UBS Warburg to revive Enron trading operation

By the OGJ Online Staff

HOUSTON, Jan. 15 -- UBS Warburg agreed to take over Enron's gas and electric trading operation without paying Enron's creditors any money up front.

Instead, UBS Warburg, the investment banking unit of Swiss-based UBS AG, will pay Enron one-third of the profits generated by the new trading organization after the first year. Enron also will put up the cash for an $11 million bonus to be distributed to the traders at the end of the first year. UBS will determine how to allocate the bonus money, according to the documents filed with the bankruptcy court.

Bidding for the remains of the trading operation, once the crown jewel of Enron Corp., which filed for bankruptcy protection Dec. 2, began last week. Only two serious bidders emerged: UBS Warburg and Citigroup Inc. The results were announced Friday. Paperwork ironing out details of the transaction were made public Tuesday. Enron unexpectedly collapsed after investors lost confidence in the former Houston energy trading giant because of incorrect earnings statements and billions of debt not revealed on the balance sheet.

Louis Gagliardi, analyst with John S. Herold, Stamford, Conn., said winning back lost trading business will be difficult. He added with its worldwide operations, sophistication, and sound credit rating UBS Warburg is in the best position to try to do so.

"Traders won't be reluctant to trade with them because trades will be on UBS standards and codes of conduct and with their cash and credit on the table," he said. Reviving Enron Online and the energy trading business needs to be accomplished quickly before more business is lost to competing trading forums such IntercontinentalExchange or Dynegy Direct, the on line trading arm of Dynegy, Inc., he said.

Gagliardi said it isn't known if Enron's most experienced traders still remain with the company. Because Enron's name is now tainted, Gagliardi predicted UBS Warburg will eventually get rid of it. Calls to UBS Warburg in New York and Enron in Houston were not returned.

Under terms of the deal, UBS can begin buying out Enron's royalty interest in the third year. UBS can exercise these rights in three steps, each representing one-third of the royalty stream, Enron said in a statement. Following the exercise of the first call, the royalty payment rate will drop from 33% to 22%.

After the second call, the rate drops to 11% from 22%. After the third call, all royalties to Enron would stop. Gagliardi said the trading operation should be considered a new entity going forward because none of the existing contracts or liabilities were assumed. The deal is pending approval by the bankruptcy court judge.

Related Articles

Nelson vows to block Murkowski’s stand-alone crude oil bill

07/31/2015 The US Senate Energy and Natural Resources Committee approved Chair Lisa Murkowski’s (R-Alas.) bill to end the ban on exporting US-produced oil. Bu...

Phillips, ETP, Sunoco JV to build, operate Bayou Bridge oil pipeline

07/31/2015 Phillips 66, Houston; Energy Transfer Partners LP (ETP), Dallas; and Sunoco Logistics Partners LP, Philadelphia, have formed a joint venture to con...

FRA issues final rule to keep unattended trains from rolling away

07/31/2015 The Federal Railroad Administration issued a final rule to prevent unattended trains carrying crude oil, ethanol, or other highly flammable content...

BLM seeks comments on proposed Fidelity E&P Utah oil and gas project

07/30/2015 The US Bureau of Land Management is seeking public comments on Fidelity Exploration & Production Co.’s proposed oil and gas project 17 miles no...

Murkowski, Warner want US ready to use energy abundance strategically

07/30/2015 The US should better prepare itself to use its new energy abundance as a geopolitical tool by jettisoning obsolete policies and broadening access f...

Tawke oil flowing despite pipeline blast

07/30/2015 DNO ASA, Oslo, said oil production from Tawke field in the Kurdistan region of Iraq continues despite shutdown of the pipeline that carries Iraqi c...

Petronas lets contract for Kanowit field FLNG work

07/29/2015 Malaysian state-owned Petronas has let a contract to France’s Technip for the engineering, procurement, construction, installation, commissioning, ...

Construction starts on first phase of Jagdishpur-Haldia gas line

07/29/2015

Construction has begun on the first phase of the Jagdishpur-Haldia natural gas pipeline, also known as the Energy Highway of Eastern India.

Report: Old crack caused Canadian pipe break

07/29/2015 The early-2014 rupture of a natural gas pipeline south of Winnipeg, Man., resulted from a fracture at a crack that formed in the pipe wall during c...
White Papers

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by
Available Webcasts

On Demand

OGJ's Midyear Forecast 2015

Fri, Jul 10, 2015

This webcast is to be presented by OGJ Editor Bob Tippee and Senior Economic Editor Conglin Xu.  They will summarize the Midyear Forecast projections in key categories, note important changes from January’s forecasts, and examine reasons for the adjustments.

register:WEBCAST


Predictive Analytics in your digital oilfield - Optimize Production Yield and Reduce Operational Costs

Tue, Jul 7, 2015

Putting predictive analytics to work in your oilfield can help you anticipate failures, plan and schedule work in advance, eliminate emergency work and catastrophic failures, and at the same time you can optimize working capital and improve resource utilization.  When you apply analytic capabilities to critical production assets it is possible to reduce non-productive time and increase your yield.

Learn how IBM's analytics capabilities can be applied to critical production assets with the goal of reducing non-productive time, increasing yield and reducing operations costs.

register:WEBCAST


Cognitive Solutions for Upstream Oil and Gas

Fri, Jun 12, 2015

The oil & gas sector is under pressure on all sides. Reserves are limited and it’s becoming increasingly expensive to find and extract new resources. Margins are already being squeezed in an industry where one wrong decision can cost millions. Analyzing data used in energy exploration can save millions of dollars as we develop ways to predict where and how to extract the world’s massive energy reserves.

This session with IBM Subject Matter Experts will discuss how IBM Cognitive Solutions contribute to the oil and gas industry using predictive analytics and cognitive computing, as well as real time streaming for exploration and drilling.

register:WEBCAST


The Alternative Fuel Movement: Four Need-to-Know Excise Tax Complexities

Thu, Jun 4, 2015

Discussion on how to approach, and ultimately embrace, the alternative fuel market by pulling back the veil on excise tax complexities. Taxes may be an aggravating part of daily operations, but their accuracy is crucial in your path towards business success.

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected