Energy

Rise in oil price lubricates equity markets

8 Oct 2004

Or so it seems. Oil and share prices have both been going up. That doesn t make economic sense. Expensive oil squeezes profits and slows down growth. But the hope of flattening rates is buoying investor confidence. That may not last.

Commodity price spikes won’t ignite inflation

29 Sep 2004

Not by themselves. The sector is too small. But it can cause significant psychological damage. And cut profits for customers. The best answer is more investment. Producers are reluctant, because they like current profits. But they cannot resist forever.

ConocoPhillips makes a $2bn bet in Russia

29 Sep 2004

By taking a 7% stake in Lukoil, the US oil and gas firm is the latest to blaze a trail in Russia. That may seem risky given the Yukos saga. But it is actually a smart move. The stake allows it to access valuable projects and reserves in Russia at a reasonable price.

Oil companies should be hedging

29 Sep 2004

The oil price may be at $50, but some oil chief executives predict it will soon fall back to $30 or lower. With the forward curve at record levels, they should be protecting themselves against a fall.

Suez tightens grip over Electrabel

28 Sep 2004

The French utility has parachuted in its chief operating officer and possibly its chairman into the top two jobs at the Belgian utility. This may not mean that Suez will buy out Electrabel's minority shareholders any time soon. But it does make an eventual move more likely.

Shell needs oil to stay high

22 Sep 2004

The oil and gas giant is spending more and producing less. To justify that, it has increased its longterm oil price assumption to $25. That may not be overly aggressive. But even if oil stays high, there appears to be no quick fix for Shell s upstream business.

Oil industry mergers could be coming soon

21 Sep 2004

The industry talk is about consolidation. Oil is getting harder to find and costs are rising. With these challenges, bigger is better. But chief executives are still nervous. A merger rush needs oil and gas prices to fall, or more confidence that they will stay high.

Opec only seems to be master of the oil market

20 Sep 2004

The cartel loves high prices. So it is happy with speculative buying and Russian problems. It does not want to push too hard on production. But its strength is fragile. Supply is not very short. And high prices could bring more nonOpec investment. And less Opec control.

Gazprom share liberalisation a sideshow

15 Sep 2004

Sure, the Kremlin s decision to end restrictions on foreign ownership of Gazprom is a good thing. But the move looks like a PR stunt. The real point is that Russia is tightening control of its energy resources, which isn t necessarily good news for investors.

British Energy pushed into EGM

7 Sep 2004

Dissident shareholders are forcing the UK generator to put its proposed restructuring to a shareholder vote. But shareholders may be better served by holding off from shooting down the agreement.

EDF’s boss to lose job – reports

6 Sep 2004

This is probably a precondition for a successful privatisation of the French utility. Roussely destroyed billions through empire building. The errors of the past will make privatisation difficult. But they also show the necessity of market discipline.

Suez restructuring pays off

2 Sep 2004

Return on capital employed has shot up. And continuing capital discipline has paved the way for returning cash to shareholders. The utility s massive asset disposals are coming to an end. But the programme has served its purpose.

Grid auction had interesting twist

31 Aug 2004

By keeping bidders guessing over the number of regional gas companies it was selling, the UK group maintained competitive tension. The result was an unexpectedly high £5.9bn haul.

National Grid sells gas networks for £5.9bn

31 Aug 2004

The power transmission firm will return £2bn to investors via a special dividend as well increasing its ordinary dividend. Not only has the Grid got a good price in the disposal; with such a large return of capital, reinvestment risk is fading.

Opec prefers to take the money and run

30 Aug 2004

But the Opec s stance has its logic. Expect prices to stay north of $30 in the medium term. The oil cartel s refusal to pump more oil into the market may seem irrational, considering predictions of soaring demand.

Yukos hangover won’t be short-lived

24 Aug 2004

Russia has many plus points. But if Yukos is anything to go by, crisis management and an efficient legal system aren t among them. Even if the oil giant's difficulties are resolved soon, there is still likely to be lasting damage to investor confidence.

Foolish speculation driving oil prices

24 Aug 2004

Sure, 2004 demand has been slightly higher than expected and supply a little lower. But not enough to justify a 45% price rise. Speculators don t have to worry too much about reality. But the price is high enough for them to be getting nervous.

Gazprom threat does Russia no favours

19 Aug 2004

PostYukos, the government needs a PR coup. And what better than lifting restrictions on foreign ownership of Gazprom stock? Instead, an MP's demand to investigate schemes that allow foreigners to own stock indirectly has spooked investors.

E.on a better bet than RWE

12 Aug 2004

Both German utilities have spent the past year cleaning up after misguided acquisition sprees. Shares have rocketed. But RWE is already laying out acquisition plans, while E.on faces a selfimposed moratorium until 2006. Bet on E.on until then.

British Energy shareholders threaten rescue

4 Aug 2004

But they are unlikely to succeed. Bondholders are running the show at the UK generator. They want to recut the rescue package because the company is doing better. But they're unlikely to succeed. Bondholders are running the show at the UK generator. Denying reality will only make shareholder s situation worse.