"We've received notification from three of the eight oil companies that they will deliver crude oil to the port within the specified timeframe. The other five have expressed interest in further negotiations..."
In early April, Duane Hurst, CEO of BFT Funds, brought Barron's the latest news.
It's important to note that the international crude oil prices mentioned previously are generally based on the price of London's Brent Light crude oil—considered one of the highest quality crudes.
The oil companies that signed agreements with BFT Funds, including those from Russia, Southeast Asia, and Africa, often produce crude oil of lower quality than Brent.
For example, the price of Russian Urals crude oil can be over $10 per barrel lower than Brent...
Furthermore, the spot crude oil purchase contract signed by BFT Funds with them for $90 per barrel is the landed price, meaning it includes shipping and insurance. This was also the landed price determined at the time of the agreement, taking into account the Baltic Composite Index.
To date, according to the purchase contracts signed at the time, a portion of the crude oil BFT Fund acquired has been delivered to three ports.
Oil produced by Russian oil companies will be shipped to Indian ports for refining at a joint refinery between United Energy Group and Reliance Industries; oil produced in Southeast Asia will be shipped to Guangxi Province, China, for refining at a joint refining and chemical base between United Energy Group and PetroChina; and oil produced in Africa will be shipped directly to the Kolo refinery.
Of course, the production capacity of these refineries is currently insufficient to absorb this crude oil, so the BFT Fund has also sold excess crude oil to some of United Energy Group's partners, including Reliance Industries, PetroChina, and Sinopec.
With the refining capacity of the two major oil companies at the time, they are more than capable of absorbing the excess inventory.
As is well known, China has numerous oil fields and is a major oil producer.
But in reality, the cost of domestic oil extraction in China is still higher than importing crude oil. However, due to the need to maintain domestic oil production capacity and a certain degree of energy self-sufficiency, and the large number of upstream and downstream personnel and businesses that rely on this industry, the two oil giants still rely on internal procurement for many of their refining and chemical plants.
Furthermore, the two oil giants also have considerable crude oil storage capacity, making the BFT Fund's oil naturally popular with them.
The five oil companies are already hoping to reduce some of the "default costs" through negotiations. As for the three oil companies that are still holding out,
they will also gradually default as crude oil prices continue to rise. Of course, as the subprime mortgage crisis intensifies, the BFT Fund will need to withdraw its funds and prepare to "buy at the bottom." Even so, they still hope to maximize their profits from these oil companies.
...
"I heard you're causing those oil companies a lot of trouble, Your Highness,"
Prince Alwaleed said upon meeting Baron in London again, after a hug.
Clearly, he was referring to the large purchase orders between the BFT Fund and those oil companies...
Although Prince Alwaleed's businesses didn't involve oil, Saudi Arabia itself was a major oil producer, and they were always very attentive to news about the crude oil market. Therefore, Baron wasn't surprised that Prince Alwaleed had learned of this.
"That's not what I wanted, dear Alwaleed..."
Baron shrugged and said innocently. "No one could have predicted that crude oil prices would continue to rise. If, on the contrary, oil prices had fallen, the situation would have been completely different,"
Prince Walid agreed with Baron.
"You're incredibly lucky, Your Highness, or perhaps you have excellent foresight. I'm more inclined to believe the latter."
"Thank you for the compliment. Perhaps I should admit that..."
Prince Walid's visit wasn't solely to congratulate Baron this time...
He then discussed the Four Seasons Hotels and Resorts with Baron. As early as last year, Baron had proactively raised the issue of buying out Prince Walid's remaining shares in the Four Seasons.
During the first phase of the Global Industrial Investment Fund, they, along with Prince Walid's Kingdom Investment Company, had jointly privatized the Four Seasons Hotels and Resorts. Currently, GII and Kingdom Investment each hold a 47.5% stake in the Four Seasons Hotels and Resorts. The remaining 5% is held by the Isadore Sharp family, the founder of the Four Seasons Hotels and Resorts, who continue to operate the Four Seasons.
Last year, Baron proposed acquiring Prince Alwaleed's 47.5% stake in Four Seasons Hotels and Resorts for $1.66 billion.
At this price, the Devonshire Family Trust's valuation of the Four Seasons would be approximately $3.5 billion, representing a 22% increase from the $2.86 billion valuation of the company during its privatization, making it a very reasonable price. However,
at the time, Prince Alwaleed had no intention of selling his stake in Four Seasons Hotels and Resorts, so the matter remained unresolved.
However, during his recent visit to London, it appears Prince Alwaleed has expressed a desire to sell his stake. Baron speculates that he may have seen the impact of the US subprime mortgage crisis on the banking industry and saw an opportunity to invest more. Prior
to this, Prince Alwaleed held a significant stake in Citigroup, making him its largest private shareholder.
However, in November of last year, after Citigroup received a capital injection from the Abu Dhabi Investment Authority, the Abu Dhabi Investment Authority held less than 5% of the company, surpassing Prince Alwaleed to become the largest private shareholder.
Prince Alwaleed had considered investing more in Citigroup at the time, but one reason was that he was already Citigroup's largest private shareholder. Given the choice, Citigroup would have preferred to secure funding from other sources to prevent Prince Alwaleed from holding too large a stake.
Furthermore, some of Prince Alwaleed's businesses had been impacted by the subprime mortgage crisis, making it difficult for him to raise sufficient capital to participate.
This likely led Prince Alwaleed to consider selling his stake in Four Seasons Hotels and Resorts to raise funds for further investment in the American banking industry.
Given this, it's safe to say the two were in love.
Barron was still willing to meet his previous terms, and with the subprime mortgage crisis impacting the global economy and stock markets declining to varying degrees, Prince Alwaleed readily agreed.
The Devonshire Family Trust would acquire a 47.5% stake in Four Seasons Hotels and Resorts for $1.66 billion, while Global Industrial Investment Fund GII-1 would hold the remaining 47.5%.
Next, they will push for a merger between Four Seasons Hotels and Resorts and Cavendish Hotels, owned by the Devonshire Family Trust, to create a larger hotel group.