Exxon performance, spending cuts rattle investors’ nerves

Originally posted on Fortune Finance: Hedge Funds, Markets, Mergers & Acquisitions, Private Equity, Venture Capital, Wall Street, Washington:

In a year in which oil approached historic highs, Exxon failed to deliver as expected. And its recent decision to cut spending has sent shivers down investors’ spines.

[cnnmoney-byline src="By Cyrus Sanati"]

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FORTUNE — If it wasn’t clear before, it certainly is now: Big Oil has got some big problems.

In a year in which oil remained near historic highs at around $100 a barrel, ExxonMobil (XOM), the all-around best-in-class energy company, said on Wednesday at its analyst meeting in New York that its return on capital employed (ROCE) for 2013 was 17%. Let me repeat that — 17%. This is bad, people.

Admittedly, achieving a 17% ROCE is something many companies would kill for — even other energy companies. But this is ExxonMobil. No other energy company is as skilled or as adept at maneuvering the political and economic quagmire that comes with drilling for fossil fuels…

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PDAC 2014: Digital investment poised to transform mining sector, survey shows

Originally posted on Financial Post | Business:

Miners are starting to spend big bucks on digital technology that could boost productivity and transform the old ways of doing business in this industry, according to a new survey from Accenture.

Mining is different from many businesses in that a lot of the core exploration, mining and processing technologies have not changed in literally decades. And yet the trade show at the PDAC conference is full of various entrepreneurs showing off devices and processes that they claim are revolutionizing how quickly and efficiently things can be done, whether it be analyzing drill results or locating employees underground.

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Digital technology is now being implemented at a rapid rate. In the survey of 40 medium and large mining companies, one quarter of executives said their digital investment has doubled or more over the last three years. Nearly all of them said they will boost their digital investment over the…

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Mining mergers and acquisitions expected to pick up

Originally posted on Informa Insights:

John Gravelle

John Gravelle

Following a torrid year for mergers and acquisitions (M&A) in the mining industry, deal activity in the sector is predicted to rise once again, according to a new report from PricewaterhouseCoopers (PwC).

PwC expects mining activity to recover this year as developed economies stabilise and mining companies take a more strategic approach to adding assets.

John Gravelle, global mining leader at PwC, said that the historically low level of M&A deals last year meant mining companies have had to turn to new strategies to survive.

“Many companies looking to buy are eyeing similar commodities in familiar regions where they are already operating,” he explained.

“While overall, the mining sector has experienced short-term pain for what could be longer-term gain. To once again create shareholder value and extend mine life, miners will need to continue to acquire assets.”

In its report, the consulting group highlighted some of the…

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Miners rebound as gold prices ride hot streak

Originally posted on Financial Post | Business:

The price of gold and the stocks of the companies that mine it have been on a hot streak this year.

Bullion has rallied about 10% since the start of the year to US$1,322.90 an ounce, a nice rebound following a crushing 2013 that saw prices fall 28% — their first decline in 12 years and the worst loss since the 1980s. The S&P/TSX Global Gold Index, which holds 37 gold exploration and mining names, has also joined in on the party, climbing 26.8% since Dec. 31.

The performance of gold stocks is notable because they are posting better returns than the precious metal itself for one of the few times in the past decade.

Gold stocks have underperformed bullion for seven straight years, mainly due to rising costs, lower margins and the introduction of new exchange-traded products that have made investing in physical gold easier.

There’s no doubt gold…

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BHP might move first, but Rio Tinto’s buyback likely bigger

Originally posted on Financial Post | Business:

Both BHP Billiton and Rio Tinto Group should begin returning excess capital to shareholders during the next year, but BHP will likely move first, says Fraser Jamieson, an analyst at J.P. Morgan Cazenove in London

He thinks BHP could make an announcement during its fiscal 2014 results in August, but he thinks Rio Tinto offers a more compelling capital returns story even though it might wait to make a similar announcement until it reports in February 2015.

Mr. Jamieson estimates the miner could support a US$4.75-billion share buyback program in fiscal 2015, while keeping net debt near its US$15-billion target. That would produce EPS accretion somewhere between 3.8% and 4.1%.

The analyst further noted BHP could support share repurchases of around US$3-billion, implying 1.3% to 1.4% in earnings accretion.

“Both management teams have emphasized they are in listening mode around the preferred mechanism for any returns,” Mr. Jamieson told clients, noting…

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Mesaieed Petrochemical Surges 400% on First Trading Day in Qatar

A staggering trading day for Qatar’s Mesaieed Petrochemicals points toward serious expectations for the company.  The trading price rose 400% in a single day, immediately after it had completed Qatar’s largest IPO in five years.

Mesaieed Petrochemical Holding rose more than five fold on its first day of trading after completing the country’s biggest initial public offering in five years.

The shares closed at 55 riyals after opening at 10 riyals on the Qatar Exchange. The stock rose as high as 73.9 riyals during the day.

State-run energy company Qatar Petroleum raised 3.2 billion riyals ($880 million) by selling a 26 percent stake in Mesaieed to Qatari nationals last month. The share sale is the nation’s biggest since Vodafone Qatar raised $1 billion in 2009, and the largest first-day gain for an IPO in the Middle East and Africa since 2009 when Saudi Arabia’s Ace Arabia Cooperative Insurance Co. (ACE) sold shares, according to data compiled by Bloomberg.

“The IPO was at 10 riyals which is a significant discount to what this company is worth,” Bobby Sarkar, head of research at Qatar National Bank Financial Services, said in a phone interview. “This is a solid petrochemical, QP-backed company.”

Mesaieed was formed in September and owns Qatar Chemical Co., Qatar Chemical Co. II and Qatar Vinyl. The government valued the company at 12 billion riyals for the IPO, below an initial valuation of 16.7 billion riyals, Finance Minister Ali Al Emadi said last month. Foreigners are allowed to trade in the company’s shares once they have been listed.

Mesaieed is the first company to be listed on the country’s bourse since MSCI Inc. (MSCI) agreed to upgrade Qatar to emerging-market status in June. It raises to 43 the number of companies traded on the Qatar Exchange, Chief Executive Officer Rashid al Mansoori said in an interview in Doha today.

By Robert Tuttle of Bloomberg

The full article is visible via the link below – Pankaj Oswal

http://www.bloomberg.com/news/2014-02-26/mesaieed-petrochemical-surges-400-on-first-trading-day-in-qatar.html

Impasse deepens over B.C. LNG tax as Shell warns 7% levy not globally competitive

Originally posted on Financial Post | Business:

Royal Dutch Shell Plc is leading an industry pushback against the scope of British Columbia’s proposed tax on liquefied natural gas exports, extending a standoff over fiscal terms for the upstart sector.

The B.C government this week announced a two-tier tax structure for the industry as part of the provincial budget. Under the scheme, profits from LNG plants will be taxed at an initial rate of 1.2%, with rates climbing as high as 7% once companies recover capital costs associated with building the multibillion-dollar export terminals.

The B.C. government said the rates are competitive with rival export jurisdictions in Australia and five U.S. states, including Alaska, Texas and Louisiana.

We’ve been clear that the rate needs to be globally competitive if B.C. is to build an LNG industry

But Shell on Wednesday questioned that assessment, deepening an impasse that has delayed final investment decisions and threatened to snuff out a…

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