Energy Sector Roundup: BP's Green May Go
Wednesday February 27, 3:46 pm ET
BP May Back Away From Green, Crude Falls on Inventories Report, Solar Shares Downgraded
NEW YORK (AP) -- Following is a summary of top stories in the energy sector Wednesday afternoon.
BP May Give Up Green in Turnaround Plan
BP PLC Chief Executive Tony Hayward suggested the oil company may offload part or all of its green business unit, reversing a central part of a plan to turn the company around.
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Hayward, giving his first annual presentation to analysts since taking over from former CEO John Browne last May, also said that BP may produce 4.3 million barrels of oil equivalent a day by 2012.
The green unit is worth between $5 billion and $7 billion, based on market valuations for similar companies, Hayward said.
Hayward said the company was making good progress with a restructuring plan aimed at improving BP's dismal operational performance after a turbulent year in which it was fined millions of dollars for environmental crimes and fraud.
BP has already begun cost-cutting and restructuring, including shedding 5,000 jobs, as it seeks to close the gap with rivals like Royal Dutch Shell PLC and Exxon Mobil Inc. caused by poor performance in BP's refining and marketing business.
Iain Conn, chief executive of that division, estimated that gap at $3.5 billion to $4 billion a year, assuming an average refining margin of $7.50 a barrel.
Inventories Data Push Oil Back from New High
Crude prices spiked above $102 a barrel for the first time but retreated after the government said stockpiles of crude oil and gasoline rose far more than expected last week.
Light, sweet crude for April delivery fell $1.24 to settle at $99.64 on the New York Mercantile Exchange, after surging as high as $102.08 a barrel in electronic trading earlier.
The weekly report from the Energy Department's Energy Information Administration showed U.S. crude oil inventories rose by 3.2 million barrels, well ahead of the 2.4 million barrel gain analysts expected, according to a survey by Dow Jones Newswires.
The data showed gasoline inventories also jumped more than expected -- by 2.3 million barrels. Analysts forecast a rise of 400,000 barrels.
Gasoline pump prices rose a penny to a national average of $3.15, according to AAA and the Oil Price Information Service. A year ago, drivers paid about $2.37 for a gallon of gas.
Gasoline futures fell by 7.28 cents to settle at $2.4777, while heating oil futures lost 4.39 cents to settle at $2.7711.
Natural gas futures gave up 27.6 cents, settling at $8.930 per 1,000 cubic feet on the Nymex.
House Tries Again for New Oil Company Taxes
House Democrats in Washington pointed to record oil prices and a surge in gasoline pump prices as they pushed to impose $18 billion in new taxes on the largest oil companies. Republicans argued the industry is being unfairly singled out for higher taxes.
House Speaker Nancy Pelosi, D-Calif., noted that the House twice last year passed similar tax provisions -- only to have them die in the Senate -- and "since then the price of gasoline has gone up 75 cents" a gallon, and large oil companies have made record profits. She said the bill will spur clean energy production with tax incentives for those industries.
Pride International in Deepwater Extension with Petrobras
Offshore drilling contractor Pride International Inc. got a six-year contract extensions for two of its deepwater rigs from Brazil's state-run Petrobras oil company.
Each of the deals is expected to generate $768 million, including a performance bonus, for combined revenue of about $1.5 billion.
The extensions for the semisubmersible rigs, Pride Rio de Janeiro and Pride Portland, are set to begin in late 2010 and early 2011. The two rigs have operated under contract to Petrobras since 2004.
Pride, which operates 64 rigs -- including eight deepwater vessels -- is set to report fourth-quarter earnings Thursday before the market opens. Wall Street expects profit of 55 cents per share.
Morgan Keegan analyst J. Michael Drickamer goes along with the consensus of analysts polled by Thomson Financial, but says he'll stay on the sidelines for now. He is concerned that Pride's exposure to the jackup rig market could hamper its earnings. He wants to hear more about the company's plans for its Gulf of Mexico operations, where most of its shallow-water drilling is focused.
Canadian Solar Signs Fixed-Price Silicon Contract
Canadian Solar Inc. entered a long-term, fixed-price contract for silicon wafers from Jiangsu Shunda Group Corp. through 2015. The solar-power product maker also has short-term agreements to receive wafers from four suppliers this year, including Jiangsu Shunda.
The long-term contract gives Canadian Solar the option of two fixed prepayments in late 2008 and 2010 for wafer supplies through 2015 at predetermined prices and schedules. That contract will provide for wafers with more than 700 megawatts of annual generating capacity over eight years.
Investors and companies favor long-term, fixed-price contracts because they limit a solar company's exposure to silicon spot prices, which are generally much higher.
Canadian Solar did not provide financial terms of the contracts.
A one-megawatt plant running continuously at full capacity can power 778 households each year, according to the Department of Energy.
Canadian Solar shares rose 44 cents, or 2.3 percent, to $19.76 in afternoon trading.
Bank of America Shades Solars
It was not a bright day for shares of most solar companies, as Banc of America issued downgrades saying high silicon prices, increasing supplies and weaker demand will hurt profit margins.
Analyst Eric Brown cut JA Solar Holdings Co. and Yingli Green Energy Holding Co. to "Neutral" from "Buy." He also cut his rating on Solarfun Power Holdings Co. to "Sell" from "Neutral" and changed Trina Solar Ltd. shares to "Sell" from "Buy." He cut price targets on all four stocks.
JA Solar shares rose 24 cents to $16.23 in afternoon trading, but Yingli lost $1.77, or 9.3 percent, to $17.30. Trina Solar gave up $2.57, or 7.5 percent, at $31.75; and Solarfun fell $1.43, or 10.2 percent, to $12.60.
LDK Solar Co. continued to fall -- down $2.01, or 6.6 percent, to $28.45 -- after some analysts repeated concerns about its polysilicon inventory accounting.
Argentina Worried About Bolivia Gas Supplies
Argentine officials are scrambling to find new sources of natural gas and other energy supplies following Bolivia's warning that it may not be able to provide all the supplies it said it would.
Argentina -- which suffered sporadic energy shortages last winter -- signed a contract in 2006 to buy more Bolivian natural gas -- up to 978 million cubic feet a day by 2011.
But Bolivia recently suggested renegotiating the contract because dwindling foreign investment in exploration for new reserves has caused it to struggle to deliver the gas promised to Argentina and other energy-hungry South American nations such as Brazil.
--Compiled by AP Business Writer Greg Stec. Questions or comments can be directed to gstec@ap.org.
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