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BP energy outlook
|BP still faces a difficult situation since the blaster of its oil platform Deepwater Horizon, in the Gulf of Mexico.|
Oil falling price weakens BP
ANNE FEITZ JOURNALIST – ON FEB. 6TH - LES ÉCHOS
In BP present position, falling oil price is not good news. This bearish trend takes place as the oil group still suffers from the blaster of Deepwater Horizon, its oil platform, which made eleven casualties and spilled 4 million of barrels in the Gulf of Mexico in 2010. BP condition is bad to such an extend that recurrent rumors about a possible hostile takeover are flowing again.
Even if BP has recorded a sound financial position with an indebtedness rate hardly reaching 17%, the oil continuously plummeting price carries on weakening the company. Yesterday the group announced a net adjusted profit (exceptional elements and stock variations excluded) of USD12,1 billion, after being compelled to record asset depreciation provisions of USD3,6 billions, because of falling oil prices.
In mid-December, the group already set up a restructuration worth USD1 billion, with thousand of job cuts in the North Sea, Azerbaijan, then Trinidad and Tobago. Moreover, the company has just transferred to Chevron the control of two prominent oil deposits in the Gulf of Mexico, where it made important discoveries a few years ago. That’s another sign announcing problems. In 2014, its stock price lost 15,8%.
These setbacks are combined with the need of selling USD40 billion of assets, after the 2010 oil spill, within a four years’ time. Whereas BP’s market valuation has fallen around USD120 billion, a possible takeover by ExxonMobil (market valuation: USD380 billion) or by Shell (market valuation: USD200 billion) has regularly fed market rumors. Exxon’s move, particularly, seems quite attractive theoretically, as BP has strong positions in the United States, but also in Russia, where the British oil company holds a 19,75% stake in Rosneft, Exxon’s partner.
Nevertheless, even if ExxonMobil indicated to be ready for possible acquisitions on Monday, most analysts don’t expect another mega-mergers era to happen in the sector, as it was the case in the late nineties (for instance, BP-Amoco, Exxon-Mobil, Total-Elf, Chevron-Texaco, and so on). “Oil majors now present a critical size and are not expected to merge to make cost synergies”, says Gaël Rouilloux, associate by AT Kearney. Moreover, Natixis highlights the fact that transnational mergers have not really convinced the markets. “Then the pending judicial proceedings represent significant uncertainties, which are in fact a kind of protection”, says an analyst. Experts bet rather on asset transfers or takeovers of smaller companies, for instance BG or Tullow, but the future may unveil surprises.