Seeking Alpha: Lukoil Not Out Of The Woods Yet

Like Gazprom (OTCPK:OGZPY), which I recently covered here, the shares of oil-focused Russian oil giant Lukoil (OTCPK:LUKOY) have struggled to make much headway amidst concerns about production growth, taxation, and geopolitical tensions. That the shares have done about as well as Gazprom and Tatneft (OTCPK:OAOFY) and better than Rosneft (OTC:OJSCY) isn't much comfort, as valuation multiples remain stubbornly low due in part to investors continue to avoid Russian equities.

A long-awaited production ramp in Iraq is now threatened by insurgency and while a partnership with Total (TOT) bodes well for the future, the company is still disadvantaged when it comes to growing production via exploration within Russia. I do continue to believe that the Street undervalues the cash flow streams that Lukoil is likely to produce, as well as the comparatively better shareholder policies here. Multiples can stay low for frustratingly long times, but I continue to believe that Lukoil is priced to generate above-average returns for long-term shareholders.

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Lukoil Not Out Of The Woods Yet

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

The Motley Fool: Statoil ASA's Focus on Returns and Higher-Grade Assets Should Pay Off

This year has already started off on a much better foot for Statoil (NYSE: STO  ) than its recent stock market experience. Maligned for its high finding and development costs, its dependence on high oil prices, and its weaker near-term production growth, Statoil investors had to endure a frustrating stretch where the short term-obsessed market wasn't willing to give the company its due.

Now, though, the market appears to be taking a more optimistic view. The turbulence in Ukraine has drawn attention back to Statoil's position as the largest supplier of gas to Europe outside of Russia. At the same time, management has openly turned to a more returns-oriented approach and has spent the last year upgrading its portfolio and making some major oil and gas discoveries. Valuation for oil and gas companies may be frustratingly imprecise, but Statoil seems to be offering a good mix of improving returns, capital appreciation, and a solid yield.

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Statoil ASA's Focus on Returns and Higher-Grade Assets Should Pay Off

Seeking Alpha: OMV's Transformation Should Unlock Meaningful Value

One of the most rewarding things about writing about stocks is when you write a piece, make certain specific predictions, and then see those come to fruition. In contrast, one of the most frustrating things is to have a piece all lined up and ready to go and then see one of your big predictions come true before your piece gets published. That has happened to me now on OMV (OMVKY.PK), as the company announced Monday that the company had reached a potentially transformative $2.7 billion deal with Statoil (STO).

The good news is that my basic thesis on OMV still holds - OMV looks like a significantly undervalued European energy major with catalysts to drive better performance in the coming years. Not only does the acquisition of North Sea assets from Statoil significantly improve the odds that the company will meet its long-term production growth goals (something the Street was incredibly skeptical about), but OMV remains a strong free cash flow-generating major with a low breakeven price and capacity for additional farm-ins as circumstances allow. All told, I believe these shares should trade more than 30% higher than they do today.

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OMV's Transformation Should Unlock Meaningful Value

Seeking Alpha: Tullow Hasn't Forgotten How To Find Oil, And The Shares Look Too Cheap

Exploration-focused oil and gas companies can give investors a wild ride. That has definitely been the case at Britain's Tullow Oil (TUWOY.PK), as uncommon drilling success built the company into Europe's largest independent, only to see the shares fall more than 20% over the past year on multiple poor results of its exploration program.

I believe that while finding oil is a "win some, lose some" sort of game, Tullow has proven over the years that it will win more than its share. With a strong core expertise in petroleum geology and demonstrated discipline in license acquisition, coupled with a rich portfolio of exploration assets, I believe that Tullow can regain some of its luster and that the shares are 30% to 40% too cheap even if future drilling success rates can't match the company's past levels.

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Tullow Hasn't Forgotten How To Find Oil, And The Shares Look Too Cheap

Investopedia: Statoil's Turnaround Proceeding Much Too Slowly

I bought Statoil (NYSE:STO) on the idea that this Norwegian energy giant was troubled, but that it would get its house back in order and deliver on its strong legacy of profitably developing energy reserves in challenging locations. So far, not so good. Statoil is one of the worst-performing energy majors over the past year, rising about 3% while Chevron (NYSE:CVX) has risen 29% and Exxon Mobil (NYSE:XOM), Total (NYSE:TOT), BP (NYSE:BP) are all up about 18%.

Statoil continues to struggle to keep a handle on production costs, and unplanned outages have wrecked havoc with a relatively fixed operating expense structure. Though I still believe that Statoil can do better, and is significantly undervalued on that basis, it's getting harder and harder to stay patient with the stock.

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http://www.investopedia.com/stock-analysis/060413/statoils-turnaround-proceeding-much-too-slowly-sto-bp-tot-xom.aspx

Investopedia: Total Looks Cheap, But There's A Reason

Some investors and commentators treat the international oil majors as an undifferentiated mass, suggesting that investors need only follow dividend yields and/or PE ratios to find the best bargains at a given point in time. Total (NYSE:TOT) offers a good example of why that's not a very good approach. While Total's aggressive exploration program could offer some upside to production and profits down the road, the company's leverage to high oil prices and lower margins/returns underline a riskier business model that ought to trade at some discount to peers.

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Seeking Alpha: Investors Seem To Be Expecting Too Much From H.B. Fuller

I love a good industrial story, particularly when companies can spike improving volumes and mix with better manufacturing margins. Along those same lines, I'm broadly a fan of companies whose products show up almost everywhere but don't necessarily capture much investor "mind-share". All of that said, I can't bring myself to love H.B. Fuller (FUL). I do understand that this specialty chemicals company can benefit from significant margin improvement initiatives and recoveries in key end markets like construction, but the valuation seems to be more than generous for that potential.

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Investors Seem To Be Expecting Too Much From H.B. Fuller

Investopedia: Barring Disaster, Anadarko Looks Too Cheap

If it were only a question of the quality of its oil and gas operations, Anadarko Petroleum (NYSE:APC) would be an easy stock to like at today's price. In the case of this company, that's a whopper of an "if," as litigation over Tronox (NYSE:TROX) nears its end and brings a large range of potential outcomes. Although Anadarko looks too cheap based on its energy operations, any investors looking to exploit that discount must be prepared for the potential that an adverse ruling could seriously dent the stock.

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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

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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Investopedia: Near Tangible Book, Teck Is Worth A Look

Commodity companies can do nothing to change the sometimes-devastating cyclicality of their markets, but that same cyclicality gives investors multiple chances to play the same stocks. Right now there's a great deal of worry about global growth, and particularly growth in markets like China, Brazil and Europe. Although no investor should fool themselves about the risks involved, the fact that Teck Resources (NYSE:TCK) trades near tangible book value ought to be of interest to investors looking for potentially over-punished commodity stocks.

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Investopedia: PetroChina As Much About Politics As Performance

There are plenty of energy companies around the world that are partially owned by national governments, but the influence that those governments have can vary considerably. Statoil (NYSE:STO) and Total (NYSE:TOT) encounter relatively little direct interference, while the involvement of Brazil's government in the operations of Petroleo Brasileiro (NYSE:PBR) is considerably greater.

Even further along the spectrum sits China's PetroChina (NYSE:PTR). Although PetroChina is one of the world's largest oil companies and generally well-regarded for its corporate governance, there are no illusions about the extent to which the Chinese government calls the shots. The question for investors, then, is whether that constant "management" (or interference, depending upon your perspective) strips away from the value of this company's stock.

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http://stocks.investopedia.com/stock-analysis/2012/PetroChina-As-Much-About-Politics-As-Performance-PTR-PBR-STO-TOT0321.aspx

Investopedia: Statoil - Iffy Operations, But Serious Potential Value

There are not many freebies in oil and gas, so if an investor wants to own an E&P company trading at a low valuation, there is a price to be paid in quality. The question with Norway's Statoil (NYSE:STO) is just how much of a discount is really fair. Although Statoil does indeed have issues with its cost structure and reserve base, the company's above-average growth potential and capacity for additional deals argues that the discount today is too steep.

Familiar Problems Show up in Q4  
Statoil's fourth quarter results weren't too surprising to long-term followers of this story. Although production slightly beat expectations, it grew less than 1% overall, as declines in Norwegian production offset better than 25% growth from international projects.


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Investopedia: Industry At A Glance - Large Oil and Gas Producers

Anyone who drives is well aware of the general trajectory of oil prices over the past decade; and likewise, anyone who uses natural gas to heat their home has some sense of the volatility in that market. Oil and natural gas are vital to the global economy. Simply put, without energy there is much less commerce, and oil and natural gas represent some of the most portable energy-dense options available today.

When it comes to big-time oil and gas, investors must consider a lot of trade-offs. Some companies see themselves almost as trusts - focusing on paying out large dividends and keeping risky development investment to a minimum. Others try to find more balance in the growth/income equation. At the bottom line, though, major oil and gas companies offer investors an opportunity to ride along for further gains in energy prices, without some of the risk of smaller names.

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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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Investopedia: Chesapeake Making The Best Of A Tough Situation

Here's a question for natural gas investors to ponder: How much growth do you really want? Natural gas prices are still low and reserves are a limited asset, so does it really make sense for these companies to cash out a meaningful amount of these assets too cheaply? Certainly, these companies need to fund their operations and establish enough production to hold valuable leases, but production at below-trend prices is a mixed blessing. 


Chesapeake Energy (NYSE:CHK), one of the largest independent natural gas producers, continues to walk that tightrope while remaining very highly leveraged to future rises in natural gas. (For more, see Natural Gas Industry: An Investment Guide.)


Decent Q1 Performance
Chesapeake reported over 6% sequential production growth for the first quarter, with realized prices up about 2%. Within those numbers, the company reported strong growth in its oil and liquids production - up nearly 9% on a sequential basis and up 56% from last year. 



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Investopedia: Total Takes A Shine To SunPower

Admittedly, it does not take a lot to get conspiracy theorists fired up, but the deal announced Thursday night between Total SA (NYSE:TOT) and SunPower (Nasdaq: SPWRA) should have some of them foaming at the mouth. 


Many energy companies bought solar power companies in the 1970s and 1980s, only to find that the technology was far from a point where it was commercially viable (conspiracy theorists choose to believe that the energy companies deliberately "killed" solar power to maintain the hegemony of fossil fuel). Now the picture may be different. While solar still requires sizable subsidies to make economic sense in many places, the technology has gotten much better and solar assets may prove invaluable to energy companies looking to diversify and stay relevant for the long term. (For more, see Spotlight On Solar Stocks.)


The Terms of the Deal
While SunPower is characterizing the deal with Total as a "strategic partnership," the reality is that Total will be acquiring 60% of the company's shares and will effectively control the company's board. For this, the company is paying $23.25 per share (nearly $1.4 billion in total), a 45% premium to Thursday's close.

Total is also extending $1 billion in credit support to help accelerate the growth of the company (and this has been a chronically capital-hungry industry). 



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One Small Step For Amyris

Exciting stories are usually built with a lot of boring announcements. To that end, Amyris's (Nasdaq:AMRS) recent announcement that it had finalized a joint venture with Brazil's Cosan (NYSE:CZZ) is not surprising or exciting, but it is a good example of the blocking-and-tackling type of announcements that will go into making the Amyris story and business model work over time. 

A Deal That Works For Both Sides
Amyris and Cosan will work together to produce and sell various so-called base oils that will be made with the farnesene that Amyris will produce in other facilities. It is a pretty typical win-win type of deal. Amyris needs to find as many customers as possible for its farnesene, while Cosan needs diversification away from ethanol as an end product of Brazil's prodigious sugarcane production. (For more, see Brazilian Stocks To Watch In 2011.)

Just One Brick In The Road
Ultimately, the success of this Amyris-Cosan venture in base oils is not critical to the overall success of Amyris, but it highlights what I think is an important part of the Amyris business model - working with other companies and finding as many potential markets for its products as possible. Where many failed ethanol companies like VeraSun and Aventine went wrong was in being just another commodity producer, but one that relied upon other commodity feedstocks (corn, notably) and government subsidies. In other words, they were refiners with pretty much one product to offer.

In contrast, Amyris has found a lot of potential uses for its genetically-modified yeast. The first key product will be farnesene, which can be used in a wide range of products including diesel and jet fuel additives, lubricants, detergents and flavors and fragrances. As time goes on, and the company's yields improve, it may be possible to produce a much wider range of products including fuels themselves, plastics and synthetic rubber. (For more, see Back To The Future With Ethanol.)  

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Sanofi Ups The Pressure On Genzyme

It is not exactly a hostile bid, but French drug company Sanofi-aventis (NYSE:SNY) has certainly stepped up its efforts to acquire American rare disease drug specialist Genzyme (Nasdaq:GENZ). Over the weekend, Sanofi went public with an offer for Genzyme of $69 per share in cash. Nothing about this announcement was really a surprise; there had been ample talk of a deal for weeks at this price, but it does move the proceedings from plausible rumor to truth.   

An Opportunistic Bid for Genzyme 
Genzyme's formal response to Sanofi's offer was predictable, if a bit confrontational. Genzyme not only rejected the bid, but deemed it so low as not to be worthy of further discussion with Sanofi's management. Those sound like bold words from a management team that has not delivered much shareholder value over the last five years until this bid.  

http://stocks.investopedia.com/stock-analysis/2010/Sanofi-Ups-The-Pressure-On-Genzyme-SNY-GENZ-SHPGY-PLX-ISIS0901.aspx