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Real-Time news about Enterprise Oil (London Stock Exchange): 0 recent articles
|maywillow: no real movement in share price despite takeover offer.|
|bionicdog: from the FT. the last two paragraphs will be of most interest to ETP holders.
"Onlooker: War makes oil a 'win-win' buy
By Vince Heaney
Published: March 15 2002 17:20 | Last Updated: March 15 2002 17:47
The possibility of US military action against Iraq cannot be ignored by investors. A second Gulf War could snuff out signs of stock market resurgence and threaten to derail the cyclical economic recovery. Investors need to look for stocks that offer the prospect of solid performance if the economic recovery continues to develop, but which also offer a degree of protection in the event of war in the Gulf. The oil sector appears to fit the bill.
I remain cautiously optimistic about the prospects for UK stocks based on improvements in the macroeconomic backdrop and the technical condition of the market, topics covered in last week's column. But experience suggests war against Iraq would produce a sharply higher oil price. The consequent transfer of income from oil consumers to producers would reduce global economic growth at a time when the scope for policy response is limited by the extent of changes already enacted in the wake of September 11.
Some insurance is needed. But the problem with assessing political risk is that it is difficult to assign a probability to the worst-case war scenario. Paying too high a price for protection can leave you high and dry if the worst outcome is avoided. The FTSE oil sector has performed strongly in 2002, rising by more than 13 per cent in the year to date. The pace of increase has picked up in March as the perceived threat of military action has grown, driving the crude oil price higher. Investors need to ask if there is still value in the sector.
Strategists at Merrill Lynch see scope for further upside, describing the European energy sector as a "win-win" proposition. A recovery in global manufacturing will increase demand for oil. If the economic recovery disappoints, Merrill suggests that an attractive mix of characteristics including sound balance sheets and solid earnings growth rates would cushion the sector.
Valuations are not excessive. Energy is the cheapest European sector on the Merrill Lynch valuation matrix. According to Credit Suisse First Boston, current share prices for the UK oil and gas sector imply a 10-year earnings growth rate of 7 per cent. By historic standards expectations do not look high - the actual 10-year earnings per share growth rate for the sector is almost 15 per cent.
But recent share price increases have introduced a note of caution. "After a reasonable run-up the absolute valuations are starting to look a bit stretched," says Mark Iannotti of Schroder Salomon Smith Barney. However, Iannotti believes the risks are not great - with crude prices above $18-$19 a barrel there will be support from earnings growth.
The crude price outlook is brighter than at the start of the year, even excluding the potential for war. In January there were doubts about compliance with the December 28 Opec agreement, and whether it would be sufficient to avert a price war between Opec and Russia. However, "threats of a price war failed to materialise, and ultimately price levels revealed the market's backing of the agreement, offsetting lower-than-expected demand due to the mild winter in the northern hemisphere," said Edward Ennis of SG Securities. The success of the agreement led the cartel to extend the quota cuts through the second quarter at yesterday's Opec meeting.
Restriction of supply will help support prices during seasonally weak demand in the second quarter, while resurgent economic growth is expected to increase oil demand as the year progresses.
Valuations look reasonable and the crude price outlook is brighter, but it is not all good news. Refining margins remain very weak, suffering from a reduction in demand after the September 11 attacks and the mild winter. Analysts see little improvement in margins in the second quarter. However, the weakness in refining margins encourages producers to reduce production runs and works to reduce stocks of refined products. Lower inventories combined with increased demand later in the year may produce a recovery in margins over the medium-term.
There is a strong positive correlation between oil prices and oil stocks. Profit at oil majors BP and Shell increases by around 5 per cent for every $1 a barrel increase in the oil price. Enterprise Oil suffers from being stuck between the higher returns offered by the majors and the growth potential of the smaller exploration companies, but it offers a more highly geared play on the oil price.
Mark Redway of Teather & Greenwood suggests Enterprise is fair value at 670p with oil prices at $20 a barrel, but if there were a sustainable rise to $24, not merely a spike higher, a valuation in excess of 700p would be more appropriate. Enterprise Oil is also a potential takeover target having already rejected an unsolicited bid in December, reportedly from Italy's ENI. The possibility exists for a premium in the event of a fresh approach.
If the recovery takes off, the oil sector will not be the year's star performer, but it has solid prospects and defensive appeal in the event of war in the Gulf.
Contact Vince Heaney"|
|diydan: Still waiting for news of bid! However that run of other oil stocks has continued yet etp not moved even with large rise in oil price. I would have thought it would at least have moved up with that. I am not sure how much of etp price is now based on possible bid and how much is based on current oil price. Anyone have any views?|
|t.ainscough: Sorry meant to say "no announcement" in the above post.
Saw that news- but don't understand why that would cause a leap in the share price- Must admit I expected a fall!|
|nackaerl: Just see the strategic presentation on eni's website , there will be a bid.However etp price can go down the next days or weeks|
|bionicdog: from the sunday times today.
Feature: Enterprise chief heads for troubled waters
The oil company kept ENI’s cash bid quiet. And there’s fury now the secret is out, says John Waples
WHEN Sam Laidlaw joined Enterprise Oil in November as chief executive, he came with a big reputation. The Old Etonian had previously run the British operation of Amerada Hess, the American oil giant.
But if Laidlaw thought he would be allowed time to settle in, he quickly discovered otherwise. His honeymoon at the £2.8 billion oil-and-exploration group has been short. Just two months into the job, he was on the receiving end of a takeover approach from ENI, the aggressive Italian oil group, which is 30% government owned.
Laidlaw and his board, which includes Sir Brian Moffat, former chairman of the steel group Corus, received the approach in mid-December. But after advice from his two brokers and NM Rothschild, the corporate-finance house, he chose not to tell shareholders.
When the City returned to work after the new year break, it began to get wind that an approach had been made. The Enterprise share price leapt a week last Friday, partly helped by a positive broker’s note from UBS Warburg. This was followed by persistent chatter that Enterprise was in play and by Tuesday Laidlaw had to confirm that an “opportunistic” approach had been made.
Shares in Enterprise immediately jumped 21% to close at 605p. By the end of the week they were 624½p. They now stand some 35% higher than on the date of the offer.
ENI and Lazard, its financial adviser, will renew the pressure on Enterprise this week and most analysts believe this is just the opening shot by Vittoria Mincat, ENI’s chief executive. Steve Turner at Commerzbank agrees: “This is the beginning of the end for Enterprise.”
It is thought ENI’s cash offer was about 600p and a number of Enterprise investors, including Deutsche Bank, are angered that they were not given the chance to consider it. Analysts say that if ENI increased the bid to between 650p and 700p, most shareholders would bite.
The Italian suitor is not the only buyer in town and, should a formal bid be made, oil companies, particularly those in North America, could join in. Talisman of Canada and Anadarko are both thought to be watching events closely.
ENI has been one of the drivers behind the consolidation among the stock market’s sub-sector of independent oil- exploration groups. In the past two years it has bought Lasmo (outbidding Amerada Hess) and British Borneo, and it remains acquisitive.
Tomorrow Mincat will outline his intentions when he makes a corporate-strategy presentation to Italian investors. This will be followed by a presentation in London on Tuesday.
Similarly, Laidlaw has brought forward Enterprise’s results from February 22 to the first week of next month. At the event he intends to unveil his own strategy to revive the company’s fortunes but analysts say he will have a tough job convincing investors to stay put.
One said: “If the right price (before the ENI approach) for this stock was 425p, how on earth is he going to be able to get the price up to between 650p and 700p? If he can do that, he should be running Shell.”
Laidlaw also has to convince investors that Enterprise de-serves to remain independent. Richard Snape at Charles Stanley says: “For a Footsie stock it is not as liquid as you might think. There was a time when exploration and production companies had their own classification but now they have been lumped together with Shell and BP.
“That sub-sector has contracted while the two majors have got bigger. For many fund managers the only question is ‘how many Shell should I have versus BP?’ because the performance of the sector is driven by those two companies.”
Laidlaw has initiated a full-scale review of Enterprise’s operations. The big issues are whether the company remains in the Gulf of Mexico and whether he concentrates on high-risk, high-return deep-water exploration or moves to lower- risk exploration with more production.
Snape says: “He has a tough job on his hands but it’s certainly not impossible.”
At the moment the Gulf of Mexico operation is too small and Laidlaw has the choice of doubling up or selling up. He may come with a clean sheet of paper but the shareholder base he inherits does not. Many have become disillusioned after several years of underperformance and flat production levels.
When Enterprise was run by Laidlaw’s predecessor, Pierre Jungels, the group did well in driving down its development and operating costs. But he failed to boost production.
Snape says: “The group has not exhibited any underlying volume growth for some time. The biggest component in the increase in profitability has been the higher oil price. If all you want to do is play the oil price, you might just as well buy the underlying commodity. When you are running a company you have to do a bit more than that.”
and from the observer
Enterprise's mystery suitors
Sunday January 13, 2002
Enterprise Oil has been a bid target for so long that the only surprise in last week's revelation was that the company would not disclose the name and terms offered by the suitor. The market quickly concluded it was Italian rival ENI, but the betting is it will not stay the only name in the frame.
The approach comes at an interesting time both for Enterprise and the industry. The company's new chief executive, Sam Laidlaw, is to announce the results of his strategy review on 5 February, earlier than expected, and the City has high hopes, expecting everything from an increase in predicted growth rates through acquisitions to a full-scale merger with an American rival.
Many of its bigger rivals are just realising that the cost-cutting and rationalisation that followed the plunge in oil prices in 1997 has left it with a production gap. An acquisition would fill that nicely but possible targets are thin on the ground - Enterprise and BG, the gas exploration arm spun out of British Gas, are the only European businesses of any size left. If ENI does open the bidding, it is unlikely to be left on its own. Even Shell might think it worth a look. While some doubt that Amerada Hess, Laidlaw's former employer, could afford it, it would want to have a look. Other bidders include Anadarko, Marathon or UKOS.
ENI may have made its approach because Enterprise looked cheap - its shares traded at around 450p in December - but that does not mean it will get a bargain. Jurjen Lunshof of Crédit Lyonnais calculates that ENI bought Lasmo, one-time prospective partner for Enterprise, for the equivalent of $4 a barrel of proven and provable reserves, to use the oil jargon. Enterprise has been trading at less than $3.50 but Lushof thinks it would fetch at least $4.50. And that could push the price up above 700p a share.|
|venomousviper: Should ETP share price not recover to a more realistic level I think we can expect a bid
When oil companies are able to see a more stable outlook to oil prices they will have a better idea of where to pitch a fair offer for Enterprise Oil.
If ETP stays at this level or drifts lower a bid is imminent ETP is a class act with prestigious acreage.
The city hates it so watch it get taken out by shrewd operators.|
|bpoole: Oil prices headed for $10 says FT. ETP price headed for 250p.|
|slyfox: ETP has had a pretty raw deal from the markets.
Back in the spring when oil prices were high, their share price took a beating when they said that this year's production would be lower than last. Now that the oil price has fallen the drop in production is actually a good thing. But their share price still gets hammered, worse than its peers.
Definitely a strong buy at these levels- we're still a long way from $10 a barrel remember !|
|pparkin405: Haven't got any shares in ETP would like too, hold Premier oil similar story there i'm afraid,it's got to be a good buying opportunity which I had lots of money,everything going for this stock with new CEO, recent buy backs, low share price, good profits, there's got to be a good rebound once oil situation sorted out|
Enterprise Oil share price data is direct from the London Stock Exchange