Finance news. My opinion.

Exxon Mobil may be getting more than it bargained for with its recent plan to purchase natural gas giant XTO Energy.

The $41 billion deal would make Exxon the country’s largest shale gas producer, drawing more attention to a controversial area of drilling that analysts say could invite tightened federal regulations for the entire industry.

When the acquisition was announced last week, it was generally seen as a smart business move. XTO (XTO, Fortune 500) is a big player in the so-called "unconventional" gas business — specifically, gas that lies in shale rock formations.

That business is booming. It’s one of the fastest growing energy sectors in the country. But some of the shale is near major population centers, and residents near the drilling are worried about air and, especially, water pollution from the chemicals used to extract shale gas.

"A $41 billion investment is going to make anyone with an environmental eye look sooner and deeper," said Kevin Book, a managing director at ClearView Energy Partners, a Washington, D.C.-based firm that tracks political developments in the energy sector. Exxon’s (XOM, Fortune 500) entry into the field, along with interest from other international oil companies, means that shale gas has hit the big time, Book said.

The shale gas industry has been operating in relative obscurity and with minimal federal oversight: A 2005 law exempted it from the federal Safe Drinking Water Act. State regulators do the policing.

Although there are air pollution and land issues associated with shale gas drilling, what most concerns people is the water. Extracting shale gas relies on a method known as hydraulic fracturing, where a huge amount of chemical-laced water is injected down the well hole to fracture the rock and allow the gas to flow out.

State regulators and the industry say the process is safe, as the gas lies thousands of feet below the water table.

But residents near the drilling, which includes much of the New York metro area, Dallas-Fort Worth, and other large population centers, fear the chemicals may contaminate the drinking water.

The federal Environmental Protection Agency has only just begun looking into the issue payday loans for bad credit.

Book said several bills in Congress include provisions that direct the EPA to study the issue more broadly, and could ultimately lead to further regulation. "These are the placeholders," said Book. "Is a change in the law coming? Probably."

Pushing up the price of clean energy

A change in regulation could result in gas companies having to pump out the injected water and removing the chemicals before disposing of it back in the ground. That could add anywhere from 8% to 30% to the cost of operating a well, said Neil Dingmann, a Houston-based analyst at Wunderlich Securities.

Yet pushing up the price of natural gas is not something environmentalists are keen to do. Natural gas is much cleaner source of electricity than coal and emits about half the carbon dioxide. Making it more expensive would only deter industries from using it, and push them toward cheaper and dirtier power sources like coal.

Exxon is so concerned about a change in the law it has a clause with XTO that allows it to walk away from the deal if Congress bans hydraulic fracturing or makes it prohibitively expensive, according to filings with the Securities and Exchange Commission. Exxon declined to comment for this story.

Dingmann also said there’s another reason Exxon may bring new attention to this type of drilling: They are a high profile company.

"It’s not the energy committee going after some company nobody’s heard of," said Neil Dingmann, a Houston-based analyst at Wunderlich Securities. "It’s big, bad Exxon."

Soon after the XTO deal was announced Chairman of the House Energy and Environment Subcommittee Rep. Ed Markey, D-Mass., issued a statement.

While acknowledging natural gas’ environmental benefits, Markey questioned the environmental safety of the drilling and raised anti-trust issues.

"I intend to convene hearings in the Subcommittee early next year so that our members can take a closer look at this proposed transaction," he said. 

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As the first decade of the 21st century comes to a close, the Denver Business Journal is revisiting some of the biggest business-news stories of the last 10 years.

Here, we look at Joseph Nacchio, the one-time hard-charging CEO of Qwest Communications International Inc. who is now serving a prison term following his 2007 conviction on 19 felony counts related to insider trading.

The story: Nacchio was an AT&T executive when Qwest — a telecom founded by Denver billionaire Philip Anschutz — named him CEO in 1996. He was granted millions of shares of Qwest stock in 1997.

In 2000, under Nacchio’s leadership, Qwest acquire the baby Bell U S West and became of the nation’s largest phone companies.

In 2001, Nacchio began selling off his shares before a write-down pushed the stock price downward. In August 2001, a class-action lawsuit was filed in federal court, accusing Nacchio and others of issuing "false and misleading" statements about the company’s financial state that had kept the stock price artificially high. Later, the Securities and Exchange Commission and the Justice Department launched probes.

In June 2002, after Qwest stock cratered, Nacchio resigned, and the company later was forced to restate three years’ worth of earnings.

Nacchio was indicted on 42 insider-trading counts in December 2005. His federal-court trial in March 2007 garnered worldwide attention.

Following his conviction and a string of unsuccessful appeals all the way to the U.S. Supreme Court, Nacchio reported to prison in Pennsylvania in April of this year.

Today: Nacchio remains behind bars while he awaits a resentencing on his original conviction, a date for which has not been set.

Click here for a roundup of DBJ coverage of this key story of the decade.

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The developer of Tempe apartments designed and marketed for Arizona State University students says it has resolved a payment dispute and lawsuit with a construction contractor.

Chicago-based Campus Acquisitions says it has settled a $3 million lawsuit filed by contractor Nelson Phoenix LLC. Nelson claimed that Campus had not paid it for work done on the Vue on Apache.

The private development sits just east of ASU’s Tempe campus.

Campus Acquisitions Project Manager J.J. Smith said in a prepared statement the two companies resolved the $3 million dispute with mediators and “a new mutually agreeable payment amount" was established on a payment plan, Smith said payday loan.

The Vue on Apache, which opened August 2009, is one of the first privately developed and owned housing projects intended for ASU students, according to Smith’s statement.

Nelson filed a tax lien and lawsuit against Campus in late October saying Campus failed to make final payments on the private student housing next to ASU.

Calls to Nelson Phoenix LLC were not immediately returned.

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Porsche SE is headed for a second consecutive annual loss in the billions of euros, as the hangover lingers from ex-Chief Executive Wendelin Wiedeking’s failed takeover of Volkswagen AG.

The indebted automotive holding company created as a vehicle for the acquisition will stay deeply in the red as it is forced to deconsolidate its Volkswagen stake and much of its Porsche AG sports car business, officials said on Wednesday.

The complex untangling at Porsche — now set to merge in 2011 with its 51-percent owned Volkswagen unit — cemented its reputation as a financial black box that scarcely resembles its roots as a maker of sports cars such as the 911 Turbo.

As its debt mounted just as car markets collapsed, Porsche was forced to drop its takeover and agree a merger with Volkswagen. The first step is selling to VW a 49.9 percent stake in the Porsche AG sports car business by the end of this year.

“To take into account the rather unlikely possibility that the merger does not take place after all, the parties concerned have incorporated a put/call structure into the transaction concept,” said Hans Dieter Poetsch, finance chief of both Porsche SE and Volkswagen.

This includes transferring the remaining 50.1 percent of Porsche AG to Volkswagen by no later than 2014, he added fast cash advance loan.

Poetsch warned on Wednesday that the deconsolidation loss in the fiscal year to July would be triggered if VW’s home state of Lower Saxony once again gets the right to appoint two members to VW’s supervisory board at the next annual meeting.

According to International Financial Reporting Standards, this would mean Porsche would have to book its VW stake at market value, he told Porsche’s annual news conference.

“This would give rise to a considerable loss based on the current market price,” Poetsch said.

Including the sale of the minority stake in the sports car business, the structural changes in its consolidated statements would lead to a loss “in the low single-digit billion euro range.”

Porsche SE posted a group net loss of about 3.6 billion euros ($5.37 billion) for the fiscal 2008/09 year. Net debt at the end of its fiscal year on July 31 was 11.4 billion euros.

Porsche shares were barely changed by 1306 GMT while the DJ Stoxx European car sector index dipped 0.2 percent.

(Editing by David Holmes)

($1=.6708 Euro)

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Current valuations of waste managers such as Waste Connections Inc, Waste Management Inc and Republic Services Inc give the company’s shares a lot of room to rise, according to a Barron’s story.

In its November 23 edition, Barron’s said Waste Connections shares could rise to $37.50 in a year, citing Raymond James analyst William Fisher’s price target for the stock, which closed at $31.79 on the New York Stock Exchange Friday.

According to Barron’s, investor Todd Lowenstein of Highmark Value Momentum Fund sees Waste Management shares rising as high as $40 from their Friday NYSE close at $32.30.

Republic Service’s Chairman Jim O’Connor has said that analysts’ discounted cash-flow analysis pegs his company’s value in the mid $30s range, according to the story low fee payday loans. This compares to Republic Services NYSE close of $27.40 on Friday.

The story also noted that Warren Buffett has bought 1 percent of Republic Services, based on Berkshire Hathaway Inc filings.

It said that Bill Gates investment vehicle had doubled its shares in Waste Management, giving it a 15 percent stake.

(Reporting by Sinead Carew; Editing Bernard Orr)

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It is "inadequate" for global regulators to merely create new rules for the financial sector, because preventing another crisis also requires an equivalent focus on the day-to-day supervision of the industry, says Canada’s top banking regulator.

Julie Dickson, superintendent of the Office of the Superintendent of Financial Institutions, made the remarks Wednesday during an address at the Women in Capital Markets luncheon in Toronto. While the OSFI is updating its supervisory framework and increasing its oversight of risk management, Dickson does not want to cross the line by intruding into the management of banks.

While regulations tend to focus on issues such as banks’ capital requirements, supervision centres on when and how regulators intervene in the industry, Dickson said. When it comes to supervision, there are significant differences in supervisory regimes around the world.

"To the extent that some financial systems were more resilient than others, we need to focus on what worked well," Dickson said. "Day-to-day supervision is one such area that deserves focus and that has not been discussed as yet in any great depth internationally; it should be."

Supervision can involve more on-site visits and proactive intervention when a company’s risk management process appears weak. Dickson made it clear that the regulator will not hesitate to step up its on-site verification if it feels that a financial institution is being deliberately opaque about its business. "We have considerable powers to use if required," she said cash advance now.

While some U.S. supervisors have established permanent offices in the banks, the OSFI prefers to take a "balanced" approach. That’s because its mandate stipulates "regulation and supervision must be carried out having regard to the fact that boards of directors are responsible for the management of financial institutions."

Still, whenever a company appoints a new chief risk officer, the OSFI does consider how that appointment affects its own risk assessment.

"We discuss how much depth the new CRO (chief risk officer) has, the person’s clout and general disposition toward risk. At times, I have to say we have expressed, within OSFI, positive and negative views about such appointments," Dickson said.

Nonetheless, she is wary about the regulator being involved in the actual selection of those individuals. "I think you are crossing the line when you do that," she said.

The OSFI, meanwhile, is "developing guidance on minimum expectations for firms in setting risk appetite," while bolstering its scrutiny of risk management around the use of models.

With respect to board composition, Canadian financial institutions should be filling more of those seats with bankers in an effort to "deepen" expertise on financial issues, she said. "It’s something all institutions should be paying attention to."

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General Motors expects to announce a market share gain for the third month in a row in October, GM executive director of corporate planning Mike DiGiovanni told reporters on Wednesday.

October will also mark the first year-over-year sales gain GM has managed in 21 months, DiGiovanni said. In September, GM’s sales were down 47% compared to a year earlier.

"When you look at GM’s performance, we’re having a really good October," he said.

The automaker expects its vehicle sales will amount to 20% to 21% of all vehicles sold that month, he said. He expects those numbers to be about 3% higher than Toyota’s and 4% higher than Ford’s, he said.

DiGiovanni credited strong product introductions for the market share rise. Over the past few months, GM has started production on six new or redesigned models: the Chevrolet Camaro performance coupe, Chevrolet Equinox, GMC Terrain and Cadillac SRX small crossover SUVs, Buick LaCrosse luxury sedan and the Cadillac CTS Sportwagon.

Sales of the new 2010 Chevrolet Equinox crossover SUV are strong enough that the automaker is adding a third shift to the Ontario, Canada factory that builds the Equinox and its sister-vehicle the Terrain easy online payday loans.

"We’ve got enough data now that we feel very confident that adding this third shift is the right ting to do, said Susan Docherty, who was recently appointed to head GM’s sales efforts.

An overall improvement in auto sales will also help GM’s bottom line, DiGiovanni predicted.

The market share rise comes despite the fact that GM has shed four of its former eight brands, DiGiovanni said. Only 5% of GM’s October sales came from the four brands that are being shut down, he said, compared to 10% a year ago.

Besides new model introductions, the automaker’s "Truck Month" promotion program has also helped boost sales, Docherty said.

GM still has a much larger percentage of 2009 models on its dealer lots, Docherty said, but part of that is a deliberate strategic decision. The automaker wanted to have more 2009 truck to sell as part of its "Truck Month sales drive. 

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German business confidence probably rose to a 13-month high in October, improving the outlook for growth in Europe’s largest economy.

The Ifo institute in Munich will say its business climate index, based on a survey of 7,000 executives, increased to 92 from 91.3 in September, according to the median of 40 forecasts in a Bloomberg survey of economists. That would be the highest reading since September last year. The index reached a 26-year low of 82.2 in March. Ifo releases the report at 10 a.m. today.

The German government last week increased its forecasts for the economy and now expects growth of 1.2 percent in 2010 after a contraction of 5 percent in 2009. With the recovery likely to be tempered by rising unemployment, the euro’s increase against the dollar and the expiry of stimulus measures, the European Central Bank is reluctant to tighten policy too soon.

“We expect relatively robust growth in the second half of this year as the economy bounces back from recession,” said Andreas Scheuerle, an economist at Dekabank in Frankfurt. “However, the recovery next year will be dull and bumpy.”

Ifo’s gauge of the current situation will increase to 88 while an index of executives’ expectations will advance to 96.2, according to the survey of economists.

Volkswagen AG, Europe’s biggest carmaker, predicts the worldwide automotive market won’t match pre-recession levels until 2013 at the earliest. “There are growing signs that the worst of the crisis may now be behind us, but it will take time for the markets to recover,” Chief Executive Officer Martin Winterkorn said on Oct. 8.

Fiscal Stimulus

Chancellor Angela Merkel’s government is trying to haul Germany out of its worst recession since World War II with about 85 billion euros ($127 billion) in stimulus measures. Her Christian Democrats are also prepared to cut taxes by 20 billion euros after they form a coalition with the country’s Liberal Democrats, negotiator Steffen Kampeter said on Oct. 16.

“The economy still is on a drip but will return to sustainable growth next year,” said Carsten Brzeski, an economist at ING Groep NV in Brussels, who expects overall output to expand by 2 percent in 2010. “We haven’t seen the election effect so far and the support measures taken are also designed to spur private investment.”

Economic data are mixed. While German factory orders rose for a sixth month in August and industrial output gained, exports unexpectedly fell. Investor confidence declined for the first time in three months in October amid concerns the recovery could falter.

The euro has appreciated 20 percent since mid-February and reached a 14-month high of $1.50 this week, eroding export returns. Rising joblessness may also discourage household spending.

The ECB has cut its benchmark rate to a record low of 1 percent and is lending banks as much money as they want for up to a year in an effort to get credit flowing through the economy of the 16 nations sharing the euro. President Jean-Claude Trichet has repeatedly said that it’s too early to withdraw monetary policy stimulus.

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Bank of England policy makers maintained consensus on the size of their bond-purchase plan this month, postponing a debate on the need for more spending until officials produce economic forecasts in November.

The nine-member Monetary Policy Committee, led by Governor Mervyn King, unanimously voted to keep the program at 175 billion pounds ($286 billion) and to leave the benchmark interest rate at a record low of 0.5 percent.

“There were differences of view among members of the committee on the balance of risks to the medium-term outlook for inflation and how it had shifted in recent months,” the minutes of the Oct. 8 meeting showed today in London. “All committee members, however, agreed that recent developments were not sufficiently compelling to justify revising the target level of asset purchases.”

King and David Miles had pushed for more spending in August, when forecasts showed that the inflation rate may not return to the 2 percent target in two years. King said yesterday that the outlook for consumer prices is volatile and that policy makers would look beyond the short term to determine how much spending the economy needs.

The pound extended gains against the euro and the dollar after the minutes were published. Britain’s currency rose 1.2 percent to 90.16 pence per euro as of 10:10 a.m. in London, and 1.3 percent to $1.6577.

November Forecasts

“The forecast round ahead of the November inflation report would provide an opportunity to assess more fully how the medium-term outlook for activity and inflation had evolved since August,” the minutes said payday loans with no fax.

The central bank should pause its bond-purchase program next month after Britain probably emerged from recession, the National Institute for Economic and Social Research said today. Gross domestic product will probably increase 0.7 percent in the last three months of the year, Niesr said.

While the U.K. economy may have returned to growth in the third quarter, policy makers have signaled that the recovery may be uneven. The statistics office will probably say Oct. 23 that the economy grew 0.2 percent in the July-September period, according to the median of 33 economists forecasts in a Bloomberg News survey.

Policy makers said that higher asset prices, lower short- term interest rates and the weakness of the pound would help economic growth in the future. London home sellers raised asking prices to a record high this month and led gains across the U.K., Rightmove Plc said Oct. 19.

The bond purchases had probably helped contribute to improvements including a narrowing of spreads, the minutes said.

“The evidence suggested that the effect on asset prices had been of the type that the committee had anticipated when it launched the program and had been substantial,” the minutes said. “The impact of the recent rises in asset prices would be to support spending, but only if sustained.”

The next policy decision is due on Nov. 5.

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Confidence in the world economy rose for a third straight month in October as gains in manufacturing and equities added to signs of recovery, a Bloomberg survey of users on six continents showed.

The Bloomberg Professional Global Confidence Index increased to a record 61.7 from 58.54 in September. The index exceeded 50 for a third month, which means there were more optimists than pessimists.

“Conditions have reached a point of stability worldwide,” said Guy LeBas, chief economist and fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, who participated in the survey. “We’re seeing growth even in parts of the world that were looking dull earlier. The eurozone is coming out of the recession fairly quickly and in decent shape and the U.S. is improving.”

The global equity rally has added about $20 trillion to the value of stocks since this year’s low on March 9 as evidence mounts that the world economy is emerging from its deepest recession since the 1930s. The pace of the recovery may be tempered as stimulus measures undertaken by policy makers fade out and unemployment threatens to continue rising.

“Asset markets are rising and that’s having positive wealth effects and helping confidence come back a bit stronger,” said Robert Subbaraman, chief economist for Asia excluding Japan at Nomura International Ltd. in Hong Kong. “There are still problems with the world economy as a lot of the support is being fueled by loose policies which cannot be sustained.”

China Exports, Intel

Stocks rose today. The MSCI World Index climbed 0.9 percent to a one-year high as the decline in China’s exports slowed and Intel Corp.’s sales forecast topped analyst estimates. JPMorgan Chase & Co., the second-largest U.S. bank by assets, said profit in the third quarter soared almost sevenfold as fixed-income revenue surged.

Confidence may abate in the event that stocks erase part of their advance. The MSCI World Index has surged 67 percent since March 9, driving valuations on the gauge of 23 developed countries as high as 27.9 times annual earnings, data compiled by Bloomberg show. The Standard & Poor’s 500 Index is priced at 20.3 times profit, the highest level since 2004.

The survey of more than 1,400 Bloomberg users was conducted between Oct. 5 and Oct. 9. Since the previous survey, Group of 20 leaders vowed to keep stimulus measures until growth takes hold, the International Monetary Fund boosted its forecast for the global economy this year and next, and the Reserve Bank of Australia raised interest rates.

‘Gathering Steam’

Europe’s manufacturing and services industries expanded more than initially estimated last month, while some U.S. gauges of production are showing an acceleration in activity. India’s industrial production rose the most in 22 months in August, while China’s output gains were the fastest in almost a year.

“Investors think the recovery is gathering steam,” said Christopher Low, chief economist at FTN Financial in New York and a participant in the survey. “Manufacturing has shown the most improvement, and global trade is picking up.”

The world economy will contract 1.1 percent this year, and expand 3.1 percent in 2010, the Washington-based IMF said earlier this month.

Policy makers are debating the timing of the withdrawal of monetary and fiscal policies that have helped avert another Great Depression. Federal Reserve Chairman Ben S. Bernanke on Oct. 8 said the U.S. central bank is prepared to tighten monetary policy when the outlook for the economy “has improved sufficiently.”

Exit Strategies

New Zealand’s central bank is removing some of the liquidity facilities it put in place last year, while the Bank of Japan left its benchmark rate near zero today and refrained from saying if it would end its corporate debt purchase programs.

“The dynamic of the global recovery is very intense,” said Jose Carlos Diez, chief economist at Intermoney SA in Madrid. “If the central banks get nervous and put the brakes on too fast, that could abort the recovery.”

Bloomberg users in Spain are the most pessimistic on their economy as the nation remains mired in a recession even after France and Germany returned to growth. Spain’s index fell to a four-month low of 10 from 14.5 in September. The confidence gauge for western Europe rose to 44 from 43.2 last month.

Dollar Weakness

Confidence jumped the most in the Latin American region this month, with its index advancing to 72.9 from 65.5 in September. Brazil, the region’s biggest economy, is unwinding stimulus measures amid a resumption of growth as the central bank tightened rules for lenders to meet reserve requirements.

Sentiment fell in Japan, where a strengthening yen against the dollar is eating into company profits just as global demand stabilizes. The gauge for Japan declined to 38.8 from 48.8, while that for Asia rose to 76.2 from 73.6.

“In Asia, the biggest threat is the weakness in the dollar, because those economies are so dependent on exports to the U.S.,” Low of FTN Financial said.

The U.S. dollar may weaken further in the next six months against the world’s most actively traded currencies, as the survey showed sentiment near an 18-month low. The trade-weighted Dollar Index has fallen 7 percent this year, and gold, which usually moves inversely to the U.S. currency, is at a record. The dollar confidence index was 31.2 from 30.8 in September.

Users in Japan are less optimistic about the yen’s appreciation against the dollar, with the index falling to 56.9 from 62.1. Respondents in western Europe are still betting the euro will strengthen against its U.S. counterpart.

Stocks Sentiment Mixed

Bloomberg users were mixed on the outlook for their equity markets in the next six months. Respondents in the U.S., Japan and Spain expect shares to decline, while those in Brazil, Mexico and Italy predict their markets will extend their advances.

New York University Professor Nouriel Roubini, who predicted the financial crisis, on Oct. 3 said stock and commodity markets have gone up “too much, too soon, too fast” and may drop in the coming months as the gradual pace of the recovery disappoints investors.

Survey participants in the U.S., Europe and Latin America are also more confident short-term interest rates will rise in the next six months, the survey showed.

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