TORONTO (Bloomberg) — Early last year, Jean-Guy Desjardins correctly predicted that Canadian equities were due for a rebound. He’s now saying oil prices will double, taking energy stocks along for the ride.
“The fundamentals of the global supply-demand relationship are favoring higher oil prices,” Desjardins, CEO of Fiera Capital Corp., said in an interview in Toronto on Thursday. “When it goes up it’s going to go up for an extended period of time. I think it can go back to $90, not in six months but over a couple of years.”
That’s way more bullish than most analysts, with the median forecast in a Bloomberg survey calling for $65 crude in 2020 from $45 now. Still, Desjardins believes global central banks will keep some amount of stimulus as their economies recover, boosting demand for crude.
His method to prepare for this outcome is to buy up relatively cheaper Canadian shares. Desjardins last February had called the bottom of the S&P/TSX Composite Index, which met his forecast by rising 18% in 2016. This year, however, it’s dropped about 1% as oil prices languish while the S&P 500 has gained more than 8%.
“You’re better off being overweighted in Canadian equities today than being overweighted U.S. equities,” he said.
Montreal-based Fiera — which had C$122.1 billion ($92 billion) in assets under management as of March 31 making it Canada’s third-largest independent asset manager — is hoping to increase it to C$200 billion by 2020. To get there, Desjardins said the company will need to add about C$25 billion through strategic acquisitions, in addition to organic and market-value growth.
Some 16 potential acquisitions are being considered — 10 in the U.S., four in Canada and two in Europe — targeted at fixed-income managers focusing on emerging markets, U.S. taxable assets and Canadian alternative assets.
Desjardins said his preference is to stick to North America, but he’s open to doing a deal in Europe or Asia if it’s an “exceptional opportunity.” Fiera made its first foray into Europe with last year’s acquisition of London-based Charlemagne Capital Ltd., which specializes in emerging and frontier markets.
Emerging markets are being watched because they’re seen as beneficiaries of the current global economic cycle.
“I think emerging markets are at the beginning of an upward cycle under the impact of a growing global economy,” he said. “I feel pretty good saying two years but I could almost say four years before we possibly go into recession.”
June 15, 2017
Update on proposed acquisition
15 June 2017
Diversified Gas & Oil PLC
(“DGO” or the “Company”)
Update on proposed acquisition of certain gas and oil assets of Titan Energy, LLC
Share placing to raise $35.0m (the “Placing”)
Restoration of trading on AIM
Diversified Gas & Oil PLC (AIM: DGOC), a US based gas and oil producer, is pleased to confirm that it has finalised the agreement to acquire certain gas and oil assets of Titan Energy, LLC (“Titan Assets”) which was announced on 5 May 2017 (the “Acquisition”). Details of the Acquisition will be set out in a new Admission Document and Circular to Shareholders which is expected to be published by not later than 7.00am on 16 June 2017 (the “Admission Document”).
As announced previously, the Titan Assets comprise certain producing gas and oil wells, close to DGO’s existing operations in the Appalachian Basin in the eastern United States, principally in the states of Ohio, Pennsylvania, southern New York and northeast Tennessee.
Daily gas production from the Titan Assets is approximately 12,500 gross boepd (6,550 net boepd) and oil production is 380 gross bopd (266 net bopd). The Acquisition will more than triple DGO’s gross gas production to approximately 17,367 boepd, and will increase gross oil production by 69% to approximately 930 bopd. Overall gross production will increase from approximately 5,400 boe to 18,300 boe. The Titan Assets will be immediately accretive to cash and earnings.
The cash consideration for the Acquisition is $84.2 million (approximately £66.1 million) (subject to adjustment in accordance with the terms of the agreement for the Acquisition). This will be funded by a new $110 million Senior Secured Loan Facility (the “Loan Facility”) and the Placing. Mirabaud Securities LLP has placed 39.3 million new ordinary shares (the “Placing Shares”) at 70p per share with certain existing and new institutional investors to raise $35.0 million (£27.5 million). The Placing will take place in two tranches. 11.4 million firm Placing Shares have been placed to raise $10.1 million. The remaining 27.9 million conditional Placing Shares are placed conditional on approval by Shareholders.
Notice of a Shareholder meeting to seek approval for the Acquisition and authority for the conditional Placing Shares will be sent to Shareholders later today. The Shareholder meeting will be held at 11.00am on 30 June 2017.
Full details of the Loan Facility and the Placing will be set out in the Admission Document.
Following publication of the Admission Document the Company anticipates that the suspension of trading in the Company’s shares will be lifted and that trading in the Company’s existing ordinary shares will recommence at 8.00am on 16 June 2017.
LONDON (Bloomberg) — The oil guru who predicted the market rout in 2014 said OPEC and its allies should have gone much further when they extended their supply deal last month.
“They should have cut another million barrels a day for ninety days in order to drain the system,” said Gary Ross, global head of oil at PIRA Energy, a forecasting and analytics unit of S&P Global Platts.
For Ross, the producers missed an opportunity to deepen cuts between June and August when refinery demand is higher and so accelerate the decline in inventories. Such a move would have pushed the market into backwardation, when near-term prices are higher than those for later months, he said. That structure favors OPEC because it would discourage their shale-oil rivals from locking in prices for future production.
“If that was really their objective, then they should have cut during this window of maximum crude runs to accelerate,” he said.
OPEC, and partners led by Russia, re-upped their agreement on May 25, agreeing to maintain curbs of as much as 1.8 million barrels a day until next March. Yet benchmark crude prices have since slid toward $47 a barrel, and the International Energy Agency said Wednesday that the cuts are only slowly diminishing global stockpiles.
Ross’s view was echoed by analysts at Sanford C. Bernstein Ltd., who said OPEC needs to cut deeper for longer to restore inventories to normal levels. “OPEC needs to drain by 34 million barrels a month or 1 MMbpd for the next 10 months,” the analysts wrote in a note. “This looks challenging.”
Ross also warned that Chinese crude-demand growth is set to decrease in the second half of this year. “That poses a real problem for OPEC as they enter 2018,” he said.
Ross lowered his forecast for benchmark Brent crude to $50-$55/bbl by year-end, he said Wednesday. In early February, he expected Brent would be trading near $60-$65/bbl by now and reach as much as $70 by year-end.
Although the market is rebalancing, the surplus isn’t reducing at the rate OPEC had hoped and will still be at 150 to 200 MMbpd by year-end, Ross said. That’s partly because crude production is increasing in Libya and Nigeria — OPEC members that are exempt from curbing output because of internal turmoil.
In November, two weeks before OPEC decided to implement curbs, Ross predicted an agreement could eliminate most of the surplus stocks by the beginning of the second half of this year.
Manchester, London, The Election, Grenfell Tower.
What price complacency?
What price a human life?
The government’s building safety experts warned last year that the drive for greater energy efficiency meant more and more buildings are being wrapped in materials that could go up in flames.
In a report compiled before the Grenfell Tower disaster on Wednesday, the Building Research Establishment, which works for the Department of Communities and Local Government on fire investigations, said attempts to innovate with insulation were leading to an “increase in the volume of potentially combustible materials being applied” to buildings.
Construction and fire experts increasingly fear that the cladding system applied to Grenfell Tower may have been instrumental in spreading the fire. The system was installed to improve the thermal efficiency of the building and improve its appearance.
Investigations are also focused on gas pipes in the stairways and lobbies recently installed by National Grid, which residents had complained had not been boxed in with fire retardant material despite assurances they would be.
London fire brigade said on Thursday a gas main inside the block had ruptured, causing firefighters to work through Wednesday night to isolate it.
There is also uncertainty over how the project’s adherence with building regulations was scrutinised. The Royal Borough of Kensington and Chelsea, where Grenfell Tower is situated, said a “full plans decision notice was not required in this case” and that “a completion certificate was issued” instead.
According to the government’s website, a full plans decision notice is “the most thorough option”, but this was not taken. Neither the borough nor the cladding contractor, Harley, responded when asked to comment on why this route was not taken.
The Reynobond cladding applied to the Grenfell tower last year as part of a £10m refurbishment is made from powder-coated aluminium panels that are usually filled with plastic insulation, which is flammable.
As detailed on the planning application, fire barriers were due to be inserted between the cladding on each floor to limit the spread to small melt out areas. But Dr Jim Glocking, technical director at the Fire Protection Association, said its own tests on external thermal insulation cladding systems showed that if these barriers are breached by a vent or a pipe, “a chimney effect may quickly develop that will cause the very rapid consumption of the insulation and expansion of the damage area”.
Geoff Wilkinson, managing director of Wilkinson Construction Consultants, said the hole could be relatively modest in size, adding: “Even a drill hole of four inches in diameter can be enough.”
During planning in 2012, the building service engineering company Max Fordham advised that one option in the refurbishment was to remove “fire stopping” systems temporarily in order to install new heating pipes. It is unclear if that approach was taken and Max Fordham did not return request for comment.
The cladding contractor, Harley, declined to comment on how the system was built out – citing the forthcoming investigation and public inquiry. But it is understood the design differed to that which was detailed in planning documents. Investigators are likely to want to quickly establish whether details such as cavity fire barriers, which appeared in planning drawings, were included.
Rydon, the main contractor, said in statement the project “met all required building regulations – as well as fire regulation and health and safety standards – and handover took place when the completion notice was issued by Royal Borough of Kensington and Chelsea building control”.
Rydon chief executive Robert Bond said: “I will do all I can to assist in this investigation in order to establish what caused this tragedy. In light of the public inquiry, we cannot make any further comment at this time.”
Ipswich firm Celotex confirmed it provided insulation materials for the refurbishment. The material has the most stringent “class 0” fire rating in building standards regulations but independent tests on the material used to make it, polyisocyanurate, show that in intense fires it can release lethal hydrogen cyanide fumes and can be rapidly fatal.
Public Health England moved to dampen fears about ongoing poisons in the air and a spokeswoman said there was “minimal wider risk to public health as a result of the smoke plume”. She said all smoke is toxic and could have affected those close to the scene but that no additional or unusual chemical fumes had been detected.
At least one other London tower block has been refurbished using the same Reynobond aluminium cladding system used on Grenfell Tower. A planning application to renovate Clements Court in Hounslow, which has 13 storeys, was made in 2008. Planning application documents filed with the council detail plans to provide the building with a rainproof cladding, using the Reynobond brand of panels.
One architect, who has used similar systems, said cladding panels are also available with mineral wool insulation, which are less flammable but more expensive.
“I only use the mineral wool ones because your gut tells you it is not right to wrap a building in plastic,” he told the Guardian.
As far back as 2000, Gordon Cooke – a leading fire safety consultant – warned in a report commissioned by the mineral wool industry “the use of plastic foam cored sandwich panels … is difficult to justify when considering life safety”.
He said the panels “can contribute to the severity and speed of fire development” and said this has led to “massive fire loses” in the past.
…and the revenge of George Osbourne