Jun 18, 2018
The Daily Chase: Oil extends declines; Baytex, Raging River to combine
By Noah Zivitz
Oil is extending losses this morning after falling almost three per cent on Friday. Seems to be plenty of uncertainty about what the outcome of Friday’s OPEC meeting will be. The latest reporting by our Bloomberg News partners indicates the cartel is considering raising daily output by as much as 600,000 barrels per day. The benchmark oil price has slumped almost 13 per cent since this year’s peak of US$72.83 in late May. The discount on Western Canadian Select, meanwhile, has widened to ~US$18 per barrel.
US$100 OIL CALL
BNN Bloomberg regular Eric Nuttall is making the case for crude to hit US$100 per barrel by 2020. Ultimately, as far as Nuttall is concerned, it comes down to simply supply-demand dynamics and that leads him to predict “100% upside in energy stocks. This represents the most compelling investment opportunity that we have seen in our 15+ year career,” he wrote in a recent note to clients. Nuttall joins us at 8:30 a.m. ET. Should point out Ninepoint Energy Fund has outperformed the energy group this year (+6.3 per cent vs -2.9 per cent)
BAYTEX-RAGING RIVER UNITE
We’ve got a deal in the oil patch. Baytex Energy and Raging River Exploration announced today they’re teaming up. The deal will see Raging River shareholders receive 1.36 Baytex shares for each RRX share held. Raging River CEO Neil Roszell will be chairman of the merged entity, and Baytex boss Edward LaFehr will serve as CEO. The deal has to be approved by both companies’ shareholders and there’s a two-way $50-million break fee. BNN Bloomberg's Andrew Bell will dig into the rationale for combining.
STOCKS SLUMP
Global stocks are falling in the aftermath of Friday’s U.S.-China tariff tit-for-tat, but it’s by no means a washout. Most major European indices are trading one per cent lower and futures are pointing to a modest fall at the start of trading in New York. At this point it’s a matter of waiting to see if the world’s two largest economies can walk back from the edge before the first wave of tariffs kicks in on July 6.
OTHER NOTABLE STORIES
-Magna International is stretching its vehicle assembly footprint, announcing today it's planning two joint-ventures in China.
-BHP spin-off South32 is buying Arizona Mining for $1.8 billion in cash. Per share offer is $6.20, a 50 per cent premium to AZ’s closing price Friday on the TSX.
-We’ll keep an eye on Walt Disney Co. shares today after 'Incredibles 2' laid claim to a record debut for an animated film this weekend. The film generated $231.5 million globally, according to Comscore.
-The Bank for International Settlements is essentially shrugging off cryptocurrencies as an alternative to standard money, in no small part due to challenges associated with scaling up. See the report here: https://www.bis.org/publ/arpdf/ar2018e5.pdf
-Ontario was conspicuous in its absence from an advisory late Friday for Quebec and California’s joint carbon emission allowance auction on Aug. 14. The decision to make it a two-jurisdiction event comes after Ontario Premier-Designate Doug Ford said his first act will be to scrap the province’s cap-and-trade program.
-Lululemon said today all profit from in-store and online sales on June 21 will be donated to non-profits supporting access to yoga and meditation programs.
-AutoCanada is launching a review of strategic alternatives, likely not coincidental to an activist’s call last week for the company to put itself up for sale.
NOTABLE RELEASES/EVENTS
-11:30 a.m. ET: Alberta Premier Rachel Notley makes changes to her cabinet and holds media avail in Edmonton
-1:00 p.m. ET: Bank of Canada Deputy Governor Lynn Patterson delivers speech in Toronto (remarks on bank's website at 12:45 p.m. ET)
Every morning BNN's Managing Editor Noah Zivitz writes a ‘chase note’ to BNN Bloomberg's editorial staff listing the stories and events that will be in the spotlight that day. Have it delivered to your inbox before the trading day begins by heading to www.bnnbloomberg.ca/subscribe.
