Investing in Energy E-Book

Gianna Bern

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Serie: Bloomberg Professional
• Sprache: Englisch

Seitenzahl: 336

Veröffentlichungsjahr: 2011

Beschreibung

An energy industry researcher and investment advisor provides a fresh perspective on the economics of energy From major players in the energy industry, such as big oil, to the emerging cap-and-trade market, no other book offers a more complete overview of the energy industry, specifically its economic and financial intricacies, than Investing in Energy: A Primer on the Economics of the Energy Industry. * Details how to value and invest in the four big energy sectors: oil, gas, power, and green * Describes key financial considerations for the energy sectors, including credit metrics, the importance of liquidity, cash flow, and capital expenditures * From Bloomberg, a leading provider of the most up-to-date business news and financial data A comprehensive guide to the economics of the energy industry, Investing in Energy will prove an invaluable resource for traditional energy investors looking to expand into new areas, as well as for eco-investors looking to better understand how energy markets function.

Leseprobe

Contents

Cover

Series

Title Page

Copyright

Dedication

Preface

Acknowledgments

Part I: Introduction and Financial Considerations

Chapter 1: Historical Perspectives

Oil and Gas Producers

Production Perspectives

Importance of Reserves

Regulatory Environment

Alternative Energy Forms

Alternative Energy Growth

Energy Investment Cost Considerations

Concluding Thoughts

Chapter 2: Investment Opportunities in Energy

Asia Comes of Age

Australia's Natural Gas Boom

Brazil Beckons with Deepwater

Iraq's Road to Recovery

North American Unconventional Natural Gas Plays

Solar Power Generation

Concluding Thoughts

Chapter 3: Cash Flow and Liquidity at Various Crude Prices

Independent Oil Companies

National Oil Companies

Capital Expenditure Planning

Liquidity—Cash Is Still King

Liquidity Metrics

Cash-Flow Considerations

Cash-Flow Metrics

Leverage

Concluding Thoughts

Chapter 4: Capital Structure and Capital Markets

Capital Structure

Investors

Alternative Energy Subsidies

Concluding Thoughts

Chapter 5: The Quarterly Earnings Disconnect

Short Term versus Long Term

Business Risks

Concluding Thoughts

Part II: Crude Oil and Natural Gas

Chapter 6: Analyzing Reserves

Authorities on Reserves

Proven Reserves

Industry Nomenclature

Proven Reserve Criterion

Unproven Reserves

Certification Process

More on Reserve Authorities

Measuring Reserves

Concluding Thoughts

Chapter 7: Crude Oil Markets and Production

The Crude Oil Markets

Benchmark Crudes

Inventory Levels

Crude Oil Quality

Crude Oil Markets

Concluding Thoughts

Chapter 8: Natural Gas Markets and Production

De-Coupling of Natural Gas from Crude Oil

Conventional Natural Gas Production

North American Unconventional Natural Gas Shale Plays

Canadian Natural Gas Markets

Natural Gas Markets

LNG—Fuel for the Future

Natural Gas Storage

Natural Gas as a Utility

Natural Gas—The Cleaner Fuel

Concluding Thoughts

Chapter 9: Understanding Refining Economics

The Business Model

Challenge for Independent Refiners

Physical Crude Oil Trading

Refining Capacity, Complexity, and Utilization

Benchmark Crude Oils

Crack Spreads

The Challenge

Concluding Thoughts

Chapter 10: Integrated Majors and the Evolution of the Competitive Landscape

Role of National Oil Companies

The Road Ahead for Integrated Majors

U.S. Safety and Regulation

UK Environmental Program

Technological Challenges Abound

Reserve Changes

Concluding Thoughts

Chapter 11: The Oilfield Service Sector and Oil Juniors

The World Is Their Platform

Oil Juniors: Is Smaller Better?

Concluding Thoughts

Chapter 12: OPEC

OPEC Organization

OPEC Crude Basket

OPEC Crude Production

OPEC's Role during the Financial Crisis 2008 to 2009

Saudi Arabia's Role in OPEC

OPEC versus Non-OPEC Reserves

Geopolitics of Crude

Nationalization of Assets

Concluding Thoughts

Chapter 13: Bidding and Production Rights

Brazil

Mexico

Norway

The United Kingdom

Venezuela

Concluding Thoughts

Chapter 14: Analyzing State-Owned Oil Companies

Hydrocarbons, a Source of Revenue

Regulatory Frameworks

Concessions and Bid Rounds

Taxes and Royalties

Pensions and Legacy Support

Transparency

Social Programs

Capital Markets

Mexico's PEMEX

Ownership Structure

Hybrid-Capital Companies

Concluding Thoughts

Chapter 15: Crude Oil Pricing and Industry Investment

Higher Crude Prices Impact Demand

Global Oil Imbalance

Unprecedented Financial Crises

Great Commodity Collapse of 2009

Leverage Creep

Improved Market Fundamentals

Investment Outlook

Concluding Thoughts

Part III: The Power Sector

Chapter 16: Hydroelectric Power

Advantages

Disadvantages

China

Brazil and Paraguay

Concluding Thoughts

Chapter 17: Nuclear Quagmire

The Issue: Nuclear Waste

The Benefits

Nuclear Power in the United States

The Future of Nuclear Energy

Nuclear Energy in France

Concluding Thoughts

Chapter 18: Geothermal and Wind Energy

United States

Philippines

Wind Generation Energy

Denmark

United Kingdom

Concluding Thoughts

Chapter 19: Solar Energy

Types of Solar Energy

Spain

Germany

Concluding Thoughts

Part IV: Green Energy

Chapter 20: Biofuels and Ethanol

Biofuels Development

Ethanol Development

Concluding Thoughts

Chapter 21: Cleaner Coal

Coal as a Fuel Source

Cleaner Coal

Concluding Thoughts

Part V: Summary and Conclusion

Chapter 22: Opportunities and Challenges in Green and Traditional Energies

Renewable Energy

Cap and Trade

Natural Gas Opportunities

Offshore Drilling Challenges

Concluding Thoughts: Energy Independence—A Strategic Imperative

Appendix: Energy Equivalent Conversions

Glossary

About the Author

Index

Since 1996, Bloomberg Press has published books for financial professionals on investing, economics, and policy affecting investors. Titles are written by leading practitioners and authorities, and have been translated into more than 20 languages.

The Bloomberg Financial Series provides both core reference knowledge and actionable information for financial professionals. The books are written by experts familiar with the work flows, challenges, and demands of investment professionals who trade the markets, manage money, and analyze investments in their capacity of growing and protecting wealth, hedging risk, and generating revenue.

For a list of available titles, please visit our web site at www.wiley.com/go/bloombergpress.

Copyright © 2011 by Gianna Bern. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, [phone], fax [phone], or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, [phone], fax [phone], or online at http://www.wiley.com/go/permissions.

Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at [phone], outside the United States at [phone], or fax [phone].

Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. For more information about Wiley products, visit our web site at www.wiley.com.

Library of Congress Cataloging-in-Publication Data:

Bern, Gianna. Investing in energy : a primer on the economics of the energy industry / Gianna Bern. p. cm. – (Bloomberg financial series) Includes index. ISBN 978-1-57660-375-8 (hardback); ISBN 978-0-47087-878-1 (ebk); 978-1-118-12838-1 (ebk); 978-1-118-12839-8 (ebk) 1. Energy industries–Finance. 2. Investments. I. Title. HD9502.A2B475 2011 333.79–dc22 2011006383

This book is dedicated to my incredible family whose encouragement eradicated any doubt that this project was achievable: my treasured parents, my sister, brother, and their spouses, and my husband and children, who have lovingly nurtured and sustained the heart and soul of this budding author. Thank you all for your support, patience, and understanding.

Preface

It is my sincere hope that this book lays a foundation for those new to energy and fills in gaps for the veterans of the energy sector. The energy sector is a very complex and growing sector for investment. Investing in Energy illustrates numerous developments worthy of consideration and review by those interested in learning more about and investing in energy.

This book takes a comprehensive and financial approach to learning about oil, gas, and renewable energy. Part I reviews financial considerations necessary for evaluating and assessing cash flow, capital structure, and the role of capital markets across a myriad of energy sector firms.

Part II is the heart of the book and covers the economics inherent to the oil and gas sector such as reserves, production, crack spreads, and refining economics. We also review certain basics relevant to the oil and gas markets and explore why the crude oil and natural gas markets behave the way they do. Part II considers the role of OPEC, production rights, oilfield sector companies, oil juniors, independent oil companies, and national oil companies. Finally, Part II evaluates the complex landscape of crude oil pricing and its volatility in the commodity markets.

Part III of Investing in Energy assesses the current state of the power sector across various global markets. In this section, we bring readers up to date on developments in solar energy, hydro electrical power, nuclear power, geothermal electricity, and wind energy.

Part IV addresses developments in green energy such as bio fuels and ethanol. Once again, we analyze various other global markets, to ascertain where there are challenges and perhaps some opportunities across the energy landscape for biofuels, biomass, and ethanol.

Part V concludes with a summary of various opportunities we explored in the book and reviews the notion of energy policy as a sovereign's strategic and economic imperative.

Acknowledgments

Books are rarely the efforts of a single individual. I must acknowledge the incredible assistance from my husband and business partner Lester Bern, whose insights, advice, and editorial assistance are pervasive throughout this book. He kept my feet to the fire, always insisting upon perfection; this book would not have been possible without his help. I would also like to acknowledge my appreciation for Lester’s technical and editorial expertise in chapters 16–19.

Enormous gratitude also goes to my outstanding editorial team at John Wiley & Sons: Laura Walsh, senior editor, and Judy Howarth, development editor. Their guidance and editorial expertise were indeed extraordinary and valuable. I am fortunate that they were on my team. Thanks are also given to the Wiley graphics department for its creative expertise and to my production editor, Melissa Lopez for her insights and patience.

Special acknowledgements and thanks are given to Team Pope for its unique analytics and graphics assistance.

My colleagues at Capital IQ and Bloomberg News are thanked for permitting me to use, throughout the book, various proprietary data used for illustrative purposes.

Special thanks go to Evan Barton, the Bloomberg Press editor who recognized the merits of this project and championed it in its early days. This book would not have been possible without his initial support. Finally, another special heart-felt thank you is extended to Joe Carroll of Bloomberg News, for his early and continuing support of this project.

Part I

Introduction and Financial Considerations

Chapter 1 Historical Perspectives

Financial Considerations

Chapter 2 Investment Opportunities in Energy

Chapter 3 Cash Flow and Liquidity at Various Crude Prices

Chapter 4 Capital Structure and Capital Markets

Chapter 5 The Quarterly Earnings Disconnect

CHAPTER 1

Historical Perspectives

The energy industry is undergoing unprecedented change as it reacts to new challenges in safety, regulation, exploration, and alternative-energy initiatives. One need only layer on the global political environment and the long-ranging repercussions of the 2010 Gulf of Mexico oil spill or the turmoil in the Middle East to realize that the energy sector is as complex as it has ever been. From this increasing complexity springs the need for this book. The following pages present a framework for understanding the basic elements of energy-industry economics. While not covering geology or refining from technical standpoints, this book provides a framework for analyzing the industry's basics and economics, and thereby helps prepare investors and other energy-industry professionals to more confidently venture forth into this vast and complex sector.