Oil & Gas

Oil price fall challenges all the theories

13 Nov 2014

In the summer, producers seemed to have finally found the key to price stability. But the stable cartel model was faulty. The supply-demand equilibrium and marginal costs explanations look even lamer. Will the principle that lower oil prices lead to faster GDP growth also fail?

RWE needs Plan B for 5.1 bln euro oil deal

13 Nov 2014

The German utility’s planned sale of oil and gas unit DEA to a group of Russian investors led by Mikhail Fridman has run into British government opposition. RWE needs the sale to cut debt and capital spending. Time to start looking for alternatives. 

New swing producers may shrug off cheaper crude

12 Nov 2014

Conventional wisdom holds that U.S. shale drillers will put a floor under world prices by pumping less if oil drops much below $80 a barrel. But committed costs and falling labor and equipment rates change the calculus. That could slow any response to falling prices.

Russia tries Chinese path out of European impasse

11 Nov 2014

Moscow has signed another mega gas deal with its southern neighbour. Vladimir Putin may have to accept bad terms, but the point is to show Europe that he can turn to China if the standoff over Ukraine persists. And that in the short term, Russia can bear the economic pressure.

China oil groups juggle profit and patriotism

11 Nov 2014

Having PetroChina source fuel, and Sinopec refine it, made political sense, especially when oil was cheap. Now with investors as well as the government to please, both are duelling in upstream, where returns are better. Of the two, PetroChina’s prospects look more compelling.

Divorcing oil baron braves market decoupling

6 Nov 2014

Billionaire Harold Hamm’s $14 bln fortune hangs in the balance of a spousal court battle. He is now scrapping hedges for his Continental Resources, betting on a reversal in the price of crude. Marital rifts can hurt investors, but in this case the business risk looks calculated.

Saudis drop gavel on OPEC confab three weeks early

5 Nov 2014

Brent crude hit $82.55 a barrel, a four-year low, after the kingdom cut the price of U.S.-destined oil ahead of the cartel’s meeting later this month. Cash-strapped Venezuela may bray about cutting supply. But the market reaction underscores how OPEC has become a majority of one.

Unfazed oil kings could make crude bulls bolt

31 Oct 2014

Exxon, Chevron and Conoco reported solid earnings and remained optimistic despite falling prices. Shale drilling, for example, is profitable at current rates. But investment cuts won’t hit other projects for a few years, making price rises unlikely. Investors may get antsy.

Sub-$100 oil will inflame geopolitical tempers

30 Oct 2014

Even with sharply lower crude prices, OPEC may not cut supply. Saudi Arabia, the lynchpin, can afford to run deficits. Not so Venezuela. Less pricey crude is painful for Russia, too. Oil at $80-plus per barrel will boost world growth, but it could make global tensions worse.

New Shell chairman has a tough job on his hands

30 Oct 2014

Charles Holliday arrives at the Anglo-Dutch major as oil prices slump towards $85 a barrel. After a dismal 2013, Shell is making good progress. But while Holliday has sound experience at DuPont and Bank of America, he will need to learn the tricks of his new trade quickly.

Shell pipeline IPO blowout heralds more shrinkage

30 Oct 2014

The $230 bln oil giant’s tax-advantaged U.S. pipeline spinoff popped 46 pct on its debut on Wednesday. With an enterprise value of $4.6 bln, it trades on eight times the valuation ratio its parent gets. That kind of uplift makes it a no-brainer for Shell to offload more assets.

BP can handle double-digit oil price

28 Oct 2014

The UK major has bumped up the dividend despite obvious headwinds of the low oil price, exposure to Russia and uncertainty over Gulf of Mexico fines. Yet cashflow is growing, it has room to cut costs and its leverage is comfortable. BP can afford to be confident.

Shale gas could blow up U.S. politics

27 Oct 2014

It’s playing a big part in upcoming midterm elections. Coal’s downfall is an important issue in one race that could swing the Senate Republican. Obama’s “war” on the dirty carbon is real, but so are market forces. Fracking-related jobs and manufacturing could rock future votes.

Hunt life lesson: Ideology and business don’t mix

22 Oct 2014

The right-wing beliefs of Nelson Hunt, dead at 88, colored his judgment on 1970s policies and led him to buy silver. An attempt to corner the market blew out when the Fed tightened money. Hunt’s failure showed why billionaire politics are best limited to funding candidates.

Total’s Margerie may need two successors

21 Oct 2014

The death of the French oil group’s chairman and CEO in a plane crash deprives the company and the industry of a flamboyant leader. It poses a challenge for succession planning at Total at a critical time. A solution could be to separate the jobs of corporate figurehead and CEO.

Cheap oil is no tonic for sluggish Asian economies

17 Oct 2014

Less expensive petrol and diesel mean smaller subsidy bills and healthier budgets in India and Indonesia. For others in the region, though, falling crude prices are a worrying sign of stalling global growth. Asia has too much debt to welcome disinflation.

Chesapeake gets double win in $5.4 bln shale sale

16 Oct 2014

The U.S. gas driller’s market cap jumped 17 pct, or about $2 bln, after rival Southwestern agreed to buy some wells. The acquirer’s 11 pct share-price slide suggests the deal favors Chesapeake. But it also gives CEO Doug Lawler a one-shot fix for his company’s balance sheet.

Saudi supply games expose OPEC impotence

15 Oct 2014

The cartel’s swing producer is watching prices fall. Why? Maybe it’s trying to slow down U.S. shale growth, but that requires crude at well below $90 per barrel. Or it may want to cajole others into sharing painful production cuts. Either way, OPEC is too weak to control markets.

BG’s new CEO will walk pay-performance highwire

15 Oct 2014

The UK gas company has poached Statoil’s well-regarded boss. Helge Lund transformed the Norwegian rival and his skills will serve BG well. But his pay, potentially worth 10 mln stg or more a year, is rich. BG will need to lay out his performance targets very clearly.

Markets finally side with economy on bad news

13 Oct 2014

For the past five years, an addiction to easy money explained most stock market moves. That era may be ending. Investors seem to be paying more attention to the surprisingly harsh economic environment. With policymakers running out of options, the gloom could worsen.