The Times - UK (2022-03-15)

38 Tuesday March 15 2022 | the times

Business

as of Friday, up 261 on the same point in

2021.

Until recently, few industry experts

believed that US oil production would

ever return to its pre-coronavirus

levels. “Even last year, the majority of

large producers were saying that we

would never see pre-Covid [output]

records in future,” Artem Abramov,

head of shale research at Rystad

Energy, a consultancy, said. As it stands,

though, records that a matter of

months ago seemed untouchable could

be toppled this year. Rystad, which

already had forecast growth of 900,000

barrels per day in American output in

2022, is now predicting a further in-

crease of up to 600,000.

Oil production is not the only thing

on the rise. Shares in America’s top

shale operators, which tumbled two

years ago, rose sharply as Putin’s forces

prepared to invade Ukraine. Conoco-

Phillips’ stock has climbed by more

than a third since the start of this year,

while shares in Chesapeake Energy and

Continental Resources are up by a fifth.

Some producers, given their strug-

gles of the recent past, are under-

standably wary of stepping up pro-

duction beyond their previous plans.

Persisting labour shortages and supply

constraints abound. Demand remains

variable. Above all, drilling and frack-

ing — or hydraulic fracturing, the pro-

cess by which a mix of water, sand and

chemicals is injected into the ground

under high pressure, breaking up shale

rock and releasing the gas held within

— are expensive. Long before the pan-

demic, Wall Street was demanding

spending cuts and greater returns.

Grappling with record petrol prices

across the US, the White House is

impatient. Yet so far Biden, on a mission

to decarbonise the world’s largest eco-

nomy by 2050, has shown little interest

in building bridges with its oil industry.

The president bluntly dismissed sug-

gestions that his policies were holding

back domestic production as “simply

not true” during a live television

address last Tuesday.

Calls from the sector for greater

support have fallen on deaf ears. Oper-

ators already have about 9,100 unused

permits to drill on federal land, Biden

FTSE Russell Indices, with NB Private

Equity Partners and Standard Life

Private Equity Trust promoted to the

FTSE 250 to take Evraz and Polymetal’s

places.

Evraz is a steel group that is part-

1

Fears are growing that

lockdowns in China to tackle a

sharp rise in coronavirus cases

are set to disrupt shipping from

one of the world’s biggest ports

and will cause shortages to ripple

through global supply chains.

Chinese markets tumbled after

authorities imposed a one-week

lockdown on Shenzhen. Page 37

2

Investors are betting on a

Russian default on its foreign

creditors for the first time

since the Bolshevik revolution

after the Kremlin warned that its

hamstrung treasury may resort to

servicing bonds in roubles. Page 37

3

The Royal Liver Building in

Liverpool, famed as the

entrance to the Mersey and

entrenched in popular culture

through the 1970s sitcom The Liver

Birds, is set to be sold for the

second time in its history, with a

price tag of £90 million. Page 37

4

With the war in Ukraine

having driven the price of

crude oil to its highest levels

since 2008, producers that only

two years ago had been pushed to

the brink are back on the march.

John Kilduff, partner at Again

Capital, an investment firm, said

that the “boom times” were about

to return for America’s shale oil

producers.

5

Four Russia-focused

companies have been

removed from the FTSE

indices after brokers shunned

dealing in them after the invasion

of Ukraine. — Evraz,

Petropavlovsk and Polymetal, the

metals and mining groups, plus

Raven Property Group, a property

investment group.

6

The number of reports to the

City regulator of alleged

cryptocurrency scams more

than doubled last year. The

Financial Conduct Authority had

6,372 alerts about suspected

crypto frauds in 2021. Page 40

7

Ford is to accelerate its efforts

to catch up in the race to build

electric vehicles, with seven

new zero-emission cars and vans

in Europe by 2024. However, the

news leaves a big question mark

over the future of its Dagenham

plant in east London. Page 42

8

The former boss of Wirecard,

the collapsed German

payments group, has been

charged with fraud and accounting

manipulation. The prosecutors’

office in Munich says Markus

Braun, 53, was part of a criminal

enterprise to inflate revenues by

using fake accounts. Page 42

9

Rio Tinto has made a

$2.7 billion offer to take

majority ownership of its

giant copper mining project in

Mongolia. The group made an all-

cash proposal to buy the 49 per

cent share it does not already own

of Turquoise Hill Resources, the

company that holds its interest in

the Oyu Tolgoi project. Page 44

10

Two British flexible office

providers are to merge,

creating a £1.5 billion

business targeting UK and

European domination of a sector

that has was buoyed by the

pandemic. The Office Group and

Fora want to expand in Britain

and on the Continent. Page 45

Need to know

America fires starting gun on

Putin’s invasion of

Ukraine has fuelled a

change in direction

from the White House,

reports Callum Jones

As Covid-19 swept the world, America’s

shale industry was brought to its knees.

An unprecedented slump in demand

drove the country’s oil price below

zero for the first time on record.

Dozens of operators filed for bank-

ruptcy protection.

What followed was a steep, pro-

tracted road to recovery — and then

Russia invaded Ukraine. Now, with the

conflict having driven the price of crude

to its highest levels since 2008, produc-

ers that only two years ago had been

pushed to the brink are back on the

march.

According to John Kilduff, partner

at Again Capital, an investment firm,

the “boom times” are about to return

for those producers. Oil’s rapid ascent

is “just too much of an allure not to

capitalise on. I don’t think that it’s un-

fair to say, if these prices last even

much longer, that there will be a gold

rush.”

A ban on Russian oil in the United

States and Britain’s commitment to

phase out all imports this year have

intensified supply fears that were

already fuelling an extraordinary rally.

Last week West Texas Intermediate,

the American benchmark oil price that

stooped as low as minus $40 in April

2020, hit $129.

President Biden, who faces a crucial

set of midterm congressional elections

in eight months’ time, is trying to per-

suade Americans that “Putin’s price

hike” is the reason they are digging

deeper than ever before to fill up their

cars. He knows that blame is rarely

apportioned far from the Oval Office

when voters are feeling the pinch at the

pump.

Jennifer Granholm, the US energy

secretary, made a stark appeal to oil

executives gathered in Houston, Texas,

last Wednesday. “We are on a war foot-

ing,” she declared at the CERAWeek

conference. “That means releases from

the strategic reserves across the world,

as we have done. That means you pro-

ducing more right now, where and if

you can.”

The last shale boom carried Amer-

ica’s oil output to a peak of 12.9 million

barrels per day before the pandemic.

Covid suppressed production to less

than 11 million barrels, but this has since

recovered to 11.7 million. The Baker

Hughes rig count, a key barometer of

activity across America’s oil sector, re-

ported that 663 rigs were in operation

Thousand barrels per day

2016 17 18 19 20 21 22

8,000

10,000

12,000

14,000

Source: US EIA

US crude production

8

1

1

Russian companies evicted from London indices

Four Russia-focused companies have

been removed from the FTSE indices

after brokers shunned dealing in them

because of the invasion of Ukraine.

Evraz, Petropavlovsk and Polymetal,

the metals and mining groups, plus

Raven Property Group, a commercial

property investment group, will be

removed from next week.

FTSE Russell, the division of the

London Stock Exchange Group that

provides the benchmark indices, said

that it was responding to feedback from

its external advisory committees and a

range of market participants.

Russell said it had been told that the

ability to buy or sell shares in the four

companies had been “severely restric-

ted due to major international broker-

age firms no longer supporting trading

of these securities and therefore there is

insufficient institutional liquidity and

market depth”.

This would prevent “index trackers

from replicating the ongoing inclusion

of these names within the FTSE Russell

indices”.

Evraz and Polymetal were both due

to be demoted from the FTSE 100

premier index to the FTSE 250 after a

sell-off in their shares since the

invasion, while Petropavlovsk was set

to be evicted from the FTSE 250 in the

quarterly reshuffle that takes effect

from Monday.

Instead, they will be deleted from all

owned by Roman Abramovich. Its

shares were suspended on Thursday

after the Russian oligarch was placed

under UK sanctions, and they remain

suspended.

Polymetal is a gold and silver miner

that operates in Russia and Kazakh-

stan. Yesterday it issued a statement

seeking to reassure investors that

trading in its shares continued. The

company said: “The recent exclusion of

Polymetal shares from the series of

FTSE equity indices does not impact

the company’s listing on the London

Stock Exchange.”

Petropavlovsk operates goldmines in

the far east of Russia, while Raven

Property Group specialises in renting

out warehouses near Moscow.

Emily Gosden Petropavlovsk share price

2017 18 19 20 21 22

0

10

20

30

40p

Source: Refinitiv