BP to Join Chevron & ConocoPhillips in Gulf of Mexico

BP announced it would sell part of its Gulf of Mexico operations to Chevron. The AP reported:

BP is selling part of its stake in an emerging oil-producing region in the Gulf of Mexico to Chevron, and the two companies, along with Conoco Phillips, will work to develop the fields together.

Terms of the deal were not disclosed. The joint-development agreement is a way for the companies to try to reduce the cost and risk of exploring and developing large, complex fields in the Gulf’s deep waters at a time of low oil prices.

For BP, it allows the company to move some of its recent discoveries closer to production as it continues to work to settle claims resulting from its 2010 oil spill in the Gulf.

ConocoPhillips board member William K. Reilly co-chaired President Obama's Oil Spill Commission.  A ConocoPhillips SEC filing stated:

Mr. Reilly elected to take a leave of absence from his position as a Director of ConocoPhillips while serving as co-chair of the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling (the Commission). Following deliberations, the Commission issued its final report on January 11, 2011. On January 12, 2011, Mr. Reilly returned from his leave of absence and resumed active service as a Director of ConocoPhillips. As a consequence of his leave of absence, Mr. Reilly received no compensation during the period from July 2010 through December 2010.

Yet, Mr. Reilly held onto his $2 million in ConocoPhillips stock during the BP oil spew investigation.   Below is a picture of Reilly's ConocoPhillips board pay.

It's interesting to look at history and how a decision can lead to personal profit.

Nonprofit Gamers Issue Shell Notes

Bloomberg reported:

Leon Black’s Apollo Global Management LLC, Carlyle Group LP and a unit of Credit Suisse Group AG have all taken steps in the past two months to create CLOs now that they may be able to refinance after the rules take effect in December 2016 without having to comply with the new regulations, according to three people with knowledge of the matter. The firms are trying to avoid a requirement to hold a stake in the funds they manage.

Private equity firms have long been virtual nonprofits.  They package securitized debt mostly untaxed. 

Apollo raised a $786 million CLO on Jan. 23 that created two sets of bonds. The first set was sold to investors, while the second hasn’t yet been funded and would be used to refinance or reprice the deal in the future, said one of the people, who asked not to be identified because the information isn’t public. By assigning the shell notes an identification number and dating them now, the New York-based money manager is seeking the option to redo the deal without making it subject to the regulations. Morgan Stanley managed the offering. 

 Shell notes are the latest way the greed and leverage boys game the system.  It's a PEU world.

Carlyle Oiled?

Bloomberg reported:

The $3.8 (private equity) trillion industry is entering the later stages of a selling cycle that, since 2012, has earned its members the most profit ever. They’re now under pressure to put a record $1.2 trillion in new money to work -- $150 billion of which is parked at Blackstone, Carlyle, Apollo and KKR & Co. -- while supporting their energy holdings amid oil’s decline. 

Oil’s 58 percent tumble since June has rippled through markets, erasing $15.1 billion from the portfolios of more than a dozen private equity firms, according to data compiled by Bloomberg on 28 publicly traded energy producers. 

Carlyle Group LP is expected to lead the decline with a 73 percent drop, driven by its energy holdings, and Apollo Global Management LLC is expected to report a 63 percent drop in earnings. Blackstone Group LP, the most diversified of the buyout firms, should be least affected, with an estimated 32 percent slide. 

How might Carlyle's historic 30% annual return on equity be impacted?  It could simply become a marketing line for co-founders.

Davos Flags Future

USA Today offered five highlights from the World Economic Forum (WEF) in Davos, Switzerland.  They are:

1.  EU's monetary stimulus (economic tampering)
2.  Ukraine (global government tampering)
3.  CEO & global leader behind the scenes discussions (efforts to produce economic tampering and global tampering that accrues to the individual's advantage)
4.  Death of Saudi King Abdullah
5.  The lack of progress in gender parity at Davos (expect the same or worse from this crowd on economic parity)

FT reported the price for global business leaders to attend WEF will rise 20% next year:

Strategic partners will have to pay SFr600,000 ($680,526) annually to send five people to the Davos conference, the 2015 edition of which concluded on Saturday. 

Most executives said that coming to Davos, even at the higher price, was less costly than flying to meet far-flung clients, who instead come to Switzerland for an intense few days of meetings.

How many middle class jobs will be eliminated to fund the $113,400 annual increase over 120 companies, which totals $13.6 million?  Using $40,000 annual income as the benchmark WEF's price increase could eliminate 340 middle class jobs next year.

Private equity is virtually a nation unto itself and it plans to fund more infrastructure projects.  Ventures Africa reported on Davos:

David M. Rubenstein, Co-Founder and Co-Chief Executive Officer, Carlyle Group, USA, said that since governments and banks are no longer funding infrastructure investments as much as they did in the past, more and more infrastructure projects will be funded by private equity. “Right now the US seems the greatest place in the world in which to invest,” he said. However, he cautioned that economic growth there is leaving many behind, especially in middle- and lower-income groups.

It's by design in our global PEU nation.  (PEU is short for private equity underwriter, my pet name for the greed/leverage boys.)

Update 1-26-15:  Haaretz did a beautiful job describing the various Davos men.  WaPo gave a different take but essentially said "Davos men" will don whatever stripes necessary to benefit themselves.

Update 1-27-15:  Nonprofit Quarterly saw through Davos' front stage behavior in their insightful piece.

Update 2-13-15:  Pew Research conducted a poll on who or what is to blame for inequality? People in our survey identify many culprits, but the top offender is government. Across the 44 nations polled, a median of 29% say their government’s economic policies are the most important reason for the wealth gap

The Week's Soundtrack: Ruling

My fantasy had Lorde crashing the World Economic Forum meeting in Switzerland.  I envisioned Lorde on state with Carlyle's David Rubenstein and Blackstone's Stephen Schwarzman singing backup for Royals:

But everybody's like: 
Crystal 
Davos
Diamonds on your timepiece 
Jet planes 
Islands 
Tigers on a gold leash 

We don't care, we aren't caught up in your greed affair

Half a world away American Royal Jeb Bush and two time loser Mitt Romney met.     

"Many of the contributors and elected officials they are courting hope to stave off a collision between the two that could imperil the party’s chances in a general election."

One can stave off a collision with collusion, which leads to the next song, based on the melody for "Cruel to be Kind.".  It's a duet of "Collude to be King" in the right measure.

Jeb is aiming, yet again for the middle class, decimated by the business practices of private equity underwriters (PEU's)?

The weak economic growth that much of the western industrialised world is currently experiencing suggests that an economic system that hollows out the middle class will struggle to grow.

How many will recall the role Mitt's and Jeb's employers/sponsors had in dismantling America's middle class?  The Rubenstein's and Schwarzman's played a clear role in the world discussed at Davos.  A former business reporter wrote me in July 2011:

I have seen so many people -- particularly those in their 50s - 70s -- taken apart by what has happened in their industry as greed has hollowed out the economy. These are people took pride in their jobs and held themselves to this invisible standard that we all just took for granted, but is being wiped out.

Which leads us to our last song for the week, "Wipeout."

Update 1-27-15:  Washington's Blog ran an excellent piece on the decimation of the middle class. 

Albany - Corrupt Yet Again

WaPo reported:

Federal agents on Thursday arrested powerful New York Assembly Speaker Sheldon Silver (D) on federal corruption charges, stemming from payments he received from two New York City law firms.

Silver is charged with five counts of fraud and conspiracy, according to court documents filed Wednesday. Prosecutors allege he used his position to take more than $6 million in bribes and kickbacks.

“The show-me-the-money culture of Albany has been perpetuated and promoted at the very top of the political food chain. And as the charges also show, the greedy art of secret self-reward was practiced with particular cleverness and cynicism by the Speaker himself,” Bharara said. “Politicians are supposed to be on the people’s payroll, not on secret retainer to wealthy special interests they do favors for. 

Five years ago The Carlyle Group settled with the New York Attorney General for $20 million for paying agents to land state pension fund investments.  That settlement (and promise to behave better) stated:

The announcement arises from a two-year, ongoing investigation into corruption involving the New York State Comptroller’s Office and the Fund. The charges to date allege a complex criminal scheme involving numerous individuals operating at the highest political and governmental levels under former Comptroller Alan Hevesi, in which the New York state pension fund was used as a piggy bank for the Comptroller’s chief political aide and a favor bank for political allies and other friends. 

Cuomo and Carlyle co-founder David Rubenstein can chuckle over old times at the World Economic Forum in Davos.  What favors are being banked betwixt and between the jet set in Davos?  It's where deals get done.

Private Jetting Davos Gives Lip Service to Inequality

Dealbook reported:

David Rubenstein, co-founder and co-chief executive of the Carlyle Group

Bullish on: the United States dollar, China, investing in Japan.

Oil prices: “Will stay low for a while.”

Concerned about: European banks holding Russian debt. “They could struggle again if Russia can’t pay off that debt.”

Other thoughts on energy: Renewables will take a hit from the oil price decline.

Regulation: He’s not complaining as it has been a major boon for his business, including its foray into lending.

Unintended consequence of regulation: Most creative minds in finance don’t go to banks anymore. “They go to hedge funds and private equity where they are more adequately rewarded.”

CNBC gave the following Davos update:

Inequality was a major topic on Wednesday, the first formal day of the WEF.

"We have a big problem in the United States," David Rubenstein, co-founder of private equity heavyweight Carlyle Group, said during a panel discussion on economic growth.
"If our GDP growth is 3.5 percent, that sounds great—corporate profits are terrific, stock prices are high—but what about the people left behind?" asked Rubenstein, himself a billionaire. 

Former Clinton Treasury Secretary Larry Summers told CNBC on Wednesday that middle-class incomes have not kept pace with the economic recovery.
Growth needs to be equally distributed, Summers said, "so we have a 'race to the top' rather than 'race to the bottom' when it comes to questions like taxation and regulation." 

"The middle class has to increase its wealth and we have to get better jobs, and it's going to have to be done, among other ways, through education," Blackstone Group head Stephen Schwarzman said on CNBC.

"We all have different views as to what level is the most important for education," the billionaire private equity boss added. "I think you have to start at the beginning, and you also can take enormous steps that can take people of very low income and get them to perform at very high levels." 

PEUs Rubenstein and Schwarzman made out like bandits after Gramm-Leach-Bliley, ushered in by one Larry Summers. Private equity has been all about paying fewer people, offering little to no raises and requiring them to do more.  Consider this from a former business reporter in July 2011:

There are very few people out there who will talk and write honestly about private equity. I know from personal experience that the financial press is so eager to break news on "deals" that reporters (who are increasingly compensated on the number of "market moving stories" they write) can't afford to be critical of Carlyle, KKR and Blackstone, and risk losing access to people at those firms.

I have seen so many people -- particularly those in their 50s - 70s -- taken apart by what has happened in their industry as greed has hollowed out the economy. These are people took pride in their jobs and held themselves to this invisible standard that we all just took for granted, but is being wiped out. 

The Carlyle Group scares me more than anything I've ever seen on Wall Street. It seems to exist to corrupt politicians and it's hard to know who they even represent.
I watched a video interview of (David) Rubenstein and his arrogance is really beyond tolerance. He was going on about the debt ceiling problem and how there would need to be cuts in services and higher taxes. When the reporter asked him about tax on carried interest he turned really disdainful and said that this "only" amounted to $22 billion over some number of years and this was not serious money. Boy, nothing like everybody doing their small part to save the country from oblivion!

Rubenstein left countless behind, as did Schwarzman.  Their words rise from the abyss of greed they've created and nurtured over the last thirty years.  The system produced that for which it was designed. PEU lamentations ring hollow, especially at Davos with its 1,700 private jets.