BP CEO Believes Shale Revolution Will Pinch Much of the World Albeit Positively

Shale gas revolution will be "very painful for many parts of the world”, with the US as potential giant.

British Petroleum (BP) Plc. (NYSE:BP) CEO, Bob Dudley, believes that the ongoing shale gas revolution in the US will serve to be “very painful” for virtually every oil producer around the world, with the US dubbed as the potential giant that can change the fortunes of crude oil producing and oil importing countries.

The shale industry is currently dominated by the US, which has boomed in recent years, despite the current slowdown, partly because of cheap financing and little government support, which pushed down global oil prices as a result to record lows on the backdrop of increased production.

At this rate, it is possible for the US to sweep past Saudi Arabia as the largest single producer, toying with the demand and the supply of oil. According to Mr. Dudley, he foresees oil prices to remain “lower for longer”, the latest amongst a string of analysts who do not foresee the possibility of $100 plus barrels of oil in the near future – even the OPEC countries know that too. Still, this has not stopped the OPEC in committing not to go for a production cut in any case ahead of a key meeting in Friday.

On the oil and gas industry as a whole, Mr. Dudley believes that there is going to be further consolidation in the oil and gas industry, once executives acknowledge that low oil prices are here to stay. He has ruled out London based oil and gas major as either a predator or a prey, when asked if BP is up for sale or if it prefers to become the predator.

Mr. Dudley also mentioned that winners of the low oil prices are the emerging economies of India, China, Southeast Asia, and much of Europe, most of them are fuel importers. Even the US is also a big winner in this regard, since most of the coastal states are usually net importers than exporters because the US has banned any export of fuel oil in the market.

On the subject of Russia, Mr. Dudley said that the company intends to maintain its presence there, despite the ongoing tensions with the west, and has no plans to sell the 20% stake on the Rosneft, which is majorly owned by the Russian state, led by CEO, Igor Sechin, who has close ties to Russian Prime Minister, Vladimir Putin.

BP stock price ended the day at $41.51, a gain of more than 1.40% from the previous day.

Halliburton Company Rated Halliburton as Overweight With $56 Price Target

The article discusses some of the reasons why JP Morgan is positive about Halliburton Company.

The past one year has been very difficult for the providers of oil services. Their services demand has tumbled expressively following over 50% decline in prices of crude oil in the 2^nd half of last year.

The United States crude oil benchmark, WTI was up 4.54% to $60 per barrel on Saturday, although Brent oil was up 4.76% to $65.56 per barrel. In the scenario of decreasing oil prices, oil companies are unceasingly seeking to decrease their average costs in an attempt to persist the downturn.

In 2014, the second biggest oil company of the world, Haliburton Co. reached Baker Hughes for a merger. Likewise, Royal Dutch Shell lately settled its merger with BG Group Plc.

On Friday, JP Morgan revealed its future perspective for the oil industry. The research firm emphasized that while the companies were surrounded by the problems with in the industry, there are still some positive for the service companies with large market capitalization. JP Morgan indicated that large cap firms are well expanded and have the scale, flexibility and technology to survive the slump.

JP Morgan has rated the Haliburton stock as Overweight. The twelve month stock price target as assigned by the research firm stands at $56.

JP Morgan praises the Haliburton merger with Baker Hughes. During the period of declining oil prices, this will allow the company to broaden its operations and witness economies of scale. As per research firm, Baker Hughes will fill in certain Haliburton product gaps, whereas providing upgrades in remaining.

Because of the huge size of joint entity, Haliburton will be requires to do asset divestment in an attempt to get approval by regulatory body. These divestment plan, as per JP Morgan will attract small firms seeking to move up their tech curves. JP Morgan also suggests market share reshuffling in the oil service sector. If the estimates of crude oil of the company are precise, then there are chances that large equipment abrasion can occur in the industry. The equity firm expects a lot better demand and supply environment by the end of year 2017.

Around 37 analysts covered the stock of Haliburton, out of which 26 rated Buy, 9 gave Hold, and two of them assigned Sell rating g to the stock. The 12 month stock price target forecasted by the analysts is $53.72 which shows 18.3% of return potential. Clarkson RS Platou Securities analyst Turner Holm has the most bullish point of view on the stock with $70 of price target and Buy rating. Whereas Griffin Securities analyst Kevin Simpson with $40 price target and Sell rating has the most bearish view on the stock.

Involvement of Braskem in the Petrobras corruption scandal

Braskem’s name has come up in the corruption probe surrounding Petrobras. Braskem is accused of bribing Petrobras officials to secure construction contracts between 2006 to 2012

Bloomberg reported, Braskem SA –the biggest petrochemical company because of revenues is the new victim of the corruption scandal that has surrounded Petroleo Brasileiro Petrobras.

The petrochemical giant got stuck in the corruption scandal after a witness claimed that the company made under the table payments to Brazilian oil company in order to get contracts. As per the evidence given by Paul Roberto Costa –former executive of the company and confessions by Alberto Youssef who were involved in money laundering Braskem used to make a payment of $5 million between the year 2006 and 2012. These bribes were given to acquire crude oil prices derivatives like naphtha and propylene at lesser price. The evidence was made public on the website of Brazilian Supreme Court earlier in March.

Naphtha is the main element for making petrochemicals, and contains almost 50% of the whole production cost. Moreover, around 70% of naphtha demand for naphtha is provided by Petrobras.

The appeal by Mr. Youssef and Mr. Costa does not allow their lawyers to say any anything related to the bribery and corruption scandal that happened in one of the biggest energy company of the world.

Braskem rejected the claims, its $750 million worth of bonds carrying a 7% coupon rate with a time period of 5 years dropped by 9.6% and traded at $0.97 last week.

After the fragile performance of bonds, the petrochemical giant informed their bond holders via Bloomberg that the company still has around $1.8 billion worth of cash available beside other facility of credit line, which is enough to safeguard its debt commitments for nearly 2 years.

The company disclosed that its growth is linked with dollar, which is strengthening against the home currency.

The entitlement against Braskem shows the penetration level due to the scandal. The interrogation took place has knotted the rig makers, Brazilian builders and officials of government. Moreover, it has also caused 1 million protestors to come out against Dilma Rousseff’s way of handling the issue.

These kinds of claims can seriously hurt the petrochemical company’s stock price, as shareholders might prefer to sell their ownership instead of holding it due to the ongoing investigation. In such situation, shareholders overlook the sufficient financial position of the company.

While talking about the current development Petroleo Brasileiro Petrobras said, “All the payments and contracts between Braskem and Petrobras followed the legal requirements and were approved in a transparent manner in accordance with the governance rules of both companies

Why BP plc. Have been accused by the United States government?

The US government feels that recovery of the Gulf of Mexico oil spill was not as considerable as BP claims, and that the company distorted compensation and spill size data in its favor.

BP plc. was the culprit of the biggest crude oil of the history in Gulf of Mexico in 2010, due to which almost 11 workers lost their lives and it also caused considerable destruction to the nearby environment. Carl Barbier Judge at Federal District considered the UK based company to have reacted with “gross negligence”. Because of that the company spent over $42 billion to gratify claims and cleaning costs.

The oil company previously said that its response was very effective in extenuating the adverse impacts of the shattering oil spill. Although, the United States senses otherwise. According to report by Financial Times that the government of United States alleged BP for misapprehending and mismanaging data, when the company debated that the Gulf had improved a lot faster than expected.

On Monday, the Oil giant company specified that the damages caused by oil spill did not have any long term effects to the bird species and also to the marine. The company also added that majority of the oil has been soaked by microbes or vanished in the water. BP said that no decline has been recorded in the population of birds in the year 2011.

While responding the company’s claim, NRDA criticized the company for jumping to the extensive undeveloped and unsuitable conclusion of the matter and said that BP’s assumptions are imprecise regarding the aftershocks of the disaster.

Financial Times reported: “BP Plc. misinterprets and misapplied data while ignoring published literature that doesn’t support its claims.” The NRDA mentioned that the oil spill’s negative impacts will take a lot of years to diminish. However, BP has paid $1.3 billion to NRDA for the environmental damage and it is still carrying out studies to find out the actual aftermath of the event.

After the research will be completed, an authorized process could start that will force the company to take satisfactory measures caused by the situation. Financial Times quoted the company claim related to the situation that the researches usually shows one side of the matter and overlooked the retrieval that has been done by the company.

The oil Spill took place 5 years ago, however there are still some disputes left the company and Government. Federal court earlier this year projected that almost 3.2 million barrels oil was spill rejecting the US government claim of 4.2 million barrels. The government is looking forward to challenge the decision.

As per the estimation the London oil giant can face a penalty of $13.7 billion depending on the size of the spill calculated by Judge Barbier.