How much of the oil and gas sector’s asset valuations could be at risk from climate mitigation policy?
The International Energy Agency’s latest annual World Energy Outlook, released in November, followed the popular practice in long-term forecasts of using several scenarios. One involves global policymakers moving to limit atmospheric CO2 concentration to 450 parts per million, in order to limit to 50 per cent the probability of average temperatures rising 2 degrees or more.
The problem for fossil fuel companies is that could limit their ability to utilise all their reserves. Read more
India’s Oil and Natural Gas Corp is in talks with foreign oil majors BG, Eni and Shell to sell stakes in deepwater developments off the country’s resource-rich eastern coast, as it seeks to replicate the lucrative $7.2bn deal struck between BP and Reliance Industries. The FT reports AK Hazarika, the chairman of India’s biggest oil and gas group, told the Financial Times that the state-owned group was looking for a partner with the technological expertise to exploit its vast but untapped deepwater oil and gas reserves. ONGC, which has a market capitalisation of $55bn, has already been collaborating with the British, Italian and Anglo-Dutch explorers but it is looking to deepen ties with foreign groups to boost the development of its 85 deepwater blocks in the Indian Ocean, according to Mr Hazarika.
First Marathon Oil, then ConocoPhillips, next BP?
The Lex column doesn’t think further Big Oil break-ups are likely: Read more
Libya’s oil output has plunged by at least a fifth as foreign companies have shut down production, running the risk of turning the political crisis in the Middle East into an oil crisis, according to the FT. Oil prices surged on Tuesday after Eni of Italy and Repsol YPF of Spain, the largest oil producers in Libya, said they were shutting down output. Traders said two of the four oil ports in the country were also closed, and refineries have also been affected. Reuters adds that Brent crude futures are still rising in early trading on Wednesday, going up by $1 to $106.78 per barrel on growing fears that unrest in Libya could spread to other top oil producers in the region and cut output. ABC News says the average price of US gasoline is this week is $3.19 per gallon — the highest average February price since the government started keeping track in 1990.
Libya’s oil output has plunged by at least a fifth as foreign companies have shut down production, running the risk of turning Middle East turmoil into an oil crisis, reports the FT. Oil prices surged on Tuesday after Eni of Italy and Repsol YPF of Spain, the largest oil producers in Libya, said they were shutting down output. Traders said two of the four Libyan oil ports were closed and refineries had also been affected. In a sign of deepening crisis, Ali Naimi, Saudi oil minister, said the Opec oil cartel stood ready to boost production if necessary, adding that the oil market was well-supplied for now. Saudi Arabia retains about 4m barrels a day of spare production capacity, which Naimi stressed could help offset losses in Libya. The NYT adds that concerns about broader disruption to Middle East supplies are also driving oil prices.
As the Great Socialist People’s Libyan Arab Jamahiriya comes crashing down, despite regime attempts to butcher demonstrators — here’s a timely reminder on corporate exposure.
Much of it, as you’d expect, is concentrated in oil production. (Output at the country’s Nafoora oil field had stopped on Monday due to strikes, incidentally.) Read more
Petrobras, Brazil’s national oil company, said on Monday it was withdrawing from talks to buy Eni ’s 33% stake in Galp, the Portuguese oil company, reports the FT. A potential deal with the Italian oil group, worth as much as €4.7bn ($6.4bn), had generated speculation for more than a year. But the move may have appeared too ambitious for the Brazilian company, amid one of the biggest investment programmes in the industry’s history: the exploration and development of enormous pre-salt fields, so-called as they lie under salt layers up to 2km thick on the floor of the Atlantic Ocean. The WSJ adds that end of the talks leaves Eni looking for other possible buyers.
Petrobras, Brazil’s national oil company, said on Tuesday it was in talks with Eni, the Italian energy group, to acquire its 33% stake in Galp, the Portuguese oil company, reports the FT. The announcement followed Portugese media reports that Petrobras was ready to pay €3.5bn ($4.6bn) for the stake, less than the asking price of €4.7bn. The deal has been the subject of speculation for a year and would bring natural synergies for Petrobras. Galp is a partner with the Brazilian group in exploration and production in offshore fields, including the potentially enormous “pre-salt” discoveries of 2007.
Some of the world’s biggest oil companies reported sharply higher third-quarter results on Thursday amid stronger crude prices and improved refining margins, the FT reports. ExxonMobil, the largest US oil company, beat analyst expectations with a 55% jump in 3Q earnings to $7.4bn from a year ago. Royal Dutch Shell, Europe’s biggest oil group, said 3Q profit rose 18% to $3.5bn. The underlying result, which strips out one-off items, was up an annual 88%. Italy’s Eni, meanwhile, saw a 47.5% rise in underlying 3Q net profit to €1.7bn ($2.36bn). The results are expected to set an industry trend, with analysts forecasting strong earnings from America’s Chevron and France’s Total on Friday. Despite the bumper profits, Lex notes, only one of the three oil giants raised its dividend: Exxon.
Those of uncharitable disposition might sum up BP’s strategic response to the Gulf of Mexico disaster as follows: remove the Brit with the funny accent and install a Yank as CEO. (And, of course, flog off some assets to help pay for the spill).
But is that really enough? A quick look at the BP share price since the well was finally capped suggests not – the share price has gone nowhere as the graphic below shows. Read more
Kazakhstan on Tuesday turned up the heat on a foreign consortium led by UK’s BG Group and Italy’s Eni that is developing one of the country’s biggest oil fields, threatening to deport expatriate workers for allegedly breaching immigration laws. The accusations mark an escalation in a feud at the Karachaganak field, in which the government is seeking a stake. It is the only foreign-led oil project where the state is not involved, the FT said.
Breaking pre-market news on Friday,
- SuperGroup prices IPO at 500p a share, values company at £395m – statement. Read more
Heritage Oil has called off its proposed $6bn deal to merge with Turkey’s Genel Enerji in the wake of its agreement to sell its Ugandan oil fields to Eni, the Italian energy group. The UK group on Sunday sealed a deal with Eni worth $1.35bn in cash for the Ugandan assets, and in doing so ended a much-delayed deal with Genel that it publicly committed to less than a week ago. The Eni deal could be worth as much as $1.5bn if conditions are met. See also FT Alphaville.
Breaking pre-market news on Monday,
- Heritage Oil-Genel merger terminated, Heritage issues letter of intent to sell its Ugandan assets to Eni for $1.3bn – statement. Read more
No one could accuse Neelie Kroes of slipping gently into retirement. In her last months as EU antitrust commissioner Ms Kroes has delivered a slap across the chops to several state-owned banks, and rolled up her sleeves regarding Oracle’s bid for Sun.
Now it is Italian energy conglomerate Eni’s turn to sweat. Read more
Knight Vinke – thy name strikes fear into the hearts of chief executives across the land.
The activist investor, armed with just a minority stake, has in the past jousted with such dragons of corporate waste as Royal Dutch Shell and its British-Dutch dual board structure, as well as mighty HSBC’s disastrous sojourn into the US mortgage market. Read more
Italy’s Eni emerged on Monday as the buyer of First Calgary Petroleums in a move that will consolidate its position as the leading oil and gas producer in Algeria and secure reserves for European markets. Eni is the biggest oil and gas equity producer in Africa overall, sourcing 50% of its production there with operations in Algeria, Libya, Egypt, Nigeria, Congo and Angola. First Calgary’s gas fields are close to Eni’s operations. The bid values First Calgary at C$923m (US$865m), C$3.60 a share, a 52.5% premium over the close on Sept 2, the day before the company said it had been approached. The offer is recommended by the board of the Toronto and Aim-listed oil company.
Kazakhstan agreed a deal with an Eni-led consortium late Sunday night to develop the Kashagan oilfield, the biggest oilfield to have been discovered since the 1960s. The consortium – which includes ExxonMobil of the US, Royal Dutch Shell and Total of France – agreed to pay Kazakhstan $2.5bn-$4.5bn in compensation for the project’s late start and to cede a bigger stake then initially envisaged to the Kazakh national oil company. KazMunaigas will buy equity in the venture to double its stake to 16.8%, equalling the holdings of the consortium’s largest western members. KMG will pay $1.78bn for the shares, about half their fair market value, and will take a bigger role in running the project. Separately, the Wall Street Journal reports that Eni has taken control of more than 77% of UK rival Burren Energy, drawing a line under its £1.74bn takeover bid.
Eni, the Italian multinational, on Monday dropped a revised takeover bid for Burren Energy, sending the shares of the London-based oil company down 15%. The offer to Burren’s management had been increased from an initial £10.50 a share in October to £12 over the weekend, but Burren said it failed to “reflect the fundamental and strategic value of its assets”. Interest has been high in Burren, which owns a stake in M’Boundi, one of Africa’s biggest onshore fields, and oil fields in Turkmenistan, where a new president has raised hopes of better investment terms.
Burren Energy, the London based independent oil company, said on Tuesday it had rejected several bid approaches worth about £1.5bn ($3.5bn), including one from Eni of Italy. The company, which produces oil in Congo, Brazzaville and Turkmenistan, said it had rejected a number of unsolicited approaches at prices of up to £11 a share. Burren’s shares leapt 28 per cent to a record £11.80.
Royal Dutch Shell has been criticised by a group of US pension funds over its activities in Iran, home to the world’s second-largest gas reserves. In a letter seen by the FT, a group of the largest US public pension funds, including Calpers and New York City Pension Funds, have written to Shell emphasising the risks of doing business in Iran. The funds have also written to several other energy companies with activities in Iran, including Total, Eni, Repsol, Gazprom and ONGC.
Italy’s Eni and Enel won an auction on Wednesday for the second lot of assets belonging to the bankrupt Yukos oil group, including a key 20 per cent stake in Gazpromneft, the oil arm of state-controlled Gazprom, and gas producers ArcticGaz and Urengoil. But immediately after the results, Gazprom’s deputy chief Alexander Medvedev said the gas giant was interested in buying the stake in Gazpromneft and at least a 51 per cent stake in gas producers ArcticGaz and Urengoil.