Anadarko Will Be Huge Stretch For Occidental's Coffers

Bloomberg News, he joined us on our Bloomberg Interactive Brooker Studio. So, first of all, Simon, are you surprised that Chevron walked away today? No, we're not surprised as as as my work, and you just heard him earlier that he's very keen. We can't stress enough capital discipline, his commitment to returning as much cash as possible to investors, not getting carried away,

and making bold and over ambitious deals here. So although this was this would have been the biggest deal of his career, it would have been I think possibly Chevron's

biggest acquisition today. The money that the offer was there on the table, and they were pretty clear they were they weren't going to go any higher, and a lot of people saw them just staying with this, and when Occidental came back improved their offer, it was it was questionable whether Chevron had the willingness to go above that. And certainly shareholders today are rewarding Chevron for that discipline, they are not rewarding Occidental. Shares down six point two

in the week of Chevron's decision to walk away. How negative is this for Accidental? To give you some idea, Occidental's market caout the last time I looked with something like a fifth of what Chevon's. It's Chevron is an enormous company by any measure. It's got the balance sheet, it's got the financial flexibility to buy a company of

Anadarko size fairly easily. For Occidental, this is a huge stretch, and as we we know, they've been flying or literally flying around the last couple of weeks trying to trying to engineer this deal and make sure it works for them. They've gone to Warren buffet it. They've got ten billion

dollars of cash, a commitment from him. They've gone total in France Total, have agreed to take some assets post deal, which should ease some concerns there Nevertheless, there is a real anxiety that how is Occidental going to pay for this and manage its balance sheet and not get too leveraged. And this is this is the oil industry, of course, this is a cyclical industry. Where the price has done a bit better this year, there's no guarantee oil prices

will stay around where they are at the moment. They won't go down back down to fifty dollars a barrel or even lower next year. Who knows, so Simon, you just you mentioned the great balance sheet that Chevron has. What do you think Chevron's next step is, given that they're now passing on in a darker I I think any CEO, especially in the oil industry and the way it is at the moment, with what's going on in the Permian, myke Worth has got to be looking at

other other opportunities. Again, we heard him there. He wouldn't be drawn into sort of naming names or really committing himself to doing another deal. He's he's playing it as you would expect him at this moment to be. It's playing it safe, stressing the increase that announced this morning, the share buy backs, and that's what she helds want to see in the near term. But look what's going on in the Permian right now. This is huge explosive

growth there. Exon and Chevron, the two big giants of the industry here have for years have kind of sat on the sidelines a bit. They've been involved, but they it's only this year that they got really they made really strong commitments to invest billions and billions over the next few years and really make the Permian a centerpiece of their growth plans. Uh. And there's a there's a huge opportunity here in the Permian for these companies and

others to come in and consolidate. There's a very fragmented ownership in that region. There are a lot of independent players, mid sized companies, some of them have you know, operational challenges. And what's what's happened in the last few weeks were with Anadarka coming into play. It's really ignited a lot of speculation about future m and A maybe involving Chevron, but also maybe involving other majors, even x On Shell. Uh, maybe some consolidation between some of those mid sized players

and really kind of rationalizing what's going on there. You know, as you mentioned, Simon this is a cyclical business, and I think about some of the pain that we've seen in the Pachelle patch, particularly from the debt market side. We certainly saw that in two thousand and fifteen, two thousand and sixteen. I'm wondering whether this acquisition by Accidental is setting up that company for a similar pain later on.

I mean, is are they going to end up paying for this largely with dead And I am looking right now at Occidental bonds that are selling off sharply, uh in the our investment grade currently, but definitely investors are showing some scottishness there. Yeah, it's a big question. I mean, you look at I can't keep going back to the buffet, the buffet deal and Buffet's got he's got, he's got

preferred stock. The paying I mean, this is really expensive to get this deal done for them, and they ostensibly did this to avoid a shareholder votes, but in the end, you know, even if they push this through, it's going to turn around and buy them. I definitely watched the bonds um. There's a there's a huge continuing anxiety among investors, bond holders, shareholders about what has happened in this sector

over the last three or four years. I mean, the oil price sold off steeply back in and it's only just started to recover. If you if you look over us at the last five years or so, you know, it used to be at a hundred dollars a barrel. Where is it at the moment. It's like arrow depending on which price you're looking at. Um. So we're not out of the woods yet. And the last few years the mantra has been in the oil industry capital discipline,

spending discipline. Uh, you know, and there are the industry has hasn't yet recovered to the damage, hasn't really pair the damage to its reputation. And you know, looking at the commentary, speaking to investors, speaking to analysts over the last couple of weeks, as I said, it's a real worry that does this take over battles signal and an

end to this period of discipline and austerity. So Chevron stepping backs given its investors a bit of a relief, um, But for occidental shareholders, the anxiety is very real at the moment, and it must be. There must be a worry for investors in other share other companies right now. Are they going to take a leap. Is this going to be We're going to see more deals? Could we see another takeover battle? I mean that would be kind of negative for some of them. Sam and Casey, thank

you so much. I wonder I wonder where actually where where is the jet right now? Real quickly, the last time, for the last time I looked, it was still in the in the Hague. And what that mean? What does that mean? Very good? We don't even look to be clear. We all we know is that the Occidental jet is in the Netherlands. We don't know who's on board or while they're there. One of my okay understood, Simon Casey, Energy team leader Bloomberg News joining us on our Bloomberg

Interactive Broker studio. I believe Royal Dutch Shell might be somewhere in that part of the world. But the Occidental now owns this asset. They now own a big, big piece of the Permian basin. UH. They've arranged for financing with Warren Buffett in terms of ten billion dollars preferred stock. UH. They've met with the folks and have an agreement a total for some divestitures. So they're certainly putting their best

foot forward here. And what is a very big deal for the occidental petroleum folks in terms of assets, in terms of purchase price. Uh So, now the hard work begins. Now, let's head to UH Nathan Hagar for World at national headlines, Nathan, globally are getting more concerned today about the prospects of no trade deal with between the US and China. Both sides appear to be hardening their stance, and Nastac leading the declines in the US, but down by one and

a half percent. Really though, one of the biggest moves that can be seen in currency markets. I'm looking right now at the ms c I Emerging Markets uh Currency Index, which is poised for its biggest one day loss right now since October eighteen, had fallen the most since August of last year at one point, and has retraced all of its gains for joining US now to talk about this from the emerging markets angle and and just currencies

in general. Al Hasseani He is senior interest rates and currencies analysts for Columbia thread Needle Investments, helping to oversee four hundred and thirty billion dollars from Minneapolis, Minnesota. Thank you so much for being with us ed. I just want to start with the big move that we're seeing in the ms I Emerging Markets Currency Index. I'm just wondering, is this the beginning of something that could be a real protracted sell off among emerging markets, particularly in South

in Asia should the deal breakdown completely? Sure, I mean I think if the deal does break down, we probably see a little bit more downside uh two currencies. If you look at what happened, let's say, in the course of the past six months in the e M space, is we've seen uh the real rate question versus the US shrink quite considerably. The M as a class of the whole has done, has done quite well until I'd

say about two months ago, and it's flatline since. And now we're starting to see some of that volatility and risk assets spill over into e M UM and and and generally that tends to be a very toxic combination for for M currencies. So I talk about some of the European currencies, thinking about the Euro obviously, the European region very sensitive to you know, the health and growth and situation in China. What is your thoughts about the

euro right here? Yeah, we we have liked being short the euro for more than a year now, it's been it's been a good trend. That trend is flat line, I would say a little bit more recently, UM, A couple of things have played into this flattening trend. And instead of the decline and volatility in euro dollar one, European data at this point seems to have a little bit less downside than it did even three months ago.

We've bottomed out in a lot of the industrial in the seas, We're starting to see some recovery in in export data, some recovering sentiment data, and that's playing against what we're seeing on on the trade front and again greater uncertainly coming in terms of US China trade relations. So those two forces are are playing off against each other at the moment. And I would add the other

factor is in terms of positioning spect positioning. Speculative positioning right now is quite heavily short the euro, and so I think that that plays against UM dollar strength as well. More broadly, I would say dollars trend has more room to run, but versus the euro, I think, UM, we're seeing less and less room for for the euro tow to weaken. And you know, I have to wonder the big story today really is the trade tensions appear to

be ratcheting up between the US and China. I'm trying to figure out how much of a game changer a breakdown in discussions would be four currency markets. How much would no deal between the US and China alter your current views on currencies and in sort of where you're positioning, Yeah, I would say I would say it probably as a first order issue, we would strengthen my conviction that the

dollar will move higher UH, particularly against two baskets of currencies. First, high beta EM currencies like South Africa, Mexico and Brazil that have performed quite well on a year to date basis um and and have a lot of room to sell off UM and Second, developed market currencies of small, open economies. And I would say there's sort of I look at a basket of five, but the Australian dollar, the New Zealand dollar, UH, Swedish Corona, Korean Land, and

the Canadian dollar. I think that basket is where we've seen a combination of things. First, weakening growth into this environment, the biggest exposure to trade, and therefore this this global or this location between the U S and China, and then central banks having to step in and now ease policy. And we've seen New Zealand take a step in that direction. We've seen easing signs from Australia, Korea, um And and Sweden.

And so all of these five currencies are now sort of the front line of of of weakness versus a are so ed you mentioned some of the areas and emerging markets where you rightly have concerns, particularly in the backdrop of a you know, a trade potential, trade escalating conflict between the U S and China. Are there areas in emerging markets where you still feel comfortable, uh, putting capital to work. Sure, I would say in in local rates markets, we've seen a couple of places where you're

pretty well compensated. Real rates are high central banks of

starting easing cycles. Um. I would say if you look around Asia the moment um, Indonesia and the Philodines standout as as pretty good places to put money to work on a currency hatched basis um in in in in the local rates markets, in in Latin America less so just because you know, some of the core markets have done quite well, uh, you know, particularly Brazil UM and then when I look around for stress cases, I would say again, so the two issues from last year in

Argentina and Turkey again float to the top of the of the risk list and and and have performed quite poorly. You today, Ed al Husseini, thanks so much for being with us it as a senior Interest Rates and currency as a Columnia thread Needle Investments joining us on the

phone from Minneappolis. Well, as usual, there is a lot going on in the media industry as traditional media companies look at their businesses to see if they can even compete with big tech giants such as Amazon, Netflix, and Apple. Our next guest is part of the top notch media reporting team. We have a Bloomberg News, Lucashaw's entertainment reporter for Bloomberg News, usually based on our Los Angeles bureau, but joining us live here on our Bloomberg Interactive Brookers

studio here in New York. So, Lucas, thanks so much for being with us. First of all, you know we had Disney this week with earnings. They're making a big pivot to try to be a streaming company. What did you take out of some of Bob Ogger's comments. You know he has very effectively changed the conversation around Disney over the past couple of years. For a while, it was, you know, the movie studio is doing so well because

of the Marvel movies and Pixar and Star Wars. But ESPN, which had been the profit driver for so long, with struggling because people were cutting the cord, canceling pay TV, And he has shifted the focus to these new streaming services ESPN Plus, Disney Plus and Hulu, in which Disney owns a majority stake, and for the most part in investors are going along with it. You know, Disney says that profits they're down a little bit, but they're not down as much as people think. Uh and and people

are cool with that. For the longest time, the the you know, the important metric at Disney has been profitability and it's not anymore. Is this a sort of a recognition by investors that really the future of media is streaming and that it's going to be expensive and this is going to be a difficult time, But it's all about how you position for the future, and profitability is that much less important than the near term for the

short term. I think that's exactly right. You know, Netflix has built this kind of colossus and earned evaluation north of a hundred fifty billion dollars without making a cent of profit. I mean they report one with their free cash flow is really negative. Uh. You know, Disney obviously can't get away with that, but they are going to have a couple of years I think where they can report profits that are flat or down a little bit,

provided that they show growth in streaming lucas. You know, one of the things that I think drove the Disney Century Fox deal was the belief that, gee, if you're bob Byger and Disney, over the next five or ten years, your competition is not so much Warner Brothers or Viacom. It's maybe more like an Apple or Amazon. Do you think those tech companies are going to at any point really dive into the deep end of the pool in terms of media and content. I would say that Amazon

at least is already there in terms of spending. I mean, they're spending five six seven billion dollars on programming in a year now. I don't know that they've had success with their shows on the scale that that Netflix or even Hulu has had. Most TV studio executives that I talked to feel like the Amazon's perception in the market is is vastly overstated. Um, Apple is a is a big question mark. I'm really not sure how committed they are. They had this big event a couple of months ago.

They tried out j j Abrams and Oprah and Reese Witherspoon and Jennifer Aniston. You know, I was talking with somebody yesterday who joked that it was like Apple just staged its own Vanity fair cover. But we haven't seen a second of any footage, and we don't know how

serious they are about selling the services. I think for for Disney, it's at least now it's all about Netflix and with the Fox steal, buying enough intellectual property, having enough shows and movies that they're going to have a robust service that has thousands of titles that you will have to subscribe to. Do we have a better sense of pricing for Apple or for Disney Disney Disney said that it's going to be I think it's six, but it's not going to include a lot of the other things, right,

I mean, it's not going to include absolutely everything. It will have what you think of as kids or family friendly programming, so the kind of everything animated Pixar and you know, the record Ralph movies. All that will be there, most of the Marvel movies, Star Wars movies, some original series. What it won't have is some of that Edgy or Fox programming that they just acquired that. I think the average show that's on the FX network, for example, will

probably live elsewhere. But one thing that is going to be on the app that surprised me a little bit was The Simpsons, which you could see being a natural fit, say for Hulu, which has done a lot in what you quote unquote adult animation. Uh, and instead it's gonna be on on Disney Plus. It's interesting that this streaming business is getting kind of crowded. One could argue, we've had announcements from you know, NBC that they're going to launch a streaming service, Um, you know, a T and

T and so on and so forth. Is there a sense out there about how much the market can really bear? Is it just kind of too early to figure that out. It's a little early to figure that out. We've seen people some firms are starting to do research on consumer willingness. I think most people figure that there's a people will subscribe to three to five, maybe six. There'll be a lot more than them. And there are a lot of already dozens, if not hundreds, of niche services that have

four hundred thousand subscribers, two hundred thousand subscribers. I really don't know what happens to them in the long term, and we could end up with, you know, a bundle that is not that different from the PayTV bundle you see today, where you pay fifty bucks a month or a hundred bucks a month and you get seven or eight of these. The question is will people participate? You know,

Apple try to do that. Instead of focusing on building its own shows, it wanted to package together different subscription services with its TV app, which it has on the Apple TV set top block right now. The problem is is that Netflix has been unwilling to participate, and if you don't have the number one player, it's really hard

to drive customers. They're talking about how crowded is. Walmart's getting into with a platform called Voodoo, not Hulu Voodoo, but it is going to offer free programs just with commercials. I'm wondering, who do you think would be the bundler.

Bundler for the different services, probably one of the big tech companies, Apple, And because Apple and Amazon already offer a version of this, Amazon as this program called Channels where if you are a subscriber to Prime, which is, you know, to free day delivery, you can add on other services. Lucas Shaw, thank you so much, as always for being with us. Lucas Shaw, Great, see you in person.

Entertainment reporter for Bloomberg News normally in Los Angeles, but here with us in New York in a Bloomberg Interactive broker's studios. But let's switch back to the China deal. We're you know, this is the two days that really matter. The US delegation and the Chinese delegation are meeting in Washington, d C. Tensions are very high on both sides. To get the latest of what we might expect, we welcome Andy Brown and he's the editorial director for Bloomberg New Economy.

He joins us live here in our Bloomberg Interactive Brooker studio. So, Andy, tensions are high on both sides. Just in the last twenty four forty eight hours. Do you think we get a deal here? Uh? Look, I I think the omens are not looking good at all. I think it's it's very notable that the chief Chinese negotiate, Leoha, is arriving this time not as an emissary of President Si Jimping as he did before, even though of course they're very close.

They've been friends since school days, which indicates it in Chinese bureaucratic terms, they are in a sense lowering them you know, position of this, of this delegation. It's smaller than it was supposed to be. And there it seems as though the lowering expectations as well. I mean, at the very least, he's not arriving as a grand planet opoury of presidents. He to wrap up a great trade deal with the White House. You don't get that feeling at all. So what happened? Look, I think a couple

of things. First of all, the economic context has changed. Um that when they began the talks, the Chinese economy was looking pretty fragile. They've since short it up with a mix of all kinds of stimulus. Um. They've got the private sector firing again. Um. And you know, on the other hand, the Chinese may calculate that the United

States has become more fragile. But I think there's another issue here that you know, regardless of how sincerely or her may have been in making concessions, he's now coming up against the reality that he's got to sell this to an unyielding bureaucracy. You know, in Chinese leaders, despite what people think, are not omnipotent. So you know, this d to get it into law, which is apparently what Robert Lightheiser wants. This is not a simple matter, you know.

To do that, it's going to require a concerted push by President Ji Jimping, And frankly, it is not clear

to me why he would want to do that. Why we Why would he want to expand that much political capital and take personal responsibility for dismantling portions of the Chinese state owned economy, which the Chinese themselves have identified as being key to supporting the Chinese Communist Party and frankly, a better modeled for competing successfully against the United States and areas of high technology and industries of the future.

What's interesting, I think when we started this whole process, maybe two assumptions might have been A, both sides needed deal, and B it doesn't happen to be the end all, be all deal. We just need to take this risk off the table. Is there an argument to be made that one side or the other maybe overplay their hand here? Yeah, the clear clearly, Um, you know, this has been a This has been a game of chicken, right between two two leaders, um, and you know, each calculating that they

have more leverage. What is interesting, however, I mean, even though the markets have been expecting a deal, I mean this was always frankly naive. I mean, you know that for the Chinese the deal is it is never a deal, It's the start of a negotiation. This was never going to be a deal to end everything. This was you know, in in in Chinese terms, Um, you know this this

this was this was going to be a truce. I mean the most we could expect a fragile piece, um, you know, to be followed by much more fundamental structural

conflict between the United States and China. I guess I'm just still struggling to understand then, how there was so much hope baked into what was going to happen this week, and the fact that people thought there would be something signed, given the fact that the U should have been aware of some of these structural challenges to getting through what they wanted to get through from the Chinese, and China knew exactly what President Trump wanted at least you know,

from the negotiations. I'm just struggling to understand what this means about the ongoing negotiations. It seems like there's a huge communication breach here. If not something well, I think we should be taking our cues from businesses on the ground in China. And what they're telling us is they're they're expecting tariffs, they're already planning for them tariffs and

two billion dollars of Chinese exports. They're already uh stockpiling some companies that are importing Chinese made goods, and they're ripping supply chains out of China just as quickly as they can. The process, of course, has been well underway

for the past year, and it's exhilarating now. And if you know what what you hear is when businesses complaining to the White House about you know, the damage that this is doing to their operations, the response is, what you've known about this for a long You've had a year to get your supply chains out of China. What are you doing? So how do you think, let's say, let's fast forward, you know, maybe you know, a day

and a half from here. In Friday evening, the two sides break and typically there's some release or some press conference or some communic a what do you expect to come from each side? I think it would be pretty surprising if what we got at the end of it was a complete breakdown of the tot. I don't think either side want that. I think it's more likely to be packaged as a we have serious issues to resolve, We're going to go away, think about it, and come

back to the table at some point. But there's no way for for for the US not to implement tariffs at you know, one minute after midnight tonight, because that's what President Trump has promised. I think it's highly likely that we're that we're going to see US tarrets and

then we're going to see retaliator reaction from China. And even if they do continue to have a conversation and eventually come out with something constructive saying that they're going to continue talking, we're still getting tariffs, the additional tariffs going up. I would have feel that's the most likely outcome, and let's be clear, it's it appears that the tariffs on the Chinese economy has had an effect. I mean they are ownerous, are they not? They are, But you know,

China's head has many ways of cushioning the impact. I mean, so you know, through the currency for instance, UM and through stimulus measures. I mean, they've been pumping up the economy through a mix of fiscal monetary policy. As I said earlier, they've been supporting the private sector. UM. They've righted the ship. There were the The Chinese economy is in much better shape now than it was six months ago. Of course, some of that did ride on this idea

that there would be a trade deal. If there is a full breakdown in talks, how much of the improvement will get reversed in China? Well, yeah, that's a good question. Another question is how much more stimulus will they apply and how much can they and how much can they? All very good questions which we will not be able to answer. But Andy Brown, we will have you back and we will attempt once more. Andy Brown, we really

appreciate your insights, truly truly illuminating. Andy Brown's editorial director for the Bloomberg New Economy Forum. Thanks for listening. To the Bloomberg pen L podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. I'm Paul Sweeney. I'm on Twitter at pt Sweeney. I'm Lisa A. Bram Woyds. I'm on Twitter at Lisa A. Bram wits One. Before the podcast, you can always catch us worldwide. I'm Bloomberg Radio