Exxon, Cali, India
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“It is often said that a wrong decision taken at the right time is better than a right decision taken at the wrong time” - Pearl Zhu
EXXON ASSET SALES.
On Tuesday, we wrote:
“in the case of a company like Exxon, where there are massive, attractive development opportunities (Guyana), this strategy [selling assets] makes sense”
Funny timing.
Reuters reports that Exxon is upping its asset divestment plan, from $15Bn to $25Bn.
The proceeds, as expected, will be used to fund mega-project developments, like Guyana, Permian Shale, etc.
Assets on the chopping block include:
U.K. North Sea (Offshore Oil+Gas)
Germany (Onshore, mostly Gas)
Romania (Offshore Gas)
Exxon’s European operations have often been 50/50 JVs with Shell.
Breaking up those JVs is easier when (a) both parties are selling, or (b) one buys out the other.
So… we'll be watching Shell’s next few moves…
CALI KILLS DRILLING.
Gavin Newsom.
Governor of California
Current holder of the title “Governor Good-Hair” (last held by Rick Perry)
Chief Operator of the California Energy Policy Guillotine
Gavin is a colorful character.
He likes to mix it up.
Some weeks, it’s wildfires sparked by derelict utility infrastructure.
Others, it’s planned blackouts.
This week, Governor Good-Hair decided to decapitate the California E&Ps.
After effectively halting fracking permits in July, Newsom banned steam-flooding on Wednesday.
California Resources Corp (CRC) & Berry, 2x California E&Ps that use the technique, got crushed.
CRC traded down >30% on the news, and its bonds dropped to 25 cents on the dollar.
Berry’s shares dropped ~25%.
***Note - CRC, in an email to the press, claims its methods are exempt***
In any case, history is clear - California likes to bring energy companies to the guillotine.
Enter at the risk of getting your head chopped off -
RELIANCE.
Earlier this week, the Indian conglomerate Reliance Industries, surpassed BP (~$135Bn) in market cap, touching a valuation of $138Bn.
Bloomberg ran an article, describing it as the world’s 6th largest Oil Company.
Which was a stretch…
Energy activities aside, Reliance does everything from retail to telecom.
However, there is a point to be made.
If India does finally boom (we’ve been waiting for a Chinese-style boom for a decade now), then Reliance is the best positioned firm to take advantage of the upward trending commodity cycle that would accompany Indian growth.
During the last commodity super-cycle of the ‘00s, Chinese natural resources firms boomed.
On the back of the blistering domestic Chinese economy, CNPC, PetroChina, & Sinopec went from being regional players to global powerhouses.
Don’t be surprised if Reliance picks up assets from the Majors over the next couple years.
Just don’t hold your breathe - India’s already 10yrs late -
OTHER NEWS.
The Wilks Brothers’s E&P bets have soured
The US approves 4x LNG Export Projects in 1x day
That’s it for this week - we’ll be back on Tuesday -