These Energy Stocks Are Affected by Russia Sanctions – Investopedia



Even as President Trump attempts to mend relations with Russia, the U.S. government seems set to impose sanctions on the country. A bill has been passed by an overwhelming vote in both houses that prohibits U.S. firms from partnering with Russian companies on projects in which the latter hold more than a 33% stake. The bill is currently lying on President Trump’s desk. (See also: How Russian Sanctions Impact Western Companies.)

Given that Russia is the world’s moment largest natural gas producer and a major energy producer, the bill is expected to fill a major impact on the commerce, trade dealings of U.S. energy companies with their Russian counterparts. Here is a brief analysis of two energy companies whose bottom lines may be affected by the sanctions. (See also: How Easily Can Trump Remove Russia Sanctions?)

Exxon Mobil Corporation (XOM)

Exxon Mobil has been present in Russia for the past 20 years. Its largest venture in Russia is a partnership with state firm Rosneft (RNFTF) to drill for oil in the Baltic Sea and Siberia, both of which are reported to contain sizeable reserves of the fuel. The Irving, Texas-based company also owns 30% of the Sakhalin oil fields through the Sakhalin consortium. Rosneft owns 20% of the oil fields, which began production earlier this year. Exxon Mobil was not allowed to gather revenue from the oil fields under the 2014 sanctions set in position by the Obama administration. Then, ExxonMobil estimated that it had potentially lost $1 billion because its joint ventures with Russian firms were “wound down.” (See also: Exxon Mobil Profit Disappoints Wall Street, Chevron Shines.)

Chevron Corporation (CVX)

Chevron is a relative newcomer to Russia. Even as oil majors made a beeline to Russia after disintegration of the former Soviet Union, Chevron didn’t fill much presence in the country until the turn of this decade. Its biggest recent investment in the region is a $36.8 billion diagram to boost oil production in Kazakhstan, a former Soviet Republic. With a 50% share of the project, Chevron is the largest stakeholder. The other international partners in the project are Exxon Mobil, which holds a 25% stake, and Russian state firm Lukoil (LUKOY), which holds 5%. The composition of that stakeholding ensures that Chevron will not suffer adverse consequences from the sanctions. CNN reported that the language of the unique bill related to sanctions “ensures that it didn’t affect a major pipeline used to transport oil from Kazakhstan through Russia to Ukraine.” (See also: Why Chevron Beat Exxon in Q2 2017.)



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