Oil & Gas

Saudis give free-marketers dose of their medicine

23 Dec 2014

The Kingdom’s message to the United States, Russia and other higher-cost oil producers is simple. If the market sets the price, it will be far too low for comfort. The Saudis and their allies can probably bear the pain long enough for a more disciplined cartel to emerge. 

Even a weaker Islamic State will drag on economy

23 Dec 2014

Cheap oil may now be the biggest worry for Middle Eastern economies, but the struggle against the radical group also has the potential to undermine growth. Even if IS has peaked, its ideology remains a problem, especially for Iraq and Turkey. Iran could end up gaining ground.

BP’s Rosneft stake exposed for what it is

22 Dec 2014

Turmoil in Russia will hurt BP’s accounts via its 20 percent stake in Rosneft, at least on paper. But in cash terms, the impact looks manageable. This is a financial holding which provides BP with limited dividend income. Any strategic value looks very long term at best.

Repsol takes risky $13 bln bet on Talisman

16 Dec 2014

The Spanish oil group is paying a big premium for the Canadian producer. The deal adds diversification after Argentina expropriated its YPF unit but also brings problematic North Sea assets. Repsol is hoping for a Talisman turnaround and an oil price recovery. Both are uncertain.

Coal and currency set glum path for Indonesian GDP

16 Dec 2014

The rupiah has slumped to a 16-year low as capital flees. Outflows could accelerate if falling Indonesian coal prices start mirroring the collapse in oil. A weakening rupiah could hurt foreign-currency borrowers and stoke inflation. That doesn’t augur well for growth in 2015.   

Technip’s M&A ambitions need firmer foundations

15 Dec 2014

The French oil services company has dropped plans to buy rival CGG. Relieved shareholders pushed the thwarted bidder’s shares up 7 pct: scepticism about pairing an engineer with a marine surveyor was rife. Technip still wants to diversify. It will have to make a better case. 

BG’s $5bln sale bodes well for Aussie M&A pipeline

10 Dec 2014

The British energy group is selling its Australian gas transmission conduit to APA for a higher price than expected. It’s another example of infrastructure assets fetching rich valuations. Amid red-hot investor demand, 2015 promises to be another bumper year for deals down under.

Beware of overhyping the oil dividend

9 Dec 2014

The sharp crude decline is widely seen as good for growth. Yet its main impact is not to boost the world’s total output but to change the distribution of income. Even then, the GDP shift from oil-exporting to oil-importing countries is likely to be substantially less than 1 pct.

Equity market could be next to drop after oil

3 Dec 2014

The huge fall in the oil price will be good for global growth, helping consumers and importing countries. That might seem to justify high equity valuations. But the growth boost will take time and speculative excesses are evident in stocks.

Oil slide threatens Malaysia’s fiscal progress

3 Dec 2014

State energy company Petronas has warned its contribution to the government’s coffers will fall 37 percent next year - and that’s assuming oil at $75 a barrel. The fiscal hit could exceed 2 percent of GDP, undermining budget reforms and further weakening the Malaysian ringgit.

Oil plunge mirrors 2008 surge, but will endure

1 Dec 2014

A chart of Brent’s 40 pct slide since June looks like the reverse of the spike preceding the financial crisis. Then, crude fell back in short order. A quick return to steadier prices is unlikely today. It will take months before U.S. output shrinks enough to squeeze supply.

Market too bearish on European oil services

28 Nov 2014

Petrofac has fared especially badly, falling 30 pct in a week. Sub-$75 oil is rattling explorers’ and producers’ nerves. As projects are shelved, oil service companies are being hurt. Share ratings reflect the pain and much depends on oil prices. But some stocks now look cheap. 

Cheap oil worsens Asian debtors’ lowflation woes

28 Nov 2014

Sliding energy prices could make already-low Asian inflation vanish. That’s bad news for heavily indebted economies like China, South Korea, Thailand, Malaysia and Singapore. If prices and wages don’t rise, borrowers will curb spending. Slowing GDP growth could stumble.

OPEC inaction confirms new order for oil

27 Nov 2014

The oil cartel, led by Saudi Arabia, is either willing to sacrifice profit or unable to agree on production cuts. Either way, lower prices challenge U.S. shale oil producers, but that industry may still thrive. In the OPEC fog, one thing is clear: weaker members will suffer. 

Review: Congo’s problems run deeper than oil

21 Nov 2014

Virunga Park sits on top of reserves and between hostile states inhabited by warring militias. A new documentary casts UK oil firm Soco as the park’s top threat. Unethical exploiters are just one symptom of a nation whose institutions are too weak to assure economic stability.

Brazil faces its come-to-Corcovado moment

19 Nov 2014

A corruption scandal at $63 bln national oil champion Petrobras is unfolding quickly with news that one executive has been fired and about 15 more fingered. Writedowns could hit $15 bln and political fallout may spread. The debacle affords Brazil an opportunity for major reform.

Activist row bigger than Keystone for TransCanada

19 Nov 2014

A sparring match with a dissident investor may be more important than the fate of the $35 bln Canadian group’s tar sands pipeline. Bay Street has welcomed activists, and the regulatory environment is favorable. But for now, TransCanada appears to have shareholders on its side.

Baker Hughes wins tactical $35 bln battle

17 Nov 2014

Playing hard-to-get squeezed a premium north of 50 pct out of Halliburton. The larger U.S. oil services group’s target of $2 bln in annual cost savings just about justifies the price it is paying. But integration challenges and competitive concerns make that look aggressive.

Halliburton raid puts shareholder rights to test

17 Nov 2014

With staggered boards increasingly rare, America has a freer market for corporate control than ever before. Halliburton’s hostile swoop on $26-bln oilfield rival Baker Hughes is a good test case. It’ll be up to investors to defend the value of their company in a proxy fight.

Halliburton can stump up $30 bln for Baker Hughes

14 Nov 2014

That’s if the $46 bln U.S. oil services giant finds cost cuts worth 5 pct of its rival’s sales, in line with past deals in the sector. Banding together makes sense in an industry downturn. And Halliburton could offset the risk of paying a potential 40 pct premium by using shares.