Oil Tumbles as Gasoline Supplies Rise

Gasoline inventories increased by 2.1 million barrels last week

The EIA said new production from non-OPEC  producers will be more than enough to meet growth in demand next year

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NYMEX crude fell to $44.70 from $46.20 per barrel following the EIA inventory data which showed gasoline inventories increased by 2.1 million barrels last week.

The street had been expecting a draw of 500k bbls in gasoline supplies. The EIA inventory data also showed a 1.7M bbl fall in crude stocks. The street had been expecting a 2.5 M bbl increase, though the API reported a 2.8 M bbl increase on Tuesday.

The International Energy Agency also said new production from non-OPEC  producers will be more than enough to meet growth in demand next year thus offsetting any cutbacks from OPEC. The U.S., Brazil, Canada and other producers outside OPEC will increase output next year by the most in four years, the IEA said in its initial forecast for 2018.

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.7 million barrels from the previous week. At 511.5 million barrels, U.S. crude oil inventories are in the upper half of the average range for this time of year.

Meanwhile, distillate stocks were up 300k bbls, versus expectations for a 0.5 M bbl rise. Refinery usage rose to 94.4% from 94.1%.

Total products supplied over the last four-week period averaged 20.1 million barrels per day, down by 1.2% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged over 9.5 million barrels per day, down by 1.2% from the same period last year. Distillate fuel product supplied averaged 4.0 million barrels per day over the last four weeks, up by 4.1% from the same period last year. Jet fuel product supplied is up 2.7% compared to the same four-week period last year.

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Mallinckrodt is In Play

Mallinckrodt continues to look at a range of strategic options to deliver shareholder value

Management detailed Mallinckrodt’s relationship with Express Scripts and explained that it is not strained

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After hosting Mallinckrodt’s CEO Mark Trudeau for an open Q&A session, Wells Fargo analyst David Maris says Mallinckrodt (MNK) continues to look at a range of strategic options to deliver shareholder value, and that all options, including going private, are on the table.

Mallinckrodt develops, manufactures, markets, and distributes branded and generic specialty pharmaceutical products and therapies in the United States, Europe, the Middle East, Africa, and internationally.

Management did an “excellent job” in correcting the record following “erroneous” short-seller presentations, Maris tells investors in a research note.

Management detailed Mallinckrodt’s relationship with Express Scripts (ESRX) and explained that it is not strained, Maris writes.

The analyst notes Trudeau spoke with Express Scripts CEO Timothy Wentworth a week ago about the relationship and that it seems “solid and mutually positive,” despite recent negative comments about Acthar from the pharmacy benefit manager’s Chief Medical Officer.

Maris has an Outperform rating on Mallinckrodt with an $83.50 price target.

As the Wall Street Journal’s Charley Grant points out on Twitter, Mallinckrodt said last month at a conference that it is exploring options to drive shareholder value.

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Glencore offers $2.55 billion for Rio Tinto’s Coal & Allied Industries

Glencore submits proposal to acquire Rio Tinto’s Coal & Allied Industries for $2.55B

Glencore Proposal will be funded from existing cash resources and committed facilities

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Glencore (GLNCY) announced it has submitted a proposal to acquire Rio Tinto’s (RIO) 100% interest in Coal & Allied Industries for $2.55B cash plus a coal price linked royalty, with the cash comprising $2.05B cash payable on completion and $500M in aggregate deferred cash payments, payable as annual instalments of $100M over five years following completion.

Rio Tinto plc (RIO) finds, mines, processes, and markets mineral resources. The company mines and produces aluminum products, including bauxite, alumina, and aluminum; copper, gold, silver, and molybdenum, as well as nickel; diamonds, titanium dioxide feedstocks, borates, and salt, as well as high purity iron, steel billets, metal powders, zircon, and rutile; uranium; iron ore; and thermal coal, and coking or metallurgical coal.

A subsidiary of #Mitsubishi Corporation has a tag-along right to sell its 32.4% interest in the Hunter Valley Operations joint venture.

Glencore has agreed to purchase Mitsubishi’s 32.4% interest in the HVO JV and 28.898% interest in the Warkworth joint venture for $920M cash conditional on completion of Glencore’s acquisition of C&A from Rio Tinto, with $520M being payable on completion and $100M payable on the first four anniversaries of completion.

The Glencore Proposal will be funded from existing cash resources and committed facilities and is subject only to regulatory conditions. Glencore will only be bound once a binding share purchase agreement is concluded with Rio Tinto.

If a transaction is concluded, Glencore intends to mitigate its overall financial commitment via a sale / monetization of assets, prioritizing its coal portfolio, of no less than $1.5B, including exploring the option of selling down up to 50% of its interest in the C&A mines.

“In any event, as part of our overall Group financial policy, in addition to targeting maximum 2x Net debt/Adjusted EBITDA through the cycle, Glencore’s balance sheet will be managed to prevent net debt increasing above December 2016’s level of $15.5B, thereby ensuring that our leverage target is comfortably met and financial conservatism maintained,” Glencore stated.

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Bottle-Maker Shares Crack as Beer Sales Fizz Out

2017 is shaping up to be the worst year for beer volumes since 2009

Owens-Illinois is trying to build out its non-beer segments to compensate for the continued weakness in beer

Shares of beverage can and bottle makers are underperforming broader market measures after beer maker Molson Coors Brewing (TAP) gave uninspiring guidance at its investor day on Wednesday.https://stockwinners.com/blog

COORS INVESTOR DAY:

At its investor day on Wednesday, the brewer said its underlying marketing, general and administrative spending will increase this year and CapEx will remain at elevated levels for 2018.

As a result of these expenses, the brewer said it sees underlying EBITDA margins rising 50-60 bps per year for next three years.

Separately, Molson Coors Brewing said it bought the remainder of the MillersCoors joint venture it didn’t own two years ago, making it the third largest beer maker.

Molson Coors’ shares declined sharply during the presentation and ended the day down over 6%. Shares are falling further today.

BEER SALES SLIDE:

For the U.S. market, “2017 is shaping up to be the worst year for beer volumes since 2009, when total industry volumes were down 2%,” said Bernstein analyst Trevor #Stirling, according to a Financial Times.

Last month, the U.S. trade association for larger brewers, said that for the three months from February to April, beer volumes fell 5%, according to the FT report.

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OWENS-ILLINOIS:

Speaking at the Deutsche Bank Global Industrials and Materials Conference Presentation on Wednesday, Jan #Bertisch, the CFO of the world’s largest maker of glass bottles, Owens-Illinois, said the company is trying to build out its non-beer segments to compensate for the continued weakness in beer.

PRICE ACTION:

Can and bottle makers Owens-Illinois (OI), Crown Holdings (CCK), and Ball Corp. (BLL) are all down in afternoon trading, missing out on a broad market rally.

Large beer makers are also missing out on the rally, with Molson Coors down again, along with Anheuser Busch Inbev (BUD), and Boston Beer Company (SAM).

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Praxair to merge with Linde

Linde and Praxair produce and distribute industrial gases

The combined company is expected to benefit from approximately $1.2B in annual synergies and cost reductions

 

 

Linde (LNEGY) has signed a legally binding business combination agreement with Praxair (PX) governing the terms and conditions of a merger of equals between the two companies.

The agreement provides for a combination of the businesses of the Linde group and the Praxair group under a publicly traded new holding company, which will bear the Linde name.

The new holding company will be incorporated in Ireland while its principal governance activities, including board meetings, will primarily be based in the United Kingdom.

Group corporate functions will be appropriately split between Danbury, Connecticut and Munich, Germany.

The company will apply for an admission for the trading of its shares on the New York Stock Exchange and on the Frankfurt Stock Exchange and will seek inclusion in the S&P 500 and the DAX 30 indices.

Praxair will become a subsidiary of “New Holdco” through a merger and Linde will become a subsidiary of New Holdco through a public exchange offer to all shareholders of Linde.

Linde shareholders will be offered 1.54 shares in New Holdco for each Linde share and Praxair shareholders will receive one share in New Holdco for each Praxair share.

Upon completion, former Praxair shareholders and former Linde shareholders will each own approximately 50% of the outstanding shares of New Holdco. The membership in the board of directors of New Holdco will also be split 50:50.

Linde’s current Chairman of the Supervisory Board, Wolfgang Reitzle, will become Chairman of the new holding company’s board. Praxair’s current Chairman and CEO, Steve Angel, will become CEO and a member of the board of #NewHoldco.

The management team of New Holdco will also be appropriately split between #Linde and #Praxair executives.

The combined company is expected to benefit from approximately $1.2B in annual synergies and cost reductions, targeted to be achieved in approximately three years following closing. The figures include existing cost reduction programs already initiated by the two companies, including an amount of approximately $310 million from Linde’s existing LIFT program.

“Linde understands that the combined company intends to achieve the total amount of synergy and efficiency savings irrespective of the allocation to the respective underlying drivers,” the company noted.

The expected one-time costs of achieving these cost reductions and synergies are estimated to be approximately $1B including transaction costs. The consummation of the business combination is subject to certain conditions, including the acceptance of the exchange offer to Linde shareholders by a minimum of 75% of the outstanding Linde shares. Closing of the transaction is expected to occur in the second half of 2018.

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