Breakingviews - Corona Capital: Natural gas, Disney, Brazil

DALLAS/NEW YORK/MILAN/HONG KONG/LONDON (Reuters Breakingviews) - Corona Capital is a daily column updated throughout the day by Breakingviews columnists around the world with short, sharp pandemic-related insights.

A flare burns excess natural gas in the Permian Basin in Loving County, Texas, U.S. November 23, 2019. REUTERS/Angus Mordant


- U.S. gas prices

- Disney promotions

- Brazilian time off

GAS BUBBLES. Natural-gas businesses are enjoying a renaissance. Stocks of big producers have risen during global lockdowns even as electricity demand has been falling. Shares in U.S. outfit EQT have more than doubled since mid-March. Antero Resources is up about 150%. The logic: Lower oil prices could mean higher natural gas prices as shale wells, which produce gas along with oil, are shut down.

But will natural-gas output really fall enough to push up prices? The U.S. Energy Information Administration says that gas production, which hit a record last year, will fall 3% this year to an average of 90 billion cubic feet per day. The EIA sees consumption of natural gas falling 4%, however. That fits with the Henry Hub price – the main U.S. benchmark – declining through April. Investors expecting it to start going up may be on a methane high. (By Lauren Silva Laughlin)

IT’S A SMALL WORLD AFTER ALL. Walt Disney Chief Executive Bob Chapek, promoted in February, is making his mark. He elevated a key manager to oversee the $210 billion group’s pandemic-challenged theme-park division. Chapek was until recently running the operation. Old hand Josh D’Amaro is taking the new CEO’s place as chair of the unit.

The curveball is Disney+. Kevin Mayer, who led the critical video-streaming service, is decamping to serve as CEO of ByteDance’s TikTok. Chapek tapped a theme-park colleague to fill Mayer’s spot too. Rebecca Campbell, another veteran, most recently president of Disneyland Resort, will chair the direct-to-consumer business. She has media experience including time with Disney+ in Europe and running TV stations. Disney+ is well on its way to meeting its five-year subscriber forecast of 90 million – one of the company’s few bright spots in coronavirus lockdown. That may make Campbell’s job steering the wild ride a little easier. (By Jennifer Saba)

HOME FOR THE HOLIDAYS. Many pandemic-scarred locales would gladly roll back the calendar, but Brazil’s Sao Paulo is looking to move it forward. On Monday, the state governor and city mayor said they were trying to fight surging Covid-19 cases by moving up holidays that would normally be celebrated later this year. The government suggested the policy would begin this Wednesday; financial institutions normally closed on holidays were initially flummoxed.

For sure, more action is needed. Brazil has over 260,000 confirmed infections – the third most in the world – with roughly a quarter in Sao Paulo. And people are, it seems, better at social distancing on weekends and holidays. But the idea of just moving days off around is symbolic of the country’s haphazard response – caused, in large part, by the erratic policies of President Jair Bolsonaro, who has lost two health ministers in a month. It’s no cause for celebration. (By Anna Szymanski)

FLYING PHISH. At last, an airline with a reason to be grateful for the coronavirus. UK budget carrier easyJet admitted “highly sophisticated” cyber attackers had accessed the personal details of nine million of its customers from January. Even though easyJet said there was no evidence of any information misuse, it could still be fined up to 4% of turnover. Due to Covid-19, that’s a lot less than normal.

In a landmark case for Europe’s data laws last year, Britain’s information watchdog hit rival British Airways with a whopping 183 million pound penalty – equivalent to 1.5% of sales – after just 500,000 people’s data was compromised. A similar amount for easyJet would have been 96 million pounds. With this year’s sales crushed by lockdowns, it may instead be on the hook for only half that. (By Ed Cropley)

PACK YOUR PATIENCE. Southwest Airlines is spreading some good news, or so it seems. The Dallas-based carrier said on Tuesday that so far in May more people have been booking seats on its planes than cancelling them. Delta Air Lines is feeling more positive, too. Reuters reported on Monday that it was going to add some more flights but keep them less full.

Travel isn’t likely to return in full force any time soon, though. It took nearly two years for North American flight demand to return following the 9/11 attacks. Even when people start getting out and about, travelers are likely to stay close to home, according to Breakingviews analysis. After all, full body suits and masks aren’t exactly vacation-ready attire.

Despite recent blips of good news, airlines probably have more severe turbulence ahead. (By Lauren Silva Laughlin)

COVID-19 SWEETENER. UniCredit is feeling generous. A pandemic-triggered dividend freeze would have spared Italy’s biggest bank from paying chunky coupons on hybrid securities known as CASHES. The instruments, issued in 2009 to fund a 3 billion euro capital hike, command an annual payment of 4.5% over Euribor rates. But that is compulsory only if UniCredit is profitable and distributes a payout.

The dividend suppression effectively exempted UniCredit from this year’s CASHES obligations, and could have saved the bank some 120 million euros. The Milan-based lender promised nonetheless to pay on May 26 the first quarterly installment linked to last year’s 3.4 billion euro profit. It’s a way to compensate CASHES holders from a 40% collapse in their investment’s value since the pandemic hit Italy. By being kind to investors, UniCredit is laying the groundwork for a warm welcome to future issues. (By Lisa Jucca)

MORAL COMPASS. Caterers are serving up bitter results these days. Just look at Compass, a 17 billion pound company that revealed alongside half-year results that it’s burning through 100 million pounds a month as school and business canteens are shut. Unsurprisingly, it tapped investors for 2 billion pounds to get through the crisis.

The deal’s size was encouraging. It’s the largest of a new breed of equity capital raisings that allow UK companies to avoid offering investors pre-emption rights. Chief Executive Dominic Blakemore softened the 6% discount to Friday’s undisturbed share price by allowing retail investors to participate. UK recruiter Hays’ deal came at a 13% discount. It may be that investors liked seeing Blakemore paying down some of the company’s 4.9 billion pounds of debt. This would leave it in good stead to pick up smaller peers as they keel over. (By Aimee Donnellan)

UPBEAT. Who says the pandemic is all bad news? Three months after unveiling a restructuring plan, new Julius Baer boss Philipp Rickenbacher is already ahead of his 2022 targets for returns and costs. In a trading update for the year to the end of April, the Swiss wealth manager said adjusted pre-tax profit was 35 basis points of assets under management, sharply up from 22 basis points in 2019 and above a mid-term target of up to 28 basis points. Costs meanwhile shrunk to 64% of revenue, beating a cost-to-income goal of below 67%.

Frantic trading amid global markets gyrations has boosted transaction fees, compensating for cratering interest rates and higher credit loss provisions. But Julius Baer’s improved profitability is also a measure of compressed expenditures: Lockdowns prevented private bankers from criss-crossing the world to visit wealthy clients. That’s a lot less money spent on first-class tickets and Michelin star dinners. As the emergency eases, expensive habits might re-emerge. (By Lisa Jucca)

HOME INVASION. It was a rough quarter for Chinese search engine operator Baidu, whose advertising revenue slumped by nearly a fifth from a year earlier, to $2 billion. Investments in artificial intelligence got a Covid-19 lift, however. DuerOS, the company’s answer to Amazon’s smart-speaker assistant Alexa, received 6.5 billion voice queries in March alone, as trapped users asked for the latest pandemic update or ordered food.

The $37 billion company doesn’t break out financial figures for its nascent smart-devices business, but they’re probably small. Baidu shipped 17 million AI-powered speakers last year, less than half Amazon’s volume, according to research outfit Canalys. Boss Robin Li envisions generating revenue from subscriptions, advertising and e-commerce down the road. Additional benefits may include locking in users to other apps and services. For now, Baidu will have to see if customers heading out more often will keep making themselves at home with DuerOs. (By Robyn Mak)

DYING EMBERS. Tobacco company Imperial Brands on Tuesday said it will cut its dividend by one-third as it struggles to contain a 13.5 billion pound adjusted net debt pile. The move should save the company about 650 million pounds. But with EBITDA expected to be around 4.1 billion pounds this year, using Refinitiv estimates, net debt of 3.3 times EBITDA is still way off its target of 2.5 by the end of 2022.

As well as further tarnishing Imperial’s “dividend stock” moniker, the cut points to more fundamental threats. The company last year dropped its dividend growth target, focusing instead on investing in the business. Imperial on Tuesday admitted that it has cut investments into its vaping product after poor returns last year. Net revenue fell 43% to 83 million pounds in that division. One of tobacco’s key survival strategies is going up in smoke. (By Dasha Afanasieva)


Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

Sign up for a free trial of our full service at and follow us on Twitter @Breakingviews and at All opinions expressed are those of the authors.