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BP PLC has bet billions of dollars on Azerbaijan’s giant natural-gas reserves

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Investors reward thriftiest oil-and-gas companies

In a reversal from recent years when investors tended to reward companies that pursued rapid growth above all else, stocks of the oil-and-gas companies that promised to rein in spending were often those that fared best during the first quarter, Timothy Puko and Mike Cherney report.

Exploration-and-production companies, including EQT Corp., Continental Resources Inc. and Anadarko Petroleum Corp. cut their 2016 budgets by 50% to 65% in recent months, and their share prices have risen 20% or more since their announcements. The emphasis on cost-cutting has taken hold as a deep slump in oil prices nears its second year.

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BP’S Azerbaijan push comes at a cost

BP PLC has bet billions of dollars on Azerbaijan’s giant natural-gas reserves, but has had to wage a battle to control inflated costs and root out fraud, Robbie Whelan and Sarah Kent report. That includes about $16 million worth of invoices billed by a shell company for transportation services that weren’t provided.

BP is the biggest foreign investor in Azerbaijan, which ranks 119th out of 168 in Transparency International’s corruption perceptions index. “Oil companies have, for a long time, showed a willingness to operate in environments where there is a lot of corruption or conflict or weak institutions,” said Alexandra Gillies of the Natural Resource Governance Institute, which advocates for transparency in commodity industries. “The profits available seem to outweigh the risks.”

Bill gross bets on Brazil

Bill Gross’s Janus Global Unconstrained Bond fund is up 2.1% this year via aggressive and risky bets on items including credit-default protection against Brazilian and Mexican bonds, making a wager that investors were overestimating the risks of that debt, Chelsey Dulaney and Gregory Zuckerman report.

But his riskier emerging-market bets still could turn against him, as Brazil remains in an economic downturn and its president might face impeachment proceedings amid the Petróleo Brasileiro SA corruption scandal. Emerging markets such as Brazil bounced back in the first quarter, but the deteriorating credit quality of many government and corporate borrowers signals possible trouble ahead, Carolyn Cui reports.

Meanwhile, Mexico will allow private companies to import gasoline for the first time since the late 1930s starting Friday, Amy Guthrie and Juan Montes report. The opening paves the way for the country’s existing 11,400 filling stations to link up with a company other than state oil firm Petróleos Mexicanos, which Anthony Harrup reports Moody’s Investors Service downgraded.

In Italy, the economic development minister resigned amid allegations that she may have used her influence to help in the development of an oil field that would benefit her boyfriend financially, Giada Zampano reports.

In Japan, a reform of the energy industry hit a glitch on its first day as trading was stopped for hours on a new electricity product, Reuters reports.

Markets

Oil prices tumbled on Friday after reports that Saudi Arabia might not curb its output unless other major producers join the efforts. Saudi Arabia’s deputy crown prince, Mohammed bin Salman, said in an interview with Bloomberg that the kingdom will only freeze its oil output if Iran and other major producers agree to curb their output.

There have been growing doubts in recent weeks about whether an agreement between major producers, including Saudi Arabia and Russia, will be reached when they meet in Doha, Qatar on April 17.

Source: WSJ

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