First, Abu Dhabi National oil Company Posted its first profit since 2016. We asked how they did it. We are very happy with the result after two years of a Transformation Program that we gained the benefits of 3. 6 billion. We have seen the result in the First Quarter. We are very happy with the result. The business is much more lean and focused. We should get the benefit of that going into the future. We also had discussion of potential asset sales. Is that still on the table now that you have returned to profit . Definitely not, we are very happy with our assets as a longterm holder. We see a lot of benefits and assets and holding assets. There is a lot of potential in terms of spending and getting more cash flow out of the business. We are very happy with the assets as they are. What about Capital Expenditure . You have returned to profitability would changeou have extra money to spend. This year, we are wrapping up cafex. The board has approved that in the last meeting. We should start seeing the benefit Going Forward in terms of cash flow. Now that you have returned to profit, you have more money to spend presumably. Are you looking to wrap up Capital Spending . Yes, we are actually planning to spend 500 million and it will be across the assets. We see a lot of benefit and efficiency in our portfolio with great opportunities for producing more cash flow for the business. What areas would you be looking to invest in if you are increasing capex . Were looking across the board. Canada is one of our main quality assets. We see a lot of benefit in spending more on our oil fields good that doesnt mean we wont spend across the board. Were looking at opportunities in the u. K. And kurdistan. What does this mean for production . If you rampup investment, presumably we do will increase production, as well. Can you give us the forecast . The goal is to sustain production at the level where we are or higher. The capex goal is to sustain cash flow as a result of that. We are very much keen on having a sustainable is missed, Sustainable Cash Flow to support the business. Where do you see revenue going . In the First Quarter, it was about 6 but the vast majority of the prophet was driven by costcutting . Will revenue be growing soon . We are confident that, especially after the Transformation Program that we saved 3. 6 billion over the last years, we will start seeing the benefit. The First Quarter result is a reflection of what we have been doing. We are very happy where we are at the moment and very confident we will start seeing the benefit of these programs Going Forward. Were happy where we are at the moment. You confident you can stay profitable even if oil prices do not pick up significantly from the current level . We have reviewed the company in a tough environment and where we are at the moment in terms of being lean and efficient is a sustainable goal Going Forward. What about debt refinancing . Weve seen you sell some bonds. In the current environment, would you be looking to refinance more . Rincing is part of the plan. The longterm goal is to reduce debt and find ways to reduce the leverage on the company. But it is on the table and we are in discussion to do that. You return to profit, you completed the two year transformation plan. What is next . We are happy with the company is at the moment. We are a much more efficient business. Our goal is to two produce more ca fw to be more efficient, to start getting the benefit of our Transformation Program over the last two years and to bring value to our shareholders. That was the chairman speaking exclusively to bloomberg. Of particular interest for the wider energy market, it has to be the Capital Expenditure figure of 500 million as well is the notion that might be looking to invest more in canada, the u. K. And the kurdish region. Yousef coming up, a conversation with a ceo about what opec should do to Keep Oil Prices afloat. This is bloomberg. Yousef welcome back to the best of bloombergarts middle east. Credit in china rebounding and a researching recount in the United States all played into oil prices this week. This came ahead of the upcoming producers meeting to decide whether to extend the output cuts. We spoke with a middle east ceo about whether an extension will actually help. I think the first thing to say is that the inventory levels have been stubbornly high despite the cuts weve seen over the last five months. I think thats to demand as well as supply issues. I think the first thing to on the demand side, the gasoline demand has been somewhat lackluster in the last few months, and also you have this story that broke out last week about the chinese authorities trying to tamp down on credit creation, which is the result of a general seleka in the commodities complex. On the supply side, to your point about show producers, we have seen about half a million bell have to Million Barrels in the last few months. At the margin, it does make some difference us bush league when inventory is not moving as expected. I think on that supplyside, you have that. Wrinkly, compliance both within opec and nonopec over the fivemonth period has not been complete. There have been supply and demand issues, but nonetheless, talking to youpot about hedge funds, market has been caught off guard. We have seen some liquidation. I expect that to continue for the early parts of this week, but then for the market to stabilize and probably rebound. You mentioned positioning. It is interesting if you look at the latest eta, some Money Managers are making bets on 40 per barrel oil in the near future. Goldman said they think oil prices will rebound but the longterm anchor for crude eens to have shifted lower significantly. Do you agree . I think i do. I see a generally increasingly consensual view that 100 oil is something of the past, the 80 oil is perhaps also in the past. Nonetheless, i think that toward the end of this year we will get a decent pickup and i expect to see up to 60 in the future. This is the latest oil breakdown. You can see your line in blue of those continues to build and also your reference line, the wpi in yellow. You can pull it up on your bloomberg. A catfight columnist is saying that the the question in the oil market is not whether opec will extend, because that is pretty much baked in. Usually, is opec going to raise its game . They going to take more oil out of the market and can they even do that . It is possible and it is probable that they will extend the cuts. I think over the midterm that will have an effect because the shale producers, while you have the output increasing, they have a limited capacity compared to what opec is prepared to sacrifice in the medium term. If opec maintains at the latest cut, it is very difficult for the shale producers to bridge the gap. I would expect industries to be affected over the midterm. In terms of what this means for saudi arabia, lets start with the largest economy in the middle east, they just embarked on this process, and a couple of weeks ago they do a uturn, restarting restoring bonuses. They say we can afford to do that. This latest downside move in oil, is that going to turn everything on its head . Not yet. Their mind that this year, the vps averages if it stays at these levels, concerns will not yet. Again be raised about the prospects for austerity measures across the region, but for now, i would say that as a shortterm move in oil prices, i would wait a week or two before making that judgment. You made a great point, which is the extension of the opec agreement is pretty much debate in to the market at this point. Given that agreement doesnt seem to have had the desired effect, what else can opec do at this point . I think they need to persist with this policy, this because as i said, entry level has been stubbornly high but at some point as you maintain these cuts and shale perhaps starts to peak in terms of the additional barrels a can add in the market, you will see an adjustment. I think that is what the oil analysts are suggesting i dont disagree. And looking at some of the Research Notes that came out. Saying that there is no vision for the fed to not march the rate up. You are looking at a review from Goldman Sachs, they are increasing off of a june said hike. Ultimately when it comes down to the core, are we seeing signals of a labor market overheating . Not yet, but nonetheless, as various said fed governors have discussed recently, we are at near fu eloyment and that has implications or the economy. There is a reason why the labor statistics are the most closely watched him a that is because an increase in workforce and wages and consumption are all tied into that data. I think it does speak to the likelihood of increasing Interest Rates of the year. We pulled up the w. A. R. Pete function, it is a great way to see how expectations are shaping up. This is based on Interest Rate swaps. You can see how that changed from a week earlier. The remarkable, the difference. Have you changed your position in terms of when we will see the fed hike . No, we have been consistently hawkish on the outlook for Interest Rates based on the strong labor market. The United States generated 178,000 jobs per month over the last 16 months or so. That is a pretty decent number. Unemployment rate is. 4 that is a really low number. I think we will definitely see a june hike and perhaps one or two more before the end of the year. There is no urgency, the f remains relatively sanguine, but rates are going up. Let me play doubles devils advocate if we think oil prices will remain relatively muted and we have the missing wage growth, could that give the fed it room to avoid hiking or maybe not hike in june . Think of june is a in. Whether we have one or two more in the latter half of the year will depend on what you mentioned. There is room for them to be slightly more dovish in the second half but i believe they will hike twice more, and the reason for that if the Global Economy generally is doing much better than it was some months back. The other thing to consider is the possibility that they will start a quantitative tightening by selling, or rather not renewing their purchases, their asset personages asset purchas r the end of the year. That might have a need trae Interest Rates. We have the fed looking to will hike twice more, and the reason for that if the global raise rates and concerns about china. You will remember those for a trio of worries that sparked a huge selloff around early last year. This time, we have u. S. Equities at work highs, we have emerging markets rally, what is going on . I think it is the trump effect. There is a lot of optimism and belief in the fact that he will deliver on his economic agenda. We saw a small victory on health care last week and i think that may translate into a greater credibility in terms of investors willing to believe he can go on and do the economic agenda, which includes spending, tax cuts in the wee of hundreds of billions of dollars potentially by amerin corporations from overseas back into the american economy. The fact that they are also enough, and you spoke about it a little bit, visit also tell a story about concerns when it comes to demand and concerns about Global Economic momentum . Talk us through this. I think china is the worry. If you look elsewherin story about concerns when it world, it is difficult to find significant weakness in any of the major economies. Thu. Is doing reasonably well, europe is increasing in terms of its momentum, its growth momentum, japan is doing reasonably well by some standards. It is difficult to find a major economy or a major part of the world that is going to direct the Global Economy down this year. China, however, is the unknown and we will wait to see what happens. Always great to have you on the show. Yousef up next, making the right moves. We spoke to someone from the emirates about Property Market that is next. This is bloomberg. Yousef welcome back to the best of markets middle east. The uaes First Real Estate Investment trusts reported lower earnings on the slump of property valuations. We spoke with the ceo and deputy chairman. For the quarter, what is really important, the First Quarter we invested a lot in our portfolio. Today, the key thing for us is we increase our operation and our net cash profit by 90 yearbyyear. In tes what it means for the road ford, because ultimately there are concerns about whether or not the dubai Real Estate Market has bottomed out, how does that affect your outlook . We are starting to investigate in the market. What this means for the trade, we invested a lot in the Third Quarter in our portfolio. We see the benefit in cash flow and we are going to increase in near future. When you say near future, when are you talking about . Your stock is down about 8 this year already. We announced yesterday that we are going to have increased dividend in june. This is an increase on our current stock price and we believe this dividend, which has been consistent over the past few years, is going to increase very same. The next dividend is going to be in january, and we dont give any guidance on whether this will increase of the following one, but what we see is that we will have to increase it very soon. Some analysts say there is limited Growth Prospect with in your existing portfolio. Will you be broadening your Investment Strategy . I beg to differ strongly on this. One of the criticisms we had was that we had large, empty buildings. Those buildings are starting to be filled up. We were at 81 occupancy and we have had good grades. When we fill the vacancy, it flows through immediately to the cash profit and dividend. There is Significant Growth here. We also have 6700 dividend from cash to invest. Im looking at your total return yeartodate. What is the market underpricing here in terms of the Success Story you are trying to point out . I think investors were quite doubtful we would increase cash flow that quickly, and indeed it is a big jump, 90 yearoveryear. I understand some of them were skeptical about this. Is a big jump, 90 today, we are seeing an increase in the cash flow. I think its going to revert to a normal price. Is this an opportunity to then, you are pointing out the cash flow to raise your development and to play some of that capital. Yes, we are building a school is this an opportunity to at the moment. We did another one last year. They all do very well. We deployed money at more than 20 . Also, the market is down at the moment. I would not underestimate buying buildings because prices cheap. 20 . What buildings are in demand right now . The markets down, so the value of the properties is pretty low. What we see in terms of building what we invest in, is mostly schools. Here it is quite easy, only start a school, we have a longterm operator. We see a lot of opportunity in office buildings, which have two sectors, schools and offices. We have some opportunities with occupancy and a very attractive dividend price. Ceo of emirates we. Thank you very much. Yousef next, we look at howhe builders can recover from the collapse of price. Thank you very much. Ive spent my life planting a sizesix, nonslip shoe into that door. On this side, i want my customers to relax and enjoy themselves. But these days its phones before forks. They want wifi out here. But behind that door, i need a private connection for my business. Wifi pro from comcast business. Public wifi for your customers. Private wifi for your business. Strong and secure. Good for a door. And a network. Comcast business. Built for security. Built for business. The shlike a bald penguin. How do i look . [ laughing ] show me the Billboard Music awards. Show me top artist. Show me the top hot 100 artist. They give awards for being hot and 100 years old . Well take 2 [ laughing ] xfinity x1 gives you exclusive access to the best of the Billboard Music awards just by using your voice. The Billboard Music awards. Sunday, may 21st eight seven central only on abc. Yousef welcome back to the best of Bloomberg Markets middle east. An yousef gamal eldin. Investors in the uae construction stocks remember the good old days when oil was about 100 a barrel and that encouraged a seemingly endless stream of lucrative product. Now, a reality check with crude about half of that, Lowes Companies are struggling to maintain their balance sheets. We took a look at this. In terms of what we have seen, the pains of the construction sector, the pains of arab tech, we have built a chart on the basis of some of the notes you sent so clients can get an additional perspective on these construction stocks. Your line is in white and blue, this is a reference line, the main index. That is your line in yellow. This is on a threeyear horizon. Investorse where start losing faith in these two companies. What is the wider story that these two companies are telling us . I think this is beyond the drop in oil prices and the government cuts in spending. I think these two companies have one thing in common. A lot of mispricing happened, to cover the cost of the labor they had on the payrolls. And that backfired on them because they were expecting the market to pick up probably faster than it did. It did not, actually. In 2014, things picked up a little bit and then things went down the hill again. It think it is more than an oil price issue, it is an operational issue in these companies. If you look at arab tech restructuring in the past three , or four years. So yes, Government Spending did impact the lack of projects in the market in this region, but i think they also have an operation problem because that was not the problem of every single Construction Company in the region. Yousef could it be a possible indicator about demands moderating or slowing down in the uae . Nabil of course, you can see that demand is less on tourism, on retail. Yousef it is a tale of two cities. You have companies that continue to sell and improve on their balance sheets, then you have arab tech and dsi that have a different story. Which is it . Nabil i think there are two different stories. Amar has a trusted bra. Ar th and dsi are different. Ijust a different story. Am ia brand, people do trusted blindly. Sompele do call t apple of this world. Some people do trusted blindly. Shery we keep hearing rumors about consolidation in the uae. What are you hearing on the ground . Nabil there are so many rumors that more mergers will happen between banks and some companies. We have not had a great track record in this part of the world with mergers. We have not seen it actually working for so many people. Usm a at the moment in thi part of the world is more off a sequence, not an action. We need to wait and see how that is going to turn out. Keeping in mind that many of the companies or big banks are partly stateowned, so it must unless the state decides to move on with these m as between banks and big sovereign companies, like what happened with abu dhabi, i dont think we are going to see much more happening unless there is a push from the upper authority. Shery you were talking about arab tech and dsi, you said there would be more than the oil price, but the Oil Prices Keep these economies and we are now hearing the all caps could be extended even further come even beyond the end of 2017. However, given that the price of oil is new the levels of november before the cuts, what is the point of extending these cuts further . Wouldnt they have to make deeper reductions . Nabil well, i have said that before. I dont really believe that opec has lots of control eril anymore, as they do not control all of the Oil Production on earth. Us, they cannot control what is available. With the u. S. Having record high inventory today. I dont think opec can do much. Actually, when they cut production, they reduce supply in the market. Which, theoretically speaking, increases the price which makes it more feasible for show producers to kick in and produce more oil. It is a difficult balance. I think the oil dynamics has really changed while opec is not really changed the way it does things. Things are not 100 in the control of opec anymore when it comes to oil. Coming up on the best of bloomberg, we will talk more about the oil story in russias role in making sure opecs plans to move prices actually work. This is bloomberg. Yousef welcome back to the best of Bloomberg Markets middle east. Russia has added its voice to saudi arabias suggestion that Oil Output Curbs will be extended later this months. There is signaled the prond extensions are needing to tin needed to drain the global glut and reduce prices. Anthony has more. Anthony i think this will take time to filter into the price because we are very w w compared to how we have been with these cuts in place and a lot of the analysts we have spoken to say this price is too low and it will be coming back up. Some of the analysts are targeting mid50s, 60s toward the end of the year. It is interesting that opec and russia do come out now or the saudis and russians come out now saying they would like this extension, it shows they think they have not done enough yet to mop up that glut of crude in the market, the chart you showed shows we may have some difficulties ahead pricewise. It kind of gives light to what opecs been saying all along, they expect demand come back in the second half and prices to firm up in the second half. If they do go ahead to extend the cuts, it seems likely end to to extend the longer into 2018 and feels like they dont believe that anymore. Shery libya is back from those disruptions, pumping the most oil since october of 2014. How much more pressure will this put on the price . Anthony thats right. They have increased and this is one of those factors that is always there at the back of the mind of opec in the markets. There are a number of members using well below historic levels. Libya is back up to 796,000 Barrels Per Day and they want to get to 800,000 of the end of the year. Effectively, they are there but they need to maintain that. There is fighting going on, ports are closed. They need to maintain that. Libya previously was at 1. 6 million. They are at half their historic levels. Nigeria is at the lowest since the early 1990s. Venezuela is also down. T e same time, you have countries like iraq and iran that are pumping close to or near to historic hhsnd they say they want to increase more. You have the prospect of more opec oil coming on the market, so that puts a question around the longterm ability for them to control prices by making cuts. Yousef lets get more analysis. We have the head of e. M. Credit research for commerzbank. Great to see on the show. Opec in a quagmire here, ey went the extra mile but they dont have anything to show for. Oil taking a tumble. Where does the story go from here . Does it matter whether they extend are not . Ultimately, now the Saudi Energy Minister is implying that cuts should be extending in the second half of the year. So they are struggling to me up with clever ideas to rebalance this market . I dont believe that opec has many options to continue its existing policy of cuts. There is obviously some cloud of skepticism if it is working or not. I think it is a bit too early to put so much of a judgment. We are not yet even six months from the original agreement, so definitely a think opec needs some more time to establish the outcome of its policy. A good thing is also we are starting to see renity with opec members, which was not the case last year. Now you have saudi very openly speaking about the cuts, even extending beyond the anticipated timeframe. Members seem toe agreement with the policy and obviously the message. Yousef the other question is, not whether the extent of not but if theyre willing to take more oil out of this market. The Saudi Oil Minister visiting per night, that could contribute to the wider story. Do you think we will see more of that as we prep for the meeting at the end of may . In terms of more nonopec becoming part of this wider agreement and ultimately trying to accelerate the rebalancing, which would have missed their own expectations . Apostolos i think he will be one of the options clearly discussed at the upcoming meing, but i am not convinced we see that happening right now. It is also an option opec may want toeefor a later date if the second ground, it is not bringing the necessary result. Clearly it will be on the table, something will be discussed and they may bring up some more potentials. Shery we also heard from Goldman Sachs and citigroup warning that what we saw last the selloff we saw last week was not reflecting fundamentals. How right are they . Apostolos they are clearly right. There has been a lot of volatility, anvotility in oil markets is not really always a function of fundamentals. There is a lot of technical factors that play a big role. Therwaalso big hedging activity from the shale producers. We have seen a few months ago some of these contracts have expired. On the fundamentals, obviously there is nothing material that could change the entire direction of oil prices. So yes, they definitely have some ground to say that the fundamental picture is not necessarily justifying such a major drop so quickly. Yousef very broad briefly, a couple of sentences, oil prices in the end of the year, the second half of the yearwhe will we be . Apostolos oil will stay in the 50 range, perhaps slightly bigger. After the announcement of the next opec agreement, we may see a nearterm bump, but i have faith it will be in the range of 50 to a little more than that. The eurodollar chart. This is to give perspective on what is happening on an tray basis. I was reading today that the market that cheered macros macrons victory was not for who he was, but rather for who he is not. That is a fairly slender thread to hang the reversal of the euro. Apostolos definitely, i agree. It is a good point. The wind comes from the fact that a lot of french voters wanted to oppose Marine Le Pen rather than support emmanuel macron. He needs to gain support in the legislative elections, which will be a big challenge for him. It is more likely that the established parties are going to n e majority, so therefore, you will have a difficult time passing proposed reforms. Also when it comes to his reforms, the unemployment, the high unemployment in france, it will be a major challenge in his promises so far have not really come with any specific solutions that are going to resolve unemployment anytime soon. He continues to stand by with a 35hour workweek. He is also not really proposing any major plans that will prevent access to unemployment benefits, each incentivize his work to stay at home. Definitely, there is a big amount of challenges Going Forward. Shery it is interesting that in your note y say that macron isnt a genuine reformer. But there is a sense of relief that the populist movement is gone for a or at least for now, has faded. How much of a boom will his win be for the eus selfconfidence . Apostolos in the short run, we will see confidence. There is definitely belief in brussels as well as in berlin. The authorities are much happier with a macron when compared with a le pen. However, i think it is too early to make a conclusion because obviously, it will all depend on hofar macron will continue on insisting on his previous statements. Lets not forget that he was a supporter of countries, he has openly mentioned using european bonds to fund the southern countries, something the government in germany is clearly opposing. If he continues that stance Going Forward after a strong wind, we will see some friction in the eurozone and particularly with the germany. Yousef coming up next on the best of Bloomberg Markets middle east. We will look at how effective sanctions relief has really been in iran. This is bloomberg. Welcome back to the best of Bloomberg Markets middle east. Irans Nuclear Accord with the west has become a major talking point in elections next week. The second televised debate, a candidate criticized the president over his economic policies since sanctions were eased. We got reaction from a partner at dla piper. The waivers on the sanctions, to be frankly with you, not something i am watching closely. It is a technicality, a legislative action happening for the past year with very little fanfare but because of the Trump Administration coming in and the elections, there has been a lot of focus. On those. I think the Trump Administration will go ahead and extent those waivers with little fanfare, but they are going to keep up their rhetoric and the key is, what else do they do . Do they veto sanctions that are coming out of congress, do they undermine the jcpoa . There are a lot of things the Trump Administration can do to undermine it or support it. Yousef in terms of what to watch out for Going Forward, because there are some seismic events that might shake up things, including elections and iir. How much of a factor is that and what else are you watching . Obviously, the elections in iran are very important but they are always important regardless of trumps position. I think critically, you see that trump has announced his of first foreign visit abroad is going to be saudi arabia and israel, the two two biggest critics of the nuclear deal. We need to watch out for the boeing and airbus deal, what happens with that, it is a little bit of a barometer and litmus test because those two companies are in constant communications with the u. S. Government. It gives us a little bit of insight into what the thinking is on the part of the department of treasury and sanctions. And obviously, there is a lot of sanctions legislation in congress. There is always sanctions legislation in the u. S. Congress, but what has hped is there was always president obama to counter and veto that. As you see sanctions legislation wind its way through congress, what the Trump Administration says about that as it comes through is important. Shery lets dig into that point. If we did see the Trump Administration off to reimpose sanctions, what would be the mechanism by which they do that and what industries you think could be most affected . Ramsey finance is critical. Even the Slightest Movement by the Trump Administration on banking channels could have an adverse effect and reverse some gains weve seen with the Nuclear Agreement because the industry is particularly sensitive to the sanctions. Petroleum industries is something the Trump Administration might go after, but you asked me what mechanisms we might see. The key is that europe, russia and china i dont think of going to follow the Trump Administration. That is where the Trump Administration, i believe, is thinking around, what can we do without these other partners support that will inflict some pain . Antiterrorism sanctions is a big one. Yousef briefly, in terms of companies you are looking at oil and Gas Companies have them looking very closely at some lucrative possible agreements. Hoarthey going to navigate that . When can they sign, or do they need to wait until after the elections . Ramsey so the interesting thing is a year ago, all the oil and Gas Companies were going to iran and the big european delegations, but we were not seeing a lot of nervousness about the nuclear deal. My view is there was a lot of talking and a lot of memorandums of understanding, and now the investment is starting to hit the ground, and i am seeing much more nervous a this nervousness in the market then there was a year ago as you saw all of these new stories about delegations visiting tehran. Certainly folks will be watching the elections. But that is always a concern. Eyes are on the Trump Administration and their full review of the nuclear deal and what will come out of that. Yousefth is it for this best of Bloomberg Markets middle east. We have a busy week ahead in the region. Next week, pakistan officially becomes part of the emerging markets. We speak to the head of pakistans stock market operator. We will have all of the political analysis in the lead up to the iranian election. I am yousef gamal eldin, this is bloomberg. Juliette coming up on bloomberg best, the stories that shaped the week and business around the web. Around the world. From paris to seoul to washington. With new faces entering the spotlight and familiar figures leaving the stage. He has the government mainly to the right. He has definitely pushed the softer line toward north korea. At different times, at for different reasons, people asked for a diert fbi director. Now they will get one. Juliette in the midst of these storms, markets are staying calm while leaders look to gauge what is on the horizon. Im still worried about european banks. Markets are really not good at pricing binary event