Oil & Gas

Chevron’s gas deal setback a blessing in disguise

1 Aug 2014

The energy giant’s Canadian project is in doubt after partner Apache said it wants out. That may seem a blow to boosting flagging production. Like Exxon, though, Chevron has other gushers in the pipeline to help. And any reduction in capex after a couple of misfires is welcome.

Exxon’s Q2 production slump not as bad as it seems

31 Jul 2014

The oil giant beat estimates. But a 6 pct output drop, the worst in years, wiped up to $9 bln off its market value. Exxon, though, has several projects coming online that should reverse the decline. With capital spending on these all but over, cash flow’s healthy again, too.

REITs and MLPs make tax inversions a diversion

30 Jul 2014

U.S. authorities are letting Windstream call its telecom cables real estate, qualifying them for tax breaks. And a partnership will shield Hess assets from the IRS. Politicians, though, are indignant over firms that move overseas – even when home-grown tax loopholes are costlier.

Russia casts mid-sized shadow over BP

29 Jul 2014

The UK oil major’s results benefitted from strong upstream earnings, including a big contribution from its stake in Russian firm Rosneft. Sanctions and a court judgment have made Russia look less reliable, but the dividend looks safe. BP will have to rely more on self-help. 

Yukos ruling casts Russia further into the cold

28 Jul 2014

The Hague’s arbitration court ordered Russia to pay $50 bln to the expropriated oil group’s former shareholders. Moscow will appeal, but could lose again. It will then have to either blow a hole in public finances or ignore the penalty – and spend years in debtors’ hell.

Pemex gives Big Oil an even bigger mess to fix

28 Jul 2014

Mexico’s energy giant lost more money in Q2. Chronic inefficiency is pushing crude output to its lowest since 1990. And the government upped its tax take to 132 pct of Pemex’s income. It’s a blessing and a curse for rivals finally allowed to participate in Mexico’s core oil biz.

Russian sanctions wide of bullseye for energy firms

24 Jul 2014

U.S. measures will raise financing costs for the likes of Rosneft or Novatek, but have limited impact on their projects with Western partners. Still, the threat of tighter sanctions, including from the EU, will keep the industry on edge.

Whiting bid for Kodiak leaves minorities in cold

14 Jul 2014

The Bakken oil driller is offering no premium in a $3.8 bln all-share bid for rival Kodiak. That’s OK for the 60 pct of shareholders who the companies say own both stocks – like hedgie John Paulson. And the deal’s logic is solid. But it short-changes the rest of Kodiak’s owners.

Renzi can show market bona fides with Eni shakeup

9 Jul 2014

Italy’s oil giant trades at a discount to peers partly due to project delays, geopolitical turmoil and downstream difficulties. Giving Eni more freedom to run itself for shareholders, and maybe sell its stake in oil-services firm Saipem, would best serve the state’s 30 pct interest.

Half-decade of $100 oil more blessing than curse

7 Jul 2014

The five-year average crude price is in triple digits for the first time. Global growth has been sluggish but not disastrous. The period also brought better efficiency, the fracking boom, cheap solar, and new products like Tesla’s. It’s a score for innovation against pessimism.

Linn pumps more risk into energy partnerships

30 Jun 2014

A $2.3 bln acquisition of gas wells by the largest drilling MLP is the latest example of how a sector once dominated by ultra-safe pipeline owners is becoming increasingly adventurous. Exposure to volatile U.S. gas prices puts the stable cash flow desired by investors in danger.

Soros takes sub-quantum leap into activism

27 Jun 2014

His $29 bln hedge fund has famously confronted governments. But facing off with a U.S. oil and gas company is novel. Whether a test of a new – and recently profitable – strategy or a sign of change at the family firm, it gives underperforming bosses another scourge to fear.

Shell’s pipeline sale is but a good carve-up start

26 Jun 2014

The $260 bln Anglo-Dutch oil company is spinning off its small U.S. midstream business into a tax-advantaged master limited partnership. It should fetch a valuation multiple four times what Shell itself gets. Separating refining from exploration would bring far bigger rewards. 

America oil export boost barely scratches surface

25 Jun 2014

The Obama administration is relaxing a decades-long ban on selling black gold abroad. But the move only affects ultra-light crude, a sliver of U.S. output. Allowing sales overseas of all oil would narrow the trade deficit and foster jobs. That, though, requires Congress to act.

Iraq troubles are unlikely to bring new oil crisis

24 Jun 2014

The continued violence looks like a harbinger of a sharp cutback from one of the world’s major oil producers. But the bulk of Iraq’s production is still secure. The Middle East is clearly becoming less stable, but it would take a cascade of problems to create a big price shock.

Fracking investors bury their heads in the sand

18 Jun 2014

Shares in miners of the fine rock debris used in modern oil and gas drilling have tripled this year as Fairmount Minerals mulls an IPO. Their valuations suggest over-exuberance. And MLPs look ill-suited to this sector. Shifting tides could wash these investment sandcastles away.

Iraq insurgency adds to stagflation risks

18 Jun 2014

The fighting has pushed oil prices to a nine-month high. The fear is a return to $140 oil last seen in 2008. Even the current rise to around $113 a barrel is bad for the weak global economy, with inflation high in some emerging markets and rising in the United States. 

Gazprom/Ukraine dispute is proxy for Putin’s whims

16 Jun 2014

The Russian energy group will deliver only pre-paid gas to Ukraine, after talks on $4 bln of overdue bills collapsed. Combine that with renewed hostilities by Russian separatists in the east of the country, and markets were premature in believing that the Ukraine crisis has ended.

Saudi and Iran hold key to oil market stability

12 Jun 2014

Political turbulence in the Middle East has helped keep crude prices unusually stable for the past three years. That irony couldn’t last forever, and the weakness of the Iraqi military might mark its end. But if Saudi Arabia and Iran can hold firm, everything else is secondary.

Stingy oil nations realize it pays to loosen up

12 Jun 2014

Mexico, Russia and others want to share black gold with the Chevrons of the world after decades of shutting them out. Concerns about lower prices and outdated technology explain the friendlier approach, but it’s also sound economics. The benefits of hospitality can flow both ways.