Fossil Fuels

Vivo Energy offers pricey road to African growth

24 Apr 2018

The operator of 1,800 fuel stations across the continent is planning a stock market listing that values it at up to $3.3 billion. Earnings growth is healthy, and the company has scale. But a comparison with smaller regional rivals suggests the premium price tag is a stretch.

OPEC’s widened tent would still be built on sand

16 Feb 2018

Oil-exporting countries are working to expand their alliance with Russia and others longer term, the UAE oil minister says. That’s just as production numbers show U.S. drillers are set to pump more oil this year. OPEC’s tent can widen, but it will still face a production gale.

Saudi needs OPEC cuts to work, but not too well

30 Nov 2017

The oil cartel agreed to extend cuts until the end of 2018. Its moderation has drained inventories and lifted prices. Further cuts won’t boost prices enough to balance Saudi’s budget. Then again, that gives the crown prince a reason to continue with his challenging reforms.

China is third-best option for Saudi Aramco

16 Oct 2017

With its $2 trln public offering in the balance, the Saudi oil giant may bring in a Chinese investor. That would provide cash the state doesn’t urgently need. The other perks of an international IPO, like regional influence and financial discipline, aren’t to be found in Beijing.

Uniper bid lacks spark for all bar E.ON

20 Sep 2017

Finnish utility Fortum’s plan to buy its German rival for 8 billion euros may create more losers than winners. Uniper's top shareholder E.ON has reasons to accept a 4.5 percent premium but its other investors will rightly grumble. Nor does the deal make much sense for the bidder.

Shell’s defence of big oil is too hopeful

11 Sep 2017

The Anglo-Dutch giant reckons demand will peak around 2030, but says crude oil will continue to play a major role in global energy supply thereafter. It’s a view that puts too much faith in the combustion engine’s survival – and China staying with its current course.

Glencore’s debt purge creates enviable problems

10 Aug 2017

Surging commodity prices are helping Chief Executive Ivan Glasenberg to slash debt faster than planned and restore profitability. That gives the mining giant scope to hand more money back to investors or make bigger bets on growing demand for resource-hungry electric vehicles.

Permian tech-like valuations come down to Earth

3 Aug 2017

Parsley Energy is the latest Texas driller to report sharply higher oil output yet see its stock fall. Companies’ growing efficiency drives global oil prices and has won multiples far higher than Google’s and Facebook’s. But in a commodity business, investors want profits too.

Rio Tinto right to take China’s $2.7 bln and run

27 Jun 2017

In selling a group of thermal coal mines, the miner weighed up a higher, less certain price from China’s Yancoal, or a lower, more secure bid from Glencore. The former looks better. Selling to China could bring other benefits. The main thing is to get shot of dirty fuel assets.

Natural gas inflicts fresh wounds on old victim

22 Jun 2017

Southern risks a new writedown after regulators tired of waiting for a novel “clean-coal” plant. As with its troubled nuclear project, the $50 bln U.S. utility tried untested designs. Efforts to diversify fuel sources are admirable but cheap gas prices continue to crush them.

Saudi Aramco IPO is exercise in reverse valuation

22 Jun 2017

The oil producer is worth $2 trillion, say its owners. The question might not be whether that valuation is right, but what Aramco’s owners and bankers will have to do to get it. A Breakingviews calculator suggests this will be a stretch of reason.

RWE can sparkle with a dirty energy merger

20 Jun 2017

The German utility risks turning into a mere holding company after spinning off clean power unit Innogy. It can avoid this fate by bulking up on coal and gas. An 8.4 billion euro bid for rival Uniper would create value even before synergies and fire up the group’s revival.

UK energy producer shows limits of futurology

15 Jun 2017

British utility Drax has stretched the definition of long-term targets with plans to triple its EBITDA by 2025. Though its business model is stable, much can go wrong in eight years. A less specific dividend promise exposes management’s limited belief in its own predictions.

Tax windfall charges up RWE, E.ON recovery

7 Jun 2017

Germany’s battered utilities can get back more than 6 bln euros in past tax payments, the country’s top court decided. It’s the final stage in the sector’s rehabilitation, following big restructurings and settlements on nuclear liabilities – and sets the scene for M&A.

Finnish-German utility would make odd couple

1 Jun 2017

Shares in Uniper jumped on a report that Finland’s Fortum is considering buying E.ON’s 47 pct stake in the 6.3 bln euro power group. Yet Uniper’s big carbon footprint would tarnish the Finns’ clean energy strategy, and its lackluster earnings make the financial logic a stretch.

DONG’s green energy premium is a work in progress

24 May 2017

By hiving off its North Sea oil and gas assets for $1.3 bln, the state-owned Danish utility is now one of the biggest clean energy pure-plays. Yet its stock market value does not reflect this unique position. A 20 pct discount to German rival Innogy seems excessive.

Engie can offer RWE a new spin on spinoff

14 Mar 2017

The French utility is reported to be interested in bidding for Innogy, which is majority owned by RWE. The latter wants to retain at least a 51 percent stake in the 19 bln euro business that it carved out in 2016. Yet a minority stake in enlarged Engie may be just as good.

Saudi’s Trump friendship more about money than oil

1 Feb 2017

Riyadh may boost its investments in American energy under the new president. An abundance of shale oil and a focus on domestic supply means Saudi Arabian crude is no longer enough to secure U.S. political support in the Middle East. Its cash is still attractive, though.

OPEC resolve is strong enough to turbo-charge oil

30 Nov 2016

The cartel’s deal to cut crude output for the first time since 2008 ends its two-year-old policy of putting market share before higher prices. This may be self-defeating if shale production rebounds. But OPEC unity is convincing enough for oil to extend and sustain gains.

Arch Coal jumps from bankruptcy frying pan to fire

11 Oct 2016

The U.S. miner, fresh from burying over 90 pct of its debt, is exiting Chapter 11 after coking-coal prices more than doubled of late. But uncertain Chinese demand, renewable-energy growth and global pressure to stem climate change leave the coal industry stuck in the pits.