Oil & Gas

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.

Overbearing Brasilia at fault in ethanol shortage

4 Oct 2011

Lack of investment and squeezed margins mean Brazil’s biofuel production is not keeping up with demand. Government efforts to change that are now affecting oil giant Petrobras. It’s the kind of tangle of unintended consequences that follows excessive government meddling.

Shell, Total have little to lose staying in Syria

28 Sep 2011

The two oil majors are still pumping in Syria, in effect helping to finance the deadly crackdown on anti-government protesters. But while both companies could easily afford to make a moral point and pre-emptively withdraw from their investments, doing so might not achieve much.

Gazprom raids escalate EU-Russia energy war

28 Sep 2011

An anti-trust investigation into the Russian gas giant’s European subsidiaries should be seen in the context of a wider diplomatic conflict. Moscow is obstructing the EU’s plans to import Caspian gas. It looks like the EU has found a way to retaliate. The row could worsen.

Richest Brazilian talks his book on protectionism

27 Sep 2011

Eike Batista thinks the U.S., like Brazil, should shield young industries from overseas competition. But it’s hard to take him very seriously when it’s his wallet talking. Batista’s oil rig-building firm, OSX, is placed to be a big winner from his country’s local content rules.

Commodity meltdown is good stimulus

27 Sep 2011

The fear of bad economic news is the standard explanation for falling raw material prices. But price drops could kindle stronger growth. They are like a tax cut in weak Western economies, and ease inflation in emerging ones. Policymakers shouldn’t undo this healthy stimulus.

Oil price jitters turn up heat on Gulf producers

22 Sep 2011

Governments are sweating as Brent creeps lower with worsening global economics. At $108 a barrel, oil is $18 above the threshold at which producers feel real pain. But shrinking oil revenues leave less room for manoeuvre. And any OPEC supply squeeze will complicate the problem.

Ruling is blow for Yukos compensation bid

20 Sep 2011

The European Court of Human Rights has offered only weak support for the claim that the Russian government expropriated the Yukos oil company, and ruled in favour of Russia on crucial points. The legal battle isn’t over, but Russia will breathe a sigh of relief.

Repsol is wrong to get heavy with activists

16 Sep 2011

The Spanish oil giant is angry at a new shareholder pact between construction firm Sacyr and Mexican energy group Pemex. The activists’ interests may conflict with those of other shareholders. But their immediate demands make some sense, and a big battle benefits no one.

Iraq’s oil ambition looks fragile

15 Sep 2011

The oil-rich country is on the verge of lowering its official output targets and exports have been disrupted. Infrastructure is a major problem. But the politics at home and away mean Iraq’s path to becoming a global oil giant again is set to get longer and tougher.

Petrobras should choose its own business partners

14 Sep 2011

Offering 40 pct of a new Brazilian refinery to Venezuela’s state oil group seemed politically smart in March 2008. But PDVSA’s cash is not forthcoming, so Petrobras is on the hook. It has the money, so there’s no big loss - just a warning against deals inspired by Brasilia.

Crude traders vulnerable to sudden falls

12 Sep 2011

With rich-nation growth slowing to a crawl, crude should be getting cheaper. Instead at $112 a barrel, Brent oil is not much down on recent peaks. While Chinese demand remains strong and Libyan output may revive only sluggishly, crude is susceptible to a rapid reversal.

Ukraine-Russia gas spat likely to cost Gazprom

8 Sep 2011

Autumn is coming and Russia and Ukraine are again squabbling over gas. Neither has an interest in a rerun of the 2006 and 2008 supply disruptions. The likely outcome is that Russia lowers prices in return for political concessions. State-backed Gazprom would be the real loser.