http://oilprice.com/Energy/Crude-Oil/Goldman-Sachs-Busts-Myth-Of-Impending-Russian-Oil-Collapse.html Yesterday's Russian downgrade pulled yet another raft of "smartest people in the room" to tell investors how screwed Russia is by low oil prices (and yet the US Shale industry is fine and will manage through this). However, Goldman Sachs prefers facts in its analysis of the Russian oil sector and concludes, investor concerns about the health of Russia's oil industry should remain more myth than reality. Two factors contribute to the low sensitivity of Russian upstream cash flow to oil prices. The first is upstream industry taxation: the per-barrel tax rate decreases as oil prices fall, shifting most of the upside/downside due to changes in the oil price from the oil producers to the state. The second factor is a ruble-denominated cost structure. Russian oil producers' opex and capex mainly consist of ruble-denominated contracts, as the services industry is localized. These factors offset the negative impact of oil price declines on upstream earnings. Effectively, at US$110/bbl oil and 33 RUB/USD, Russian upstream free cash flow (FCF) for the companies we cover is roughly the same as under US$60 oil and 60 RUB/USD. Hence, we do not expect to see a slowdown in upstream activity. Moreover, the Russian government is likely to incentivize output growth in order to mitigate the impact of lower oil prices on budget revenues. Given that Russia has one of the lowest cash costs of production in the world, it would make sense in the current oil price environment for Russia to maintain its market share. We therefore expect production to reach 532 million tons in 2015 from 527 in 2014. In most countries, lower oil prices negatively affect the upstream industry while positively impacting refining due to feedstock cost reduction. In Russia, however, the tax system is designed in such a way that changes in oil prices have no major upstream implications but strongly influence refining profits. Even if the operating environment turns more negative- assuming RUB/USD of 70, a 20% decline in capex volume, and no dividend payments - the companies' strong starting positions would allow them to navigate 2015 at an oil price as low as $40/bbl (below our commodity research team's forecasts). In sum, provided that the ruble continues to adjust to the shock of weaker oil prices, investor concerns about the health of Russia's oil industry should remain more myth than reality.
16 Mar '15
Financial Times 23/02/2015
http://blogs.ft.com/beyond-brics/2015/02/23/guest-post-russia-ripe-for-ma-in-oil-and-gas/ On February 2, the Financial Times reported that ExxonMobil is considering acquisitions to ‘strengthen its long-term production potential’. Exxon’s Vice President said that the current business climate “presents a number of really good opportunities” and investment analysts expected the company to take “advantage of depressed oil and gas valuations”. And with falling oil prices, it’s likely that other buyers and sellers across the world will be looking to do the same and start the hunt for potential acquisitions. Could some of these acquisitions take place in Russia? Yes, I think so – in spite of the international sanctions and, in a way, thanks to them. The international sanctions imposed by the US and the EU in 2014 negatively affect the ability of Russian companies to develop shell and Arctic shelf fields, as Russia has neither technology nor experience in these areas. However, these projects have been pushed by large vertically integrated companies (known in Russia as ‘VINCs’), such as state-controlled Rosneft. At the same time, Russia has a large number of small conventional fields which have so far escaped the attention of domestic giants. Some of them are not being developed as private licence holders do not have the resources; others are being developed by small local producers with some success. According to Elena Korzun, head of Russian Association of Independent Oil and Gas Producers, the independents’ share in total oil and gas production in the country rose from 2.7 percent in 2013 to 3.7 per cent in 2014. Multinationals may not be the only ones looking to capitalise on these opportunities, and competition from Russian buyers is highly possible. To quote Igor Sechin, the Rosneft CEO, speaking at the International Petroleum Week in London in February: “Small and medium oil companies will suffer more than others… Many of them will experience financial problems and may become takeover targets”. The window of opportunity is open but it might not be for long. If the peace process in eastern Ukraine holds and the EU revisits sectoral sanctions which are due to expire on 31 July, Russian banks will be back in the international debt market by the end of the year. The lifting of the sanctions will relieve a great deal of pressure on the Russian hydrocarbons sector, and cheap assets might begin regaining their value. So, if you are considering taking advantage of the current market in Russia, now is the time to go hunting
4 Mar '15
Reserves update this month. Will be interesting to see what happens to 2P reserves, two years in the waiting.
16 Feb '15
RE: gambier, what do you think?
Decent volumes on the buy side and all automatic trades - somebody is willing to clear the book upto a certain price. As a single event it still does not imply anything significant, if it continues this week and the price starts to move towards two hundred, then maybe we can think something is happening. I have been thinking maybe the recent movements are related to the ceasefire and today's annocuncement: '(Reuters) - The Moscow Arbitration Court has awarded the Sistema business conglomerate damages of 70.7 billion roubles ($1.13 billion) for losses related to the seizure of the Bashneft oil company, RIA news agency reported on Monday. The court ruled that a firm called Ural-Invest, which sold a stake of over 70 percent in Bashneft to Sistema in 2009, should pay the damages. Last year, Sistema had to transfer its stake in Bashneft to the state to comply with a court ruling that said the privatisation of Bashneft in the early 2000s was unlawful.' This maybe is risk off with regards to Putin nationalisation of private oil companies. Maybe it is that a bid is coming, I'm guessing it is not.
16 Feb '15
gambier, what do you think?
Big volumes today and buys of over 2.5mil??Maybe at last things are moving??
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