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Warren Buffett ends his deal drought with $10 billion bet on energy – Financial Post

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Warren Buffett finally found his next crisis-era deal.


Warren Buffett

Reuters/Scott Morgan/File Photo

His Berkshire Hathaway Inc., which has stayed relatively quiet during the tumult of the coronavirus pandemic, broke its silence at the end of a holiday weekend with its biggest acquisition in more than four years. The US$9.7 billion deal for Dominion Energy Inc.’s natural gas pipeline and storage assets signalled to the market that Buffett is willing to pounce despite his cautious tone in May about the pandemic, according to David Kass, a professor of finance at the University of Maryland’s Robert H. Smith School of Business.

“He’s willing to make investments now, of a fairly sizable amount,” Kass said. “It’s very positive that he’s sending a signal for the right deal at the right price, US$10 billion or more, ‘We’re ready to go, we’re ready to invest.’”

Buffett, who has crafted Berkshire into a conglomerate valued at US$434 billion, built his reputation as an investor able to swoop in during volatile markets to strike unique and complicated deals in past crises. After being stymied on the acquisition front during the recent bull market for stocks, Buffett still wasn’t striking any deals during the initial stages of the pandemic and even dumped his stakes in the major U.S. airlines.

His inability to make a major acquisition recently has drawn scrutiny from his critics who have argued that Buffett has lost his ability to pull off the game-changing transactions that helped vault Berkshire into the ranks of the most valuable U.S. public companies. Now, the deal to buy substantially all of Dominion Energy’s natural gas transmission and storage assets for US$4 billion, along with the assumption of US$5.7 billion in debt, shows that Buffett is willing to put his money to work, Kass said.

“We are very proud to be adding such a great portfolio of natural gas assets to our already strong energy business,” Buffett, who is chief executive officer and chairman of Omaha, Nebraska-based Berkshire Hathaway, said in a statement Sunday.

“I’m inspired to see that, given that he’s bearish, he’s still willing to make acquisitions where he thinks it makes sense and where it meets Berkshire’s hurdle points,” said Darren Pollock, a portfolio manager at Cheviot Value Management, which invests in Berkshire shares.

Buffett has considered its energy business one of the “lead dogs” of Berkshire’s non-insurance operations alongside its railroad. Berkshire’s purchase expands its hold in the sector, adding more infrastructure to handle natural gas to its already sprawling energy operations across states such as Nevada and Iowa. Berkshire also struck the deal at a low point in the market. Natural gas futures in the U.S. dropped last month to their lowest point in 25 years and have recovered just slightly since then.

“This looks like confirmation that commodities like energy are undervalued,” Bill Smead, chief investment officer at Smead Capital Management, which owns Berkshire shares, said in an emailed comment. “At the bottom, assets move from weak hands to strong hands.”

Berkshire is digging deeper into a business that’s been facing increasing scrutiny amid the push for energy companies to shift away from fossil fuels. In its own statement on Sunday, Dominion Energy cited its target to reach net-zero emissions by 2050.

The deal also highlights the work of one of Buffett’s key deputies, Greg Abel, who led the energy business for years and is now chairman of Berkshire Hathaway Energy alongside his role as Berkshire’s vice chairman for all non-insurance businesses. Abel has gained a reputation as a key dealmaker for Berkshire with the 2013 purchase of NV Energy and even the battle to buy Oncor Electric Delivery Co., which didn’t ultimately come together. Abel is viewed as a potential successor to Buffett, 89.

The Dominion deal is set to be Berkshire’s largest acquisition ranked by enterprise value since its purchase of Precision Castparts Corp. in 2016. Still, Buffett ended the first quarter with a record US$137 billion on hand and has been hankering for an “elephant-sized acquisition” to put a chunk of his cash pile to work. The Dominion agreement’s total enterprise value would account for about 7 per cent of that total.

“It’s not something that’s going to move the needle from a balance sheet standpoint, but it’ll produce several hundred million dollars a year in net income to Berkshire,” said Cheviot’s Pollock. “That’s no paltry sum. That adds up over time.”

Bloomberg.com

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Corbeil man wins big money through Encore – BayToday

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Saying “yes” to ENCORE paid off for James Braund of Corbeil. Jim matched the last six of seven ENCORE numbers in exact order in the April 14, 2020 LOTTO MAX draw to win $100,000.

Jim, a 67-year old father and grandfather says he plays the same numbers regularly.

“I was at the gas station where I purchased my tickets and the terminal froze when the retailer scanned my ticket,” he shared, while at the OLG Prize Centre in Toronto to pick up his cheque.

“When I realized I won $100,000, I was so excited,” he smiled.

The retired public servant plans to take a family vacation with his kids and grandkids when the time is right. “My wife spent some time shopping today while I was here at OLG collecting my prize,” he remarked.

“This was amazing. You wake up in the morning to know you have an additional $100,000 in your bank account. It’s surreal,” he concluded.

The OLG Prize Centre in Toronto has resumed in-person prize claims for winning-ticket holders of $50,000 or more by-appointment only. 

The winning ticket was purchased at MacEwan on Highway 94 in Corbeil.

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COVID-19 slams businesses and consumer sentiment: Bank of Canada – Yahoo Canada Finance

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(REUTERS)

Even as economies across Canada gradually reopen, Canadian consumers and businesses worry about the effects of COVID-19.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="The Bank of Canada’s Canadian Survey of Consumer Expectations (CSCE) was conducted between May 11 to June 1 and asked for views on inflation, the labour market, and household finances.” data-reactid=”24″>The Bank of Canada’s Canadian Survey of Consumer Expectations (CSCE) was conducted between May 11 to June 1 and asked for views on inflation, the labour market, and household finances.

“The perceived probability of losing one’s job rose to its highest level in the CSCE, and respondents anticipated having greater difficulty finding new employment if they were to lose their current job.” said the Bank of Canada in a release.

Barring a second wave, restrictions have eased since the survey was conducted. So the outlook could be getting more optimistic. 

“Although most provinces were reopening during this time period, we would hope that the further removal of social distancing measures following the survey period would provide at least modestly better results for job prospects if it were conducted today,” said CIBC economists Andrew Grantham and Katherine Judge, in a note.

Compared to the previous CSCE in April for the first quarter, expectations for wage growth and household income growth eased. Plans for spending tumbled, with households focusing on essential products and services. 

Survey respondents also said they excepted a pause for real estate prices for the next 12 months.

“Overall, consumer expectations for house price growth in Canada dropped to zero. The decline was widespread across provinces. Expectations in Alberta, Saskatchewan and British Columbia were negative,” said the Bank of Canada.

Respondents said they expect inflation to remain near the Bank of Canada’s target range of between 1 and 3 per cent.

<h2 class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Sour business outlook” data-reactid=”32″>Sour business outlook

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="The Bank of Canada also released its Business Outlook Survey, which found business sentiment is negative in all regions and all sectors due to COVID-19.” data-reactid=”33″>The Bank of Canada also released its Business Outlook Survey, which found business sentiment is negative in all regions and all sectors due to COVID-19.

“Businesses in most regions and sectors intend to significantly cut their investment spending. Hiring plans are muted, although a quarter of firms plan to refill some positions after recent layoffs,” said the Bank of Canada.

The Business Outlook Survey found labour shortages are easing. But credit conditions are tightening, although government measures have helped offset the situation.

The survey was conducted from mid-May to early June. 

“The composite indicator fell to -7 in Q2, from -0.5 in the prior quarter, and a level close to the lowest reading seen during the 2008/09 financial crisis,” said CIBC’s Grantham and Judge.

“The headline reading probably could have been even worse if the survey had been conducted a month earlier, as the mid-May to early June survey period coincided with provincial governments reopening their economies but came before we had seen the spike in Covid-19 case counts in the US.”

Nearly a third of businesses said the Canada Emergency Wage Subsidy (CEWS) helped avoid layoffs.

Respondents said the labour pool was vast enough to hire workers if they had to ramp up.

“However, a few businesses noted that the Canadian Emergency Response Benefit has made it difficult to retain current workers or hire new staff.”

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter&nbsp;@jessysbains.” data-reactid=”42″>Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Download the Yahoo Finance app, available for&nbsp;Apple&nbsp;and&nbsp;Android.” data-reactid=”43″>Download the Yahoo Finance app, available for Apple and Android.

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China's June Crude Oil Imports Hit Record High – OilPrice.com

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China’s June Crude Oil Imports Hit Record High | OilPrice.com

Julianne Geiger

Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group.

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    China oil

    China’s crude oil imports in June hit a record high, according to a market analysis by OilX Research, in a sign that China’s thirst for crude oil is not being hampered by the coronavirus.

    In June, according to data compiled by OilX, China’s crude oil imports hit a record high of 11.93 million bpd—an increase of 820,000 bpd from May levels, which were also at record levels.

    This 11.93 million bpd represents a 2.4 million bpd increase year over year, which is a 25.4% increase.

    OilX attributes this increase in June to the restart of its economy, along with favorable crude oil prices and spreads.

    So much so has the environment been kind to thirsty importers that China is experiencing a nagging backlog of tankers that are piling up in its ports, with about 40 million barrels waiting in line to be offloaded in the Yellow Sea—up from 1.8 million barrels of oil sitting in stationary vessels in the Yellow Sea in March.

    Besides the overall increase, the breakdown of China’s imports by country are shifting, with China importing more oil from Brazil (451,000 bpd more in June) and Angola (309,000 bpd more in June), while importing less oil from Saudi Arabia and Iran.

    Saudi Arabia has raised its oil prices three months in a row as Middle Eastern benchmarks strengthened and supply continues to tighten at least for the rest of July. Aramco raised its crude oil price to Asia to $1.20 above the Oman/Dubai average.

    According to Hellenic Shipping News, China was nearly out of space in early June to hold all the oil that they are getting on the cheap, using as much as 69% of its storage capacity to hold the 33.4 million tons it had accrued at the time.

    By Julianne Geiger for Oilprice.com

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