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phil
December 12th, 2017 at 3:23 pm

Edison says fire investigations now include possible role of its facilities

• Edison International (EIX -7%) sinks in early trading following an investor update on the wind-driven Southern California wildfires that are affecting customers and electric service in Southern California Edison's service territory.
• The causes of the wildfires are being investigated by fire protection agency CAL FIRE, other fire agencies and the California Public Utilities Commission, but SoCal Edison believes the investigations now include locations beyond those identified last week as the apparent origin of the fires as well as the possible role of its facilities.
• The fires have destroyed more than 1,000 structures since igniting last week; the Thomas Fire – one of six in total – is larger than all of New York City and was ~20% contained as of last night, according to CAL FIRE.

Canadian oil plunges to three-year-low on pipeline, rail bottleneck

• Prices for heavy Canadian crude oil tumble to a three-year low against benchmark prices, widening by more than US$10/bbl since August, as pipeline companies including Enbridge (ENB-0.6%) ration space amid high Western Canadian inventories.
• ENB said yesterday it would ration space on some of its pipelines by another 5% in December, which comes after it required shippers on light oil feeder pipelines around Edmonton, Alberta, to restrict deliveries because of “high inventories.”
• Crude export pipelines already were filling up as new oil sands production enters the market; for example, output at Suncor Energy’s (SU +0.4%) Fort Hills mine has started and is scheduled to reach 20K-40K bbl/day by next quarter.
• TransCanada’s (TRP -0.6%) Keystone pipeline to the U.S. shut for nearly two weeks last month after a spill in South Dakota, contributing to rising oil inventories in Western Canada; service has resumed, but the pipeline is required to run at a reduced pressure, meaning less oil can pass through.
• Also, space on rail cars is in short supply after three disruptions to the Canadian National Railways (CNI -0.3%) system in the past two months, while business on all of the company’s lines is up 10% since last year, CNI says.

Oasis Petroleum -15% after paying 'hefty price' for Delaware Basin acres

• Oasis Petroleum (OAS -14.7%) plunges ~15%, most on the NYSE, in heavy volume as investors show their dismay over the company's planned public offering of 32M common shares.
• OAS agreed to buy 20.3K acres in the Delaware Basin for $946M, consisting of $483M in cash and 46M common shares of common stock, meaning the company is issuing 78M new shares – substantial dilution to existing investors considering it had ~233M shares outstanding as of the end of Q3.
• The deal also is viewed as a departure from its Bakken-focused strategy, and its per acre price of $46,660 looks like a hefty premium; Motley Fool's Matthew DiLallo notes two deals in the same region by Marathon Oil in March, one in which MRO paid $1.1B for 70K net acres (~$15K/acre) and the second  in which it spent $700M for 21K net acres (~$33,333/acre).
• SunTrust Robinson Humphrey downgrades shares to Hold from Buy with an $11 price target, cut from $14, citing the "hefty price" OAS paid to enter the Delaware Basin.

Explosion at key Austrian gas hub cuts flow to other countries

• An explosion this morning at a major natural gas facility near Austria’s border with Slovakia killed one person and injured 21 while causing some gas flow disruptions to other countries.
• The Baumgarten plant east of Vienna is one of Europe's most important gas supply hubs as the key entry point for Russian gas into Austria and onward to Italy and other countries; Austrian and Italian gas prices are surging as a result of the blast.
• Austrian operator OMV (OTCPK:OMVJF) has closed the facility, and Gazprom (OTCPK:OGZPY), which feeds gas to the hub, says it has been forced to reroute supplies to customers.
• Analysts say a prolonged outage would reduce stocks and set the stage for higher prices in parts of Europe this winter, with Italy the most vulnerable.

Glencore to double cobalt production as automaker demand surges

• Glencore (OTCPK:GLCNF, OTCPK:GLNCY) says it is the “best placed” among diversified mining companies to profit from the electrification of vehicles and plans to double its production of cobalt in the next two years, while also confirming that it is in talks with Tesla, Apple and Volkswagen for possible cobalt supply deals.
• Glencore's Katanga Mining unit in the Democratic Republic of Congo expects to produce as much as 34K tons of cobalt in 2019 vs. the 20K tons/year guidance CEO Ivan Glasenberg gave in August, which could give Glencore control of ~40% of world supplies.
• The company’s Mutanda Mining, also in the Congo, was the largest cobalt producer last year, shipping 24.5K tons out of a worldwide market of 109.5K tons, but the planned increase at Katanga will make the mine the world’s biggest by a comfortable margin.
• Earlier: Glencore sees strong year of trading as metals rally (Dec. 12)

Volkswagen brand posts big month

• Volkswagen (OTCPK:VLKAY) announces a record month for its namesake brand.
• Volkswagen deliveries were up 11.8% globally to 594.3K units.
• China deliveries rose 5.2% to 285K to help offset a dip in Europe. North America deliveries were up 3.5% to 51.4K.
• YTD Volkswagen brand deliveries +4.0% to 5.417M units.
• The company says orders for e-models are on the rise.

Consumer Edge positive on Tesla

• Consumer Edge analyst James Albertine forecasts Tesla (TSLA +2%) will generate $2.0B to $3.5B in annual revenue from its truck business depending upon volume and final pricing.
• The outlook is based on Tesla capturing 5% of what is expected to be a smaller Class 8 market in a few years.
• In previous reports, Albertine has pointed out that Tesla’s competitive edge is in battery manufacturing and autonomous software.
• Consumer Edge has an Overweight rating and $385 price target on Tesla.

Chicken processing stocks under pressure

• The chicken processing industry is being hit by a price collusion lawsuit filed by a group of grocery cooperatives and smaller grocery chains.
• The legal action alleges price fixing through the Georgia Dock Benchmark Price Index.
• Defendents include Tyson Foods (TSN -0.2%), Pilgrim’s Pride (PPC -1.3%), Perdue Farms and Sanderson Farms (SAFM -0.9%).
• The group fell off yesterday on concerns over the suit and retail chicken pricing. On a longer time fram, investors should keep an eye on a push to tax producers based on greenhouse gas emissions.
• Sources: Bloomberg, Agweb.com

Toy story: Mattel weak after downgrade, Star Wars hopes for Hasbro

• Shares of Mattel (MAT -4.8%) trade weak again as investors assess the company's update on Q4 sales issued yesterday.
• The stock was also hit with a downgrade by Moness Crespi Hardt to Neutral from Buy on concerns that toy sales are trending lower this holiday season.
• Hasbro (HAS +0.1%) is holding up today, despite the negative view on toy sales. Early positive reviews on Star Wars: The Last Jedi could be helping to boost sentiment.
• Previously: Mattel announces private offering of senior notes due 2025 (Dec. 11)
• Previously: Ratings agencies weigh in on Mattel (Dec. 11)

CRISPR/Cas9 gene editing players sell off, down as much as 4%

• CRISPR/Cas9 gene editing outfits Editas Medicine (EDIT -2.2%), Intellia Therapeutics (NTLA-2%) and CRISPR Therapeutics (CRSP -3.6%) are all under pressure mid-session.
• The culprit appears to be an article from EurekAlert!, published by the American Association for the Advancement of Science, citing a study implying that people's unique genetic differences could undermine the efficacy of CRISPR/Cas9, regarded by many as the "next big thing" in biotech. Such differences could mean than the gene edited therapy will need to be customized to each patient's genome.
• The study, led by Boston Children's Hospital and the University of Montreal, analyzed 7,444 previously published whole-genome sequences to determine if any of the individuals carried DNA sequence variants in the areas targeted by the guide RNAs used to direct CRISPR/Cas9 enzymes to the desired DNA locations for ~30 high-priority diseases. Results revealed that about 50% of analyzed guide RNAs could be potentially affected by such variants. In a few cases, the genetic variants could cause off-target editing which, in rare cases, could have serious consequences.
• The data will appear this week in the Proceedings of the National Academy of Sciences Early Edition.

Big Media shadow over Netflix?

• Is big media a big problem for Netflix (NASDAQ:NFLX)? The Wall Street Journal's Elizabeth Winkler notes the Disney-Fox and AT&T-Time Warner deals on top of the huge original content push from Apple and Amazon could disrupt the streaming scene.
• "While the deal making may not dethrone Netflix, it faces risks. High audience numbers will be driven by blockbuster shows, not loyalty, which helps explain why content exclusivity on platforms is rising," writes Winkler on the development.
• Shares of Netflix are up 50% YTD.

Costco offers up a movie deal

• Costco (NASDAQ:COST) is offering members the opportunity to buy a one-year subscription to MoviePass and Fandor in a package deal for a flat fee of $89.99.
• MoviePass is the surging movie ticket subscription service that has sent shockwaves through the exhibitor sector, while Fandor is a highly-regarded streaming provider of independent films.
• The offer will only be available online at Costco.com until December 18.
• Shares of MoviePass owner Helios and Matheson Analytics (NASDAQ:HMNY) are up 28% in early trading off the development. Fandor is a private company.
• Source: Press Release

Positive reviews on 'The Last Jedi' ahead of key opening

• Positive reviews for Star Wars: The Last Jedi are providing a bit of a lift for AMC Entertainment (AMC +3.1%) and Cinemark Holdings (CNK +0.9%) ahead of the key opening weekend. Regal Entertainment (RGC) trades slightly lower after a Cineworld investor questioned the pending merger earlier today.
• Rolling Stone calls the latest Star Wars installment the "epic" you have been waiting for.
• New York Times: "Lo, it is a satisfying, at times transporting entertainment. Remarkably, it has visual wit and a human touch, no small achievement."
• IndieWire say director Ron Johnson gives "new hope to the sprawling franchise by balancing off the spectacle with a fresh bag of tricks."
• After 138 reviews, the Rotten Tomatoes rating on The Last Jedi is 93%.
• A common complaint on the film was the 2 hour and 32 minutes running time, a length which will also hold down the number of screening during the opening weekend.

Verizon +2.4% as Nomura upgrades to Buy, sees 15%-plus upside

• Verizon (NYSE:VZ) is up 2.4% and inching close to its 52-week high (set in the first few trading days of 2017) after an upgrade to Buy at Nomura Instinet.
• Jeffrey Kvaal had previously rated the stock Neutral, as have about two dozen other analysts.
• But he's joining 10 others in the Buy column, and boosted his price target on the stock to $61 from $47, implying about 15% upside from today's higher price.

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