Sunday, March 25, 2007

Oil industry deals The deals are constant in the oil business. Here are a few recent deals and a consideration at the strategies involved. Hercules Offshore buys Todco Hercules Offshore, a US company that specializes in drilling oil and gas, amounted it would acquire Todco. A larger player in the same industry. The deal is for $2.4 billion. Both companies specialize in drilling in the Gulf of Mexico, where their rigs are hired by oil and gas field owners. According to a Wall Street Journal article ("Driller Hercules Offshore to Buy Todco," 3/20/07), "The proposed acquisition points to further consolidation in the drilling-services sector, which has become more appealing as rental rates for offshore drilling have risen with oil companies expanding exploration." One strategy being considered is cutting down the total number of rigs, of which Hercules will have a leading share (Over a third of one type of rig used for shallow-water drilling, for example), so as to increase the daily rates for each rig. Hercules is planning further acquisitions in what has been, up to now, a fragmented market. Petrobras to buy Ipiranga A consortium led by Brazil's Petrobras, a state-controlled petroleum company, announced plans to buy Ipiranga, a Brazilian company involved in refining, gasoline distribution, and petrochemicals. Ipiranga is the #2 gasoline distributor in Brazil with over 4,000 stations, while Petrobras is #1. The bid is for $4 billion. The deal would be one of the biggest ever in Brazil. In the consortium with Petrobras are two large Brazilian firms, Braskem and Ultra. Braskem would get Ipiranga's petrochemical operations. Ultra would gain gasoline distribution in the South of Brazil, while Petrobras will gain stations in the north, center, and east. Petrobras will control over 50% of Brazil's gasoline distribution. Part of the reason for the move was to keep foreign players out of the Brazilian market. Meanwhile, Petrobras has operations in Argentina and may be looking to expand more in Latin America. BP sells off UK refinery BP announced recently it would sell off its Coryton (UK) refinery to Swiss oil refiner and oil distributor Petroplus. The deal is for a value not less than $1.4 billion, plus the value of available petroleum stocks. The Cotyton refinery is the major refinery in the southeast UK, the leadings source of gasoline, heating oil. And jet fuel. According to a Wall Street Journal article ("BP to Sell Coryton Refinery To Petroplus for $1.4 Billion", 1/1/07)) "For BP, the sale is part of its strategy to streamline and concentrate its downstream assets. BP will enter a long-term supply agreement with Petroplus to supply BP's U.K.-based retail and other businesses." BP had sold two major refineries in 2005, one in France and one in the Scotland. Given its recent problems in the US, it would not be surprising if it intended to unload US refinery assets as well. On the other hand, it also recently bought the remaining 33% of a Dutch-based refinery from Chevron for around $900 million. So is BP buying or selling, or just reshuffling its assets? 10:10:20 PM

comment []