The Wall Street Journal - 02.08.2019

B2| Friday, August 2, 2019 **** THE WALL STREET JOURNAL.

INDEX TO BUSINESSES

These indexes cite notable references to most parent companies and businesspeople
in today’s edition. Articles on regional page inserts aren’t cited in these indexes.

A
AbbVie.........................B
Allergan.......................B
Alphabet................A2,B
Amazon.com...............B
Anadarko Petroleum.B
Apple..................B10,B
ArcelorMittal..............B
Archer Daniels Midland
...................................B
AT&T..........................B
B
Barclays.....................B
Bayer.........................B
BeIN Media Group......B
Beyond Meat...............B
Blackstone Group
........................... B10,B
BMW...........................B
Boeing.........................B
Bunge........................B
C
Cargill........................B
Chevron...........B1,B2,B
Chipotle Mexican GrillB
Concho Resources
......................B2,B11,B
Corteva......................B
D
Daimler........................B
Dunkin' Brands Group B
DuPont de Nemours...B
E
Eastman Chemical......A
eBay.............................B
Equinor........................B
Exxon Mobil....B1,B2,B

F

Facebook.....................A

FactSet Research

Systems..................B

Fiat Chrysler

Automobiles.............B

Fitbit..........................B

Ford Motor..................B

G

General Electric..........B

General Motors...........B

Ginnie Mae..................A

H

Hess...........................B

Huawei Technologies

......................A6,B10,B

I

Impossible Foods........B

Ingredion...................B

Intercontinental

Exchange.................B

J

JPMorgan Chase.........B

K

Kellogg.........................B

L

Lions Gate

Entertainment..........B

London Stock Exchange

Group...............B10,B

Lowe's.........................B

M-O

Mylan...........................B

Occidental Petroleum

...................................B

Onavo Mobile..............A

P

Parsley Energy..........B

Pfizer...........................B

Pioneer Natural

Resources..................B

R

Refinitiv....................B

Refinitiv Holdings.....B

Rio Tinto...................B

Royal Dutch Shell..B1,B

S

Safran..........................B

Samsung Electronics

........................... B10,B

Siemens.......................B

Spirit AeroSystems

Holdings....................B

Spyglass Media Group

.....................................B

T

Thomson Reuters.....B

T-Mobile US................B

Total............................B

U

Union Pacific...............B

V

Verizon Communications

............................. B3,B

Viacom.........................B

W

Whiting Petroleum

........................... B11,B

Y

Yum Brands...............B

INDEX TO PEOPLE

Rising output, bolstered by the company’s fields in North America, wasn’t enough to offset a drop in commodity prices.

PATRICK T. FALLON/BLOOMBERG NEWS

Other tightly spaced devel-

opments are set to begin pro-

ducing later this year, the

company said, but they are

less dense than the 23-well

project.

Concho is planning to bring

fewer wells to production in

the second half of the year,

which will translate into re-

duced output. The company

forecast third-quarter produc-

tion of 316,000 to 322,

barrels of oil and gas a day,

down from 328,681 barrels a

day in the second quarter.

“The magnitude of the miss

will invariably raise capital ef-

ficiency concerns,” JPMorgan

analysts wrote in a note.

Concho reported a second-

quarter loss of $97 million,

down from $137 million in

profit during the same period

a year earlier and missing ana-

lyst expectations of profit to-

taling $142.6 million, accord-

ing to FactSet.

struggling to make money.

Concho pointed to lacklus-

ter results from a 23-well de-

velopment in the western por-

tion of the Permian, where it

tried cutting the distance be-

tween its wells by 50%.

“While initial rates were

solid, current performance

data indicates that we devel-

oped the Upper Wolfcamp too

densely,” Mr. Leach said, refer-

ring to a rock formation in the

Permian. “We’re incorporating

the data into our development

model to adjust spacing on fu-

ture projects.”

half of the year to slow down

and not chase incremental

production at the expense of

capital discipline,” Chief Exec-

utive Tim Leach told investors.

Another factor likely weigh-

ing on Concho’s shares was a

decline in the price of oil

Thursday after President

Trump announced a new 10%

tariff on some Chinese goods.

The Midland, Texas-based

driller is one of several shale

companies grappling with

lower-than-expected output

from wells it drilled too

densely. Many shale compa-

nies sought to boost produc-

tion by placing wells in prox-

imity, but have since found

that doing so often means the

wells produce less as they

draw down the same resource.

These production chal-

lenges have come into focus as

investors put intense pressure

on companies to live within

their means after years of

BUSINESS & FINANCE

Concho ResourcesInc. dis-

closed disappointing output

from wells drilled close to-

gether, an emerging problem

in the shale-drilling industry,

and its shares fell 22% on

Thursday.

The company, one of the

largest shale drillers in Amer-

ica’s hottest oil field, the

Permian Basin of Texas and

New Mexico, forecast that its

production would likely de-

cline in the third quarter, due

in part to an experiment to

pack wells closely together

that wound up hurting output.

That, along with lower nat-

ural-gas and natural-gas-liq-

uids prices, led the company

to scale back this year’s drill-

ing plans to stay within bud-

get.

“We made the decision to

adjust our drilling and com-

pletion schedule in the second

BYREBECCAELLIOTT

Driller Flags Drop in Well Output

22%

The decline in Concho’s stock

price on Thursday

slow or halt production if reg-

ulators don’t approve the

plane’s return to service by

the end of this year.

“We’re at a lower level of

production than we thought

we would be at this point in

the year, for obvious reasons,”

Mr. Culp said Wednesday. He

declined to comment on the

ramifications of another slow-

down or complete halt in MAX

production.

Spirit AeroSystems Hold-

ingsInc., which makes the fu-

selages and other parts for the

MAX, said Wednesday that

200 workers have taken volun-

plans to sell off major busi-
ness units.
Boeing has said it hopes to
restart MAX deliveries in the
fourth quarter, but some gov-
ernment and industry officials
don’t expect it to carry pas-
sengers again until next year.
The MAX has been barred by
regulators from commercial
flight since March after two
fatal crashes over the past
year.
With hundreds of finished
jets piling up on tarmacs, Boe-
ing in April slowed monthly
production of its 737 jets to 42
from 52.
Boeing executives recently
warned they might further

Continued from page B

possible. Shell completed a

$30 billion divestment pro-

gram last year and plans to

sell another $10 billion worth

of assets by the end of 2020.

At its management day in

June, the company said it in-

tended to sell or close nine of

its 19 refineries by 2025.

“We think we’ll end up with

something like 10 [remaining

refineries] and these will be

really the top-notch refineries

that have longevity and resil-

ience through the cycle,” Chief

Executive Ben van Beurden

said Thursday.

U.S. oil giantsExxon Mobil

Corp. andChevronCorp. are

pared with a year earlier. Its

output is also expected to rise

in the third quarter as produc-

tion ramps up from some

fields and liquefied natural gas

projects.

Total and BP also posted

solid production increases. Af-

ter the 2014 oil price collapse

led to dramatic cuts to invest-

ment plans, companies are

back investing in new produc-

tion, albeit sometimes in the

form of acquisitions rather

than developing their own ex-

ploration finds.

Total is on track to raise

production by 9% this year,

helped by its acquisition of

Maersk Oil’s assets which

closed a year ago, alongside

projects starting up, including

in Angola and the North Sea.

“In Shell’s case for instance

we do have the startup of sev-

eral major projects that are

contributing to production

growth,” said Jefferies equity

analyst Jason Gammel, adding

that some of these, including

the Appomattox project in the

Gulf of Mexico, were sanc-

tioned before the 2014 down-

turn.

Shell’s cash flow from oper-

ations rose to $11.03 billion

from $9.5 billion in the prior-

year period. It has pivoted to-

ward gas production since its

2015 deal to buy BG Group

PLC, known for its global liq-

uefied natural gas business.

set to report their results Fri-

day. Exxon Mobil warned ear-

lier in July that weaker natu-

ral gas prices and margins

from its chemicals business

could weigh on its second-

quarter profit.

Shell reported a lower plant

utilization in chemicals and a

loss in refining in its quarterly

results.

“This is always a much big-

ger issue for Exxon and Shell”

than their peers, Oswald Clint,

an analyst at Bernstein said,

referring to weaker margins in

refining and chemicals.

Shell said its quarterly

profit on a current cost-of-

supplies basis—a number sim-

ilar to the net income that U.S.

oil companies report—was

$3.03 billion, down from $5.

billion a year earlier. Adjusted

results missed the company-

provided analyst consensus by

almost a third.

Its shares closed 6.5% lower

on the New York Stock Ex-

change on Thursday.

Shell’s chemical plants op-

erated at 85% availability for

the quarter, down from 93% a

year earlier, due to strike ac-

tion in the Netherlands and

maintenance.

Its rising output, bolstered

by fields in North America,

wasn’t enough to offset lower

commodity prices. Shell’s pro-

duction rose about 4% to 3.

million barrels a day com-

Royal Dutch Shell PLC’s

profit plunged in the second

quarter, with lower oil and gas

prices and weaker refining

margins outweighing a rise in

production.

The Anglo-Dutch oil giant’s

results came in well below ex-

pectations and marked a poor

quarter for energy majors,

suggesting efforts to rejig and

diversify their portfolios have-

n’t fully cushioned them from

swings in oil and gas prices

and refining margins.

Brent crude—the global

benchmark—traded around 7%

lower in the second quarter

compared with the previous

year and European and Asian

gas prices were down sharply.

Across the industry, there

was also a slowdown in de-

mand for chemicals, Shell said.

France’sTotalSA and Nor-

way’sEquinorASA both re-

ported profit declines last

week and missed analysts’ ex-

pectations. However, BP PLC

beat expectations, reporting

quarterly profits that were flat

compared with the comparable

period a year earlier.

Many energy companies

slashed their portfolios in the

wake of the oil price collapse

in 2014, with a focus on keep-

ing only the most profitable

assets and cost-cutting where

BYSARAHMCFARLANE

ANDOLIVERGRIFFIN

Lower Crude, Gas Prices Hurt Shell

Energycompanies’quarterly

resultsshowedrisingoutput.

Oilandgasproduction,

inmillionsofbarrelsaday

Source: the companies

4

0

1

2

3

2Q2018 2Q

Total

▲8.8%

BP

▲4.5%

Shell

▲4.1%

prices have barely moved in
response to recent attacks in
and near the Strait of Hormuz,
a critical shipping area near
the Persian Gulf.
Before Thursday’s slide,
U.S. crude prices had generally
stayed in a range of $55 to
$60 a barrel during the past
six weeks, remaining well be-
low their 2019 peak above
$66. Oil would need to close at
or above $61.37 to exit from
its current bear market, which
began in early June when
crude closed 20% below its
April high.
Prices are up in 2019,
though they are still down
about 20% in the past year.
The moves have encouraged
hedge funds and other specu-
lative investors to boost bets
prices will fall.
The ratio of bullish bets to
bearish wagers by the group
on U.S. crude has fallen to just
over 3, down from last year’s
peak of 26. The most recent
figures showed speculators in-
creased bearish bets by nearly
50% from a week earlier.
“There’s a greater apprecia-
tion now that we’re not in a
supply-constrained world,”
said Noah Barrett, an energy
research analyst at Janus Hen-
derson Investors.
Inventories have already
been rising. Oil stockpiles in
Organization for Economic Co-
operation and Development
countries rose in each of the

Continued from page B

B
Babin, Rebecca............B
Bajaj, Mohit..............B
Barrett, Noah..............B
Beurden, Ben van.......B
Block, Bill....................B
Bradshaw, Roger.......B
Bramson, Edward.....B
Brown, Ethan..............B

C-E
Culp, Larry...................B
Ellenberger, Don.......B

F-G
Finazzo, Chris.............B
Graner, Kenny.............B

H-I

Haque, Kona..............B

Inch, John....................B

K-L

Kung, Darwei..............B

Leach, Tim...................B

M

Martin, Thomas........B

Miller, Jamie...............B

Mittal, Lakshmi..........B

Morzaria, Tushar......B

Muilenburg, Dennis....B

N

Nielsen, Desiree..........B

O

Osher, Bob..................B

P

Park, James..............B

Pollard, Steve...........B

S

Schwimmer, David....B

Staley, Jes.................B

W

Wamhoff, Steve..........B

Wells, Bret..................B

Willens, Robert...........B

Y

Yepez, David...............B

first five months of the year,

the International Energy

Agency estimates.

The group expects that the

world’s requirement for OPEC

crude is set to fall next year to

its lowest level in 16½ years as

supply outside the cartel rises.

Prices haven’t seen a boost

even with supply disruptions

at their highest in three de-

cades.

That means any shifts in

sanctions policies affecting

Iran and Venezuela or other

political developments could

add to bearish momentum.

“Some of the constraints on

capacity could come off if geo-

political events change, on top

of the potential growth,” said

Darwei Kung, a portfolio man-

ager of the $2.8 billion DWS

Enhanced Commodity Strategy

Fund. “That’s one of the rea-

sons we’re a little bit con-

cerned about what the in-

crease might mean to the

global balance.”

Still, some analysts hope

that OPEC will continue curb-

ing output and that demand

will exceed low expectations,

supporting crude and beaten-

down shares of producers. In-

vestors are also demanding

discipline from U.S. oil compa-

nies, many of which are limit-

ing production activity.

With the S&P 500 energy

sector down about 20% in the

past year, some say companies

with lower costs and higher

shareholder returns look at-

tractive, even if oil stays in its

current range.

“Thewaytoplayitistobe

cautious and select the quality

names,” said David Yepez, a

portfolio manager at Exencial

Wealth Advisors, which has

been increasing positions in

Exxon andPioneer Natural

ResourcesCo. recently.

Oil Supply

Is Expected

To S u rg e

tary retirement as part of ef-

fortstocutcostsby5%to

counter the impact of the pro-

duction cut. Boeing said it has

made no staff cuts as a result

of the MAX grounding.

GE is also is one of the air-

craft maker’s top customers.

The company’s finance arm

operates one of the world’s

biggest jet-leasing companies,

known as Gecas.

That business owns 29 MAX

planes, with 25 of those rented

to customers who are obli-

gated to continue making pay-

ments during the grounding,

according to a GE securities

filing.

Gecas has made predelivery

payments for 150 more of the

planes and financing commit-

ments to buy an additional 19

under purchase-leaseback con-

tracts with airlines, the filing

shows.

At the end of 2018, Gecas

owned or had on order more

than 1,850 aircraft, according

to a regulatory filing.

Overall, GE had $2.1 billion

worth of MAX jets with no im-

pairment charges incurred in

the first half as the company

expects the planes will ulti-

mately be delivered and return

to service.

Meanwhile, Boeing recently

pushed back the expected first

flight of its 777X long-haul jet-

liner, blaming problems with

GE’s new engine for the plane.

GE said it has redesigned a

part that was wearing out

faster than expected and is

working with Boeing on the is-

sue.

“The scheduled flight is ob-

viously disappointing given

how well the aircraft has been

performing in preflight tests

and that we are on track on

non-engine activities,” Dennis

Muilenburg, Boeing’s CEO said

last week. “The engine issue

has added significant risk to

the schedule.”

Boeing now hopes to fly the

777X next year and deliver the

first ones by the end of 2020.

—Doug Cameron

contributed to this article.

The project for the jet’s engine is a major driver of growth for the company’s aviation unit.

TED S. WARREN/ASSOCIATED PRESS

GE’s New

Problem:

the MAX