidley Austin LLP -  SEC Adopts Key Cross-Border Security-Based Swap Rules, Anticipates Further Rulemaking

Derivatives Update: Jul 21 2014

On June 25, 2014, the Securities and Exchange Commission (SEC) adopted final rules (theSEC Final Rules) that will form the cornerstone of its cross-border rules governing security-based (SB) swap transactions. The SEC Final Rules are notable not only for what they provide, but also for what they promise – namely, that the SEC will undertake a series of measured steps in the course of rolling out the SB swap equivalent of last year’s cross-border swap guidance (the CFTC Guidance) from the Commodity Futures Trading Commission (CFTC).

Here are the highlights of the SEC Final Rules and the related adopting release (the SEC Adopting Release):

  • Subject Matter. The SEC Final Rules focus on (i) which entities must register as SB swap dealers or major SB swap participants (SB MSPs) in a cross-border context, and (ii) the procedures that will apply to, but not the substantive standards that will be used to evaluate, substituted compliance applications. They also include a rule delineating broad anti-fraud jurisdiction.
  • Relation to CFTC Guidance. Generally speaking, the SEC Final Rules close but do not eliminate the gap, in relevant part, between the CFTC Guidance and the cross-border rules that the SEC first proposed in May 2013 (the SEC Proposed Rules). Unlike the CFTC, which took an interpretive approach to its cross-border jurisdiction, the SEC has acted via formal rulemaking.
  • More to Come. Substantive cross-border SB swap issues remain to be addressed, as the SEC Final Rules cover only a small but key part of the ground covered by the SEC Proposed Rules. Unlike the CFTC, the SEC has decided that domestic and cross-border formulations of its rules will arrive hand-in-hand (rather than the domestic formulation coming first, accompanied by a series of actions providing temporary cross-border relief). Thus, unlike the CFTC Guidance, neither the SEC Final Rules nor the SEC Adopting Release addresses how specific entity-level requirements (e.g., reporting and recordkeeping requirements) or transaction-level requirements (e.g., mandatory clearing or trade execution requirements) will apply in a given cross-border context.
  • Issues Addressed. The principal issue addressed by the SEC Final Rules is which SB swaps a non-U.S. person will need to count against SB dealer and SB MSP thresholds when the non-U.S. person is determining whether it must register with the SEC as an SB swap dealer or SB MSP under rules previously adopted by the SEC.For this purpose, the SEC Final Rules define “U.S. person” and prescribe the treatment of SB swaps with non-U.S. persons that either are guaranteed by, or act as “conduit affiliates” for, one or more U.S. persons. This definition will also be used in the future as the SEC rolls out the domestic and cross-border formulations of its substantive SB swap rules.

(continue to original source – Sidley Austin LLP)

Chicago Fed Calls for Curbs on High Frequency Trading SEC

Source: Bloomberg –  Chicago Fed Calls for Curbs on High Frequency Trading SEC

By Doni Bloomfield and Sam Mamudi - Original Source Writers Bloomberg   Jul 10, ’14  9:11a

The Federal Reserve Bank of Chicago entered the debate over whether financial markets are fair, proposing limits on high-frequency trading firms and incentives to bring more buying and selling into public view.

Recommendations in a working paper published yesterday include breaking up the trading session into a series of half-second periods, a snail’s pace in an era of microsecond trading. The Fed’s John McPartland also suggested curbing hidden orders on public markets by mandating that they stay at the back of the queue, executed only after fully public trades at the same price are filled.

While some of the Fed’s suggestions have been made elsewhere, they may give further credence to the argument that computerized financial markets are rife with problems that need to be solved. The proposals from the Fed’s office in Chicago, a city that’s home to many high-frequency trading firms, follow a barrage of criticism and allegations that speed traders, exchanges and brokers have rigged markets.

The paper “makes nine recommendations that, if implemented, would likely restore the perception of fairness and balance to market participants that would be willing to expose their resting orders to market risk for more than fleeting milliseconds,” wrote McPartland, a senior professional in the central bank’s economic research department.

Latest Critique

His recommendations came after the U.S. Congress this week held the latest in a series of hearings on high-speed trading. The U.S. Securities and Exchange Commission recently revealed its own set of plans to improve trading, and New York’s attorney general accused Barclays Plc of misleading customers in its private trading network, secretly exposing them to predatory high-speed traders.

Supporters of high-frequency trading — which accounts for roughly half of U.S. stock volume — argue that the firms provide a valuable service, filling orders more cost effectively than the human market makers who once facilitated trading….

(continue to original source – Bloomberg)


Natural Gas – Study links quakes to water dumping — not fracking

Source – Cnbc Energy  -  ‘Small number’ of gas drilling wells shaking up Okla., study says

A “very small number” of disposal wells are behind a swarm of earthquakes that have plagued Oklahoma since 2009, and embroiled fracking in a new controversy, according to a study released on Thursday.

Getty Images

Getty Images

In new research conducted by geologists from Cornell University, the University of Colorado and the U.S. Geological Survey (USGS), the surge in Oklahoma’s tremors may be linked to “a small number of exceedingly high-rate” wastewater injection wells. These repositories are the primary method of dumping water used in hydraulic fracturing (fracking), and are seen by scientists as a force multiplier behind an exponential increase in quakes across the country.

The study used geological models to show how migration of wastewater from key wells in the state may be the culprit behind the largest swarm of earthquakes.

Although tremors have been felt in states involved in or close to the shale boom, The Sooner State has been the epicenter of a cluster of tremors since the shale boom began. Oklahoma recorded nearly 100 earthquakes of at least 2.5 magnitude in the last month, according to USGS data, and just this week experienced two quakes of at least 3.0 on the Richter scale.


Link to full article – CNBC Original Source

Source – Cnbc Energy – ‘Small number’ of gas drilling wells shaking up Okla., study says
Written by Javier E. David
Thursday, 3 Jul 2014 | 2:29 PM ET

AMT American Tower Corp – Focus on existing markets for incremental M&A and margin – BUY

The following company update report is writtern by David W. Barden, CFA of BofA Merrill Lynch Global Research

American Tower Corp. – BUY – PO US$95.00
Focus on existing markets for incremental M&A and margin

  • We were pleased to host American Tower at investor meeting in the Asia Pacific region.
  • We reiterate our Buy rating on continued strong fundamentals leading to premium growth.
  • Among key nuggets from our trip was the company’s plan to focus on existing markets for expansion which can boost margins.

Investor meeting takeaways 

BofA-ML was pleased to host American Tower for a week of investor meetings last week in the Asia-Pacific region. Topics discussed included basic business mechanics, the fundamental demand environment, M&A and AMT’s view of international markets, the potential impact of US wireless industry consolidation and other risks to the expected growth opportunity. 

A focus on scaling up in existing markets to boost margins 

Among the most interesting nuggets from the trip was the assertion that AMT’s most recent deals expanding into existing market footprints added just 2.5% incremental SG&A vs. the 8% it has currently across its portfolio. This 5.5% delta on revenue is a solid data point to help evaluate synergy opportunities in-market in our view. As a result of this margin accretion function, AMT’s focus with respect to incremental acquisitions is within its existing 13 market footprint. 

A novel pitch for REIT investors 

At recent REIT industry conferences, among the strategic issues discussed is the threat the internet poses to real estate values as telecommuting via broadband, remote computing, cloud computing, e-commerce, etc. all disintermediate physical property. AMT points out that its business, enabling wireless capacity, is a beneficiary of this trend which represents an excellent diversification and hedging opportunity for REIT investors.  

Reiterate Buy 

We estimate AMT is currently trading at a ’15 AFFO multiple of 17.7x with 15% growth in AFFO/share. AMT trades at a discount to the 21x multiple for the other large, liquid REITs in the S&P 500 but with much faster growth (15% vs. 7%).  

We estimate a ’14 dividend per share of $1.34 for AMT growing 22% which compares to the average dividend growth for the S&P 500 REITs of 11%. Although the current estimated yield of 1.5% for AMT is below the average yield for the S&P 500 REITs of approximately 3.5%, AMT’s AFFO growth rate is higher which will support faster dividend growth over time. 

AMT full report – BUY




Natural Gas Update – Summer Weakness Providing Entry And Trading Opportunities

With inventories coming in slightly above expectations over the part few weeks, UNG and UGAZ have come under pressure. Though there is no particular rush given that there are still several months left in the inventory building summer period, it is worth watching the price action carefully since we are very near technical support levels.

Previously established technical support for UGAZ is in the $17-$20 level and it is currently trading between $21-22. Our opinion is that below $21 is the level to begin accumulating and aggressively so if UGAZ gets into the low to mid teens. Any sharp rallies in response to the Thursday inventory numbers are worth selling into until we reach the winter months.

We Continue To Like Hewlett Packard

We continue to like the prospects for HPQ. At less than 10x earnings, improving cash flow, improving prospects in the cloud and a better outlook for the declining printer and PC businesses, the risk/reward, even after the big move, is very attractive. It is still early in the company’s turnaround and we see a 12-18 month target of $55-$60 based on a 15x multiple on higher earnings.

Accumulation of additional shares should be done on dips but the Street is still far from strongly behind this stock and as it becomes so, that will assist in the multiple expansion. A good example of that occurred last Friday when a combination of a Goldman upgrade from sell to neutral combined with better guidance from a Intel resulted in another 5% upside move in Hewlett. Given the continued skepticism about the company and many Wall Street firms not yet having buy recommendations, it will not take much good news to have a sizable impact on the stock.

Natural Gas – Positioning after last weeks inventory report

Last week’s slightly below expectation inventory report caused a strong 5% rally in UNG and an accompanying 15% rally in UGAZ. The strength of the rally is another sign of the general upward bias of natural gas as we have discussed previously. Though inventories are building each week, there is a tremendous build that is required by the end of summer to get back to normal inventory levels and as each week passes, it becomes less likely. If the summer becomes hotter than normal that will also have an impact given that natural gas is used for 1/4 of the US electricity consumption.

Strategically, we would look to add to long term positions on any significant sell offs caused by the weekly numbers and would also look to trade around the position on very significant rallies caused by the same.

Natural Gas Update – Be Vigilant

As inventories are gradually building and creating any sell offs in the UNG and UGAZ ETF’s look for entry points to build a position by late fall. A warm summer will temper the sell offs and a cold winter will again cause prices to rally. One has to be vigilant on a weekly basis to take advantage of the volatility. UNG in the $22-$25 range and UGAZ in the $17-$22 range appear to be the best technical entry levels.

Current Overall US Market Outlook

Interest rates are and will remain low for an extended period. Even when they do start trending higher, rates are so far below historical norms that interest rates will remain a net positive for the stock market for some time.

Mergers and acquisitions continue to be a powerful positive force in the market both in terms of reducing the supply of stock and for creating higher realized values in the companies that are acquired and their comparables.

P/E ratios remain at fair to slightly below fair value. Earnings continue to grow albeit at a slower pace than in previous recoveries.

Corporate balance sheets, dividend growth, and stock buybacks have never been healthier or more robust and they all provide positive support for the market.

So, if you aggregate the impact of all of these market forces, excluding some unpredictable exogenous event, the market has reasonable upside both this year and next in the 5-10% range. Given other alternatives, the US market remains an attractive investment and buying best of breed companies on the normal dips in the market also remains a sound strategy.