The Zacks Analyst Blog Highlights:Royal Dutch Shell, Chevron, Exxon Mobil, BP and Petrobras
CHICAGO, Aug. 21, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Royal Dutch Shell plc (NYSE:RDS.A-Free Report), Chevron Corp. (NYSE:CVX-Free Report), Exxon Mobil Corp. (NYSE:XOM-Free Report), BP plc (NYSE:BP-Free Report) and Petrobras (NYSE:PBR-Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Wednesday's Analyst Blog:
Mexican Wave for Big Oil?
Last week, Mexican President Pena Nieto signed legislation which ended state control over the nation's oil sector. This is the first time since 1938 when private players will have access to the nation's oil reserves. During that year, the Mexican government had expropriated the resources and facilities of private players.
Pemex Dominates
These actions led to the creation of state-owned oil company Petroleos Mexicanos, or Pemex. Since then, the company has emerged as the world's seventh largest oil producer and dominated the Mexican energy space. The new legislation, which received legislative approval in December, goes a long way in diminishing Pemex's dominance.
On the other hand, it provides an opening to foreign companies which can now invest in Mexico's vast oil reserves. This includes behemoths like Royal Dutch Shell plc (NYSE:RDS.A-Free Report).
Reasons for Reforms
Oil production from Pemex has been declining for quite some time now. The state-owned company has been unable to match up to the pace of production across the world. Now, the government is opening up its energy space in order to increase the pace of production.
The government has said that rights for 83% of Mexico's "proven and probable" energy reserves will be awarded to Pemex as per a "Round Zero" allocation. The company's director Emilio Lozoya has said Pemex believes this will help to boost flagging production levels.
However, Pemex will have access to only 21% of the country's future oil and gas reserves. This is much lower than the share it had demanded. Speaking to CNN Lozoya said: "Of the prospective resources, we have received 67% of what we asked for."
Big Oil Gets a Boost
Pemex had demanded 31% of "possible reserves" before these allocations were made. But now, private companies will have access to the balance 79% of such reserves. This translates into at least 21 billion oil barrels which can be produced from the Gulf of Mexico.
In March 2013, Chevron Corp. (NYSE:CVX-Free Report) made large discoveries in this region at the "Shenandoah" and "Coronado" locations. Last month, Royal Dutch Shell announced that it has made yet another major find in the deepwaters of the Gulf of Mexico in the Norphlet play. Shell estimates resource potential of about 100 million barrels of oil equivalent.
Such discoveries will further increase interest in Mexican oil. In a statement to CNN, Exxon Mobil Corp. (NYSE:XOM-Free Report) said: "We will pursue potential investment opportunities in Mexico that are competitive with other opportunities around the world."
Apart from shale gas, these companies will compete for vast deepwater reserves in the Gulf of Mexico. These areas remain largely unexplored, in sharp contrast to furious activity taking place in U.S. territory.
What's in It for Mexico?
Oil majors were silent during the reforms process, declining to interfere in a politically sensitive exercise. In fact, Exxon was possibly the first oil major to break its silence post the enactment of the legislation. Now that reforms have started, they have set the stage for a fiercely competitive auction.
As a consequence of the reforms process, Mexico hopes to receive $50.5 billion in private and foreign investment by 2018. The "Round One" tender will invite bids for 69 exploration and extraction blocks. This includes both offshore and onshore areas which span an area of 28,500 square km.
Additionally, Pemex's director for exploration and production said the company hopes to enter into partnerships with oil majors for deepwater drilling. This includes the likes of BP plc (NYSE:BP-Free Report) and Petrobras (NYSE:PBR-Free Report). The company revealed that a year before reforms, the company received offers to enter into partnerships and utilize infrastructure on the U.S. side of the Gulf of Mexico.
Implementation is the Key
Mexico stands to make substantial gains from the reforms process. The country stands to gain monetarily from the auction of oil reserves. But more significantly, Pemex hopes to increase production to levels last witnessed in 2004 by 2025.
However, the success of these reforms lies in effective and transparent implementation. Efficient handling of the auctions and new procedures are the first step in this direction. Secondly, Mexico will have to deal firmly with corruption. It will have to prevent unfair trade practices and ensure that the auctions process is above board.
This is particularly relevant when it comes to Pemex. The state-run company has acquired a reputation for corruption which needs to be dealt with. A smooth reforms process will go a long way in aiding oil majors. It comes as no surprise that they have welcomed the announcement and are keenly watching developments on this front.
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today.
About Zacks
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros.
Get the full Report on RDS.A - FREE
Get the full Report on CVX - FREE
Get the full Report on XOM - FREE
Get the full Report on BP - FREE
Get the full Report on PBR - FREE
Follow us on Twitter: http://twitter.com/zacksresearch
Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Logo - http://photos.prnewswire.com/prnh/20101027/ZIRLOGO
SOURCE Zacks Investment Research, Inc.
Share this article