E.ON sets dismal scene for dirty power spinoff 11 Nov 2015 The German utility has taken a $9 billion charge on the value of power plants and oil and gas exploration business in the third quarter. The charge does not affect actual cashflow but highlights the grim prospects of the units E.ON will spin off by 2016 under the Uniper brand.
IEA history lesson makes $100 oil more likely 10 Nov 2015 The Paris-based International Energy Agency says the world’s reliance on low-cost Middle East oil could return to 1970s levels. By cutting capex, oil majors are bolstering that dependence. Supply squeezes could feed through to higher crude sooner rather than later.
New York coal settlement could be climate canary 9 Nov 2015 Peabody’s deal with state prosecutors over misleading atmospheric risks may inform a similar probe of Exxon. Though the lack of fines is a weak sign, the miner at least must share its assessment of possible climate rules. That could expose the danger of stranded energy assets.
Qatar’s austerity drive will be felt beyond Doha 5 Nov 2015 Despite being among the wealthiest people on the planet, Qataris must cut “wasteful” spending as low energy prices squeeze revenue, their ruler has warned. Years of high-profile investments including VW, Glencore and Barclays mean it may not just be Qataris who feel the pinch.
Oil funds misery may leak into global markets 4 Nov 2015 Equity turbulence led to a loss for Norway’s wealth fund. Energy-dependent funds may in turn get their revenge. With oil prices low, governments are tempted to dip into hoarded wealth. And the funds themselves are becoming more apt to diversify away from financial assets.
Cheap oil no deterrent to Shell-BG deal 3 Nov 2015 The Anglo-Dutch major says its bid for BG Group still works at mid-$60s oil thanks to higher expected synergies. Cheaper oil means BG is probably worth less too, but cost savings will help. The deal needs a recovery in oil prices sooner rather than later for it to work.
Exxon pumps up position in world of cheap oil 30 Oct 2015 The $340 bln energy giant is standing firm despite $50-a-barrel crude, avoiding the kind of writedowns and job cuts that tarnished results at Shell and Chevron. An iron-clad balance sheet and strong cash flow leave Exxon primed to acquire assets as weaker producers falter.
LNG moves from blessing to curse for BG/Shell 30 Oct 2015 BG Group posted a big drop in third-quarter liquefied natural gas EBITDA. Earlier this year LNG, which provides a fifth of BG earnings, looked a definite plus for Shell as it completes a $70 bln takeover. Now it looks like yet another headache for the Anglo-Dutch major.
Energy subsidies will test Saudi’s pain threshold 29 Oct 2015 The kingdom is considering how to claw back the $107 bln it foregoes each year by subsidising the price of domestic energy. Without that support, companies would be uncompetitive and subjects angry. But the impact of low oil prices makes giveaways an unaffordable luxury.
Petrobras should be considered too big to fail 29 Oct 2015 The scandal-plagued Brazilian oil giant is hobbled by rising debt with bond yields pricing in a high degree of distress. A default does not look imminent, however, and the government has means and motive to keep the group afloat. Petrobras is probably a good fixed-income bet.
Conoco shows flexibility in oil’s awful year 29 Oct 2015 The $66 bln crude producer cut capital-spending plans yet again as it reported a $1.1 bln loss in the third quarter. Low oil prices have yet to hit output, though. And CEO Ryan Lance is cutting other costs, too. Investors can take comfort from all that, but should still watch their dividends.
Shell throws kitchen sink at low oil 29 Oct 2015 The Anglo-Dutch major’s quarterly results were scarred by a net charge of $7.9 billion. It’s painful, and the comparison with rival Total unflattering. Shell was able to cover dividends with cashflow in the last year, but the balancing act is only going to get more difficult.
Shell faces tough call on what to cut next 28 Oct 2015 Shelving a high-cost Canadian oil sands project and taking a $2 bln writedown is smart amid lower crude prices. It is getting harder for the group to sift the wheat from the chaff in terms of bankable projects, but if it wants to safeguard its dividend, it has little choice.
Eni’s decoupling from Saipem is for the best 28 Oct 2015 The Italian oil major is selling a stake in the oilfield contractor while subscribing to a 3.5 bln euro rights issue. The complex refinancing will see Eni reduce its debt by a third and put Saipem’s borrowings at arm’s length. Both get much-needed balance-sheet underpinning.
Collapsed Ares deal leaves friends with benefits 27 Oct 2015 Tony Ressler’s buyout shop called off its $2.6 bln merger with Kayne Anderson after disagreements over investing in energy. Even so, Ares is giving Kayne $150 mln to play with. It’s a cozy solution between cronies that contrasts starkly with how some crisis-era LBOs ended.
Glencore ought to lift the lid on its blackest box 27 Oct 2015 Investors seem unconvinced that the commodity trader’s $18 billion of inventory is as good as cash. The value of that hoard may have fallen by a fifth since last disclosed. Boss Ivan Glasenberg could allay concerns with better disclosure, but might put his trading edge at risk.
Self-help underpins BP’s $108 billion value 27 Oct 2015 The UK-based oil major reckons it can fund its dividend organically by 2017 with oil at $60 a barrel. It is slashing operating costs and capital expenditure. It’s a big ask. BP’s forecast-busting third-quarter results provide comfort that it can pull it off.
Scrip dividends are a fool’s gold 23 Oct 2015 Europe’s oil majors paid out more than $30 bln in dividends last year. Some will now offer a share option in lieu of cash and some investors like scrip dividends, but they loosen a key discipline on management. They also suggest companies cannot afford cash dividends.
Beijing backing for UK nuclear comes at high price 22 Oct 2015 China and France’s EDF are nearing an 18 billion pound N-plant deal at Hinkley. Long horizons make the economics hard to judge, but at current prices Britain is on the hook for 1 billion pounds a year in implied subsidies. The price of Chinese support is fiendish complexity.
Repsol’s plan looks good on paper 15 Oct 2015 The Spanish oil firm wants to raise 6.2 bln euros selling assets. It is also slashing costs and spending. The measures will ease balance-sheet strains at $50 oil and reflect welcome realism. But the targets are ambitious and assume half the dividend is paid in shares.