Is Pearl GTL ready for full production?

Shell's Pearl GTL project, situated 80km north of Doha, was due to reach full production in mid 2012, but is late and experiencing cost overruns. It is a gas-to-liquids project aiming to convert gas into valuable liquid products like gasoil and liquid ethane (used to produce ethylene). The raw gas is coming from the North Field, roughly the size of Qatar itself.

Shell is into Qatar in a big way, but an even bigger investor is Exxon Mobil, who have invested $30bn over 10 years (Forbes) to build the world's largest collection of LNG export terminals. An export terminal is where gas is liquefied, stored and shipped to other destinations.

BP goes Kangaroo

Kangaroo bonds are AUD bonds sold by international (non-Ozzie) issuers. BP's first issue takes place now with an A$500m issue at a coupon of 4.5% and is issued by BP Capital Markets (largest kangaroo issue this year, according to UBS, who are the joint "promoters" for the bond aka "bookrunners", together with ANZ). 75% allocation goes to asset managers and insurance funds. Part of the enthusiasm for issuing Kangaroos is the shift in the cross-currency basis swap.

Gazprom latest to Axe Large Capital-Intensive Projects

First it was BHP Billiton's announcement that they were downsizing the Olympic Dam project. Now Gazprom is the latest firm to cut capital spending as it dumps it Shtokman gas field project in the Arctic due to excessive costs. Shtokman contains nearly four trillion cubic metres of gas making it one of the world's largest natural gas fields. The head of Gazprom's production, Mr Cherepanov, said the project was too expensive "for the time being". Total and Statoil were partners in the project (Gazprom had selected them as partners), with 25% and 24% stakes respectively. The oversupply from the US shale gas boom has changed the dynamics of gas exploration across the industry. Gazprom trades on a number of exchanges including the Moscow Exchange, LSE and Berlin and Frankfurt Stock Exchanges and is Russia's largest listed company. The news comes just as Shell has gained permission to drill for oil in the Arctic off the cost of Alaska.

Japan - World's Largest LNG Consumer - Reduces its Bid Price for Asian Cargoes

Asia:
Asian LNG has slipped below $13 per mmBtu as the stockpiling from Japan and Korea and mild weather (reducing air conditioning demand) has given East Asia more bargaining power in the market for seaborne cargoes. According to Reuters, Kogas is not paying more than $12.50 with Indian importers paying up to $2 less per mmBtu owing to lower transport costs.

Europe:
In the UK the price of wholesale gas went up due to summer maintenance schedules at North Sea fields.

US (Henry Hub):
Henry Hub spot is around $2.74 and future at $2.80. Another US benchmark is New York City Gate spot (the diff between Henry Hub price and another hub being known as "location differential"). Major pricing locations include "citygates" which are places where distribution companies receive gas from a pipeline. NYC Gate spot is commonly used for pricing gas in the north-eastern US. Other city gate locations include Boston, Baltimore, Pittsburgh and Buffalo (second most populous city in the State of New York, originally the "Village of Buffalo" with 25 residents).

Citygate prices include the premium paid for delivery to the "citygate" from the main market centre (Henry Hub in Louisiana, adjacent to Texas and Mississippi). The Henry Hub is where gas is channelled to smaller distribution lines.

What factors do you think influence the city gate prices most? Henry Hub spot, weather patterns or inventory levels?

Serco Drop in H1 Profit

British outsourcing firm Serco that runs air traffic control centres, Britain's DLR and the Dubai Metro are bullish despite the 17% drop in H1 profit. 46% of its income is made outside of the UK. Serco is particularly strong in public sector outsourcing. The National Physical Laboratory in  (Richmond upon Thames, London) is also run by Serco.

Miner BHP Billiton postpones Olympic Dam Mega-Project

The Olympic Dam was supposed to be a $30bn project. The idea was to create the world's largest copper and uranium mine, in the heart of the Outback in South Australia. Now this has been put on the back-burner and what's more, no new projects are supposed to be approved till June 2013. This decision has already led to a cut in BHP's workforce in Adelaide, a coastal town in South Australia. Part of this aversion to capital spending is the 35% drop in profits this year although some news channels suggest mining taxes may have played a factor.

It is worthwhile considering the Board of Directors of BHP Billiton. Among them is Lebanese-born Jacques Nasser, the former Chief Executive of Ford Motor Company from 1998 to 2001, who received a $17m golden handshake when he left in October 2001. Marius Kloppers is the Chief Executive of BHP and holds a PhD from MIT in Materials Science and an MBA from INSEAD. Before becoming CEO, Marius circulated through various roles at BHP including Chief Marketing Officer and Chief Commercial Officer.

BHP is involved in onshore gas development of shale resources in the United States and affected by gas prices. In 2012 it has spent just over $3bn developing these resources. Over half its drilling activity takes place in Eagle Ford. In 2013 it expects to spend $4bn further developing these assets. Chesapeake (NYSE:CHK) is especially active in Eagle Ford with 550,000 acres (although most of the production is oil rather than gas). Exxon, ConocoPhilips and Occidental Petroleum have also entered Eagle Ford.

BHP is also undertaking appraisal drilling in the 440,000 acres of the Permian basin (part of Western Texas and South Eastern New Mexico) to evaluate its potential for producing shale liquids. Estimated output is currently around 100Mboe.

This gives us some idea of costs, but what about cash flow? Here are some findings from Graham Kerr's presentation for FY2012. EBIT margin was 39% - this means roughly 39% of revenues weren't consumed in expenses. H2 net operating cash flow was $12bn, slightly lower than in H1.

The history of BHP is a fascinating one. It was formed from the merger of BHP (Broken Hill Proprietary) and Billiton, originally a tin mine on the Indonesian island of Beilitung. Later Billiton expanded into bauxite, first on Bintan and then later in Suriname, leading a largely independent life until its acquisition by Royal Dutch Shell in 1970. When BHP and Billiton merged in 2001 it was dual-listed on both the LSE (BLT) and Australian stock exchanges (BHP) including ETOs.

What is the market capitalisation of BHP? That depends on what exchange you are looking at. Its UK listing is worth about £38bn (Aug 2012).

What about ADV of BHP? On the LSE, it's about 10,000, which means monthly will be roughly 300k.

Deutschland retains S&P AAA Rating

Rating for long-term debt, maintained thanks to "highly diversified and competitive economy". Merkel says German economy is "very sound". Debt is currently 80% of GDP. The German economy is the world's third largest exporter (includes exports to the EU). This includes exports of automobiles from Volkswagen, Daimler and BMW, which constitute around 9% of exports by value.