NCB Stockbrokers analyst Peter Hutton said Baillie Gifford’s rejection is significant
because three-quarters of minority of shareholders must approve ENOC’s offer. „Baillie Gifford hold 4.2% of Dragon – one third of the votes necessary to block the approval,“ he said. „[This] will provide a significant catalyst around which other holders may choose to group. I have not yet spoken to any holder who has indicated that they are minded to accept the 455p,“ he added.
Largest Dragon Oil Minority Shareholder Rejects ENOC Bid
The largest minority shareholder in Dublin-listed Dragon Oil PLC (DRS.DB) has rejected a takeover offer from Emirates National Oil Company, saying it materially undervalues the Turkmenistan oil producer, according to a statement published on its Web site Tuesday. “Over the past decade, the company has delivered very strong oil production growth which we believe should be sustained for a number of years to come,“ said the statement from investment management firm Baillie Gifford. „We would encourage management to continue its successful growth strategy and progress its proposed restructuring and application for primary listing on the London Stock Exchange.“ ENOC already owns 51.5% of Dragon Oil and is offering 455 pence a share in cash for the remaining shares. The offer represents a 35% premium to the share price the day before the bid and values the whole company at $2.357 billion. Dragon Oil’s principal asset is the Cheleken contract area, in Turkmenistan’s Caspian Sea section. The contract area, operated and 100% owned by the company, contained proven and probable reserves of 645 million barrels of oil and contingent gas resources of 3.2 trillion cubic feet, as of June 2008.
Warning light is on for OPEC over Iraqi oil deals
The US seeks independence from crude imports, and the greying of Japan’s population points to a steady decline in oil consumption by Asia’s largest economy. But the latest threat to OPEC comes from one of its own. Last week, Iraq, a founding member of the 12-nation group of oil exporters, signed three huge deals with foreign energy firms that in seven years could nearly triple the country’s output capacity to more than 7 million barrels per day (bpd). Several more contracts may be awarded next month and could push Iraq’s crude-pumping capacity to 11.65 million bpd by 2017, according to an analysis by Ruba Husari, the editor of Iraq Oil Forum. That would put Iraqi capacity close to Saudi Arabia’s 12.5 million bpd, just as the OPEC kingpin has completed the biggest oilfield expansion programme in its history. Because of that investment, the Saudis have borne the brunt of OPEC cuts aimed at limiting the stockpiles of unwanted crude that have piled up this year. An estimate by the Middle East Economic Survey this week put the kingdom’s October crude output at 8.2 million bpd, implying more than 4 million bpd of idle capacity. In total, OPEC may have spare capacity equivalent to the combined current output of the UAE, Kuwait and Libya. This is expensive to maintain, and none of it is in Iraq. That country is exempt from OPEC quotas while it rebuilds its shattered economy. The scale of Iraq’s recently unveiled plans, however, may be beyond what fellow OPEC members envisioned when they met in 2003 to debate how to digest the country’s return to the market after UN sanctions were lifted. So far, progress has been halting. But the contracts awarded last week to consortiums of some of the world’s biggest oil companies – BP with China National Petroleum Corporation, ExxonMobil with Shell, and a team of Eni, Occidental Petroleum and Kogas of South Korea – may represent a breakthrough. They are aimed at boosting output from just three oilfields in southern Iraq by 4.8 million bpd, equivalent to adding another Iran or bringing all the idle Saudi capacity back online. Throw in a few more oil discoveries, such as the two big fields that the minnows Heritage Oil and Gulf Keystone Petroleum uncovered in Iraqi Kurdistan this year, and the full potential for expanding Iraq’s oil production could be equivalent to adding another Russia, the world’s top oil producer and exporter. But it is unlikely that the world will thirst for so much additional crude any time soon, given the current energy glut, the mixed signals on economic recovery and initiatives to fight climate change. That presents OPEC with a dilemma: it can accommodate Iraq’s efforts to expand its petroleum sector while other members put oil developments on hold, or it can risk a mutiny if the Gulf exporters with the most to lose move to reimpose a quota on Iraq amid efforts to tighten overall OPEC discipline. The threat of an Iraqi oil flood is taking shape as the group’s West African members, Angola and Nigeria, champ at the bit to raise output following a string of major oil discoveries. Another conundrum for OPEC would be determining an appropriate production target for Iraq. The last time the state had a quota was in 1990, just before it invaded Kuwait. That was set at 3.14 million bpd, or 14.5 per cent of OPEC’s total output. Today, the equivalent slice of OPEC’s pie would be 4.18 million bpd, a dauntingly high volume for the other members to accommodate if oil demand remains weak. Riyadh’s concerns over Tehran’s influence on Iraqi politics could also colour deliberations within OPEC, with the potential to exacerbate regional tensions in the Gulf if Baghdad starts flooding the market with crude. For now, however, Iraq is only the ninth-largest oil producer worldwide, and the prime minister Nouri al Maliki and the oil minister Dr Hussain al Shahristani face huge political and legal hurdles to implementing their oil development plan. Not the least of these is an impending national election, for which plans have been disrupted by violence and a parliamentary dispute over a new election law. Baghdad wants foreign oil firms to ramp up production quickly, but the companies may not be ready to play ball. According to Samuel Ciszuk, the Middle East energy analyst at the consulting firm IHS Global Insight, the group led by BP has negotiated a window of up to three years before it has to invest heavily, giving it time to gauge Iraq’s post-election political and security climate. That also gives OPEC a reprieve as it confronts the imminent threat of a double-dip global recession. Iraq’s output is not an issue that will dominate next month’s meeting in the Angolan capital – at least not publicly.
Iraq’s Kurds to hold on to oil revenues -Barzani
(Reuters) – The president of Iraq’s Kurdish region criticised the central government on Tuesday for its failure to draw up a clear law on sharing oil revenues and said the Kurds would hold on to what they earn for now. Speaking during a visit to the European Parliament, Masoud Barzani said Kurdistan had the right to retain the income from the export of about 100,000 barrels of oil per day, despite a law stating that all Iraq’s oil and gas assets are shared. The Iraqi oil ministry has failed … in their laws and therefore we are not obliged to adhere to the oil laws of Iraq because they have failed in producing a much more transparent situation,“ Barzani told a news conference. „Eight billion dollars has been used by the Iraqi oil ministry for development of oil production but unfortunately the level of production has dropped. Therefore we have no faith in that law that already exists,“ he said through a translator. Iraq’s central government and semi-autonomous Kurdistan have since 2004 engaged in a long-running dispute over Iraq’s vast oil and gas assets and the growing revenue generated by them. The discord threatens to aggravate the political strains that already exist between autonomy-minded Kurds and Shi’ites. According to Iraq’s constitution, all the country’s hydrocarbon assets are shared and there is a formula for distributing the income among regions, with the Kurdish region granted 17 percent of total oil revenues. But Kurdistan, which occupies the top third of Iraq along the borders with Turkey, Iran and Syria, has been quicker to exploit the oil and gas assets that lie in its territory and is reluctant to give up the revenue they generate. Foreign investors including Norway’s DNO International and Toronto-listed Addax Petroleum have helped expand the region’s oil production to 100,000 barrels a day, generating potential income of $2.9 billion a year at current oil prices of nearly $80 a barrel. Barzani said on Tuesday output could increase tenfold to more than 1 million barrels a day by the end of 2011, bringing forward a previous forecast for that level of output in 2012. But the income would not be shared, he said. „Until the disputed areas are resolved, we feel that the share of Kurdistan of 17 percent should go to the account of Kurdistan by itself and not be distributed by the finance (ministry) in Baghdad because often they use that as a weapon against us,“ Barzani said. „We believe it is our right.“ While the Kurdish region moved rapidly after the U.S.-led invasion in 2003 to boost oil output, the central government is catching up, signing a series of development contracts with major international oil companies in recent months. If all the deals in the pipeline come together in the coming years, Iraq is set to triple its total oil output to 7 million barrels per day, making it the world’s largest producer after Russia and Saudi Arabia.
Peak beim Ölangebot aus Nicht-Opec-Ländern erreicht
Aus Sicht der IEA wird die konventionelle Ölförderung in Ländern, die nicht zur Organisation Erdöl exportierender Länder gehören, ihren Höhepunkt bereits nächstes Jahr erreichen. Im 2008-Bericht war noch die Rede von „Mitte nächster Dekade“, also 2015 gewesen. Darunter fallen Länder wie Russland, Mexiko oder Kanada. „Diese neue Einschätzung deckt sich mit den meisten anderen vorliegenden Studien“, sagte Steffen Bukold, Gründer des Hamburger Beratungshauses Energycomment und Herausgeber eines wöchentlichen Ölnewsletters. Den Ölpreis sieht die IEA im Jahr 2020 bei 100 Dollar, im Jahr 2030 bei 115 Dollar. Die Industriestaaten würden so im Jahr 2030 zwei Prozent ihrer Wirtschaftsleistung für Öl- und Gasimporte ausgeben, schreibt die IEA.
Phosphate Pricing Poised For Turnaround
It’s been a fallow year for fertilizers and although demand is likely to remain soft through much of next year, improved phosphate demand represents green shoots in the market. „Among the three major crop nutrients, we believe phosphate has the highest probability for further pricing improvement over the next 12 months,“ said RBC Capital Markets Fai Lee. She said prices likely bottomed in June and have since climbed 18%–a trend that bodes well for Mosaic, the largest integrated phosphate producer. The outlook for potash isn’t as clear. Although orders are expected to improve from 2009 levels, the strength of the eventual turnaround remains clouded by pricing uncertainty. „Recent price declines, lack of demand and high producer inventory levels have reinforced buyers’ perceptions that they could be further rewarded by continuing to hold off on their potash purchases,“ Lee said, adding that the strength of potash’s recovery will also largely demand on whether China resumes its potash imports in 2010. Longer-term, demand for both nutrients remain strong. Global population growth will require more food production, making farmers worldwide more dependent on fertilizers. „According to the International Plant Nutrition Institute, fertilizer accounts for approximately 40% of crop yields,“ Lee said. „In the major agricultural regions of China, India and Brazil, potash and phosphate application rates are below scientifically recommended levels and improved fertilization practices could lead to higher yields.“
Mechel: Russia’s largest coking coal miner, reversed two successive quarterly losses by posting a $219 million net profit in the three months to June as steel production returned to pre-crisis levels.
New York-listed Mechel said on Monday the worst part of 2009 was already behind its mining business after the group, controlled by billionaire Igor Zyuzin, brought in second-quarter revenue 8.6 percent higher than in the preceding three months. Earnings before interest, taxation, depreciation and amortisation (EBITDA) reached $370.0 million, versus a negative $474.3 million in the first quarter of 2009. „For our mining segment, the worst part of 2009 is over and we will witness only improvement of the segment’s performance,“ Mechel’s senior vice-president, Vladimir Polin, said in a statement. Zyuzin said in the same statement Mechel had refinanced its debts with a syndicate of international banks. Net debt stood at $5.1 billion as of June 30 and total debt was $5.9 billion, the company said. Mechel, Russia’s sixth-largest steel maker, had posted a net loss of $690.7 million in the first quarter of 2009.
Gulf Keystone: Drilling update expected this week, share placement of up to USD 80m likely sooner rather than later
Gulf Keystone is likely to announce a drilling update this week while a share placement worth up to USD 80m (GBP 48m) is likely sooner rather than later, said a source familiar with the company. An update on GKP’s Shaikan-1 well in Kurdistan could be expected by the end of this week, said the same source. Market rumours this morning suggest a positive announcement on the well is expected within days. The Shaikan structure has a mean estimate of 2.8m barrels of oil in place, according to an independent assessment disclosed by GKP on 22 October. The AIM-listed Kurdistan focused oil and gas company has this week continued to talk to its advisors about the timing and size of a capital raising to fund its planned drilling activities next year, the source confirmed. It is likely GKP will carry out a share placement sooner rather than later, added the source. A spokesperson for GKP was not immediately available to comment. GKP requires USD 80m to fund its drilling programme through 2010. It is not yet decided whether GKP will raise the majority of this shortly and leave the remainder for next year, added the source. Last month’s GBP 4.5m draw down on its GBP 30m standby equity distribution agreement means the company is fully funded for the remainder of this year. GKP has a market value of GBP 536.8m up from around GBP 50m in early August on the back of positive drilling results. A second source familiar with the company, but not directly involved, expressed surprise that GKP had not already carried out the share placement and said it is possible that both announcements would be made at the same time. However, a third person familiar with the situation downplayed the liklihood of this. GKP last carried out a GBP 6.8m share placement in early August ahead of a positive drilling update a few days later. The problem GKP has is that a lot of the expected good news is already factored into the share price, said the second source who is familiar with UK-listed E&P capital raisings. They will need a very good drilling update to attract fund managers willing to invest, the same source said. The source added that it was likely a future capital raising would succeed but doubted whether it would be over subscribed. The problem they’ve got is that Kurdistan is becoming a more expensive place to do business, said the second source. However, the market is ascribing a higher value to Kurdistan focused explorers rather than producers because of the local political situation, the source added. The Kurdistan Regional Goverment in October announced it had halted all petroleum exports until Baghdad pays the international companies, such as DNO International, that are producing pumping oil in the region. Meanwhile, the first source downplayed the liklihood that GKP would raise any cash in the short term from its intended Algerian asset sale. „I’d be surprised if the asset was sold before Christmas,“ said the source, who added that GKP’s main desire was simply to exit the region and focus on Kurdistan. GKP has a return of USD 1 for every equivalent amount invested in Algeria. It’s hardly a good return for shareholders, said the source.
Oil explorer Afren looks set to benefit from a reform in the Nigerian oil industry
Under the proposed Petroleum Industry Bill, the Nigerian Government will renegotiate old contracts, impose higher costs and repossess acreage yet to explored. Smaller indigenous operators will see benefits – such as First Hydrocarbon Nigeria, in which Afren has a 40% stake. With a strong balance sheet and stable and rising production, Afren is well placed. Buy.
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Alfren Like all oil explorers of its size, Afren is a bet on drilling success
The £660 million company has promising acreage in West Africa, particularly in Ivory Coast and Ghana, where its licence interests are close to the bumper Jubilee discovery of Tullow Oil. But it is also a bet on reform of the Nigerian oil industry. Under the proposed Petroleum Industry Bill, the Nigerian Government would be able to renegotiate old contracts, impose higher costs on oil companies and repossess acreage that has yet to explored. The likely losers are established multinationals, such as Shell, ExxonMobil and Chevron, which, having faced disruption to production from militant attacks in the Niger Delta, would have even less incentive to invest in the region. The potential winners include Nigeria’s state oil company, as well as smaller indigenous operators, including First Hydrocarbon Nigeria, in which Afren has a 40 per cent stake. For now, Afren continues to buy licences on its own account, yesterday acquiring additional acreage offshore Nigeria. But, given the recent strengthening of its balance sheet and stable and rising production (it targets 100,000 barrels a day by late 2012), it has scope for more. Confirmation of Afren’s move from AIM to the full list further enhances its appeal. At 92¼p, buy.
Roca Mines
- Share Structure 15. September 2009
Bannerman
- Annual Report 2009 3. November 2009
