2012-12-11 15:37:17 -
NEW YORK, NY -- (Marketwire) -- 12/11/12 -- Energy companies have been facing a number of challenges as of late, but have still been able to produce encouraging results. With energy prices fluctuating, many companies are currently looking into reorganizing themselves to best move forward, and have been divesting certain assets while acquiring others. The recovering economy in the U.S. coupled with encouraging news from China bodes well for future consumption, and could help companies such as Ivanhoe Energy Inc. (NASDAQ: IVAN) and Nexen Inc. (NYSE: NXY). The recent downturn in prices for oil and natural gas could be detrimental if they continue to fall, yet, the outlook at the moment is positive. Companies able to maintain or increase production levels while managing production costs could be best positioned at this time.
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Companies with a broad geographical reach also look well positioned for the future, as they are better able to deal with changing demand levels and weather related issues. Ivanhoe Energy is one such company as it has operations in Canada, the U.S. and China, as well as Ecuador and Mongolia. Ivanhoe recently made headlines, announcing that Sunwing Zitong Energy, its wholly owned subsidiary, received approval from the Ministry of Commerce of the People's Republic of China to transfer to Shell China Exploration and Production Co. its participating interest in the Contract for Exploration, Development and Production in the Zitong Block, Sichuan Basin. The transfer is expected to be completed shortly and should allow the company to increase its pre-tax working capital by $105 million. The company has been performing well of late and interested investors may want to take a closer look.
Elsewhere in the industry, Nexen Inc. has been making some headlines of its own. In a recent press release, the company stated that the Canadian Minister of Industry has approved the proposed purchase of Nexen by CNOOC Limited, a state-owned Chinese company, and that no more Canadian approvals are needed. On top of its operations in Canada, Nexen operates in a number of other countries, and approval of the acquisition in the United Kingdom and the United States is still pending. News of the approval in Canada sent share prices of Nexen up on Monday.
While the future looks bright for the energy industry, there are a number of challenges currently facing select companies. Europe continues to drag down energy demand, as the economy there looks set to finish 2012 with a splutter. Efforts have been made to improve the situation and steps have been taken in the right direction. However, there is still a lot of work to be done before a full-blown turnaround is expected.
For those with natural gas operations, a large supply of natural gas in the U.S. continues to keep prices down. Furthermore, with companies cutting production in an attempt to drive natural gas prices higher, once prices do move up, an increase in production could reverse any gains. Demand levels are also less than stellar at this time, as mild winter weather has kept customers from reaching for the thermostat. As winter marches on and temperatures drop, companies should see an increase in demand. Companies could also benefit from the increasing number of vehicles that are being powered by natural gas, as well as operations underway to export the fuel.
Despite facing headwinds, energy companies have been making strong moves to close out the year. Improving emerging markets and recovering established ones auger well for the industry, and if cold weather sets in, demand levels should increase. It will be interesting to see how industry players close out the year and who will be able to start the New Year off with a positive note.
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