Money Matters: Firstline Securities Blog


13 March 2017










A Firstline Securities Limited Blog by: Mike


Standard & Poor’s (S&P Global Ratings) recently-issued rating actions with regard to Barbados has pushed this country one step further down the ratings ladder.

The rating actions issued by S&P Global Ratings were as follows:

  • The long-term foreign and local currency sovereign rating was lowered from “B-” to “CCC+” and the overall outlook was characterised as “negative.”
  • The short-term ratings were lowered from “B” to “C”.
  • The transfer and convertibility assessment for Barbados was lowered from “B-” to “CCC+”.

Read more…


6 March 2017

The incredible likeness of George Chambers’ ghost.

When George Chambers uttered the phrase: “fete over, back to work”, he probably didn’t realise how immortal and timeless those words would become.
With the economy of Trinidad and Tobago in recession, oil prices remaining in a stagnant state, GDP falling, foreign exchange in scarce supply, and many of our citizens finding it hard to make “ends meet,” does it make sense shelling out over $1,500.00 to attend a fete, or borrowing over $6,000.00 at a 9% interest to fund a Carnival costume that is good for just a day’s or two days’ use?
So, in the spirit of George Chambers’ immortal words, the fete may be over and we may all be back at work, but was the fete worth supporting in the first place, especially when the activities of the central government and the economy of Trinidad and Tobago are severely curtailed by a lack of revenue and positive economic activity?

Read more…

A Primer on Compounding Interest – Strategies for the Prudent Investor

1 March 2017

Carnival has come and Carnival has gone. Costumes were bought, fetes were had, paint was spilled along with some level of alcohol, and, in the end, everyone’s wallet feels a little bit lighter. It is now time for most of us to start saving again for next year’s celebration. But what if it did not have to be that way? What if you had saved up enough that you did not need to save anymore for Carnival but instead could save for yourself and still participate? This is where the magic of compounding interest comes in. Follow along to learn about one of the simplest and yet the most important aspect of saving responsibly. Read more…

A Thousand Tiny Sighs of Relief in Champs Fleurs

22 February 2017

 In this blog entry we look at Krafts proposed acquisition of Unilever through the second largest takeover in history. The offer – which came and went over the weekend before we even had a time to blink – would almost certainly have caused some discomfort for senior executives and employees at Unilevers subsidiary in Champs Fleurs. With a weakened pound UK companies may look increasingly attractive for overseas predators prepared to take on the risk of a post BREXIT UK.

A Firstline Securities Ltd. Blog by: Mike 

Now you see us, now you don’t

On February 17th 2017, it was announced that Kraft Heinz Co had made a US$143 billion offer to take over the Anglo-Dutch multinational Unilever Plc, a significantly larger competitor with 126,000 more employees and an annual revenue US$24 billion higher than Kraft Heinz.

For each existing Unilever share, Kraft Heinz offered $US30.23 in cash and 0.222 shares in a new holding company, representing an 18% premium over Unilever’s closing stock price last Thursday.

The subsequent news that the US food company Kraft Heinz Co was withdrawing its proposal on Sunday will almost certainly be welcome news for Unilever’s local subsidiary Unilever Caribbean Limited.

The offer has come and gone before many even had a chance to see it.

Read more…

4 Ways to Protect Yourself Against Phishing

20 February 2017

4 Ways to Protect Yourself against Phishing

A Firstline Securities Ltd. Blog by: Ahamad Hosein

Phishing (not to be confused with ‘Fishing’) is a form of technological scamming in which emails and/or text messages are sent to persons with the intent of obtaining their personal details (usernames, passwords, bank account information etc.). Once garnered, a “phisher” then utilises this data to infiltrate their victims’ bank accounts with the primary purpose of theft.  In some instances, perpetrators go even further and use this private information for blackmail…or even enslavement. Read more…

Per the Big Boys – No Quick Rebound of Oil and Gas Prices on the Horizon

14 November 2016

In this blog entry we take a look at the recent financial results of two of the key players in Trinidad and Tobago’s oil and gas sector – BP and Royal Dutch Shell.

We consider their future plans in Trinidad and Tobago, the outlook for oil prices in the short to medium term, and we consider whether a further sustained period of lower prices might strengthen the Minister of Finance’s hand in his attempts to negotiate a fairer more equitable oil and gas regime.


A recap of the 2017 National Budget – the Minister lays down his marker in the sand 

On the 30th September 2016, the Minister of Finance delivered his budget for financial year 2017. The 2017 budget is predicated on an oil price of US$48 per barrel and a gas price of US$2.25 per MMBtu. At the time the budget was presented the Minister stated that these figures were below IMF forecasts, World Bank forecasts, and USEIA forecasts.

At the time of writing this remains the case. The IMF currently forecasts 2017 oil prices at US$50.64 per barrel, the World Bank at US$55 per barrel, and the USEIA at US$51 per barrel.

On the 1st November 2016 both BP – who own 70% of BP Trinidad and Tobago, and Royal Dutch Shell – who own all of BG’s assets in Trinidad through Centrica announced their third quarter results. Both BP and Royal Dutch Shell make up their accounts annually to 31st December annually and both agree with the IMF, World Bank, and USEIA. Oil prices are likely to remain flat for the rest of 2016 and 2017.


The official BP position on oil and gas prices 

BP had a difficult third quarter for 2016 with its underlying Replacement Cost Profit of US$930 million being 49% lower than the amount recorded for the same period in 2015 (for a definition of Replacement Cost Profit please see the technical section below).

BP’s position on oil prices remains unchanged from the position it stated in its second quarter results. While BP believe that the oil market has moved into “balance”, with the amount of oil being produced each day broadly equating to the amount consumed each day, there is little impetus for prices to increase because the level of inventories held remain at record levels and will take some time to reduce.

BP expect inventory levels to decline gradually in 2017 supported by a rise in demand and sustained weakness in supply from the non-OPEC countries. The pace and timing of that reduction is dependent on the outcome of the next OPEC meeting carded for the end of November and discussed in further detail below.

In response to questions BP’s Chief Financial Officer Mr. Brian Galvery stated that “we see some firming in prices next year but nothing significantly north of what we see now.”


The official Royal Dutch Shell position on oil and gas prices

 Royal Dutch Shell also had a difficult third quarter for 2016. Using different terminology, but essentially the same metrics (for a definition of Current Cost Supply of Earnings see below), Royal Dutch Shell’s Current Cost of Supply Earnings for the third quarter of 2016 amounted to US$2.8 billion representing an 8% fall over the corresponding period in 2015.

Royal Dutch Shell made no prediction as to the future levels for oil and gas prices but the Chief Financial Officer Mr. Simon Henry did state that “lower oil prices continue to be a significant challenge across the business, and the outlook remains uncertain.”


Getting a little technical – How BP and Royal Dutch Shell Calculate Profit

 For those readers wondering what Replacement Cost Profit (RCP) and Current Cost of Supplies (CCS) Profits are they are types of accounting conventions used in the oil and gas industry to measure profitability. Despite the difference in terminology used by BP and Royal Dutch Shell RCP and CCS are essentially the same.

As stated above BP uses a system called RCP and Royal Dutch Shell uses CCS Profit to calculate and report their profitability to shareholders.

When any company calculates its profit one of the calculations that company performs is the deduction of the cost of the goods they have sold from revenue. The result of this calculation is referred to as gross profit. For oil companies the value of the cost of goods sold can vary dramatically depending on how much the company paid for the item being sold.

In the oil industry, the value of cost of goods sold varies significantly due to market variations in the price of oil. An oil company’s profit is effectively driven by the value of its cost of goods sold.  For example, if BP acquired some oil reserves when the price was $100 a barrel and sold those reserves when the price had fallen to $40 a barrel, BP would under normal circumstances report a loss of $60 per barrel.

RCP and CCS addresses the problem of volatility in oil prices (coupled with potentially long stock holding periods) by allowing oil companies like BP to base their cost of goods sold on the current oil price rather than the price at the time the reserves being sold were acquired (often referred to as the historic cost). This means that oil companies report profitability based on how much it would cost to replace the oil it sells at current prices.


The consensus on oil prices

 Looking at the IMF, the World Bank, the USEIA, BP and Royal Dutch Shell, the consensus on oil prices is that they will remain flat throughout what little remains of 2016 and the whole of 2017. That consensus could change if a meaningful agreement to cut output is agreed at the next meeting of OPEC to be held in Vienna on the 30th November 2016. 


Will OPEC save the day

OPEC pledged at its September meeting in Algiers to cut production by as much as 2% but left the final decision on which countries within OPEC would trim output and by how much to the November meeting.

Prospects for a significant improvement in oil prices depends on OPEC being able to reach an agreement on which of its members are to cut output. At the time of writing this blog entry, four countries have requested exemption from the cuts. Those countries are Iran, Iraq, Libya, and Nigeria. Iran has stated that it wants to increase production until it reaches a total of 4.2 million barrels a day. Iraq is in a different position. It needs to increase production to generate sufficient levels of revenue to fund its continuing fight with the Islamic State. OPEC has agreed to exemptions for Iran, Libya, and Nigeria, but not Iraq.

Even if an agreement is reached there is no guarantee that Russia (as a non-OPEC producer) or another non-OPEC oil producer won’t increase output to pick up the shortfall, and certainly no guarantee that it or they might cut back production to bolster prices.

In these circumstances the Minister of Finance must be looking at the OPEC meeting with some trepidation hoping for a meaningful cut in supply.


Implications for future investment by Royal Dutch Shell and BP in Trinidad and Tobago

 When Royal Dutch Shell completed its US$50 billion acquisition of the BG Group it effectively created a huge footprint in Brazil. As the largest foreign oil company in the country, Brazil is now its focus.

Although not specifically identified it is fair to assume that Royal Dutch Shell’s Trinidad assets are up for sale because the BG Group had been trying to sell those assets for two years prior to the company’s acquisition by Royal Dutch Shell. This is of course speculation but it would be a logical move for Royal Dutch Shell to complete full exit from Trinidad.

Royal Dutch Shell stated in their investor presentation that they are using asset sales as an important element of their strategy to reshape the company. Up to 10% of Royal Dutch Shell’s oil and gas production is earmarked for sale including several country positions. Although not disclosed in nature 16 separate asset sales of a material nature are now in various stages of progression towards completion.

It is unlikely that Royal Dutch Shell see Trinidad as a key investment opportunity moving forward, although that of course may not be the position of any potential purchaser of Royal Dutch Shell’s Trinidad assets. Royal Dutch Shell plan to spend around $25 billion on capital investment in 2017, with little (if any at all) being earmarked for Trinidad and Tobago.

BP, with less attractive results than Royal Dutch Shell, also plan to curtail capital expenditure. BP expect capital expenditure to be between $15-$17 billion in 2017 representing a 30-40% drop from the level of capital investment recorded at the zenith of its operations in 2013 before oil prices crashed.

While Royal Dutch Shell is looking for the exit, BP remains committed to its investments in Trinidad and Tobago. BP Trinidad and Tobago (owned 70% by BP and 30% by Repsol) currently operates in 904,000 acres of the east coast of Trinidad using 13 offshore platforms and two onshore processing facilities.

BP is also making (or considering making) additional investments in Trinidad and Tobago. On the 29th July 2016, BP announced the successful sanctioning of the Trinidad Onshore Compression (TROC) project. The TROC project is designed to increase production from low-pressure wells in BP’s existing acreage in the Columbus Basin using an additional inlet compressor to be operated by Atlantic LNG at Atlantic’s plant in Point Fortin. The TROC project has the potential to deliver 200 million cubic feet of gas per day when it comes into operation during 2017.

In addition, BP Trinidad and Tobago expects to make an investment decision in the final quarter of 2016 on whether to develop its Angelin gas field situated 40 km off the east coast of Trinidad. There were no indications of BP’s intent in respect of the Angelin field in the third quarter results.


Implications for tax collection

In the mid-year review of the economy of Trinidad and Tobago presented by the Minister of Finance on the 8th April 2016, the Minister noted that the policy of the previous administration to significantly increase allowances for capital investment by oil companies would result in the major oil companies paying little or no tax in Trinidad during 2016.

In the national budget presented on the 30th September 2016 the Minister of Finance stated that the government’s current position was that a rebalancing of the oil and gas regime was needed as a matter of urgency. The government’s position can be summarised in two bullets:

  • While the government will seek to promote investments on projects with low profitability forecasts it is of the view that it must also seek to assure the public that the extraction of the nation’s natural resources always results in at least the payment of some minimum royalty.
  • If a project generates a surplus over the total costs of production, including any profit necessary for initial and continuing investment, the government should, under a set of revised rules, share substantially in the surplus generated.

To assist in the rebalancing of the oil and gas regime the government engaged the IMF to provide it with technical assistance. The IMF has delivered an initial report. This report recommends:

  • A moderate fixed rate royalty in the region of 10-12% to ensure a minimum income stream.
  • A cash-flow tax that will replace the existing Supplemental Petroleum Tax (seen as a disincentive to smaller producers especially when the oil price is close to $50 per barrel).
  • A reformed Petroleum Profits Tax (PPT), where the PPT rate is reduced and harmonised across projects and capital allowances granted are streamlined.

As at 30th September 2016 the IMF proposals were, per the Minister of Finance, being studied by the major oil and gas companies. At the time of writing this blog entry it is not known what the view of those companies is to the IMF’s suggested reforms. A further sustained period of low oil prices may strengthen the government and the Ministers position.


Closing thoughts – time to consider your investing strategies 

Firstline Securities Limited offers comprehensive coverage of local and international markets with a bias for the energy sector. Firstline offers many unique opportunities to put surplus cash to work either as your asset manager or investment advisor. Please contact us for more details at or at 868.628.1175, we can discuss your investment needs in detail and craft a portfolio that makes sense for you. We look forward to hearing from you.

PDVSA – An update

4 November 2016

Hi everyone,

In an earlier blog entry in this series (“Nightmares Aplenty – The Continuing Saga of PDVSA and Venezuela “) we discussed the recent attempts by PDVSA and the government of Venezuela to restructure the debt of PDVSA in the face of sustained low oil and gas prices. The original entry in this blog series can be found online at the following location:

In this blog entry, we look at the latest events in the great PDVSA bond swap

Firstline Team

The great PDVSA Bond Swap – a little recap

In September 2016 PDVSA announced the launch of a $7 billion bond swap to alleviate mounting financial pressure on PDVSA – and by extension the Maduro regime in Venezuela – as it stares down the barrel of multi-billion-dollar debt repayments falling due over the next 14 months.

The proposed bond swap covers notes issued by PDVSA that fall due in April 2017 and November 2017 and would allow holders in those notes to trade them in for new notes with maturity dates in 2020. The logic behind the swap is PDVSA is banking on oil prices recovering in the period to 2020 from the low prices experienced since June 2014.

Initially the swap was priced at a one-to-one ratio but an improved offer was made by PDVSA once it became clear that investors had little appetite for a straight 1:1 swap. The amended terms offered granted an additional $170 in new 2020 bonds for every $1,000 in April bonds, and an additional $220 for each $1,000 in November bonds.

Wanting at least 50% of 2017 bond holders to swap but falling short of target

Under the original terms the PDVSA bond swap offer was only valid if the holders of at least 50% of the April and November bonds agreed to the swap. This was because PDVSA was facing a critical problem with over $11 billion in bond repayments falling due by the end of 2017. In dollar terms the target was to swap at least $5.325 billion of the 2017 notes for new 2020 notes to buy PDVSA and Venezuela time.

On the 24th October 2016 PDVSA announced that creditors holding $2.8 billion of the 2017 bonds have agreed to extend maturities by swapping 2017 debt for new 2020 bonds.  The number of bonds tendered equates to around 39% of the 2017 notes eligible for the swap. This is well short of the intended target of 50%. To complete the exchange PDVSA will issue $3.4 billion in new debt.

Has PDVSA dodged the bullet, or is still staring down the barrel? 

By exchanging 2017 bonds for new debt with annual payments through 2020, PDVSA will reduce bond outlays that would have totalled $3.05 billion by more than $900 million. Whether this is enough to save PDVSA from default remains to be seen. Looking purely at dollars and cents, PDVSA still stares down the barrel of $6.1 billion in principal payments due by the end of 2017. For extra comfort – or if you prefer a “margin of error” – PDVSA, Venezuela (and probably bond holders) need oil prices to rise, and they need them to rise quickly.

PDVSA may have dodged the bullet, but it is still too early to say whether the company has escaped default.

Do ratings matter anymore to PDVSA bond holders?

One of the most interesting facets of the bond swap concerns the position of the rating agencies.

Two of the major rating companies – S&P Global Ratings, and Moody’s Investor Services – announced that they might consider the proposed swap as “distressed” effectively classifying it as a default. There is little evidence that this has had any impact on existing bonds holders or the proposed swap. One reason for this is that PDVSA, at least in terms of bonds, has always been considered “high risk” by investors.

The savviest of bond holders would have seen the writing on the wall once it became clear that the fall in oil prices was likely to be sustained over the medium term. To that extent ratings of PDVSA, or opinions on its credit worthiness have become less important, while return (and the perceived return) on bonds has become king. Risk is still a factor, but the 2020 bond is well secured and the risk are well known.

Why this bond swap comes at a heavy cost to both PDVSA and Venezuela

The great PDVSA bond swap has come at a heavy cost to both PDVSA and Venezuela.

Apart from having to “sweeten the pot” from the terms of the original issue to roughly 1.2 times the face value of the 2017 bonds, and apart from having to extend the deadline four times because investor interest could not be stimulated sufficiently, Venezuela has effectively placed in hoc arguably it most attractive overseas asset – Citgo Petroleum Corp.

While the Oil Minister, Mr. Eulogio Del Pino has touted the swap as a “victory for the Fatherland” this is not necessarily so. Venezuela has bought some time, but there is a still a real possibility that PDVSA will default on its bonds obligations. The story of PDVSA -its persistent repeating nightmare- will therefore continue for some time.

Why the bond swap should be viewed by investors as a positive sign

We shouldn’t close the door on PDVSA, at least for this blog entry, without saying something positive. PDVSA has duly settled the $1 billion 5.125% bond that just matured October 28, 2016. Arguably the bond swap should be viewed by investors as a positive sign if only because the overwhelming signal from Caracas is that Venezuela has not and does not want to default on its obligations at any cost. Willingness to pay is a material factor to be considered by any bond investor and rating agency.

Venezuela – the ship that just keeps sinking

Against the backdrop of the PDVSA bond swap key economic data coming out of Venezuela remains far from pretty. Officially the government maintains exchange controls that sell one US dollar for 10 bolivars (for the importation of priority goods) and 659 bolivars for items deemed less important.

On the Black Market – seen by many as key benchmark indicator of the health of the country as a whole – the bolivar weakened significantly in the week to 31st October 2016 reaching an unofficial rate of 1,501 bolivars per dollar compared with 1,222 bolivars per dollar a week earlier.

Venezuela is sinking but not without hope. Chinese and Russian investments in the oilpatch and  possibly the construction of an LNG plant across the water from Trinidad to be fed by the Dragon field could stabilize the outlook materially. The PDVSA bond swap buys time but other factors need to change and they need to change quickly.

Closing thoughts – time to consider your investing strategies
Firstline Securities Limited offers comprehensive coverage of local and international markets with a bias for the energy sector. Firstline offers a number of unique opportunities to put surplus cash to work either as your asset manager or investment advisor. Please contact us for more details at or at 868.628.1175, we can discuss your investment needs in detail and craft a portfolio that makes sense for you. We look forward to hearing from you.


Nightmares Aplenty – The Continuing Saga of PDVSA and Venezuela

19 October 2016


Hi everyone,
As we approach Divali and the Christmas season, if ever a reminder was needed that we are living in the most challenging and interesting of times – and that collectively as a nation, T&T has a lot to be grateful for – we take a look at the situation in Venezuela and consider PDVSA’s proposed bond swap.
By the way, how well do you know your country?
Firstline Team

Nightmares Aplenty – The Continuing Saga of PDVSA and Venezuela


Petroleos de Venezuela SA (PDVSA)PDVSA is the Venezuelan state owned oil and natural gas company. It undertakes activities in production, refining, and exportation of oil, as well as the exploration and production of natural gas.

Since PDVSA was founded on the 1st January 1976 – when the Venezuelan oil industry was nationalised – PDVSA has dominated the oil industry of Venezuela. As a nation Venezuela is currently the world’s fifth largest exporter of oil and its proven hydro-carbon reserves are the largest in the world.


PDVSA and the Venezuelan Government – Running on Empty

The funds generated by PDVSA have traditionally been used by the Venezuelan government to fund its social development projects. Because Venezuela is so heavily reliant on revenue from the oil and gas sector such a reliance has always been fine when prices have been close to or over $100 dollars per barrel.

In June 2014 the price of oil per barrel was $115. At the time of writing of this blog entry, the price of Brent Crude stands at $51.42 per barrel. For most of the intervening period since June 2014, oil prices have been at least 70% lower than the high recorded in June 2014. Of greater importance to both PDVSA and Venezuela, the oil price per barrel has been consistently below or close to PDVSA’s cost of production.

In the most literal of terms – PDVSA has been running out of money and consequently the government has been for some time attempting to “run on empty”.


What running on empty really means

The Venezuelan economy and its public finances have been decimated by the collapse in oil prices. The government – starved of cash – has struggled to find sufficient hard currency to pay for the importation of basic necessities including badly needed medicines, and of more importance to bond holders, it now seems it will struggle without action to meet its debt payments

Looking at just the numbers presents a frightening picture. The price of Venezuela’s crude oil fell to a 13 year low of $21.63 in January after a period of four years where it had been close to $100 per barrel. It has since recovered to a price in the vicinity of $44 dollars but $44 is a long way from $100.

Measuring these prices against the average cost to produce a barrel of oil or gas equivalent in Venezuela in 2016 highlights the problem both PDVSA and the government face. Venezuela is a high cost per barrel producer with an average cost of US$27.62 per barrel. With oil prices in the vicinity of $50 that doesn’t leave much profit to build or sustain a socialist economy.


The average cost of production of oil or gas equivalents in 2016

Based on the last available comparative data (March 2016) the average cost to produce a barrel of oil or gas equivalent in 2016 can be represented by the following information.

Of the major producers Venezuela sits high up on the table in terms of the cost to produce a barrel with only the United Kingdom, Brazil, and Nigeria having higher costs per barrel. Venezuela’s cost of production is over three times higher than the country with the lowest cost per barrel – Saudi Arabia – who on average extract at an average cost of just under $9 per barrel.

Read more…

The Credit Union – In Evolution

17 October 2016


For more than 68 years, credit unions in Trinidad and Tobago have been serving the under-served elements of the population, who hitherto had no access to ownership of their own institution, no access to credit, no opportunity to serve on a Board of Directors and to chart their own path. What credit unions brought to this section of the population was the opportunity to be part of an organization which encouraged ideals of democracy, social consciousness and human relations.



If one were to trace the evolution of credit unions in Trinidad and Tobago, many would recall familiarity with the concept of “sou sou” which had its genesis in Rotating Credit Associations, which are incidentally also  known as the “Poor Man’s Bank”. Several parties assert that the birth of credit societies worldwide occurred in the 1800s with the first being established in Germany, spreading to the west and other parts of the world in the 1900s.

There are other pieces of evidence in the literary sphere which point to the embryonic form of credit societies in many parts of the world. Known as Rotating Credit Associations (RCAs), several authors have provided definitions for these RCAs.

Read more…

The 2017 National Budget of the Republic of Trinidad and Tobago

13 October 2016

Shaping a better future: A blueprint for Transformation and Growth – Part Two

On the 30th September 2016 the Minister of Finance, the Honourable Mr. Colm Imbert delivered the second national budget of the current PNM administration.

In this second blog entry on the 2017 budget we look at some of the additional items mentioned by the Honourable Minister of Finance.

The medium term goal – where we are all heading

The central tenet of the 2017 national budget of Trinidad and Tobago is the continuation of the adjustment process started in the first budget of the new PNM administration and the mid-year review.

In addition, the government intends to accelerate its public sector investment programme, and enhance and improve its collaboration with the private sector (particularly in the field of capital projects and construction) in order to stimulate economic recovery, diversification away from the reliance on oil and gas, and a move away from the culture of dependency and entitlement that is considered by the government to be pervasive throughout society.

The government has set specific targets to be achieved by 2020. These include:

  • A balanced budget (meaning the eradication of an annual budget deficit) by 2020
  • Limiting the level of public sector debt to no more than 65% of Gross Domestic Product (GDP)
  • Reducing Trinidad and Tobago’s dependence on energy revenues
  • Containing government expenditures through the elimination of waste and corruption
  • Redirecting expenditure away from subsidies and discretionary transfers and towards spending on essential economic infrastructure

Read more…

Page 5 of 77« First...34567...102030...Last »