Oil & Gas

Pemex and Repsol separation is for the best

4 Jun 2014

The Mexican oil firm is selling most of its stake in its Spanish rival. The investment, made in another era, serves little purpose. Pemex can use the cash at home. For Repsol, the sale removes a stock overhang and underlines the challenge of spending its growing cash pile.

Middle East spending gap may let Big Oil off hook

3 Jun 2014

The region needs to invest 23 pct more a year in its wells, says the IEA. Otherwise, a shortfall in black gold could push the price up by $15 a barrel. These states’ other priorities make such outlays unlikely. That’s good news for Exxon and others under pressure to cut costs.

U.S. energy independence death greatly exaggerated

27 May 2014

A new government report slashes California’s estimated oil endowment by 96 pct, roughly halving the nation’s supply of frackable crude. But it only impacts total resources, not reserves that can be drilled profitably. These remain intact, as do U.S. hopes of curbing oil imports.

Hess $2.9 bln sale vindicates high-octane activism

22 May 2014

The oil industry laggard will shed its retail outlets to refiner Marathon and focus on lucrative exploration. Hedge fund Elliott can take credit for the transformation that has allowed Hess to catch up with rivals. It’s more evidence that uppity investors can drive useful change.

Big Oil can learn from $50 bln Kazakh fiasco

21 May 2014

The oil majors running the Kashagan field may have to wait until 2016 before any black gold flows again. That’ll be a decade late and five times over budget. The debacle shows the drawback of too many partners involved in the same project under tough climate conditions.

Russia puts gas-hungry China in a bear hug

21 May 2014

A planned pipeline gives Russia a new market outside the increasingly frosty EU. For oil major PetroChina this should staunch losses from low regulated prices at home. China gets cheap supply, but at a cost: the optics of the deal shred Beijing’s claims of political neutrality.

Oil’s eerie calm cannot continue

21 May 2014

Crude has been oddly stable since 2011. That’s tough for traders. For consumers, oil is expensive but at least predictable. Yet $110 a barrel promises alluring profits for too many potential producers. Brace for increased supply, lower prices and way more volatility.

Reborn Chesapeake starts to hit its stride

20 May 2014

A year to the day after replacing profligate CEO Aubrey McClendon, the U.S. oil and gas explorer secured a two-notch credit rating upgrade to nearly investment grade. By slashing debt and simplifying Chesapeake, new boss Doug Lawler is winning over stock and bond investors alike.

Joke’s on lenders in $2.6 bln Batista payback plan

19 May 2014

The fallen Brazilian billionaire wants investors in his bankrupt shipbuilder, OSX, to wait until 2040 for full payment and proposes an $11,000 installment after a year. To think he once boasted that his assets were “idiot proof.” His chutzpah now threatens OSX’s reorganization.

Populism may come back to bite Argentine president

16 May 2014

Cristina Fernandez nationalized YPF to win votes and control the nation’s oil. A growing fight over fracking pits those two motives against each other. Caving to demands to stop shale drilling and curb foreign investment might be popular. But it would raise costs and hurt growth.

Shale laggard’s $3 bln deal just a baby step

7 May 2014

Encana is paying Freeport just half the price per barrel Devon paid in a similar deal last year. After snubbing the shift from cheap gas for longer than rivals, the Canadian firm needed to do something. But catching up with shale leaders like EOG takes more than one canny deal.

Brazilian blunders fuel a better Mexican oil plan

2 May 2014

State meddling, onerous buy-local rules and limits on foreign control slowed Brazil’s expected boom in crude. So its rival to the north has proposed looser regulation and more freedom for government-owned Pemex. The scheme faces hurdles, but it’s a recipe for boosting output.

Exxon investors can anticipate benefits of boring

1 May 2014

The oil giant isn’t the growth machine of yore, as falling production and a 4 pct slide in first-quarter income attests. But a fourfold rise in free cash flow from capital cuts shows it still pumps out cash. While not exciting, that allows owners to pocket generous dividends.

BP could be most tempted by BG

1 May 2014

Bid speculation around BG has intensified since the recent departure of the gas giant’s CEO amid fresh operational setbacks. Bigger majors like Exxon or Shell could be interested. BP might have better reasons to buy, though there are hurdles.

Record U.S. oil stocks show need for policy shift

28 Apr 2014

There’s more crude on hand than at any time in the last 30-plus years – perhaps since 1931. That reflects booming production. Drillers are getting less for their oil than global market rivals. The gap will tend to widen unless lawmakers rethink a long-running ban on exports.

Uncle Sam’s Putin sting also threatens investors

28 Apr 2014

Sanctions can cut both ways. The U.S. is targeting Rosneft boss Igor Sechin. Will Russia retaliate against BP, which owns 20 pct of the oil giant? Probably not, thanks to the British company’s approach. But all foreign business partners are subject to Putin’s wrath.

BG’s CEO exit highlights bid vulnerability

28 Apr 2014

Chris Finlayson is leaving the UK gas group abruptly after another profit warning. BG says it is a question of leadership, not strategy. Chairman Andrew Gould looks like a safe caretaker. But until a new CEO is in place, BG’s takeover defences are weak.

Suppose Brazilian CEOs saw light on pay secrecy

25 Apr 2014

Bosses of Vale, Ambev and other companies are fighting in court to keep their compensation under wraps. Concerns over privacy and kidnapping loom large. Yet there’s evidence that transparency could make them richer. Breakingviews imagines a closed-door meeting on the subject.

Sinopec retail sale is key to topping up its value

23 Apr 2014

The state-owned Chinese oil group is seeking investors for up to 30 pct of its petrol station arm. Though comparisons are tricky, multiples for other operators suggest a valuation of at least $50bln. A sale at that level could prompt a revaluation of the rest of Sinopec.

Regulatory dithering can cost the economy dearly

22 Apr 2014

The U.S. government’s continued deferral on the Keystone pipeline decision is a case in point. One year’s economic benefit from the project may be $1.8 bln; if the answer is no, the energy system can be optimized another way. Win or lose, regulators need to make up their minds.