Ocado Share News (OCDO)

LONDON (Alliance News) - BP and BG Group Tuesday joined Royal Dutch Shell in slashing their capital expenditure budgets for 2015 and booking impairments and writedowns on assets in 2014, in response to the recent slide in oil prices.

The Brent oil price is up again Tuesday morning at around USD56 a barrel, but is still down from over USD115 a barrel last June, and that's forcing the oil industry to review their spending plans and earnings expectations. With oil becoming harder, and hence more costly to extract, analysts fear that the industry contraction in the current cycle could be deeper than in previous cycles.

BP said it has cut its 2015 capital expenditure plan by up to USD6 billion, while BG Group said 2015 spending would be USD6 billion to USD7 billion down on 2014. Last week, Shell reduced its capital investment for 2015, saying it would curtail USD15 billion of potential spending over the next three years, and could cut further if oil prices stay low.

BP Chief Executive Bob Dudley recently warned oil prices could remain low for the next three years, and Tuesday said the small rise in the oil price over the last three days could be a "short squeeze", which is why all three companies are being cautious with their budgets and capital.

"The scale of the capex reduction highlights BP's greater capex flexibility compared to some of its super-major peers, as BP has less capital tied up in mega-projects," analysts at Edison Investment Research wrote in a note to clients.

The moves by the big UK oil players are being reflected across the industry. US oil major Chevron Corp has cut its 2015 capital budget by 13% compared with 2014, while peer ExxonMobil Corp, which plans to reveal its 2015 spending plans in early March, slashed its share buyback programme in the first quarter by more than half to USD1 billion. The world's fifth oil major, Total SA of France, has indicated it will cut capital expenditure by 10% this year and put two oilsands projects on the back burner for a long time.

BP and BG Group both reported a fall in fourth-quarter earnings, as expected, but comfortably outperformed analysts' earning estimates.

BP booked a USD3.6 billion post-tax net charge for non-operating items in the fourth quarter, mainly relating to impairments of its upstream assets and to reflect the current low oil price environment, revisions to reserves and other factors. It also reported USD450 million in restructuring charges.

BG Group reported a pretax non-cash impairment charge of USD8.9 billion, or USD5.9 billion post-tax, in the fourth quarter, which was driven by the fall in global commodity prices.

All three companies kept dividend payments fairly flat from 2013, as expected. Analysts had previously said BP was set to review its dividend in the first and third quarter of 2015, but BP said the dividend was its first priority despite the current market conditions whilst Shell confirmed its dividend would remain flat for the first quarter of 2015.

The oil price fall is also bad news for the UK Treasury, which still takes a hefty chunk of tax revenue from the North Sea, and has, during the good times in recent years also made one-off grabs for more money from producers.

Shell Tuesday said it had taken the first steps in decommissioning the renowned Brent oil field in the North Sea whilst BP has recently announced job cuts in the North Sea, just some of the restructuring both companies are undergoing to lower costs and improve efficiencies to combat the low oil price.

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Markets: London stocks are trading higher after the UK Markit construction Purchasing Managers' Index came in above economists' expectations and the Financial Times reported that the newly-elected Greek government outlined proposals on Monday for ending the confrontation with its creditors by swapping outstanding debt for new growth-linked bonds, running a permanent budget surplus, and targeting wealthy tax-evaders. The pound is up against the dollar after UK construction PMI unexpectedly rebounded in January.

US stocks are set for a higher open, with stock futures indicating the DJIA and Nasdaq 100 will open up 0.4%, and the S&P 500 up 0.5%.

FTSE 100: up 1.2% at 6,861.40
FTSE 250: up 1.3% at 16,567.28
AIM ALL-SHARE: up 0.2% at 692.55
GBP-USD: up at USD1.5059
EUR-USD: flat at USD1.1342
GOLD: up at USD1,280.44 an ounce
OIL (Brent): up at USD56.85 a barrel
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Other Top Corporate News
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Capita has agreed to buy customer contact management services company avocis for EUR210 million on a cash-free, debt-free basis. The FTSE 100-listed outsourcing company said it was buying the company from an unnamed private equity owner and said avocis has a leading position in the customer contact management sectors in Germany, Switzerland and Austria.
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Aberdeen Asset Management said assets under management dropped slightly in the first quarter of its financial year as weak investor sentiment hit inflows in December, although it said flows returned to more normal levels in January. The asset manager said assets under management stood at GBP323.3 billion at the end of December, down from GBP324.4 billion at the end of September, after it booked gross inflows if GBP11.3 billion for the fiscal first quarter as a whole but outflows also increased as the emerging market backdrop remained tough.
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Associated British Foods said it will write down its investment in wheat-fed bioethanol joint venture Vivergo Fuels, and will book an exceptional charge of GBP98 million in its first-half results as a result. The joint venture is with BP and DuPont in the UK. It has been hit by the steep fall in crude oil and bioethanol prices, and the further weakening of the euro against sterling.
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Inspection and testing services company Intertek Group said it has acquired Adelaide Inspection Services for AUD12 million in cash. AIS provides non-destructive testing services primarily to the power generation sector, along with support services to construction, oil, gas and mining industries.
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Ocado Group said it swung to its first ever annual profit on the back of surging revenue over the year, as higher customer numbers offset a fall in the average price of a shopping basket. Shares in the online grocery delivery service rose after it said its statutory pretax profit for the 52 weeks to November 30 was GBP7.2 million, compared to a GBP12.5 million loss posted a year earlier. It is the first time Ocado has posted an annual pretax profit since it was founded in 2000. The company said its revenue for the year rose 20% to GBP948.9 million from GBP792.1 million in 2013, while gross sales increased 15% to GBP972.4 million from GBP843 million.
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TalkTalk Telecom Group said it expects its full-year earnings before interest, tax, depreciation and amortisation to be at the lower end of market expectations as a result of buying Tesco's loss-making Blinkbox business, and due to lower cost savings than planned. The telecommunications firm said its revenue was up 4.2% to GBP449 million in its third quarter to end-December from GBP431 million a year before. TalkTalk said that cost savings in its current year are likely to be GBP10 million to GBP15 million lower than it had previously planned.
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ICAP faces an EU fine this week for allegedly facilitating cartels on yen-denominated inter-rate benchmarks, as Brussels tackles the holdouts in rate-rigging probes that have already resulted in about EUR1.7 billion in penalties, the Financial Times reported. The world’s largest interdealer broker has strongly denied wrongdoing, refused to settle, and has informed the European Commission that it will appeal any fine as wrong in fact and law, the FT said, citing people involved in the case.
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Melrose Industries confirmed it will return GBP200 million, or 18.7 pence a share, to its shareholders, using part of the net proceeds it received when it sold its Bridon business for GBP365 million. The company had already indicated it would return some of the proceeds to its investors, using the rest to pay down borrowings. Its shareholders will get one B share or one C share for every existing share they hold, as well as 13 new shares for every 14 existing shares in an associated share capital consolidation.
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St Modwen Properties reported a surge in pretax profit for its recent financial year, prompting a hike to its dividend as its net asset value and property profits both rose over the period. The FTSE 250-listed property company said its pretax profit for the year to November 30 was GBP138.1 million, up 68% from the GBP82.2 million reported last year. The group hiked its total dividend for the year to 4.6 pence per share, up from 4 pence per share last year.
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AIM Movers
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Churchill Mining shares are doing well after it said it is seeking to replace its lawyers, Quinn Emanuel Urquhart & Sullivan LLP, with Clifford Chance LLP, in the ongoing arbitration dispute with the Indonesian government. SyQic shares are up after it inked a deal with Singapore-based streaming website Viki Inc to make its television shows and films available to SyQic customers, and said it is re-branding its recently acquired Maaduu service as 'cool2vu.' SyQic's partnership with Viki could lead to a buy-out or investment by Japanese internet services giant Rakuten if the deal is a success, according to Allenby Capital's head of research. TomCo Energy is up after it said it has reached an agreement with environmental group Living Rivers over the Holliday shale gas project in Utah. Rose Petroleum is another gainer after it said mud logs from a recently drilled well at its Uinta Basin site in Utah indicated the presence of oil and gas throughout the shale and in a deeper conventional reservoir, while it is also set to start earning revenue at its Mina Charay gold mine in Mexico from March. Zambeef Products is up after it said it will sell its Zamanita Ltd subsidiary to Cargrill Holdings BV, a unit of US agriculture group Cargill Inc, for USD25.7 million in cash. Premier African Minerals shares are down after it signed a GBP1 million convertible loan note financing deal with Darwin Strategic Ltd to finance its RHA Tungsten project in Zimbabwe, but said there remains a USD2 million shortfall still to cover. Orogen Gold is also down after it reported good results from its drilling programme at the Mutsk gold project in Armenia, but said it has issued shares to its joint venture partner to continue work at Mutsk at a big discount.
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Top Economics And General
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The expansion in the UK construction sector quickened unexpectedly in January, survey data from Markit Economics showed. The Markit/Chartered Institute of Procurement & Supply Purchasing Managers' Index rose to 59.1 in January from the seventeen month low of 57.6 in December. The score was forecast to fall to 57 in January. This marked the twenty first month of expansion, though the latest reading indicated the second slowest rate of growth since September 2013. A reading above 50 signals expansion. Residential building activity rose for the twenty fourth successive month in January.
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Eurozone producer prices declined at the fastest pace in five years during December, figures from Eurostat showed. Producer prices fell 2.7% year-on-year in December, faster than 1.6% decline in the previous month. Economists had forecast a 2.5% fall for the month. The latest decline in producer prices was the biggest since December 2009, when they fell 3%.
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Italy's harmonized consumer prices dropped for the second straight month in January due to falling energy prices, preliminary data from Istat showed. The harmonized index of consumer prices fell 0.4% from last year, following a 0.1% drop in December. The rate of decline matched economists' expectations. On a monthly basis, the HICP was down 2.4% in January versus flat growth a month ago. The monthly fall also came in line with expectations.
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The newly-elected Greek government outlined proposals for ending the confrontation with its creditors by swapping outstanding debt for new growth-linked bonds, running a permanent budget surplus and targeting wealthy tax-evaders, the Financial Times reported. The country's new finance minister, Yanis Varoufakis, told the FT the government will no longer call for a headline write-off of Greece's EUR315 billion foreign debt and would instead request a "menu of debt swaps" in order to ease the burden on its finances.
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Australia's first cut in interest rates in some 17 months took the cost of borrowing to a low last seen in the 1990s. The Reserve Bank announced a cut of 25 basis points, which brings the interest rate to 2.25%. Glenn Stevens, head of monetary policy at the central bank, said the cut came in light of the Australian dollar's poor performance against the US dollar.
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The Reserve Bank of India retained its key benchmark rates unchanged as widely expected but lowered its statutory liquidity ratio to create space for banks to expand credit. The central bank retained its key repo rate at 7.75% and its reverse repo rate at 6.75% at its sixth bi-monthly monetary policy review on Tuesday. The RBI lowered its key rate by a quarter basis point in an unscheduled review last month.
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US President Barack Obama confronted the opposition-controlled Congress with a proposal Monday for a USD4 trillion dollar budget. The 10-year measure proposes tax increases on businesses and the highest-earning individuals and boosts spending on infrastructure and social programmes without eliminating the federal budget deficit. The presidential budget proposes higher defence spending but has few other provisions that would garner support from Republican legislators.
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The top leader of pro-Russian separatists in eastern Ukraine announced an all-out mobilization, after the latest efforts for peace talks foundered. Alexander Zakharchenko said that the separatists would mobilize "as many people as necessary" to boost their forces to 100,000 in both the Luhansk and Donetsk regions, according to video of his comments released on the self-declared Donetsk People's Republic website. The New York Times reported Monday that the US was now "edging toward" supplying weapons to Kiev, but a White House spokesman denied weapons would be delivered "in the near future."
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Afternoon Watchlist (all times in GMT)

13:55 US Redbook index
14:45 US ISM New York index
15:00 US Factory Orders
15:00 US IBD/TIPP Economic Optimism
16:45 US Fed Minneapolis's Narayana Kocherlakota speech
n/a US Total Vehicle Sales
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Wednesday's Key UK Corporate Events

GlaxoSmithKline - Full Year Results
Hargreaves Lansdown - Half Year Results
International Consolidated Airlines Group - January Traffic Statistics
Sky - Half Year Results
Victrex - Interim Management Statement
Daily Mail and General Trust - Trading Statement
GW Pharmaceuticals - Q1 Results
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Wednesday's Key Economic Events (all times in GMT)

00:01 UK BRC Shop Price Index
01:30 Japan Labor Cash Earnings
01:35 Japan Markit Services PMI
01:45 China HSBC China Services PMI
08:00 EU Non-monetary policy's ECB meeting
08:45 Italy Markit Services PMI
08:50 France Markit Services PMI
08:55 Germany Markit Services PMI
09:00 Italy Gross Domestic Product
09:00 EU Markit PMI Composite
09:00 EU Markit Services PMI
09:30 UK Markit Services PMI
10:00 EU Retail Sales
12:00 US MBA Mortgage Applications
13:15 US ADP Employment Change
14:45 US Markit Services PMI
14:45 US Markit PMI Composite
15:00 US ISM Non-Manufacturing PMI
15:30 US EIA Crude Oil Stocks change
17:45 US FOMC Member Mester speech
22:50 Japan Foreign bond/stock investment
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