Oil & Gas

Gas Natural’s Chile deal smacks of empire-building

13 Oct 2014

The Spanish utility will pay $7.6 bln including debt for CGE, Chile’s largest electricity distributor. This increases Gas Natural’s footprint in Latin America, countering weak growth at home. But it is paying more than 10 times 2013 EBITDA with few obvious synergies.

Petrobras’ post-election pop looks premature

6 Oct 2014

The $95 bln Brazilian petro-giant’s stock leapt after pro-business candidate Aecio Neves put in a strong showing against President Dilma Rousseff. But even if Neves wins in a runoff, Petrobras will still be saddled by the massive debt and bad investments of the Rousseff era.

Asset price disinflation may be next big thing

6 Oct 2014

Iron ore led the way, oil is following and stocks may be joining the bandwagon. Even some hot property markets are cooling. Less ultra-loose U.S. monetary policy is blamed, but this looks more like the spread of a disinflationary tide. If so, safe bond prices will keep rising.

Double-digit oil forces majors into more self-help

2 Oct 2014

The Big Oil groups already had a profitability issue before prices started falling. There’s no quick fix. They will have to step up efforts to boost cashflow by cutting costs and capex, and selling assets. At least balance sheets aren’t stretched, so dividends are safe – for now.

Encana’s pirouette demands greater fanfare

29 Sep 2014

The Canadian driller’s $7 bln acquisition of Athlon Energy cements a commitment to move from gas to shale oil. It’s paying a full price, especially after the recent fall in crude to $94 a barrel. If Encana can get the transition right, though, its valuation will deserve a lift.

Sinopec’s petrol station revamp is an uphill job

25 Sep 2014

The Chinese oil giant wants to sell more from its 23,000 pump-side stores. But even if non-fuel sales rise sixfold, the unit won’t be worth a lot more than the $58 billion valuation put on it by outside investors. Breakingviews’ calculator spells out the scale of the challenge.

Oligarch arrest shows Russia back to siege economy

17 Sep 2014

The owner of Sistema is being accused of money laundering. A row over his oil group Bashneft, eyed by state-owned Rosneft, may be the cause of his troubles. That would be the latest sign that, with sanctions hitting hard, Russia is turning back to its old authoritarian model.

Putin gives Exxon a blessing in disguise

16 Sep 2014

The Russian president’s belligerence drew U.S. sanctions that could squelch the oil giant’s $700 mln Arctic drilling venture. That may deprive the company of a shot at a gusher down the road. For now, though, it’s a chance to make needed cost cuts – and delay a risky project.

Sinopec $17.5 bln pump deal lacks reform drive

15 Sep 2014

The Chinese oil titan has sold 30 pct of its petrol station arm to 25 mostly-domestic investors. For them to get a good return, Sinopec’s convenience store sales will have to multiply. Yet the new shareholders have little retail expertise – and even less control over the unit.

Global glut means more pain for Europe’s refiners

11 Sep 2014

New plants in China and the Middle East will flood the world fuel markets, lifting output at the fastest rate since 1999. U.S. firms like Phillips 66, with access to cheap crude, can weather the storm. Rivals across the Atlantic, where margins are low, won’t be so lucky. 

Double-digit oil promises lubrication not seizure

9 Sep 2014

Brent fell below the $100 a barrel threshold on Monday. The decline is mostly an adjustment to less money-printing, a firmer dollar and shale supply, not a sign of impending deflationary doom. Oil could fall further. That will be good for consumer spending and global recovery.  

Hugo Dixon: Gas and bank security have similarities

8 Sep 2014

Europe is conducting simultaneous stress tests on its lenders and energy suppliers. An effective regime for gas security requires many of the same elements as financial stability. The main difference is you can’t print gas if Russia turns off the taps.

Blowout BP oil-spill ruling brings sliver of hope

4 Sep 2014

The UK energy giant could pay $18 bln in penalties after a U.S. judge found it reckless in handling the Macondo well disaster. But punitive damages may be off the table, and the final tally could well be lower. Investors, at least, are showing they can stand the pain for now.

Scottish secessionists in bind over North Sea oil

4 Sep 2014

Both sides of the independence debate are arguing over how many barrels are left. Oil revenue is key for an independent Scotland to manage its finances. But the need to raise funds could undermine an equally vital imperative: tax breaks to incentivise flagging exploration.

Investors decide not to worry about the world

1 Sep 2014

The demise of the post-Cold War vision of Europe? Not a big problem, markets say. Nor do investors see the rise of Islamic State, arguably the biggest threat to Middle East peace in decades, as their issue. The financial indifference is defensible, but increasingly precarious.

Sinopec petrol sale attracts a motley bunch

19 Aug 2014

The Chinese oil giant is seeking investors for its vast network of filling stations. Retail, energy, technology and private equity groups are keen. With a price tag of $16 bln for a minority stake, they will have to club together. That will make it harder to exert influence.    

Venezuela digs way to distressed seller status

14 Aug 2014

The country wants to offload Citgo, its U.S. refinery and pipelines unit. It may be worth up to $15 bln, money that’s sorely needed thanks to President Nicolas Maduro’s barmy economic policies. And the drop in value of heavy-oil assets like Citgo owns makes it a bad time to sell.

Petrobras woes go way beyond Brazilian president

12 Aug 2014

The energy giant’s stock is rising despite a 20 pct drop in profit last quarter. That’s largely because investors pin the firm’s problems on Dilma Rousseff – and sense she’s losing influence. They should watch Petrobras’ soaring debt and lagging oil output instead of the polls.

Kinder Morgan’s large-number solution: get bigger

11 Aug 2014

Energy boss Richard Kinder’s master class in financial engineering is back in session with $71 bln of deals to unite his sprawling pipeline empire. Various partnerships had reached a scale that was limiting returns. The new structure should benefit everyone but Uncle Sam.

Pemex troubles could drag down Mexican oil

8 Aug 2014

The nation is lifting its 75-year ban on private drilling while easing costs at the state-owned energy giant. That may boost falling output but won’t do much to make Pemex more efficient. Without a broader overhaul of the company, plans for an oil and gas revival may flounder.