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A British firm will control Libyan oil field company October 7, 2011

Posted by mytruthaboutoil in Geostrategy.
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British company Heritage Oil PLC said Tuesday that it has acquired a controlling interest in a Libyan company licensed to provide oil field services including offshore and land-based drilling.

Heritage said it paid $19.5 million for a 51 percent stake in Sahara Oil Services Holdings Ltd. Heritage said the acquisition will allow it to play a significant role in Libya’s oil and gas industry.

Sahara Oil Services was established in 2009 and is based in Benghazi.

Heritage established a base in Benghazi this year and has been dealing with senior members of the National Transitional Council, the company said.

Richard Griffith, analyst at Evolution Securities, said the move “could prove to be a very shrewd investment” by the company.

Heritage Oil shares, however, were down 2.9 percent at 217.8 pence in early trading on the London Stock Exchange.

The company’s CEO Tony Buckingham said they are “well placed to play a significant role in the future oil and gas industry in Libya.”

“This acquisition is consistent with Heritage’s first mover strategy of entering regions with vast hydrocarbon wealth where we have a strategic advantage,” Buckingham said.

Heritage has exploration projects in the Kurdistan Region of Iraq, the Democratic Republic of Congo, Malta, Pakistan, Tanzania and Mali, and a producing property in Russia.


How Eni is facing the Arab revolutions March 16, 2011

Posted by mytruthaboutoil in Oil giants, Oil prices.
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The calling card of Italian oil and gas giant Eni has always been its diplomatic fluency – an ability to negotiate for exploration deals in parts of the world that have been closed off to American oil companies. Lately, however, what had been the greatest strength of Eni (ticker: E) has become a liability.

Eni has fully one-third of its production volumes generated in North Africa, including exposure to both Egypt and Libya. Protests against the Egyptian government which began in late January led to the forced resignation of Egyptian President Hosni Mubarak. And in Libya, a widespread revolt threatens to end the four-decade reign of Col. Moammar Gadhafi.

Libya – once an Italian colony – accounts for 14% of the Eni’s oil production.

It’s small wonder that the market sees risk in Eni shares.

Whereas shares of most major global energy producers have risen on the spike in energy prices in the past two weeks – Chevron (CVX), for instance, is up 8% since protests began in Libya – Eni’s shares have fallen 2%.

”The deteriorating situation in Libya is having two countervailing effects on energy stocks,” Morningstar wrote in a recent note.

First, producers with Libyan exposure are selling off, none worse than Eni. Second, the threat to production has boosted oil prices worldwide, sending Brent crude to over $115 a barrel, and West Texas Intermediate crude – commonly traded in the U.S. – to over $100 in recent trading.

But Eni’s stock selloff isn’t supported by the fundamentals, bulls say.

Morningstar, for instance, is still holding to its fair-value estimates on the company, despite the developments in Libya.

To be sure, the developments in Libya – especially the supply disruption that’s trimmed nearly half the country’s nearly 1.6 million barrels a day of output – are ”very relevant to the market,” said BofA Merrill Lynch Global Research in a recent report.

Libya is the 13th largest oil exporter in the world. It’s also a producer of the kind of light sweet blends that are easily refined into gasoline.

But investors who step up to buy Eni shares now will be getting a cheap stock: Its enterprise value to debt-adjusted cash flow – a common measure for oil stocks – is just 5.6 times for 2011. Compare that with Royal Dutch Shell at six times EV-to-DACF, or Exxon Mobil (XOM) at 8.2 times.

And they’ll be getting paid for the privilege: Eni is throwing off a dividend yield of 5.5% in 2011, easily the highest in the sector. Exxon is paying 2.3%, Chevron just 2.8%.

Fundamentally, Eni has been performing well. When it reported fourth-quarter results last month, the Italian oil giant posted adjusted income that came in 11% above consensus – ahead of its historical performance, which has seen it beat estimates by around 8% since the first quarter of 2005.

Its cash flow from its exploration and production operations, which represent about three-quarters of the company’s business, came in 8% above forecasts.

The company has several new ventures that analysts describe as intriguing – if sometimes seemingly risky. It recently landed a contract to develop Iraq’s Zubair oil field, and agreed to purchase Heritage Oil’s interest in Uganda oil assets.

Of course, investors in Eni shares aren’t trading on intriguing new projects. They are trading on worries about Libya. Those worries, however, have been overstated, at least in terms of Eni’s underperformance.

As has been the threat to Libya’s productions. For one thing, global monetary policy provides something of a cushion for any oil shocks.

Meanwhile, there’s little sign that Libya’s unrest threatens oil supply. While the chaos created by civil unrest has disrupted production briefly – nearly half of Libya’s 1.6 million barrels a day of production have been halted during the protests – the infrastructure itself remains intact. In fact, production at some of Libya’s key facilities in the eastern region of the nation resumed production this week.

While the outcome of Liby’s unrest remains uncertain, the fortunes of Eni appear more predictable.

Could climbing oil prices destroy economical recovery? March 5, 2011

Posted by mytruthaboutoil in Geostrategy, Oil (general), Oil prices.
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Libya today. Tomorrow the whole arabic peninsula? Oil trading analysts are scared of what could become a major problem for a recvoering world economy. With $200 a barrel, ain’t we doomed for a new recession?

Oil has been trading at more than $100 a barrel in the U.S. the past couple of days, largely because of fighting in Libya. That has gasoline prices up, too.

The Energy Information Administration says last week the average price for regular gasoline across the country jumped nearly 19.4 cents to $3.34 a gallon. That was the steepest one-week rise since Hurricane Katrina disrupted oil production in the Gulf of Mexico in 2005.

Now there are concerns higher gas prices could stall a recovering economy. You can count Joe Occhipinti of Portland, Ore., among the concerned.

“I’m getting $20 worth of gas,” Occhipinti said, standing near his white work van at an Arco station. “I can’t afford to fill it up.”

Occhipinti, a cabinetmaker, estimates he’s spending about $100 a week on gasoline. That makes it difficult to keep his costs down and his jobs profitable.

“Lumber — all that other stuff — I can factor in, but this thing happens with Libya and now all of the sudden gas prices are raised up, but I made my bid three months ago,” he said.

Occhipinti also is relearning a lesson from 2008 when gas sold for $4 a gallon: Spending more on gas means you have less to spend elsewhere.

“One of the things that I miss a lot [is] taking my wife out to dinner,” he said.

Instability in the Middle East is largely blamed for the most recent jump in oil prices. But government data show a steady increase since September. That’s because demand for oil has been going up in the U.S. after declines during the recession. Then the fighting in Libya prompted traders to worry about supply.

“If you were to remove some of that oil supply, we’d be in a situation where demand could exceed supply, and that’s just a scary moment in economics,” says Patrick DeHaan, senior petroleum analyst at GasBuddy.com.

Saudis increase their oil production to burst the bubble February 26, 2011

Posted by mytruthaboutoil in Geostrategy, Oil prices.
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SAUDI Arabia, the world’s top oil producer, has raised its production to compensate for the loss of output from Libya during political turmoil in the Middle East.

The International Energy Agency confirmed that Saudi Arabia was stepping in to cover the fact that many platforms producing high-grade oil from Libya have been shut down because of the unrest.

It is believed that the Saudi state oil company had increased its output to more than 9 million barrels per day – a rise of more than 700,000 barrels. The worsening situation in Libya has led to a loss of about 1.2 million barrels out of its 1.6 million barrels of daily output.

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European refineries have been particularly worried about a shortage of high-grade crude, of which Libya is a key supplier.

However, the news of Saudi Arabia’s intervention eased the spot price of oil, which had risen to a two-and-a-half-year high above $US119 at one point on Thursday. Yesterday, Brent crude dropped to $US111 a barrel. But it still closed up 9 per cent for the week, reflecting continuing unrest in the wider oil-producing region.

ICAP Shipping analysts said yesterday: ”In terms of pure volumes, there are ample supplies of crude that can be brought to the market if there is a

prolonged disruption of exports [from Libya]. But with the lion’s share of Libyan crude comprised of light, sweet grades, it is also not entirely clear how global trade flows will be affected.”

International Energy Agency figures show that Saudi Arabia has 3.5 million barrels a day of spare capacity, while the United Arab Emirates could add 330,000 barrels, Qatar could put on 180,000, and Kuwait 230,000. While not all of this would be likely to come on stream at once, Middle East production is still 1.7 million barrels a day lower than it was at the height of the oil price spike in mid-2008.