The drama of Mexico's Black Gold
1 of 10
http://fortune.com/2014/08/14/pemex-oil-black-gold/
8/18/2014 8:26 AM
The drama of Mexico's Black Gold
2 of 10
http://fortune.com/2014/08/14/pemex-oil-black-gold/
Mother Nature long coddled Mexico’s national oil company, blessing it
with fountains of homegrown black gold. But in recent years she has
gotten ornery, frustrating Petróleos Mexicanos with juicy but
recalcitrant fields of oil. One day this spring she played a nasty joke. She
unleashed a 6.4-magnitude earthquake on Mexico that caused the
50-story headquarters of the company known as Pemex to sway woozily,
like an aging prizefighter struggling not to fall. Inside the iconic but
timeworn building, the second-tallest in Mexico City, doors rocked on
their hinges, metal blinds banged against windows, and frightened
workers braced themselves inside door frames, hoping to ride out a
threat they all knew was beyond their control.
Scant hours later, Pemex’s 39-year-old chief executive, Emilio Lozoya,
sits at the head of the massive conference table in his cloud-level office.
The Pemex tower has stopped shaking, but the Pemex corporation faces
a foundational challenge. In a move that has both shocked and thrilled
the global oil industry, Mexico’s government is performing an
about-face.
For the first time in three-quarters of a century, it intends to invite
international oil firms into the country to sink their drills into its
petroleum-rich earth. That decision has infuriated many Mexicans, and
it fundamentally threatens Pemex, which has always been a monopoly.
As the oil giants prepare to pounce, Lozoya, a Harvard-educated
investment executive and an oil industry newcomer, has the task of
whipping the bloated behemoth into competitive shape.
“It is, by all means, the most important transformation Pemex has
suffered in our entire 76 years,” says the fresh-faced CEO, who speaks
excellent English and chooses his words—including his verbs—
deliberately. As he talks, he jots talking points onto a small white
notepad that has been placed in front of his high-backed chair. By his
right hand sits a red phone, a direct line to the office of Mexican
President Enrique Peña Nieto, the oil reform’s architect and Lozoya’s
friend and boss. Everything about Mexico’s energy opening is being
carefully choreographed. But in Mexico’s rough-and-tumble energy
business, even the most meticulous plans have a way of getting blown
up.
Ever since 1938, when Mexico expropriated its gushing oilfields from
foreign companies in a burst of revolutionary nationalism, that bounty
has been off-limits to outside producers. The oil has been the exclusive
purview of Pemex. Favored by geology as well as by law, the company
has had the luxury of getting most of its oil from a couple of huge,
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8/18/2014 8:26 AM
The drama of Mexico's Black Gold
3 of 10
http://fortune.com/2014/08/14/pemex-oil-black-gold/
8/18/2014 8:26 AM
The drama of Mexico's Black Gold
4 of 10
http://fortune.com/2014/08/14/pemex-oil-black-gold/
Procter & Gamble recently announced plans to shed up to 100 brands,
and it appears some well-known names — including Duracell batteries,
Braun shavers and Ivory soap — could soon find new homes.
Reuters and The Wall Street Journal have both speculated which brands
), the maker of
could be on the chopping block. P&G (
Gillette razors and Crest toothpaste, is planning to streamline its
business and focus on 70 to 80 brands, which are responsible for about
90% of the company’s recent sales and 95% for profit.
Reuters, citing people familiar with the matter, said Duracell and Braun
are two of the largest assets likely to be divested. The Journal,
meanwhile, floated the underperforming Ivory soap brand as a possible
brand that could be shed, although the Journal report is more
speculative.
In any case, top brands such as Pampers diapers and Gillette appear safe
based on their size and scale. Other likely keeps because of their size
include Pantene, Olay, Oral-B and Bounty. At the time of the P&G
divestiture announcement, Sanford Bernstein analyst Ali Dibadj issued
a list of P&G’s global brands tracked by the firm and Euromonitor, and
those brands were all among the top sellers last year.
Of the brands listed by Euromonitor-Bernstein, Ivory ranked 69th with
$112 million in 2013 sales. Duracell notably wasn’t on that list, and only
Braun’s Oral-B business unit was included (ranked 108th with $34
million in sales last year).
P&G hasn’t unveiled too many divestitures of late, so this action is pretty
notable for the company. It sold off Pringles in 2012 and in 2011,
unloaded Zest soap and PUR Water Purification Products in separate
transactions. Rival Unilever has acted more aggressively on divestitures
of late, agreeing to shed the Slim-Fast, Ragu and Bertolli brands this
year.
8/18/2014 8:26 AM
The drama of Mexico's Black Gold
5 of 10
http://fortune.com/2014/08/14/pemex-oil-black-gold/
8/18/2014 8:26 AM
The drama of Mexico's Black Gold
6 of 10
http://fortune.com/2014/08/14/pemex-oil-black-gold/
I never understood the Internet’s hostility to “Misunderstood,” the
holiday TV ad from Apple that took home the 2014 Emmy Award for
best commercial at the Creative Arts Emmys on Saturday.
“Of course, we’re talking about Apple here,” wrote Ken Segall, the
former creative director at TBWA\Chiat\Day, shortly after the spot
aired.
“So there’s no shortage of critics eager to tell us why
the commercial fails. Take your pick: it says little
about the product, any smartphone can make a
movie, or the spot is a depressing statement about
human values.
“Good grief.
“Most of these people mistake their personal
opinion, instinct, values and/or taste for actual
marketing talent. There are tens of millions of people
who will stop in their tracks at this commercial and
wipe a tear from their eye. As a result, they will feel
slightly more attached to Apple, which is the
marketing purpose of this spot.
“Far from depressing, this ad is wonderfully
optimistic. In the most human terms, it says that the
right technology can bring people closer together. It’s
a perfect thought for the holidays.
“If you want to get a read on the ad’s effectiveness,
8/18/2014 8:26 AM
The drama of Mexico's Black Gold
7 of 10
http://fortune.com/2014/08/14/pemex-oil-black-gold/
8/18/2014 8:26 AM
The drama of Mexico's Black Gold
8 of 10
http://fortune.com/2014/08/14/pemex-oil-black-gold/
American homebuilders’ confidence in the housing market has hit the
highest level of the year, according to a key report released Monday
—the latest sign that some are hopeful an improving job market will
help unleash some pent-up demand.
Confidence from builders that focus on newly-built single-family homes
increased two points in August to a reading of 55 on the National
Association of Home Builders/Wells Fargo Housing Market Index. That
reading was a seven-month high and surpassed an important milestone,
as any reading over 50 indicates that more builders view sales
conditions as good than poor. It was above the reading of 53 projected
by housing experts polled by Bloomberg News.
Key housing reports have indicated conditions remain choppy in the
sector. Some are bullish that slower price appreciation and rising home
inventory will better position the sector down the road, and ideally
inspire more potential home buyers to make a purchase. But supply
shortages in some hot markets, as well as tight credit conditions, have
been problematic.
The NAHB report was issued a day before the Commerce Department
will report U.S. construction data for July. Economists surveyed by
Bloomberg expect housing starts will climb 7.8% in July from the prior
month.
8/18/2014 8:26 AM
The drama of Mexico's Black Gold
9 of 10
http://fortune.com/2014/08/14/pemex-oil-black-gold/
8/18/2014 8:26 AM
The drama of Mexico's Black Gold
10 of 10
http://fortune.com/2014/08/14/pemex-oil-black-gold/
Kroger is the latest retailing chain to be dragged into the battle over gun
rights.
The anti-open carry advocacy group Moms Demand Action has issued a
statement calling on the grocery company to ban openly-carried
firearms in its stores.
In a press release, the group calls out President and COO Michael Ellis
and CEO W. Rodney McMullen to ban open carry in Kroger stores. The
call comes after pro-open carry activists brought guns into Kroger
(
) stores while grocery shopping, a tactic that has drawn the
ire of Moms Demand Action before.
A Kroger spokesman referred to an official statement on the companies
website which says that Kroger’s “long standing policy on this issue is to
follow state and local laws and to ask customers to be respectful of
others while shopping.”
Moms Demand Action has launched campaigns against other retailers
in the past several months, including Target (
), which
asked customers not to bring in guns, but did not ban them outright,
and Chipotle (
restaurants. Home Depot (
carry battle.
), which decided to not allow open carry in
) has also been a part of the open
8/18/2014 8:26 AM