Duke Energy CEO: We're cutting costs so 'we can save jobs'

Yahoo Finance’s Sibile Marcellus joins Akiko Fujita to discuss her recent interview with Duke Energy CEO and President Lynn Good.

Video Transcript

AKIKO FUJITA: We've been talking about the big market rally coming on the back of a three-day weekend-- oil is certainly a big part of that. We are seeing WTI today up nearly 3% now-- Brent crude up just over 1%. Let's bring in Scott Bauer. He is the CEO of Prosper Trading Academy. And, Scott, it's good to have you on today. Let's start with those moves that we are seeing in the market today. Why are we seeing-- why are we seeing Brent crude so much higher? It's up 2.8% compared to where-- I should say WTI-- why are we seeing that move so much higher?

SCOTT BAUER: That's all right-- it's the first day of the week. You know, there's a lot of demand that is starting to come through here based on the opening-- right, based on the reopening of states. And you know, I don't know if it's so much that the data's there that we're seeing cars actually picking up, but it's the prospect of things happening. So what that does is, where is the demand going to come from if we're opening up in the states here? It's going to come from West Texas. And that was a really, really big rally-- not just all day here, but into the final minutes of the close today-- West Texas rallied almost another percent in the last 10, 15 minutes of the day.

AKIKO FUJITA: It does seem like we're seeing sort of two narratives, right? On the one hand, the reopening is helping lift the oil markets, you know, the sense that demand is, in fact, coming up-- coming back up, activity is picking up. And then you've got what's playing out over in China and concerns about whether those tensions could play out and whether that could bring demand down at a time when they're already struggling on the economic front. How do you weigh those risks right now?

SCOTT BAUER: Very, very carefully, honestly. And in addition to the risks of US-China tensions, you know, there's estimates out there now with China reopening and demand ramping up in China, that they might get up to 13 million barrels per day in the second quarter sometime, which is not quite where it was a year ago, but very close. So you have all of these dynamics.

You have this risk of the US-China tensions, but then being offset by potential demand. So I think if you're looking at the entire oil space, you have to keep any sort of trade that an investor or trader is going to make very, very close to the vest here.

AKIKO FUJITA: So the pickup in the activity that we've seen as a result of the reopening, I mean, how should we be looking at that in terms of the big supply glut that we have seen build up over the last two months? How far does this go in clearing that?

SCOTT BAUER: Right.

AKIKO FUJITA: And then we'll talk about OPEC on the other end.

SCOTT BAUER: Sure. Sure. And that's a real tough one, because, unfortunately-- and I don't mean to be a glass half-empty, and I'm not a glass half-empty person-- I'm not quite as optimistic about some of the drawdowns that we might see from the massive supply and storage glut that we've seen coming over the next few months. You know, you look at Baker Hughes-- they came out, they just said that rig count was down again by 21 rigs last week-- or fell by 21 last week.

They now have 237, which is more than 60% less than it was just two months ago. So what is going to happen with the massive amount of supply with the storage we have? I don't think it's going to get depleted as quickly as people think it's going to.

AKIKO FUJITA: So what does that mean for oil prices, then?

SCOTT BAUER: Well, what it would mean is this rise up that we're seeing. This-- I don't want to call it a shock, but this quick rise up that we're seeing now. I think really ebbs a little bit, and, if anything, is going to put some pressure back to the downside.

AKIKO FUJITA: We've got another meeting coming up in June with the OPEC members. And obviously, they've already agreed to a certain supply cut. It isn't just extending that enough to keep prices where they are right now? Or do they need to add additional cuts in order to at least try to rebalance the market?

SCOTT BAUER: It's a great question. And I still really feel that the impetus behind the oil market is more on the demand side than it is on the supply side. So I think that they are going to keep the status quo. As long as OPEC and Russia-- so OPEC-plus-- are adhering to these initial cuts that we're supposed to get, which they are, in May and June, I don't think they're going to raise it. I think that they're going to just kind of play it out a little bit and feel out the demand side of the market. And you know what? If things change, I think they'll be willing to change real quickly with it. But I don't really see them increasing those cuts in the near future.

AKIKO FUJITA: So the thinking is now as we go on the next few weeks, the next few months, the reopening process will continue with-- you know, in phases. What's the one risk that we should be looking out for? The thinking is if economic activity improves and demand pushes higher, that's sort of a very overly simplified way of looking at things, but what are you looking at you think that could kind of derail the gains that we've seen so far?

SCOTT BAUER: So, it's not really over-simplified. It's not, because the entire market right now, whether you're looking at the commodity space like oil, other risk on or off asset classes like metals, gold, or the equity market, it's really trading now off of the reopening of the economy and where the growth or the bounceback in the economy is going to be. So the risk is that we reopen and we get data in a week or three weeks or six weeks, whatever it is, that says, you know what? This didn't go as well as we had hoped for.

Now, none of us hope that that is the case. We all hope that these increased phases go very well, very safely. We want that. But I think the overall biggest risk to the entire market-- not just commodities, but the equity market as well-- is that this reopening sets us back and that we have to pull in the reins a little bit and say, you know, no, we can't do this yet. We have to wait a little bit. Or, another scenario is maybe a second wave, which all the experts and, you know, scientists are predicting, maybe that hits sooner than expected.

AKIKO FUJITA: Yeah, like so much of what we talk about, a lot of it is going to depend on what happens on the medical front. Scott Bauer, always good to talk to you. Thanks so much.

SCOTT BAUER: You too, Akiko. Thank you.

AKIKO FUJITA: Let's stay within the energy space and talk about Duke Energy. Sibile Marcellus had a chance to speak with the CEO of the company, specifically as it relates to what the picture looks like on the layoff front. Sibile, what did she have to say in terms of what the financial picture looks like right now, given what we've gone through over the last two months?

SIBILE MARCELLUS: That's right, Akiko. So I spoke to Duke Energy CEO Lynn Good for a special exclusive "Yahoo Finance Presents" to talk about the effects of the coronavirus pandemic on the company. Duke Energy, they serve 24 million people across the Carolinas, Midwest, and Florida. Now, because they've suspended disconnections if people don't pay, they now have over 100,000 customers who are 60 days or more behind on their bills.

And now, they're doing cost cuts of $350 to $450 million. I asked CEO Lynn Good how they're doing that.

LYNN GOOD: Yes, so we saw a 5% reduction in the volume of electricity that we sold in the month of April, Sibile. And we're kind of forecasting over the balance of the year probably 3% to 5% is what we should expect. And so our assignment is to match that reduction in cash flow and revenue with the reduction in expenses. And with the system running differently with lower load, we have opportunities to move some projects out. We've put a hiring freeze in place. We're watching our discretionary expenses. And we're doing all of this to save costs so we can save jobs.

We have not had any voluntary or involuntary layoffs, and really would like to maintain that posture as long as we can. But as you know, there's an uncertain future ahead of us, so we'll continue to monitor how the economy comes back, how electricity load comes back, and always focus on trying to find that right balance on how do we provide reliable service, how do we maintain employee jobs in a way that really makes sense for our communities.

SIBILE MARCELLUS: And as you can see there, the company is trying not to have any layoffs. And when it comes to employees who've been working from home-- essential workers were out in the field, but for those working from home, they're trying to bring them back into the office little by little over the next couple of months.

AKIKO FUJITA: So, Sibile, I guess the good news is that they haven't had those layoffs. The question is, how much more can they sustain in their current stance? Because we just don't know how long this is going to drag on. Did you get a sense of how quickly she thinks things are going to bounce back?

SIBILE MARCELLUS: Right. So what they're trying to do is mitigate some of the costs. They're trying to save jobs. So that's pretty much the focus now. But the coronavirus pandemic has made many things unpredictable, so they're going to keep monitoring the situation.

AKIKO FUJITA: Sibile Marcellus bringing us that interview with the CEO of Duke Energy-- thanks so much.