Why a Revolution in Bahrain or Oman Will Affect These 11 Oil Stocks

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 |  Includes: BP, HP, OXY, PDE, PDO, RDC, RDS.A, REPYY, RIG, SSUMY, TOT
by: Investment Underground

According to the U.S. Energy Information Administration, Bahrain produced 48,430 barrels per day of oil and 444 billion cubic feet of natural gas in 2009. Moreover, the refinery capacity is 262,000 barrels per day of oil. It also exports 2,000 barrels per day of oil to the US. Proved reserves are 120 million barrels of oil and 3 trillion cubic feet of natural gas, which ranked 56th and 50th in 2008, respectively.

Bahrain is also home to the Fifth Fleet of the U.S. Navy.

Oman produced 816,150 barrels per day oil and 875 billion cubic feet of natural gas in 2009. It also exports 30,000 barrels per day of oil to the US. Proved reserves are 5.5 billion barrels of oil and 30 trillion cubic feet of natural gas, which ranked 22nd and 24th in 2008, respectively.

Occidental (NYSE:OXY), in December 2009, and its partners began operating the Bahrain Field. Occidental has a 48% interest in the joint venture. Occidental expects gross gas production capacity to grow more than 35% from a current level of 1.6 billion cubic feet per day to over 2.1 billion cubic feet per day within 5 years. Gross oil production from the Bahrain Field is expected to more than double to approximately 75,000 barrels per day within 5 years, and grow to a peak level of more than 100,000 barrels per day thereafter. The company’s share of production from Bahrain during 2010 was approximately 169 million cubic feet of gas and 3,000 barrels of oil per day.

In Oman, Occidental is the operator of Block 9 and Block 27, with a 65% working interest in each, Block 53, with a 45% working interest, and Block 62, with a 48% working interest. The company and its partners signed a 30-year production-sharing contract for the Mukhaizna Field (Block 53) with the Government of Oman in 2005. In September 2005, Occidental assumed operations of the Mukhaizna Field. As of year-end 2010, the exit rate of gross daily production was over 15 times higher than the production rate in September 2005, reaching nearly 120,000 barrels of oil equivalent per day. Occidental plans to steadily increase production through continued expansion of the steam flood project. The company has operations in Block 62 where it is pursuing development and exploration opportunities targeting gas and condensate resources. Occidental's share of production from the Oman properties was approximately 69,000 BOE per day in 2010.

Total (NYSE:TOT) has a 4% direct interest in Block 6, 2% direct interest in Block 53, 5.54% interest in Oman LNG, and 2.04% interest in Qalhat LNG in Oman. For the company, production in Oman was 34,000 barrels of oil equivalent per day in 2009.

As of December 31, 2009, the company’s worldwide refining capacity was 2,594,000 barrels per day. In 2009, its worldwide refined products sales were 3,616,000 barrels per day (including trading operations), compared to 3,658,000 barrels per day in 2008 and 3,774,000 barrels per day in 2007. This stock will also be affected by a crisis in Saudi Arabia.

Repsol (OTCQX:REPYY) has a 1.1% direct interest (48 million euros) in Qalhat LNG in Oman. This entity made 9 million euros in profits in 2009.

Repsol YPF is an integrated oil and gas company engaged in all aspects of the petroleum business, including exploration, development and production of crude oil and natural gas, transportation of petroleum products, LPG and natural gas, petroleum refining, petrochemical production and marketing of petroleum products, petroleum derivatives, petrochemicals, LPG and natural gas. Repsol YPF is also engaged in the generation, transport, distribution and marketing of electricity.

Shell (NYSE:RDS.A) has a 34% interest in Petroleum Development Oman (NYSEMKT:PDO), which is the operator of an oil concession expiring in 2044. The government of Oman holds a 60% interest in the concession and

Private Oil Holdings Oman Ltd. holds the remaining 40%. Shell has an 85% shareholding in POHOL. PDO has a portfolio of field-development projects that will build on the successful delivery of ongoing enhanced oil recovery projects and other chemical and thermal pilots.

Shell also participates in the development of the Mukhaizna oil field (Shell interest 17%) where horizontal steam flooding will be applied on a large scale. Additionally, Shell has a 30% interest in Oman LNG, and an interest of 11% in Qalhat LNG.

In Oman in 2009, Shell and its subsidiaries produced 195,000 barrels of oil per day. To add some perspective, in 2009, Shell sold 6,156,000 barrels of oil products per day, refined 3,067,000 barrels of oil equivalent per day, and sold 18,311,000 tons of chemicals products. This stock will also be affected by a crisis in Saudi Arabia.

BP (NYSE:BP) performed extensive exploration in Oman in 2010. Also, in the Oman Khazzan Makarem gas appraisal program, BP was awarded of the contract for early engineering, design and concept studies for the potential long-term development of hydrocarbon resources in the block, and the commissioning of early well test facilities. We identified a safe way to BP via put options.

Sumitomo (OTCPK:SSUMY) has an interest in the Hidd Power Company in Bahrain. Its main business is power generation and sea water desalination.

Sumitomo engages in multifaceted business activities benefitting from its Integrated Corporate Strength, selling a variety of domestic products and services, conducting import / export and trilateral business transactions, providing domestic and international business investment, and participating in numerous other profitable activities facilitated by our global network and the relationships of trust built with corporate business partners and consumers in various industrial sectors around the world.

The company made 779,512 million yen ($9.4 billion) in gross profit in the year through March 31, 2010.

Transocean (NYSE:RIG) has one subsidiary in Oman: Fortress Energy Services LLC.

The company made revenues of $9.57 billion in 2010, which was a decrease of 20.6%, after falling 8.8% in 2009. Transocean is the world’s largest offshore drilling contractor. It helps its clients find and develop oil and natural gas reserves. We do think this stock is poised for growth, however.

Rowan (NYSE:RDC) has 1 shipyard in Bahrain undergoing modifications for a contract in Saudi Arabia.

The company generated $1.8 billion in revenues in 2010, which was an increase of 2.7%, after tumbling 20% in 2009. The EBT margins in 2010 and 2009 were 20.8% and 28.3%, respectively. The respective ROEs were 9.79% and 12.7%.

Rowan is a major provider of international and domestic contract drilling services. This stock will also be affected by a crisis in Saudi Arabia.

Helmerich & Payne (NYSE:HP) has 1 rig in Bahrain, and 1 en route. Both of these rigs have an optimum depth of 8,000 feet, and are of the type AC(FlexRig4).

As of September 2010, the company made $1.87 billion in revenues, which was a decrease of 1%, after declining 7% in 2009. The EBT margins in 2010 and 2009 were 23.37% and 30.4%. The latest quarter ending in December 31, saw revenues increase by 48.7% from Q1 2010.

The company is primarily engaged in contract drilling of oil and gas wells for exploration and production companies. The contract drilling business accounts for almost all operating revenues, making it one of the major land and offshore platform drilling contractors in the world.

Pride (NYSE:PDE) has 2 rigs in Bahrain, both of which were built in the 1970s.

Pride International made $1.46 billion in revenues in 2010, which was a decrease of 8.4%, after also falling in 2009 by 31%. The EBT margin in 2010 and 2009 was 17.26% and 25.85%. The respective ROEs were 4.99% and 6.6%. The 30-day put/call ratio is 0.3. PDE shares are up 32.2% since December 17, 2010.

Headquartered in Houston, Texas, Pride International is one of the world's largest offshore drilling contractors. The company provides contract drilling and related services to oil and gas companies worldwide. With approximately 4,000 employees, Pride offers a multinational workforce with offices in the US, Angola, Brazil, and Saudi Arabia. We have positioned our fleet in some of the world's largest and most active exploration and production basins. However we do like Pride’s management team, as we wrote about here.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.