Monday 25 June 2012

Eni to acquire two offshore exploration blocks in Vietnam from Kris Energy and Neon Energy

Eni S.p.A., an Italy-based company engaged exploration and production of oil and gas, has signed an agreement to acquire two exploration blocks located in offshore Vietnam from Kris Energy, Ltd. and Neon Energy, Ltd.
Kris Energy is a Vietnam-based independent oil and gas company, Neon is an Australia-based company engaged in the exploration and production of oil and gas properties.
The agreement cover blocks 105-110/04 and 120 located in the Song Hong and Phu Khanh basins in the Gulf of Tonkin. The Song Hong basin is estimated to contain 10% of Vietnam's hydrocarbon resources, mainly gas, and significant discoveries have recently been recorded there. The two blocks cover approximately 15,600 square kilometers of acreage.
The participating interests in the blocks will be Eni with 50% stake as operator, KrisEnergy with 25% and Neon with 25%.

Monday 4 June 2012

SSA Marine SWOT 2012

The constant pressure to lower operating costs in the face of volatile fuel prices could have a negative impact on SSA Marine's business.

Strength:

Significant international presence and broad service offering.

SSA Marine enjoys a strong brand image in the market by virtue of its international presence and broad service offering. The company has established a global presence with over 150 operations in 120 locations worldwide including Africa, Asia and Latin America. At its locations, SSA Marine provides a full spectrum of transportation services including terminal management, stevedoring, rail yard operations, project development management, technology system design, installation and training, equipment procurement, marketing support, trucking, warehousing, off-dock yard operations, and feasibility studies.

The company's strong international presence and broad service offering enhances its bargaining power and lends a significant competitive advantage.

Robust operational infrastructure

SSA Marine is a leading container terminal operator and cargo handling company. The company handles approximately 22 million container twenty-foot equivalent units (TEUs) per year. This is rendered possible with the company's strong operational network. Domestically, SSA Marine has worked steadily to establish productive cargo handling and related operations in every major US shipping region including the West Coast, East Coast, Gulf, and several river operations, as well as intermodal rail terminals across the country. The flexibility of these terminals, serving customers across different industries, places SSA Marine at a competitive advantage. The company's network enables it to gain access to key markets and enhance the quality of its delivery services.

Weaknesses

Private ownership.
SSA Marine is a privately held company, which places it in a disadvantageous position as compared to publicly held companies in terms of raising capital. Publicly held companies have greater financial flexibility in funding organic and inorganic initiatives. Public companies besides having better access to capital markets can fund acquisitions through stock transactions. Private ownership restricts financing options available to the company.

Legal issues impacting the company's reputation
The company is subject to many legal and environmental issues in the due course of its business. Such issues may increase the company's operating expenses. For instance, in March 2012, the company's proposal to build a coal-exporting terminal has drawn strong opposition from environmental groups and others locally. If completed, the Gateway Pacific Terminal could handle up to nine trains a day and 54 million tons of material a year. One group, Coal-Free Bellingham, decided to gather signatures with the hope of placing an anti-coal-train initiative on the Bellingham ballot in 2012.

Similarly, another group, called Protect Whatcom, sent a letter to county officials urging them to require an economic impact assessment as part of the environmental review for the project. Such issues impact the company's cost structure as it incurs additional costs in the form of legal expenses. In addition, frequent legal tussles would negatively impact SSA Marine's reputation in the market place.

Opportunities

Strategic contracts contributing to revenue stability

The company has entered into a number of contracts in the recent years. For instance, in October 2010, SSA Marine and its partners have received approval of their investment license to construct and operate a three berth container terminal at Quang Ninh Port in North Vietnam. Operations are scheduled to begin in 2012. The first phase capacity will be 510,000 TEU's per annum with future build out capacity to 1,200,000 TEU's per annum.
Similarly, in July 2011, the company won a $300 million contract to develop and operate a container and cargo dock at Tuxpan port in Veracruz, Mexico. The port is used to ship containers, steel and cars to Europe, the US and South America. In the same month, the company won a $300 million contract to build a key port on the Gulf of Mexico to ship containers, steel and cars to Europe, the US and South America. Such strategic contracts would contribute significantly to the company's revenue stability as the multi-year deals guarantees future revenues.

Construction of new terminals
The company is planning to expand its operations and enhance its production capacities by increasing its production facilities. In this context, the company planned to construct new shipping terminals throughout the US. For example, in June 2011, the company proposed to build a bulk-shipping terminal at Cherry Point, north of Bellingham in Washington. The new terminal is expected to hold approximately 54 million tons of bulk commodities including coal, wheat, potash (a mineral used in fertilizers), and calcined coke (a byproduct of oil refining). The terminal is also expected to store up to 2.75 million metric tons of coal at a time in an open-air 80 acre stockpile.

In addition, in December 2011, SSA Marine announced it plans to spend $200mn to expand Panama's Colon port. The expansion works which are scheduled to be carried out over the next two years include dredging the access canal, construction of a dock, three piers for post-Panamax ships and additional warehousing space as well as the installation of nine gantry cranes. Similarly, in March 2012, SSA Marine proposed to build a coal export terminal named Gateway Pacific Terminal in the US. Such expansions help the company to increase its production capacity and also help it to generate incremental revenues.

Threats
Volatile fuel prices
SSA Marine was significantly impacted by fuel price volatility in recent years.The prices of fuel have been fluctuating rapidly in the recent years. For example, the average price of WTI crude oil increased from about $79 per barrel in 2010 to about $95 per barrel in 2011. In addition, it is expected to average $104.1 per barrel in 2012 and $103.8 per barrel in 2013. The constant pressure to lower operating costs in the face of volatile fuel prices could have a negative impact on the company's business.
Competitive pressures
The shipping industry across the globe is competitive with several players offering a comprehensive range of services through a global platform. As a result, pricing pressures on freight rates are intense, and maintaining a low delivery time is crucial for success. Product differentiation is low, and players seek to differentiate their services by offering faster delivery times and extended services to attract market share. Moreover, the industry faces significant cost pressures and volatile fuel costs. Players are also investing in large capacity vessels to carry high capacity and to optimize delivery times. A competitive industry environment could put additional pressures on the company's operations.