Financial Times 09Apr2020

Thursday9 April 2020 ★ FINANCIAL TIMES 7

C O M PA N I E S & M A R K E T S

A N N A N I C O L AO U— N E W YO R K
M A R K D I ST E FA N O— LO N D O N

Will Lewis is stepping down as chief
executive of Dow Jones, the Rupert
Murdoch-owned publisher, according
to people familiar with the matter.

The British media executive is leaving
“amicably” from the company, accord-
ing to people with knowledge of the
decision. Mr Lewis did not respond to
requests for comment.
Mr Lewis has held the top job at the
News Corp-owned financial news and
data group since 2014, where he has also
served as publisher of the Wall Street
Journal, guiding the newspaper through
an industry-wide shift towards online
readership.
Dow Jones, which includes its news
wire and Barron’s magazine, has
reached 3.5m digital subscribers,
including 2m for the Wall Street Journal,
the company reported in February.
Mr Lewis has an extensive back-

ground in journalism, having worked

for the Financial Times during the

1990s.

He later joined The Sunday Times and

then the Daily Telegraph, where in 2006

he became the youngest ever editor in

chief, and oversaw the newspaper’s

investigation into British MPs’ parlia-

mentary expenses.

He joined the Murdoch family-owned

newspapers in 2010 as the general man-

ager of News Group International, lead-

ing the newspaper division’s internal

investigation into the phone-hacking

crisis.

Dow Jones, which Mr Murdoch

bought for $5.7bn in 2007, has been

adapting to the decline in print media

by shifting towards online subscrip-

tions.

In an interview with the New York

Times in 2016, Mr Lewis said that chief

executives should be thinking like an

“agitator in chief ”. “You constantly

think about the next iteration of the

model and structure,” he said.

ews Corp chief Robert Thomson inN

February said that Dow Jones had

increased revenues by 4 per cent in the

most recent quarter, as digital subscrip-

tions grew by 17 per cent, reflecting

the “growing appetite for factual, fair

and deeply reported journalism”.

On word of his departure, one senior

newspaper executive questioned

whether Mr Lewis would consider

putting his hat in the ring for the vacant

director-general job at the BBC.

“It would be a clever move by the

BBC,” the person said.

“Will has good contacts within the UK

government and was Boris’s former

editor.”

Media

Lewis to quit as chief of publisher Dow Jones

AT T R AC TA M O O N E Y A N D

M A D I S O N DA R BYS H I R E —LO N D O N

More than £52bn in company divi-

dends are at risk in the UK this year as

the coronavirus crisis prompts busi-

nesses to slash payouts, according to

new research.

Dividend payments from UK compa-

nies will fall by as much as 53 per cent in

2020 to £46.5bn, including first-quarter

payouts that have already been made to

shareholders, according to a worst-case

scenario forecast by Link Group, which

administers financial ownership data.

More than 40 per cent of UK compa-

nies have already axed dividends, repre-

senting cuts of £28.2bn. Almost £24bn

more are at risk, the group said.

Dividends, a key source of income for

savers and investors, have come under

intense scrutiny during the outbreak as

entire sectors are put into lockdown and

thousands of workers furloughed.

Big investors have urged ailing com-

panies to ditch dividends to secure a

business, but some have warned that

well capitalised groups are scrapping

payouts for fear ofa backlash if they are

seen to be rewarding shareholders.

“Some of the cancellations for this

year are very necessary to protect com-

panies,” said Kit Atkinson, head of capi-

tal markets for corporate markets Emea

at Link Group. “For many, public rela-

tions are playing a role.”

Dividends “really matter”, providing

an income for pensioners and other sav-

ers, as well as underpinning share price

valuations, he said.

Several insurers, including Aviva and

Direct Line, said yesterday that they

were postponing their dividend pay-

ments, while banks have also scrapped

their payouts. The Link research said

that it expected “classic defensive sec-

tors” such as food retailers, healthcare

and basic consumer goods, to continue

paying their dividends.

Tesco, the supermarket, announced

that it would pay a full-year dividend of

6.5p a share. Dave Lewis, the chief exec-

utive, acknowledged the sensitivity

around paying dividends, but said the

needs of savers and pension funds also

had to be considered in the debate

around payouts.

Neville White, head of responsible

investment policy at EdenTree, the

asset manager, said that for sectors

“that are largely unaffected” by the out-

break, “there is no reason why they

shouldn’t continue paying their divi-

dend”.

Eugenia Unanyants-Jackson, head of

environmental, social and governance

research at Allianz Global Investors,

said decisions about dividends should

be on a company-by-company basis.

“We should not give the impression that

all dividends are bad.”

Retail investors have also criticised

companies with adequate cash reserves

for trimming payments.

See Lex

Financials

UK dividends of £52bn at risk this year

L AU R A N O O N A N —N E W YO R K

The Federal Reserve has agreed to
“temporarily” lift Wells Fargo’s asset
cap so that the bank can lend more to
customers who need support.
The news comes days after Wells
stopped accepting applications to the
government’s $350bn small business
rescuescheme, claimingit could not
lend any more money because of a cap
on its balance sheet imposed two years
agoafter a fake accounts scandal.

“Due to the extraordinary disruptions

from the coronavirus, the Federal

Reserve Board... will temporarily and

narrowly modify the growth restriction

on Wells Fargo so that it can provide

additional support to small businesses,”

the Fed said in a statement.

Wells said that it would resume

accepting applications under the

scheme, and would offer them to a

broader range of clients, having initially

prioritised charities and companies

with fewer than 50 employees for the

$10bn the bank first allocated to the

programme.

The Fed stressed that Wells would be

able to use the extra lending capacity

only to make loans under the pay

cheque rotection programme and thep

main street lending programme, two

government-backed schemes to help

businesses affected by the coronavirus’

economic fallout.

Wells will also have to surrender

any money it is paid for either pro-

gramme to the US Treasury or to “non-

profit organisations approved by the

Federal Reserve that support small

businesses”.

The Fed said that Wells would be

given flexibility on the asset cap for “as

long as the facilities are active”.

The small business lending pro-

gramme has been beset by difficulties

and delays since its launch last Friday,

despite the White House’s plea for

banks to quickly disburse the funds.

Congressional leaders have discussed

expanding the scheme by another

$250bn.

Wells said that ithad been contacted

by more than 170,000 customers inter-

ested in the loans over a period of just

two days.

On Monday, in a bid to whet banks’

appetites, the Fed said that it would buy

PPP loans from the bank, in a pro-

gramme that could have helped Wells to

lend more.

A person familiar with the bank’s

thinking said that the terms of the pro-

gramme were not clear enough for Wells

to take on more applications.

The Fed has told banks it will give

them more details on the programme,

but has not told them when those details

will be forthcoming.

Charles Scharf, chief executive, who

has made removing the $1.95tn asset

cap a priority since his October appoint-

ment, has argued that Wells is a far cry

from the group that was fined billions

for inflating its growth figures by fraud-

ulently creating customer accounts.

The FT reported in late March that Mr

Scharf and has lieutenants were press-

ing the Fed to lift the cap so that Wells

could lend more to households and

companies whose incomes have been

dramatically reduced, or eliminated, as

large parts of the USshut down their

economies to slowthe spread.

Banks

Fed loosens the leash on Wells Fargo

Balance sheet cap

lifted to bolster small

business lending

D E R E K B R OW E R —U S E N E R GY E D I TO R

Five years after the last crude price
crash, 2020 was supposed to mark a
recovery for Alberta, the heart of Can-
ada’s oil sands boom. The coronavirus
pandemic and Russia-Saudi price war
have dashed those hopes.
The oil bust has hurt producers
worldwide but the pain is acute in
Alberta, where local crude has traded
beneath $5 a barrel in recent weeks, a
shock to an industry that built a world-
class export business during an era of
triple-digit prices earlier this century.
“It’s a boat with a massive leak at the
bottom and we’re throwing whatever we
can off the side to stay afloat,” said an
executive at one big producer. “If there
is anything we can defer or shut, we are
doing it.”
Alberta is by far the biggest crude-
producing province in Canada, which
boasts the world’s third-biggest oil
deposits. Analysts say its output could
plunge as much as 1.7m barrels a day, a
third of the national total, cutting into
provincial royalties and depleting a
budget based on US oil trading at $58 a
barrel this year, twice today’s price.
The Saudi-Russia price war “is going
to ruin a lot of people’s livelihoods,
destroy countless small businesses and
inflict a lot of pain”, Jason Kenney,
Alberta’s premier, told the Financial
Times. He backed proposals fortariffs
on oil ntering North America, sayinge
he had discussed the matter with the US.
Mr Kenney said Alberta, which will
participate in this week’s meeting of
Opec, the oil producers’ cartel, would be
“open” to joining a move to shore up
prices by cutting output provided US
producers also participate — and “Opec
has to move first and has to move big”.
But given a 30 per cent fall in global oil
demand, analysts question whether
supply cuts can be large enough to com-
pensate for the loss in consumption.
Alberta’s hand in any negotiations is
weak. Its producers’ output is con-
strained by a government-mandated
quota from late 2018 during another
bout of weak prices. The limits have
been lifted gradually but not entirely.
Further involuntary cuts are inevita-
ble, producers say. As US fuel demand
falls, the Midwest refineries that take
about 70 per cent of the Canadian prov-
ince’s oil exports will soon cut back and
crude supplies will exhaust available
storage, said Jackie Forrest, senior

director of the Arc Energy Research

Institute in Calgary.

Projects in Alberta’s northern oil

sands, where almost half of the bitumen

is mined, require huge upfront capital

investments but produce steadily for

decades with relatively low operating

costs. Oil prices are just about high

enough to sustain production, which

would be costly to shut and restart.

Even so, about 100,000 barrels per

day of output has been curtailed

already, according to a tally by Tudor,

Pickering, Holt & Company, the invest-

ment bank. Athabasca Oil, Suncor

Energy and Teck Resources are among

companies to have announced cuts.

The bigger output losses will come

elsewhere. “We think there’s some other

things producers will choose to cut

first,” said April Read, analyst at Wood

Mackenzie, the consultancy, including

more conventional output of lighter oil.

Ms Forrest estimated output from

western Canada could fall at least 1m

b/d as storage fills up. Analysts at Royal

Bank of Canada said the total could

reach 1.7m b/d in the second and third

quarters of the year.

Wood Mackenzie said that if Brent

averaged $35 a barrel this year producer

cash flow across the sector would be

$17bn in the red. Alberta would lose

$2bn in royalties, the consultancy said,

about 6 per cent of total revenue. Econo-

mists say another recession is likely.

“Alberta never came close to recover-

ing from the last downturn,” said John

Berg, president of Shackleton Energy,

one of many small producers trying to

outlast another slump. Shackleton is to

shut a third of its 1,500 b/d of produc-

tion, he said. “Companies like ours are

just hanging on.”

The plunging crude price is only the

latest problem for Alberta’s oil patch.

For more than two decades, energy

companies have been battling to open

new export routes to global markets,

hoping to break an almost total US

stranglehold on the province’s supplies.

“We’re price-takers at the end of a

pipe,” said Mr Berg.

One federally owned project to boost

Alberta’s oil shipments to Canada’s west

coast is under way after years of wran-

gling. The provincial government last

week said it would spend $4.2bn buying

a stake in TC Energy’s $7bn Keystone XL

pipeline to Texas and lending it funds.

Theexpansion will not be online until

2022, and Keystone XL isthree years

from operation — assuming it over-

comes US legal challenges andclimate

protesters trying to halt development of

the oil sands, where the carbon foot-

print is particularly large because of the

energy required for extraction.

The province’s willingness to take out-

right stakes in new energy projects was

notable for a rightwing government.

That move was at least backed by

Alberta’s biggest producers. The fol-

low-up step, potential collaboration

with Opec, was viewed more dimly.

“The weaker barrels need to die so

that this market can be fixed,” said one

executive. “The government should be

listening to the companies that can sur-

vive this, not the ones who can’t.”

Additional reporting by David Sheppard

Energy. ector shockS

Double blow puts Canada’s oil sands in the pits

Alberta had expected better

times until the Russia-Saudi

spat and virus hove into view

Operations at

the Athabasca

oil sands near

Fort McMurray

Ben Nelms/Bloomberg

D E L P H I N E ST R AU S S

One of thelargest language training

providers is applying for state funding

under the UK’s virus job retention

scheme even though it has told staff

they will automatically be made redun-

dant once the programme stops.

EF Education First, which runs lan-

guage schools, cultural exchanges and

educational travel, with 52,000 employ-

ees in 114 countries, has been heavily

exposed to the restrictions imposed on

movement. It has cut staff across several

divisions.

In the UK, it told more than 40 staff

they would be made redundant on

March 17,one person briefed on the

mattersaid. The workerswere offered

full pay during their contractual notice

period, a statutory redundancy pay-

ment, and anex gratia payment in lieu

of consultation.

A few days later, the government

announced ascheme designed to

help employers hit by theoutbreak

retain staff. Through this, the state will

pay 80 per cent of wages for furloughed

workers, initially for three months from

March 1.

The government later made clear that

employers who had already cut staff

could rehire them and put them on fur-

lough instead.

EF made the affected staff a second

offer on March 31, giving them a choice

between redundancy on the original

terms, or furlough on 80 per cent pay,

while the scheme was available. Those

opting for furlough would still face

redundancy, with their notice period

starting once the furlough period ended.

They would still receive the statutory

redundancy payment, but EF would no

longer make the ex gratia payment orig-

inally offered.

Many of the employees concerned

might welcome the new offer as it would

give them more time to make new plans

before they stopped receiving payments

— with a slim chance of the company’s

prospects improving in the meantime

and the decision being reversed.

Jolyon Maugham, a barrister who

heads the Good Law Project, which

brings cases in the public interest, said

EF’s approach went against the govern-

ment’s intention to preserve jobs.

“The purpose cannot be to cut

the cost of redundancies for employers

and put the cost of making those

employees redundant on the state,” he

said, adding that the cheme should bes

amended to include a rule guarding

against abuse.

EF,a private, family-owned group

that does not disclose revenue or profit

growth, argued it was doing everything

it could to support the staff affected by

job cuts.

It believed the job retention scheme —

which some staff had urged it to use —

was meant to give employers and

employees a pause before redundancies

became effective. There is nothing in

the rules requiring employers to pre-

vent redundancies occurring later.

“It is our hope that we — along with

everyone else — will recover from this

challenging period even stronger than

before,” the companysaid.

Support services

Trainer taps

UK scheme

for previously

planned

redundancies

‘It’s a boat

with a

massive

leak at the

bottom and

we’re

throwing

whatever

we can off

the side to

stay afloat’

It was made clear that

employers who had cut

staff could rehire them and

put them on furlough

Crude crash

Western Canadian Select

( per barrel)

Source: S&P Global Platts Analytics





Jan  Apr

  

MEG: Christina Lake

Cenovus: Christina Lake

Suncor: Mackay/Firebag

Cenovus: Foster Creek

Husky: Tucker

CNRL: Thermal

Husky: Lloydminster

Athabasca: Leismer

Husky: Sunrise

Athabasca: Hangingstone

ConocoPhillips: Surmont

Suncor: Fort Hills

Imperial: Kearl

Costs before diluent expenses

Price barely exceeds

extraction cost

Oil sands projects

(operating costs,  per barrel)

Will Lewis became

the UK’s youngest

ever editor in chief

in 2006 when he

was head of the

Daily Telegraph

APRIL 9 2020 Section:Companies Time: 4/20208/ - 18:57 User:cathy.pryor Page Name:CONEWS1, Part,Page,Edition:EUR, 7, 1