Oil and gas supermajors keep energy sector riding high
Overall the energy industry is struggling with the continued low price of crude, but the oil and gas supermajors remain a positive force in the investment sector. The valuation of publicly traded petroleum firms is down, making those stocks attractive to investors looking to buy into energy. More importantly, despite the price of oil, the supermajors are very liquid with large cash reserves. They’re taking a long-term approach and investing in oil fields, refineries and other petroleum investments.
The supermajors are able to continue developing long-term oil and gas investment projects because the planning process takes oil price volatility into account. Most of the largest firms are keeping capital spending either flat for 2009, or in some cases even increasing investment over 2008.
The late 1990s saw a major merger and acquisition boom in the petroleum sector, and today’s circumstances have a very similar feel. Because the supermajors are flush with cash and many smaller oil and gas firms are in retrenching mode, look for increasing M&A activity over the next several months with larger companies bidding to increase property holdings in major oil and gas plays.
An analyst report from Morningstar outlines other areas of activity for oil and gas supermajors.
From the link:
Aggressive Pursuit of Growth Opportunities
In their pursuit to expand production, major operators find themselves pushing the boundaries further. Exploration success has spawned major new discoveries to drive global oil-production growth, while higher commodity prices have made the discoveries economically viable. Deep-water drilling is now a major focus for majors to secure deposits with heavy investment in Nigeria, Angola, the Gulf of Mexico, and the recent discoveries in Brazil. These investments continue despite the geopolitical risks involved, evident in the frequent troubles Shell and Chevron have had in Nigeria.Another significant tenet of growth for the majors is investment in stranded natural gas resources and LNG infrastructure. LNG resources allow companies to capture the trend toward global natural gas usage and direct resources toward the highest-value markets. Developments in Qatar, Australia, and Nigeria are just an early indication of a continued effort by the major operators to tap natural gas deposits.
Published Wednesday, April 15th, 2009 at 12:35 pm and filed under Industry News.