Energy
Big Oil Rules! Strong Earnings, Takeover Chatter, Dividends, Asset Sales (XOM, OXY, VLO, CVX, BP)
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Perhaps the most intriguing item in today’s news is that India’s Reliance Industries Ltd. is considering a takeover bid for Valero. Bloomberg reports that the Indian giant could make an all-cash offer of $48/share for the US’s largest refiner. That is more than a 90% premium to Valero’s closing price yesterday, and a total of more than $27 billion. Reliance, which has a market cap of about $1.3 trillion, could easily afford the deal, but getting US regulators to approve the sale of the country’s largest refiner to a foreign buyer will be a non-trivial exercise.
Chevron has announced another rise in its quarterly dividend. The company, which reports earnings tomorrow, has bumped its payout to $0.81, or $3.24 annually, up from $3.12. Chevron is expected to post EPS of $3.44 on revenue of $67.93 billion tomorrow, even though the company issued an interim report a couple of weeks about saying that earnings would be about flat with EPS of $3.57 in the second quarter.
Finally, when BP announced earnings earlier this week, the company said it would expand its asset sales to a total of $45 billion, a sharp increase to its previous commitment to sell some $30 billion in assets to fund its liabilities for the Macondo well disaster last year. The company has also received approval from US regulators for a new project involving four wells in the Gulf of Mexico and yesterday received a permit to beginning drilling a new ultra-deepwater well. BP’s Gulf of Mexico production fell to 250,000 barrels/day last quarter, from a pre-explosion total of 440,000 barrels/day. Getting permits to drill new holes is critical to the company’s future because it gets about 10% of its total production from its Gulf of Mexico wells.
In the first hour of trading this morning, Exxon Mobil shares are up less than 0.5%, at $81.42, in a 52-week range of $65.09-$88.23. Occidental’s shares are up more than 6.8%, at $93.14, in a 52-week range of $66.36-$117.89. Valero’s shares are up nearly 3.5%, at $26.02, in a 52-week range of $16.40-$31.12. Chevron’s shares are up more than 1.5%, at $108.45, in a 52-week range of $80.41-$109.94. BP’s shares are up about 0.6%, at $44.93, in a 52-week range of $33.62-$49.50.
Paul Ausick
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