Rant About It

Archive for the ‘South America’ Category

What is ExxonMobile Upto

Posted by rantaboutit on March 11, 2007

Last year ExxonMobil (XOM) produced about 4.2 million barrels of oil/day. Is that enough ? Probably not. To add to their existing production volume, ExxonMobil has decided to invest in more than 20 new projects around the world over the next 3 years. This would bring in an additional 1 million barrels of oil/day to its volumes at peak production.

Capital Spending
Capital spending is projected to be around $20 billion/year through the rest of this decade. Isnt this something to worry about ? $20 billion/year for an extra one million barrels a day in production ? So what does Exxon have to say about that ? Probably nothing…Just that Exxon’s volume will keep growing through the end of the decade.

So where does Exxon plan to invest ?
Exxon has an ownership interest in 40 refineries located in 20 countries. 20 new projects the company plans to invest in will be mature markets such as North America, Australia and the North Sea, as well as growth areas like the Middle East, Russia and West Africa.

Venezuela Story
Exxon has decided to turn over the control of a joint project in Venezuela’s oil-rich Orinoco River region to its partner, Petroleos de Venezuela SA, Venezuela’s government-controlled oil company, now that President Hugo Chavez has ordered the nationalization of all foreign-run oil projects. Exxon is also in talks with Libya to get access to the country’s enormous oil fields.

Qatar Story
In another news ExxonMobil and Qatar Petroleum announced they were abandoning their joint gas-to-liquids project that sought to produce clean diesel from natural gas, instead focusing on providing natural gas to Qatar.

Earnings
Recently Exxon posted the largest annual profit by a U.S. company of $39.5 billion thanks to high energy prices as crude oil topped $78 a barrel in the summer. Stock prices stand at $71.12. The shares have traded in a range of $56.64 to $79 in the past year. However what bothers me is the capital spending.

Rants: Is Exxon a greedy corporation ? I mean they posted the largest annual profit, even though oil prices were down in the 4th quarter. It seems like Exxon would rather squeeze the consumers than take a hit themselves. Is Exxon for you ? With that kind of profit margins the answer is evident. Corporations like Exxon is going to make money year after year, doesnt matter what the oil prices are. Their 30 year chart will support my statement. The best thing to do would be to own Exxon stocks and make some money on their greed. Also the capital spending of $20 billion for the returns is simply outrageous. Is this some early warning for oil depletion ?

Stocks/ETFs to watch: ExxonMobil Corp. (XOM). Competitors: ConocoPhillips (COP), BP plc (BP), Chevron Corp. (CVX), Royal Dutch Shell (RDS.A), Total (TOT). ETFs: SPDR Oil & Gas Exploration & Production ETF (XOP), iShares Dow Jones U.S. Oil & Gas Exploration/Production (IEO) (Source: Seeking Alpha)

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Posted in Energy, Middle East, South America | Leave a Comment »

Foreign Investment in United States

Posted by rantaboutit on March 7, 2007

In 2004, the total foreign direct investment (FDI) in the United States (U.S.) stood at $1.5 trillion, equivalent to $2.7 trillion in today’s market value which represents approximately 10% of the total current market value of all publicly traded companies in U.S.

Geographic Breakdown

  • European companies made up 65-70% of direct investment in the U.S., with United Kingdom (UK) leading the way. 1/3rd of the total investment from Europe came from UK, with $250 billion invested in 2004. UK, Germany, Netherlands and France were the top four investors in U.S. in that particular order.
  • Asian and the Pacific firms had the next highest level of investment in the U.S., at approximately $219 billion in 2004. Japan accounted for 75% of the investment. Chinese & Indian investments in 2004 were minimal. However that is bound to change with a number of acquistions by Chinese and Indian firms.
  • Canada finished in the third spot.
  • Direct investment from Latin American investors totals $86 billion. The biggest presence from South American firms came from Panama due to it financial hub status. Brazil ranked #4 behind Mexico and Venezuela respectively.
  • Investment from Africa and the Middle East were less than $10 billion, only 1-2% of the total foreign investment. Israel was the largest investor from the Middle East, with some $4.1 billion in investments. Kuwait follows with $1.2 billion.
Sectoral Facts
  • 1/3rd of FDI in the U.S. is held in the manufacturing sector.
  • 14% of FDI is invested in the financial services sector.
  • Asian and Pacific FDI holdings in the U.S. manufacturing sector amounted to 12.3% in 2004.
Quick Review on Benefits of Foreign Investment
  • Creates New Jobs: U.S. affiliates of foreign companies employ 5.3 million U.S. workers.
  • Boosts Wages: U.S. affiliates of foreign companies tend to pay higher wages than U.S. companies. Foreign companies support an annual U.S. payroll of $318 billion. Some studies have found that foreign companies have paid wages in the past that were as much as 15% higher on average than wages paid by U.S. companies.
  • Strengthens U.S. Manufacturing: 41% of the jobs related to U.S. affiliates of foreign companies are in the manufacturing sector.
  • Brings in New Research, Technology, and Skills: Affiliates of foreign companies spent $30 billion on research and development in 2003 and $109 billion on plants and equipment.
  • Contributes to Rising U.S. Productivity: The increased investment and competition from FDI leads to higher productivity growth, a key ingredient that increases U.S. competitiveness abroad and raises living standards at home.
  • Contributes to U.S. Tax Revenues: In 2002, foreign affiliates paid $17.8 billion in taxes, which represented 12% of U.S. corporate tax revenues.
  • Increase U.S. Exports: U.S. companies can use multinationals’ distribution networks and knowledge about foreign tastes to export into new markets. Approximately 21% of all U.S. exports come from U.S. subsidiaries of foreign companies.
  • Helps Keep U.S. Interest Rates Low: The inflow of foreign capital also decreases the cost of borrowing money for domestic entrepreneurs, especially in the small- to medium-sized enterprise sector.
Some Major Acquisition In Recent Years
  • Acquisition by Lenovo, the largest personal computer company in China, of IBM’s personal computer and laptop unit.
  • State-owned China National Offshore Oil Corporation’s attempted acquisition of UNOCAL.
  • State-owned Dubai Ports World’s planned acquisition of P&O, the operator of many US ports.

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(Source: US Dept of State, Bureau of Economic Analysis, TickerSense)

Posted in Asia, Middle East, Sector, South America | Leave a Comment »

Hugo Chávez: Nationalize Nationalize

Posted by rantaboutit on January 17, 2007

Venezuelan President Hugo Chávez recently announced he would nationalize power utilities and the country’s biggest telecommunications firm CANTV VNT. After the announcement the share prices of CANTV tanked from trading around $20/share to $12/share. Ouch !!!

He also mentioned that he plans to nationalize the entire energy sector indicating there are more targets for take-over. But he said he would permit foreign firms to hold minority stakes in energy deals. It was not immediately clear whether he intends to nationalize the whole sector or moves against specific projects or companies.

Venezuela will have to judge how closely private firms must be connected to the country’s oilfields, refineries, pipelines, gasoline stations and coal mines to count as targets for nationalization.

Companies at Stake
Huge oil service companies such as Halliburton HAL and Schlumberger SLB operate in Venezuela but Chávez gave no indication whether deals involving such businesses were now in his sights. Chávez also said Venezuela was almost ready to take over the foreign-run oil projects of the Orinoco Belt, which produce about 600,000 barrels per day. Those projects are run by U.S. majors including Chevron, Conoco Phillips and ExxonMobil, as well as European heavyweights such as France’s Total, Norway’s Statoil and Britain’s BP. Chávez confirmed such firms could stay on as minority stakeholders after the state had acquired 51 %.

Another noteworthy company that has operations in Venezuela is Crystallex International Corporation KRY. They are engaged in the production of gold, including exploration, development, mining and processing. The shares also took a plunge with the announcement, but it recovered after the management responded that nothing had changed the status of their mining operation.

Recommendation: For now i would not touch these stocks. They are high risk stocks and will depend on the intention of the Venezuela government.

Posted in Industry News, Political News, South America | Leave a Comment »