Investment opportunities in oil majors

Investment case: BP PLC is a key energy products and services company. It explores for oil and natural gas, engages in the downstream and upstream segments for crude oil, petrochemicals, and related products. One of the key issues facing the company is the question of how to regenerate proven reserves as there are virtually no unknown reserves now around the globe. While the Deepwater/Macondo oil spill is still not fully settled, the company has recently come under fire because of its exposure in Russia, where it maintains a joint venture with Rosneft.  

A previously set-up joint venture, TNK-BP, was merged into Rosneft some years ago, and through this transaction BP became a 19% shareholder in Rosneft. Rosneft took control of the bulk of Yukos Oil Co.’s assets when it was pushed into bankruptcy in 2005/2006, and following international arbitration is now being asked to refund international investors in excess of USD 50 billion. Therefore, as a 19% shareholder, BP has a new potential liability of USD 10 billion. 

Investment case: Shell is one of the largest integrated energy companies in the world with operations in the US, Europe and Asia. RDSA is highly engaged in traditional and deep-sea drilling with relatively little exposure to the presently more lucrative shale gas opportunity. Because of that, and since it is lagging due to some restructuring in Europe (disposing of some over-capacity in its refining business), it may continue to lag behind the overall market for some time ahead.  

Investment case: Exxon Mobil Corp. is engaged in the exploration and development of crude oil and natural gas. It also undertakes the transportation and sale of crude and oil products. XOM is relatively well placed to maintain its proven reserves as it acquired the exploration rights for projects like oil sands and LNG in Canada relatively cheaply. These are expected to produce on average about half of the 1 million of barrels of oil equivalent per day (mmboe/d) of the new output XOM is aiming for by 2017. 

Investment case: OAO Gazprom, together with its subsidiaries, is engaged in the exploration, production, transportation, and sale of gas in the Russian Federation and other countries. Its fields are relatively well placed to serve its principal clients in Europe; however, given the sanctions implemented by Europe and the US, the company’s business, despite being based on long-term contracts, should suffer because of lower financing, and therefore reduced investment opportunities.

Investment case: OAO Gazprom, together with its subsidiaries, is engaged in the exploration, production, transportation, and sale of gas in the Russian Federation and other countries. Its fields are relatively well placed to serve its principal clients in Europe; however, given the sanctions implemented by Europe and the US, the company’s business, despite being based on long-term contracts, should suffer because of lower financing, and therefore reduced investment opportunities.

Investment case: OAO Rosneft is engaged in the exploration, production, refining, marketing and distribution of crude oil and petroleum products. Its products, developed in the fields in Siberia and the Volga-Ural region are designated for the retail market in Moscow and the Ukraine.   

A previously set-up joint venture, TNK-BP, was merged into Rosneft some years ago, and through this transaction BP became a 19% shareholder in Rosneft. Rosneft took control of the bulk of Yukos Oil Co.’s assets when it was pushed into bankruptcy in 2005/2006, and following international arbitration is now being asked to refund international investors in excess of USD 50 billion. The execution of this court decision is mostly likely going to take time. To increase the pressure, it’s anticipated that the committee will present the Yukos file in over 158 courts so that Russia officially recognizes its wrongdoing. Ultimately, as suggested by the magnitude of the proceedings, the plaintiffs are not after Rosneft itself, but rather the matter has become a political issue about the State’s [Russia] behavior and how it ignored the rights of international investors. 

Given the sanctions implemented by Europe and the US, the company’s business, despite being based on long-term contracts, should suffer because of lower financing, and therefore reduced investment opportunities.

Investment case:OAO Lukoil is engaged in the exploration, production, refining, marketing and distribution of crude oil and petroleum products. Given the sanctions implemented by Europe and the US, the company’s business, despite being based on long-term contracts, should suffer because of lower financing, and therefore reduced investment opportunities.

Investment case:Petrobras is a Brazilian-based integrated energy company controlled by the Brazilian government. The company focuses on the exploration and production of oil and gas in Brazil’s offshore fields.  The company’s prospects are probably the best among its peer group, yet the company could have some difficulties moving forward in terms of making the right capital allocations. The ongoing interference of the government also obviously negatively influences the short-term outlook.

Investment case:Chevron Corp is a fully-integrated petroleum operator providing a full range of services, including administrative, financial, management and technology support to US and international oil related companies. The company runs a relatively concentrated portfolio of assets which are currently yielding above average returns.  

Investment case: Total is an