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An oil pump jack operates at the Inglewood Oil Field in Culver City, California, U.S., on Sunday, July 11, 2021.
Kyle Grillot | Bloomberg | Getty Images

LONDON — Oil and gas majors are likely to report bumper second-quarter earnings in the coming days, energy analysts have told CNBC, following a brutal 12 months by virtually every measure.

The expected upswing would build on a surprisingly strong showing in the first quarter and lend further support to the oil and gas industry’s efforts to pay down debt and reward investors.

“Big Oil” companies, referring to the world’s largest oil and gas majors, still face significant challenges and uncertainties, however.

These include the remarkable success of shareholder activism in recent months, a “tremendous degree” of ongoing investor skepticism and intensifying pressure to massively reduce fossil fuel use in order to meet the demands of the climate emergency.

“Europe’s integrated oil sector already enjoyed surprisingly strong earnings in 1Q, but 2Q is set to show further improvement as commodity prices took another step up,” analysts at Morgan Stanley said in a research note.

International benchmark Brent crude futures rose to an average of $69 a barrel in the second quarter, the Wall Street bank said, up from an average of $61 in the first three months of the year. The oil contract was last seen trading at around $73.57.

Oil companies that ignore climate in their earnings calls will be seen as laggards. Long-term investors will conclude they are financially risky.
Kathy Hipple
Finance professor at Bard College

Analysts at Morgan Stanley noted that energy major share prices continue to be anchored by their dividend distributions. Notwithstanding substantial increases to free cash flow forecasts, the bank said Big Oil dividend expectations remain “rather static.”

“The energy transition confronts investors with much uncertainty, and the sector’s capital allocation track record has been mixed at best over the last decade. Hence, investors are only valuing the cash flow paid to them, with little credit given for cash flow retained within companies,” they said.

“As the dividend outlook has not improved much, and dividend yields in aggregate are already low by historical standards, share prices have trailed the earnings outlook considerably.”

In Europe, Royal Dutch Shell and TotalEnergies will report second-quarter earnings on July 29, with BP scheduled to follow on Aug. 3. Stateside, ExxonMobil and Chevron are expected to publish their latest figures on July 30, while ConocoPhillips will report second-quarter earnings on Aug. 3.

Fuel prices on a sign at a BP gas station in Louisville, Kentucky, on Friday, Jan. 29, 2021.
Luke Sharrett | Bloomberg | Getty Images

Rene Santos, manager for North America supply at S&P Global Platts Analytics, told CNBC via email that he expects second-quarter earnings from U.S.-based energy companies to be “significantly higher” when compared to the same period in 2020.

This is “mainly due to much higher oil prices,” he added. “In addition, the majors, large and mid-cap companies have kept capital discipline and have continued to focus on paying down debt and increasing free cash flow instead of increasing activity [drilling and completion] despite higher oil prices.”

Santos said S&P Global Platts Analytics also foresee an increase in the reporting of ESG activity, noting that it “looks like pressure from environmental groups and fear of more regulations from the current administration is persuading many companies to do more to decrease emissions.”

Growing climate risk

The oil and gas industry was sent into a tailspin last year as the coronavirus pandemic coincided with a historic fuel demand shock, plunging commodity prices, unprecedented write-downs and tens of thousands of job cuts. The torrent of bad news prompted the head of the International Energy Agency to suggest it may come to represent the worst year in the history of oil markets.

Oil prices have since rebounded to multi-year highs and all three of the world’s main forecasting agencies — OPEC, the IEA and the U.S. Energy Information Administration — now expect a demand-led recovery to pick up speed in the second half of 2021.

Clark Williams-Derry, energy finance analyst at IEEFA, a non-profit organization, said he expects oil and gas companies to try to claim a clean bill of health after a bumper second quarter. “That’s the mantra that we will hear,” he told CNBC via telephone.

However, while energy majors will likely have had the opportunity to pay down some debt after generating a significant chunk of cash from their operations, Williams-Derry said that this hides the fact that these companies have not invested much in future production.

Members of the environmental group MilieuDefensie celebrate the verdict of the Dutch environmental organisation’s case against Royal Dutch Shell Plc, outside the Palace of Justice courthouse in The Hague, Netherlands, on Wednesday, May 26, 2021. Shell was ordered by a Dutch court to slash its emissions harder and faster than planned, dealing a blow to the oil giant that could have far reaching consequences for the rest of the global fossil fuel industry.
Peter Boer | Bloomberg | Getty Images

“What I think the market is starting to signal is that it kind of likes when the oil companies shrink and aren’t going all out into new production but they are using the cash that their operations are generating to pay down debt and reward investors.”

Longer term, Williams-Derry warned there’s a “tremendous degree” of investor skepticism about the business models of oil and gas firms, citing the deepening climate crisis and the urgent need to pivot away from fossil fuels.

“We saw earlier in the year signs of a sea change in investor thinking about, frankly, the legal status of some of the supermajors,” he said, referring to a series of landmark courtroom and boardroom defeats for the likes of Royal Dutch Shell, ExxonMobil and Chevron.

“So, even if you are riding high for a quarter or two when prices are high, the reality is still that stock prices are way below the market as a whole and there’s just not the investor enthusiasm for the old business model that I think these companies probably expected to see,” he said.

Energy transition

Kathy Hipple, finance professor at Bard College in New York, told CNBC via email that she believes two key themes are likely to emerge this earnings season: Addressing investor concerns around climate risk and the outlining of new business models to survive a pivot toward renewables.

“Investors are future-oriented and will look past a short-term pop in earnings compared to last year’s dismal second-quarter results,” Hipple said. “They want to see concrete business strategies that acknowledge the energy transition that is gathering speed.”

She argued it was important to note that these earnings will be announced “against a backdrop of climate disasters around the globe,” from extreme heat in the Pacific Northwest to flooding in Europe and China.

“Oil companies that ignore climate in their earnings calls will be seen as laggards. Long-term investors will conclude they are financially risky,” Hipple said.

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Would you rather have one $50k EV or 50 of these $1k Chinese electric cars

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Would you rather have one k EV or 50 of these k Chinese electric cars

Panning for gold in Alibaba’s electric vehicle catalog is bound to find some real doozies, such as this week’s Awesomely Weird Alibaba Electric Vehicle of the Week. Meet this fun little purple three-wheeled electric car that barely manages to fulfill the requirements of a car.

The “Minitype 3 Seater Passenger Electric Passenger Tricycle” is quite a mouthful of a name, but what’s really important here are the specs.

With a single driver’s seat up front and a narrow bench in back, there is theoretically space for three souls aboard this thing. There’s no steering wheel up front, though. Instead, drivers operate the handlebar that controls the front wheel through a fork instead of traditional automotive linkage to two wheels. Think of it like an enclosed tuk-tuk.

That’s probably fine based on the rather low performance of the machine, reaching just 40 km/h (25 mph) and likely taking its sweet time to do so.

It may not seem spacious, but this is one of those “the seats go aaaalllllllllll the way back” kind of cars. Or at least, the one seat.

I’m not sure what kind of freedom or bonus points that buys you, unless your date is super into trikes. But let’s just say that the car is doing everything it can to be a good wingman for you.

If you can’t pick up chicks in this babe magnet, then you’re obviously doing something wrong.

The coolest part about this thing though is the price. Sure, if you try to buy just a single car then it’s a bit expensive at US $1,200. But if you’ll take 15 units then you can knock that price down to $1,100. An order of up to 49 gets you down to an even $1,000.

So which would you rather have? One $50k electric car or 50 $1k electric cars? Well let me answer that for myself with another question. How easy is it to start a Chinese EV racing league in your backyard track with just one $50k EV?

Ok, jokes aside, please don’t anyone try to actually order one of these. This glorified mobility scooter is likely sans batteries for that price, plus you’ll absolutely spend several times the supposed purchase price just to try and get it shipped out of China.

Then there’s the wrinkle of these not being street-legal anywhere outside of China, and potentially not even there.

So let’s just enjoy them from the safe distance of our computer screens, shall we? In the meantime, I’ll appreciate even more the electric mini-truck I actually DID buy from China.

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GE scraps plans to make giant 18 MW offshore wind turbines

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GE scraps plans to make giant 18 MW offshore wind turbines

GE Vernova is abandoning plans to supersize its offshore wind turbines and will instead focus on rolling out smaller “workhorse” turbines.

In March of last year, GE Vernova CEO Scott Strazik said during a GE Investor Conference that the market was receptive to larger variants of the company’s Haliade-X offshore wind turbines: “Now we are getting a very positive reception from the market with our 17 to 18 MW Haliade-X variant off of what we’re shipping this year.”

However, GE Vernova has decided to shelve that idea for the future. Parent company GE writes in its US Securities and Exchange Commission EX-99 that its Haliade-X platform has included “offerings available from 12 MW to 18 MW with estimated capacity factors ranging from 60% to 64%.” It continued:

One Haliade-X 13 MW turbine can power the equivalent of up to 16,000 European homes.

…We believe the future of our offshore wind business will be the Haliade-X 15.5 MW-250, a workhorse product.

The company made project losses in its offshore wind business last year. It expects margins to remain challenged in 2024 as it executes its Haliade-X backlog, “which will require significant cash use and working capital.” However, GE anticipates working capital dynamics and margins to improve beyond 2024.

The 800 MW Vineyard Wind I project off the Massachusetts coast consists of GE’s 13 MW Haliade-X turbines.

Read more: 5 wind turbines just came online at Massachusetts’ first offshore wind farm


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Jeep’s first EV will land in the US as early as July, electric Wrangler-like Recon to follow

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Jeep's first EV will land in the US as early as July, electric Wrangler-like Recon to follow

The first all-electric Jeep could be delivered to US customers as soon as July. According to new CEO Antonio Filosa, production of Jeep’s first EV, the Wagoneer S SUV, is expected to begin in Q2. Deliveries could happen as soon as the third quarter. Jeep’s CEO also confirmed we may see the electric Wrangler-like Recon launch by the end of the year.

The first Jeep EV could reach US buyers as early as Q3

After slashing prices amid slumping sales Friday (including up to $4K on its best-selling Grand Cherokee), Filosa admitted more needs to be done to fend off incoming competition.

Jeep is facing new rivals like the Rivian R1S, which was the seventh best-selling EV in the US last year. Volkswagen’s off-road Scout brand is also set to launch its first EVs soon.

Jeep’s first EV in the US, the Wagoneer S SUV, is expected to enter production in the second quarter. Filosa said the first deliveries could happen as early as the third quarter. Ahead of its official launch, Jeep is hyping the electric SUV with new teasers.

You can see Jeep’s iconic design evolving as it shifts to electric. Jeep claims the Wagoneer S will be “lightning fast,” packing 600 hp for a 0 to 60 mph sprint in 3.5 seconds.

Jeep-Wagoneer-S-leaked
Jeep Wagoneer S electric SUV teaser (Source: Jeep)

It will be the first EV based on parent company Stellantis’ new STLA Large platform. Jeep aims for around 400 miles range, rivaling Rivian’s R1S.

Jeep also showed the first glimpse of the EV’s interior, which has plenty of buttons and digital screens. You can see a custom driver control center with Jeep’s signature Selec-Terrain toggle.

It also includes a standard dual-pane panoramic sunroof and a premium 19-speaker McIntosh audio system.

Jeep’s electric Wrangler-like Recon launching soon

Filsosa confirmed Jeep’s electric Wrangler-like Recon could launch by the end of the year, although the timing is still unclear.

We’ve already seen a sneak peek of the Recon Moab 4xe after images leaked out of a dealer event in Las Vegas.

Jeep's-electric-Wrangler-like-Recon
Jeep Recon Moab 4xe (source: Jeep Recon Forum)

The Recon will be a “rugged and fully capable electric SUV” inspired by the off-road Jeep Wrangler. Previous head of Jeep North America, Jim Morrison, said the Recon EV “has the capability to cross the mighty Rubicon Trail.” Not only that, it will “reach the end of the trail with enough range to drive back to town and recharge,” Morrison claimed.

Jeep's-electric-Wrangler-like-Recon
2024 electric Jeep Recon (Source: Stellantis)

Filosa confirmed the Recon will also be based on the STLA Large platform, suggesting at least 600 hp is likely.

The platform serves between 85 and 118 kWh battery pack options with up to 500 mi (800 km) range for sedans. It will also come with 400V and 800V options.

Stellantis claims the platform includes “extreme power,” claiming it will “outperform any of the existing Hellcat V-8s.” More powerful models can sprint from 0 to 62 mph (0-100km/hr) in the 2-second range, according to Stellantis.

According to the new UAW agreements, an electric Jeep Wrangler is also expected to launch, but not until 2028. Jeep’s best-selling Grand Cherokee will also get an all-electric option around 2027.

Source: Detroit News

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