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  • 1. BHP Billtion acquires Petrohawk for $12.1B> Premium paid for Natural Gas Liquids (NGL) which is trading at roughly 60% of oil.2. Sunoco to sell loss-making refinery business> Company worth 53% more in pieces, killed by WTI-Brent spread.3. Exxon Mobil and Rosneft> The last frontier: investment needed to develop all the fields involved and associated infrastructure may reach $500 billion.4. Cnooc $1.3B investment in shale oil projects with Chesapeake energy, $2.1B acquisition of Opti Canada> Shale gas and oil sands: "unconventional resources" as growth drivers.
  • * US oil boom as fracking used for oil> Texas' Permian Basin, newer fields like North Dakota's Bakken shale and the Utica shale in Ohio as well as the recent Gulf discoveries opens up a new era spurred by hydrofracking and ultradeep drilling.* WTI, Brent doing funny stuff> WTI futures curve in contango while Brent futures curve in backwardation, pointing to lower spread after recent reversal in inventory trends.* The Low Hanging Fruit to Create Jobs> 1 million potential American jobs in the Oil and Gas industry just needing an expansion of offshore drilling in the Gulf of Mexico; opening up drilling in the Arctic National Wildlife Refuge (ANWR); allowing companies to tap reserves in some sections of the Rocky Mountains; and embracing the vast natural gas deposits in the Marcellus Shale.* Profitable US refineries to feel pressure from narrowing WTI-Brent spread> Weak demand and unsustainable spread as economy slows and Brent "shortage" turns around.

Mc energy 091211_final - copy Mc energy 091211_final - copy Presentation Transcript

  • Energy Mid Cap Summer Update
    XJ Teo
  • Market Performance
  • M&A Activity
    Key drivers:
    midstream assets
    foreign investors
    * Exploration and production has led activity, with 26 deals in the second quarter.
    * Eight of the top 10 deals by value were associated with shale plays.
    * Chinese state-owned oil companies in the market for oil and natural gas acquisitions.
  • Trends and opportunities
    US oil boom as fracking used for oil
    WTI, Brent doing funny stuff
    O&G- The Low Hanging Fruit to Create Jobs
    Profitable US refineries to feel pressure
  • Energy Sector Outlook
    Oil and gas upstream, midstream to outperform on M&A, earnings growth
    Risks: environmentalists
    Refiners to underperform on weak demand, narrowing WTI-Brent spread.