How can a loss making Unit in the Oil Sector Invest Billions in Overseas Oil Sctor?

Question

On page 17 of today's Times of India, there is a news about the ONGC group  submitting $.5 bn bid for Conoco Assets in Canada.

While our Ministers are lamenting about the Loss in Petroleum Sector and trying to curb the supply of Gas  Cylinders for Domestic consumers,we hear about the ONGC's attempt to  go on Investment Spree for controlling Overseas Oilfields. One can not understand the Logic behind such  policies as to how the Company can find surplus funds when they are unable to  sustain the subsidies on the  domestic Gas Cylinders? Can any body throw light on this?

underexposed... · Accepted Answer

http://business-standard.com/india/news/ongc-ioc-oil-india-bid-for-conoco-canada-oil-assets/188291/on

hmmm...well the Oil Sands of Alberta have reserves of oil that rival the middle East so many major oil companies want a piece of this action.

ConocoPhilips is an American company not a Canadian Company so I smile when I see this comment in the news article

"A trio of state-controlled oil companies on Monday said it has bid $5 billion for stakes in Canadian oil sands assets owned by ConocoPhillips , in what could be the next major test of Canada's appetite for foreign investment in its energy resources."

I don't see this as a test of Canada's foreign policy on the Oil Sands as it would be just one foreign country (USA) selling a property to another foreign country. There is no net loss of Canadian content here. The Indian publication is wrongly assuming that Conoco is somehow a Canadian company I suppose :)

It is also a very small deal...producing only 12,000 barrels of Oil / day is not a major purchase.

in fact it is a drop in the bucket. Since Conoco is not acknowledging the "rumour" leads me to almost believe that this is a pump and dump info leak.

http://www.conocophillips.com/EN/about/company_reports/fact_book/Documents/FactBook-Spring2012.pdf

here is the information on ConocoPhillips holdings...on page 40 of this document you will find the production from their oil sands projects

Foster Creek:    46 million barrels/day of Bitumen
Christina Lake:  11 million barrels/day of Bitumen
Surmont:           10 million barrels/day of Bitumen


Pfffftttt:  12,000 barrels/day production is nothing...a pittance.

Also this is just a proposal...not a done-deal...Conoco has not even acknowledged the bid by Indian companies if it really exists.

Finally, I looked at the website of ONGC

http://www.ongcindia.com/

Funny...no press release about such a deal....really...Nothing

I don't know what the reputation of Business Standard is in the Indian investment community but this deal if it is a deal....is really really small....or it is a pump/dump rumour

Just my opinion

cornflake#1 · Answer

Oil is a high value commodity (look at what is happening to the price of gas). 

Banks and investors are prepared to throw money at something - even if it only has a possibility of making a return.  In this case the risk is enormous - so the return will be likewise.

Also - these big oil companies can hire crafty accountants who can legally cook the books to turn a profit into a loss through mysterious taxes and whatever changes in an assets values. That way the company appears poorer than it really is, while still giving shareholders large dividends

DeAnne · Answer

Invest in Zion Oil and Gas; it's booming

? · Answer

Welcome to the world of the leveraged strategic buyout.

How can a loss making Unit in the Oil Sector Invest Billions in Overseas Oil Sctor?

4 Answers