Addressing the Billions Underserved

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No Organic Growth for Chemical Giants

A federal jury in the U.S has ordered Dow Chemical (NYSE:$DOW) to pay $400 million in fines over price fixing of urethane. Several companies were named in the $1 billion class action law suit filed by urethane buyers but Dow was the only one that had not settled. Other defendants in the case included Bayer AG, Huntsman Corp’s (NYSE:$HUN) Huntsman International and BASF SE. Dow will try to have the lawsuit dismissed in a post-trial motion.  However, if the verdict is sustained by the judge, then the $400 million could potentially become $1.2 billion under federal anti-trust statutes.

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Sinopec is the Latest Beneficiary of Chesapeake’s Deflation

The asset bubble that is Chesapeake Energy Corp. (NYSE:$CHK) is continuing with its asset sales for the acreage it has amassed using massive leverage. In its most recent quarter, the company increased its output and made significant improvements in crude output but this was overshadowed by management tumult and a massive sale of its shale acreage to a Chinese firm at a price which is three times less than Chesapeake’s own estimates.

The China Petroleum and Chemical Corp (NYSE:$SNP), more commonly known as Sinopec, is purchasing half of Chesapeake’s  850,000 acres of oil and gas assets at the Mississippi Lime shale field for $1.02 billion. Through this deal, Asia’s biggest refiner will considerably increase its shale footprint in the U.S. And, as I said at the outset, Sinopec won’t be paying any premium for the privilege. While some analysts have identified that the sale is $200 million below estimated value, Chesapeake itself had the land valued at an estimated $7,000 to $8,000 per acre for the property in July 2012. Calculating from the mid-point of $7,500, the asset is being sold at less than one-third of what Chesapeake valued it at less than 8 month ago.

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Chevron Trapped by Gorgon and the Aussie Dollar

In early December, Marathon Oil (NYSE:$MRO) announced a $5.2 billion capital budget for 2013 and ConocoPhillips (NYSE:$COP) plans to invest $15.8 billion in the next year. But the biggest announcement came from Chevron (NYSE:$CVX) which will make investments of $36.7 billion in 2013, which is 12% more than its planned budget for 2012–$3.3 billion of which is allocated for its affiliates. About 90% of $36.7 billion will go towards upstream crude oil and natural gas exploration and production while 7% will go towards downstream operations.619196-gorgon-project

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A Slimmer GE Brings New Profits to Life

General Electric (NYSE:$GE) delivered strong results for the final quarter of its fiscal year 2012. Analysts had estimated an EPS of $0.42 from revenues of $38.74 billion. The company delivered an EPS of $0.38 cents and revenues of $39.33 billion. Excluding extraordinary items, the quarterly revenues increased 3.6%. Quarterly profits increased from $3.73 to $4.01 billion year-over-year Q4-2012.ge.manufacturing.sensorx519

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ConocoPhillips’ Asia Strategy Hedges Dollar Risks

ConocoPhillips (NYSE:$COP) is showing renewed interest in the lucrative Asia-Pacific oil market.  It is gearing up to resume its biggest Chinese operations as well as having made a “final investment decision” on the Malaysian offshore project as it divests from China’s neighbor Kazakhstan.   These represent an important diversification tool as the world heads towards a stagflationary, low-growth period. ETRM_LRG_oilrig_opt

There are three big deals to look at.

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Peter Pham is an author, international fund manager, and a registered financial director by the Cayman Monetary Authority (CIMA). In 2013 he published his first book entitled, The Big Trade: Simple Strategies for Maximum Market Returns. He currently manages the portfolio of a global hedge fund and runs an asset management company, Phoenix Capital.  (read more)

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