1. The valuation process firms undergo when looking to acquire a company is very complex, but when a company, especially a foreign one, makes the conscious decision to enter another foreign market is even more complex and tricky. In this case three western oil firms the neophyte Philbro; the legacy Mobil; and, the middle weight Conoco all have to determine if and how they want to enter the newly open Russian Oil market. The Russian oil market is characterized as high risk for potentially high rewards. High risks include but are not limited to obsolete and poor infrastructure; murky and opaque governmental (and subsequently economic) policies; unreliable Russian geologic surveys; and, etc. Furthermore, Russian inflation is soaring and the …show more content…
Conoco elected to be the most strategic of the three, not as big as Mobil, but having more technical know-how and more industry expertise than Philbro, Conoco was willing to take on some risk in Russian oil. It focused on sequential investment, which gave Conoco time to ascertain the Russian state of oil; as not all the money is invested up front, this provides an incentive for Russia and Russian partners to help ensure project success. Conoco also sought multiple investors (OPIC and EBRD) and US backed organization which could help apply political pressure when necessary. Conoco also elected to build a lot of the infrastructure which gave them more control, but was also more expensive.
Conoco has the best strategy. They have mitigated a lot of the risk and have gotten into the Russian Oil game. With their financial structure, partnering agreements and political backing Conoco may see some losses and volatility in the near term (e.g. I think all companies will suffer the effects and volatility of the Russian Tax code), but by being there and working with the Russian government their long-term outlook for value has them well positioned.
3. Philbro and Conoco have adopted joint venture strategies with Russian firms to mitigate some risk; however, Conoco has also diversified and included other firms/organizations that can bring political pressure. Also, Conoco took small incremental steps such as sequential investments and brought aspects of control by
The oil and gas business is highly competitive in the exploration for and acquisitions of reserves, the acquisition of oil and gas leases, equipment and personnel required to find and produce reserves, and in the gathering and marketing of oil, gas, and natural gas liquids. The competitors include national oil companies, major integrated oil and gas companies, other independent oil and gas companies, and participants in other industries supplying energy and fuel to industrial, commercial, and individual consumers.
Besides, the organization has upgraded its technological capacity through the projects and innovation section of its business. In this word, there are few oil companies and most of the oil and natural business is controlled by powerful organizations. The large amount of capital investment tend to remove a lot of supplier of rigs, pipeline, refining and other. even the suppliers product are important info to the oil organizations, the oil organizations still have critical control over smaller drilling and support
The divestiture of Conoco by DuPont also reflected changing conditions in the energy industry. As noted in a May 12, 1998, article in the New York Times: DuPont bought the oil company in 1981 as insurance against the pricing and supply tactics of the Organization of Petroleum Exporting Countries. But oil prices have been far less volatile than it feared, and DuPont continues to de-emphasize the petrochemical side of its
Chevron Texaco, or Texaco Shell, is the leading competitor to ExxonMobil. Texaco is in the same areas of business as Exxon. Their petroleum products and lubricants are sold in the same markets, stores, and in many cases opposite street corners from each other. The two companies are very similar, but Exxon’s recent petroleum deals in the Middle East and Africa have allowed its stock price to jump ahead for the time being (1). In the industry, the two companies mainly compete for the ability to negotiate for new production. The competition is not made at the pump or at the local auto store. It seems that it’s more important to control oil than it is to sell it quickly. Because oil has so much value and power in the world, the industry is made of semi-friendly companies. Surviving and making as much profit as possible, is more important than trying to put people out of business.
By establishing these set shipping rates with the railroad companies, it not only made it impossible for his competitors to stay in business, but it also allowed Rockefeller to establish a strong relationship with a key method of transportation for shipping products (Biography). By establishing a strong relationship with the railroad companies, Rockefeller was able to use his successful business practice to “control over 90 percent of the nation’s oil-refining industry by 1880” (The New Tycoons). As time continued on and his business became more successful, he also applied another clever business strategy known as vertical integration. This process consisted of a company purchasing and controlling each and every step of one’s industry production process. Rockefeller’s company used this process very efficiently as they “became known to manipulate crude oil prices to drive refineries to bankruptcy, allowing him to buy them cheaply” (Epstein). By controlling each production step, he was able to minimize costs by removing any companies from the middle that were previously completing steps on the way to the finish product. Rockefeller was also known to manipulate prices of crude oil in order to drive his competing refineries into bankruptcy which allowed him to buy them cheaply (Epstein). However, his economic beliefs and ideas were not the only strategies which John Rockefeller used to elevate his business and personal profile to a national level and
The largest world supplier oil company is Saudi Aramco. It is the most profitable company on the earth. Since it is the most powerful oil company, it has a great impact on the world economy. As a result, a strong international relationship was built with the Kingdom of Saudi Arabia. In addition, the strong developing of international relationship with other industrial countries resulted in massive contributions to the politics, economy, and many different aspects. In 1933, Saudi government bestowed oil concession to California Arabian Standard Oil Company (Chevron). The main factor for this grant was to explore the oil in the eastern region of the Kingdom of Saudi Arabia. After discovering a huge amount of oil, part of the
In March 2012, ConocoPhillips Company and ConocoPhillips Canada Marketing & Trading ULC expressed intent to assign the Keystone Expansion, Patoka and Marketlink Transportation Service Agreements to Phillips 66 Canada ULC. The year before, the Conoco Phillips board of directors announced that it would pursue the separation of its refining and marketing and exploration and production business into two separate standalone companies. Phillips 66 was to be the refining and marketing company and COP was to become the exploration and production company. The TransCanada credit risk department assessed that COP and CPCMT had an “A” credit rating and assets totaling $110,000,000,000 while Phillips 66 had a “BBB-” credit rating and estimated assets of
Shell must be sharp and focus to sustain competitive advantage over Total, Exxon, Chevron, and BP. Shell lowered costs at its Canadian operations to ensure that they remain competitive in other regions. Shell is believed to be around longer than any other oil, gas, and energy company because of the new patents and creations they are about to be a part of in the alternative energy industry. Shell has countless projects in the future and will still be the largest and
João Nogueira Batista, Chief Financial Officer of the Brazilian firm Petrobras, reflected on Gros’s words as he prepared for a Board of Directors meeting in July 2002. The main item on the Board’s agenda was the proposed acquisition of an Argentinean firm, the Perez Companc Group, or Pecom.2 The acquisition would significantly increase Petrobras’s oil and gas production and add to its oil reserves. It would also provide the mainly Brazilian-based
A prospective buyer has to consider the motives and financial positions of other bidders. Kohlberg wants to buyout the company in order to turn it into a private firm. ARCO has a pretty strict limit in what it can offer because of its highly leveraged position. Even if a company has the ability to take out a larger loan to make a greater offer, it has to consider the consequences of doing so. While a company like Socal has unrestricted credit, its decisions as to how to operate the company after the buyout are very limited. Creating a lot of debt in order to finance the purchase is a large risk. If the company does not perform well in the future it could face tremendous loss. In this case, a bid of $80 per share would be appropriate for an un-leveraged company like Socal. This would be enough to win Gulf while still leaving breathing room for shareholders. Taxes do not need to be considered, because the benefits cancel out the
Russia’s legislature approved the forced transfer of certain fields to government-controlled firms. In 2006, Shell was forced to transfer an expansion project to Gazprom. That same year, concern over the possible revocation of the license to the Kovykta gas field and Gazprom’s ability to block construction of a pipeline to China, forced TNK-BP to sell its stake in the field. Gazprom purchased the stake for less than a third of its real value. The Russian government had also been known to both privatize or nationalize firms and rig auctions in order to favor government-controlled corporations.
Russia's new strength is also based on its vast reserves of oil and natural gas, which as the price of crude exceeds $ 120 per barrel, give the country tremendous bargaining power, not only in its relations with countries directly dependent on its supplies as Ukraine, Germany and Hungary, but, in general, by the capacity of influence that give
The oil industry is one of great power that countries are invest in. Russia is one of the leading contenders in producing oil and exports the goods to various countries. With great resources comes great strength. Oil is of the utmost important to every country therefore, Russia has an upper hand in some respects. Moreover, the history behind the oil pipelines and how Russia connects to different countries allows for insight into the power they withhold politically and economically, and on the improvements that need to be made to continue growth in this industry.
Though it took many years to get in British Petroleum was able to start with a selective group of stations and build from there. BP, Chevron, and ExxonMobile today make up three of the biggest in the oil industry. (Chevron Official Website)
Gas and oil development plans are branded by huge capital investments. Exploration and production operations incorporate numerous activities, reaching from undertaking geological surveys, finding hydrocarbon resources, and commercially exploiting them. Projects in this area are of a high risk nature in physical trading, and political sense as it is hard to know in advance the presence, degree and value of hydrocarbon resources, as well as production costs and the price oil of oil in the global world market Kaiser, Mark .J (2007)