14 Stocks to Watch If Unrest Spreads to Saudi Arabia

by: Investment Underground

by Roger Choudhury, Lead Editor

According to the U.S. Energy Information Administration and the Oil and Gas Journal, Saudi Arabia contains approximately 260 billion barrels of proven oil reserves (plus 2.5 billion barrels in the Saudi-Kuwaiti shared Neutral Zone), amounting to around one-fifth of proven, conventional world oil reserves. Although Saudi Arabia has around 100 major oil and gas fields (and more than 1,500 wells), over half of its oil reserves are contained in only 8 fields, including the giant 1,260-square mile Ghawar field (the world's largest oil field, with estimated remaining reserves of 70 billion barrels). The Ghawar field alone has more proven oil reserves than all but 6 other countries.

Total (NYSE:TOT) is building its largest refinery in Jubail, Saudi Arabia. It has a 37.5% stake. The refinery will have a capacity of 400,000 barrels of crude oil per day. It is scheduled to come on stream in late 2012.

The refinery will be supplied by the Manifa and Safaniya oil fields. Manifa will be developed for the first time during the refinery’s construction. Its estimated 11 billion barrels of reserves make it one of the world’s largest still undeveloped deposits. Safaniya, by far the biggest offshore oil field, with reserves estimated at 19 billion barrels in 2004, currently supplies mostly bitumen and heavy fuel oil for industry and bunker fuel for the shipping sector.

Plans also call for annual production of 700,000 metric tons of paraxylene, 140,000 metric tons of benzene and 200,000 metric tons of high-purity propylene for the petrochemical industry. In 2009, the company produced 6,895,000 metric tons of olefins, which include ethylene, propylene, and butadiene. Also, 3,090,000 metric tons of styrenics were produced. Benzene is polystyrene’s prinicipal raw material.

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.

Exxon Mobil (NYSE:XOM) has a 50% interest in the Yanbu refinery in Saudi Arabia. It produces 200,000 of oil -barrels per day. At the end of 2010, the company has a total refining capacity of 6,260,000 barrels per day. -This refers to ExxonMobil's Downstream segment, which manufactures and sells petroleum products. This division drew in $3.56 billion in profits in 2010.

ExxonMobil's Chemical segment manufactures and sells petrochemicals. It made $4.9 billion in profits in 2010. At the Yanbu and Al Jubail plants in Saudi Arabia, 1.6 of 8.8 million metric tons of ethylene, 1.3 of 7.3 million metric tons of polyethylene, and 0.2 of 2.2 million metric tons of polypropylene were produced in 2010.

Exxon Mobil made $30.46 billion in profits in 2010. In sum, the company has a 50% stake in Al-Jubail Petrochemical Company, another 50% stake in Saudi Aramco Mobil Refinery Company Ltd., and a 50% interest in Saudi Yanbu Petrochemical Company. Yesterday, we wrote about a safe option play on Exxon here.

Chevron (NYSE:CVX) produced 98,000 barrels per day of oil equivalent, 94,000 barrels per day of crude oil and natural gas liquids, and 23 million cubic feet of natural gas from the Partitioned Zone between Kuwait and Saudi Arabia in 2010. To put this in perspective, in 2010, 2,763,000 barrels per day of oil equivalent, 1,923,000 barrels per day of crude oil and natural gas liquids, and 5,040 million cubic feet of natural gas were produced.

The company also continued to evaluate data from a steam injection pilot project that was initiated in 2009. The pilot is an application of steam injection into a carbonate reservoir and, if successful, could significantly increase heavy oil recovery. No proved reserves have been recognized for this project. Moreover, assessment of alternatives continued on the company’s Central Gas Utilization Project to increase natural gas utilization and eliminate routine flaring. A final investment decision is expected in 2012. No proved reserves have been recognized for this project.

According to the US Energy Information Administration, this zone was left undefined in 1922. It is 2230 square miles of real estate between the borders of Saudi Arabia and Kuwait. Most importantly, it contains an estimated 5 billion barrels of proven oil reserves, shared between the two countries, from which ~600,000 barrels per day are produced. Yesterday, we wrote about a safe option play on Chevron here.

Shell (NYSE:RDS.A) has a 50% stake in the downstream Saudi Arabian Shell Refinery Company as well as another 50% interest in Saudi Petrochemical, which is a part of the company’s downstream operations. In 2009, the latter produced 1,050,000 metric tons of ethylene, 1,070,000 metric tons of styrene monomer, 840,000 metric tons of ethylene dichloride, 670,000 metric tons of caustic soda, and 700,000 metric tons of MTBE. The former has a total capacity of 305,000 barrels per day.

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.

Dow Chemical (NYSE:DOW) has a 42.5% stake in the Kuwait Olefins Company K.S.C., which manufactures ethylene and ethylene glycol. It also owns 42.5% of Kuwait-based EQUATE Petrochemical Company K.S.C., which manufactures ethylene, polyethylene and ethylene glycol.

Dow’s share of the earnings of nonconsolidated affiliates in 2010 was $1,112 million, compared with $630 million in 2009 and $787 million in 2008. In 2010, increased earnings at Dow Corning Corporation, EQUATE Petrochemical Company K.S.C., MEGlobal, The Kuwait Olefins Company K.S.C. and The Kuwait Styrene Company K.S.C. more than offset a decline in earnings resulting from the September 2009 divestitures of the Company’s ownership interests in TRN and the OPTIMAL Group of Companies, and the June 2010 divestiture of the Company’s ownership interest in Americas Styrenics LLC.

In 2009, equity earnings declined compared with 2008, reflecting the overall decrease in global demand and poor economic conditions, with EQUATE, Dow Corning and OPTIMAL reporting the largest declines. Improved results were reported by The Kuwait Olefins Company K.S.C. in 2009, following the successful startup of additional production capacity for ethylene oxide / ethylene glycol and increased production of ethylene in support of additional polyethylene capacity (from FY 2010 Dow 10K).

Dow made $2,310 million in earnings in 2010.

ConocoPhillips (NYSE:COP) has a chemical segment that consists of its 50% equity investment in CPChem, a joint venture with Chevron. CPChem owns a 49% interest in Qatar Chemical Company Ltd. (Q-Chem), a joint venture that owns a major olefins and polyolefins complex in Mesaieed, Qatar. CPChem also owns a 49% interest in Qatar Chemical Company II Ltd. (Q-Chem II), a joint venture that began construction of a second complex in Mesaieed in 2005. The Q-Chem II facility is designed to produce polyethylene and normal alpha olefins on a site adjacent to the Q-Chem complex. In connection with this project, an ethylene cracker that provides ethylene feedstock via pipeline to the Q-Chem II plants was developed in Ras Laffan Industrial City, Qatar. The ethylene cracker and pipeline are owned by Ras Laffan Olefins Company, a joint venture of Q-Chem II and Qatofin Company Limited. Collectively, Q-Chem II’s interest in the ethylene cracker and pipeline and the polyethylene and normal alpha olefins plants are referred to as the “Q-Chem II Project.” Operational startup of the Q-Chem II Project was achieved in 2010.

Saudi Chevron Phillips Company (SCP) is a 50-percent-owned joint venture of CPChem that owns and operates an aromatics complex at Jubail Industrial City, Saudi Arabia. Jubail Chevron Phillips Company, another 50-percent-owned joint venture of CPChem, owns and operates an integrated styrene facility adjacent to the SCP aromatics complex.

Saudi Polymers Company (SPCo), a 35-percent-owned joint venture company of CPChem, is constructing an integrated petrochemicals complex at Jubail Industrial City, Saudi Arabia. SPCo will produce ethylene, propylene, polyethylene, polypropylene, polystyrene and 1-hexene. Construction began in January 2008, and commercial production is scheduled to begin in late 2011.

At December 31, 2010, ConocoPhillips’ chemicals segment represented 2% of total assets, and made $11 million in sales. In comparison, the company made $189.4 billion in total sales in 2010. Yesterday, we wrote about a safe option play on Conoco here.

Sumitomo (OTCPK:SSUMY) owns a 16% stake in National Pipe Company, Ltd. in Saudi Arabia. In 2009, the company was also awarded contracts by Saudi Aramco and King Abdullah University.

The company 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.

Noble (NYSE:NE) has 2 rigs in Saudi Arabia: the Noble Scott Marks, and the Noble Roger Lewis. By contract, Saudi Aramco’s estimated start date is respectively mid-July 2011 and early March 2011. Also, the estimated contract expiration date is respectively mid-July 2014 and early March 2014.

The company has been around for 90 years. It performs contract drilling services with a fleet of 69 offshore drilling units and 5 pending drilling rigs, located worldwide, including in the Middle East, India, the U.S. Gulf of Mexico, Mexico, the Mediterranean, the North Sea, Brazil, West Africa and Asian Pacific. Noble also owns and operates a dynamically positioned floating production, storage, offloading vessel.

Rowan (NYSE:RDC) made $207.1 million in revenues in 2010 from Saudi Arabia. In comparison, it made $1.8 billion in total. One drilling customer, Saudi Aramco, accounted for 11% of consolidated revenues in 2010 and 15% in each of 2009 and 2008. The company also has 3 rigs operating in Saudi Arabia.

Rowan is a major provider of international and domestic contract drilling services.

Transocean (NYSE:RIG) has 2 subsidiaries operating in Saudi Arabia: Saudi Drilling Company Limited and GlobalSantaFe Saudi Arabia Limited.

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.

Pride (NYSE:PDE) has a subsidiary based out of Saudi Arabia, which is called Pride Arabia Limited. Pride International made $1.46 billion in revenues in 2010, which was a decrease of 8.4%, after also falling in 2009 by 31%.

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 U.S., Angola, Brazil, and Saudi Arabia. The company has positioned its fleet in some of the world's largest and most active exploration and production basins.

Tidewater (NYSE:TDW) has a 50% stake in Tidewater Al Rushaid Company Limited in Saudi Arabia.

For the 12 months through December 2010, the company has made $1.06 billion in revenues. Tidewater has a fleet of more than 350 vessels, and is oldest, largest and most experienced provider of the marine support services for the “work boat” industry. Tidewater has a global footprint, with over 90% of its fleet working internationally in more than 60 countries.

Eni (ENI) has 51,687 acres of oil and natural gas interests in Saudi Arabia. Of that, 25,844 acres are undeveloped. The company has a total of 646,673 acres that are slated as oil and natural gas interests.

Eni is one of the most important integrated energy companies in the world operating in the oil and gas, electricity generation and sale, petrochemicals, oilfield services construction and engineering industries. In these businesses it has a strong edge and leading international market position. Eni is active in 79 countries with a staff of 79,900 employees.

Lukoil (OTCPK:LUKOY) has a joint venture with Saudi Aramco in the Empty Quarter. The company relinquished most of the 29,900 square km area, and has decided against moving forward with a second phase exploration.

LUKOIL is one of the world’s leading vertically integrated oil & gas companies. Main activities of the company are exploration and production of oil & gas, production of petroleum products and petrochemicals, and marketing of these outputs. Most of the company’s exploration and production activity is located in Russia, and its main resource base is in Western Siberia. LUKOIL owns modern refineries, gas processing and petrochemical plants located in Russia, Eastern and Western Europe, near-abroad countries. The company’s products are marketed in Russia, Eastern and Western Europe, in near-abroad countries and U.S.

LUKOIL is the second largest private oil company worldwide by proven hydrocarbon reserves. The company has around 1% of global oil reserves and 2.4% of global oil production. LUKOIL dominates the Russian energy sector, with 18.6% of total Russian oil production and 18.9% of total Russian oil refining.

LUKOIL proven reserves at the beginning of 2010 were 13,696 million barrels of crude oil and 22,850 billion cubic feet of natural gas, totaling 17,504 million barrels of oil equivalent.

The company has a portfolio of production assets. The main production region for LUKOIL Group is Western Siberia. LUKOIL is carrying out international exploration and production projects in Kazakhstan, Egypt, Azerbaijan, Uzbekistan, Saudi Arabia, Colombia, Venezuela, Cote d’Ivoire, Ghana and Iraq.

Repsol (OTCQX:REPYY) explored 15,420 square km in 2009 in Saudi Arabia. It has a 30% interest in Saudi Arabia-based EniRepsa Gas Limited, amounting to 254.4 million euros ($353.4 million). This subsidiary lost 17.5 million euros ($24.3 million) in 2009. This entity focuses on supply and/or distribution of natural gas.

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.

For 4 other undervalued global energy names, click here.

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

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