PetroChina, Sinopec Surge on Industry Merger Speculation

PetroChina Co. and China Petroleum & Chemical Corp., the nation’s two largest oil explorers, jumped by their daily trading limit in Shanghai on Monday on speculation the government is considering mergers.
“Big oil names are soaring because of speculation that the government is studying mergers in the industry,” said Clement Cheng, an equity trader at RBC Investment Management Asia in Hong Kong. “The oil sector has been undervalued for a long time.”
PetroChina jumped 10 percent to 14.65 yuan, the highest in more than five years, and China Petroleum, or Sinopec, also rose 10 percent to 8.56 yuan as of 2:26 p.m. in Shanghai. The Shanghai Composite Index climbed 2.6 percent to 4,506.15.
Separately, the Economic Information Daily reported today that China’s state-assets regulator may cut the number of government-owned enterprises to 40 from 112 through mergers and restructuring. The report, which didn’t specifically mention Sinopec or PetroChina, cited people it didn’t identify.
A merger of the two Chinese oil explorers goes against China’s own policy of allowing markets to play a greater role in the allocation of resources, Bloomberg Intelligence analyst Grace Lee said.
“A merger of the two will only create more monopoly, not less,” she said. “I don’t see it helping with overseas aquisitions in any way, as a bigger company will certainly invite more antitrust concerns.”
PetroChina will announce first-quarter earnings today. Profit may drop 71 percent to 9.98 billion yuan, based on the average of three analyst estimates compiled by Bloomberg. Sinopec may post a 1.88 billion yuan first-quarter loss later this week, compared with a 13.5 billion yuan profit a year ago.

Denmark, Goldman Decide on Possible Split of Dong After 2015

Denmark’s government, Goldman Sachs Group Inc., and the other owners of Dong Energy A/S will base any decision to split up the state-backed utility on a review due to be published later this year, Danish Finance Minister Bjarne Corydon said.
“A plan is being drafted for the future development of Dong Energy ahead of the stock-exchange listing,” Corydon said in an e-mailed reply to questions forwarded by his office. “Based on that, a decision will be made. The plan is expected to be completed in the second half of 2015.”
The review, conducted by JPMorgan Chase & Co., explores a number of options including one that envisages Dong Energy spinning off, or selling, its oil exploration and production unit, Bloomberg News reported last month, citing three people with knowledge of the matter. Corydon said the review isn’t focused “specifically on analyzing the company’s E&P unit.”
Skaerbaek, Denmark-based Dong Energy, the world’s largest operator of offshore wind parks, is struggling to find the right balance between its operations in wind, thermal power and oil and gas as energy prices fall. Some of Dong Energy’s bondholders have spoken in support of the prospect of getting rid of the E&P business, arguing the unit has turned into a liability.

Back Shares After Loeb Pushes Change

Fanuc Corp., a Japanese maker of industrial robots, said it would double its dividend payout ratio and buy back shares, following calls by billionaire investor Daniel Loeb to return more cash to shareholders.
The dividend payout ratio will be 60 percent starting with the year ended March 31, compared with 30 percent for the previous year, the company said today in a statement.
Loeb’s Third Point LLC said in February it had acquired a stake in Fanuc and urged the company to buy back stock. Third Point said the company was similar to Apple Inc. in its approach to products, but its capital structure was “illogical.”
“Clearly, Fanuc was conscious of the fact that they had to provide better returns to investors,” Mitsushige Akino, an executive officer at Ichiyoshi Asset Management Co. in Tokyo, said by phone. “It’s good for the market in general, you can expect to see a lot of other companies doing things like raising dividends or buying back shares.”
The company said Monday it would buy back shares “in a flexible manner,” according to the statement.
The robot maker has had a reputation for secrecy and declining to meet with shareholders. Loeb is among the investors that have sought more open policies.
In March, Fanuc had said it planned to start a shareholder relations department and begin meeting with stockholders. Loeb at the time praised the company’s President Yoshiharu Inaba for the steps.
“Dr. Inaba’s consistent adaptability and sharp focus have made Fanuc a world-class company,” Loeb said in an e-mail at the time. “We are pleased he is applying these same principles to capital allocation and investor engagement.”
Fanuc also said Monday that net income almost doubled to 207.6 billion yen in the 12 months ended March 31, the company reported Monday. That compares with the 195.5 billion yen average of 20 analyst estimates compiled by Bloomberg.
The company’s shares gained 1.1 percent to close at 26,800 yen in Tokyo trading Monday, before the dividend announcement. The stock has jumped 34 percent this year, compared with a 15 percent increase for the benchmark Topix index.

Norway’s Shift From Oil Starts With Two Left Feet

Norway's prime minister is fond of saying the nation is facing a ``new normal'' as a decade-long boom in its petroleum industry starts to fade. Erna Solberg has given little explanation of what that means, except to say that ``knowledge is the next oil'' and ``fish will be Norway's Ikea,''  ideas she echoed in a speech on Friday at her party's annual convention in Oslo.
It's no wonder then that economists are scratching their heads as to what will fill the gap in the economy once oil takes up less space.
The biggest element crippling the oil and non-oil industry is the exorbitant price of labor. Average hourly wage costs in Norway were 47 percent higher than those in the European Union last year, according to government statistics.
``And that's after taking into account the considerable weakening of the krone through 2013 and 2014,'' said Kari Due-Andresen, chief economist at Svenska Handelsbanken AB. ``This is hardly a good starting point for a major transition.''
Rising oil and gas prices over the last 15 years kept Norway afloat, even during the financial crisis when the rest of the world was suffering. As western Europe's biggest crude producer, the country relies on oil and gas for more than one-fifth of its gross domestic product.