Energy

BP’s outlook deceptively bleak

6 Feb 2007

The oil and gas giant has slashed its production targets. But the drop isn't as dramatic as it looks. BP might just be giving incoming chief executive Tony Hayward a chance to beat expectations when he starts in July.

How to finance the world’s biggest cash bid

5 Feb 2007

E.on can raise the bulk of the E41bn cash that it needs to take over Endesa from piling on more debt and still keep a singleA rating. The Germans can make up the balance with asset sales, such as its 6.4% Gazprom stake. As a last resort, it could try a rights issue.

E.on’s E41bn Endesa bid should be enough to win

4 Feb 2007

The Spanish utility s shareholders would be crazy not to sell. The German utility is offering a generous price 9.1 times ebitda. If the bid goes through, Acciona will do well. The construction company won t control Endesa, but it would make a 30% return in six months.

Macquarie’s tactics backfire in Techem LBO

2 Feb 2007

The Australian bank thought a 27% stake in the German metering company would cut its final price and scare off potential rivals. But the big position left Macquarie desperate to win. Hedge funds smelled blood. They ve blocked Macquarie s bid, leaving it in a quandary.

Russia comes clean on resource nationalism

29 Jan 2007

A new law limiting foreign ownership of energy assets is more honest than the underhand tactics that Moscow used on Shell in Sakhalin. But as Gazprom's partial uturn on Shtokman shows, Russia can t go it alone. Its nationalism may come back to haunt it.

Surgut shows perils of Russian investment

26 Jan 2007

Investors have grown complacent about Russian risks, as the recent collapse in the oil company s share price shows. Even though Surgut s corporate governance failings were wellknown, investors had still bought the stock.

Acciona raises the stakes over Endesa

25 Jan 2007

The Spanish construction group, which owns 21% of the Spanish utility, has put an ambitious E45 a share price tag on Endesa. This might be a selfserving attempt to take control via the backdoor. The timing suggests it is a ploy to squeeze a higher bid from E.on.

Mexican tortilla glut intensifies ethanol debate

24 Jan 2007

President Bush is calling for more ethanol production. Corn price spikes due to the US ethanol program led Mexico to cap tortilla prices. As the flap over this Mexican staple shows, reliance on US cornbased ethanol is bad economics for both countries.

Will Shell be taken to cleaners by Canadians?

23 Jan 2007

After tussling with hedge funds, the oil giant raised its offer to buy out the 22% of Shell Canada that it didn t own for C$8.7bn. That s a 37% premium in a period when oil prices have fallen by 13%. This shows Shell s desperation to get a deal done to top up reserves. Hedge funds want more than the C$8.7bn Shell is offering to buy the remaining 22% of Shell Canada. That s a 37% premium even as oil is down. This shows Shell s desperation to get a deal done to top up reserves. But it should resist shelling out further.

Baker Report shapes Hayward’s priorities at BP

16 Jan 2007

First on the list of priorities is to restore confidence in BP s operations. Fixing problems will mean more investment and lower returns. The culture needs to change too. Longer term, BP s new chief executive might consider more radical options, such as breaking itself up.

Lord Browne rightly quits BP early

12 Jan 2007

The oil giant's CEO, long considered Britain's best businessman, became a lame duck after losing power struggles with his chairman. Browne's legacy as a great industrialist has been tarnished by mishaps in the US, creating questions over whether BP is too big to manage. The new CEO Hayward is taking over at a difficult time. He must restore confidence among investors against a backdrop of falling oil prices.

Tumbling oil price challenges Opec

5 Jan 2007

A few weeks ago, it looked like the cartel would be able to keep oil above $60 a barrel. After a twoday drop of 9%, the price is now $56. Speculative excess is a likely explanation. But to prevent further falls, Opec needs to persuade market players that it is in control.

Nigerian explosion demonstrates country’s risk

27 Dec 2006

Tuesday's tragedy did not affect oil exports, but it underlines the risk of doing business in Nigeria. The production system is constantly flirting with disaster. That s a problem as oil majors look to increase their profits there.

Can BP escape Russia’s resource nationalism?

27 Dec 2006

The company has done everything right, but a reported investigation into one of TNKBP s most promising gas fields is a worrying sign. No foreign company is in a strong position to counter the trend towards government control. It s hard to fight the Kremlin.

BP faces more civil charges over old US trading slip-ups

14 Dec 2006

Regulators everywhere are worried about possible market abuse by large energy firms, be they US, European or Russian. BP s problem is that a series of US cockups keeps it in the regulatory glare and harsh light is never flattering.

Russia to get control of Sakhalin-2 – report

11 Dec 2006

Moscow seems to have bullied Shell into ceding control of the giant gas project to Gazprom. The Anglo Dutch company didn t have much choice. Russia hasn t broken any rules. But it didn t have to. Western companies are getting wise to its methods.

Selling Pemex would kick-start Mexican growth

8 Dec 2006

President Calderon has a unique opportunity to sell Mexico s large stateowned oil company. True, that wouldn t raise much cash. But it would signal a commitment to free markets and an end to policies which fostered inefficiency.

Arb gap opens in Iberdrola bid for Scottish Power

3 Dec 2006

Scottish Power s investors should be delighted with the price Iberdrola has offered. Instead they have given it a lukewarm reception. There's now a gap between Scottish s share price and Iberdrola s offer, even after allowing for transaction costs.

Lafarge break-up bid for Saint-Gobain could be a winner

29 Nov 2006

The E33bn conglomerate looks ripe for a breakup. But private equity would find it hard given management hostility and political opposition. But Lafarge, which has a better track record than its French rival, might be able to pull off the trick in alliance with other investors.

Iberdrola’s £11.6bn Scottish Power bid lacks logic

28 Nov 2006

The deal requires approval by Iberdrola's shareholders. It will be interesting what ACS, which wanted a merger with Union Fenosa, says. The promised £88m synergies are piddling compared to the transaction's size. The argument for merging seems little more than big is better.