One Slick Deal

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What's going on?

US oil giant ConocoPhillips could be in for a windfall – it’s exclusively courting interest in some of its assets from British chemicals and energy company Ineos.

What does this mean?

Conoco is an exploration and production company: it finds oil and gas fields, extracts the stuff and sells it on. But after 50 years of operating around the UK coastline, the firm has been looking to focus its attention elsewhere – namely on burgeoning US domestic production.

Ineos is Britain’s biggest private company, owned by the country’s richest man. He made a fortune turning Scottish oil into plastic and pharmaceutical products, and is now aiming to extend his grip further up the pipeline: Ineos made a reported $3 billion offer for Conoco’s remaining stake in a major North Sea oil field, as well as other UK assets.

Why should I care?

For markets: An oily bargain?

Six weeks ago, oil was on a tear – up to its highest level in four years. But prices have fallen more than 20% since. A lower oil price may make Conoco more amenable to selling if it thinks the slide will continue. For Ineos, joining up oil production with its existing refinery operations could lower costs (and thus net more cash) by way of synergies; it may also anticipate an oil price rise in the future.

The bigger picture: Frack it all.

Ineos is a fierce advocate of fracking, the controversial process whereby oil and gas are extracted from underground rock. Earlier this year, it lost a battle with the Scottish government to allow it to frack on Scottish soil – but other parts of the UK are more supportive of the practice. And with Britain soon to be free from tight European Union regulations, Ineos may eventually broaden its energy production operations there into the sort of fracking activities that are luring Conoco back to the States.

Originally posted as part of the Finimize daily email.

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