Eni keeps foot on the gas in high-speed Gulf drive

Eni keeps foot on the gas in high-speed Gulf drive
The headquarter of the Italian oil and gas company Eni in San Donato Milanese, near Milan. (AFP)
Updated 01 February 2019

Eni keeps foot on the gas in high-speed Gulf drive

Eni keeps foot on the gas in high-speed Gulf drive

MILAN: In less than 12 months Eni CEO Claudio Descalzi has turned the Middle East from a sideshow to a strategic hub for the Italian energy major. And the shift is not over.
Since last March the 63-year-old has clinched nine deals in the United Arab Emirates, gained a toehold in Bahrain and expanded in Oman to reshape the group’s future.
In the latest deal on Sunday, Eni pledged $3.3 billion to buy part of the world’s fourth-biggest refinery in the UAE, increasing its own refining capacity overnight by more than a third.
But the buying spree is not over and the company is looking to further bolster its presence in the Gulf region, according to three banking and industry sources with knowledge of the matter.
They said Eni was now primarily targeting “upstream” exploration assets — oil and gas fields — rather than downstream operations.
The company is looking to buy more assets in the UAE, as well as entering Qatar, the sources said, without giving further details.
“Descalzi was in the UAE 20-odd times last year to personally build relationships to secure the deals,” said a separate industry source. “And there’s more on the way.”
Eni declined to comment.
The Gulf drive is part of Descalzi’s plans to cut Eni’s traditional reliance on Africa, which accounts for more than half its production, while gaining more exposure to refining assets in an oil-rich region closer to Asian markets.
In recent years, weakness in the company’s downstream businesses like refining and chemicals have dragged on profits and placed more of a premium on securing success in exploration.
Its heavy presence in Africa, with the risk associated with working in places like Libya and Nigeria, has also weighed on share price performance.
A banking source with knowledge of the matter said Eni was targeting the Gulf area of the Middle East because it did not have the political and security risks of countries like Iraq.
PRIZE ASSETS
The Gulf region has in recent years attracted the world’s top oil companies seeking stakes in big and easy-to-develop oil and gas fields at a time of uncertainty over oil prices.
Long-term contracts in the region also guarantee stable revenues even if the returns are lower than other, riskier fields.
But while majors like BP, Total, Shell and Exxon have had a strong presence in the Gulf for decades, Eni has not.
The Italian firm’s strategy of selling down assets like its prize Zohr gas field in Egypt has been key to its recent expansion in the region.
Last March Eni traded a stake in Zohr with Emirates fund Mubadala to get its first foothold in the country, since when it has clinched a flurry of more deals with UAE oil giant ADNOC.
“Zohr was used as a way in. Since then the group has ramped up operations lightning fast in an area that has some of the world’s biggest resources and that’s on the doorstep of Asia,” said Mediobanca oil analyst Alessandro Pozzi.
In Qatar, Eni can count on good relations with the state petroleum firm which recently bought Mexican oil blocks from the Italian company.
A decade ago Eni was struggling to replace reserves and lost credibility over its management of the huge Kashagan oilfield in Kazakhstan.
But giant gas discoveries in Mozambique and Egypt have since given it the strongest discovery record in the industry, boosting its credentials with oil-producing nations.
In 2017 ADNOC presented its 2030 strategy plan to open up its energy markets to foreign operators and attract the skills needed to develop the exploration and production, refining and petrochemical industries.
“When you are a country thinking, who can find the stuff, you look to Eni with its track record,” said a source familiar with Eni management.


Jack Ma video reappearance fails to soothe all investor concerns

Jack Ma video reappearance fails to soothe all investor concerns
Updated 29 min 11 sec ago

Jack Ma video reappearance fails to soothe all investor concerns

Jack Ma video reappearance fails to soothe all investor concerns
  • Ma had not appeared in public since Oct. 24, after he blasted China’s regulatory system
  • Chinese regulators have set about reining in Ma’s financial and e-commerce empires

HONG KONG: Billionaire Jack Ma’s 50-second video reappearance has done little to resolve Alibaba Group’s troubled relationship with regulators that is making some investors hesitate about owning the Chinese e-commerce giant’s stock.

Relief at Ma’s first public appearance added $58 billion in market value on Wednesday as Alibaba’s Hong Kong-listed stock soared, though doubts crept in a day later and the stock fell more than 3 percent as the broader market steadied near two-year highs.

Ma had not appeared in public since Oct. 24, when he blasted China’s regulatory system. That set him on a collision course with officials and led to the suspension of Alibaba fintech affiliate Ant Group’s blockbuster $37 billion IPO.

A source familiar with the matter said Ma cleared his schedule late last year to keep a low profile, prompting discussion at Alibaba about when and how he should reappear to assure investors.

It was decided he should do something that would appear as part of his normal routine, rather than anything overt that could irk the government.

While Ma has stepped down from corporate positions, he retains significant influence over Alibaba and Ant, and the regulatory crackdown on his business empire coupled with his absence was a concern for some investors.

There was skepticism that Ma’s brief reappearance meant all was well with his businesses.

“The coast is not all clear for Alibaba and it is a judgment call whether you believe the company can still thrive in the changing environment,” said Dave Wang, a portfolio manager at Singapore’s Nuvest Captial, which owns Alibaba stock.

“Without some skepticism, the price would be a lot higher,” he said, adding his firm had increased exposure to China and with it Alibaba, which he believes can prosper over the medium to longer term.

Two of the company’s investors in the US who have sold out or reduced positions in Alibaba said they needed more reassurance about the company and the regulatory environment before reconsidering the stock.

“One of our top criteria is leadership and we were investing in Alibaba because I really respect Jack Ma as a leader,” said William Huston, founder and director of institutional services at independent investment advisory firm Bay Street Capital Holdings in Palo Alto, CA, with assets under management of $86 million.

“We all know that just because he showed up ... doesn’t necessarily explain what is going on.”

Huston, whose firm cut its holding in the Chinese firm last year from 8 percent of its portfolio to less than 1 percent, said the halting of the Ant IPO in November had caused uncertainty, and that Alibaba was “not a prudent investment” for it going forward.

David Kotok, chairman and chief investment officer at Cumberland Advisers, Florida, which has about $4 billion in assets, said he held Alibaba last year but also sold as the Ant IPO was pulled.

“When you don’t know what to do in an evolving situation like this you can’t use traditional securities analytics to reach decisions. We are standing aside and watching,” Kotok said.

Chinese regulators have set about reining in Ma’s financial and e-commerce empires since the Ant IPO suspension, which has weighed on its stock that remains below levels prior to the cancelation of the Ant IPO.

“What his actual state is will be completely up to Beijing to reveal to us,” Leland Miller, CEO of US-based consultancy China Beige Book.

“What we do know is whether Jack is running around, Jack is hiding or something else, Alibaba is not in the clear. There is a lot more of the story still to see.”

Some investors are, however, betting on long-term potential for Alibaba in the world’s second-largest economy.

Dennis Dick, a proprietary trader at Bright Trading, who holds Alibaba shares, said he had protected against a potential fall when speculation about Ma’s whereabouts began by buying put options.

He covered those puts earlier in January on a report that Ma was OK and retains a long position in the stock.

“We have been investors for many years ... there’s a very strong team of executives and Alibaba is bigger than just one person,” said a Hong Kong based long-only investor, declining to be named as he was not authorized to speak to the media.