Abu Dhabi Spanish oil unit Cepsa acquires stake in Liberian exploration block



Compania Espanola de Petroleos (Cepsa), the Spanish oil company owned by Abu Dhabi's International Petroleum Investment Company (Ipic), said it had acquired a 30 per cent stake in an exploration block off the Liberian coast in a so-called farm out agreement.

The move into West Africa comes as part of the Madrid-based company’s expansion into emerging markets.

The block, LB-10, is operated by Anadarko Liberia Block 10, a wholly owned subsidiary of Anadarko Petroleum Corporation headquartered in Texas, Cepsa said.

Cepsa did not say how much it intends to spend on the stake.

Under the farm out agreement, an oil and gas company will typically bring on board a third party to share expenses of exploration and drilling in return for a cut of the final profits.

In this agreement, Cepsa will participate in the drilling of two exploratory wells before August 2016, it said. The block is in a deep water area, with depths of between 1,000 and 2,000 metres.

Cepsa and Anadarko, which has extensive experience as an operator in this basin, are joined in the block by London-based Liberia Japan Petroleum and Repsol of Spain.

Cepsa’s chief executive Pedro Miro said in November that the company plans to spend US$10 billion in the next five years to expand its exploration and petrochemical businesses in North Africa, South America and South East Asia.

In the same month, Cepsa and partner Strategic Resources bought Coastal Energy for $2.2bn. Its biggest acquisition since 1999, Coastal Energy gives Cepsa a portfolio of oil and gas assets in South East Asia.

Cepsa’s largest production facilities are in Algeria and it would like to invest a further $1bn in that country, where it boasts a long-standing relationship with the government, Mr Miro said last year.

Cepsa’s offshore portfolio includes two exploratory blocks in Brazil and one in Suriname as well as exploration and production blocks in Thailand and Malaysia.

Ipic, formed by the Abu Dhabi Government in 1984 to invest in energy around the world, made a 10 per cent investment in Cepsa in 1988 and increased its stake to 47 per cent in 2009. It became the sole shareholder in 2011 after buying the stake held by France’s Total for $5.4bn.

Abu Dhabi, which holds about 6 per cent of the world’s oil reserves, has been buying global energy assets to diversify its stores of wealth and to buy companies that can enhance exploration and production at home through advanced technologies.

Cepsa, which also works in Brazil, Canada, Panama and Peru, has said that it is also keen to grow in the field of petrochemicals, where demand from Asia is expected to accelerate. It is building a plant in Shanghai to produce phenol, a petrochemical used in the production of detergents and pharmaceuticals.

mkassem@thenational.ae

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What does the S&P 500's new all-time high mean for the average investor? 

Should I be euphoric?

No. It's fine to be pleased about hearty returns on your investments. But it's not a good idea to tie your emotions closely to the ups and downs of the stock market. You'll get tired fast. This market moment comes on the heels of last year's nosedive. And it's not the first or last time the stock market will make a dramatic move.

So what happened?

It's more about what happened last year. Many of the concerns that triggered that plunge towards the end of last have largely been quelled. The US and China are slowly moving toward a trade agreement. The Federal Reserve has indicated it likely will not raise rates at all in 2019 after seven recent increases. And those changes, along with some strong earnings reports and broader healthy economic indicators, have fueled some optimism in stock markets.

"The panic in the fourth quarter was based mostly on fears," says Brent Schutte, chief investment strategist for Northwestern Mutual Wealth Management Company. "The fundamentals have mostly held up, while the fears have gone away and the fears were based mostly on emotion."

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Maybe. It depends on what your long-term investment plan is. The best advice is usually the same no matter the day — determine your financial goals, make a plan to reach them and stick to it.

"I would encourage (investors) not to overreact to highs, just as I would encourage them not to overreact to the lows of December," Mr Schutte says.

All the same, there are some situations in which you should consider taking action. If you think you can't live through another low like last year, the time to get out is now. If the balance of assets in your portfolio is out of whack thanks to the rise of the stock market, make adjustments. And if you need your money in the next five to 10 years, it shouldn't be in stocks anyhow. But for most people, it's also a good time to just leave things be.

Resist the urge to abandon the diversification of your portfolio, Mr Schutte cautions. It may be tempting to shed other investments that aren't performing as well, such as some international stocks, but diversification is designed to help steady your performance over time.

Will the rally last?

No one knows for sure. But David Bailin, chief investment officer at Citi Private Bank, expects the US market could move up 5 per cent to 7 per cent more over the next nine to 12 months, provided the Fed doesn't raise rates and earnings growth exceeds current expectations. We are in a late cycle market, a period when US equities have historically done very well, but volatility also rises, he says.

"This phase can last six months to several years, but it's important clients remain invested and not try to prematurely position for a contraction of the market," Mr Bailin says. "Doing so would risk missing out on important portfolio returns."

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