Tickers in this Article: COP, E, OXY, HES
The ongoing civil war in Libya continues to hurt the operations of various energy companies and highlights the impact that geopolitical events can have on the oil and gas industry. Most operators expect the disruption to continue for the balance of 2011.

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Libyan Shortfall
Hess Corporation (NYSE:HES) reported average production of 399,000 barrels of oil equivalent (BOE) per day in the first quarter of 2011, down by 6% from the 423,000 BOE per day reported in the comparable quarter of 2010. The company cited the Libya unrest and the sale of assets in the North Sea.

Hess Corporation also reduced its full-year production forecast by 20,000 BOE per day as the management of the company assumes that the civil war will continue for at least the balance of 2011. The new forecast is for 2011 production to be in a range between 385,000 and 395,000 BOE per day. This reduction in production also had the effect of increasing the company's unit costs since they are expressed on a per barrel basis.

Hess Corporation allocated less than $100 million in capital expenditures for Libya in 2011 and will be able to spend these funds in other areas of its portfolio. The company also benefits from a lower tax rate overall.

Further Disruption
Conoco Phillips
(NYSE:COP) reported a 65,000 BOE per day production impact from "unplanned E & P downtime" in the first quarter of 2011, with Libya as the main component of this reduction in production. On a year-over-year basis, the company's production declined by 125,000 BOE per day.

Conoco Phillips expects a further disruption in its Libyan operations of 45,000 to 50,000 BOE per day for the rest of the year, with an earnings and cash flow impact every quarter of $25 million to $30 million. The company previously expected total company production to average 1.7 million barrels per day in 2011.

Eni (NYSE:E) had the most to lose from unrest in Libya and it showed in the first quarter of 2011, with the company reporting production from Libya down by 129,000 BOE per day from the same quarter in 2010. Overall company production for Eni fell by 8.6% from last year. The company is also being hurt by the closure of the GreenStream pipeline, which carries natural gas from Libya to Italy.

Little Impact
Occidental Petroleum
(NYSE:OXY) operates in Libya but did not see much of a production impact because the company is at an early stage of activity there. The company reported average daily production of 15,000 barrels of oil from Libya in the quarter, up marginally from 13,000 BOE per day from last year.

Total company production for Occidental Petroleum averaged 730,000 BOE per day in the most recent quarter, up by 4% from the same quarter last year. The company also wrote off $35 million in exploration expenses related to Libya during the first quarter of 2011.

Bottom Line
Civil unrest in Libya is hurting the operations of some major oil companies and underscores the importance of geopolitical events can have on the exploration and development of oil and gas resources. This disruption will continue for the rest of 2011. (So you've finally decided to start investing. But what should you put in your portfolio? Find out here. Check out How To Pick A Stock.)

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