On Energy Source:
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The Rio Tinto rumour mill is buzzing with the idea that BHP Billiton could yet again be interested in buying part or all of Rio Tinto, following a Sunday Telegraph report and a Friday note from respected mining analyst Michael Rawlinson.
Revived speculation about a BHP-Rio megamerger follows from a wider controversy about Rio’s agreed deal with Aluminum Corp of China (Chinalco), which would see Rio selling stakes in top-tier mines and smelters to Chinalco, plus an exclusive chunk of convertible bonds, in return for almost $20bn that Rio would use to pay off crippling debts. Some powerful UK and Australian investors remain opposed to the deal, and Australian regulators are making signs that they might be more opposed to China’s creeping influence in the Australian resources sector than first thought. Read more
Thomas Friedman this week calls for a Dow Jones index that reflects Mother Nature’s wellbeing (or lack thereof). What he might in fact want to do is take a leaf from Gretchen Morgenson, who wishes more shareholders would follow the lead of those willing to smoke out Chesapeake Energy’s overpaid chief executive.
We all know Mother Nature is feeling poorly, so perhaps what she needs more urgently than Mr Friedman’s Dow index is more active investors. Come to think of it, what investors of companies listed on the Dow need is an index that better highlights – and shames into submission – grossly overpaid chief executives and the board members that allow them to get that way.
On Energy Source:
2008 profits for Sinopec, China’s biggest refiner, were down 47 per cent at about $4.4bn, but beat analysts’ expectations. The outlook for this year looks better, but depends on government decisions on regulated fuel prices (Bloomberg)
OMV, Austria’s oil and gas company, has at last accepted defeat in its long battle to win control of Mol of Hungary, selling its 21 per cent stake for about €1.4bn. The really striking feature of the deal is the price that Surgutneftegaz, the Russian buyer, is paying: over Ft19,200 per share, almost double the market price of about Ft9,900 last Friday. OMV had appeared to be sitting on a substantial loss, but it has emerged from its Hungarian adventure roughly breaking even.
So why is the minority stake stake in Mol worth so much? Read more
The long term inexorable march toward poorer quality crudes will be interrupted by better grades coming from expansions in Saudi Arabia and West Africa, but won’t save refiners the cost and bother of retooling their equipment to deal with the ever sludgier stuff coming from newer fields (and our ongoing thirst for petrol and diesel - the lighter half of the barrel). It’s a tough conclusion by Sanford Bernstein and will affect refiners already bracing themselves for the changes they forced on them by Washington’s green revolution. Best positioned are the majors and sophisticated refiners such as Valero. US refiners, who have been more fastidious about upgrading their kit, have the edge over their European counterparts. The Indians, however, are a step ahead with the giant Jamnagar complex.