Bartle Doo Article Archives

By Sara Murphy, The Motley Fool

Shell Wins; the World Loses

April 17, 2013 Bartle Doo Leave a comment

Filed under: Investing

The Supreme Court sided with Royal Dutch Shell today in the landmark Kiobel v. Royal Dutch Petroleum case dealing with alleged corporate human rights abuses in the Niger River Delta. This decision constitutes a disgraceful victory for corporate impunity. Shell shareholders would be shortsighted to celebrate, and responsible investors have the power to do what the judiciary won’t.

Dismissed, but not innocent
To be clear, the Supreme Court did not find Shell innocent of the accusations against it. Those accusations are for crimes against humanity, including torture and extrajudicial executions. Rather, the court found that the case could not be resolved in U.S. courts under a federal law called the Alien Tort Statute (ATS), because Shell is a foreign company that allegedly committed acts against foreign victims on foreign soil. Never mind that Shell is listed on the New York Stock Exchange and earned almost 20% of its 2012 revenue in the United States.

In the past, activists have used the ATS as an accountability tool for the worst corporate human rights abuses. Indeed, the groundbreaking 1997 Doe v. Unocal case — which yielded compensation for victims of horrific abuse by security forces while working on a natural gas pipeline in military-ruled Burma — was brought under the ATS. Today’s result seriously curtails the future applicability of the ATS.

If your interest as an investor is purely in the bottom line, you might think this is a very good development. That kind of thinking could get you into trouble, though. I asked Bennett Freeman, senior vice president of sustainability research and policy at Calvert Investments, for his reaction to today’s judgment.

“What’s crystal clear here,” Freeman said, “is that this decision is going to make it very difficult, if not impossible, to use the [Alien Tort] Statute for this purpose in the future. This was a very significant ruling.” But Freeman emphasizes that the court’s decision should in no way be interpreted as undermining a consensus that the international community long ago established: Business has a responsibility to respect human rights. Indeed, this responsibility is embodied in the United Nations’ Guiding Principles on Business and Human Rights (link opens PDF).

A glimmer of good news
For as troubling as today’s decision is, it’s important to remember that Shell lost on some key points. The company had shamelessly argued that corporations are immune from the ATS, and the court didn’t buy that. It’s interesting how corporations want to enjoy the same rights as people when it comes to things like free speech, but none of the responsibilities of people when it comes to criminal liability.

Furthermore, the court’s finding does not undermine the use of the ATS in cases of human rights abuses. It just requires a stronger connection to the United States. That means that other ATS cases currently working their way through the legal system, such as Earth Rights International’s case against Chiquita for

From: http://www.dailyfinance.com/2013/04/17/shell-wins-the-world-loses/

1 U.S. State That Big Oil Is Scared Of

April 14, 2013 Bartle Doo Leave a comment

From: http://www.dailyfinance.com/2013/04/14/big-oil-is-wary-about-operating-in-this-state/

Filed under: Investing

Despite calling a proposed tax overhaul in the state a “game changer,” the oil industry’s top players in Alaska remain nervous. Call it once burned and twice shy, but the industry is holding back on committing more capital to the state’s declining oil fields. The concern here is twofold: First is nervousness that this overhaul will fail, and even more concerning is that federal regulations are too unclear at the moment.

This overall regulatory and tax uncertainty has caused ConocoPhillips to put its 2014 Chukchi Sea project plans on hold. The project was just one of its many worldwide exploration and appraisal projects that the company expects to drive future production growth. However, the timing of the decision is odd, considering the company has said that it would commit more capital to the state if the tax overhaul goes through.

Conoco’s current plan is to invest $2.5 billion in Alaska as part of its five-year development plan. That spending, however, isn’t enough to offset its production declines in the state, though it would hold those declines to just 3% per year through 2017. It has said that it could spend additional development capital under improved fiscal terms. However, until the tax overhaul is passed, the company won’t pursue additional development.

The overhaul has the potential to cut $1 billion in taxes for the oil companies. That would provide a nice savings, as these companies provided the state with $8.9 billion in tax revenue last year. Representatives from ConocoPhillips, BP and ExxonMobil all spoke before the Alaskan House Finance Committee earlier this week to make sure their voices were heard.

All three view the proposed structure as being much more conducive to increasing production, because the current structure is progressive, which limits the incentive for increasing production when prices are high. The structure starts out at as a base tax of 25% on profits when oil prices are $30 a barrel, and then it increases 0.4% for every $1 per barrel that prices rise over $30. That has yielded tax rates between 40% and 80% of profits for some companies. The new structure would be a simple flax tax rate, with a reduced rate for areas of new production.

While there’s a general nervousness that the overhaul won’t pass, the real issue for Conoco’s putting Chukchi on hold lies with the federal government. According to Conoco, a recent Department of the Interior report calling for the industry to work with it to develop an Arctic-specific model for offshore oil and gas drilling in Alaska adds too much uncertainty. Because of this unknown, it’s simply not worth the risk of committing capital at this point.

Overall, drilling in the Arctic is a risky venture. Royal Dutch Shell has already pulled its 2013 program after the company experienced a number of problems. The company also was never able to finish its work on a spill barge as part of its spill

Peace in the South China Sea Is Vital for the Oil and Gas Industry

April 14, 2013 Bartle Doo Leave a comment

From: http://www.dailyfinance.com/2013/04/14/peace-in-the-south-china-sea-is-vital-for-the-oil/

Filed under: Investing

Regional geopolitical disputes are increasingly becoming international economic issues thanks to our global economy. At first glance, rising tensions in the South China Sea would appear to be no more than a fishing dispute. However, some see this situation as one surrounding supposed gas and oil reserves under the sea.

That, however, is in conflict with some reports that state that there are negligible reserves to be found in the disputed areas. Even if the potential energy reserves are what’s behind the current squabble, it probably won’t be something that’s solved anytime soon. That could mean future flare-ups that affect the energy industry beyond the resources that may or may not be under the sea. So as China, Vietnam, and others debate the territorial rights of two certain islands in the region, let’s look at how future incidents might have the potential to affect the global energy trade.

According to the Energy Information Administration, 15 million barrels of oil per day, or a third of all seaborne oil, traveled through this region in 2011. That puts it nearly on par with the higher-profile Strait of Hormuz, which is responsible for more than 17 million barrels per day. If this situation here were to boil over, it could have a significant impact on the flow of oil through the sea, given China‘s military might.

As important as the region is for the oil trade, it’s also responsible for more than half of the global liquefied natural gas, or LNG, trade. With growing demand for natural gas in Asia, this dispute could become a big problem for LNG exports from places such as Africa and australia, while putting exports from North America at a competitive advantage. Take a look at the following map, and I’ll explain what I mean.

Source: Energy Information Administration.

In 2011, Africa shipped 0.3 trillion cubic feet, or Tcf, per day, while while australia shipped 0.9 Tcf. However, those numbers are probably headed much higher in the future. Energy companies are spending billions to develop new LNG export facilities designed to tap these highly profitable Asian markets.

For example, Anadarko Petroleum recently joined forces with Eni on a major LNG export facility in Mozambique. The project is designed to support Anadarko’s major natural gas find off the coast. The partners expect the project to begin exporting gas by 2018. While that’s a long way off, geopolitical disputes tend to be recurring themes.

Moving over to australia, ConocoPhillips is moving forward on a major LNG export facility. The company expects to begin exporting in mid-2015. Chevron is working to complete its own LNG projects with its Gorgon project, a joint venture with ExxonMobil and Royal Dutch Shell expected to come online in early 2015. Overall, a lot of gas will be flowing from Australia to Asia in the coming decades.

If China were to use its military might to shut down shipping lanes, it could conceivably crimp the

By Business Wirevia The Motley Fool

Alexandra Health, Toyal America and Royal Dutch Shell Named Winners in Search for Healthiest Workpla

April 12, 2013 Bartle Doo Leave a comment

Filed under: Investing

Alexandra Health, Toyal America and Royal Dutch Shell Named Winners in Search for Healthiest Workplaces

Shining examples of how to improve employee health and wellness
Awards based on WHO Healthy Workplace Model for Action
Sponsored by Cigna Foundation
Awards, Summit hosted by Global Knowledge Exchange Network

LONDON–(BUSINESS WIRE)– Alexandra Health, Toyal America and Royal Dutch Shell today were named winners in the inaugural Global Healthy Workplace Awards and Summit held in London. These companies’ programs lead as examples of how the workplace can play an important role in improving health and wellness in regions around the world. The search for the healthiest workplaces in the world was sponsored by the Cigna Foundation and hosted by the Global Knowledge Exchange Network (GKEN) together with International Health Consulting and i-genius, whose common goal is to promote awareness of emerging better practices in health promotion and wellness in the workplace.

Identifying these winning healthy workplaces so that other employers worldwide can learn from them is especially timely, as a new global study out this month by Global Corporate Challenge found that 86 percent of employees worldwide don’t participate in their company’s wellness programs.

Companies of all sizes from 28 countries submitted workplace programs for award consideration. The submissions were reviewed by an international panel of public health experts from five continents who judged the workplace programs – for the first time – through the lens of the World Health Organization (WHO) Healthy Workplace Model for Action, which includes the physical work environment, psychosocial work environment, personal heath resources and enterprise-community involvement. Six finalists who exemplified leadership in these areas were chosen to present their programs in London, where they were evaluated a final time before the three winners were chosen.

Congratulating the winners and commenting on the awards, Maggie FitzPatrick, Cigna’s chief communication officer and president of the Cigna Foundation, said, “At a time when chronic disease is rising globally, the private sector is playing a critically important role advocating for health and wellness. The healthiest workplaces in the world are increasing wellness and productivity and reducing costs. Their workplace programs are improving health and wellness one employee at a time.”

The Summit attracted more than 100 employers of all sizes, health system leaders, universities, policy leaders, NGOs, and world-renowned award <a target=_blank

From: http://www.dailyfinance.com/2013/04/12/alexandra-health-toyal-america-and-royal-dutch-she/

By Roland Head, The Motley Fool

Should I Buy Rio Tinto or BHP Billiton?

April 10, 2013 Bartle Doo Leave a comment

Filed under: Investing

LONDON — After making strong gains toward the end of last year, shares in miners Rio Tinto and BHP Billiton have fallen by around 10% since the beginning of 2013.

The falls have been caused by institutional shareholders trimming their holdings in each company — but I believe this is a great opportunity to buy into these two world-class companies at very attractive prices.

Rio Tinto vs. BHP Billiton
‘m going to start with a look at a few key statistics that can be used to provide a quick comparison of these two companies, based on their last published results:

Value	Rio Tinto	BHP Billiton
2012 revenue	£33,529	£44,043
P/E ratio	9.5	11.9
Dividend yield	3.5%	3.9%
Net gearing	41%	45%

Both Rio and BHP made paper losses last year, after writing down the value of several major assets. The P/E ratios I’ve included in the table above are based on underlying earnings, which I think provides a more realistic view of each company’s performance.

The income available from both companies is also attractive — both dividend yields are above the FTSE 100 average of 3.2%, making them worth considering for a diversified portfolio of income shares.

I expect Rio’s and BHP‘s dividends to continue to grow over the next few years, as both companies have said they will cut back capital expenditure on new projects, and focus on maximizing their profitability and enhancing shareholder returns.

What’s next?
Analysts’ forecasts are notoriously unreliable, but FTSE 100 companies generally get the benefit of the most comprehensive analysis, and tend to deliver fewer surprises than smaller companies.

With that in mind, let’s take a look at the forecasts for Rio Tinto and BHP Billiton. These apply to the companies’ current financial years, which end in June (BHP) and December (Rio):

	Rio Tinto	BHP Billiton
Forecast P/E ratio	7.2	11.3
Forecast dividend yield	3.7%	4%
Forecast dividend growth	6.3%	5.2%
Forecast earnings growth	26%	(32.0)%

These figures, which are based on the companies’ guidance figures and analysts’ forecasts, suggest that Rio may be nearer the end of its consolidation phase than BHP, which is expected to deliver another year of disappointing earnings.

It’s worth taking a brief look at the main commodities produced by each company. Around 75% of Rio’s earnings come from iron ore, while the remainder is split between aluminum, copper and coal.

In BHP‘s case, around 50% of earnings from iron ore, while around 25% comes from oil and gas production, mostly in the U.S. The remainder comes mostly from copper, aluminum and coal.

Which share should I buy?
BHP‘s major commitment to oil and gas is something to consider if you want a diversified portfolio, as it could take you overweight on oil if you also hold shares in a supermajor like BP or Royal Dutch Shell.

On the other hand, BHP does offer exposure to all the major industrial commodities in one share, which may be attractive, depending on your requirements.

I prefer Rio’s focus on mining, rather than petroleum, and I like its growing emphasis on copper. For all of these reasons, Rio is my pick as a buy — but I

By Arjun Sreekumar, The Motley Fool

BP's Latest Move Highlights Dilemma for Oil Companies

April 8, 2013 Bartle Doo Leave a comment

Filed under: Investing

Last Wednesday, British oil giant BP announced that it had put its U.S. wind power assets up for sale, as the company continues its strategy of focusing on more profitable oil and gas operations.

If it receives a favorable offer, the company thinks it can create more value for shareholders by divesting the wind assets, which are estimated to be worth some $1.5 billion.

Not only does the decision highlight BP‘s overarching focus on profitability, especially in the wake of the infamous 2010 Gulf of Mexico oil spill, it also underscores a major dilemma that energy companies face – choosing between the need for immediate profits and the option to invest in renewable energy sources over the long term. Let’s take a look.

Beyond petroleum?
BP‘s move to sell its wind power assets may come as a surprise to some, especially considering that the company once referred to itself as “Beyond Petroleum,” reflecting its determination to expand beyond its core oil and gas businesses.

But now, the need to remain profitable appears to be overpowering its prior focus on renewable energy, which began in earnest under Lord Browne‘s leadership from 1995 to 2007.

If the company sells its wind power assets, its biofuels business, which consists primarily of ethanol production facilities in Brazil, would be the last remaining artifact of its earlier push into alternative energy.

More like “Back to Petroleum”
Though a company spokesman denied that the recent move signals a departure from alternative energy, BP‘s decisions over the past few years suggest otherwise.

BP‘s CEO Bob Dudley recently announced that the company has given up on solar, after more than three decades of unprofitable attempts. The company has also ditched plans to develop carbon capture and storage technology, after it threw in the towel on a $500 million Scotland plant in 2007. And last year, it abandoned plans to construct a cellulosic biofuel plant in Florida, a facility that would have turned biological materials, such as wood, grasses, and plants, into ethanol.

Since the infamous 2010 Deepwater Horizon incident, the company has embarked on a highly publicized downsizing effort. Since it sold its Texas City refinery and related inventory to Marathon Petroleum last fall, it has parted with some $38 billion of assets. To date, the company has divested half its pipelines and upstream installations, as well as a third of its producing wells.

The bigger picture
BP‘s decision to part with its wind power assets highlights an important trend among energy companies. Many are struggling to strike a balance between investing in projects with immediate payoffs, such as drilling for oil, and investing in those with longer-term payoffs, such as renewable energy.

Consider Royal Dutch Shell , for instance. After having invested millions of dollars into a major wind project over the course of eight years, it recently gave up. Citing “unfavorable market conditions” and issues related to “transportation logistics,” the company announced last year that it was pulling …read more

By David O’Hara, The Motley Fool

3 Blue Chip Bargains: Royal Dutch Shell, GKN, and RSA Insurance Group

April 8, 2013 Bartle Doo Leave a comment

Filed under: Investing

LONDON —

Royal Dutch Shell
Shares in super-major Royal Dutch Shell are down 1.4% so far this year. The shares have actually declined 5.4% in the last month alone.

In the last month, oil prices have fallen almost 5%. There are three reasons for this, all related to demand for the product.

First, the shale gas boom in the U.S. has delivered a plentiful alternative source of energy. Second, fears of global economic stagnation have inspired futures traders to start selling oil contracts. Third, a report last week confirmed that U.S. oil inventories reached highs not seen in over 20 years.

Analysts expect that Shell will pay $1.84 in dividends for 2013 and make $4.14 per share of profits. That’s a prospective yield of 5.7% and a price-to-earnings (P/E) ratio of just 7.9.

GKN
Shares in GKN have lost 10.4% in the last month. As things stand today, GKN is trading on a historic P/E of 8.1, with a forecast dividend of 3.2%.

As a big supplier of automotive parts and engineering services, GKN‘s fortunes are linked to the notoriously cyclical automotive industry. Cyclical stocks have less earnings visibility than most. The result is that they usually trade at a discount to the market.

As more people move into car ownership in countries such as India and China, any industry downturn will likely be less severe than has been suffered in the past. I would be a buyer of GKN today if the yield was higher.

RSA Insurance
Shares in RSA Insurance have not been as low as this since November 2012. Since the company announced a dividend cut with its final results, investors have lost 30% of the market value of their holding.

Though recent times have been rough for RSA shareholders, the current share price looks attractive for new entrants.

The fact that RSA has already cut its dividend makes another cut less likely in the short term. I estimate that the payout for 2013 will be around 6.2 pence per share. That’s a yield of around 5.6% at today’s price. Analysts expect 12.4 pence per share of profits for the year, putting the shares on a P/E of 8.8 times forecasts.

Though RSA now offers a large, well-protected yield, our analysts here at the The Motley Fool believe that they have found an even better dividend share for 2013. To help you benefit from their detailed analysis, they have prepared a special free report “The Motley Fool’s Top Income Share for 2013.” To get the lowdown on this opportunity, click here and get your totally free copy of the report today.

link

The article 3 Blue Chip Bargains: Royal Dutch Shell, GKN, and RSA Insurance Group originally appeared on Fool.com.

David O’Hara does not own shares in any of the above companies. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter …read more

By Arjun Sreekumar, The Motley Fool

Shell's Latest Move Highlights Challenges Facing Australian Refiners

April 7, 2013 Bartle Doo Leave a comment

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Royal Dutch Shell recently said that it’s looking to offload its last remaining refinery in australia, as the oil and gas company reconsiders its operations in the country. Shell is currently searching for a buyer for its 120,000-barrel a day Geelong refinery in southeastern australia, as it refocuses its investment toward large-scale facilities in the Asia-Pacific region, such as its Pulau Bukom refinery in Singapore.

The Geelong refinery, which has been operating for more than five decades, produces a diverse array of products, including ultralow-sulfur diesel. According to statistics from the Oil & Gas Journal, Geelong has a capacity of 113,500 barrels per calendar day, or b/cd, for hydrotreating, 40,000 b/cd for catalytic cracking, 20,000 b/cd for cyclic catalytic reforming, and 11,000 b/cd for semiregenerative catalytic reforming.

Andrew Smith, vice president at Shell Refining australia, said he hopes to finish up the sale process by the end of 2014. If the company fails to receive an attractive offer, it has the option of converting the plant into an import terminal, a process currently under way at Shell’s former Clyde refinery in Sydney.

In a separate decision, Caltex Australia, which is partially owned by Chevron , recently said it will also be converting its Kurnell refinery — also in Sydney — to an import terminal.

Australia to become major oil importer
Since Shell and Caltex Australia announced the closure of two ageing refineries near Sydney last year, Australia‘s refining capacity has been reduced by almost a third. Growing competition from Asia and weak margins are the two major factors behind the country’s spate of recent refinery closures. In addition, Australia-based refineries are struggling with high global crude prices and a strong Australian dollar, which has led to higher labor and financing costs.

That’s worrying, because fuel demand in the country is growing rapidly. In fact, Australia is expected to become the Asia-Pacific region’s largest importer of refined products, as domestic fuel demand continues to rise and as smaller, older refining plants are closed down. According to estimates by the nation’s Bureau of Resources and Energy Economics, Australia is expected to import nearly half the fuel its economy consumes this year.

Potential risks
The changing dynamics of Australia‘s energy market have drawn the attention of several large commodities trading houses, including Trafigura, that are seeking to capitalize on the country’s rising fuel imports. However, some commentators have voiced their skepticism about the expected rise in Australia‘s oil imports, citing a potential downturn in the nation’s resource boom as a major risk.

Australia was one of the few countries that emerged relatively unscathed from the global financial crisis and has enjoyed robust economic growth over the past few years, led by a surge in foreign investment into its resource sector. But the country’s resource boom is inextricably tied to China‘s economy and its demand for coal, iron ore, and aluminum. That leaves it especially vulnerable …read more

3 Things to Know Before You Buy Stock in Chevron

April 6, 2013 Bartle Doo Leave a comment

Filed under: Investing

As one of our largest oil companies, Chevron is a company you’ve probably heard of before. In fact, given what you’re paying at the pump these days, and all the talk about oil and natural gas, you just might be thinking about buying a few shares of its stock. Before you make that purchase, there are three core areas to its business performance that you need to know a little more about.

Production growth
Topping the list is Chevron’s ambitious plan to grow its oil and gas production by 1 million barrels of oil equivalent per day, or MMBOED, by 2017. That would put the company’s overall total daily production of 3.3 MMBOE in 2017. That’s an ambitious goal, but it would still be a far cry from ExxonMobil’s overall projected production of 4.8 MMBOED by that time. What is different is the rate of growth.

ExxonMobil, for example, expects to add only 600,000 BOED of production over that time frame, which equates to a growth rate of 2%-3% annually. Production growth is really hard to come by as oil companies are fighting an uphill battle against the natural decline of an oil and gas well. Even smaller exploration and production companies such as ConocoPhillips need to spend billions of dollars just to grow production by 3%-5% each year. With that context, Chevron’s doing a really great job at growing its production, especially relative to its peers.

Return on capital
That being said, is this a growth at all costs company? Last year, Chevron earned 18.7% on the capital it employed to grow its business. That’s a terrific number, but it’s not the highest-returning major oil company. That honor goes to ExxonMobil, which enjoyed a return on capital employed of nearly 25%.

However, when you look at other oil majors such as BP and Royal Dutch Shell you can see that Chevron really does shine. Last year BP‘s return on capital employed was under 10%, while Shell’s was just slightly over 10%. Again, with that as context, Chevron really stands out as company that delivers not just growth, but profitable growth.

Shareholder returns
Growth is nice, but does it translate into shareholder returns? That’s the only reason you’d be buying its stock, so a history of returns something you’ll want to see. Again, the news here is good, as Chevron’s stock has vastly outperformed its peers:

Source: Chevron investor presentation.

Not only that, but just last year the company increased its dividend by 11% and bought back $5 billion in its own stock. Given the company’s projected future production growth and the returns that growth should generate, it’s fairly safe to say that investors should do well over the next few years.

Given the stubbornly high price of both oil and gasoline, Chevron’s not the only energy stock that should do well over the next few years. If you’re on the lookout for …read more

By Harvey Jones, The Motley Fool

It's Time for Royal Dutch Shell to Start Motoring Again

April 4, 2013 Bartle Doo Leave a comment

Filed under: Investing

LONDON — When I invested in Royal Dutch Shell three years ago, I was sure I was onto a gusher. With oil trading at comfortably over $100 a barrel, emerging markets getting thirstier by the day and new sources of energy hard to access, this oil and gas big boy seemed a no-brainer. Thanks to its generous 5% yield, Shell was one stock I fully expected to retire on. So what went wrong?

Shell’s share price has barely shifted in the last two years, while the FTSE 100 rose 8% in that time. Yet I reckon the market has been a little harsh on Shell, which reported a fourth-quarter 2012 profit of $5.6 billion, up 15% on the year, thanks to strong performance in its refining and marketing divisions. Management was upbeat about the future, and boosted the quarterly dividend by 4.7%, but it wasn’t enough. The market had expected more. Shell stalled.

Shale and hearty
These are hardly car crash figures. Production rose 3.3% to £3.41 million of oil or natural gas equivalents per day, with new projects in Qatar and australia offsetting falls elsewhere. Shell is investing in 30 new projects that should boost production to four million barrels of oil equivalent a day by 2017 or 2018. With up to £130 billion in the capital spending kitty, it is investing heavily in its future. This is a company that throws off notes, generating $46 billion of cash flow in 2012. It is also getting stuck into the task of exploiting China‘s potentially vast shale oil reserves, after signing a production-sharing contract with China National Petroleum Corporation. New markets, new profits.

Double Dutch
Shell has its problems. The oil price is volatile and new sources such as oil sands are expensive to extract. Gas prices have plummeted thanks to U.S. shale discoveries, hitting its struggling U.S. upstream business. Brokers have lost their enthusiasm. UBS recently downgraded Shell to neutral, blaming a lack of near-term momentum, and held its target price at £23. I will definitely continue to hold Shell. That 5.1% yield, covered 2.5 times, is reason enough to be loyal. The question is, should I top up my tank? The recent bull run has left many of my favorite shares looking fully valued, but I don’t have that problem with Shell, which trades at just 7.7 times earnings. Even BP trades at 11.7 times earnings, while BG Group is even more expensive at around 13 times earnings, despite its lowly 1.5% yield, and recent admission that it won’t grow at all in 2013. On that basis, Shell looks cheap.

Five sure things
Earnings-per-share growth isn’t as juicy, with Shell on course for a 4% drop in 2013 and a meager 2% rise in 2014. The market isn’t fooled, it knows Shell has a long and winding road ahead of it. But for the long-term investor, recent sluggish performance makes now a tempting time to hop on board.

Shell looks a good long-term investment, …read more

ExxonMobil Stock: 2 Keys to Higher Returns

April 3, 2013 Bartle Doo Leave a comment

Filed under: Investing

ExxonMobil‘s stock is one of the most widely held securities in the investing world. That might have something to do with the fact it’s one of the largest publicly traded companies in the world. However, there’s a reason investors keep pouring money into the stock: It’s been a steady performer for decades.

In fact, the company has vastly outperformed the S&P 500 over the past decade as you can see from the following chart:

XOM data by YCharts

While past performance is nice to see, it tells us nothing of how ExxonMobil’s stock will perform in the future. For investors interested in the stock there are two areas that you need to watch carefully. If ExxonMobil can continue to excel in these areas, then I don’t see any reason why its stock can’t continue to outperform.

Allocation of capital
ExxonMobil, thanks to high oil prices, generates billions of dollars of annual cash flow. While that’s a good problem to have, the company does need to spend those dollars wisely. While the company spends billions to invest in new oil and gas projects, it also sends a lot of cash back to its investors. The company pays a relatively small dividend, currently around 2.5%, however, where the company really excels is a buying back its own stock. Over the past decade ExxonMobil has bought back more over $200 billion in shares.

That’s important for investors because it means that you’d own a larger portion of the overall company by holding on to your shares. For example, ExxonMobil has only grown its oil and gas production by about 1% annually over the past decade. However, buy repurchasing all that stock, ExxonMobil was actually able to grow its production per share by 48% over that same time frame. That’s a buyback with a real impact and one that few companies can match.

That’s not the only area where ExxonMobil excels. The company’s return on capital deployed has averaged just under 25% since 2008. That smashes the returns’ of Chevron and Royal Dutch Shell which averaged 20% and 15%, respectively, over the same time frame. ExxonMobil does this by choosing to invest in the projects that can deliver the greatest overall rates of returns. If the company can keep up this pace, its stock should continue to rise.

Growing production
If there is a rub against ExxonMobil, its the fact that its returns-focused business has delivered only meager production growth over the past decade. However, growth is expected to accelerate in the decade ahead. After a projected 1% decline in production this year, the company expects to grow production by a 2%-3% annual clip through 2017. More importantly, this growth will focus on higher margin oil and natural gas liquids projects.

I will point out that this production growth is a bit lower than some of its peers. ConocoPhillips for example is expected …read more
Source: FULL ARTICLE at DailyFinance

By Taylor Muckerman and Joel South, The Motley Fool

Big Oil Wants to Develop Its Own Maritime Fleet

April 3, 2013 Bartle Doo Leave a comment

Filed under: Investing

Due to the costs of gathering natural gas from the ocean‘s depths and transporting it to processing centers on land, big oil companies are starting to develop facilities that will perform these actions out at sea. Royal Dutch Shell was the first to announce that it had begun construction back in October 2012, but its larger rival ExxonMobil is not to be outdone.

Partnering with Exxon will be BHP Billiton . Together, these two companies hope to begin processing millions of tons of liquids, LNG, and condensate by 2020 at the earliest. With that long time horizon, both companies are hoping that such a large investment will still be worth it.

Could this be bad news for pipeline companies with an offshore presence?
The growing production of natural gas from hydraulic fracturing and horizontal drilling is flooding the North American market and resulting in record low prices for natural gas. Enterprise Products Partners, with its superior integrated asset base, can profit from the massive bottlenecks in takeaway capacity by taking on large-scale projects. To help investors decide whether Enterprise Products Partners is a buy or a sell today, click here now to check out The Motley Fool’s brand new premium research report on the company.

var FoolAnalyticsData = FoolAnalyticsData || []; FoolAnalyticsData.push({ eventType: “TickerReportPitch”, contentByline: “Taylor Muckerman and Joel South“, contentId: “cms.29165”, contentTickers: “NYSE:RDS-A, NYSE:XOM, NYSE:BHP”, contentTitle: “Big Oil Wants to Develop Its Own Maritime Fleet”, hasVideo: “True”, …read more
Source: FULL ARTICLE at DailyFinance

A Blue-Chip Starter Portfolio: BHP Billiton, HSBC Holdings, and Royal Dutch Shell

By G. A. Chester, The Motley Fool

Filed under: Investing

LONDON — Every quarter, I take a look at the largest FTSE 100 companies in each of the index’s 10 industries to see how they shape up as a potential “starter” portfolio.

The table below shows the 10 industry heavyweights and their current valuations based on forecast 12-month price-to-earnings (P/E) ratios and dividend yields.

Company	Industry	Recent Share Price (pence)	P/E	Yield (%)
ARM Holdings	Technology	921	44.9	0.6
BHP Billiton	Basic materials	1,915	10.1	4.1
British American Tobacco	Consumer goods	3,527	15.0	4.3
GlaxoSmithKline	Health care	1,539	13.0	5.1
HSBC Holdings	Financials	703	10.7	4.8
National Grid	Utilities	765	14.0	5.5
Rolls-Royce	Industrials	1,130	16.9	2.0
Royal Dutch Shell	Oil and gas	2,185	8.0	5.4
Tesco	Consumer services	382	11.6	4.1
Vodafone	Telecommunications	187	11.4	5.9

Excluding tech share ARM Holdings, the companies have an average P/E ratio of 12.3 and an average dividend yield of 4.6%. The table below shows how the current ratings compare with those of the past.

Month	P/E	Yield (%)
April 2013	12.3	4.6
January 2013	11.4	4.9
October 2012	11.1	5.0
July 2012	10.7	5.0
October 2011	9.8	5.2

As you can see, the group of nine industry heavyweights is rated more highly today than at any time in the past couple of years.

My rule of thumb for this group is that an average P/E below 10 is firmly in “good value” territory, while a P/E above 14 starts to move toward expensive. On this spectrum, the group as a whole is neither cheap nor expensive. As such, I think the market currently offers a fair opportunity for long-term investors to buy a blue-chip bedrock of industry heavyweights for a U.K. equity portfolio.

At the individual company level, there are three stocks whose ratings compare favorably with their level three months ago. So, let’s have a look at them.

BHP Billiton
After strong rises in equity markets since the start of the year, the share prices of eight of the U.K.’s 10 industry giants are higher today than when I last looked at them in January. Global mining titan BHP Billiton is the bigger underperformer of the two exceptions: The company’s shares are trading at 1,915 pence compared with 2,145 pence last time.

BHP Billiton’s drop in share price and some upgrades to forecast earnings and dividends bring the P/E down to an attractive-looking 10.1 from 12.8, while the yield rises to an industry-leading 4.1% from 3.6%.

Royal Dutch Shell
Oil supermajor Royal Dutch Shell is the other company whose shares are lower today than three months ago — but by very little: 2,185 pence compared with 2,197 pence.

Shell’s P/E remains firmly in “value” territory at a mere eight (the same as last time), making the company the only one of our industry giants with an earnings multiple in single digits at the present time. Meanwhile, the dividend yield has edged up from 5.1% to an even-juicier 5.4%.

HSBC
Banking behemoth HSBC, in contrast to BHP Billiton and Shell, has seen its shares rise since January: by 8% to 703 pence from 651 pence.

Nevertheless, as a result of the City’s more optimistic earnings and dividend outlook, HSBC‘s P/E today is only fractionally higher than last time: 10.7 compared with 10.6. The company’s sector-leading dividend yield has nudged up to 4.8% from 4.6%.

Finally, if you already have BHP Billiton, Shell, and HSBC tucked away in your …read more
Source: FULL ARTICLE at DailyFinance

KBR to Work on First Oil Sands Carbon Capture Project

By Rich Smith, The Motley Fool

Filed under: Investing

Houston-based KBR is “going green,” and it’s going to Canada to do it.

On Tuesday, the oilfield services firm announced that Royal Dutch Shell subsidiary Shell Canada Energy has contracted KBR to perform “off-site modularization and pipe fabrication” for Shell’s new Athabasca Oil Sands operations. KBR‘s task will be to employ Shell’s own “Shell Quest Carbon Capture and Storage” technologies to build equipment that will reduce CO2 emissions at the oil sands site. According to the companies, this equipment, when finished, will enable Shell to reduce greenhouse gas emissions from the site by capturing more than 1 million metric tons of CO2 per year.

Financial terms of the contract were not disclosed.

Contract win notwithstanding, KBR shares closed Tuesday trading down 3.2% at $30.14.

The article KBR to Work on First Oil Sands Carbon Capture Project originally appeared on Fool.com.

Fool contributor Rich Smith and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Why BP Could Deliver a Quick Gain

By O’Hara, David, The Motley Fool

Filed under: Investing

LONDON — BP shares can be bought today for 460 pence. That values the company at just 8.3 times earnings forecasts for the year. Last year, the company paid dividends totaling $0.33. Dividends of $0.36 are expected for 2013 — a prospective yield of 5.1%.

By my calculations, only two companies in the FTSE 100 (Aviva and Royal Dutch Shell) are cheaper on both an earnings and a dividend basis.

BP is currently defending itself in a civil trial in New Orleans. This relates to the company’s involvement in the 2010 Gulf of Mexico disaster. If BP‘s culpability is deemed less than the market is currently expecting, the shares will likely jump immediately.

At this level, the market is clearly expecting a bad outcome for BP.

However, even a large fine could be good for the share price. Markets are typically forward-looking. Any resolution will give investors the opportunity to start looking at more positive future changes at BP.

Since the Gulf of Mexico disaster in 2010, BP has been cementing a new deal in Russia with state oil company Rosneft. This looks to have been secured on far more favorable terms than the old TNK-BP venture. Russia has long been a key market for BP. This new deal should deliver a more secure earnings stream than the previous partnership. Remember — markets love reliable earnings.

After the trial, I expect that analysts will give more consideration to BP‘s future in Russia. This could lead to a significant and sustained rerating of the shares.

There is another reason to expect BP to advance from here.

Just over a week ago, BP announced that it would be using $8 billion from its sale of TNK-BP to buy back its own shares. This amounts to around 6% of all BP shares in issue.

A buyback on this scale will help increase earnings per share and dividend per share, as there would be less stock in issue. A buyback on the proposed scale would help secure the expected dividend payout of $0.39 next year, a prospective 5.5% yield at today’s price.

BP today looks like a great combination of long-term yield with short-term upside potential. Finding winning income shares is a specialty of top fund manager Neil Woodford. £10,000 invested in Woodford’s High Income fund 10 years ago with payments reinvested would be worth more than £30,000 today. To help you learn from this top stock picker, The Motley Fool has prepared a newly updated report on some of Woodford’s biggest investments. “8 Shares Held By Britain’s Super Investor“ is totally free — to get your copy today, click here.

link

The article Why BP Could Deliver a Quick Gain originally appeared on Fool.com.

David O’Hara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We …read more
Source: FULL ARTICLE at DailyFinance

Are Scotland and England Headed for Divorce Court?

By David Lee Smith, The Motley Fool

Filed under: Investing

We may be about to enter a period of intrigue in Scotland comparable to the events that Shakespeare poured into “Macbeth”. Amid a push for increased autonomy for his country from England, Scottish First Minister Alex Salmond announced recently that Scotland will conduct a referendum in 18 months seeking to abolish its three-centuries-old union with the English.

It doesn’t take an intellect comparable to that of the Bard of Avon to conclude that the proposed separation is tied to oil and gas in the North Sea. The vast majority of British hydrocarbons emanate from waters closest to Scotland. Indeed, as Austin-based geopolitical consultants at Stratfor have noted, Scotland is responsible for fully “90% of British offshore oil production and more than half its offshore natural gas production. ”

A Scottish fortune looming?
Given that balance — or lack thereof — Salmond has said that, if separated from the other United Kingdom countries, Scotland could generate in excess of 50 billion pounds (about $76 billion) within five years. He also believes that the resulting tax revenue would permit the country to establish its own sovereign wealth funds, much as Norway has been able to accomplish from its own North Sea tax receipts.

But there are those who believe that the Scottish take on its likely proceeds may be excessive. For starters, past revenues from North Sea waters have been volatile, to say the least. As the 20th century came to an end, with crude prices hunkering around $10 per barrel, the country took in about 2.5 billion pounds in production-related taxes. And then, with that same black gold commanding up to $147 per barrel in 2008, the tax yield rose to nearly $13 billion pounds.

Dangerously dipping production
Trepidations exist in a number of quarters, however, about future North Sea production volumes. Unlike such venues as the U.S. Gulf of Mexico, Brazil, Angola, or Iraq, output from the waters surrounding the British Isles is sliding. From 2.7 million barrels a day in 2001, production from the sector tumbled to 1.5 million daily barrels in 2010. Further, British oil output in 2011 reached a low not seen since the 1970s.

None of this is to imply that asset trading and hydrocarbon discoveries by the producers have all but ceased in the North Sea. As recently as 2010, for example, Norway‘s Statoil uncovered the John Sverdrup field — which may contain 3.3 billion barrels of oil — in its country’s sector. And Apache appears to be perpetually shopping in North Sea waters. About a decade ago, it bought BP‘s Forties field. And in 2011, it paid $1.75 billion for ExxonMobil‘s North Sea assets, including the sizable Beryl field.

Both Apache acquisitions are in waters that would almost certainly be accorded to Scotland in the event of a separation from England. In November, Royal Dutch Shell boosted its stake in …read more
Source: FULL ARTICLE at DailyFinance

A Blue-Chip Starter Portfolio: BHP Billitonc, HSBC Holdings and Royal Dutch Shell

By G. A. Chester, The Motley Fool

Filed under: Investing

LONDON — Every quarter, I take a look at the largest FTSE 100 companies in each of the index’s 10 industries to see how they shape up as a potential “starter” portfolio.

The table below shows the 10 industry heavyweights and their current valuations based on forecast 12-month price-to-earnings (P/E) ratios and dividend yields.

Company	Industry	Recent Share Price (in pence)	P/E	Yield (%)
ARM Holdings	Technology	921	44.9	0.6
BHP Billiton	Basic Materials	1,915	10.1	4.1
British American Tobacco	Consumer Goods	3,527	15.0	4.3
GlaxoSmithKline	Health Care	1,539	13.0	5.1
HSBC Holdings	Financials	703	10.7	4.8
National Grid	Utilities	765	14.0	5.5
Rolls-Royce	Industrials	1,130	16.9	2.0
Royal Dutch Shell	Oil & Gas	2,185	8.0	5.4
Tesco	Consumer Services	382	11.6	4.1
Vodafone	Telecommunications	187	11.4	5.9

Excluding tech share ARM Holdings, the companies have an average price-to-earnings (P/E) ratio of 12.3 and an average dividend yield of 4.6%. The table below shows how the current ratings compare with those of the past.

	P/E	Yield (%)
April 2013	12.3	4.6
January 2013	11.4	4.9
October 2012	11.1	5.0
July 2012	10.7	5.0
October 2011	9.8	5.2

As you can see, the group of nine industry heavyweights is rated more highly today than at any time in the past couple of years.

My rule of thumb for this group is that an average P/E below 10 is firmly in “good value” territory, while a P/E above 14 starts to move toward expensive. On this spectrum the group as a whole is neither cheap nor expensive. As such, I think the market currently offers a fair opportunity for long-term investors to buy a blue-chip bedrock of industry heavyweights for a U.K. equity portfolio.

At the individual company level, there are three stocks whose ratings compare favorably with their level three months ago. So, let’s have a look at them.

BHP Billiton’s drop in share price, and some upgrades to forecast earnings and dividends, bring the P/E down to an attractive-looking 10.1 from 12.8, while the yield rises to an industry-leading 4.1% from 3.6%.

Royal Dutch Shell
Oil super-major Royal Dutch Shell is the other company whose shares are lower today than three months ago — but by very little: 2,185 pence compared with 2,197 pence.

Shell’s P/E remains firmly in “value” territory at a mere eight (the same as last time), making the company the only one of our industry giants with an earnings multiple in the single digits at the present time. Meanwhile, the dividend yield has edged up from 5.1% to an even-juicier 5.4%.

HSBC
Banking behemoth HSBC, in contrast to BHP Billiton and Shell, has seen its shares rise since January: by 8% to 703 pence from 651 pence.

Finally, if you already have BHP Billiton, Shell, and HSBC tucked away in your portfolio and are …read more
Source: FULL ARTICLE at DailyFinance