Vetalian Petroleum

Introduction

Vetalian Petroleum is the largest publically-traded energy producer(VCSE Ticker: VPC)in Vetalia with a market capitalization of over 403 billion rubles as of 2033. Its 107,000 employees are divided in to five main sectors: R&D, VP Alternative Energy, Energy Systems Equipment, Finance, and Chemicals. The name "Vetalian Petroleum" is something of a misnomer given that Vetalia's oil production peaked in 2018 and was generally exhausted by 2032; the company has retained the name for historical reasons rather than any actual ties to the petroleum industry. Nonetheless, the company does maintain a large presence in the natural gas and refining industries, serving more as a refiner and packager of these products for resale rather than a primary producer.

History

Early Operations: 1923-1950

Vetalian Petroleum was founded in 1922 by a group of petroleum engineers during an oil boom following the final subjugation of the oil-rich region of present-day Chernograd in the Expansion War of 1911-1913. The firm recieved 4 million rubles in venture capital and accquired exploration rights to a region in the north of Telere for 530,000 rubles. Initial exploration found about 3 million barrels of recoverable oil; this would allow the company to produce at best 1,000-2,000 bpd over 10 years, hardly enough to finance repayment of its debts and to meet its equity investments given the price of oil was only 1.2 rubles per barrel.

The company's leaders were disappointed by the news, yet decided to go ahead with developing the field since the company could still generate about руЯ1.5 million in revenues with production from the proven reserves; that would be enough to turn a small profit but far from enough to generate the return on investment that the company's investors had expected. Further complicating matters was the steady decline in oil prices during the period due to sliding military demand and rising production; oil fell from руЯ5.2/bbl in late 22 to руЯ3.55/bbl by the end of 1923. With the company's revenues deteriorating along with oil prices, the future of Vetalian Petroleum seemed grim. The stock, which had performed well from its IPO tumbled with the price of oil to under руЯ2/share.

Vetalian Petroleum's fortunes changed dramatically and rapidly only a year later in early 1924 when Engineering discovered that prior exploration had not used drills capable of punching deep enough through the porous bedrock in to the main oil resivoirs; when test drilling was conducted it was found that the block contained upwards of 1.5 billion barrels of light crude and possibly 2-3 billion barrels of sour crude in existing sites, let alone the significant amount of unexplored territory in their purchase. This discovery prompted a massive turnaround in both the Vetalian petroleum industry and the region of Chernograd, whose economy had stagnated following the end of the war a decade and a half before. Further lifting the company, oil prices rose as the booming economy increased demand for consumer products and automobiles, providing VP with a considerable increase in profits. Vetalian Petroleum saw its stock soar nearly 1,000% over the next five years to over руЯ20/share, a trend which would continue well in to the 1930's. Revenue and production also soared, and the company's financial situation was considered stable enough to upgrade its credit rating to AA. Over the next two decades the company expanded its influence, assets, and reserves; by 1940 the company had over 20 billion barrels of proven reserves. During this period the company also expanded in to downstream sectors like refining, petrochemicals, and retail sales through its VP chain of gas stations.

Revolution and Rebuilding: 1951-1992

The Vetalian Revolution badly damaged the company, with significant portions of its refining and drilling infrastructure destroyed during conflicts in the Chernograd area, and several key pipelines to the south either sabotaged or simply left to decay in the tropical heat thanks to lack of maintenance. In mid 1954, when Republican victory was mostly assured, the company was nationalized in to the Vetalian National Petroleum Corporation and its assets used to support the war effort. The company's oil production, although only at a fraction of its pre-war levels (230,000 bpd versus the nearly 4.5 million barrels per day produced in 1950), was enough to give the rebels the critical advantage over the remaining Imperial forces and played a decisive role in the battle for Vetalia City.

Following the war, the company remained in state hands during the rest of the 1950's and early 1960's, its resources primarily being used to fuel government reconstruction projects. During this time, it also branched in to the natural gas industry, using its vast reserves of untapped gas to fuel power stations, homes, and chemical plants. Production recovered quickly, with the company recovering to its 1950 levels of production by 1963 despite the need to refurbish, repair, and even rebuild the vast majority of its infrastructure. Beginning in 1965, under the guidance of the Rodachenko administration, the company was gradually privatized until it was fully privately owned in 1972. During this time, it launched an ambitious refinery construction program to capture much of the demand for gasoline and jet fuel, both of which were driven by the rapid growth in income and living standards of the 1960's. It received further boost in the 1970's, when a sharp increase in global energy prices boosted profits and led to vast new investments in exploration and drilling. However, the equally as sudden drop, motivated by a global recession in 1977, led to a subsequent plummeting in revenues, with many wells capped and projects suspended. The price of oil bottomed at руЯ7.53, its lowest level since the 1950's, in 1978 and the company's revenues plunged from руЯ56.13 billion in 1975 to only руЯ27.5 billion in 1979. The company was forced to lay off thousands of workers, and a number of its older refineries were either sold off or shut down. During this time, it was also discovered that the company had been involved in a number of questionable deals in regard to investment in the Xilare region, a scandal which ultimately revealed that nearly руЯ4.5 billion worth of revenues from 1969 to 1979 had been completely fabricated..

However, the company's dire straits would reverse in the 1980's, as a second updraft of economic growth pushed up oil prices as well as the company's flagging revenues. Oil rebounded to руЯ10.30 in 1980 and then руЯ15.33 in 1983, driving revenue back to its mid-1970's levels. A number of strategic acquisitions during this time, along with the decision to prospect for offshore fields, significantly increased the company's proven reserves and its profitability. However, the rising environmental sentiment in the country stifled its ability to operate new refineries in Vetalia, so it turned abroad for many of its new investment projects. By the late 1980's, the company was investing in several dozen oil producers and was marketing its products in seventeen. To further boost the company, oil prices peaked in 1989 at руЯ29.30 per barrel, a level nearly triple its point a decade ago. Profits soared, and the company's stock broke the 100 ruble mark for the first time in its history. However, like a decade before, these good times were not to last, and the bursting of the stock market and asset bubbles in 1990-1992 caused a prolonged secular bear market in the energy market that would last in to the late 1990's.

The Plateau: 1992-2018

Vetalian Petroleum was better prepared in 1990 than it was in 1977, with the majority of its major investment projects already nearing completion or operational and a significant amount of cash on its balance sheet, but the bear market in oil prices during the next three years would test it considerably. The stock nosedived from руЯ104.43 in 1989 to only руЯ30.02 in 1992, and a second wave of layoffs was needed to stem the tide of revenue losses. However, under a conservative new managerial staff, the company successfully stabilized in 1993 and began to recover rapidly despite continued weakness in oil prices. Although growth was modest, the company was building revenue and profit, and its stock was on a solid uptrend. By the late 1990's, the company had successfully recovered to its 1990 stock price and had nearly 30% more revenue than in 1989. Further aiding the company, following a weak localized recession in 2001 which did not significantly affect oil prices, the price of oil began to accelerate, rising from руЯ19.33 in 1992 to руЯ40.59 in 2003. Although this caused revenues to soar, the company was also cognizant of a far greater problem looming on the horizon.

Based upon estimates from the company's engineering division, they would rapidly be approaching peak output, most likely around the year 2018. This was still over a decade away, but in terms of the company's operating plans, this was a fairly short time. However, high oil prices offered an excellent opportunity for the company to branch in to alternative energy, and in 2004 the company created its Alternative Energy division. Although initially small, the sector saw explosive growth from the onset as demand for alternative energy soared, driven both by the high price of fossil fuels as well as concerns over its impact on the planet. The company also made moves in to the LNG and LPG businesses, tapping in to the need for greater quantities of imported gas in Vetalia and other nations. These, combined with the rise in oil prices, led to another period of strong growth for the company, although the profitability of their oil sector was hampered by rising production costs and lower quality crudes entering the market. By 2018, when the company's oil production peaked, the alternative energy sector was at around 10% of oil revenues and growing rapidly, although many investors were uncertain as to the company's ability to transition.

Vetalian Petroleum, Post-Petroleum 2018-Present

The company's transition from petroleum was rocky, with the volatility both of oil prices as well as production causing instability in its balance sheets and its stock price. However, growth in alternative energy and finance, especially VP's mortgage financing wing, were enough to provide a cushion for declining oil output. By the mid 2020's, these non-petroleum sectors were producing enough to make up for the decline in oil revenues, and it was likely the company would be able to function profitably as an energy supplier. Several major acquisitions in the natural gas field boosted reserves, and the discovery of several major gas reservoirs in the Chernograd area, site of the company's original oil fields, drove the gas sector to become the main source of revenue on the hydrocarbon side by 2027. However, the company still retained its gasoline fueling stations, retrofitting them to alternative fuels and electricity during this time, and purchasing oil on the market for refining in to gasoline. However, given the declining demand for fossil fuels in Vetalia, the company was generally looking to phase out its domestic gasoline production infrastructure and sell off its refining infrastructure to other producers.

During the early 2030's, there was some debate as to whether or not the name of the company should be changed to reflect its new business. However, consumer polling and responses suggested that the Vetalian Petroleum trademark was highly regarded by customers and that changing it would only negatively impact sales. Nevertheless, the company has begun to use the names VP and Vetalian Energy on its alternative fuel stations, and it is likely the Vetalian Petroleum name will be phased out in the next few decades.