atans1

HoHoHo: Will Temasek slip on oil patch?

In Energy, Temasek on 13/02/2016 at 5:31 am

investors and lenders have laid the groundwork for the rebound – buying assets in fire sales and making new loans. But even opportunists are still uneasy. Many investors fear they could be too early if they jump in now – they had already been burned by forecasts that predicted oil would recover last year.

Remember tthis investment?

NYT Dealbook reports

LOW OIL PRICES AND A RECKONING ON DEBT Energy executives and their bankers are preparing for a prolonged downturn that could change the energy industry in a way not seen since the turmoil of the late 1990s gave rise to mega-mergers like Exxon Mobil, Clifford Krauss and Michael Corkery report in DealBook.

Crude prices have plunged more than 70 percent over the last 20 months, but until recently, companies were able to ride out the slump using hedges to sell their oil for more than the market price.

These hedges have expired in recent months, leaving oil companies low on cash and unable to pay their debts. They are also realizing that a recovery in oil prices is at least a year away – too long for many companies to hold out.

If prices hold at such low levels – oil traded near $28 a barrel on Tuesday –as many as 150 oil and gas companies could file for bankruptcy, according to IHS, an energy research firm.

That is a relatively small slice of the industry, but hundreds of other companies that piled on debt to grow into significant players in the shale oil boom are now likely to be acquired or sell their assets. As much as a third of the oil industry could be consolidated as a result of the downturn.

As losses have mounted, investors and lenders have laid the groundwork for the rebound – buying assets in fire sales and making new loans. But even opportunists are still uneasy. Many investors fear they could be too early if they jump in now – they had already been burned by forecasts that predicted oil would recover last year.

Temase should remember that it already has exposures to the oil patch via Heppel and SembCorp Marine: the bad and ugly, the good 

And think about buying SembCorp. If oil prices recover, it’ll bewnefit from its stake in Marine. If it doesn’t, there’s the other biz.

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  1. Chesapeake is mainly gas — it’s been imploding way before crude oil prices started collapsing. Much better investor-friendly companies to invest in US & Europe compared to S’pore, both energy-related and other sectors.

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