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Speaker 1: Global business news twenty four hours a days, Bloomberg dot Com,

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Speaker 1: the Radio plus mobile last and on your radio, This

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Speaker 1: is a Bloomberg Business Flash and I'm Karon Moscow. US

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Speaker 1: dock index future is a lower this morning. Let's go

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Speaker 1: to the First Word Breaking news desk for today's morning call,

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Speaker 1: and here's Bill Maloney. Good morning Bill, Good morning Karen.

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Speaker 1: US futures have paired some of their losses since the

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Speaker 1: last time we spoke down. Futures now lower by six

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Speaker 1: and nine points, says. The futures drop ten and as

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Speaker 1: a futures fall five. The US ten yield at one

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Speaker 1: point eight five percent and crew futures turn higher, now

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Speaker 1: at point five percent. Main upay markets have paired or

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Speaker 1: reverse their losses. Italy gains point three percent after de

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Speaker 1: Bellas night. Shake Shack expects same source sales to rise

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Speaker 1: two and a half to three percent in shares down

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Speaker 1: eight percent pre market, and Urban outfit Or ZP has

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Speaker 1: topped highest estimates shares up nine percent pre market. Regarding

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Speaker 1: airrings this morning, Dick sports few missed estimates. In other news,

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Speaker 1: Goldman Sachs warned the Commodis rally is premature and Qualcom

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Speaker 1: boosted It's dividend finally Summer Key Wall Shoot upgrades and downgrades,

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Speaker 1: BMO cut to neutral at Trade Sweets, Blossom Bear cut

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Speaker 1: to underperform at c l s A aut Nation, cut

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Speaker 1: to sell over at Goldman Sachs, Fall Spark cuts the

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Speaker 1: Second Way to Key Bank, Panara Bread rays to overweight

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Speaker 1: at Morgan Stanley with a price target of two fifty

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Speaker 1: and acting when cut your neutral over at Sunshrust Live

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Speaker 1: in the first Breaking news desk on Bill Maloney, Karen

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Speaker 1: thanks bail to hear live breaking news over your Bloomberg

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Speaker 1: type squawk go on your terminal. That's squ you a

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Speaker 1: w K go and that's a Bloomberg business flash. Tom

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Speaker 1: and Mike Karen, thanks so much. Bloomberg Surveillance this morning

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Speaker 1: brought you by Investco. Have you considered all of your

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Speaker 1: investment alternatives? Non traditional asset classes and strategies may help

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Speaker 1: you achieve your goals? Find out more at investco dot

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Speaker 1: com slash alternatives. Michael where stays Yeah is here with

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Speaker 1: us from your Asia Group. He is the Global Oil

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Speaker 1: Practice Director. And I know you want to get too natural, guests,

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Speaker 1: but I just have to ask a quick question because

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Speaker 1: we just had a listener right in and uh, say

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Speaker 1: there was sort of a disconnect to them in what

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Speaker 1: you had said about the oil companies refinancing and going

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Speaker 1: to the capital markets. Uh, they're hearing nothing but oil

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Speaker 1: companies in high yield, and high yield is imploding because

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Speaker 1: energy companies are in trouble. So, um, how's that working? Yeah? No, no,

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Speaker 1: And and I think that that that's part of what

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Speaker 1: I was alluding to before. High yield. Absolutely that that's

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Speaker 1: where most of these bankruptcies are residing. I mean clearly

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Speaker 1: that the companies that were highly leveraged at you know,

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Speaker 1: higher costs of capital are gonna have a harder time

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Speaker 1: in a lower price environment. The real challenges if we're

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Speaker 1: talking about rebalancing the market is how volumetrically significant are

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Speaker 1: the high yield names that are having trouble right now.

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Speaker 1: So there are a lot of people who are able

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Speaker 1: to refinance in investment grade. That's CORECT. So if you

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Speaker 1: look at where the volume, the percentage of volume productions

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Speaker 1: coming from, you're talking about names like EO G, Pioneer, Devon.

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Speaker 1: These are large EMPs that if you were to sort

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Speaker 1: of aggregate all of the sort of mid to larger

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Speaker 1: size publicly traded MPs. They're not having a hard time

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Speaker 1: raising money. So you know, if you're looking for bankruptcies

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Speaker 1: to clean up the supply situation, you're not getting it

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Speaker 1: in the names that control a significant or impactful amount

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Speaker 1: of the production. Tell me about net Gas, I missed it,

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Speaker 1: Mike McKee, nailed it. I said one day, look at

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Speaker 1: the charter of net Gas. I was thunderstruck. How oil

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Speaker 1: is going one way and that guess is going the

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Speaker 1: other way and inflation adjusted. Basically, we've never seen this

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Speaker 1: in the modern age. Yeah, yeah, I mean it can't

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Speaker 1: catch a break. I really can't. Um. And here's the

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Speaker 1: funny thing about natural gas. We had a record number

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Speaker 1: of coal plant retirements in the power sector in twenty fifteen.

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Speaker 1: Everything it was supposed to, it was worked the way

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Speaker 1: it was supposed to. You know at the end of

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Speaker 1: the day that that power generation has to go somewhere now,

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Speaker 1: and it's it's overwhelmingly going to natural gas. So you

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Speaker 1: have this kick in demand in the power sector. Um.

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Speaker 1: I can only imagine where it would have gone if

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Speaker 1: it were not for that, because you see a precipitous

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Speaker 1: drop in coal plant retirements. So look, the reality is

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Speaker 1: a lot of this is weather based. I mean, look

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Speaker 1: at the winter, right, we didn't have much of a

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Speaker 1: winter that you really ascribe it to still the standard

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Speaker 1: correlation weather, No, No, it's part of it. The real

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Speaker 1: issue is episodic though, and I don't think we're going

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Speaker 1: to see the same situation in we had an onslaught

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Speaker 1: of supply hit the market in into this year. You

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Speaker 1: had a huge swath of the Marcellus basin being tied in,

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Speaker 1: meaning production was being tied into hit market, huge unprecedented

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Speaker 1: amount of supply that hit the market. Everyone saw it coming, right,

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Speaker 1: everyone knew um. But you know it was really a

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Speaker 1: this dance between coal retirements and production hitting the market

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Speaker 1: from these these infrastructure tie ins. Clearly the weather was

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Speaker 1: the balancing ie and that really that really trip thing.

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Speaker 1: I've run a great yea here with news cheval, undercut,

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Speaker 1: capital spending a huge tent. They go to seventeen to

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Speaker 1: twenty two billion, which I think is a center tendency.

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Speaker 1: Let's round it to twenty billion. They did thirty eight

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Speaker 1: billion in two thousand thirteen, capex thirty eight, thirty five,

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Speaker 1: thirty thirty, and then it implodes down. What are the

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Speaker 1: ramifications of a CAPEX cut like that. Yeah, I mean

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Speaker 1: they're huge and and it just show how much waste

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Speaker 1: there was. No, I don't think that there was. It

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Speaker 1: shows that there was a lot of waste. I think

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Speaker 1: the waste is going to come out, and not from

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Speaker 1: the CAPEX investment side, but from the UM, the the

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Speaker 1: operating in variable cost side, and there was waste there

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Speaker 1: that they're rooting out. I think that UM. Look the

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Speaker 1: Saudias in particular, I mean they've been pretty savvy, despite

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Speaker 1: a lot of a lot of commentary. I think they've

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Speaker 1: been pretty savvy about the signals they're looking for, CAPEX

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Speaker 1: certainly being one of them. You start with CAPEX and

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Speaker 1: there's got to be a correlation between reduced CAPEX and

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Speaker 1: ultimately reduced production, which is what they're all looking for. Yes,

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Speaker 1: I mean you need to see CAPEX coming off first,

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Speaker 1: but it has to be followed by a commencer and

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Speaker 1: amount of production decline. The critical question is are they

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Speaker 1: cutting capex for the financial engineering of saving a dividend

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Speaker 1: at all costs UM. I think that's going to be

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Speaker 1: company specific, but I think it's it's prudent deployment of capital.

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Speaker 1: At the end of the day. They're responsible for doing

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Speaker 1: one thing, taking investors capital and deploying it in the

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Speaker 1: most efficient way and generating the highest risk averse return

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Speaker 1: on capital employed. Um so, I think that it's really

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Speaker 1: centered around that that sort of investor sort of pushed

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Speaker 1: to do that. We've got a lot more things to

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Speaker 1: talk about me quickly to get the send and I

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Speaker 1: mean unfortunately quickly. The basic idea of CAPEX reduction is

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Speaker 1: it to a new lower level or is it a

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Speaker 1: one off and CAPEX comes back down the road. If

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Speaker 1: if C E O S and C suite level executives

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Speaker 1: think that they can deploy capital for whatever I R

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Speaker 1: are they think they they're constituents, they do, they'll do

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Speaker 1: it and right now. And this is the thing that

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Speaker 1: saudis have to be careful about. NOPECK generally is every

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Speaker 1: oil and gas producer is pivoting and positioning themselves to

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Speaker 1: deploy that capital that we're talking about. We gotta leave

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Speaker 1: Rena Stanzil with your raise your group brilliant, Chevron cuts

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Speaker 1: capital spending, stay with US worldwide. This is Bloomberg surveillance

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