Suncor
Cuts Capex By $1 Billion, Fires 1000, Implements Hiring Freeze - (www.zerohedge.com) Suncor
Energy Inc. announced today significant spending reductions to its 2015 budget
in response to the current lower crude price environment. The cuts include
a $1 billion decrease in the company's capital spending program, as well as
sustainable operating expense reductions of $600 million to $800 million to be
phased in over two years offsetting inflation and growth. "Our integrated
model and strong balance sheet have positioned us well for the price
downturn," said Steve Williams, president and chief executive officer.
"Cost management has been an ongoing focus, with successful efforts to
reduce both capital and operating costs well underway before the decline in oil
prices. However, in today's low crude price environment, it's essential we
accelerate this work. Today's spending reductions are consistent with our
commitment to spend within our means and maintain a strong balance sheet. We
will monitor the pricing environment and take further action as required."
Suncor is implementing a number of initiatives to achieve the cost reduction
targets. These include deferral of some capital projects that have not yet been
sanctioned, such as MacKay River 2 and the White Rose Extension, as well as
reductions to discretionary spending. Budgets affecting the company's safety,
reliability and environmental performance have been specifically excluded from
the cost reduction program. Suncor has also implemented a series of workforce
initiatives that will reduce total workforce numbers in 2015 by approximately
1000 people, primarily through its contract workforce, in addition to reducing
employee positions. There will also be an overall hiring freeze for roles that
are not critical to operations and safety.
Copper
Tumbles Most in Six Years Amid Commodity Collapse - (www.bloomberg.com) Copper
tumbled the most in almost six years as it followed other metals lower amid a
collapse in commodities. Lower energy costs and demand weakness amid
worse-than-expected economic data in China are driving prices down, according
to Goldman Sachs Group Inc. Consumption in the world’s biggest user will grow
at the slowest pace since at least 2009, Deutsche Bank AG estimates. Prices
slumped as much as 8.6 percent in London today and fell by the daily limit in
Shanghai. Commodities have sunk to the lowest level in more than 12 years, led
by a rout in energy prices, after a decade-long bull market led producers to
boost output and a stronger dollar diminished their allure to investors. Oil’s
60 percent decline since last year’s peak is cutting costs for mining companies
and bolstering speculation the glut will worsen. Copper is the worst performing
non-energy raw material this year on the Bloomberg Commodity Index, which fell to the lowest since August 2002.
Oil
Collapse of 1986 Shows Rebound Could Be Years Away - (www.bloomberg.com) The
last time excess supply caused a plunge in oil, it took almost five years for
prices to recover. The CHART OF THE DAY shows how West Texas Intermediate, the
U.S. oil benchmark, tumbled 69 percent from $31.82 a barrel in November 1985 to
$9.75 in April 1986 when Saudi Arabia, tiring of cutting output to support
prices, flooded the market. Prices didn’t claw back the losses until 1990. Oil
has dropped 57 percent since June and OPEC members say they’re willing to let
prices sink further. Surging prices in the 1970s led to the development of the
North Sea and Alaska oil fields. OPEC members also increased capacity, leaving
the Saudis to trim output when demand softened.
Treasury
Bond Yield Drops to Record Low Amid Fear of Global Deflation - (www.bloomberg.com) Treasury 30-year bonds yields are tumbling to
record lows as the collapse in oil and commodity prices smothers inflation and
hampers global economic growth. Global sovereign yields fell to records in the
U.K., France,Canada and Japan as a report showed retail sales in
the U.S. slumped in December by the most in almost a year, reflecting a
broad-based retreat that may prompt economists to cut growth forecasts. The
slide prompted traders to push back expectations for the timing of the first
Federal Reserve interest-rate increase into December less than a month after
speculating that rates could rise as soon as April. “The Fed’s between a rock
and a couple of hard places.” said Daniel Fuss, Boston-based vice chairman at
Loomis Sayles & Co., who helps manage the $24.5 billion Loomis Sayles Bond
Fund and has been in the securities business since 1950. “The savings flows go
toward safety and return, and the U.S. Treasury market has both.” Even at the
record low yield of 2.39 percent reached today, 30-year Treasuries are
attractive to global investors looking at negative returns on the sovereign
debt of nations including German with the European Central Bank expected to add to its bond-buying
program as policy makers seek to avert deflation.
Freeport
Leads Plunge in Mining Stocks After Copper Slump - (www.bloomberg.com) Freeport-McMoRan Inc. (FCX), the largest publicly traded copper producer,
and other suppliers of the metal plunged after the metal fell the most in six
years. Freeport declined 9.5 percent to $19:05 at 9:51 a.m. in New York and
traded at the lowest since April 2009. Glencore Plc (GLEN), the third-biggest producer, dropped 12
percent in London and First Quantum Minerals Ltd. slid 27 percent in Toronto. The
world’s largest mining companies have already been hurt by a slide in
commodities, with steep drops in iron ore, coal and oil as a supply glut
collides with sluggish demand. Copper on the London Metal Exchange
tumbled as much as 8.7 percent today, undermined by worse-than-expected
economic data in China,
according to Goldman Sachs Group Inc. Consumption in the country, the biggest
user of the metal, will grow at the slowest pace since at least 2010, Deutsche
Bank AG estimates.
4
Reasons Warren Buffett Should Fear Oil's Plunge (and a Few Reasons He'll Like
It) - (www.bloomberg.com)
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