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Speaker 1: This is Bloomberg Surveillance. We're seeing slow but steady growth

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Speaker 1: in the European economy. It's just simply moving forward at

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Speaker 1: a very smuggish paste. The good trends that are happening

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Speaker 1: in the job market are starting to spread, and I

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Speaker 1: see that in our surveys of our smaller businesses, people

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Speaker 1: who vote via the stock market, even though this political

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Speaker 1: environment really doesn't have much to do with medium and

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Speaker 1: long term earnings growth prospects. Bloomberg Surveillance your link to

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Speaker 1: the world of economics, finance, and investment on Bloomberg Radio.

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Speaker 1: Good morning, This is Bloomberg Surveillance at eight o'clock on

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Speaker 1: Wall Street and Michael mckeeth David Garrow sitting in with

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Speaker 1: me today as Tom Keane continues on his vacation. I'm

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Speaker 1: not sure we're going to get our vacation days back,

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Speaker 1: David from Tom and borrowed a few of them to

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Speaker 1: go off and sit on the beach. We are watching

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Speaker 1: right at the moment. Excellent earnings come in the details

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Speaker 1: just breaking. Here's a bit of a surprise x On

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Speaker 1: Mobile first quarter earnings to share, and I'm not ready

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Speaker 1: yet to say these are final. There they go now

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Speaker 1: they're final us to share because the estimate was for

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Speaker 1: twenty nine cents. So Xon finds a way to make

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Speaker 1: the money that Phillips six could not. One point eight

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Speaker 1: billion is what they made in the first quarter. They

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Speaker 1: are cutting their capital expense spending a capital investment by

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Speaker 1: uh thirty three percent or did cut it in the

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Speaker 1: first quarter. We'll have more details as those headlines continue.

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Speaker 1: I also want to pass this along. Goldman has just

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Speaker 1: cut Apple to hold uh from what's instant? From hold

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Speaker 1: to cell? That doesn't make any sense. Um you'd raise

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Speaker 1: it to hold from cell. I guess so maybe cut

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Speaker 1: from hold to cell. The headline a little confusing on Apple,

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Speaker 1: but we will continue to check that out as the

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Speaker 1: morning go on. As I mentioned, we are Bloomberg Surveillance

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Speaker 1: and were brought to you by colone Resnick Accounting Tax Advisory.

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Speaker 1: To keep your business on top of issues in the

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Speaker 1: evolving renewable energy market, it takes dedicated industry experts like

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Speaker 1: colne Resnick. Find out more at colne Resnick dot com. David,

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Speaker 1: what else do we know about exce on mobile? Here? Uh?

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Speaker 1: Looking here? It says uh that that you mentioned the

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Speaker 1: Capex cuts here down five point one three billion. Looking

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Speaker 1: at these numbers reminds me of BP, which reported earlier

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Speaker 1: in the week or late last week. Uh, and also

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Speaker 1: kind of beat expectations in a way that we're surprising

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Speaker 1: people here looking for the price of oil here to

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Speaker 1: really diminish those returns. A quotation here from Rex Tailors,

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Speaker 1: and of course, the chairman and CEO of x On

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Speaker 1: mobily says the organization continues to respond effectively the challenging

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Speaker 1: industry conditions, capturing enhancements to operational performance and creating margin

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Speaker 1: uplift despite those low prices. I just mentioned, the scale

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Speaker 1: and integrated nature of our cash flow provide competitive advantage

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Speaker 1: and support consistent strat execution or that from the release

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Speaker 1: from Xson moment to get mobile again at just moments ago,

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Speaker 1: here's the number revenue first quarter forty eight point seven billion.

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Speaker 1: Estimate was for forty four point two So Exxon finds

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Speaker 1: away Philip sixties sixty not Stephen Short finds a way

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Speaker 1: every day as the man who publishes the Short reports

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Speaker 1: sort of the industry bible on what's going on in

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Speaker 1: the energy space. As Stephen, good morning to you. Before

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Speaker 1: we get to the important topic of the day, which

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Speaker 1: is the Philadelphia Eagles picking Carson wren Um. What what

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Speaker 1: an Exxon do right here that other oil companies are

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Speaker 1: struggling with well, first and fore most, they still have

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Speaker 1: their refineries, and they have their huge refineries. They got

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Speaker 1: rid of the some of their units are assets on

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Speaker 1: the West coast where it is difficult to margins are tighter,

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Speaker 1: and they really started to build up and they're holding

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Speaker 1: onto these assets. So they have both the advantage of

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Speaker 1: the upstream when oil prices are high in p is good,

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Speaker 1: but that's not the case right now, so they have

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Speaker 1: the down steam, the refining. And so we're looking at

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Speaker 1: a situation here where for instance, the NYMEX contract and

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Speaker 1: this is just a proxy for for margins, but guess

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Speaker 1: means trading out premium to corude oil. So if you

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Speaker 1: own a refinery, you have cheap inputs going into the

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Speaker 1: refinery and you have expensive outputs coming out of the

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Speaker 1: refinery to sell to the host sale and then retail markets.

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Speaker 1: So that's certainly helping to stem the low crudal price environment.

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Speaker 1: The cut in CAPEX was huge expectations. Who are about

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Speaker 1: a cut? Uh, they actually reported eight pent cut, So

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Speaker 1: I think you have the combination of UH, the much

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Speaker 1: greater CAPEX cut backs a suspension of the buyback program.

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Speaker 1: So I think xon UH appears to be trying to

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Speaker 1: obviously strengthen its balance sheet, it's cash position on its

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Speaker 1: balance sheet, and given what we're going to see now

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Speaker 1: guys with the bank redeterminations of credit facilities for the

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Speaker 1: debt laden being ps, I think the big guys, the

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Speaker 1: excellents we just saw it with VP, are certainly putting

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Speaker 1: themselves into position, and I would expect to see increased

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Speaker 1: M and A activity through the remainder of the year,

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Speaker 1: as these bank credit lines really make it hard for

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Speaker 1: debt leading companies still with good assets on the books.

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Speaker 1: It's going to make it a harder environment. So I

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Speaker 1: think we're looking finally a year and a half into this,

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Speaker 1: looking for this integration of this consolidation in the industry.

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Speaker 1: Just continuing to pick up part these numbers. Your first

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Speaker 1: quarter downstream earnings for x on Mobile nine hundred six

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Speaker 1: million dollars, down seven sixty one million from the prior

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Speaker 1: you're looking at the upstream earnings for the first quarter

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Speaker 1: two point nine billion dollars from the first quarter fifteen

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Speaker 1: to a loss of seventy six million dollars. Let me

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Speaker 1: ask you about Phillip sixty six, the company that did

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Speaker 1: not perform as well here in the first quarter. Is

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Speaker 1: that because of size, because of the shape of its portfolio. Yeah, exactly,

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Speaker 1: so I felt with their um uh assets and then

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Speaker 1: the way they divested and made the cuts from I mean,

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Speaker 1: they really drew a fine line in between those going

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Speaker 1: to be the upstream and the downstream. So uh. This

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Speaker 1: is certainly where this is a matter of scale. Exson

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Speaker 1: having a much larger portfolio in areas where the company

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Speaker 1: was able to benefit in steographical areas with regard to refining,

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Speaker 1: also in a much more in a greater global scale

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Speaker 1: as well, that Exon is in a better position superlogive

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Speaker 1: for you. Here, Excen posts the smallest profits since, according

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Speaker 1: to the headline on on the bloombergunitive and that makes guys,

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Speaker 1: because we're we're was oil and we were prices in

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Speaker 1: you had crude was at ten dollars a barrel. The

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Speaker 1: margin between distillate fuel and crude prices was negative. Crudo

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Speaker 1: is more expensive than the product. So the fact that

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Speaker 1: we were down at earnings at that level given this environment,

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Speaker 1: that that that makes sense al right now excellent obviously

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Speaker 1: managed to survive, survive that and and grow and make

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Speaker 1: tons of money between now and then. But are are

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Speaker 1: we watching when when you look at the numbers is

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Speaker 1: the most important thing, perhaps the level of capex? In

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Speaker 1: other words, are they eating the seed corn that would

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Speaker 1: help them make money down the road if they're not

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Speaker 1: going to be investing as much? And and that's certainly

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Speaker 1: the huge question mark going forward. We're still in a

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Speaker 1: relatively low crudal price environment. We have had a significant rally,

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Speaker 1: but the concern with this price rally is that there's

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Speaker 1: no signs that this is a fundamentally driven rally. And

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Speaker 1: that is to say that if we look at the

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Speaker 1: price rise both in the ice bread crudal market or

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Speaker 1: the nomics w t I market to produce sers have

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Speaker 1: actually been selling into this, so they have been locking

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Speaker 1: in forward production during this rise. What is interesting is

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Speaker 1: what has the speculator been doing. The bullish speculator has

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Speaker 1: not been doing anything that they they they've been moving sideways.

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Speaker 1: All of the action in the futures is being driven

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Speaker 1: by the bearish speculator. So back in February and oil

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Speaker 1: prices were in the mid twenty dollar range. You had

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Speaker 1: the largest bet against oil prices ever recorded. There was

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Speaker 1: a massive short position, not just in the commodity itself,

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Speaker 1: but the short interest in the ets. So what has

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Speaker 1: happened now is the largest short squeeze that we have

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Speaker 1: ever seen. And I'll throw a number out there. Since February,

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Speaker 1: during this twenty dollar barrel rise in oil prices, for

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Speaker 1: every one contract that the bullish speculator bought, the bearish

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Speaker 1: speculator bought nine contracts. So when you have the bear

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Speaker 1: out buying the bull by a margin of nine to

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Speaker 1: one because they're getting squeezed, you have this scenario for

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Speaker 1: a significant price rise. So again, this is not an

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Speaker 1: open interest has been falling, mind you. Also so even

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Speaker 1: as prices have been rising, money's been withdrawn from this market.

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Speaker 1: So this is a rather shaky rally. I'm not stepping

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Speaker 1: in front of it, mind you. Markets could remain illogical

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Speaker 1: longer than I can remain solvent, but I'm not convinced

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Speaker 1: that this is a fundamentally driven rally. So now when

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Speaker 1: you look at Exxon cutting back at cap bacs, trying

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Speaker 1: to conserve cash, this is clearly your sign. And if

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Speaker 1: we look at the CFTC data, the producer, the Exons

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Speaker 1: and the vps of the world have been selling into

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Speaker 1: this rally, so you get the sense that they're not

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Speaker 1: absolutely sold on this. So there's still a tremendous amount

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Speaker 1: of head wind going forward. I mean, if we just

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Speaker 1: look at the geopolitic politics side, if we look at

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Speaker 1: the war and this is a war between the Sunny

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Speaker 1: side of OPEC and she Is side of OPEC. Saudi

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Speaker 1: Arabia is not cutting production. They are going to continue

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Speaker 1: to battle Iran for market share. So now Exxon and

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Speaker 1: BP and the large integrated will now have to compete

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Speaker 1: on the global scale against the market that the big

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Speaker 1: boys are telling us they're going to keep glutted at

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Speaker 1: this point. So there are still a lot of headwinds

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Speaker 1: cutting back the cap BAX, the not fundamentally driven rise

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Speaker 1: in oil prices, and the battleful market share around the

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Speaker 1: globe is still makes for a very dicey alright, Steve

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Speaker 1: Short stay with us. Will continue to look at the

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Speaker 1: oil industry. We've got exce on mobile earnings out better

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Speaker 1: than forecasts, still have Chevron to go today. Exxon shares

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Speaker 1: up by a percent in early trading here on Bloomberg Surveillance.

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Speaker 1: Aytan on well Strain this news update We're up to

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Speaker 1: you by Michael Barr with the latest world of national headlines.

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Speaker 1: Thank you very much, Mike David. Police in her eye

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Speaker 1: had gear pushed demonstrators away from an Orange County, California

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Speaker 1: arena when protesters got a rally after a Donald Trump

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Speaker 1: campaign appearance. Police said they made about twenty arrests. Police

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Speaker 1: cars were damaged. The Obama administration is formally proposing a

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Speaker 1: rule today to give what they say is a fairer

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Speaker 1: chance to federal job applicants who may have criminal or

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Speaker 1: credit histories. The rule would prohibit federal agencies from asking

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Speaker 1: certain applicants questions about criminal and credit history into the

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Speaker 1: conditional offer of employment. Has been made. Cal quarterback Jared

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Speaker 1: Golf is the overall number one NFL draft pick. Golf

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Speaker 1: was taking about the rams last night. Global News twenty

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Speaker 1: four hours a day, powered by our twenty four hundred

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Speaker 1: journalists and more than a hundred fifty news bureaus from

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Speaker 1: around the world. On Michael Barr, Mike David, Thanks very much. Michael.

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Speaker 1: You're listening to Bloomberg Surveillance on Bloomberg Radio. I'm David

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Speaker 1: Guray in for Tom Keane with Michael McKee. We're looking

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Speaker 1: at futures here barely moving. It seems. The nastacumen is

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Speaker 1: down a third of a cent twelve points at four

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Speaker 1: three six nine more. After the break, we are talking

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Speaker 1: with Stephen Shark of the Short Report as West Texas

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Speaker 1: breaks through forty six and rent breaks through. He says,

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Speaker 1: don't trust that rally Well, continue to talk to him

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Speaker 1: about what it means for the oil companies. Global Business

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Speaker 1: News twenty four hours a day at Bloomberg dot Com,

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

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Speaker 1: is a Bloomberg Business Flash. Yeah, I'm good morning. I'm

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Speaker 1: John Tuck. Here now over to the First Word Breaking

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Speaker 1: news desk for today's morning call, and here's Bill Maloney.

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Speaker 1: Good morning, John. Futures are quiet this morning after yesterday

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Speaker 1: sell off. DALTH futures are currently highed by three points,

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Speaker 1: sessiities down to point, and Nazak futures declined by eleven.

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Speaker 1: The U S ten yield at one point eight six

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Speaker 1: per cent, and on the US Economic Friday eight thirty,

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Speaker 1: Personal Income and Spending at nine o'clock I s M.

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Speaker 1: Milwaukee and at ten o'clock Michigan sentiment after the bells night,

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Speaker 1: Amazon beat shares her up twelve percent pre market. Gilead missed,

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Speaker 1: MGIN beat, and LinkedIn boosted your forecast regarding earnings today

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Speaker 1: practice they're eating an Exxon Mobile beat, Moody's cut your revenue,

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Speaker 1: EPs views, Seagate EPs missed, and Royal Caribbean boosted for

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Speaker 1: your guidance. In deal news, Roby to buy Tvo for

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Speaker 1: ten seventies share in cash and stock and other news.

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Speaker 1: Valiant file it's ten k head of creditor deadline. Final

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Speaker 1: Q four revenue two point seven six billion reported preliminary

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Speaker 1: two point seven nine billion on March fifteen. Finally, some

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Speaker 1: of your wallsheet upgrades and downgrades. Ford and Level three

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Speaker 1: cut to neutral over at Bank of America, George Bank,

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Speaker 1: cut to underperform at k b W serupt to cut

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Speaker 1: to underperform at Jefferies g n C cut to neutral, Goleman,

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Speaker 1: Sachs and Molina Healthcare cut to neutral over at UBS.

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Speaker 1: Live from the first to breaking news desk. Go on

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Speaker 1: Bow Maloney, John, thanks Bill, and to hear live breaking

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Speaker 1: news over your Bloomberg type squawk. Go on your terminal

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Speaker 1: that is a Bloomberg business splash. Mikeael, David John Tucker,

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Speaker 1: thank you very much. This is Bloomberg Survalance, brought you

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Speaker 1: by Investco Explorer. What high conviction investing means to investcos

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Speaker 1: value equity managers. Watched the conversation at investco dot com

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Speaker 1: slash interactive. We're talking with Stephen Shark from the Shark

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Speaker 1: Report about energy company earnings x On topping Wall Streets forecasts.

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Speaker 1: Although the company reports its smallest profits since n we're

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Speaker 1: waiting for UH Chevron to report. Uh, Steven, I want

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Speaker 1: to get back to something you and I were talking

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Speaker 1: about a couple of weeks ago on the program, and

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Speaker 1: that is the UM situation in the fracking areas with

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Speaker 1: the companies that had to face the the bank hangman,

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Speaker 1: I guess as their loans came to We were talking

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Speaker 1: about how the big companies like x On Mobile and

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Speaker 1: others would scoop up those who were too small. Is

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Speaker 1: is that's what's happening. That's what we're starting to see.

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Speaker 1: We're starting to see increased UH bankruptcies in the space. UH.

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Speaker 1: You're certainly starting to see credit lines being drawn up,

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Speaker 1: UH drawn down. You actually had the situation where at Chesapeake, Uh,

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Speaker 1: they came out a couple of weeks ago with and

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Speaker 1: maintained there their revolving credit line. The only catch was

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Speaker 1: the company had to put its entire assets up as

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Speaker 1: collateral for this. So we're certainly hanging in there by

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Speaker 1: a but by a thin margin at this point, but

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Speaker 1: certainly that the template is there, and it kind of

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Speaker 1: goes into the theory of why do we ever need

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Speaker 1: to see seventy dollar oil again? And and seventy dollar

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Speaker 1: oil essentially where we were at the end of and

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Speaker 1: as soon as we broke that level, then the dam

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Speaker 1: burst and then we went almost straight down to twenty dollars. So,

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Speaker 1: but there's no necessary reason why, because what is happening

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Speaker 1: when what do we start and seeing the industry while

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Speaker 1: as we're starting to see with the VP earnings and

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Speaker 1: the Exxon earnings and so forth, is efficiencies are being

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Speaker 1: squeezed out. Uh, greater capital discipline is being applied. Cash

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Speaker 1: is king. So you're getting into a situation now where

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Speaker 1: once these assets, these dead laden assets are acquired, and

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Speaker 1: they're going to be acquired attractive prices, Uh, you're already

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Speaker 1: squeezing the margin out. So what opec or Saudi Arabia

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Speaker 1: has done, and what people thought they were trying to

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Speaker 1: do was what was patently false, and that is to say,

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Speaker 1: Saudi Arabia was never trying to destroy the North American

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Speaker 1: oil and gas complex. They weren't troyn because they knew

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Speaker 1: very well they couldn't destroy the complex. Because what's happening

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Speaker 1: to the complex, It's can come out of this retrenchment

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Speaker 1: much stronger. It's gonna come out leaner, more efficient and

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Speaker 1: be able to extract margins at lower prices. So Saudi Arabia,

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Speaker 1: by its actions, if it's intent was to destroy North

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Speaker 1: American industry, it is backfired because the industry will ultimately

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Speaker 1: be stronger for this. And hence this was never Saudi

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Speaker 1: Arabia's design on the market. So Saudi arabia design on

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Speaker 1: the market is to maintain oil as the premier source

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Speaker 1: of energy for global markets in the generations ahead. And

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Speaker 1: when you look at the introduction of substitutes into the market,

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Speaker 1: that the one aspect of the elasticity that has impacted

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Speaker 1: demanding elasticities as the substitute. So it's the tesla, it's

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Speaker 1: the prius, it's the alternative fields, driver less technology. These

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Speaker 1: are all assets that are going to eat into oil

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Speaker 1: consumption in the years ahead if Saudi Arabia and other

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Speaker 1: oil producers do not do something to stem and to

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Speaker 1: keep consumers hooked on their product. So at the end

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Speaker 1: of the day, Saudi Arabia, Watts and I maintained SAVE

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Speaker 1: wants North American oil production to succeed because it can

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Speaker 1: always compete with another competitor on the block. What it

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Speaker 1: cannot compete with is someone who's going to introduce the

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Speaker 1: technology Elon Musk, who can potentially wipe away my market

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Speaker 1: share within one or two generations. So these m and

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Speaker 1: A that that we're starting to see the industry becomes stronger,

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Speaker 1: and the stronger industry does not require seventy oil, which

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Speaker 1: then would translate into two dollar and fifty cent for

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Speaker 1: dollar four dollar fifty cent gasoline and really kind of

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Speaker 1: grease the skids to push consumers away uh from you know,

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Speaker 1: away from the hum vy, shall we say, towards the

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Speaker 1: tesla right now. But if you keep gasoline prices two

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Speaker 1: dollars in the winter two dollars and fifty cents and

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Speaker 1: the summer, that is going to be an extremely hard

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Speaker 1: level the entry barrier for alternative fuels will remain extremely

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Speaker 1: high into the foreseeable future. Only about fifteen seconds left.

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Speaker 1: You're in Philadelphia. You're happy with the Eagles pick. Well,

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Speaker 1: you know what, Actually, I'm a transplanted New Yorker to

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Speaker 1: the fact that the Eagles spent a king's ransom to

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Speaker 1: get a Division one double a quarterback. I'm loving it.

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Speaker 1: Steven Shark from the Shark grow Port, uh, transplanted New

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Speaker 1: Yorker down in Philadelphia. Well, we're keeping an eye on

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Speaker 1: oil prices, which have such a big effect on the

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Speaker 1: oil company earnings. West Texas now nine tenths of a

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Speaker 1: percent Brent crude two tenths gain not not up as

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Speaker 1: high as it was reached, but it looks like whether

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Speaker 1: Steven believes it's gonna last or not, but it looks

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Speaker 1: like we will reach fifty dollars heading that way reasonably quickly.

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Speaker 1: This is Bloomberg Surveillance. We're listening to Bloomberg Radio world worldwide.

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Speaker 1: Coming up with all due respect, highlight brought to you

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