Cheap oil comes with hidden risks for airlines 19 Jan 2015 Falling oil prices cut airlines’ fuel bills and will lift earnings this year. European carriers’ share prices are up, but weaker players will find it easier to stay in business so needed consolidation may slow down. Excess capacity could soon put pressure on ticket prices.
Guest view: Hard to spell Colombia without o-i-l 15 Jan 2015 Latam is exposed to varying degrees to the steep drop in the price of crude. Itaú economists expect Brent to rebound to $70 this year, but the uncertain outlook means Colombia has much to lose. Brazil, Argentina and Mexico can’t afford a prolonged slump. Chile is a clear winner.
Freeport-McMoRan has yet to fully settle M&A tab 15 Jan 2015 The U.S. miner’s $138 mln check to resolve a lawsuit over conflicts-riddled deals sets a precedent that gives shareholders more clout. It should turn up the heat on Chairman James Moffett, whose cross-holdings factored in the case. Better governance would enhance the big payout.
Oil price trough could be far away 13 Jan 2015 Petro-economics are painfully simple for producers. Lower prices hardly push up demand. And it will take a price below $30 a barrel before supply falls enough to balance the market. Unless producers can regroup into an effective cartel, their suffering will continue.
Cheap oil lubricates Li Ka-shing’s corporate rejig 12 Jan 2015 Asia’s richest man is shifting a 6 pct stake in Canada’s Husky Energy to his holding company as part of a broader shake-up. The move is vital to keeping Li’s grip on the telco-to-property empire. Though shareholders may object, the falling oil price has worked in their favour.
Petrodollar drought is new risk for markets 6 Jan 2015 Low oil prices are not only a blight for energy producers. They could hurt global financial markets too. After years of surplus petro-earnings gushing into a range of assets, notably fixed income, the flows are at risk of reversing. The sharp equity market fall may be a first sign.
Edward Hadas: The oil price is just plain wrong 5 Jan 2015 At $55 a barrel, crude is still too expensive for the industry to be rational about development. But after the big price drop, some consumers will pay too little for a rational economy. And the market drama wastes resources. The right goals are a weak cartel and high user taxes.
Crude slump will stoke European oil and gas M&A 2 Jan 2015 The sharp drop in the price of Brent might make it harder to get deals done in the short term. But if the downturn persists, financial distress will put some small players in play. Larger, more defensive mergers, designed to create value by sharing costs, are also possible.
Oil glut cracks foundation of U.S. export ban 2 Jan 2015 Cheap gasoline could make lawmakers consider loosening the 40-year-old prohibition on crude exports. Plentiful oil may also force a rethink of ethanol and natural gas policies. Help for domestic producers smarting from low prices could even bring a rare show of Washington unity.
Clean sweep needed to restore trust in Petrobras 24 Dec 2014 The state-controlled oil giant is mired in a corruption scandal and has seen its stock plunge over the past year. Nothing short of firing current management and appointing more independent directors will allow Petrobras, and really Brazil, to restore credibility with global markets.
Saudis give free-marketers dose of their medicine 23 Dec 2014 The Kingdom’s message to the United States, Russia and other higher-cost oil producers is simple. If the market sets the price, it will be far too low for comfort. The Saudis and their allies can probably bear the pain long enough for a more disciplined cartel to emerge.
Even a weaker Islamic State will drag on economy 23 Dec 2014 Cheap oil may now be the biggest worry for Middle Eastern economies, but the struggle against the radical group also has the potential to undermine growth. Even if IS has peaked, its ideology remains a problem, especially for Iraq and Turkey. Iran could end up gaining ground.
BP’s Rosneft stake exposed for what it is 22 Dec 2014 Turmoil in Russia will hurt BP’s accounts via its 20 percent stake in Rosneft, at least on paper. But in cash terms, the impact looks manageable. This is a financial holding which provides BP with limited dividend income. Any strategic value looks very long term at best.
Repsol takes risky $13 bln bet on Talisman 16 Dec 2014 The Spanish oil group is paying a big premium for the Canadian producer. The deal adds diversification after Argentina expropriated its YPF unit but also brings problematic North Sea assets. Repsol is hoping for a Talisman turnaround and an oil price recovery. Both are uncertain.
Coal and currency set glum path for Indonesian GDP 16 Dec 2014 The rupiah has slumped to a 16-year low as capital flees. Outflows could accelerate if falling Indonesian coal prices start mirroring the collapse in oil. A weakening rupiah could hurt foreign-currency borrowers and stoke inflation. That doesn’t augur well for growth in 2015.
Technip’s M&A ambitions need firmer foundations 15 Dec 2014 The French oil services company has dropped plans to buy rival CGG. Relieved shareholders pushed the thwarted bidder’s shares up 7 pct: scepticism about pairing an engineer with a marine surveyor was rife. Technip still wants to diversify. It will have to make a better case.
BG’s $5bln sale bodes well for Aussie M&A pipeline 10 Dec 2014 The British energy group is selling its Australian gas transmission conduit to APA for a higher price than expected. It’s another example of infrastructure assets fetching rich valuations. Amid red-hot investor demand, 2015 promises to be another bumper year for deals down under.
Beware of overhyping the oil dividend 9 Dec 2014 The sharp crude decline is widely seen as good for growth. Yet its main impact is not to boost the world’s total output but to change the distribution of income. Even then, the GDP shift from oil-exporting to oil-importing countries is likely to be substantially less than 1 pct.
Equity market could be next to drop after oil 3 Dec 2014 The huge fall in the oil price will be good for global growth, helping consumers and importing countries. That might seem to justify high equity valuations. But the growth boost will take time and speculative excesses are evident in stocks.
Oil slide threatens Malaysia’s fiscal progress 3 Dec 2014 State energy company Petronas has warned its contribution to the government’s coffers will fall 37 percent next year - and that’s assuming oil at $75 a barrel. The fiscal hit could exceed 2 percent of GDP, undermining budget reforms and further weakening the Malaysian ringgit.