National oil companies: Price fall highlights investors' favourites

As oil prices fell in the second half of last year, oil companies’ shares suffered. But few were as badly bruised as the partially-listed national oil companies that had been investors’ favourites until the end of the commodity’s decade-long climb.

National oil companies’ shares fell 64 per cent in 2008, as investors moved away from companies with huge potential and back to those with strong cashflow. By comparison, shares in international oil companies – which have more varied portfolios covering everything from exploration to refining and marketing – lost 34 per cent.
The longer that countries rich in oil maintain the tight fiscal conditions they introduced while oil prices were high, the more difficult they will find it to boost production to compensate for the the loss in revenue caused by the drop in oil prices, analysts warn.

In fact, in countries such as Venezuela, Mexico, Iraq and Kuwait, where state-owned oil companies are struggling to stop old fields from declining, national budgets are being hit by the double whammy of falling production and lower prices.

Financial Times