Seeking Alpha: Controversial Gazprom Still Cheap, Still Risky

Recommending Russia's giant natural gas company Gazprom (OTCPK:OGZPY) to readers last year was a controversial pick and one that has not worked out as well as I might have hoped. I went into it well aware of the attendant risks of owning a company that is virtually an arm of the Russian government and that has a reputation for not working and playing well with others. While the roughly 3% gain since then isn't horrible, it has lagged other turnaround energy stories like Statoil (STO) as well as its home index (though only by a couple of percentage points).

Given the Russian government's combative attitude toward Europe and the West, I'm less bullish that Gazprom's valuation discount is going to improve in the near future. I continue to believe that only modest growth can support a fair value well above today's price and that Gazprom has significant restructuring opportunities, but it takes a strong contrarian streak to invest here. I continue to see opportunities here for aggressive investors with a long-term orientation, but I can't fault investors who will argue that there are easier ways to generate alpha in the market over the next 12-24 months.

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Controversial Gazprom Still Cheap, Still Risky

Seeking Alpha: Can Natural Gas Development Drive PetroChina Further?

Having recently gone over the investment prospects for Italy's Eni (E) and China's CNOOC (CEO), I went into PetroChina (PTR) expecting to find another state-owned energy company trading at a discount to fair value. I think that is what I found, though deciding on the "right" EV/EBITDA multiple involves pretty arbitrary decisions of whether to add a half-point here or there that move the fair value quite a lot. I think PetroChina is undervalued today if it can deliver the mid-single digit EBITDA growth that analysts expect, but significant reserve potential has to be viewed in the context of rising production costs and a significant degree of interference from the government at all levels of the operation and end markets.

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Can Natural Gas Development Drive PetroChina Further?

Seeking Alpha: Eni's Solid Upstream Overshadowed By Multiple Downstream Issues

To paraphrase Mark Twain, Italy's Eni (E) is a good upstream company spoiled. In this case, the spoilage comes from money-losing capital sinkholes in the downstream operations like its Gas & Power and Refining & Marketing operations. To be sure, Eni's upstream operations are not perfect or risk-free, as the company has a recent history of disappointing on production growth targets and its production is heavily weighted toward some pretty dicey countries. It's hard for me to argue strongly for buying Eni over other majors like Statoil (STO) (which I own), but I will say that sentiment is pretty bearish on Eni relative to its solid production pipeline and further progress in reforming its downstream operations and/or selling off subsidiary stakes could unlock some worthwhile upside.

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Eni's Solid Upstream Overshadowed By Multiple Downstream Issues

Commodity HQ: 5 Of The Biggest Oil Finds In History

Oil makes the world go ’round, and finding more oil is one of the principal goals of multinational energy giants like Exxon Mobil (XOM), British Petroleum (BP) and Chevron (CVX). Unfortunately, it has become harder and harder to find fields that really move the needle for corporate or national reserve totals. Nevertheless, just because it is difficult does not mean it is impossible, and investors can look back to some notable successes in the history of the oil industry.

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5 Of The Biggest Oil Finds In History

Commodity HQ: A Deeper Look At Iran's Commodity Industry

Iran is quite possibly one of the best-known and least-known countries in the world for American investors. Tense, if not outright hostile, relations between Iran and many Western countries have kept it in the news, but relatively few investors seem to appreciate Iran’s size, demographics (it’s a very young country), and economic prospects. In recent years sanctions have had a massive impact on Iran’s economy, but it remains a major player within OPEC and in the global energy market.

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A Deeper Look At Iran's Commodity Industry

Investopedia: Statoil - Should You Love What The Analysts Hate?

The great thing about investing is that there's no one right way to make money. Some investors do quite well surfing along with the crowd and have the dexterity to get in or out just as the mood starts to shift. Others succeed by boldly trusting their own analysis and going directly against prevailing sentiment. Investors considering Norwegian oil and gas company Statoil (NYSE:STO) need to be more of that latter mindset. While Statoil has changed for the better in some significant ways over a relatively short time period, the company is hardly a darling on the Street.

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http://stocks.investopedia.com/stock-analysis/2012/Statoil---Should-You-Love-What-The-Analysts-Hate-STO-XOM-E-BP0815.aspx

Investopedia: Total Has More To Lose With Falling Oil Prices

Major oil and gas companies are clearly suffering as oil prices decline. While some investors look at this situation as a bargain-in-the-making on the basis of a never-ending demand for oil around the world, the truth is a little more nuanced. Oil demand does indeed look solid on an intermediate-term basis, but many majors are finding that they have to spend enormous amounts of money to harvest their reserves. Consequently, today's oil prices do start to change the expected path for project development and dividend payouts.

Total (NYSE:TOT) is one of those companies that looks vulnerable to the squeeze play. Not only does Total have a sizable downstream (refining) business that drags on results, but the upstream operations have some questions around them as well. With so much expected production tied to areas with political risks and/or advanced technological needs, Total has a has a problem with sub-$90 oil.

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http://stocks.investopedia.com/stock-analysis/2012/Total-Has-More-To-Lose-With-Falling-Oil-Prices-TOT-RDS-E-STO0629.aspx

Investopedia: Eni Still Not Getting Much Love

Admittedly these aren't the best of times for energy companies, but it's even worse for those whose assets lean towards natural gas and/or politically dicey areas. Eni (NYSE:E) has never been among the most-loved major energy companies, but valuation is now starting to look quite interesting. With progress on divestitures and big discoveries off the coast of Mozambique, there's still work to do, but management has taken some solid positive steps.

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http://stocks.investopedia.com/stock-analysis/2012/Eni-Still-Not-Getting-Much-Love-E-APA-OXY-PBR0604.aspx

Investopedia: Eni Hoping To Be An African Queen

Much like its home country, Italian energy Eni (NYSE:E) needs to rethink its approach and restructure its operations. While the company has a valuable growth-oriented exploration and production business (centered on Africa), overall performance has been held back by a collection of structurally uncompetitive downstream operations. While valuation is close to attractive, Eni is a stock that will need some time to work out.

A Tough 2011 Breaks a Strong Streak  
Eni had built a reputation as a fairly reliable under-promise/over-deliver company that routinely delivered results slightly above expectations. Although that technically continued in the fourth quarter as adjusted income was 3% above expectations, it was a low-quality beat and underlying results actually missed most sell-side estimates by about 5%.

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http://stocks.investopedia.com/stock-analysis/2012/Eni-Hoping-To-Be-An-African-Queen-E-BP-PBR-APA0227.aspx

Investopedia: Libya Adds Some Good News To Energy Names

With word coming out this weekend that the rebel forces had begun to enter Libya's capital of Tripoli, it looks as though the Arab Spring may be winding down. Although investors should never fully discount the risk of further turbulence - citizens are getting restless in Egypt, Syria is still spasming with protests and crackdowns and further troubles could always emerge in nations like Iran or Iraq - it looks like many Western names may be soon getting back to the business of exploiting sizable untapped foreign reserves. (Dividend capture strategies provide an alternative investment approach to income seeking investors. See How To Use The Dividend Capture Strategy.)

Back to Business as Usual?  
With a few exceptions here and there, major international oil companies pulled their employees out of Libya when armed insurrection against Qaddafi's regime began earlier this year. Now that it appears that the rebels are closing in on victory, it may be time to reconsider some of the names that had sizable partnerships with the Libyan government in developing oil and gas reserves that had gone largely underutilized during Libya's long period of isolation.

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http://stocks.investopedia.com/stock-analysis/2011/Libya-Adds-Some-Good-News-To-Energy-Names-E-TOT-COP-HES-STO0823.aspx

Big OIl Looks To Prevent Another Oil Catastrophe

Give the energy industry titans a little credit - they learn slowly, but they do learn. Late Wednesday, four major international energy companies announced a joint venture aimed at developing and preparing equipment to handle future oil spills in the Gulf of Mexico (and perhaps in other offshore locations as well).

As it stands now, the agreement includes Exxon Mobil (NYSE:XOM), Royal Dutch Shell (NYSE:RDS), Chevron (NYSE:CVX) and ConocoPhillips (NYSE:COP). Each company will contribute $250 million to the venture, which will be called Marine Well Containment Company and established as a non-profit entity.

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http://stocks.investopedia.com/stock-analysis/2010/Big-Oil-Looks-To-Prevent-Another-Oil-Catastophe-XOM-COP-CVX-RDS-APA-CAM-NOV0726.aspx

Of course ... by taking this step, these companies guarantee that the next major disaster will be something completely different and will leave them flat-footed.