Oil & Gas

Refiner’s credit crunch augurs wider pains

29 Dec 2011

Petroplus, Europe’s biggest independent oil refiner, may have to close plant if it can’t refinance a $1 bln credit line. Rivals may benefit if a poor result for the Swiss firm speeds reduction in refining capacity. But weak profit margins are likely to remain a widespread problem.

Oil services outlook firmer than stocks suggest

21 Dec 2011

Halliburton, for one, has lost a third of its value in six months. Yet capital spending by big energy groups, which becomes revenue for services firms, is set to rise to a record $600 bln in 2012 - even if oil prices decline. It’s hard to justify the sector’s low multiples.

Exxon bets its size, not troops, will help in Iraq

20 Dec 2011

American forces may have left, but the world-dominating U.S. oil giant is still willing to take risks. Exxon is playing Baghdad off with the Kurdish government, wagering the spoils are worth it and that the company is too important for Iraq’s own oil wealth to be forced out.

Fracking tie-up makes sense for shale-rich China

16 Dec 2011

Buying a piece of Frac Tech, a U.S. gas services company, for a mooted $2.2 billion would be a savvy move by China’s national energy majors. Frac Tech’s drilling technology should be easy to copy, and could help China unlock 140 years of gas supplies. The strategic benefits justify a premium price tag.

Oil price looks set for a reality check

15 Dec 2011

The oil market will remain in balance if the relatively rosy economic forecasts made by OPEC and others prove accurate. But at $106 a barrel, Brent looks vulnerable to a euro zone recession. If growth slows, OPEC’s new production ceiling might quickly seem overly generous.

OPEC desperately looking for a deal, any deal

13 Dec 2011

Global oil markets are fragile, but it might not matter whether the cartel maintains or increases its output target when it meets later this week. Quotas are already ignored. After OPEC’s last acrimonious get together, simply reaching a consensus would soothe buyers and sellers.

Frackers need to get ahead of the regulatory curve

12 Dec 2011

A report linking hydraulic fracturing to polluted drinking water is a significant setback for U.S. shale gas. Fracking’s economic benefits are huge, but drillers risk losing public support. To avoid a backlash, they should embrace more centralised regulation.

Exxon nicely hedged against its own green guess

8 Dec 2011

Tighter environmental rules will curb coal, boost cleaner gas and cause a leap in vehicle efficiency, the energy titan says. This rosy scenario has the growth in CO2 emissions halting by 2030. But despite hefty gas investments, a less green future would also suit Exxon dandily.

Europe’s Iranian oil ban is affordable but risky

30 Nov 2011

Attacks on the UK’s Tehran embassy have added momentum to calls for an embargo. As the economic slowdown hits demand, cutting off Iranian supply won’t be too hard. But a ban could be in place for years. And it’s not clear Saudi Arabia would be willing to fill the gap in the long term.

Sub-$90 oil would quickly restore OPEC harmony

29 Nov 2011

Spats like the one at the oil cartel in June once often stemmed from the hugely different crude prices members needed to balance their books. Now, even Nigeria’s ultra-low $20 a barrel mark six years ago is up to $80. If prices fall anywhere near that level, OPEC will reunite.

Pricey oil doesn’t insulate Russia from euro woes

25 Nov 2011

High oil prices have done little to boost Russia’s economic growth, which is now heading for a slowdown. More euro zone turmoil will hit Russia hard, even if prices stay resilient – which is far from certain.

KKR’s $7.2 bln Samson deal looks more BO than LBO

23 Nov 2011

The private equity firm and its partners are putting more than 50 pct equity down to buy the Oklahoma energy firm. That surely reflects more than Henry Kravis’ desire to bet on a hometown play. Banks are understandably nervous about lending against the promise of wildcat riches.

Sinopec’s M&A strategy gets a little smarter

11 Nov 2011

The Chinese oil major’s $5.2 billion investment in Brazilian oil resembles a deal it did last year – but at 20 pct less per barrel. Non-financial considerations explain some of the difference. But state-owned Sinopec appears to be learning more tricks of the M&A trade.

BP making a habit of botched M&A

7 Nov 2011

Closing a $7 bln disposal in Argentina is not as urgent today as it was a year ago, when the oil major was reeling from the Gulf of Mexico disaster. But setbacks look bad, coming after the collapse of the Rosneft deal. BP is now stuck with a challenging partner in Buenos Aires.

Nabors’ $100 mln payout to CEO offers warning

31 Oct 2011

To hand Eugene Isenberg that much just to give up one of two titles seems absurd. But the board was stuck with a 1987 contract and did reduce his golden parachute. Even so, Nabors has underperformed for a decade. It shows the danger of companies binding themselves too far ahead.

Gassier Exxon’s brave new world isn’t here yet

27 Oct 2011

Alongside a 41 pct profit surge, the $400 bln energy group’s third quarter showed a further rise in gas output relative to oil. That may set Exxon up for the future. But for now, with crude pricier than gas, it could help explain its shrinking valuation premium to oilier Chevron.

BP’s turnaround still work in progress

25 Oct 2011

The UK oil major says it has reached a turning point in its operations. It plans to grow cash flow by 50 pct in the next three years and make more divestments. The strategy is right. But a real recovery would require more clarity about Russia and the Gulf of Mexico litigation.

BP’s spill woes start to clear, but not disappear

17 Oct 2011

The $4 bln settlement with Anadarko is good news for the UK-based oil major. It may be a fraction of the $41 billion estimated cost of the spill. But with the co-owners of the infamous Gulf of Mexico well on side, BP can focus on the big-picture damages claims.

Oil trader, stock investor variance is opportunity

10 Oct 2011

Economic fear has taken a heavier toll on U.S. oil company shares than on crude itself. Either there are bargains among the stocks of oil explorers, or commodity investors are too bullish. The difference of opinion ought to mean there’s room to make money.

Sinopec shows quirks of Chinese resource M&A

10 Oct 2011

The Chinese energy group has offered a massive 120 pct premium for Canadian producer Daylight. Like similar Chinese deals, the $2.2 bln offer works because of strategic necessity, still-high commodity prices, cheap capital and a shareholder none too fussed about value creation.