by Jonathan Berr | October 24, 2011 1:21 pm
Libya will be a multibillion-dollar payday for U.S. stocks if the political situation stabilizes itself. And stocks like Exxon (NYSE:XOM), General Electric (NYSE:GE) and Caterpillar (NYSE:CAT) will be first in line to benefit from the rebuilding.
Thanks to more than four decades of misrule by the late Libyan dictator Moammar Gadhafi, the North African nation is a mess. Though it boasts Africa’s largest proven reserves of oil, the petroleum sector remains in dire need of investment. Libya’s National Oil Company had planned to double production to 3 million barrels per day by 2012, a goal that became unrealistic as foreign oil companies fled during the civil war. Libyan light, sweet crude is of high quality and easy for oil companies to refine and thus in very high demand.
Gadhafi squandered billions in Libya’s oil wealth for more than four decades — the country’s unemployment rate is about 30%, and according to the CIA World FactBook, one-third of Libyans live at or below the national poverty line. But thanks to a revolution, the economy could provide opportunity to the region.
Many U.S. companies tried to make a go of it in Libya but weren’t able to under the former regime. But with billions in potential profits to be made, expect many of them to give Libya another try. Ditto for oilfield services firms, construction companies and the companies that supply them equipment.
Below is a list of potential winners in Libya. Some have well-known ties to the country while others are well-established in the Middle East and could easily pick up business from the new government in Tripoli.
Exxon Mobil (NYSE:XOM) came back to the country in 2005 after a 25-year absence. Five years later, the largest publicly traded oil company declared that a well that it was drilling in conjunction with Libya’s National Oil Company was not commercially viable. Chevron (NYSE:CVX) and Occidental Petroleum (NYSE:OXY) said last year they would not extend their five-year oil and gas licenses, but that could change. All three firms will likely try again to make a go of it in Libya.
ConocoPhillips (NYSE:COP) returned to Libya in 2005 after a 19-year absence and operated the Waha Oil Co. concession, Libya’s biggest collection of fields along with Hess (NYSE:HES) and Marathon Oil (NYSE:MRO). In March, it temporarily closed up shop as the fighting in Libya intensified. Workers at Waha have been on strike for a month and are now demanding the resignation of Waha’s chairman because of his alleged ties to Gadhafi. Nonetheless, there is plenty of oil left to find in Waha and COP stock may benefit.
Halliburton (NYSE:HAL) has been active in Libya for years, so it will benefit from any rebound in the country’s oil sector. Earlier this year, the oilfield services company said sanctions against Libya hurt its earnings. Dick Cheney’s old firm has also been active in the rebuilding of the oil industry in Iraq, so it has experience in war-torn regions.
Jacobs Engineering Group (NYSE:JEC) has vast experience with large construction projects such as oil refineries. The California firm already has close ties to Saudi Aramco which should help it win business in Libya. It already has operations in Saudi Arabia, United Emirates and Bahrain.
URS Corp. (NYSE:URS) has been in the Middle East for 70 years, providing consulting services to clients in the oil and gas, power and petrochemical sectors, among others. In addition, it builds large public infrastructure projects such as airports, hospitals and schools, It already operates in Saudi Arabia, United Arab Emirates and Qatar.
Weatherford International (NYSE:WFT), the oilfield services giant, lists three offices in Libya. It also has rig operations in Libya along with Oman , Kuwait and Saudi Arabia. Libya likely will ratchet up its offshore exploration in the coming months.
Defense stock Lockheed Martin (NYSE:LMT) should also do well. After all, a new Libyan government will need to rebuild its military. The county already has a head start. Gadhafi bought 8 C-130 “Hercules” cargo planes in the 1970s. The U.S. government wisely never allowed their delivery. Maryland-based Lockheed already has extensive ties in the Arab world that should help it win business in Libya.
General Electric (NYSE:GE) — The conglomerate already has extensive operations throughout the Middle East. It has been in the region since the 1930s and is involved with clean energy and water infrastructure projects among other things. The company will also play a role in rebuilding Libya’s health care system.
Caterpillar (NYSE:CAT) is an easy winner from the rebuilding of Libya – literally. All the construction that will occur in Libya will need equipment to make it happen. Libya also is eager to reduce its dependence on food imports and is planning a $30 billion dam to alleviate water shortages, which was bombed during the Civil War.
As of this writing, Jonathan Berr did not own a position in any of the aforementioned stocks.
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