Regional oil and gas producers reported fourth quarter losses yesterday as the tumbling price of crude forced asset writedowns from Egypt to the Kurdish region of Iraq.
Sharjah-based Dana Gas swung to a loss as lower oil prices battered the sector. Meanwhile DNO, the Norwegian oil producer part-owned by RAK Petroleum Holdings, said its fourth quarter loss more than doubled.
Dana reported a net loss of US$4 million for the period, compared to a profit of $35m a year earlier. That sent the stock tumbling as much as 6 per cent in morning trading to close 4 per cent lower.
“Oil prices do affect our business,” said Patrick Allman-Ward, the Dana Gas chief executive. He said that the company’s short-term focus would be on boosting production in Egypt and the UAE.
DNO widened its fourth quarter loss to $252.5m from $98.1m a year earlier. It wrote down the value of its oil and gas assets in response to the lower price of crude, which led to $297m in impairments.
“Our focus in 2015 is to align our spending with our earning,” said Bijan Mossavar-Rahmani, the DNO executive chairman.
DNO will focus on its Kurdish operations to generate more revenue. The company started selling oil to the local market again, with plans to ramp up deliveries. Mr Mossavar-Rahmani added that the company had “one foot on the accelerator and one on the brake”.
Dana Gas also took a $22m impairment charge after it wrote down the value of assets in Egypt.
The company has battled to recoup payments from Egypt and the Kurdistan Regional Government (KRG) over the course of the past year.
Dana Gas Egypt collected $210m last year as compared to $134m in 2013. Dana’s KRI operations, in which it has a 40 per cent share, collected $34m last year, about half as much as it recouped a year earlier.
Last year the Egyptian government gave up its share of the profit from production to Dana Gas, totalling 52 per cent, to offset its debt. The company’s assets in Egypt provided a 10 per cent increase in production to an about 40,000 barrels of oil equivalent per day.
“Overdue receivables are forecast to be fully recovered by 2018, excluding any further payments that may be coming from Egypt,” Mr Allman-Ward said.
In the Kurdish region, Dana Gas has been in a dispute with the KRG over about $700m in payments since 2009. In December, a London court ordered the KRG to pay $100m in back payments, which was rejected by the KRG.
Dana Gas continues arbitration, but said it was open to reaching a deal outside of court. It was able to collect $18m from the KRG in October as part of its stake in the Kurdish Pearl Petroleum venture.
“We detect structural positives in the company reducing trade receivables in Egypt and the receipt of $18m in cash from the KRG,” said Sanyalaksna Manibhandu, a senior analyst at NBAD Securities. “The company is having some success in solving the long-standing problem of trade receivables.”
He added that the payment from the KRG also indicated a potential resolution in the lengthy dispute.
Oil traded below $50 a barrel in New York yesterday after US crude inventories rose from the highest level in more than three decades.
West Texas Intermediate rose as much as 2.1 per cent, erasing an earlier decline of 2.3 per cent. Prices dropped 8.7 per cent on Wednesday, the most since November.
Market volatility has forced companies such as BP and the ConocoPhillips to slash capital expenditure.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
The Brutalist
Director: Brady Corbet
Stars: Adrien Brody, Felicity Jones, Guy Pearce, Joe Alwyn
Rating: 3.5/5
Directed by Sam Mendes
Starring Dean-Charles Chapman, George MacKay, Daniel Mays
4.5/5
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Match info
Manchester United 4
(Pogba 5', 33', Rashford 45', Lukaku 72')
Bournemouth 1
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Red card: Eric Bailly (Manchester United)
Key products and UAE prices
iPhone XS
With a 5.8-inch screen, it will be an advance version of the iPhone X. It will be dual sim and comes with better battery life, a faster processor and better camera. A new gold colour will be available.
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iPhone XS Max
It is expected to be a grander version of the iPhone X with a 6.5-inch screen; an inch bigger than the screen of the iPhone 8 Plus.
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iPhone XR
A low-cost version of the iPhone X with a 6.1-inch screen, it is expected to attract mass attention. According to industry experts, it is likely to have aluminium edges instead of stainless steel.
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Apple Watch Series 4
More comprehensive health device with edge-to-edge displays that are more than 30 per cent bigger than displays on current models.
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Our legal consultant
Name: Dr Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
Dr Afridi's warning signs of digital addiction
Spending an excessive amount of time on the phone.
Neglecting personal, social, or academic responsibilities.
Losing interest in other activities or hobbies that were once enjoyed.
Having withdrawal symptoms like feeling anxious, restless, or upset when the technology is not available.
Experiencing sleep disturbances or changes in sleep patterns.
What are the guidelines?
Under 18 months: Avoid screen time altogether, except for video chatting with family.
Aged 18-24 months: If screens are introduced, it should be high-quality content watched with a caregiver to help the child understand what they are seeing.
Aged 2-5 years: Limit to one-hour per day of high-quality programming, with co-viewing whenever possible.
Aged 6-12 years: Set consistent limits on screen time to ensure it does not interfere with sleep, physical activity, or social interactions.
Teenagers: Encourage a balanced approach – screens should not replace sleep, exercise, or face-to-face socialisation.
Source: American Paediatric Association
What is Bitcoin?
Bitcoin is the most popular virtual currency in the world. It was created in 2009 as a new way of paying for things that would not be subject to central banks that are capable of devaluing currency. A Bitcoin itself is essentially a line of computer code. It's signed digitally when it goes from one owner to another. There are sustainability concerns around the cryptocurrency, which stem from the process of "mining" that is central to its existence.
The "miners" use computers to make complex calculations that verify transactions in Bitcoin. This uses a tremendous amount of energy via computers and server farms all over the world, which has given rise to concerns about the amount of fossil fuel-dependent electricity used to power the computers.
Europe’s rearming plan
- Suspend strict budget rules to allow member countries to step up defence spending
- Create new "instrument" providing €150 billion of loans to member countries for defence investment
- Use the existing EU budget to direct more funds towards defence-related investment
- Engage the bloc's European Investment Bank to drop limits on lending to defence firms
- Create a savings and investments union to help companies access capital
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