The Wall St.Journal 24Feb2020

B2| Monday, February 24, 2020 ** THE WALL STREET JOURNAL.

and Africa decide on whether to move forward with huge export expansions that could reduce the need for U.S. projects. In addition to Tellurian, Freeport LNG, owned by founder Michael Smith,Global Infrastructure Partnersand Osaka GasCo., andCameron LNGLLC, owned by affiliates ofSempra Energy,Mitsubishi Corp.,TotalSA, andMitsui& Co., are planning to expand existing U.S. facilities. Asian and European buyers are stretched to absorb the LNG circulating on ships around the globe. Some have been turned away in China, following the outbreak of coro- navirus. Indian natural-gas companyGAIL (India)Ltd. has resold some U.S. cargoes in the past year, according to people familiar with the matter. “There is only so much ap- petite globally for supply from the furthest supplier in the world to Asian markets,” said Madeline Jowdy, senior direc- tor of global gas and LNG for

and energy ties between the countries, the official said. Mr. Trump will try to lock down a prospective deal publi- cized when Prime Minister Na- rendra Modi visited Houston in September. At that time, Mr. Trump touted a $7.5 billion nonbinding LNG agreement between fledgling U.S. exporterTellurianInc. and In- dia’sPetronet LNGLtd. Such a deal would put Tel- lurian’s proposed U.S. Gulf Coast export facility, the $27 billion Driftwood LNG project in Louisiana, closer to the total commitments it needs to move forward, and secure a trade victory for Mr. Trump. Tellurian Chief Executive Meg Gentle, Chairman Charif Souki and other company officials are headed to India this week to continue negotiations with Petronet. In an interview, Ms. Gentle said she appreci- ates the president’s highlight- ing the role of energy in the U.S. economy and isn’t alarmed by a reduction in long-term contracting. “I view that as a huge posi- tive,” Ms. Gentle said. “We’re seeing fewer and fewer long- term contracts because buyers and sellers are becoming more comfortable that the market is going to be there.” Ms. Gentle said Tellurian has roughly two-thirds of the commitments it needs to go forward with the Driftwood project and is working toward completing a deal with Petro- net by the end of March. Some analysts believe 2020 is a pivotal year for the U.S. LNG export industry, as low- cost rivals in the Middle East

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 Aetna...........................B3 Airbus ........................A1 Alibaba Group Holding B4 Alphabet................B4,B9 Amazon.com..........B5,B6 Anadarko Petroleum Corp...........................B1 Apple......................B6,B9 AT&T............................B6 B Baker Hughes.............B6 Bank of America.........B9 Berkshire Hathaway B1,B6 Boeing....................A1,B6 Box ...........................B10 C Cheniere Energy..........B1 Chevron.......................B2 Credit Karma...............B1 Crown Affair...............B5 CVS Health..................B3 D Dell Technologies........B4 Diamondback Energy..B2 Domino's Pizza...........B1

Dropbox.....................B10 E Exxon Mobil...........B2,B6 F Facebook......................B6 Fidelity Investments..B1 Freeport LNG Development.............B1 G Greylock Capital Management.............B2 I ING Groep N.V...........B10 Intuit...........................B1 K Karner Blue Animal Impact Fund..............B6 KPMG International....B4 Kraft Heinz.................B9 M Microsoft..........B4,B6,B9 N Netflix....................B3,B9 O Occidental Petroleum.B1 Oracle..........................B4

P Pacific Investment Management.............B1 Plaid.............................B4 S Seed Health................B5 Starboard Value........B10 Starbucks....................B6 T Tencent Holdings........B4 Tesla............................B6 Textron........................B6 Twitter........................A4 U UBS Group.................B10 UnitedHealth Group....B3 V Vale..............................B3 VMware.......................B4 VR Capital Group........B2 W WarnerMedia..............B3 Wells Fargo.................B9 Western Asset Management.............B2

INDEX TO PEOPLE

BUSINESS & FINANCE

‘The Call of the Wild,’ starring Harrison Ford, opened at No. 2.

20TH CENTURY FOX/ASSOCIATED PRESS

Estimated Box-Office Figures, Through Sunday SALES, IN MILLIONS FILM DISTRIBUTOR WEEKEND* CUMULATIVE % CHANGE 1.Sonic the Hedgehog Paramount $26.3 $106.6 -55 2.The Call of the Wild 20th Century Studios

$24.8 $24.8 —

3.Birds of Prey Warner Bros. $7 $72.5 -59 4.Brahms: The Boy II STX Entertainment

$5.9 $5.9 —

5.Bad Boys for Life Sony $5.9 $191.2 -49 *Friday,SaturdayandSunday Source:Comscore

tor and took a leading role in the restructuring, which recov- ered 80% for bondholders. Investors are likely to recover far less if Argentina and its mu- nicipalities default as expected this spring. Bonds of the sover- eign and Buenos Aires trade at between 40 and 50 cents on the dollar, according to data from MarketAxess. The confrontation with Fidel- ity took shape in January. Bue- nos Aires was reluctant to spend dwindling cash reserves just weeks before its expected debt restructuring alongside the fed- eral government, the people familiar with the matter said. In mid-January, about three weeks ahead of the payment deadline, Mr. Kicillof’s administration asked bondholders to wait until May to get paid. Members of a bondholder committee, includingGreylock Capital Management,VR Capi- tal GroupandWestern Asset ManagementCo., suspected the province would default before then and refused, the people said. The province reached a deal with the group a few days before the early February deadline, agreeing to pay 30% upfront, but it still needed consent from Fidelity as a holder of a large chunk of the debt. A new portfolio manager of Fidelity’s largest emerging-markets bond fund, Jonathan Kelly, wanted to send a message to the province that Fidelity would bar- gain aggressively in the bigger restructuring to come, these people said. It was Mr. Van Du- zer’s job to deliver that message. Mr. Van Duzer grew up in Rochester, N.Y., and wrestled at West Point before doing two

Continued from page B1

years of missionary work in South Africa at the end of the apartheid era. After serving in the Army Corps of Engineers, he studied law and became a bank- ruptcy attorney, first at a white- shoe firm, then for almost two decades at Fidelity. “He’s a fighter, it’s hard wired into him,” said a person who knows Mr. Van Duzer. His time in South Africa proselytizing to both Afrikaner and black com- munities “helped him learn how to deal with difficult issues,” the person said. Mr. Van Duzer parachutes in when Fidelity’s big bond investments go bad, representing the company in restructuring talks with borrowers that default and with other creditors., Recent as- signments include bankrupt utility PG&E Corp. and Brazilian conglomerate Odebrecht SA. He spends most Sundays tending to Boston’s Mormon community as a bishop for the regional parish, or ward, the person who knows him said. Mr. Van Duzer has a reputa- tion as a forthright and thought- ful negotiator, equally capable of forging consensus or going it alone with a hard line. In the case of Buenos Aires, he chose the latter. Fidelity thought Buenos Aires had access to the money and be- lieved it would be neglecting its fiduciary duty if it went along with the bondholder group, the people familiar with the matter said. Mr. Van Duzer told Mr. Kicillof’s staff that Fidelity re- quired 50% upfront, with monthly installment payments to follow, the people familiar with the matter said. No deal emerged, and members of the bondholder group were angry with the province’s officials for risking an early default, according to these people. Buenos Aires communicated with Fidelity several times before and after launching its restructuring proposal, an official for the province said. On Feb. 4, Mr. Kicillof said the province would make the payment.

A Abel, Greg...................B1 Aniston, Jennifer........B3 B Baldwin, Zacharia.......B9 Buffett, Warren..........B1 C Cardona, Maria...........A4 Cox, Courteney............B3 D Deal, Stan...................A1 Duzer, Nate Van.........B1 H Hamers, Ralph..........B10 Hancock, Alexis..........R4

Hogan, Art..................B9 J Jain, Ajit.....................B1 Jester, John................B4 K Kelly, Jonathan...........B2 Khan, Iqbal................B10 Kudrow, Lisa...............B3 Kurian, Thomas...........B4 L Larsen, Andreas Steno B10 LeBlanc, Matt.............B3 Lucchesi, Ray..............R4 M

Meggyesi, Paul.........B10 Munger, Charlie..........B1 N Naratil, Tom..............B10 O Oxley, David..............B10 P Perry, Matthew...........B3 S Schneier, Bruce...........R4 Schultz, Greg..............A4 Schwimmer, David......B3 Stucki, Thomas.........B10 V Vilfer, Don...................B9

Fidelity Is

Argentina

Nemesis

2013 ’15 ’20*

0

150

300

450

$600

Estimatedannualwinter spendingbyanaverageU.S. householdheatedprimarily withnaturalgas

*2020 figure is a projection. Note: Years refer to year winter ends; winter covers period from Oct. 1 to March 31. Source: Energy Information Administration

S&P Global Platts. Foreign buyers committed to long-term purchase agreements of U.S. LNG are paying almost twice as much as buyers taking cargoes from the spot market. In essence, they are potentially losing $14 million to $17 million per cargo on some contracted ship- ments, said Dumitru Dediu, a partner at consulting firm McKinsey & Co. Like others, he believes the majority of export terminals proposed in the U.S. will never be built. “We’re talking about 30 or so projects, and I think only two or three—at most, four— are likely to go ahead,” Mr. Dediu said. With global commodities traders such as Gunvor Group and Trafigura Group playing a growing role in the LNG market, cheap prices for spot cargoes are forcing U.S. LNG firms to offer cheaper contracts. In an effort to woo potential customers to 10-to-20-year offtake agreements, some U.S. companies have offered ul- tralow fees for liquefying natural gas—as little as $1.75 per million British thermal units, according to two people familiar with the matter. That price is below the $2-per-unit capital cost of liquefying the gas for some projects. Tellurian’s Ms. Gentle re- mains optimistic, noting that demand for U.S. LNG has continued to grow. “You’ll still need 75 million tons from the other projects. We really view it as, ‘All are welcome,’” she said. —Michael C. Bender and Timothy Puko contributed to this article.

that the average household be- ing heated by natural gas would spend $541 from October to March—an 8% drop in winter heating costs from a year earlier. With temperatures across much of the country milder than expected and production robust, U.S. inventories are well above their levels from a year earlier. Plentiful natural gas has dented profits for major pro- ducers, however, and many analysts expect prices to remain low. “We’re not banking on a re- covery,”ChevronCorp. Chief Executive Mike Wirth said on the company’s January earn- ings call. The energy giant wrote down the value of its as- sets by more than $10 billion in December. Still, consistently low fuel prices have helped many consumers. For Colin Giles, 27, who lives near Detroit, low fuel ex- penses help him maintain hob- bies including playing hockey. Limited heating costs for his home and cheaper gasoline have removed a possible source of worry, he said. “I like to drive,” said Mr. Giles, who works as an auto-industry research analyst. “That’s certainly influenced by the fact that gas is not expensive.”

quarter of 2019 from a 3.2% pace the prior quarter. Some economists are hoping that a reacceleration in consumer spending can keep growth sta- ble despite a drop in global demand for goods and services early in the year. “It’s going to be a welcome reprieve,” said Lindsey Piegza, chief economist at Stifel Nico- laus & Co. “This arguably couldn’t come at a better time.” The Energy Information Ad- ministration recently projected

a Giant Eagle grocery store, said he can’t remember the last time gasoline exceeded $2.50 a gallon. Mr. Maier also often saves at the pump with points from the supermarket chain, and consistently low natural-gas prices have helped him budget costs for heating his two-story town- house. Analyzing the economic impact of cheap fuel is challeng- ing, as costs vary widely across the country because of a com- bination of pipeline limitations, state and local taxes and energy companies’ pricing. The average retail gasoline price in Cali- fornia, for example, is more than $1 higher than the cost na- tionally. The recent rise of the U.S. to become the world’s largest pro- ducer of oil and natural gas also makes the economic impact murky because of the de- pleted profits for energy companies, fromExxon MobilCorp. toDiamondback EnergyInc. Shares of many of those companies are down 20% or more in the past year, while the S&P 500 has risen 20%. But analysts say a prolonged period of low fuel costs would support consumers after their spending slowed to a 1.8% an- nual growth rate in the fourth

Affordable energy prices are brightening Leonore Barfield’s winter. Gasoline has dropped about 50 cents a gallon from last year near her home in the 6,000- person town of Raton, N.M.— lowering the cost of trips to restaurants, movie theaters or the closest Walmart, in neigh- boring Colorado. And even though cold weather has blan- keted the area since October, falling natural-gas prices have helped the 63-year-old retiree keep her three-bedroom home comfortably warm. “When I get my utility bill, I don’t fall off my sofa,” she said. Ms. Barfield’s satisfaction re- flects a broader trend. Some of thelowest prices for crude oil and natural gas in years are saving many Americans money. The declining costs could help cushion the U.S. from the economic fallout related to the cor- onavirus, which has disrupted supply chains and threatened global growth early in 2020. But they also mark the latest challenge for energy-producing companies and regions, many of which are struggling to cur- tail output enough to stabilize prices. With analysts projecting am- ple supplies of natural gas ahead, futures prices earlier this month fell to their lowest level in almost four years. They have since rebounded to about $1.90 a million British thermal units but remain down roughly 30% in the past year, benefiting the nearly half of U.S. households that are heated primarily with the fuel. Meanwhile, with oil also falling, the average price of a regu- lar gallon of gasoline recently dropped below $2.40 to its lowest point in a year, per price- tracking firm GasBuddy. IHS Markit Ltd.’s Oil Price Informa- tion Service estimates that the average U.S. household con- sumes 100 gallons of gasoline a month, so a 45-cent decline like the one registered in the past nine months would result in an- nual savings of $540. “You just don’t feel that tightness,” said Brian Maier, 38 years old, who lives in Colum- bus, Ohio. Mr. Maier, the beer buyer for

BYAMRITHRAMKUMAR

Lower Fuel Prices Aid Consumers

More affordable natural gas has helped retiree Leonore Barfield heat her Raton, N.M., home this winter.

RAMSAY DE GIVE FOR THE WALL STREET JOURNAL

LNG exporters, includingFree- port LNG Development LP andCheniere EnergyInc. From 2016 through 2019, U.S. suppliers reached 19 long- term deals with foreign buyers, covering 24 million tons of LNG a year, S&P Global Platts data show. That total excludes a deal between Exxon Mobil Corp. and Qatar that amounted to a sharing agreement between production partners. “The low-price environment makes it very difficult to sign long-term deals, and the market is evolving into a more com- moditized market,” said Robert Fee, Cheniere’s vice president of international affairs and com- mercial development. “Yet there is still a clear role for long-term contracts. Some buyers may see this as an opportu- nity to lock in low prices.” The Trump administration has championed LNG export deals in trade talks, with for- mer Energy Secretary Rick Perry and other officials tout- ing the potential of “freedom gas” and “molecules of freedom” to help Europe and Asia reduce dependence on Russian and Middle Eastern sources. U.S. officials have aggressively pursued LNG agreements with countries including China, India, Poland and Ukraine. Thus far, however, fewer concrete deals have emerged since Mr. Trump took office. Three out of four nonbinding LNG agreements the Trump administration an- nounced with China subse- quently fell apart, and that was before a U.S. trade war with China disrupted Ameri- can LNG flows to the country. As he makes his first official visit to India this week, Mr. Trump will be joined by Commerce Secretary Wilbur Ross and Energy Secretary Dan Brouillette, among other officials, according to a senior administration official. The trip will focus on economic

Continued from page B1

Exporters of

Natural Gas

Struggle

Freeport LNG is planning to expand existing U.S. facilities.

FREEPORT

Wearepleasedtoannouncethat

Justin Gmelich

Randy Stuzin

havebeennamedMembersofourFirm.

KINGSTREETCAPITALMANAGEMENT NewYork•London•Singapore•Tokyo•Charlottesville

KING STREET

®

c

The Wall St.Journal 24Feb2020

c

Get our desktop app

Company

Features

Documentation

Resources