Oil & Gas

Exxon slow and steady in race back from gas to oil

31 Jan 2012

The energy giant went big on gas with a $31 bln acquisition in 2010. With oil now almost seven times more precious than U.S. gas in energy terms, the company has been slower than rivals to move back toward crude. But there may be method to Exxon’s avoidance of a dash to liquids.

Brazil’s oil plutocracy flexes its muscles

30 Jan 2012

A foreign offshore driller has put off its IPO to appease corporate concerns of state-owned giant Petrobras. Meantime, the country’s richest man, Eike Batista, is set to extract his first barrel after navigating the bureaucracy in record time. Brazil’s oil winners keep winning.

Apple’s cash is key to unlocking suppressed value

30 Jan 2012

Though it’s the world’s most valuable company, the iPhone maker doesn’t get full credit for its near-$100 bln cash hoard or its growth. A huge special dividend could be close to a free lunch. And regularly paying out half its earnings could show why Apple may be worth $1 trln.

Chevron still safest oil bet despite profit miss

27 Jan 2012

Knocking $6 bln off Chevron’s market value looks like an over-reaction. The hit makes the second-largest U.S. oil company even cheaper compared to rivals. The recent weakness in refining will pass, and the firm has strong finances and the sector’s lowest exposure to cheap gas.

Iran’s first move on oil ban would backfire

26 Jan 2012

Oil prices may shoot up if Tehran abruptly cuts off the EU ahead of a full embargo. This would likely trigger a release of emergency stocks, and increased production from Saudi Arabia. But Iran won’t win much from higher prices, and would be the first to lose from a glut.

Conoco must prove tortoise can win oil race

25 Jan 2012

In one of its last quarters as an integrated U.S. major, Conoco delivered 66 pct profit growth. But production fell ahead of a spin-off that will pit its exploration arm against a faster-growing peer set. Though it’s buying more dynamic assets, the valuation will depend on quality.

Indian economy could gain from Iran sanctions

24 Jan 2012

Beggars can’t be choosers. Iran would prefer to sell its oil for dollars, but sanctions mean it might have to take rupees from India, its second largest customer. Rupees are hard to spend outside of India, so New Delhi would get cheap oil and a captive buyer of its exports.

New Petrobras CEO has it all – except independence

23 Jan 2012

There’s plenty for shareholders to like about Maria das Graças Foster becoming the oil giant’s boss. A veteran engineer, she has the qualifications needed to help boost output. But her close friendship with Brazil’s president reinforces the company’s subordination to the state.

Chavez tests limits of resource nationalism

23 Jan 2012

The Venezuelan president nationalised foreign operators in 2007 and now threatens not to pay them as much as the international arbitrator orders. Such bravado might play well at home, but escape is almost impossible. Creditors can easily seize the state’s ample overseas assets.

Essar Energy’s risks outweigh any likely rewards

20 Jan 2012

A legal defeat has hammered shares of London-listed Essar Energy, deepening losses since the 2010 IPO of the India-focused power group. Though big risks were outlined in its prospectus, and are now more realistically priced by the market, the shares are still likely to struggle.

Dana Gas could let its bondholders burn

16 Jan 2012

With a $1 bln London-listed Islamic bond fast coming to maturity, the energy firm remains without a finance chief. Dana has good assets but cashflows are erratic and bondholders led by BlackRock have weak collateral. Short of a bailout, a painful restructuring is on the cards.

Gulf states will benefit from Iran sanctions

16 Jan 2012

Tehran has warned of dire consequences if regional producers replace its shut out oil. But Saudi Arabia and its allies have strong incentives to fill any sanctions-supply gap. They need to keep the United States on their side, and they have much to gain if Iran is weakened.

Build cost inflation threatens new gas economics

13 Jan 2012

Australia’s latest liquid natural gas mega-project will cost 70 pct more than initially envisaged. The French and Japanese backers should still be able to justify the $34 billion price. But cost inflation makes life more difficult for U.S. groups planning big LNG export facilities.

China will fudge Iran oil sanctions

12 Jan 2012

Simple disobedience of the U.S. freeze would give China cheap oil, but it can’t afford the cost of angering Uncle Sam. Total obedience would push up prices, and could spark social unrest in China. But Beijing can probably find a middle way: do just enough to placate the Americans.

Iran sanctions shouldn’t shift oil price

10 Jan 2012

The latest sanctions are not enough to justify an oil price spike. Sure, the lack of foreign equipment may bring Iran’s oil production down, but not in a hurry. Globally, crude supplies will remain fairly steady. A serious military escalation in the Gulf would change that.

Shale oil set to take edge off crude price

9 Jan 2012

Gas from shale has flooded the U.S. market, providing 20 pct of supply and squashing prices. Rock-derived oil, by contrast, may add only about 4.5 pct to global supply by 2020. But that would still cover the expected rise in Chinese demand and help keep a lid on crude inflation.

Tighter sanctions push Iran to unpleasant choices

9 Jan 2012

The Islamic Republic can probably cope with a decline in oil revenue and restrictions on its central bank. But tighter sanctions will worsen already high inflation and put extreme pressure on the rial. President Ahmadinejad risks political fallout, however he chooses to respond.

Iran sanctions’ impact could prove slippery

6 Jan 2012

Iran’s nuclear ambitions are a problem, but more sanctions may not be a solution, especially if China doesn’t cooperate. Iran will suffer, but may just become more determined. Without a realistic plan for unwinding sanctions if they fail, they will just distort oil markets.

Exxon’s Japan sale may not show downstream doubts

4 Jan 2012

With rivals like Conoco splitting off refining, investors are on the lookout for signs the Texas titan will join the trend. Exxon’s likely $5 bln exit in Japan isn’t a clear one. The group recently sank $25 bln into downstream projects. It may merely be ditching a weak asset.

Uncle Sam’s gas exports could sink global prices

3 Jan 2012

If energy firms win official approval, the U.S. may one day export up to a fifth of its gas – enough to shift the balance of energy power elsewhere in the world. But exporters risk undercutting the buoyant global prices that justify the huge capital cost of LNG projects.