By Janet McGurty
NEW YORK, Dec 8 (Reuters) - Leading oil price assessment agency Platts will buy Oil Price Information Service for an undisclosed sum, it said on Wednesday, expanding its suite of benchmark prices deeper into the wholesale market.
Platts, a unit of McGraw-Hill that provides energy and other commodity prices and news, said the deal would give it a greater share of the oil pricing market used as a benchmark by producers and refiners to price products, especially in the rack business where OPIS has been dominant.
Platts has said it will maintain the status quo of OPIS' products and employees.
'OPIS is a great complement to Platts. It supports our growth strategy by expanding our presence in North America and extending our price reporting into the wholesale and retail petroleum markets,' said Larry Neal, president of Platts.
'The combination of Platts and OPIS data will bring greater transparency to the markets by giving customers greater insight into the petroleum supply chain from crude trading to retail sales.'
Platts has long held the franchise as the benchmark for over-the-counter oil pricing. Many long-term trades going out years are based on Platts price assessments.
'My sense is that the addition of OPIS will serve to further strengthen the Platt's franchise in the energy pricing market,' said Peter P. Appert, an analyst with Piper Jaffray in San Francisco.
'OPIS serves portions of the market where Platt's traditionally has not had a strong presence (eg, downstream wholesale and retail price reporting) so the purchase broadens MHP's offerings in the energy market - definitely a positive from a strategic standpoint.
Some oil traders feel reduced competition within the oil price arena could drive more business toward Argus Media, Platts' biggest competitor in oil pricing.
Argus, headquartered in London, has been making inroads into Platt's franchise. Last year, oil kingpin Saudi Arabia began using Argus' Sour Crude Index as the benchmark for pricing its crude oil as opposed to benchmark West Texas Intermediate. Kuwait and Iraq followed suit.
OPIS is currently owned by Maryland-based United Communications Group, which is privately held.
It collects retail prices from more than 120,000 U.S. gasoline stations used as a benchmark for regional and national gasoline prices by travel club AAA.
OPIS also gathers prices in seven U.S. spot markets but it widely looked to with in the oil industry as the authoritative source on wholesale or rack prices.
Platts' oil pricing service is more international, serving customers in 150 countries and covering cash and futures oil markets globally, including the major oil hubs in London, Singapore, New York and Houston.
Some traders view OPIS as having a better position for prices along the West Coast and in the jet markets, boosting Platt's presence there.
OPIS was not immediately available for comment.
Thomson Reuters competes with both Platts and Argus to provide news and price information to the oil industry.
From a corporate point of view, Platts is not a big part of McGraw-Hill earnings.
'Platts is a relatively small part of McGraw-Hill,' said John Pechalla, an analyst with Moody's, who said that reinvesting the cash into purchasing a business which would grow and add revenue was better than using the cash for a share buyback
But some analysts think Platts' steady earning performance is why investment dollars are flowing into the franchise.
McGraw-Hill does not break out segment earnings but most analysts agree Platt's consistently boosts the bottom line.
Analyst estimates of McGraw-Hill's earnings, which shows about a 30 percent growth in Platts in 2009. That year, 'the rock star performer has been Platts,' said Chuck Richard, vice president and lead analyst with Outsell Inc.
(Reporting by Janet McGurty; Editing by Marguerita Choy and David Gregorio) Keywords: OPIS PLATTS/ (janet.mcgurty@thomsonreuters.com; Reuters Messaging: janet.mcgurty.reuters.com@reuters.net; 646 226 3027) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
NEW YORK, Dec 8 (Reuters) - Leading oil price assessment agency Platts will buy Oil Price Information Service for an undisclosed sum, it said on Wednesday, expanding its suite of benchmark prices deeper into the wholesale market.
Platts, a unit of McGraw-Hill that provides energy and other commodity prices and news, said the deal would give it a greater share of the oil pricing market used as a benchmark by producers and refiners to price products, especially in the rack business where OPIS has been dominant.
Platts has said it will maintain the status quo of OPIS' products and employees.
'OPIS is a great complement to Platts. It supports our growth strategy by expanding our presence in North America and extending our price reporting into the wholesale and retail petroleum markets,' said Larry Neal, president of Platts.
'The combination of Platts and OPIS data will bring greater transparency to the markets by giving customers greater insight into the petroleum supply chain from crude trading to retail sales.'
Platts has long held the franchise as the benchmark for over-the-counter oil pricing. Many long-term trades going out years are based on Platts price assessments.
'My sense is that the addition of OPIS will serve to further strengthen the Platt's franchise in the energy pricing market,' said Peter P. Appert, an analyst with Piper Jaffray in San Francisco.
'OPIS serves portions of the market where Platt's traditionally has not had a strong presence (eg, downstream wholesale and retail price reporting) so the purchase broadens MHP's offerings in the energy market - definitely a positive from a strategic standpoint.
Some oil traders feel reduced competition within the oil price arena could drive more business toward Argus Media, Platts' biggest competitor in oil pricing.
Argus, headquartered in London, has been making inroads into Platt's franchise. Last year, oil kingpin Saudi Arabia began using Argus' Sour Crude Index as the benchmark for pricing its crude oil as opposed to benchmark West Texas Intermediate. Kuwait and Iraq followed suit.
OPIS is currently owned by Maryland-based United Communications Group, which is privately held.
It collects retail prices from more than 120,000 U.S. gasoline stations used as a benchmark for regional and national gasoline prices by travel club AAA.
OPIS also gathers prices in seven U.S. spot markets but it widely looked to with in the oil industry as the authoritative source on wholesale or rack prices.
Platts' oil pricing service is more international, serving customers in 150 countries and covering cash and futures oil markets globally, including the major oil hubs in London, Singapore, New York and Houston.
Some traders view OPIS as having a better position for prices along the West Coast and in the jet markets, boosting Platt's presence there.
OPIS was not immediately available for comment.
Thomson Reuters competes with both Platts and Argus to provide news and price information to the oil industry.
From a corporate point of view, Platts is not a big part of McGraw-Hill earnings.
'Platts is a relatively small part of McGraw-Hill,' said John Pechalla, an analyst with Moody's, who said that reinvesting the cash into purchasing a business which would grow and add revenue was better than using the cash for a share buyback
But some analysts think Platts' steady earning performance is why investment dollars are flowing into the franchise.
McGraw-Hill does not break out segment earnings but most analysts agree Platt's consistently boosts the bottom line.
Analyst estimates of McGraw-Hill's earnings, which shows about a 30 percent growth in Platts in 2009. That year, 'the rock star performer has been Platts,' said Chuck Richard, vice president and lead analyst with Outsell Inc.
(Reporting by Janet McGurty; Editing by Marguerita Choy and David Gregorio) Keywords: OPIS PLATTS/ (janet.mcgurty@thomsonreuters.com; Reuters Messaging: janet.mcgurty.reuters.com@reuters.net; 646 226 3027) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.