Saudi Oil Attacks, Climate Strikers, and Airbnb’s IPO
Why is everyone talking about oil this week?
By now, you’ve probably heard about last week’s attack on Saudi Arabia’s oil infrastructure, which caused the largest single impact to global oil supply – ever.
Catch me up.
Last Saturday, drone missiles hit Saudi oil facilities owned by Saudi Aramco, the country’s nationalized oil and gas company. Saudi Aramco is one of the largest corporations in the world as measured by revenue, and supplies a massive proportion of the world’s oil and gas. The missile strikes were claimed by Houthi rebels, a Yemeni armed group backed by Iran, which is another major global supplier.
The facilities that were destroyed made up 5%, or 5.7 million barrels per day, of global oil supply, which is roughly the same amount of oil as Canada produces. As a result, oil prices sharply rose – the steepest crude price jump for oil since the 1991 Gulf War.
According to Rory Johnston, an economist at Scotiabank, it will likely take anywhere from four to six weeks to repair the facilities, though it is likely global supply will remain tight until Christmas.
So what does that mean for Canada?
With global supply decreased, Canadian energy stocks surged after the attack, with Calgary-based firms Baytex Energy Corp, Encana Corp., MEG Energy Corp, Canadian Natural Resources Ltd., and Cenovus Inc. posting double-digit gains.
In the medium and long-term though, Canada doesn’t stand to gain too much from the shortage. Our lack of pipelines means that while we have the oil to sell, we don’t have the infrastructure to get it to market. According to Richard Masson, a fellow at the University of Calgary’s School of Public Policy, “Higher prices are a good thing but most of what companies have been doing with their cash flow these days is paying down debt or buying back equity.”
As for gas prices, most of Western Canada purchases Albertan oil, so prices at the pump were barely affected. Eastern Canada, however, does purchase Saudi oil – again, the lack of cross-country pipelines plays a role here – so prices should have surged. Fortunately for drivers in Eastern Canada though, the attacks occurred just one day before Canadian gas stations switched to a winter blend, which is cheaper to produce and therefore costs a couple cents less anyways, balancing the prices.
So while we’ll see a modestly positive impact on Canadian energy, especially by casting Canada as a secure and peaceful destination for potential natural resource investment, the attack still manages to highlight Canadian pipeline constraints (WOMP, WOMP).
It’s Gettin Hot in Here…
(And yes, this is a bit of a 180)
On Friday, September 20 an estimated 4 million participants followed the lead of Swedish teenager Greta Thunberg and took part in a climate strike to draw attention to the lack of meaningful climate action on the part of big business and governments. USA Today reported that New York City had the biggest turnout of protesters, a quarter million people, strategically protesting three days ahead of the United Nations Climate Action Summit, which begins today.
Some notable companies closed their doors to allow employees to join the movement – including Lush Cosmetics, Ben & Jerry’s, and Patagonia. Canadian cities will be participating on September 27th – and MEC, the Vancouver-based company, has already pledged to close their stores to facilitate staff participation.
So far, The Global Climate Strike movement has been somewhat successful in persuading multi-nationals to commit to addressing their impact on the environment. On Thursday, Amazon released a pledge outlining their commitment to becoming 100% reliant on renewable power by 2030, and entirely carbon neutral by 2040. In addition, Amazon has pledged to purchase 100,000 electric delivery vans from Rivian (a company they already invest in), and invest $100 million in reforestation.
How do we know they’ll follow through? Amazon plans to create a sustainability website for transparency, but other than that, we don’t really know. The plan comes after several failed attempts by employees to make Amazon and CEO Jeff Bezos take responsibility for the 44 tons of carbon it produces each year.
Other multinationals seem to be following suit by releasing climate pledges – We Mean Business, a coalition of advocacy groups and companies, has managed to bring together notable companies such as Nestle, Saint-Gobain, and L’Oreal to pledge to reach zero carbon emissions by 2050. Other companies, including Nokia, Danone, and AstraZeneca are pledging to align operations to the 2015 Paris Agreement. Canadian companies working with We Mean Business include Aldo Group, Canadian National Railway, Maple Leaf Foods, Ontario Power, TD Bank, and Thomson Reuters.
Airbnb to issue IPO
That’s right. Everybody’s favourite vacay-like-a-local home sharing company has officially announced their intention to go public.
It’s a big move for Airbnb, which has been privately held since its inception in 2008 by bffs/former roommates/current executive dream team Brian Chesky, Joe Gebbia and Nathan Blecharczyk.
Airbnb’s last valuation in September 2017 amounted to a whopping $31 billion USD and reported revenues as high as $1 billion USD in the third quarter of 2018. In short, this is a business that generates a tonne of cash, and could be a very worthwhile opportunity for investors to pick up some stock in.
Aside from it being a lucrative avenue for Aibnb to raise HEAPS more money, rumour has it that the decision to issue an IPO was prompted by less-than-happy company employees that are eager to cash in on their company stock options.
The announcement comes on the heels of recent much-hyped IPOs – most of which were met with criticism and ultimately disappointed investors (we’re looking at you, Uber, Lyft, Slack, Smile Direct Club). However, investors have indicated that they are slightly warmer to the idea of an Airbnb IPO, as it offers a much clearer path to profitability than the aforementioned did.
At this stage, exact details aren’t known on where Airbnb plans to list their stocks, or whether it has confidentially filed S-1 IPO paperwork, which includes financial details for potential investors. But don’t fret – we’ll keep you up-to-date with everything you need to know as more info comes out.