LOS ANGELES (KABC) — As Californians struggle to pay sky-high natural gas bills, utility access activists are encouraging people to contact state regulators.
Mark Toney is the executive director of The Utilities Reform Network, a nonprofit also known as TURN that is working to ensure utilities are clean, safe and affordable.
He said people who are upset about the sudden jump in their SoCalGas bills need to call in to Thursday’s upcoming California Public Utilities Commission meeting and voice their anger.
“We’re just very concerned that this is out of control and something needs to be done to moderate these type of price spikes,” he told Eyewitness News.
SoCalGas said the wholesale price of natural gas has skyrocketed this winter, now up 128% just from December to January. The company is warning customers that if their peak winter bill was around $130 last year, it will most likely jump to roughly $315 this year.
Crestline resident Dennis Duvall is recovering from triple bypass surgery and suffers from Lupus. Those health issues keep him in the house around the clock with the thermostat set at about 75 degrees.
His latest bill was $918.75.
READ ALSO | Residents fear SoCalGas customers will ‘freeze to death’ trying to save money to pay sky-high bills
“I’ve got to pay it,” he said. “I’ve got to keep the heat on. It’s going to be very hard.”
Dave Miner of Crestline just saw his gas bill shoot up to $700.
“It’s taking money away from my kids, it’s taking money away from my grocery bill,” Miner said.
Toney said many California residents with medical problems qualify for programs like Medical Baseline to help bring utility costs down.
“They can sign up for Medical Baseline for the gas and get a reduced price and additional protections against shut-off if you fall behind on your bill,” said Toney.
Other tips to save gas?
“Turn down the thermostat if your health and your family’s health allows it, rely a little bit more on sweaters, blankets, closing off the vents in rooms that you’re not using,” Toney advises.
A sudden thaw across the Northern Hemisphere has melted down natural-gas prices, upending dire forecasts of energy shortages and sinking Vladimir Putin’s plan to squeeze Europe this winter.
It isn’t expected to remain as balmy as it was on Wednesday, when temperatures hit 66-degrees Fahrenheit in New York, but the forecasts that energy traders monitor call for abnormally warm weather extending into February, sapping demand for the heating fuel.
U.S. natural-gas futures for February delivery ended Wednesday at $4.172 per million British thermal units. That is down 57% from the summer highs notwithstanding a 4.6% gain on Wednesday that snapped a four-session losing streak, including an 11% drop on Tuesday.
The price is now about the same as it was a year ago, when temperatures were also warmer than normal and before Russia’s invasion of Ukraine jolted energy markets.
The plunge is a bad omen for drillers, whose shares were among the stock market’s few winners last year. Cheaper gas is good news for households and manufacturers whose budgets have been busted and profit margins pinched by high fuel prices. Though shocks of cold and problems with pipelines could still push up regional prices, less expensive natural gas should help to cool inflation in the months ahead.
There are also major geopolitical implications. Mild weather is driving gas prices lower in Europe, too, spelling relief for the region that coming into the winter faced the possibility of rolling blackouts and factory shutdowns. The war threw energy markets into chaos, but benchmark European natural-gas prices are now less than half of what they were a month ago and lower than any point since the February invasion.
The drop is a welcome surprise for European governments that committed hundreds of billions of dollars to shield consumers and companies from high energy prices. Moscow cut supplies of gas to Europe last year in what European officials described as an attempt to undermine military and financial support for Kyiv.
So far, Russia’s strategy isn’t working. Warm weather is limiting demand, as is a European Union-led effort to curb consumption. But analysts say prices in Europe could shoot up again when the continent tries to refill stores for the 2023-24 winter without much Russian gas.
PHOTOS: How a 102-Year-Old Maritime Law Affects Today’s Home-Heating Prices
Besides being burned to heat roughly half of American homes, natural gas is used for cooking, along with making electricity, plastic, fertilizer, steel and glass. Last year’s high prices were a big driver of the steepest inflation in four decades.
When prices peaked in August, the question was whether there would be enough gas to get through the winter, given record consumption by domestic power producers with few alternatives, as well as demand in Europe, where the race is on to replace Russian gas.
Now the question in the market is how low prices will go.
They were already falling when the late-December storm brought snow to northern cities and stranded travelers. Frigid temperatures prompted a big draw from U.S. natural-gas stockpiles and froze wells in North Dakota and Oklahoma. At its peak, the storm took nearly 21% of U.S. gas supply offline, according to East Daley Analytics, a gas consulting firm.
The demand surge and the supply disruptions were fleeting and failed to counteract forecasts for balmy January weather. Prices were also pushed lower by another delay in the restart of a Texas export facility. It has been offline since a June fire left a lot of gas in the domestic market that would have otherwise been shipped overseas.
Temperatures above 60 degrees Fahrenheit are forecast this week around the Great Lakes and along the Ohio Valley, while highs in the Southeast might reach into the 80s.
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As measured in heating-degree days, a population-weighted measure of temperatures below 65 degrees Fahrenheit, this week will be twice as warm relative to normal as the last week of December was cold, said Eli Rubin, senior energy analyst at the gas-trading firm EBW AnalyticsGroup.
The firm estimates that warmer weather over the first half of January will reduce gas demand by about 100 billion cubic feet over that stretch. That is about the volume of gas that the U.S. produces each day. The Energy Information Administration estimates that daily American output hit a record in 2022.
Analysts anticipate similarly strong production in 2023. They expect the year to pass without new LNG export capacity coming online for the first time since 2016, when the U.S. began to ship liquefied natural gas abroad from the Lower 48 States.
“The market is moving from a mind-set of winter scarcity to looking ahead to exiting winter with more in storage, adding production and not adding any new LNG exports,” Mr. Rubin said. “If anything, the market looks oversupplied.”
Analysts have been reducing their gas-price assumptions as well as their outlooks for producers as the first weeks of winter pass without sustained periods of cold weather.
Gabriele Sorbara, an analyst at Siebert Williams Shank, told clients this week that he expected natural gas to average $4.25 in 2023, down from a forecast of $5.50 before the warm spell. As a result, he downgraded shares of
EQT Corp.
, the biggest U.S. producer and one of the top-performing stocks in the S&P 500 last year, from buy to hold.
“EQT will be dead money until estimates recalibrate and there is visibility of a rebound in natural-gas prices,” he wrote in a note to clients.
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Hedge funds and other speculators have, on balance, been bearish on natural-gas prices since the summer, maintaining more wagers on falling prices than on gains, according to Commodity Futures Trading Commission data. Analysts said that is probably the safe bet.
“We continue to caution against any attempts to time a price bottom,” the trading firm Ritterbusch & Associates told clients this week.
Amid sub-zero temperatures, more than one million We Energies customers across Wisconsin are being asked to conserve natural gas because of a pipeline malfunction
We Energies asked its customers to immediately turn their thermostats to 62 degrees or lower Friday evening to prevent a widespread service outage.
Guardian Pipeline notified customers Friday that it had constrained the northbound flow of gas on one of its interstate pipelines due to unplanned maintenance at a compressor station in Illinois.
We Energies spokesperson Brendan Conway said Guardian had cut the utility’s gas supply by 30%.
Conway said the utility is drawing from liquified gas and propane storage facilities and has cut gas deliveries to business customers whose contracts allow for service interruptions. But because of the extreme cold gripping most of the nation, the utility is unable to get gas from other pipeline suppliers.
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A spokesperson for the pipeline company said one of two malfunctioning valves had been restored as of Friday night and crews were working on the second to restore capacity “in a timely manner.”
We Energies said it would reassess the situation and update customers on Saturday. No update had been provided as of 6 a.m. Saturday.
In addition to turning down thermostats, the company asked residents to avoid using secondary gas heaters, ovens, stoves and clothes dryers.
The National Weather Service was forecasting low temperatures of zero to 14 below across Wisconsin Friday night and highs mostly in the single digits, with much of the state under a wind chill advisory.
Winter survival tips
With temperatures falling below zero and wind chills plunging far below that, emergency officials are urging residents to stay safe. The combination of drifting snow and low temperatures is also making travel particularly treacherous. Here are some tips for riding out the storm.
• If possible, stay indoors. Limit outdoor time for pets.
• If you have to go out, dress in several loose-fitting layers. Wear a hat, mittens and snow boots. Use a scarf to cover your mouth and face.
• Know the signs and symptoms of hypothermia, including shivering, exhaustion, confusion and slurred speech.
• Know the signs and symptoms of frostbite, including redness or pain in any skin area.
• Check on friends, family and neighbors. People most likely to be hurt from the cold are older adults, babies, people who spend lots of time outside, such as the homeless and hunters, and people who drink alcohol or use drugs.
• Prepare emergency kits for your home and vehicle that include blankets, snacks and water, medication and other essentials. Keep your gas tank at least half full. Go to readywisconsin.wi.gov/make-a-kit for tips on how to prepare emergency kits.
• Check to make sure snow is not blocking outdoor furnace and hot water heater vents, which could cause dangerous levels of carbon monoxide to build up in a home.
If your power goes out:
• Close off unused spaces and limit the number of times you open exterior doors.
• Open cupboards to keep pipes from freezing; in the event of an extended outage, leave a faucet partially open to keep water moving.
• Never use a stove, oven, grill or unvented heater to stay warm, and do not run portable generators in enclosed spaces as these devices give off carbon monoxide, an odorless gas that can be fatal.
Income-seeking investors are looking at an opportunity to scoop up shares of real estate investment trusts. Stocks in that asset class have become more attractive as prices have fallen and cash flow is improving.
Below is a broad screen of REITs that have high dividend yields and are also expected to generate enough excess cash in 2023 to enable increases in dividend payouts.
REIT prices may turn a corner in 2023
REITs distribute most of their income to shareholders to maintain their tax-advantaged status. But the group is cyclical, with pressure on share prices when interest rates rise, as they have this year at an unprecedented scale. A slowing growth rate for the group may have also placed a drag on the stocks.
And now, with talk that the Federal Reserve may begin to temper its cycle of interest-rate increases, we may be nearing the time when REIT prices rise in anticipation of an eventual decline in interest rates. The market always looks ahead, which means long-term investors who have been waiting on the sidelines to buy higher-yielding income-oriented investments may have to make a move soon.
During an interview on Nov 28, James Bullard, president of the Federal Reserve Bank of St. Louis and a member of the Federal Open Market Committee, discussed the central bank’s cycle of interest-rate increases meant to reduce inflation.
When asked about the potential timing of the Fed’s “terminal rate” (the peak federal funds rate for this cycle), Bullard said: “Generally speaking, I have advocated that sooner is better, that you do want to get to the right level of the policy rate for the current data and the current situation.”
Fed’s Bullard says in MarketWatch interview that markets are underpricing the chance of still-higher rates
In August we published this guide to investing in REITs for income. Since the data for that article was pulled on Aug. 24, the S&P 500
SPX,
-0.50%
has declined 4% (despite a 10% rally from its 2022 closing low on Oct. 12), but the benchmark index’s real estate sector has declined 13%.
REITs can be placed broadly into two categories. Mortgage REITs lend money to commercial or residential borrowers and/or invest in mortgage-backed securities, while equity REITs own property and lease it out.
The pressure on share prices can be greater for mortgage REITs, because the mortgage-lending business slows as interest rates rise. In this article we are focusing on equity REITs.
Industry numbers
The National Association of Real Estate Investment Trusts (Nareit) reported that third-quarter funds from operations (FFO) for U.S.-listed equity REITs were up 14% from a year earlier. To put that number in context, the year-over-year growth rate of quarterly FFO has been slowing — it was 35% a year ago. And the third-quarter FFO increase compares to a 23% increase in earnings per share for the S&P 500 from a year earlier, according to FactSet.
The NAREIT report breaks out numbers for 12 categories of equity REITs, and there is great variance in the growth numbers, as you can see here.
FFO is a non-GAAP measure that is commonly used to gauge REITs’ capacity for paying dividends. It adds amortization and depreciation (noncash items) back to earnings, while excluding gains on the sale of property. Adjusted funds from operations (AFFO) goes further, netting out expected capital expenditures to maintain the quality of property investments.
The slowing FFO growth numbers point to the importance of looking at REITs individually, to see if expected cash flow is sufficient to cover dividend payments.
Screen of high-yielding equity REITs
For 2022 through Nov. 28, the S&P 500 has declined 17%, while the real estate sector has fallen 27%, excluding dividends.
Over the very long term, through interest-rate cycles and the liquidity-driven bull market that ended this year, equity REITs have fared well, with an average annual return of 9.3% for 20 years, compared to an average return of 9.6% for the S&P 500, both with dividends reinvested, according to FactSet.
This performance might surprise some investors, when considering the REITs’ income focus and the S&P 500’s heavy weighting for rapidly growing technology companies.
For a broad screen of equity REITs, we began with the Russell 3000 Index
RUA,
-0.18%,
which represents 98% of U.S. companies by market capitalization.
We then narrowed the list to 119 equity REITs that are followed by at least five analysts covered by FactSet for which AFFO estimates are available.
If we divide the expected 2023 AFFO by the current share price, we have an estimated AFFO yield, which can be compared with the current dividend yield to see if there is expected “headroom” for dividend increases.
For example, if we look at Vornado Realty Trust
VNO,
+1.01%,
the current dividend yield is 8.56%. Based on the consensus 2023 AFFO estimate among analysts polled by FactSet, the expected AFFO yield is only 7.25%. This doesn’t mean that Vornado will cut its dividend and it doesn’t even mean the company won’t raise its payout next year. But it might make it less likely to do so.
Among the 119 equity REITs, 104 have expected 2023 AFFO headroom of at least 1.00%.
Here are the 20 equity REITs from our screen with the highest current dividend yields that have at least 1% expected AFFO headroom:
Company
Ticker
Dividend yield
Estimated 2023 AFFO yield
Estimated “headroom”
Market cap. ($mil)
Main concentration
Brandywine Realty Trust
BDN,
+1.82%
11.52%
12.82%
1.30%
$1,132
Offices
Sabra Health Care REIT Inc.
SBRA,
+2.02%
9.70%
12.04%
2.34%
$2,857
Health care
Medical Properties Trust Inc.
MPW,
+1.90%
9.18%
11.46%
2.29%
$7,559
Health care
SL Green Realty Corp.
SLG,
+2.18%
9.16%
10.43%
1.28%
$2,619
Offices
Hudson Pacific Properties Inc.
HPP,
+1.55%
9.12%
12.69%
3.57%
$1,546
Offices
Omega Healthcare Investors Inc.
OHI,
+1.30%
9.05%
10.13%
1.08%
$6,936
Health care
Global Medical REIT Inc.
GMRE,
+2.03%
8.75%
10.59%
1.84%
$629
Health care
Uniti Group Inc.
UNIT,
+0.28%
8.30%
25.00%
16.70%
$1,715
Communications infrastructure
EPR Properties
EPR,
+0.62%
8.19%
12.24%
4.05%
$3,023
Leisure properties
CTO Realty Growth Inc.
CTO,
+1.58%
7.51%
9.34%
1.83%
$381
Retail
Highwoods Properties Inc.
HIW,
+0.76%
6.95%
8.82%
1.86%
$3,025
Offices
National Health Investors Inc.
NHI,
+1.90%
6.75%
8.32%
1.57%
$2,313
Senior housing
Douglas Emmett Inc.
DEI,
+0.33%
6.74%
10.30%
3.55%
$2,920
Offices
Outfront Media Inc.
OUT,
+0.70%
6.68%
11.74%
5.06%
$2,950
Billboards
Spirit Realty Capital Inc.
SRC,
+0.72%
6.62%
9.07%
2.45%
$5,595
Retail
Broadstone Net Lease Inc.
BNL,
-0.93%
6.61%
8.70%
2.08%
$2,879
Industial
Armada Hoffler Properties Inc.
AHH,
-0.08%
6.38%
7.78%
1.41%
$807
Offices
Innovative Industrial Properties Inc.
IIPR,
+1.09%
6.24%
7.53%
1.29%
$3,226
Health care
Simon Property Group Inc.
SPG,
+0.95%
6.22%
9.55%
3.33%
$37,847
Retail
LTC Properties Inc.
LTC,
+1.09%
5.99%
7.60%
1.60%
$1,541
Senior housing
Source: FactSet
Click on the tickers for more about each company. You should read Tomi Kilgore’s detailed guide to the wealth of information for free on the MarketWatch quote page.
The list includes each REIT’s main property investment type. However, many REITs are highly diversified. The simplified categories on the table may not cover all of their investment properties.
Knowing what a REIT invests in is part of the research you should do on your own before buying any individual stock. For arbitrary examples, some investors may wish to steer clear of exposure to certain areas of retail or hotels, or they may favor health-care properties.
Largest REITs
Several of the REITs that passed the screen have relatively small market capitalizations. You might be curious to see how the most widely held REITs fared in the screen. So here’s another list of the 20 largest U.S. REITs among the 119 that passed the first cut, sorted by market cap as of Nov. 28:
Company
Ticker
Dividend yield
Estimated 2023 AFFO yield
Estimated “headroom”
Market cap. ($mil)
Main concentration
Prologis Inc.
PLD,
+1.29%
2.84%
4.36%
1.52%
$102,886
Warehouses and logistics
American Tower Corp.
AMT,
+0.68%
2.66%
4.82%
2.16%
$99,593
Communications infrastructure
Equinix Inc.
EQIX,
+0.62%
1.87%
4.79%
2.91%
$61,317
Data centers
Crown Castle Inc.
CCI,
+1.03%
4.55%
5.42%
0.86%
$59,553
Wireless Infrastructure
Public Storage
PSA,
+0.11%
2.77%
5.35%
2.57%
$50,680
Self-storage
Realty Income Corp.
O,
+0.26%
4.82%
6.46%
1.64%
$38,720
Retail
Simon Property Group Inc.
SPG,
+0.95%
6.22%
9.55%
3.33%
$37,847
Retail
VICI Properties Inc.
VICI,
+0.41%
4.69%
6.21%
1.52%
$32,013
Leisure properties
SBA Communications Corp. Class A
SBAC,
+0.59%
0.97%
4.33%
3.36%
$31,662
Communications infrastructure
Welltower Inc.
WELL,
+2.37%
3.66%
4.76%
1.10%
$31,489
Health care
Digital Realty Trust Inc.
DLR,
+0.69%
4.54%
6.18%
1.64%
$30,903
Data centers
Alexandria Real Estate Equities Inc.
ARE,
+1.38%
3.17%
4.87%
1.70%
$24,451
Offices
AvalonBay Communities Inc.
AVB,
+0.89%
3.78%
5.69%
1.90%
$23,513
Multifamily residential
Equity Residential
EQR,
+1.10%
4.02%
5.36%
1.34%
$23,503
Multifamily residential
Extra Space Storage Inc.
EXR,
+0.29%
3.93%
5.83%
1.90%
$20,430
Self-storage
Invitation Homes Inc.
INVH,
+1.58%
2.84%
5.12%
2.28%
$18,948
Single-family residental
Mid-America Apartment Communities Inc.
MAA,
+1.46%
3.16%
5.18%
2.02%
$18,260
Multifamily residential
Ventas Inc.
VTR,
+1.63%
4.07%
5.95%
1.88%
$17,660
Senior housing
Sun Communities Inc.
SUI,
+2.09%
2.51%
4.81%
2.30%
$17,346
Multifamily residential
Source: FactSet
Simon Property Group Inc.
SPG,
+0.95%
is the only REIT to make both lists.
Saudi Arabia and other OPEC oil producers are discussing an output increase, the group’s delegates said, a move that could help heal a rift with the Biden administration and keep energy flowing amid new attempts to blunt Russia’s oil industry over the Ukraine war.
A production increase of up to 500,000 barrels a day is now under discussion for OPEC+’s Dec. 4 meeting, delegates said. The move would come a day before the European Union is set to impose an embargo on Russian oil and the Group of Seven wealthy nations’ plans to launch a price cap on Russian crude sales, potentially taking Moscow’s petroleum supplies off the market.
After The Wall Street Journal and other news organizations reported on the discussions Monday, Saudi energy minister Prince
Abdulaziz bin Salman
denied the reports and said a production cut was possible instead.
Any output increase would mark a partial reversal of a controversial decision last month to cut production by 2 million barrels a day at the most recent meeting of the Organization of the Petroleum Exporting Countries and their Russia-led allies, a group known collectively as OPEC+.
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The White House said the production cut undermined global efforts to blunt Russia’s war in Ukraine. It was also viewed as a political slap in the face to President Biden, coming before the congressional midterm elections at a time of high inflation. Saudi-U.S. relations have hit a low point over oil-production disagreements this year, though U.S. officials had said they were looking to the Dec. 4 OPEC+ meeting with some hope.
Talk of a production increase has emerged after the Biden administration told a federal court judge that Saudi Crown
Prince Mohammed
bin Salman should have sovereign immunity from a U.S. federal lawsuit related to the brutal killing of Saudi journalist Jamal Khashoggi. The immunity decision amounted to a concession to Prince Mohammed, bolstering his standing as the kingdom’s de facto ruler after the Biden administration tried for months to isolate him.
It is an unusual time for OPEC+ to consider a production increase, with global oil prices falling more than 10% since the first week of November. Oil prices fell 5% after reports of the increase and then pared those losses after
Prince Abdulaziz
‘s comments. Brent crude traded at $86.25 on Monday afternoon, down more than 1%.
Ostensibly, delegates said, a production increase would be in response to expectations that oil consumption will rise in the winter, as it normally does. Oil demand is expected to increase by 1.69 million barrels a day to 101.3 million barrels a day in the first quarter next year, compared with the average level in 2022.
Saudi energy minister Abdulaziz bin Salman has said the kingdom would supply oil to ‘all who need it.’
Photo:
AHMED YOSRI/REUTERS
OPEC and its allies say they have been carefully studying the G-7 plans to impose a price cap on Russian oil, conceding privately that they see any such move by crude consumers to control the market as a threat. Russia has said it wouldn’t sell oil to any country participating in the price cap, potentially resulting in another effective production cut from Moscow—one of the world’s top three oil producers.
Prince Abdulaziz said last month that the kingdom would “supply oil to all who need it from us,” speaking in response to a question about looming Russian oil shortages. OPEC members have signaled to Western countries that they would step up if Russian output fell.
Talk of a production increase sets up a potential fight between OPEC+’s two heavyweight producers, Saudi Arabia and Russia. The countries have an oil-production alliance that industry officials in both nations have described as a marriage of convenience, and they have clashed before.
Saudi officials have been adamant that their decision to cut production last month wasn’t designed to support Russia’s war in Ukraine. Instead, they say, the cut was intended to get ahead of flagging demand for oil caused by a global economy showing signs of slowing down.
Raising oil production ahead of the price cap and EU embargo could give the Saudis another argument that they are acting in their own interests, and not Russia’s.
Another factor driving discussion around raising output: Two big OPEC members, Iraq and the United Arab Emirates, want to pump more oil, OPEC delegates said. Both countries are pushing the oil-producing group to allow them a higher daily-production ceiling, delegates said, a change that, if granted, could account for more oil production.
Under OPEC’s complex quota system, the U.A.E. is obligated to hold its crude production to no more than 3.018 million barrels a day. State-owned Abu Dhabi National Oil Co., which produces most of the U.A.E.’s output, has an output capacity of 4.45 million barrels a day and plans to accelerate its goal of reaching 5 million barrels of daily capacity by 2025. Abu Dhabi has long pushed for a higher OPEC quota, only to be rebuffed by the Saudis, OPEC delegates have said.
Last year, the country was the lone holdout on a deal to boost crude output in OPEC+, saying it would agree only if allowed to boost its own production much more than other members. The public standoff inside OPEC was the first sign that the U.A.E. has adopted a new strategy: Sell as much crude as possible before demand dries up.
Earlier this month, Iraqi Prime Minister Mohammed Shia’ al-Sudani said that his country, which is the second-largest crude oil producer in OPEC, would discuss a new quota with other members at its next meeting.
A discussion of OPEC production quotas has been on hold for months. The idea faces opposition from some OPEC nations because many can’t meet their current targets and watching other countries run up their quotas could cause political problems domestically, delegates said.
—Michael Amon contributed to this article.
Write to Summer Said at summer.said@wsj.com and Benoit Faucon at benoit.faucon@wsj.com
SHARM EL SHEIKH, Egypt—President Biden is moving to tighten restrictions on emissions of methane, a potent greenhouse gas, and boost funding for developing countries to adapt to the effects of climate change and transition to cleaner technologies, according to the White House.
Mr. Biden is expected to announce the measures in a speech before a United Nations climate conference, known as COP27, according to a fact sheet released by the White House ahead of the address. The measures include plans for the Environmental Protection Agency to require oil-and-gas companies to monitor existing production facilities for methane leaks and repair them, according to administration officials.
Methane is 80 times as potent at trapping heat from solar radiation as carbon dioxide over its first 20 years in the atmosphere. It is responsible for about half a degree Celsius of global warming since the preindustrial era, and its levels are rising fast, according to measurements made by the National Oceanic and Atmospheric Administration.
The planned rules affect hundreds of thousands of U.S. wells, storage tanks and natural-gas processing plants, and require companies to replace leaky, older equipment and buy new monitoring tools.
EPA Administrator
Michael Regan
said flaring—a technique used by gas producers to burn off excess methane from oil and natural-gas wells—would be reduced at all well sites under the planned rules. Owners would be required to monitor abandoned wells for methane emissions and plug any leaks, he said.
“We’ve tightened down to limit flaring as much as possible without banning it,” Mr. Regan said.
President Biden met on Friday with Egyptian President Abdel Fattah Al Sisi in Sharm El Sheikh.
Photo:
KEVIN LAMARQUE/REUTERS
The American Petroleum Institute, which represents U.S. oil and gas producers, said it was reviewing the proposed rule.
“Federal regulation of methane crafted to build on industry’s progress can help accelerate emissions reductions while developing reliable American energy,”
Frank Macchiarola,
API’s senior vice president of policy, economics and regulatory affairs, said in a statement.
Lee Fuller of the Independent Petroleum Association of America, a Washington, D.C., trade group that represents many smaller producers, said his group would be reviewing the regulations closely.
“While everyone wants to produce oil and natural gas using sound environmental procedures, there will always be a need to assure that the regulatory structure is cost effective and technologically feasible,” he said in a statement.
Rachel Cleetus, lead economist for the Union of Concerned Scientists, a nonprofit advocacy group, said in a statement that the EPA had “taken an important step forward by issuing a robust standard for methane emissions from oil-and-gas operations.”
Mr. Biden is walking a political tightrope during his brief stopover in Egypt on his way to summits in Cambodia and Indonesia. The war in Ukraine has unleashed turmoil in energy markets, underscoring the world’s continued reliance on fossil fuels.
Control of the U.S. Senate and House of Representatives still hinged on races that were too close to call as of early Friday morning, with both parties girding for a final outcome that might not be known for days. If Republicans win control of either chamber it would mean more power to a party that is deeply skeptical of Mr. Biden’s climate agenda and reluctant to spend billions of dollars to help other countries transition to cleaner sources of energy.
The White House said Mr. Biden is expected to announce an additional $100 million for the United Nations Adaptation Fund, which helps countries adapt to floods, droughts and storms that climate scientists say are increasing in frequency and severity as the earth’s atmosphere and oceans warm. The U.S. has yet to pay the $50 million it pledged to the fund at last year’s climate talks in Glasgow.
As world leaders gather for the COP27 climate conference in Egypt, WSJ looks at how the war in Ukraine and turmoil in energy markets are complicating efforts to reduce carbon emissions. Photo: Mohammed Salem/Reuters
The U.S. also owes $2 billion to the U.N. Green Climate Fund, which finances renewable energy and climate adaptation projects in the developing world. The administration has asked for $1.6 billion for the fund in the fiscal 2023 budget.
The White House said Mr. Biden would also pledge $150 million to a U.S. fund for climate adaptation and resilience across Africa; $13.6 million to the World Meteorological Organization to collect additional weather, water and climate observation across Africa; and $15 million to support the deployment of early-warning systems in Africa by NOAA in conjunction with local weather-forecasting agencies.
The U.S. pledges don’t address demands from poorer nations to provide money for damage they say is the result of climate-related weather events—a new category of funding known as “loss and damage.” This week at the summit, Belgium and Germany pledged a combined 172 million euros, equivalent to $176 million, to support loss-and-damage payments to developing countries. Scotland pledged $5.8 million and Ireland pledged $10 million.
Developing countries have made a renewed push to set up a mechanism for loss-and-damage payments after severe floods in Pakistan this summer that caused $30 billion in losses, according to World Bank estimates, killed more than 1,700 people and displaced 33 million residents. Sen.
Sherry Rehman,
Pakistan’s federal minister for climate change, said she is hoping for more resources from the U.S. and other nations to help her country.
U.S. negotiators are concerned the concept of loss and damage exposes wealthier nations to spiraling liability. There is also the scientific uncertainty of determining which effects can be tied to human-induced climate change and which are part of normal seasonal variation. However, U.S. climate envoy
John Kerry
said this week at the conference that he is open to discussing loss and damage.
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“We need more,” Ms. Rehman said in an interview. “What you hear everywhere at COP is ‘action now.’ Everything else is fluff.”
Mr. Biden arrived at the climate summit Friday after most world leaders have departed. He met privately with Egyptian President
Abdel Fattah Al Sisi
at the conference, located at a resort town along the Red Sea. The U.S. and Germany were expected to announce Friday a $250 million financing program to build 10 gigawatts of new wind-and-solar energy facilities in Egypt while decommissioning 5 gigawatts of inefficient natural-gas power plants.
The Biden administration’s efforts to curb methane emissions follow an agreement reached on the sidelines of the Glasgow summit a year ago, in which China and the U.S. pledged to work on reducing emissions of the gas. Beijing this week announced a plan to cut methane emissions but hasn’t yet included the new measures in its climate plans submitted to the U.N.
Nigeria announced its first-ever regulations, including limits on flaring, to cut overall methane emissions by more than 60% over 2020 levels. Canada said Thursday it plans to cut emissions of methane from its oil-and-gas industry by more than 75% over 2012 levels by 2030.
Emissions from flaring are far higher than previous government and industry estimates, according to an analysis of 300 wells in four states published in September in the journal Science.
The White House says 260 billion cubic meters of gas are wasted every year from flaring and methane emissions within the oil-and-gas sector.
Under the 2015 Paris climate agreement, countries aim to limit global warming to well under 2 degrees Celsius above preindustrial levels and preferably to 1.5 degrees. The gap between the emissions cuts pledged by 166 nations, including the U.S., and their current emissions puts the world on track to warm 2.5 degrees Celsius, or 4.5 degrees Fahrenheit, by the end of the century, according to a recent U.N. report.
White House officials point to Mr. Biden’s support of the Democrats’ climate, health and tax legislation that allocates hundreds of billions of dollars to climate and energy programs, including tax credits for buying electric vehicles and investments in clean technologies.
Administration officials said the legislation has helped put the U.S. on track to meeting Mr. Biden’s goal of cutting domestic emissions 50% below 2005 levels by 2030.
—Matthew Dalton and Scott Pattersoncontributed to this article.
is changing its name to SLB, dropping the family name of the brothers who founded the oil-field services company nearly a century ago.
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The company said the punchier moniker, which is effective Monday, is meant to embrace its focus on newer energy services, such as clean hydrogen and carbon-capture technology. The rebranding includes a new logo and comes as the company said it would focus on creating and scaling new energy systems such as carbon solutions, hydrogen, geothermal and geoenergy, energy storage and critical minerals.
“It’s simple, it’s bold, it’s still related to our heritage,” Chief Executive
Olivier Le Peuch
said. “We have to find a path to keep this heritage and, at the same time, [it’s] an opportunity to draw a new north for the company.”
Brothers Conrad and Marcel Schlumberger founded the predecessor to the company that would carry their family name in France in 1926, when they created the Société de Prospection Électrique, or the Electric Prospecting Company, according to the company website.
Throughout the 1930s, the company grew rapidly and established international business units bearing the Schlumberger name. In 1940, the company moved its headquarters to Houston, the burgeoning center of the U.S. oil drilling industry.
Over the past century, the company has evolved from its roots doing surface prospecting for the metal-ore mining industry. By the 1960s, its deep-sea drilling equipment was used in the search for sunken vessels and the company began providing high-precision sensors to the National Aeronautics and Space Administration.
Money is a sticking point in climate-change negotiations around the world. As economists warn that limiting global warming to 1.5 degrees Celsius will cost many more trillions than anticipated, WSJ looks at how the funds could be spent, and who would pay. Illustration: Preston Jessee/WSJ
The company has since grown aggressively through acquisitions, cementing its lead as the world’s largest oil-field services company through its 2010 acquisition of Smith International for over $11 billion.
More recently, Schlumberger has expanded into renewable-energy services along with the broader oil-and-gas industry. In 2020, Schlumberger launched a business unit to explore low-carbon and carbon-neutral technologies.
The following year, the company said it wanted to achieve net-zero greenhouse gas emissions by 2050, with minimal reliance on offsets. The company has since rolled out new offerings to reduce carbon dioxide and methane emissions from oil-and-gas operations.
Earlier this month, Schlumberger announced two partnerships, one meant to introduce sustainable technology into the production process for battery-grade lithium compounds and another to accelerate the industrialization of carbon-capture technology.
Shares of Schlumberger are up more than 68% so far this year, outperforming the S&P 500’s decline of 21% over the same period. Last week, the company posted third-quarter earnings that topped Wall Street expectations on 28% revenue growth from a year ago.
Write to Will Feuer at will.feuer@wsj.com and Benoît Morenne at benoit.morenne@wsj.com
Israel and Lebanon have reached a historic agreement, leaders on each side said separately on Tuesday, settling a years-long maritime border dispute involving major oil and gas fields in the Mediterranean.
The United States has been trying to broker a deal between the neighboring countries over the 860-square-kilometer (332-square-mile) area of the sea that has been under dispute for years.
It includes the Karish oil and gas field and a region known as the Qanaa prospect, which are expected to fall into Israeli and Lebanese waters respectively under the deal. Israel has said it would begin extracting oil and gas from Karish and exporting it to Europe imminently.
“The final version of the offer is satisfactory to Lebanon and meets its demands and preserved Lebanon’s rights of this natural wealth,” Lebanon’s President Michel Aoun said in a statement hours after receiving Israel’s final offer through US mediator Amos Hochstein.
Aoun said he hopes the agreement, which is yet to be signed, will be announced “as soon as possible.”
Israeli Prime Minister Yair Lapid said: “This is an historic achievement that will strengthen Israel’s security, inject billions into Israel’s economy, and ensure the stability of our northern border.”
The draft agreement meets all the security and economic principles laid out by Israel, Lapid said.
The Israeli prime minister will convene the security cabinet on Wednesday followed by a special meeting of the government, he said.
Lebanese officials have said the deal does not mean any “treaty” will be signed with Israel and this agreement is not a step toward normalization of relations between the two countries, which are technically at war.
Earlier Tuesday, Lebanese negotiator and deputy parliament speaker Elias Bou Saab told CNN that “Lebanon felt that [the deal] takes into consideration all of Lebanon’s requirements and we believe the other side should feel the same.”
Meanwhile, Israeli chief negotiator Eyal Hulata said: “All our demands were met, the changes that we asked for were corrected. We protected Israel’s security interests and are on our way to an historic agreement.”
On Tuesday, Lebanese Energy Minister Walid Fayyad also said the French energy company Total, which owns the contract to explore Lebanese waters, would start working on the Qanaa prospect “immediately.”
Talks gained momentum after London-based oil and gas exploration company Energean arrived in June to begin development of the Karish field on Israel’s behalf. Although the Energean ship is well south of the disputed area, part of the field is in an area Lebanon had claimed.
Hezbollah, the powerful Iran-backed Lebanese Shiite milita, had threatened Energean’s gas rig if they started producing gas before a deal had been struck.
On Tuesday, Hezbollah declined to comment when contacted by CNN, but the Iran-backed armed group has previously said it would abide by any agreement signed by the Lebanese government.
The historic agreement does not affect land borders, but it is likely to ease security and economic tensions for both nations.
Lebanon’s caretaker Prime Minister Najib Mikati said on Thursday that an agreement “will circumvent us from a definite war in the region.”
Exxon expects to report strong financial results for the third quarter of the year after smashing previous profit records in the second quarter on the back of the oil and gas price rally.
Per a Reuters report citing a snapshot issued by the supermajor, Exxon could book a third-quarter net profit close to its second-quarter record of $17.9 billion.
Average oil prices in the third quarter were $98 per barrel of Brent, which was substantially lower than the $109-per-barrel average in the second quarter, but still high enough to boost profits.
Natural as prices on international markets in the period averaged $7.95 per million British thermal units, however, up from $7.17 million per mmBtu in the second quarter, Reuters also noted.
Exxon booked second-quarter earnings of $4.21 per share assuming dilution. This is nearly quadruple the $4.69 billion in earnings for the second quarter of last year, and more than triple the earnings from the first quarter of this year. Exxon’s earnings per share easily beat the analyst consensus of $3.84.
Higher oil and gas prices, the highest refining margins in years, increased production, and aggressive cost control all contributed to the record-breaking profits at Exxon, which beat its previous quarterly earnings record from 2012 and the quarterly profits from 2008 when Brent prices hit a record $147 per barrel.
Now, despite the almost 25-percent slide in oil prices during the third quarter of the year, price levels remained conducive to higher profits, especially coupled with the increase in gas prices on international markets demand continued to outstrip supply.
The outlook for the immediate term is bullish, too, as the market anticipates a deep production cut from OPEC+, which would push oil prices significantly higher, creating yet another potential windfall for the industry, in which Exxon is among the biggest players.
Adobe beat revenue and profit expectations, and on the same day announced it would acquire a smaller but faster-growing rival in online design-collaboration tools. The stock market rewarded the company by pushing down its shares
ADBE,
-3.12%
to the lowest level in almost three years.
Investors punished the company not for its earnings report, released Thursday, but for their disdain of the Figma deal. Specifically, the deal’s price.
Read: Nervous investors are slamming tech deals. Just look at Adobe.
In a $20 billion half-cash, half-stock transaction, Figma became the highest-multiple cloud-scale SaaS deal ever done. An estimated $400 million in revenue for all of 2022 marks this deal at around 50 times this year’s revenue in what I believe to be the second-largest software as a service deal in history.
In this market, where growth is persona non grata, the market deemed this deal a bridge too far. However, in this case, the market may have gotten this wrong.
Figma is among the fastest-growing companies
If you aren’t familiar with Figma, it’s a red-hot, venture-backed (before Thursday) company that makes collaboration tools used for digital experiences. While Figma was founded in 2011, the first five years were spent trying to get to product. The company printed its first dollar in revenue in 2017 and will hit $400 million in annual recurring revenue (ARR) in 2022.
For those who aren’t familiar with SaaS economics, hitting $400 million in recurring revenue in just over 10 years is remarkable. However, doing so five years from the first dollar of revenue is even more impressive.
For reference, the average cloud-scale SaaS company books $10 million in revenue after about 4.5 years, according to Kimchi Hill. In the same study, assessing more than 72 SaaS companies that reached $100 million, only eight did so in less than five years from the first dollar — and that was precisely $100 million. Most take five to 10 years to hit $100 million, and well-known names like DocuSign
DOCU,
-6.14%,
Coupa
COUP,
-4.28%,
RingCentral
RNG,
-5.34%
and Five9
FIVN,
-4.22%
took 10 to 15 years.
Beyond its speedy growth, the company is also performing in a way that should have been lauded by at least the savviest of investors. Its 150% net customer retention rate, 90% gross margins, high organic growth and positive operating cash flow make it more of what investors want in a company today. Adobe already grows in the double digits, plays in attractive markets, compounds ARR and, at this point, has seen its multiple come way down off its highs.
It is also worth considering how Figma may benefit from Adobe’s strong market position, known product portfolio and defined channels, and go-to-market strategies to speed its growth in this space with a total addressable market of about $16.5 billion.
Rare companies are still rare
Perhaps it sounds as if I’m gushing over this deal. I want to be clear that I am not. At least not yet.
However, the hive mind of the market can be quite perplexing at times, and there is a data-driven story here that justifies Adobe’s decision to buy Figma at such a lofty price. Unfortunately, we won’t know with any certainty for five or even 10 years. Investors may not like that, but Adobe’s longevity depends on operating with the longer term in mind.
Tough economy or not, rare companies are still rare, and Figma is traversing market conditions and delivering growth in a large market, drawing Adobe in at an unprecedented price. Perhaps higher than it should have, or could have, paid.
However, based on its rapid revenue growth, strong net dollar retention, 100% growth rate in 2022, massive margins and apparent synergies across the Adobe portfolio, it may be Adobe that has the last laugh on this one.
Daniel Newman is the principal analyst at Futurum Research, which provides or has provided research, analysis, advising or consulting to Adobe, Five9 and dozens of other technology companies. Neither he nor his firm holds any equity positions in companies cited. Follow him on Twitter @danielnewmanUV.