After cutting billions from their budgets and thousands from workforces over the past three years, big oil companies are back on the acquisition trail. Since September, nine large deals have added up to US$20 billion of spending. But these mark sharp divergences in strategies between the super-majors.
Whose view of the future prevails is vital for shareholders and management alike.
The largest deal was the most recent – last Tuesday, ExxonMobil agreed to pay the Bass family up to $6.6bn, mostly in its own shares, for acreage in west Texas’s Permian Basin. Smaller companies have also made a string of acquisitions here, the only shale region where production has kept rising through the price slump, with attention moving from the Midland sub-basin to the less-fancied Delaware farther west.
The US super-major is also still waiting on shareholder approval for its $2.5bn buyout of Interoil, which is developing gas in Papua New Guinea.
After putting the 2010 Macondo disaster largely behind it, BP has been refilling its growth portfolio. The British company paid $2.2bn in stock for a 10 per cent stake in Abu Dhabi’s onshore Adco concession, and acquired exciting deepwater African gasfields, paying $916 million for part of Kosmos Energy’s discoveries in Mauritania and Senegal, and $525m for 10 per cent of Eni’s giant Zohr find in Egypt. Shortly afterwards, Russia’s Rosneft paid a proportional amount for 30 per cent of Zohr.
Total has also been active, buying stakes from Tullow in Uganda and Petrobras in Brazil. This adds to its interesting moves over the past year, notably displacing Maersk Oil from Qatar's largest producing oilfield, Al Shaheen, in June, and signing a preliminary deal for Phase 13 of Iran's super-giant South Pars gasfield. But it also bought an early-stage US liquefied natural gas project in December, and should soon announce another deal in Texas.
Meanwhile, Norway’s Statoil paid heavily indebted Petrobras $2.5bn for Brazil’s Carcara field in December.
By contrast, Chevron and Shell have been quiet on the acquisition front. Chevron already has a large position in the Permian and has been concentrating on developing it. Shell’s $50bn buy of smaller UK rival BG, completed in February, is the only recent mega deal. It has since focused on divestments to pay down debt; as well as downstream assets, it is looking for buyers for its historic onshore fields in Gabon, and some of its Norwegian and Iraqi fields.
This acquisition boom has three significant features. Firstly, companies now have enough confidence in commodity prices to move on medium-sized purchases. Recent metrics imply assumed oil prices around $60 to $65 per barrel, a little above current futures levels. But there is still a desire to conserve cash, with BP and, unusually, ExxonMobil paying in their own shares.
Secondly, some companies are making bold moves, while others are still managing their balance sheets, or are confident enough in their organic growth portfolio.
Thirdly, the American super-majors, like their smaller compatriots, are focused on their backyard. They are betting that drilling shale reservoirs more efficiently can keep outrunning low oil prices. The Europeans, by contrast, are active across the globe, relying on traditional super-major strengths in deepwater, integrated gas developments, frontier areas, and close relations with Middle Eastern governments.
Both approaches have dangers. The European super-majors risk being stranded with high-cost, long lead-time assets in a world of permanently depressed oil prices. The Americans are exposed to intense competition from nimbler small players, and concentration on a single country and single resource type. Carried to extremes, their abilities and asset base outside America may be eroded completely.
After years in which they all did very similar things, the big oil companies now offer very different investment propositions. This year, if the price recovery continues, we can expect each one to double down on its own strategy, providing a real test of their management team’s vision.
Robin Mills is the chief executive of Qamar Energy, and author of The Myth of the Oil Crisis.
business@thenational.ae
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Ziina users can donate to relief efforts in Beirut
Ziina users will be able to use the app to help relief efforts in Beirut, which has been left reeling after an August blast caused an estimated $15 billion in damage and left thousands homeless. Ziina has partnered with the United Nations High Commissioner for Refugees to raise money for the Lebanese capital, co-founder Faisal Toukan says. “As of October 1, the UNHCR has the first certified badge on Ziina and is automatically part of user's top friends' list during this campaign. Users can now donate any amount to the Beirut relief with two clicks. The money raised will go towards rebuilding houses for the families that were impacted by the explosion.”
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Have you been targeted?
Tuan Phan of SimplyFI.org lists five signs you have been mis-sold to:
1. Your pension fund has been placed inside an offshore insurance wrapper with a hefty upfront commission.
2. The money has been transferred into a structured note. These products have high upfront, recurring commission and should never be in a pension account.
3. You have also been sold investment funds with an upfront initial charge of around 5 per cent. ETFs, for example, have no upfront charges.
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A foster couple or family must:
- be Muslim, Emirati and be residing in the UAE
- not be younger than 25 years old
- not have been convicted of offences or crimes involving moral turpitude
- be free of infectious diseases or psychological and mental disorders
- have the ability to support its members and the foster child financially
- undertake to treat and raise the child in a proper manner and take care of his or her health and well-being
- A single, divorced or widowed Muslim Emirati female, residing in the UAE may apply to foster a child if she is at least 30 years old and able to support the child financially
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Skewed figures
In the village of Mevagissey in southwest England the housing stock has doubled in the last century while the number of residents is half the historic high. The village's Neighbourhood Development Plan states that 26% of homes are holiday retreats. Prices are high, averaging around £300,000, £50,000 more than the Cornish average of £250,000. The local average wage is £15,458.
Ms Yang's top tips for parents new to the UAE
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Ground floor banquet hall: 370 square metres to accommodate about 750 people
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Straightforward ways to reduce sugar in your family's diet
- Ban fruit juice and sodas
- Eat a hearty breakfast that contains fats and wholegrains, such as peanut butter on multigrain toast or full-fat plain yoghurt with whole fruit and nuts, to avoid the need for a 10am snack
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Washmen Profile
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The specs
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Fuel economy, combined: 6.5L/100km
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Price: From Dh330,000 (estimate)
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Rating: 3/5
